Larking Gowen tourism survey prompts call for more MPs to back VAT cut

Chris Scargill of Larking Gowen.

Chris Scargill of Larking Gowen. - Credit: Archant

East Anglian tourism businesses calling for a cut in VAT for the sector have yet to win the support of most of the region’s MPs.

According to the latest Tourism Business Survey, compiled by regional accountancy firm Larking Gowen, only four MPs from Essex, Suffolk and Norfolk have signed up as supporters of the industry-led Cut Tourism VAT campaign – despite claims that a reduction would actually boost the Treasury’s income.

The campaign calls for the UK to fall in to line with 25 of the European Union’s 28 member states which have a reduced rate of VAT for tourism businesses while those in Britain have to apply the full rate of 20%.

The Cut Tourism VAT campaign says that a reduction in VAT to 5% for tourism businesses would generate an extra £4billion a year for the UK economy, by attracting more overseas visitors, encouraging domestic tourism and creating 120,000 new jobs, so producing an extra £3.9bn in tax income for the Government over 10 years.

In the East of England alone, the campaign says a reduced rate would add 6,700 jobs to the 225,500 directly employed in hospitality and boost the regional economy by £355m.

Chris Scargill, tourism and leisure partner at Larking Gowen, said the campaign offered a “beacon of light” for businesses striving to find the competitive edge against cheap European holidays and it was surprising that only four of the region’s MPs had indicated their support.

“With the inevitable cuts to funding, a loud political voice in favour of our economic engine is surely what the region needs,” he added.

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MPs who have signed up in support of the campaign include Conservatives Peter Aldous (Waveney) and George Freeman (Mid Norfolk), Liberal Democrat Sir Bob Russell (Colchester) and UKIP’s Douglas Carswell (Clacton).

Mr Aldous says in the survey report: “The UK is currently operating with one hand tied behind its back as the majority of European countries have more competitive rates.

“The economic case for a cut in tourism VAT, using the Treasury’s own model, has been proved and I urge the Government to consider carefully the compelling case which has been made.”

The call for a cut in VAT for UK tourism businesses has become all the more urgent as a result of the current weakness of the euro against the pound and the Government’s decision to abolish Air Passenger Duty for children travelling abroad from May, both of which will make foreign holidays cheaper for Britons.

Nearly three quarters (72%) of tourism-based firms reponding to Larking Gowen’s survey believe VAT on tourism and leisure-related activity should be reduced, with only 10% opposed to such a move.

Of those supporting a reduction, nearly nine out of 10 (88%) believe the rate should be cut to either 5% or 10%, although more than two thirds (69%) do not expect it to be reduced to less than 15%.

The annual survey, which has been extended this year to cover Essex as well as Suffolk and Norfolk, shows the region’s tourism sector to be in confident mood, with two thirds (66%) of firms having seen an increase in turnover last year and a similar number (68%), expecting growth this year.

More than half of firms (55%) also reported an increase in profit during 2014 with slightly more (59%) expecting an improvement this year.

The sense of optimism also extends to job creation, with 22% of tourism firms in Suffolk expecting to increase their staff numbers this year, 21% in Essex and 17% in Norfolk, with only 3% in Suffolk and Norfolk expecting to cut numbers and none at all in Essex.

The lack of support among MPs for a cut in VAT is perhaps reflected in a wider scepticism concerning political support for the tourism and leisure industry.

Asked which party was most supportive of the sector in the region, nearly six out of 10 firms (59%) replied “None.” The Conservatives achieved the next highest score (27%), followed by the Liberal Democrats (5%), the Green Party (4%), Labour (3%) and UKIP (2%).