Liberal Democrats Call for Cut in VAT on Tourism

By BathNES Lib Dems 🔶, Sep 25, 2015 4:09

The Liberal Democrats have become the first major political party to back a campaign to reduce the Value Added Tax on Britain's Tourism Industry. The move came when the party voted to back the campaign at their Autumn Conference in Bournemouth on Sunday (20th September).


The 'Cut Tourism VAT' campaign is run by a host of national organisations in the UK, including the British Hospitality Association, the British Association of Leisure Parks, Merlin Entertainments Group and Butlins. In Bath it also has the support of groups like the Bath Independent Guest House Association (BIGHA). The campaign is pushing for a reduction in VAT on UK tourism accommodation and attractions from its current 20% level to 5%.

Under EU law, the UK government can set VAT levels at either the full 20% rate, or a reduced level of 5%. Of the 28 member states who make up the European Union, 25 have so far taken advantage of the ability to reduce VAT on tourist accommodation and attractions. Other countries that have done this have found that it boosted both employment and their economy, and has led to an increase in total tax revenue as a result. For example, in 2009 France cut the VAT it charged on meals in restaurants from 19.6% to 5.5% - a move which created 28,200 new jobs in the sector. In 1996 Ireland reduced the level of VAT on hotel rooms and restaurant meals, which research shows has since led to a sustained growth in overseas tourism numbers and earnings. The UK now has the second highest rate of VAT on hotel accommodation in the EU, and the World Economic Forum ranks it in 140th place for price competitiveness in tourism out of 141 countries.

Steve Bradley is the Liberal Democrat Parliamentary Spokesperson for Bath, and he spoke in favour of reducing the tax on tourism at his party's conference. He commented:

"The big challenge Bath faces is that only a quarter of the 5.5million visitors we receive every year choose to stay overnight in our city. The rest come for short day trips, which contribute little to our economy. A reduction in tourism VAT would make Bath up to 15% cheaper as a destination - encouraging more overnight stays, boosting our economy and keeping more of the money generated by tourism within our city. And lower cost accommodation and attractions would also be of benefit to local residents too. So it would be a positive change for Bath's economy and its people".

Figures from Bath and North East Somerset Council show that tourism, culture and leisure is the biggest employer in the area, accounting directly for 10,500 jobs and contributing £205m to the local economy.  A 2014 report produced by leading economic forecasters Michael Nevin Associates stated that a VAT cut for the UK's tourism economy would boost the nation's annual GDP by £4bn. It also showed that the cut would help the wider economy too, as for every £1 spent in the tourism by overnight visitors, a further 70p is spent in other sectors such as retail, transport and construction.

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