Tourism (VAT)

Adrian Sanders Excerpts

Tuesday 11th February 2014 Westminster Hall

[Mr Adrian Sanders (Torbay) (LD)]

I congratulate the hon. Member for South Down (Ms Ritchie) on securing this debate. I repeat the message that the far south-west is open for business, particularly the spectacular English riviera. People might bag a bargain if they book their summer holiday there now, and I am sure that the hon. Member for Totnes (Dr Wollaston) and I will be there to welcome them, if we are free.

This is the fourth debate in which I have raised this issue, so it is not new. We have seen that Ireland, France and many other countries have successfully used VAT reductions as a stimulus for tourism, which has been disproportionately affected by the recession, both overseas and here. There is no doubt but that such a reduction would help areas, especially coastal towns, that have particularly weak local economies. It is therefore puzzling that the Government have so strongly ruled out looking at how to help the tourism industry. On the one hand, there is rhetoric from the Prime Minister and senior members of the Government saying that the UK should be the most competitive economy in the world, and woe betide any suggestion that we increase tax rates, lest that scare off investment; but on the other hand, there is a twisted adherence to a particular idea of credibility that insists that we do not want to minimise the burden on businesses and consumers.

I specifically mention credibility because it has been the bulwark of the Government’s argument against VAT cuts. That argument misses a vital point, because credibility is not particularly quantifiable and is decidedly context-specific. One could argue that the inconsistencies in the Government’s fiscal approach undermine economic confidence and credibility more than the state of the figures produced by the Treasury. If the Government chose to, they could incorporate VAT cuts into a narrative of growth, prosperity, stability and a competitive economy. Those cuts can and should be a credible and legitimate approach. We have long heard the message that we have structural economic problems that require long-term solutions. It is not as if a VAT reduction would be a fiscal disaster. What we lost in VAT revenues would be regained within a few years by greater income tax revenue from the estimated 200,000 jobs that the reduction would create, and significant savings on out-of-work and low-wage benefits.

I have several tourism businesses in my Torbay constituency, and the tourist trade represents the biggest contributor to the private sector locally. We have some of the toughest economic conditions in the UK, with the associated social ills of poor health and housing, high rates of teenage pregnancy and drug dependency, low educational achievement and aspiration, and so on. Driving local economic investment is the only way out. Thankfully, the Government have realised one part of that and are investing locally in business infrastructure, such as the Kingskerswell bypass, but we need to do more.

The main thing local businesses point out to me is that the UK is one of only four EU members not to exercise its discretion somewhere within tourism and leisure spending. We already have high costs compared with much of Europe, and that unnecessarily harms businesses when they try to attract visitors. South-west England has a great deal to offer, but when it is cheaper to visit just about any other country in Europe, how can we even start being the most competitive in the global race?