MPs propose tourism VAT cut

The VAT rate should be slashed for businesses in the tourism and hospitality sectors.

This is according to a group of MPs who secured a Westminster Hall debate on lowering the VAT rate for tourism and hospitality to five per cent from 20 per cent.

Margaret Ritchie MP, who called the debate, said: “To have a reduction in VAT is very important from a tourism point of view from the perspective of economy and jobs. Tourism is an absolutely vital industry for our islands, providing 10% of GDP and supporting over two million jobs in the UK.”

According to the Campaign for Reduced Tourism VAT, 24 of the 28 EU member states have reduced tourism VAT rate. The Campaign is supported by 3,500 businesses in the tourism industry.

During the debate MPs cited the work of Professor Adam Blake, and advisor to the Treasury who modelled a VAT cut. According to Mr Blake a reduction to 5 per cent on visitor accommodation and attractions would generate an extra £4 billion in GDP each year, and “would be fairly close to fiscal neutrality.”

But Treasury minister David Gauke responded with scepticism to the proposals. He said: “Funding the cut by additional borrowing would be contrary to our long-term economic plan to get the deficit down and put our public finances in a credible position. It would entail a risk to the recovery.”

What do you think? Should VAT be cut for tourism and hospitality? Let us know in the comments.