Tourism Industry and VAT

Debate between Mike Weir and Caroline Lucas

Tuesday 17th March 2015 Westminster Hall

[Mr Mike Weir (Angus) (SNP)]

It is a pleasure to take part in this important debate and to serve under your chairmanship, Ms Dorries. I congratulate the hon. Member for Ceredigion (Mr Williams) on bringing forward this issue.

I have been raising this matter for more than a decade. I first asked a question about golf tourism in 2004, at which time I represented the magnificent golf course at Carnoustie—sadly, I no longer represent it, due to boundary changes. I had no luck with the Chancellor at the time, and I have had no luck with Chancellors since.

Tourism is a vital part of Angus’s local economy. According to the Government’s official labour market statistics, tourism-related jobs account for a higher percentage of the workforce in Angus than the UK and Scottish averages, which is not surprising, given the wonderful mountain glens and coastal areas that we enjoy. Many other rural areas across all parts of the United Kingdom rely heavily on such jobs. The current campaign has a lot of support in Scotland, including from the Scottish Tourism Alliance.

Unlike many other parts of the European Union, there is currently no provision in the UK for charging a lower rate of VAT for tourism-related businesses, yet there is nothing to prevent the Government from doing so. For example, it has been done for hotel accommodation in 24 of the 28 European Union states, including Germany and France. The factsheet of the Cut Tourism VAT campaign shows that the UK has the second highest rate of VAT on hotel accommodation. It is exceeded only by Denmark, and it is equal to Slovenia, while Luxembourg’s rate is 3%, and Portugal, which is a major tourist destination, has a rate of 6%. Tourism businesses are fighting hard to retain business against cheaper destinations, and those lower rates give continental destinations a considerable advantage over businesses in the UK.

The 2013 World Economic Forum report on travel and transportation ranked the UK 138th out of 140 countries on the basis of price competitiveness. The VisitBritain website laments Britain’s lack of competitiveness for visitors from the USA, Australia, Canada, Germany, Austria, Belgium and the Netherlands. It showed that Britain has a clear competitive weakness in terms of value for money and expense. Ratings of holidays in Britain were below almost every major European destination for value and expense for both short and long-haul visitors. Britain was the only destination to have a negative balance, in terms of expense, compared with expectations.

The Government have not always been averse to cutting VAT on selective tourism-related operations. In the 2012 Budget, they cut the VAT charge on ski lifts, which was a welcome change—especially for businesses in the constituency of the Chief Secretary to the Treasury, which were the main beneficiaries. That vividly illustrates that it can be done and that it need not apply only to accommodation facilities.

Ireland’s 9% rate applies to facilities for taking part in sporting activities, including green fees charged for golf and subscriptions charged by non-member-owned golf clubs. A rate of that kind would be a boost for places such as Carnoustie. It puts the Irish at a competitive advantage, compared with the wonderful golf clubs in Scotland and other parts of the UK. In addition to that 9% rate, for some time Ireland had a 13.5% rate on some other services, including short-term car hire and tour guide services, which shows that a multitude of things can be done to assist tourism businesses.

The Government’s 2011 tourism strategy stated that they aimed to generate 4 million extra visitors by 2015. It said:

“The increase in overseas visitors would bring an extra £2 billion worth of visitor spend and help to create 50,000 new jobs across the country over that period, securing tourism’s place as one of Britain’s biggest industries.”

I struggle to see how the GREAT campaign and simplifying visa applications for Chinese visitors, which seems to be all that has been done so far, could in isolation do anything to achieve those objectives. However, a cut in VAT would have a significant impact.

Clearly, there is a huge opportunity to increase employment by promoting tourism. One of the most effective ways of doing that is to cut VAT on tourism businesses, which is well within the Government’s power.

[Caroline Lucas]

Does the hon. Gentleman agree that there is a strong environmental argument for reducing tourism VAT? It would encourage more people to take domestic holidays in the UK, not just in Scotland, but in lovely Brighton Pavilion.

[Mr Weir]

I am sure that is the case. The hon. Lady can develop that argument if she catches the Chair’s eye.

It is not cheap to holiday in many areas of the UK. The standard rate of VAT puts our tourism businesses at a considerable disadvantage when competing with other parts of Europe. An increase in visitors would not only help tourism businesses, but bring much-needed income into many other businesses in the rural economy. The Republic of Ireland’s 9% rate—its standard rate is 24%—is calculated to have boosted the Irish economy by about €40 million and created between 5,600 and 35,000 jobs, depending on how the figure is calculated. The Irish Minister for Finance claimed in his Budget speech that it created 15,000 jobs. Various pieces of research have shown that a similar—perhaps a greater—effect could be achieved here, including Professor Blake’s work, which has already been referred to.

A VAT cut would reduce the Treasury’s income in the short term, but it would generate a stimulus that created a large number of jobs and increased businesses directly and indirectly. It could lead to a significant, long-term increase in income that would have a positive effect on the whole economy. Research suggests that up to 123,000 jobs could be created in the UK, which could contribute a surplus to the Treasury of £3.9 billion over 10 years. Additional spending and growth in tourism and the wider economy could produce GDP gains of up to £4 billion per year.

The Irish experience suggests that the cost per job created by the VAT cut is about €23,000. That is a competitive rate for creating jobs—certainly, in rural areas of the UK. I urge the Minister, even at this late stage, to look positively at cutting VAT to give a much-needed boost to our rural economies.

Energy Price Freeze

Debate between Mike Weir and Caroline Lucas

Wednesday 6th November 2013 Commons Chamber

[Caroline Lucas (Brighton, Pavilion) (Green)]

I am very pleased finally to have an opportunity to contribute to this important debate, because it concerns a crucial issue that is raised with me time and again by my constituents. We should bear in mind that, as many other Members have said today, behind all the statistics that often dominate debates such as this are real people and real suffering. We are talking about people who wake up with ice on the inside of their windows, and about people who huddle in a single room because that is the only room that they can afford to heat.

More than 1.5 million children in he United Kingdom are growing up in cold homes. Each winter, four times as many people are killed by fuel poverty as are killed on Britain’s roads, and fuel poverty-related illnesses cost the national health service more than £1 billion every year. I think that, given that background, few would deny that we have an energy bill crisis. In the context of the Fuel Poverty Advisory Group’s warning that fuel poverty affects 6 million households, the profits of the big six are deeply offensive. Between 2008 and 2010, their profits doubled to £4.6 billion. Last year, Centrica alone made profits of £1.3 billion, no doubt benefiting in a range of ways from the secondments of its employees to the Department of Energy and Climate Change and from its boss Sam Laidlaw’s influence as a former member of the Prime Minister’s business advisory group. That is just one example of the revolving door between the big fossil fuel companies and Whitehall, which was similarly well oiled under the last Government.

A temporary bill freeze would be a welcome respite from price hikes which, as the Committee on Climate Change has reminded us, are mainly due to increases in the price of gas. I called for a price cap, along with a windfall tax on big six profits and a public inquiry, almost two years ago, on one occasion during a Westminster Hall debate in February 2012, and many Labour Back Benchers signed my early-day motion on the subject. I support the relief that a temporary price freeze would bring, so I shall vote in favour of the motion, but we also need a much more ambitious, far-reaching and coherent response. I hope that today the Opposition parties will be able to unite behind calls for a radical reform of the energy market as well, because I believe that that is the only way—and a permanent way—in which to tackle high energy bills, and I hope that they will get behind effective measures to break the stranglehold of the big six.

As Fuel Poverty Action says:

“Freezing prices at their current level won’t help the thousands of people who already die each winter due to fuel poverty: our bills are already at deadly highs”,

so I want to set out five practical, positive and powerful policies to tackle fuel poverty this winter and for winters to come.

First, the only permanent solution to the Energy Bill crisis is to make all our homes much more energy-efficient, so I am disappointed that there is no mention of energy-efficiency in the motion, especially as the green deal barely scratches the surface. Under the energy company obligation, at current rates it would take about 32 years to insulate all fuel-poor homes. Insulation rates are plummeting when they should be rocketing, and energy-efficiency businesses, often SMEs, are struggling when they should be flourishing.

That is why a huge coalition of organisations representing consumers, families, faith groups and others all back the Energy Bill revolution campaign. It calls for revenue from carbon taxes, which currently disappears into Treasury coffers, to be recycled into a nationwide programme to make all homes super energy-efficient, with full insulation, modern boilers and renewable energy such as domestic PV, solar hot water and biomass heating. That could bring nine out of 10 homes out of fuel poverty, lower people’s bills, deliver four times more carbon cuts than current schemes and create 200,000 jobs. I again ask both the Government and the official Opposition why they will not support it.

Mandatory efficiency standards are crucial, too. Some 70% of Britain’s fuel-poor live in properties with bottom of the barrel energy-efficiency ratings of E, F or G. A genuine fuel-poverty strategy must, at the very least, commit to lifting all these properties to band D standards by 2020 and raising the rest of our housing stock to today’s new-build standards by 2030.

Secondly, we need ambitious fuel poverty eradication targets. I want to highlight a coalition amendment that was sneaked in during the Lords Committee stage of the Energy Bill. Astonishingly, Ministers are trying remove the statutory duty on Government to eradicate fuel poverty. They are replacing it with a vague provision to do something at some point merely to address the situation of those in fuel poverty, and all in secondary legislation, thereby reducing accountability and scrutiny. As the fuel-poor prepare for the onslaught of the cold and avoidable winter deaths, I trust the Minister and the Opposition will rethink their position and give strong cross-party support to the fuel-poverty amendment tabled by Lord O’Neill of Clackmannan when the Bill returns to this House.

The Committee on Climate Change has confirmed that by far the greatest contributory factor to higher energy bills has been the rising price of gas. That makes the Government’s dash for gas deeply irresponsible. It will increase our dependence on gas with higher energy bills, as well as fatally undermine our hopes of tackling climate change. That is the third area where we need urgent action. This also makes Labour’s position of conditional support for shale gas inconsistent with its enthusiasm for a 2030 decarbonisation target and its rhetoric on affordable energy.

There is an alternative to gas. Renewable energy can go hand in hand with affordable energy and can help cut our exposure to high and volatile fossil-fuel prices. While fossil fuels are on an upward cost trajectory, renewable technologies have seen dramatic price falls in the past few years. So if we are serious about creating an affordable energy system, we should be going all out for renewables and energy-efficiency.

Fourthly, we should be doing much more to end the big six’s control over power generation and supply, not regulating them better, not just erecting a paper wall between their generation and supply businesses, not just requiring them to sell their power through a different structure. If we are serious about diversity in the energy market and cutting costs by allowing renewables to push down wholesale peak prices of power, we need to ensure renewables are given priority access to the grid.

We have an opportunity to create a radically different energy system, where co-operative and community and independently-owned local renewable energy schemes flourish. In those circumstances, local people benefit from the energy created. The Belgian co-operative Ecopower provides energy for over 30,000 members. Denmark guarantees that 20% of all energy projects are open for community financing. In Germany over half of all the installed renewable energy capacity is owned by private citizens and co-operatives. That is the sort of transformative scale of community power we should be aiming for here, too. It is where the greatest wins for households and business energy bills can be secured. Projects such as the Brighton Energy Co-operative in my constituency provide a glimpse of an incredibly positive alternative energy future where people are active producers rather than just passive consumers.

Community energy should be central to the debate about energy bills. Words alone will not deliver, however; we need policies and action. For every community to generate its own electricity, we need a regulatory framework that allows communities to buy the electricity they generate at wholesale costs, freeing them from the rip-off retail market.

[Mr Weir]

I am very interested in what the hon. Lady is saying. Does she agree that the Government’s obsession with nuclear—in particular, the strike price agreed for Hinkley Point—shows that they are going totally in a different direction?

[Caroline Lucas]

I thank the hon. Gentleman for his intervention, because it makes exactly the point that I want to move on to. For as long as both the Opposition and the Government are committed to these huge subsidies that are going to be behind nuclear power, their outrage at energy bills sounds a bit thin—it beggars belief. The size of the subsidies that will go to nuclear power will lock us into extremely long periods of paying over the odds to companies such as EDF. The rate of return on investment reportedly given to EDF is a whopping 10%—that is 10% profits, guaranteed for decades, going from our constituents to EDF, one of the big six. Why is it acceptable for UK bill payers to be fleeced in order to provide a rate of return to EDF that is double that which Ministers have said they see as fit for renewable projects—schemes that could be owned by communities themselves? Let us not forget that Hinkley Point C will not boil a kettle until the early 2020s, at best, by which time many renewable energy technologies will be a much better deal when it comes to keeping energy costs down.

[Mr Weir]

Hinkley Point C will start boiling a kettle on that date only if it is built on time, and no nuclear reactor has yet been built on time or on budget.

[Caroline Lucas]

I thank the hon. Gentleman, who must have been looking over my shoulder, because these are exactly the points that I would make. When we compare nuclear with renewables, we see that in some cases renewables are already cheaper. They are also asking for a strike price of £91 by 2018, which is substantially less than what we are going to be giving to nuclear.

Consumer Futures said that the Hinkley deal

“moves the risks of future variations in wholesale prices from investors onto consumers, will likely see household bills increase and will distort future investment in electricity generation.

Consumers will again feel that the energy market is stacked against them.”

I just cannot understand why there is not greater outrage at the way in which we are allowing ourselves to be locked into these long contracts with EDF, paying over and above market prices for decades to come. I repeat that it is hard to take seriously the crocodile tears we are seeing from hon. Members on both sides of the House while we are suggesting paying hand over fist to the nuclear companies, which will be laughing all the way to the bank.

In conclusion, I welcome the greater focus on the problem of high energy bills that we have seen in recent months. It is a massive issue in all our constituencies; people come to us on a daily basis worried about how they are going to be able to survive the winter. It is a matter of life and death, not just of discomfort; we are talking about people who are going to be suffering from radically ill health and about the premature deaths associated with fuel poverty. So I welcome this debate, but I regret that most of the solutions put forward do not fully address the root causes of fuel poverty and high energy costs. A fundamental shift should be at the heart of energy market reform. I am worried that we have heard much more about tinkering around the edges of a system that keeps the big six in power and far too many people in fuel poverty, rather than about much more radical energy transformation, which we are beginning to see in other countries. There is a precedent and we could be following it here—if the political will existed.