Cut Tourism VAT to 5%

Guto Bebb is backing a national campaign calling for the Chancellor to cut VAT on tourism from 20% to 5%, which would result in a £7.6m boost to the local economy. 

The Cut Tourism VAT Campaign is run by a coalition of hotels, self-catering, caravan sites, B&Bs and visitor attractions calling on the Government to boost the economy in the upcoming Budget by cutting VAT on tourism, as 25 of the 28 countries in the European Union already do.

Reducing VAT on tourism to 5% would not only make the UK more competitive with other destinations within Europe, but would also increase the affordability and attractiveness of regional tourism hotspots and generate more investment for local businesses.


He took the opportunity during Wales Tourism Week Guto Bebb to repeat his call for this VAT cut during a debate in the House of Commons. Here is the speech Guto Bebb gave in a Westminster Hall:


It is a pleasure to serve under your chairmanship, Ms Dorries. I join other Hon. Members in congratulating the Hon. Member for Ceredigion (Mr Williams) on securing this debate, which is appropriate at the beginning of Wales tourism week. I was pleased to be part of a small group that welcomed representatives of the tourism sector in Wales to the Wales Office yesterday, and on Thursday and Friday I will be getting involved with that sector in my constituency, to highlight its importance to the economy in my part of North Wales.

I am taking part in the debate very much in my role as a constituency MP. My constituency is the second most dependent on tourism in the country, if the experts are to be believed. It has everything from seaside resorts such as Llandudno to historical towns such as Conwy; it has the Conwy valley, and access to Snowdonia via Betws-y-Coed. Tourism is a vibrant and growing sector of the economy, and in many ways it shows what small rural businesses can do.


The Government has a great track record of support for small businesses such as those in the tourism sector. Many will be sole traders, or husband-and-wife partnerships, and the significant increases in the personal allowance will make a difference to the profitability and value of those individuals’ businesses. The increase in the tax free allowance is a huge contribution to the well-being of those who run small tourist-related businesses.


The reductions in corporation tax also have an effect, but just as important, from the point of view of a sector employing so many staff, is the introduction of the employment allowance—in effect a national insurance rebate. That makes a huge difference for those businesses who employ staff.  Finally, there have been changes to business rates, including the business rates rebate, which also makes a difference to small tourism providers. So the story is not one of the Government ignoring the small business sector. There is plenty of evidence of support being offered but we seem to have a problem getting the message across about whether a VAT reduction would make a significant long-term difference.


I am persuaded of the evidence, but I agree with the hon. Member for Southport (John Pugh) that there is unlikely to be an announcement in the Budget tomorrow. However, it is important to keep a watching brief. I find it hard not to agree with the recommendation that the Treasury embark on an independent examination of the evidence in relation to the cost of such a change. If it pointed clearly to a huge implementation cost, we could be persuaded that the Treasury is right in its approach to the issue; but if an independent analysis of the evidence suggested that the campaigners’ arguments are valid, there would be a good reason to reconsider the calls to reduce VAT within the sector.


There are examples on which we can build. I was one of the MPs who campaigned vigorously against the proposal to impose a 20% VAT rate on static caravans, and I am delighted to say that the Treasury listened. It is no bad thing for any Department to listen to points made by Back-Bench Members on behalf of their constituents and I applaud the Treasury for doing so on this occasion. I was disappointed by the comments of the hon. Member for Angus (Mr Weir), who dissuaded me from thinking that I might have an influence on Government policy. As I have a cable car in my constituency, I thought my efforts towards a reduction in VAT to 5% for tourist attractions were just as important as those of the Chief Secretary to the Treasury. 



Finally, I have spent a significant time on the Public Accounts Committee during this Parliament where we have spent a significant amount of time talking about tax avoidance, which clearly we should strongly condemn. However, we need clarity about the fact that the tax system should not create a situation that discourages businesses from growing. That is exactly what 20% VAT in the tourism industry does.


A good-quality local bed and breakfast whose turnover hits the £80,000 threshold has a choice: increase turnover to £96,000 to stand still, or close for the rest of the winter. I find it unacceptable when I see small businesses in places such as Betws-y-Coed or Llandudno deciding to close for the winter, because, being honest individuals, they do not want to avoid paying any tax that is due, but increasing turnover to a level at which they will still benefit from their efforts is far too challenging. That VAT threshold keeps businesses from growing.  I know this to be the case and I am ashamed of any tax policy that has such a negative impact.


Any policy that prevents businesses from wanting to grow and serve their customers’ needs to be looked at again.  In considering the 5% VAT target for the tourism sector, the key thing for the Treasury to examine is whether the 20% threshold stops good businesses growing. If the evidence suggests that it does, then action should be taken.…