Finance (No. 2) Bill

Nickie Aiken Excerpts

2nd reading
Wednesday 17th April 2024 Commons Chamber

[Nickie Aiken (Cities of London and Westminster) (Con)]

As I highlighted in my contribution to the spring Budget debate last month, I support the measures that the Government are taking to grow the economy, boost productivity and ensure long-term prosperity for families. Today, I will focus on two clauses in the Bill, which will have an extraordinarily positive impact on the art and culture sectors in the Cities of London and Westminster, as well as across the country.

First, clause 16 amends the Corporation Tax Act 2009 to permanently set the rate of credit to 45% for touring theatrical productions, and to 40% for non-touring theatrical productions. The rates were due to taper to 30% and 35% respectively in April next year, but will now be set permanently at 40% and 45% from that date. The Bill increases the tax relief available for theatre productions.

Secondly, clause 17 increases the tax credits available for orchestral companies and also amends the Corporation Tax Act 2009 to permanently set the tax credit rate at 45%, instead of there being the taper that was planned for the end of this financial year.

The performing arts sector plays a crucial role in the economy of the west end. According to the Office for National Statistics, 8% of the UK’s arts and cultural businesses in 2023 were based in the Cities of London and Westminster. That equates to around 2,500 businesses and thousands of jobs. World-renowned venues, including the Theatre Royal, Dury Lane, the London Palladium, the Royal Opera House and the Royal Albert Hall, attract audiences from not only around the country, but across the globe. The Society of London Theatre and UK Theatre recently produced a study that underscored the importance of the theatre sector to our economy. Their research showed that UK theatres generate £2.39 billion in gross value added, supporting more than 200,000 jobs and generating a total turnover of over £4.4 billion every year. I am in no doubt that this uplift in tax credits will have a positive impact on actors, musicians, costume designers, set creators, singers and those in a whole host of other jobs that rely on a strong and prosperous performing arts sector.

As we know, the past few years have been difficult for this industry; it first dealt with the shock of the covid pandemic, which closed all shows, and then slowly emerged out of the crisis and rebuilt its businesses and audiences. This Government have worked tirelessly to support the creative sector in the Cities of London and Westminster, and I was proud to work with the performing arts sector and others, such as UKHospitality, to secure the £1.57 billion cultural recovery fund to support large and small performing arts businesses throughout the dark times of the pandemic. I learned from that experience, and the whole pandemic in general, just how connected the west end economy is. It is a jigsaw of complementary pieces: theatres, restaurants, hotels, cafés and bars. During that time, we learned that for every £1 spent in the theatre, an incredible £5 was generated for hospitality and other businesses. The tax clauses in the Bill will not only support the performing arts, but have a positive effect on the wider hospitality and leisure sectors, which will benefit the UK economy as a whole.

While I fully support the Bill and the included changes to tax relief, there is one specific issue that I wish to raise. It concerns the new definition of theatre production that was introduced in the Finance Act 2024. The Society of London Theatre, UK Theatre and theatre companies based in the two cities have told me that immersive theatre companies will now not be eligible for the relief that the Bill offers, due to the new definition of theatre production. The new, narrow definition of an audience means that immersive theatre companies such as Little Lion Entertainment, based in the west end, will be ineligible for the tax relief provided in the Bill. Little Lion Entertainment has been a recipient of theatre tax relief for the past 10 years. It employs 350 people in London and Manchester, and during its time it has welcomed more than 2 million patrons to its performances. Yet because of the change in definition, it fears for its future and that of the entire immersive theatre industry. I would be grateful if the Minister would consider looking again at the definition of theatre production, so that companies such as Little Lion Entertainment are not excluded from the fantastic support that the Bill will provide.

I am proud of the Government’s continued support for the performing arts in the United Kingdom. The Bill will continue ensure that our world-renowned theatres and opera productions flourish, and will safeguard them for future generations.

Oral Answers to Questions

Nickie Aiken Excerpts

Tuesday 19th March 2024 Commons Chamber

[Nigel Huddleston]

My hon. Friend will be well aware that Government Members are implementing measures to tackle the very problems she outlines while turning the corner in the economy and doing everything we can to put more money back in people’s pockets, whether workers or pensioners.

[Nickie Aiken (Cities of London and Westminster) (Con)]

20. What assessment he has made of the potential merits of reintroducing tax-free shopping for international visitors.

[The Financial Secretary to the Treasury (Nigel Huddleston)]

As set out at the spring Budget, we are considering the findings of the Office for Budget Responsibility’s review of the original costing of the withdrawal of tax-free shopping, alongside industry representations and broader data. The Government welcome further submissions from stakeholders in response to the OBR’s findings as we keep all taxes under review.

[Nickie Aiken]

Last week, the OBR informed the Treasury Committee that it has not assessed the Treasury’s forecast that it would cost £900 million to extend tax-free shopping to EU visitors. The OBR has also failed to support the Treasury’s assumption that EU visitor behaviour and costs can be extrapolated from assessed non-EU data. The UK retail industry firmly believes that it will cost as little as £50 million to reintroduce tax-free shopping for tourists. As we mark English Tourism Week, is it not time that we had a full, independent review of the Treasury’s data on tax-free shopping?

[Nigel Huddleston]

I thank my hon. Friend for her consistent championing of tourism, particularly during English Tourism Week. It is not in the OBR’s remit to consider the effect of alternative policies and, as expanding tax-free shopping to EU visitors is not current Government policy, it has not considered that. However, the findings of the review will be useful in giving insights on the overall behavioural incentives of the policy, which will be relevant for both EU and non-EU populations. It is therefore right that the Government take time to consider the OBR’s findings along with other representations and within the context of broader data, as announced in the Budget.

--- Later in debate ---

[Jeremy Hunt]

Even Torsten Bell from the left-leaning Resolution Foundation said that the right hon. Lady’s argument that this was a mini Budget-style black hole was nonsense, because we specifically said that we would not fund national insurance cuts from increasing borrowing or cutting spending on public services. I gently ask her, if she wants to put on the mantle of fiscal rectitude, where is Labour going to find literally billions of pounds to fund unfunded spending pledges, from grid decarbon-isation to NHS waiting lists? We all know what that will lead to: higher taxes, like under every Labour Government in history.

[Nickie Aiken (Cities of London and Westminster) (Con)]

T4. St Mary’s in Paddington is a much-loved, much-used hospital in my constituency. Although it was taken off the list of 40 new hospitals to be redeveloped, I am delighted to be working with my hon. Friend the Member for Kensington (Felicity Buchan) and the Minister in the Lords responsible for hospitals to make a case with the trust to ensure that it is redeveloped. Could the Chief Secretary to the Treasury please update the House on the timeframe for making available Government funding so that we can submit the planning business case for the redevelopment?

[The Chief Secretary to the Treasury (Laura Trott)]

I commend my hon. Friend and my hon. Friend the Member for Kensington (Felicity Buchan) on their great work on this project. There appears to be a compelling case, and I know that the programme team at the Department of Health and Social Care is looking closely at the proposal.

Budget Resolutions

Nickie Aiken Excerpts

Tuesday 12th March 2024 Commons Chamber

[Nickie Aiken (Cities of London and Westminster) (Con)]

The measures announced in the Budget by my right hon. Friend the Chancellor promote a pragmatic and sensible approach to growing the economy, improving productivity and ensuring that more people keep more of their earnings. We still carry the economic scars and fallout of the once-in-100-years pandemic and the energy crisis caused by Russia’s illegal invasion of Ukraine. Let us not forget that covid shut down major parts of our economy and the Government spent more than £400 billion protecting hundreds of thousands of businesses and millions of jobs.

I note the Chancellor’s comments in his speech last week that the UK’s post-covid recovery is among the strongest of the G7, ahead of France, Germany and Italy. Russia’s war in Ukraine has led to a serious energy crisis. I am proud that the Government chose to support households with increased energy bills, providing £40 billion of financial support. This Conservative Government were able to spend that money because they spent the previous nine years rebuilding our economy after it was ravaged by successive Labour Governments. Let us not forget that when we took office, the then Chief Secretary to the Treasury told us that there was no money left.

Thankfully, we are now witnessing a steady recovery, following two major economic shocks in the last four years. Economic recoveries do not succeed overnight, but this Conservative Chancellor is doing the right thing by ensuring that our public finances are on a strong footing, and that the recovery is sustainable and aimed at growth and improving productivity. He is also doing the right thing by putting more money back into people’s pockets. Following this Budget and the autumn statement, we have seen a 4p cut in national insurance in just five months. Some 27 million working people will keep an average of £900 more of their earnings.

One tax loophole that I was pleased to see closed was the abolition of the furnished holiday lettings tax regime, eliminating the tax advantage for landlords who let short-term furnished holiday properties over those who let residential properties on a long-term basis. I have campaigned for reform of the short-term lets industry for over a decade. In the Cities of London and Westminster, 10,000 short-term let properties are stripping out the long-term rental market, leaving young people struggling to pay rising rents in the capital, as they are in regions such as the south-west.

I also welcome the Chancellor’s recognition of the importance of culture in our economy, with his unveiling of the package that will provide the creative industries with over £1 billion in additional tax relief over the next five years. That is a vital sector not only in my constituency but to the wider economy. It employs 2.4 million people across the UK and contributed to £125 billion to the UK economy in 2022 alone. The relief will make a huge difference to the creative industries.

Our public services play a vital role in the life of our nation, schools, council, police and fire service and, of course, our beloved NHS, supporting us from the cradle to the grave, but we must never forget that these are all funded by taxpayer money. Thus, it is imperative that we strive for the best value for money and focus on efficiency. I fully support the Chancellor’s public sector productivity programme. Currently, productivity remains below pandemic levels, and we must close the gap. Modernising and streamlining our public services will mean better allocations of resources, leading to better outcomes for those who use these services.

Our medical professionals are best placed to improve a patient’s experience and outcome. I saw that at first hand on a visit to Barts hospital in my constituency. Barts-based Dr Debashish Das and colleagues from across London’s cardiac units have designed a shared platform to monitor remotely more than 5,000 patients who are awaiting heart surgery. This doctor-led initiative has significantly reduced emergency surgery, improved patient outcomes and saved the NHS money. That sort of project must be encouraged, not only in the NHS but throughout the public sector.

As a former councillor, I know full well how we must improve productivity and reduce costs. In 2010, as cabinet member for children’s services, I led Westminster’s merger of children’s services with Royal Borough of Kensington and Chelsea, and Hammersmith and Fulham. It was a landmark move and the first of its kind in the United Kingdom. It not only led to improved outcomes for our children but saved tens of millions of pounds for the taxpayer. We must see more of this type of project, and freedom and flexibility must be given to the public sector to improve productivity.

There is one measure missing from this Budget, which would benefit the economy if implemented: the reinstatement of tax-free shopping. Since the tax incentive was lifted, international visitor spending has fallen in the UK and risen in European cities such as Paris, Milan and Madrid. An Oxford Economics report predicts that reintroducing tax-free shopping could attract more than 1.6 million extra visitors to the UK, stimulating an extra £2.8 billion in tourist spending overall. I remain at a loss to understand why the Treasury does not accept the arguments to reintroduce tax-free shopping for overseas visitors, and to go further and extend it to EU citizens. Reintroducing tax-free shopping would boost the economy for the retail, hospitality, hotel, leisure and culture sectors, and also for the manufacturing of luxury goods. It is a no-brainer.

Thanks to the responsible and prudent management of the economy under this Chancellor, we are seeing green shoots of a sustainable recovery. That is fair and sensible.

Tax-free Shopping for International Visitors

Nickie Aiken Excerpts

Thursday 7th September 2023 Westminster Hall

[Sir Geoffrey Clifton-Brown (The Cotswolds) (Con)]

I beg to move,

That this House has considered tax-free shopping for international visitors.

I thank you, Dr Huq, and Mr Speaker very much for granting me this opportunity to bring before the House the important subject of tax-free shopping—both VAT reclaim and duty-free shopping—for international visitors to this country. I also thank my hon. Friend the Minister, to whom I am grateful for turning up on this hot afternoon when I am sure she would much rather be doing something else. I am delighted to have the support of colleagues from throughout the country on this campaign. Of course, this issue affects not only London—it affects London greatly—but cities and tourist hubs across the UK, shopping destinations, cultural venues and the major regional airports.

This is an important debate on an issue I have campaigned on for the past few years following the Government’s decision to end tax-free shopping for international visitors when we left the EU. We are now the only major European country that does not have tax-free shopping, and the British economy is missing out as a result. In fact, the United Nations World Tourism Organisation barometer shows that Britain’s post-pandemic recovery in visitor numbers is the worst of all major European countries.

It is important at the start of the debate to respond to the idea that such a scheme would not benefit the British people. A study by Oxford Economics showed that restoring tax-free shopping would directly create a staggering 78,000 new jobs up and down the UK, possibly add as much as £4.1 billion to UK GDP, and result in—we believe—a net positive £350 million each year for His Majesty’s Treasury. In my speech, I will go into more detail and examine what the data suggests on the opportunities for economic growth from reintroducing tax-free shopping and VAT reclaim for foreign visitors.

Before we review the figures, I make it clear that my sole ask today of my hon. Friend, which I have to say would be almost cost-free, is for the Treasury to commission an independent assessment through the Office for Budget Responsibility or a respected audit firm—so that the Treasury believes it when it gets the results—of the full economic effect of tax-free shopping on the UK figures and all the figures that are available.

I believe the Government’s current position is based on inaccurate and incomplete Treasury figures that say that the cost of tax-free shopping would be £2 billion a year in refunded VAT. To highlight briefly how inaccurate those figures are, that calculation was reached by overestimating VAT refunds to UK shoppers by £600 million and excluding any tax revenue from increased spending by extra tourists. I therefore urge the Government to reconsider their objections to tax-free shopping which, as I say, I believe are based on inaccurate figures. We need an independent review to consider the topic so that we do not miss out on what could be a hugely positive and almost instantaneous win for the UK economy.

On 31 December 2020, the UK ended its tax-free shopping schemes for non-EU visitors and did not extend the schemes to EU visitors after the UK left the EU. The Government’s reasoning for that decision was the estimated cost of extending tax-free shopping to EU residents. Incidentally, all EU countries refund VAT on goods purchased by non-EU visitors—those visitors get the VAT refunded on purchases on the high streets and at duty-free shops in airports. Critically, Britain is therefore now 20% more expensive for shopping than any EU destination.

As we know, the entire economy was badly hit by the covid-19 pandemic and the wide shutdown of society during lockdown. Some of our hardest-hit industries were the tourism, culture and leisure, and hospitality sectors, which, owing to the very nature of their businesses, were unable to adapt easily to the hard lockdown rules, the impact of international restrictions, and reduced travel and tourism.

Now, thankfully, the pandemic is over. We have seen tourists return to the UK to enjoy the cultural sites in London, travel to our other great cities across our great country, and visit our picturesque towns and villages—including tens of thousands of visitors, I am glad to say, to my constituency of the Cotswolds. Sadly, however, our tourist industry recovery has not been as strong as that of some of our European neighbours.

All the real trading data from 2022, as international travel resumed, consistently undermines the Treasury’s forecast, which is that tax-free shopping would have little impact on visitor numbers and spending. The actual data on visitor numbers from 2022 and early 2023 show that ending tax-free shopping has had a significant negative impact on the behaviour of international travellers. Many choose to visit the UK, but unfortunately the really high spenders travel to Europe, because it is 20% cheaper to do their luxury goods shopping there.

For example, in 2022, spending by US visitors to the UK was back to pre-2019 pandemic levels, but in France, Spain and Italy it was double. In quarter 1 of 2023, US visitor spending was still just at 2019 levels in the UK, but in France and Spain it was around three times as much as 2019. Unfortunately, the differential is widening. Similarly, spending by Gulf Co-operation Council visitors to the UK in 2022 was around 65% of 2019 levels, whereas in Italy and Spain it was one and a half times the 2019 levels and in France it was double.

Brexit was an opportunity to create change in our economy that truly benefits the UK—creating new opportunities for growth for our innovative and internationally renowned retail, tourism and hospitality sectors. Instead, the EU is enjoying a Brexit bonus at Britain’s expense. Unfortunately, we have a double whammy: British shoppers joining other international visitors to shop tax-free in the EU, not in the UK, but not the same level of increased spending here as in other European countries. British shoppers now spend £1 billion on shopping tax-free in the EU, not here. If tax-free shopping was reinstated, Britain would be the only major European economy where 447 million EU residents could shop tax-free, which would create a huge new tourist market. Britain is missing out on a £1 billion Brexit bonus—a real opportunity for Brexit growth.

HMT did not forecast that that many visitors would be diverted completely from visiting the UK in favour of EU destinations. At the Government’s request, many businesses submitted actual evidence to HMT, in confidence, on the impact of ending tax-free shopping. The submissions show without a doubt that British businesses have suffered hundreds of millions of pounds in lost sales since 2022, and they see it getting worse, as more and more international travellers realise that they cannot shop tax-free in Britain.

In June 2023, the business improvement district for London’s west end, the New West End Company, which my hon. Friend the Member for Cities of London and Westminster (Nickie Aiken) knows well, surveyed its member businesses. More than half—54%—said that they were reviewing their long-term capital investment programmes to take account of the fall in the relative performance of their west end stores compared with their stores in continental Europe. More than one fifth—22%—are considering closing their London stores and relocating to mainland Europe. That is an example of how the UK is losing out.

HM Treasury forecasts that allowing 415 million EU residents to shop tax-free in Britain would generate only 50,000 additional trips annually—0.2% of the 24 million EU visitors in 2019. By the same logic, 66 million British residents now being able to shop tax-free in the EU would generate only an additional 9,000 trips. That is simply not credible. The reality is that in 2022 around 48,000 British people claimed VAT refunds in the EU, worth more than half a billion pounds. In 2023, that figure has more than doubled. We estimate that more than 1 million British residents will spend more than £1 billion on tax-free shopping in the EU, but not in the UK. That is one more proof that the Treasury has out-of-date forecasts.

On 3 August, along with my right hon. Friend the Member for Ashford (Damian Green), I co-signed a letter to the Chancellor highlighting the most recent forecasting report from leading economics consultancy Cebr, the Centre for Economics and Business Research. Its figures were built on an earlier study by Oxford Economics. The two reports were staggering. Cebr forecast additional visitor numbers of between 1.6 million and 1.7 million into this country if the measures were reinstalled, and increased spending of £1.7 billion to £2.8 billion. They each forecast that the GDP of the UK could increase by between £4.1 billion and £9.1 billion annually.

I note that the Treasury forecast is just an extra 50,000 visitors. The slight difference between the data of the Oxford Economics and Cebr forecasts is due to timing, with the former’s report released in October 2022 and the latter’s published in July 2023. However, we now have real consumer behaviour and spending data. By contrast with the up-to-date findings from Cebr, the Treasury’s own figures, on which the Government are making their decisions, come from 2020 estimates. I say to the Minister that the data is quite out of date and so low that it considerably reduces the estimate for visitor numbers and spend.

The Minister recently wrote to me saying that the Government were concerned that the findings of the Oxford Economics study did not match those of the OBR, particularly on the expected number of visitors as a result of introducing tax-free shopping. As I just said, the Oxford Economics forecast is an extra 1.6 million visitors, whereas the OBR forecast is 50,000. However, the Oxford Economics forecasts are being proved right by the real data from businesses that is now coming in, and the OBR figure is being proved significantly wrong.

All the data coming in clearly shows that the reason why the Treasury does not recognise the figure from Oxford Economics is not because the Oxford Economics forecast is wrong but because the OBR forecast is out of date. The Government are understandably acting on figures from the Treasury that they deem to be reliable. To assess the figures and bring some finality to the debate, I wrote to the OBR in May asking whether it could examine the costings and benefits related to tax-free shopping, both for VAT reclaim and duty-free shopping. Unfortunately, I am yet to receive a full response.

Chinese travellers are the biggest spenders of all, and in the last year Chinese visitors spent $258 billion—almost twice as much as visitors from the USA, who are the second biggest spenders at $135 billion—and they have the biggest potential for growth in the UK. Shopping is their No. 1 priority. Ending tax-free shopping in Britain is closing the door on the most important market for the international visitor economy. From 2009 to 2019, I was heavily involved in growing the number of Chinese visitors to the UK from 130,000 to 800,000, which is almost as many as France has. It was largely due to that increase in high-spending Chinese visitors that overall international spending pre-pandemic increased by 60%, from £17.6 billion to £26.4 billion.

The figures are significant. In 2019, some 800,000 Chinese visitors made up 5% of the 16 million non-EU visitors to the UK, but accounted for a staggering 32% of all tax-free shopping in the UK, spending around £1 billion. Of course, the Chinese were not travelling in 2022 because they were still locked down, but a survey of Chinese who had previously shopped in Europe showed that Britain had dropped from the second favourite European destination in 2019, just below France, to the least popular of all major European countries. In 2022, 75% visited France but only a tiny 42% visited the UK.

The Minister has quite rightly been asking for real evidence on the ground; I will give it to her now. Evidence from Heathrow airport shows that Chinese visitor numbers in July 2023 were at 88% of their 2019 levels, but spending in the shops at Heathrow was at just 33%. The Chinese are coming to the UK, but they are not spending money without the option of VAT reclaim.

There is a common perception that tax-free shopping affects only Oxford Street, Bond Street and the west end; however, this issue affects the whole United Kingdom. That is why the campaign has such wide and growing support, not just from colleagues throughout the country in this House but from major airports, hoteliers, cultural institutions and companies. The amounts spent outside London are significant for local economies—for example, Edinburgh, Manchester, Liverpool, Glasgow and Leeds together accounted for £225 million of tax-free sales in 2019.

The direct impact of all this is on retail sales, but there is also a wider impact on hospitality, culture, leisure and manufacturing. Here is another real example: in its annual report, the Dorchester hotel group reported that its Paris hotel was overperforming and its London one was underperforming as a direct result of the end of tax-free shopping. The Royal Opera House, Shakespeare’s Globe, west end theatres and Rank casinos have all publicly criticised the ending of tax-free shopping.

International travellers buy more goods from brands in the countries they are visiting, so British brands such as Mulberry, Burberry and Church’s shoes suffer the most. Mulberry has already had to close its flagship Bond Street store, which it blames solely on the end of tax-free shopping. Just imagine that: Mulberry, after all those years on Bond Street, is having to close. That has an impact on its London stores but also on the manufacturing plants and jobs throughout the UK that depend on the shops that are closing. Burberry manufactures in the north-east, Mulberry manufactures in the south-west and Church’s shoes manufactures in the east midlands, so support from across the country has been submitted in this campaign, demonstrating the real impact of the removal of tax-free shopping.

Just a few case studies include National Museums Scotland’s shop, Essential Edinburgh, Edinburgh Tourism Action Group, Birmingham Chamber of Commerce, Marketing Manchester, North West Business Leadership Team and businesses including Johnstons of Elgin, Church & Co, Boodles and Samsonite. The estimated loss of revenue and jobs will affect regional airports as well as manufacturing in factories in Blyth, Yorkshire and Somerset and high-value shopping areas such as Edinburgh, Dundee, London, Manchester and Leeds.

My hon. Friend the Financial Secretary kindly responded to my letter to the Chancellor yesterday to say that the Government are accepting evidence—I welcome that openness and thank her for that—to inform their policymaking on this issue and ensure that the Treasury has the latest data on the impact of the removal of the VAT retail export scheme. I hope that she and other colleagues will find that this debate adds to the compelling case for tax-free shopping for international visitors.

With all the real-world data emerging by the day showing that HMT’s forecasts are out of data, we urgently need the independent assessment that I referred to earlier on the full impact of tax-free shopping on the UK economy and its tax revenues. I say this to my hon. Friend the Minister: if an independent assessment shows that the full tax impact is either neutral or net positive, the Government must move quickly to restore tax-free shopping before more damage is done to the UK economy. If such a study proves that the Treasury’s figures of £2 billion costs are correct, I will happily accept that and go away and not be a nuisance to her.

[Nickie Aiken (Cities of London and Westminster) (Con)]

International visitors pay VAT when they stay in hotels, eat in restaurants, drink in bars and go to the theatre, so the independent review must look not just at retail but at the possible VAT revenue that the Treasury would receive if there were more international visitors coming here to shop.

[Sir Geoffrey Clifton-Brown]

My hon. Friend makes a really good point. This is what the Treasury figures do not cover at the moment. It is not just the VAT reclaimed; it is the VAT paid on all the other items, such as meals in hotels. And it is not just VAT: it is corporation tax, air passenger duty and a range of other duties that will be brought into the Treasury. That is where the figure of £350 million—our estimate—comes from, so my hon. Friend makes a really important point.

You will be glad to know I am coming to a conclusion, Dr Huq. The Treasury’s figures are based on the wrong methodology that does not consider in full the major upside for the country. I make an urgent plea today to the Financial Secretary. It is time that the OBR or another audit firm did a proper investigation into all the figures, as my hon. Friend the Member for Cities of London and Westminster said, instead of sticking to the figures that were produced for it in 2020. If it proves that the Treasury figures are correct, so be it. But if, as so many experts and businesses believe, there is considerable economic gain from introducing tax-free shopping, it would be an utter tragedy not to do so. Let us consider the real opportunity for growth and invigorate our economy by introducing tax-free shopping for tourists who come to this country.

[Nickie Aiken (Cities of London and Westminster) (Con)]

It is a pleasure to serve under your chairmanship, Dr Huq. I thank my hon. Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown) for securing this important debate. As the Member of Parliament for Cities of London and Westminster, the issue is incredibly important to the economy of my constituency.

International visitors are the lifeblood of so many businesses in areas such as Knightsbridge and the west end, including iconic streets such as Oxford Street, Bond Street and Regent Street. Retail in the two cities accounts for over 4,000 businesses employing approximately 55,000 employees. World famous department stores such as Selfridges and Liberty, as well as the luxury brands along Regent Street and Bond Street, rely on international visitors from China, India, the USA and the middle east. I highlight visitors from those countries and regions because visitors from those areas spend on average 60% more than EU visitors. But of course we are also currently disincentivising visitors from both outside and inside the EU.

Visitors from India and the middle east consistently list shopping as the No. 1 reason for visiting London, according to VisitBritain. Visitors from those areas also state that the tax rate is a consideration when they decide where they wish to travel and how much they are willing to spend when they travel.

I know the Government are committed to supporting retail businesses of all sizes. I thank the Minister for her Department’s strong support over the challenging couple of years that we have endured during the pandemic, but now is the time to kickstart the regrowth of our high streets. She will recognise that reintroducing tax-free shopping would be a boost to the businesses that suffered most in the pandemic as their physical stores were forced to shut and tourists were not allowed to travel.

Many of the luxury brands that visitors love to buy in the shops in my constituency have factories based in the United Kingdom, creating skilled jobs and supporting great British manufacturing. For example, Burberry’s iconic trench coats are handmade in Castleford in Yorkshire.

As a Conservative, I believe strongly in the growth potential of cutting taxes. Tax-free shopping for international visitors is a perfect example of when cutting a tax rate will increase the total amount of taxable spending. It goes back to the point that I made earlier: when we consider how much tax revenue that international visitors bring in, the issue is not just about shopping. We should take tax away from shopping and allow people to claim back tax on it. They are spending millions, probably billions, of pounds. They probably spend more money on the theatre, restaurants, drinking in our bars and going to other tourist attractions and paying VAT on that. That is why I would ask for an independent review of the whole situation in which we look at VAT and other taxes, including national insurance for the increased number of employees we will have if we want to grow our economy. We want to grow our hospitality sector and our leisure and tourism sector. Those are real jobs. Companies pay corporation tax and employee tax.

I truly believe that re-introducing tax-free shopping will provide a much-needed boost to a wide range of businesses across a number of sectors. This is borne out of new research from Oxford Economics and the Association of International Retail that clearly demonstrates that the tax receipts we will take from these connector sectors will far exceed the revenue lost by offering VAT exemptions on visitor shopping. By offering a VAT exemption, we will reverse the trend we have seen since the abolition of tax-free shopping, where international visitors have been choosing to go to Paris instead. UK international arrivals are down 22% since 2019. The pandemic has obviously had an impact, but France’s visitor figures are down by only 12.7%.

I suspect that one of the reasons for the discrepancy is that EU countries still offer tax-free shopping for international visitors. I believe that the French actually improved their tax-free shopping offer for international visitors once we got rid of ours. That shows how important it is to attract visitors into the country—and the French realise this. We know that these visitors are spending less in the UK compared with other European countries. In 2022, spending by visitors in the UK from the US was at 101% of 2019 levels, but in France it was a staggering 226% of 2019 levels. It is obvious that we must do all we can to ensure that London remains the No. 1 destination for international visitors.

Let us not forget that when international visitors come here, they come to London—it is obviously a huge draw to go to the capital city of a country—but they also go elsewhere. They go to Edinburgh, to Inverness to see if they can find Nessie, to York, to Oxford and, of course, to the beautiful Cotswolds. Reintroducing tax-free shopping will lead to more international visitors enjoying the rest of the United Kingdom and the home nations. Since taking away tax-free shopping for international visitors, the number of days that people are coming here for has reduced. People come to London from all over the world, but now, rather than staying for four or five days, they stay for two or three days and then take the Eurostar to Paris to do their shopping. That is what we need to stop. We need to ensure that people come here to enjoy London and the rest of the United Kingdom and to shop here too.

We must reintroduce tax-free shopping. London is one of a small handful of global cities, and I fear that losing tax-free shopping is damaging our reputation as a global city. As my hon. Friend the Member for The Cotswolds mentioned, the Oxford Economics study predicted that by offering tax-free shopping, we could attract more than 1.6 million extra visitors to the UK every year, stimulating an extra £2.8 billion in tourist spending overall. Think about the tax revenue that we could get from VAT on all the other money they spend here. We must not underestimate the huge impact these extra visitors have on the spending in our wider economy, not just in my constituency but across the United Kingdom. I do believe that it was one of the big attractions when people came here.

The key point is that people do not just spend their money on clothes, or jewellery or watches. They spend money in the restaurants they dine in and in the black cabs they take—I checked earlier, and people have to pay VAT on black cabs, so the cabbies should be supporting our campaign here. People also go to theatres and clubs. They spend money across so many sectors.

I know from speaking to restauranteurs, theatre owners and other stakeholders, such as UKHospitality, that they are all united in wanting tax-free shopping for international visitors to be reinstated. Many of these businesses tell me that they are struggling to get back to their pre-pandemic levels of business and believe that a large part of that is a reduction in foreign visitors, who are preferring to go to Paris or Milan.

The Cities of London and Westminster can be seen as a jigsaw in many ways. The hotels, restaurants, shops, bars, cafés and theatres fit together neatly as an impressive tourist offer. Tax-free shopping has become the missing piece of that jigsaw. If it is returned, it will benefit not just my constituency and retailers, but thousands upon thousands of businesses across this country. That is why I call on the Government to review the whole situation and consider reintroducing tax-free shopping for all international visitors from the EU and outside it.

--- Later in debate ---

[Victoria Atkins]

In fairness, it may be that people do not know that it is available. I do not know whether shops or brands advertise it to their customers. If a consumer is buying a larger item, they may think it much more convenient to have it sent home. The scheme is available should shoppers wish to make the savings described in the debate.

I acknowledge this has not been the case today, but some people call the current situation a “tourist tax”. Again, that is not correct, because the change in the law that happened a couple of years ago means that we simply expect overseas tourists to pay the same amount of tax as British people do when making a purchase, especially when so many countries—including some of the alternative shopping destinations that can be mentioned—do impose a genuine tourist tax on their visitors. So please let us not refer to it in that way, because that would not be correct.

My hon. Friend the Member for The Cotswolds understandably referred to a 20% saving from such VAT refunds, but that assumes that shoppers receive all the VAT back. In reality, we know that the companies processing refunds, who are sometimes the retailers themselves, charge significant administrative fees for the service. Indeed, one third of VAT RES users surveyed by HMRC were charged more than 50% of their refund in fees, and the average was 36%, so the savings to the consumer may be far less than the 20% rate of VAT.

To try to set in context the environment in which I am considering this request—alongside many others—since we voted to leave the European Union in 2016, the Treasury has received some £50 billion-worth of helpful suggestions and requests for products or items that should be zero-rated or have VAT relief applied to them. Cases are made in different debates on different subject matters where we are asked to make VAT relief decisions. Of course, VAT remains our third most productive tax in the UK, and it helps to support many of the public services that we all care so deeply about. Those are serious considerations that we must take into account for any request for VAT relief that we receive.

I completely understand the intentions behind my hon. Friend’s work—indeed, I commend him on it—and I share his wish to ensure that the UK remains an attractive place to visit and that support for our retail sector and high streets is strengthened. Both intentions and aspirations are shared across the Government. Therefore, if I may, I will take a couple of moments to help the House understand what we have done to achieve exactly that.

Through VisitBritain and the GREAT campaign, we have invested significantly in marketing the UK both domestically and internationally to stimulate demand and support recovery. According to updated forecasts from VisitBritain, there are due to be 37.5 million visits to the UK this year, which is some 92% of the level seen in 2019 before the pandemic, and inbound visitor spending is forecast to be £30.9 billion, which is up 9%. Those updates follow the stronger recovery we are seeing, with spending by American visitors up 42% to a record £6 billion last year alone. Sadly, international visitor numbers are still below 2019 levels for all G7 members and large European countries in 2022 and 2023, but of course that comes against the backdrop of the UK economy doing much better than was forecast over the last year or so, as we saw really encouraging growth figures more generally for the economy last week. Rather than ours being the weakest post-pandemic recovery in terms of visitor numbers, the post-pandemic recovery in the UK has been stronger than in countries, such as Germany and Japan, that continued to offer VAT RES. Post-pandemic recovery in the UK has also been stronger than in the United States and Canada in both 2022 and 2023.

We want to make sure that the tourist experience in the UK is as great as it can possibly be. One of the ways in which we have tried to reduce the bureaucracy and the barriers for tourists coming into the UK is by creating an exemption from visa requirements through our new electronic travel authorisation scheme to boost international tourism numbers, with visitors from the Gulf Co-operation Council states and Jordan being the first to benefit. We have also worked with industry to set up the tourism industry working group on international competitiveness and demand, which has been established to recommend practical policy options to support tourism recovery.

[Nickie Aiken]

I was interested to hear about that new collection of people working together to improve the tourist offer. If that group recommended that VAT RES be reintroduced to help the growth of tourism, would the Treasury be minded to accept that recommendation?

[Victoria Atkins]

My hon. Friend will know that that group will not necessarily have access—in fact, I would be surprised if it did—to the macroeconomic data that the Treasury, the OBR and others, including the retail industry itself, have. We understand that every decision we make will be scrutinised in due course by the independent Office for Budget Responsibility, so there are processes that we have to go through. As I have said, however, and as I will repeat in this speech, we are very keen to hear evidence and data from the retail sector. We very much keep this policy under review.

In respect of high streets, it is argued that the reintroduction of the VAT RES scheme would be a useful move to support our world-leading retailers. This Government are proud to have provided huge support to the retail sector, not least through the extreme challenges that that sector faced during the pandemic. Hon. Members will recall the measures that we took to ensure that the sector paid no business rates—support that was worth £16 billion to businesses in the retail, hospitality and leisure sectors throughout the pandemic—as well as the very practical support measures such as the furlough scheme, bounce back loans and even small business grants for the smaller businesses in our communities, all of which helped to secure and safeguard millions of jobs across the UK economy and keep businesses surviving through that very difficult time. We would argue that that support helped to keep our high streets, our retail centres and our communities thriving.

We clearly recognise the importance of retailers and will continue to act effectively to support them. At autumn statement 2022, the Government announced business rate changes and tax cuts worth more than £13.5 billion over the next five years, which will support the retail, tourism, leisure and hospitality sectors, as well as other parts of the economy. These announcements included a freeze to the business rates multiplier for 2023-24, which is a tax cut worth £9.3 billion over the next five years, meaning that all bills are 6% lower than without the freeze.

We also introduced an Exchequer-funded transitional relief scheme, which many sectors had asked for and which is worth £1.6 billion, to protect an estimated 700,000 rate-payers facing bill increases due to the increases in rateable value. Indeed, I have had the pleasure of visiting that great British company John Lewis, on Oxford Street, to see for myself the positive impact that these and other changes have had on that really important British business.

[Nickie Aiken]

I thank the Minister for giving way yet again. I am interested in what she says about a great British company such as John Lewis, which is based in my constituency, and its flagship branch in Oxford Street, which is also in my constituency. Does she agree that, if we are to encourage people back to places such as Oxford Street—the nation’s high street—those places have to have a great offering? They have to look good, be clean and have brilliant shops, and not so many of the candy stores and that type of retail offer, which we seem to have at the moment and which is really disappointing. Also, the Mayor of London has a huge role to play in ensuring that there is a tourism offer, and the current Mayor is letting down London.

[Dr Rupa Huq (in the Chair)]

Order. May I just say that we are straying from the subject matter, which is tax-free shopping? Also, when you say “you,” that means me. I did not do anything—it is “the Minister”.

Financial Services Reforms

Nickie Aiken Excerpts

Tuesday 11th July 2023 Commons Chamber

[Andrew Griffith]

My hon. Friend the Minister for pensions is proceeding at pace to deliver that important element in people’s ability to access the most information. It is just one component. We want people to have good pension choices and to understand the ways that investments are being made. The hon. Gentleman will understand, because we have engaged in the past about pensioners not necessarily having had the best information available to them in a regulated way, that it is better to be right in this case than to be fast.

[Nickie Aiken (Cities of London and Westminster) (Con)]

I was delighted to attend the Mansion House dinner last night as the Member of Parliament representing the City of London and to listen to excellent speeches by the Lord Mayor and the Chancellor of the Exchequer. Does the Minister agree that the Mansion House compact will do much to secure the City of London’s position as a global powerhouse in the financial services sector and will also create more jobs across the country?

[Andrew Griffith]

My hon. Friend, who knows so much and speaks so lucidly for Cities of London and Westminster, is absolutely right. These are a bold and ambitious set of reforms. They will not just help communities across the whole of the United Kingdom—I never fail to remind the House that financial services touch almost every constituency—but continue to underwrite the strong and leading position of the City of London, which she so ably represents.

The Growth Plan

Nickie Aiken Excerpts

Friday 23rd September 2022 Commons Chamber

[Kwasi Kwarteng]

I do not admit that at all. In fact, the gamble was to do nothing. The gamble was to stick on the path that we were on and simply raise spending and taxes and think that, magically, we were going to get to the promised land. That was not a credible path; this is.

[Nickie Aiken (Cities of London and Westminster) (Con)]

I certainly welcome the comprehensive growth plan that the Chancellor has outlined today. I particularly welcome the reintroduction of tax-free shopping for international visitors. I hope that that also now includes EU citizens. It sounds like this Chancellor and this Government are very much a reforming Government and I welcome that. Can my right hon. Friend please guarantee that he will consider now reforming one of our most antiquated and punitive taxes—business rates?

[Kwasi Kwarteng]

We are having a tax review to fit our tax system to the 21st century. I pay tribute to my hon. Friend and her campaign on VAT and duty-free shopping. We engaged on that when I was the Business Secretary, and I hope that we can deliver on her vision.

Health and Social Care Levy Bill

Nickie Aiken Excerpts

2nd reading
Tuesday 14th September 2021 Commons Chamber

[Nickie Aiken (Cities of London and Westminster) (Con)]

I am a low-tax Conservative, but I have concluded over many years that if we are to resolve the social care crisis, it is necessary to raise the money to pay for it. I therefore support the introduction of a national health and social care levy. Pandemic or no pandemic, we have to raise the funds somehow. I feel that successive Governments, whether Labour, coalition or Conservative, have failed to address the social care crisis in this country because they were too scared to face the fact that we would have to raise the funds—until now. Well, the Prime Minister has made the brave decision to do it, but with that decision to raise funds must come reform.

I accept that the pandemic has meant that we now have a huge NHS waiting list of more than 5 million people. If we do not address that, it will only increase. I therefore accept that the money, in the first year or so, has to go to the NHS. However, as we have heard from across the Chamber over the last couple of hours, we must have reform. We cannot allow the money to continue to go into what has been described as a black hole.

When I was the leader of Westminster City Council, 40% of my budget was for social care and adult social services. That is an incredible amount of money. We know that people are living longer, whether in their own homes or in care homes. We have to ensure that local authorities are properly funded to provide the frontline services that they do. The Local Government Association claims that there is a gap of more than £2 billion, so I ask the Government to ensure that, in the spending review, local authorities are given the funding they need to address the immediate social care issues that they face.

During the summer recess, I was proud to spend a week looking after my father, who has advanced Alzheimer’s, while my mother had a respite holiday. It was a pleasure, but it was also very difficult. I pay tribute to all those family members who look after their loved ones who have dementia and Alzheimer’s. Our society owes them a huge debt. I hope that the money raised from this levy will go towards helping partners who look after their loved ones with respite care, and towards providing brilliant care workers—whether in care homes or providing care at home—with the pay and conditions that they deserve. Throughout the pandemic, they have shown what a brilliant service they provide.

I support the Government this evening, but I hope that we will see reform along with the tax rise.

Spending Review 2020 and OBR Forecast

Nickie Aiken Excerpts

Wednesday 25th November 2020 Commons Chamber

[Rishi Sunak]

The reason I talk about the things that we have done is that they last all the way through the winter to next spring, whether it is the VAT cut or the business rates holiday. I have consistently come to this Dispatch Box to support the hospitality industry. Many times I have been accused of doing the wrong thing by Opposition Members, but the local restrictions grants that we put in place will last through the winter, which means that if a pub is closed, it will receive up to £3,000 per month. When we look at the average rateable value of a pub in England, we see that the vast majority of small and medium-sized pubs will have their rent covered by that. Of course, they can furlough their staff as well, and those pubs operating in tier 2 areas under restrictions will still get a grant worth 70% of that value. Of course we are trying to do what we can to support the hospitality sector. I have done that since the beginning of this crisis, and I will keep doing so.

[Nickie Aiken (Cities of London and Westminster) (Con)]

I congratulate my right hon. Friend on his statement today and on his stamina, as mine will be the 80th question he has answered so far this afternoon. Rough sleeping and tackling the causes of rough sleeping are subjects close to my heart. Sadly, in my constituency, we see more rough sleepers than in any other constituency in the United Kingdom. Will my right hon. Friend give me an assurance that today’s statement will provide financial support so that we can focus on the Government’s priority to end rough sleeping by 2024?

[Rishi Sunak]

I can give my hon. Friend that assurance. I think £254 million has been made available to local authorities to help them to end rough sleeping. That is a 60% increase in cash terms on the money available this year. She is absolutely right to say that this is something we must end, and I know that the funding will make an enormous difference in her constituency. I know this is an issue that she cares passionately about.

Financial Services Bill

Nickie Aiken Excerpts

2nd reading & 2nd reading: House of Commons & Programme motion & Programme motion: House of Commons & Ways and Means resolution & Ways and Means resolution: House of Commons
Monday 9th November 2020 Commons Chamber

[Nickie Aiken (Cities of London and Westminster) (Con)]

I am grateful for the opportunity to speak in this debate and to highlight, as other hon. Members have, the invaluable contribution that the financial and professional services industry makes to UK plc: more than 60,000 companies providing 2.3 million jobs and 10% of the UK’s overall gross value added. While two thirds of those jobs are outside London, I must stand up for my constituency by saying that the City of London alone contributes approximately 25% of the sector’s GVA.

I have spoken to businesses and business groups in the City of London, who are broadly in favour of the Bill’s overarching objectives. They want to see an efficient regulatory framework after our transition from the EU and would welcome in particular changes that help to ensure the UK’s regulatory regimes are more coherent and attractive to international firms. They also strongly believe that the new regime must maintain the highest of global standards to maintain the sector as a strategic national asset and ensure sound capital markets. Businesses also welcome the clear way in which the Treasury and my hon. Friend the Economic Secretary to the Treasury have sought their views in coming to their position and are keen to maintain a dialogue as the Bill and the future regulatory framework review progress.

I will turn, if I may, to address the specific content of the Bill. Businesses in my constituency are supportive of the Bill’s objective to enhance the UK’s world-leading prudential standards and promote financial stability, but they would appreciate clarity from the Government on specific clauses. In particular, with regard to the implementation of Basel III, as some businesses have been working towards the implementation of EU capital requirements regulation 2, further guidance would be welcome on how the UK regime may differ from the EU regime. With regards to the LIBOR wind-down and benchmarking, again I urge the Government to ask the FCA to provide the further detail and clarity that businesses require as soon as possible.

I turn to how the Government intend to promote openness between the UK and international markets. The businesses I spoke to in my constituency again welcome the changes, but, crucially, they would also welcome further clarity on how the Treasury intends to make equivalence decisions under the new frameworks. Business would also welcome assurances from the Government that they will continue to look to improve the UK’s global competitiveness. I would like the Bill to be more explicit in that area and expressly signal the objective to maintain and even expand our competitiveness on the world stage. I hope the Government will continue to work with the financial sector to ensure that that crucial aspect can be developed in relation to further rules and, in particular, when considering differing international tax regimes and access to talent.

I turn to the Bill’s third objective: maintaining the effectiveness of the financial services framework and sound capital markets. These provisions have been broadly welcomed. As businesses in my constituency know that an effective financial services framework has a significant impact on both business and customers, ensuring clarity in regulation and providing sound support mechanism for customers must be welcomed. However, the Bill also enshrines significant powers in regulators. I ask Ministers to consider whether they are satisfied that existing appeal mechanisms are sufficient. Will they increase the level of autonomy given to regulators? May that be worthy of consideration in the House at another time? In that vein, I would welcome from the Government a financial services strategy for the sector. That may enable arm’s length financial regulators to ensure that they interpret the “have regard to” objectives in the context of the Government’s vision for the sector.

Finally, in the light of the ongoing covid-19 crisis, the objective of maintaining sound capital markets should not be underestimated or forgotten. The capital market provides a vital source of funding for businesses, alongside the lending market. The measures in the Bill will help to support a market that is vital to the re-energising of the economy post covid.

I encourage the Government to consider, with one eye to the future, how the Bill demonstrates UK leadership in addressing digital and sustainability-related regulatory challenges, because although a recovery from covid may dominate the short-to-medium term, the continued development of FinTech and our response to the global climate crisis will surely be long-term considerations for the financial sector.

The Bill should be welcomed as a necessary but early step as we leave the EU, but a fuller, more comprehensive overhaul of the UK’s regulatory framework is required to ensure that the UK—and in particular the City of London in my constituency—retains its competitiveness as a global financial centre. I look forward to working with businesses and Treasury Ministers throughout the passage of the Bill and the others that will surely follow to implement the necessary changes to ensure just that. I commend the Bill to the House.

Future of Financial Services

Nickie Aiken Excerpts

Monday 9th November 2020 Commons Chamber

[Rishi Sunak]

It would not be right for me to give a day-by-day commentary on the negotiations. As we heard from the Prime Minister at the weekend, we have made significant progress. Those talks are ongoing and it is clear that a deal can be done, but it will require both sides to act constructively. We remain ready to do that and are working hard at it.

[Nickie Aiken (Cities of London and Westminster) (Con)]

I welcome my right hon. Friend’s statement. Yet another statement—he seems to be here more often than not. Although I recognise that two thirds of the 1 million-plus jobs that the financial services industry supports are outside London, it is the City of London, in my constituency of Cities of London and Westminster, that is the heart of financial services in this country and supports those jobs across the UK. What further measures will the Government take post transition to ensure that the UK maintains and enhances its global competitiveness in the financial services sector?

[Rishi Sunak]

My hon. Friend is rightly proud of this industry, given her constituency, and she is right that we should not rest on our laurels. We may be world beating today, but we want to remain the most competitive place to do business. The initiatives that we have launched today, for example the listing reform, which was mentioned, the investment funds regime reform, or Solvency II, will provide opportunities for us to tweak and flex our regulation going forward, and attract capital and business so that the industry can continue to grow and go from strength to strength.