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MP asks PM to put his money where his mouth is on Tourism
Following the speech today by the Prime Minister, David Cameron, on the importance of Tourism to the British economy, Mike Hancock, is demanding that the PM puts his money where his mouth is. In Portsmouth, Tourism generates £500 million for its economy every year and supports 10,000 jobs.
Mike has written to the Prime Minister asking that the Government reduces VAT on tourist attractions. Virtually every European Government has a reduced rate on VAT for these. A report for British Association of Leisure Parks and Piers and Attractions (BALPPA) said that reducing VAT would boost business and mean that the Government was actually gain £700 million in extra revenue and it would create 26,000 extra jobs.
Mike said: "The PM asks in his speech why this country is lagging behind other European countries on Tourism. May I suggest that our competitive disadvantage on VAT may be a considerable reason why. This is one tax cut that even the Chancellor should approve of, as research shows that cutting VAT on tourist attractions and hotels would increase the Government's tax take overall due to increased business.
"I hope the PM will now put his money where is mouth is and cut VAT on tourism. And I will be campaigning for the Government to do that and raising it in Parliament."
The MP has vowed to raise the issue in Parliament when it returns and put down a Parliamentary motion.
He also wants the PM to back towns and cities like Portsmouth with extra cash for marketing and development as a tourist destination.
There is more on the economic impact of Tourism on Portsmouth at http://www.visitportsmouth.co.uk/site/tourism-industry and details of the BALPPA report on the effect of reducing VAT is at www.balppa.org/admin/downloads/Press-090308.pdf
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Rt Hon David Cameron
Prime Minister
10 Downing Street
London SW1A 2AA
OUR REF: MA/TOURISM
12 August 2010
Dear Prime Minister
I am writing to thank you for your speech today on Tourism. It is an industry that is important to the country as a whole and particularly important to my city, Portsmouth. You say Britain must try harder on Tourism. I agree. But that also includes the Government. I am writing to you to urge you to do two things. Firstly reduce VAT on tourist attractions. And secondly give local councils and other bodies more money to market Britain as a tourist attraction.
A key problem for this country is that we levy VAT at the full rate on tourist attractions and hotels etc. In most European countries this is not the case and they attract a lower rate of VAT. All EU member states except for Denmark, Bulgaria and Romania currently apply reduced rates of tax for tourism services. Reduced rate VAT accounts for one third of the entire European tax revenue.
Obviously this directly affects our competitiveness in the international tourist marketplace. Being more expensive with this additional cost is a particular problem at the moment with the difficult global financial situation as consumers and tourists across the world become more price sensitive. This will also apply to the emerging markets you highlighted in your speech such as China and India which as you say have a very great deal of potential for tourism.
Obviously most exports and foreign currency earning industries pay the local rate of sales tax in the country that they are exporting to. This is not the case for tourism where of course the local rate of VAT for the country itself has to be paid. This puts the tourist industry in a fairly unique position.
A recent report by The British Association of Leisure Parks Piers and Attractions (BALPPA) showed that a cut to the standard 5% UK reduced VAT rate on tourist attractions admission and accommodation will boost employment and result in gains of up to £760 million savings in social security payments increased income and corporation tax. It also predicts an additional £440 million will be injected into the industry supply chain. Research shows the measure would also create 26,000 extra jobs.
In your speech you posed the question as to why Ireland was doing better on Tourism. BALPPA report that reducing VAT on tourism services played a key role Ireland's economic revival. Foreign exchange receipts have increased by €170 million since Ireland reduced VAT in 1986.
In your speech, you wonder why Britain is lagging behind other countries on Tourism. Can I suggest that the VAT situation may be a considerable reason why.
The Government could immediately help by saying that it will not increase VAT to 20% on tourist attractions in January. But I hope it will go further by introducing a reduced rate for tourist attractions.
Secondly the Government could help by increasing the amount that local councils and tourist boards have to promote their areas, regions and Britain in general as a Tourist attraction.
With the immense pressure at the moment on local council budgets, there is a danger that councils, after funding their statutory services will have to cut non-core activities such as tourism marketing and economic development. I would therefore urge the Government to create a ring-fenced grant to help councils market their areas as tourist attractions - if needed coming together with other councils, bodies and businesses in their regions. Again a win-win situation for the Government - ultimately increasing economic activity and the Government's tax take.
Britain with its rich culture, heritage and historic ties to countries around the world has, as you outline in your speech today massive more potential to offer as a tourist destination.
It is disappointing that the lack of action by the previous Government left us at a competitive disadvantage. Your Government can act to rectify that.
And, as I say I am grateful for your interest in Tourism as it is very important to Portsmouth and my constituents as well as the country. I, therefore, look forward to the Government taking the action outlined in this letter. This is a win-win situation. It will improve the Government's finances and it will improve the country's finances.
I look forward to receiving your response and perhaps more importantly hearing about the Government's actions, particularly on the issue of VAT for tourist attractions.
Best wishes
MIKE HANCOCK CBE MP
CC: Chancellor of Exchequer, Secretary of State for Business, Innovation and Skills, Minister for Tourism.
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