Campaigners demanding a cut in VAT for UK tourism firms will hand over research to the Treasury today claiming the move would boost the economy by up to £4 billion annually.
The Cut Tourism VAT Campaign also claims reducing the sales tax would net the government a £3.9 billion one-off windfall.
The Nevin Report, commissioned by the campaign, says that a cut from 20% to 5% for visitor accommodation and attractions would boost the UK’s tourism economy.
This is in addition to a boost to GDP each year peaking at £4 billion per annum, and the creation of over 120,000 jobs around the UK.
The group says political backing for the Cut Tourism Vat campaign has grown with over 70 MPs indicating their support.
Nick Varney, chief executive of Merlin Entertainment, said: “Doing a few fancy posters saying ‘Heritage is Great’ and putting them up at Shanghai Airport is not going to turn around 30 years of constant decline. If all UK holidays became 15% cheaper, economics tells you what’s going to happen.”
The campaign group claims UK is currently one of the most expensive destinations to holiday in the world – ranked 138th out of 140 for price competitiveness by the Travel and Tourism Index.
It says it is one of just four countries in Europe not to have a reduced rate of VAT for the tourism sector.
The Nevin Report states cuts made in France, Germany and Ireland in the last five years have been hugely successful.
The new report adds to a Deloitte study conducted in 2011, and analysis by Prof Adam Blake using the Treasury’s own model in 2012 who said: ‘cutting Tourism VAT represents one of the most, if not the most efficient, means of generating GDP gains at a low cost to the Exchequer.”
A series of tourism firms, operators and organisations and MPs in the UK have thrown their weight behind the campaign
Patrick Dempsey, managing director of Whitbread Hotels and Restaurants, said: “We fully support the initiative to cut tourism tax.
“A cut would deliver a huge financial boost for tourism around the UK and 120,000 new jobs with 8,000 already being created by Premier Inn by 2018.”
Ufi Ibrahim, chief executive of the British Hospitality Association, added: “As the driving force behind our recovery, it’s vital we help smaller firms grow.
“Cutting VAT to 5% not only allows the sector to be competitive with Europe, where the majority of countries charge less VAT, but it shows hard grafting businesses the government is behind them.
“No one denies the cut would dent tax revenues initially, but this is a chance for politicians to prove they are really in it for the long by making an investment in an industry which is the UK’s biggest employer of young people.”
Graham Wason, chairman of the Cut Tourism VAT Campaign, said: “This new research is the economic proof the Treasury has asked for to prove what every other country in Europe knows – that cutting VAT on holidays is profitable for governments.
“Many of our coastal towns are ignored but cutting VAT would help them thrive. More than 60 cross-party MPs have signed our parliamentary motion and more than 1,000 companies and groups are backing the campaign.
“David Cameron and George Osborne should remember that next election will be won or lost in the regions and in coastal constituencies who would benefit from the huge boost cutting tourism VAT would add to our economy.”
Dermot King, managing director of Bourne Leisure, which owns Butlins, said: “As the pound continues to strengthen against the Euro driven by a combination of Mark Carney indicating higher UK interest rates and the European Central Bank considering a programme of quantitative easing, the gap in price competitiveness between the UK and her European partners widens.
“Outside of the London bubble, UK tourism continues to try to compete with not just one but increasingly two arms tied behind it’s back.”
Margaret Ritchie, MP for South Down said: “A cut in the rate of [Tourism] VAT would create demand, which would spur job creation and go some way towards reducing youth unemployment.”