UK Government rejects push by Welsh MPs for a cut in the tourism VAT rate

By David Williamson,

The UK Government has rejected a push by Welsh MPs to lower the tourism VAT rate.

Last year the cross-party Welsh Affairs committee urged the Government to “review” its policy, “with the ultimate aim of reducing the current 20% rate”.

However, the Government has batted away the proposal in its official response to the report, claiming that it would have to either increase borrowing or raise taxes to meet the cost.

It states: “The Treasury estimates that a cut in VAT to 5% for accommodation and attractions would have a cost of up to £2.7bn to the Exchequer. Given the current fiscal climate, these costs would have to be met either from increasing other taxes or from increased borrowing.

“This Government’s priority is to tackle the record budget deficit in a decisive but fair way, to restore confidence in our economy and support the economic recovery…

“However, Treasury ministers have been working closely with the industry to increase both inbound and domestic tourism. The Government does recognise the importance of the tourism and hospitality industry, and is providing additional support to these businesses in a number of ways.”

The Cut Tourism VAT campaign claimed in November that a reduction from 20% to 5% would “create almost 6,000 jobs in Wales, and boost the Welsh economy by over £165m”.

In the committee’s report, fears were expressed that the “refusal of the UK Government to reduce the VAT rate for the tourism industry, unlike most other EU states, could be having a detrimental effect on the Welsh tourism industry.”

The Welsh MPs also called for UK Trade & Investment to have a greater focus on the nation, pointing out that some of the poorest households in Northern Europe were found in West Wales and the Valleys.

They argued UKTI had a “crucial role in helping address geographical wealth inequalities” and pointed to the example of German Trade and Investment to reduce disparities, adding: “UKTI should be mandated by the UK Government to perform a similar function.”

In response, the Government noted that “London has local authorities that rank among the most deprived in the UK, such as Newham, Hackney and Tower Hamlets”. West Wales and the Valleys, it added, have “a significant competitive advantage when attracting capital investment versus most of the rest of the UK and Western Europe” because it is designated as an assisted area where “the maximum proportion of a project cost that can be met by the state is higher”.

The MPs called for a “dedicated trade promotion agency” that could work either as part of the Welsh Government or as a private sector body to drive inward investment projects into Wales.

The UK Government states: “It is for the Welsh Government to determine their structures or ways of working however UKTI would be happy to share its experience is requested.”

A further demand by the MPs is that on UKTI ensures a “regional spread of businesses are included on overseas trade delegations and that Welsh companies are given opportunity to participate”.

The Government responded: “UKTI is surprised at suggestions that Welsh companies are not sufficiently encouraged to participate. It does however, welcome the challenge, and will redouble efforts to ensure that participation is truly representative of the UK.”

It adds that the “Wales Office will inform Welsh MPs and Assembly Members about forthcoming trade delegations so that business can be informed” and urges the Welsh Government to “do the same”.

The committee wants to see the “Wales Office and Welsh Government seek greater opportunities for joint overseas trade delegations”.

The UK Government states it is “fully prepared to engage with the Welsh Government and be involved in joint trade missions, where appropriate.”

The committee also called for the UK Embassy in Argentina to “have a specific strategic goal to help promote the Welsh language in Patagonia and foster relations between the region and Wales.”

In response, the UK Government stated: “The British Embassy works closely with the British Council on promoting both the Welsh language and culture in Argentina. Currently we have a specific focus on celebrating the 150 anniversary of Welsh settlement in Patagonia.”

The MPs were alarmed that Wales has the “third smallest number of international visitors” of any UK region and blamed a “a lack of awareness internationally about Wales’s strengths as a holiday destination”.

They warned of a lack of a “coherent brand for the overseas market” and called for a “strong and clear narrative about the country’s historic and modern aspects and its attractions for tourists”.

The MPs wanted Visit Britain and the Welsh Government’s Visit Wales to have a strategy in place by next month to promote Wales as “a first choice destination for international visitors to the UK.”

In its response, the UK Government states: “From September a member of Visit Wales has been embedded in VisitBritain’s London office to better represent Wales. Visit Britain and Visit Wales are also exploring opportunities to work together on commissioning research, running familiarisation trips for international media and trade, marketing promotions on territory and working with commercial partners.”

Sourced by Wales Online

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