Oral Answers to Questions

Alistair Carmichael Excerpts

Tuesday 18th April 2017 Commons Chamber

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

12. What assessment he has made of the potential effect on the tourism industry of a reduction in the rate of VAT.

[The Financial Secretary to the Treasury (Jane Ellison)]

The Government have carefully considered the evidence for applying a 5% reduced rate of VAT on accommodation and visitor attractions, which has come up several times in the House, but we believe, on balance, that the costs of doing so outweigh the benefits. We keep all such things under review, but there are no plans for a reduction in the rate of VAT on tourism activity.

[Mr Carmichael]

That is a disappointing answer. The campaign for a reduced rate of VAT for tourism estimates that a 5% rate would produce a higher tax take and could create 121,000 jobs across the country. That would be of particular benefit to many economically fragile coastal and island communities. Will the Minister meet campaigners to discuss things in more detail?

[Jane Ellison]

I am familiar with the right hon. Gentleman’s figures, and Treasury officials have met campaigners over several years to look at them. We will always look at the evidence, but we disagree with the campaign’s economic assessment. Together with HMRC, the Treasury assesses that such a cut would cost around £10 billion a year—approximately £7 billion for restaurants and bars, and about £3 billion for leisure and accommodation.