Cut food and tourism VAT and improve hospitality staff training, Select Committee tells Government

By Sophie Witts contact

- Last updated on GMT

The report urged the government to do more to support the tourism and hospitality industry
The report urged the government to do more to support the tourism and hospitality industry

Related tags: Cut tourism vat, Tax

The Government must cut tourism VAT and give the hospitality sector greater support, according to a report published today (26 March) by Parliament’s Culture, Media and Sport Select Committee.

The report argues that tourism’s ‘central role’ in the UK economy ‘is not given sufficient recognition’ by the Government.

“Tourism needs a stronger voice, and Government should look at how the burden of regulation and taxation on the tourism industry could be lightened to boost its contribution even further," said John Whittingdale MP (Con), Chair of the Committee.

Cutting Tourism VAT

The Select Committee report backed the Campaign to Cut Tourism VAT’s calls to reduce tourism VAT from 20 to five per cent.

The Campaign has argued that the UK is at a ‘major competitive disadvantage’ because VAT is applied at the standard rate, while 25 of the 28 EU member states have reduced rates.

“Reducing tourism VAT will make days out, short breaks and holidays in Britain more affordable for UK families, as well as encouraging more visitors from overseas to explore all parts of the UK,” said Graham Wason, Chairman of Cut Tourism VAT.

“We have extensive and robust research that shows the positive impact a lower rate of VAT would have, improving the UK's trade deficit, currently £34.8bn, by £20.1bn over ten years.”

The Chancellor recently faced criticism from the hospitality and tourism industry after failing to mention a reduction in VAT in the most recent budget,​ despite cross-party backing from 118 MP’s and the British Hospitality Association (BHA).

Reducing food VAT

The report highlighted extending potential VAT cuts to food, benefiting pubs and restaurants.

"The cost of cutting food would be greater to the Treasury but the job creation would probably be greater as a result, because you would need more people in a pub to work there if you have more customers," Brigid Simmonds, British Beer and Pub Association (BBPA) chief executive, told the Committee.

“We would not be against [cutting VAT on] accommodation because we have 40,000 rooms in pubs, but it does not perhaps create as many jobs."

Last year over 15,000 pubs and restaurants​ highlighted the issue by cutting their prices by at least 7.5 per cent for Tax Equality Day, resulting in a ten per cent rise in sales. 

Cut Tourism VAT have not extended their campaign to food, arguing that the cost of applying the reduction to restaurants and catering services in terms of the direct loss of value added tax is not ‘feasible or realistic’ in the present economic climate.

Campaign chairman Wason told the Select Committee: “On accommodation we are more internationally competitive. There are not as many people who travel internationally to go for a cheaper meal, but they do travel internationally for cheaper accommodation and cheaper attractions. The disparity with the rest of Europe is far greater on accommodation than it is with VAT on restaurants.”

Improving staff training

The report highlighted a need for training and apprenticeships to become ‘better adapted to the features that makes many tourism businesses unique’, including seasonality, scale and uncertainty in customer demand.

“The Government should also do more to inform tourism businesses of the opportunities and funding that exist to train people, particularly young people, for the world of work,” the Committee recommended.

The report comes in the wake of a study from the World Travel & Tourism Council (WTTC)​ which estimated that government failure to tackle the skills crisis in the hospitality industry could result in the sector employing 352,000 less people and contributing £17bn less to the economy over the next ten years.

The full Select Committee report can be found here.

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