In January 2011, the Government introduced an increased VAT rate of 20 per cent,rocking the hospitality industry which was already struggling to cope with the effects of the recession. During a live Q&A session with Global Radio in Manchester earlier this month, Cameron admitted the coalition government are now in a ‘difficult’ position to bring the rates back down, as other industries are apparently making just as good an argument.
“We introduced the new VAT rate because we had to deal with this budget deficit," said Cameron. "When I came in as Prime Minister, we had the biggest the biggest budget deficit of virtually any country anywhere in the world, it was a similar size to Greece.
“You can’t deal with it only by cutting spending, you have to look at taxes as well, and so VAT was one of the taxes that went up.
“There are always good cases for cutting VAT on individual items - the leisure industry and the hotel industry makes a very good argument. But as do other industries - people say to me ‘why not cut VAT on repairing houses?’
“There are lots of arguments for cutting VAT, people have to come up with a very good one before it gets accepted. In terms of tourism and hotels, I think Britain’s actually got a massive opportunity here.
“We’ve seen the level of our currency has gone down as we’ve had these economic difficulties, so it’s cheaper to come to Britain. It’s a great country to come and visit. I think we need to do more to promote Britain as a destination – that’s why we have the GREAT campaign.
“Crucially, when people come and visit, we’ve got to try and get them to visit outside London and get them to travel round the country and come to great cities like here in Manchester.
“There are lots of things we can do to encourage tourism, to make sure Britain becomes a great destination which doesn’t involve VAT, which would be expensive.”
Cut Tourism VAT
Graham Wason, chairman of the Cut Tourism VAT campaign, said he was ‘surprised’ by Cameron’s comments.
“Earlier this year Cut Tourism VAT presented findings to HM Treasury; that according to their own economic model, a reduction in tourism VAT would be one of the most efficient means of generating GDP gains at low cost to the Exchequer,” said Wason.
“It is not true that lots of other industries make a strong case for cutting VAT – tourism is one of only a limited number of sectors that is permitted to have a reduced VAT rate. As an industry we have the strongest case for a reduction and we will be bringing this directly to the attention of the Prime Minister.
“It is surprising that the Prime Minister refers to the weak pound as an opportunity for tourism. Relying on the UK economy to remain weak is not part of a sustainable strategy for tourism – and it makes no difference to the cost of domestic breaks for hard-working British families.”
Wason’s campaign is led by the British Hospitality Association and is supported by over 500 groups, associations, businesses, individual hotels, restaurants and attractions from across the UK.
It is seeking a level playing field with the UK’s tourism competitors in the EU which apply VAT at reduced rates – for example 7 per cent in Germany and France, compared to 20 per cent in the UK. Following recent reports of the ‘staycation’ trend sweeping the UK, the campaign is now calling on regional communities across the country for more support.