Economic stability has been urged by a travel agency group leader on the back of the shredding of last month’s disastrous mini-budget overseen by new prime minister Liz Truss.
Advantage Travel Partnership chief executive Julia Lo Bue-Said was responding to new chancellor Jeremy Hunt’s U-turn on almost all tax cuts unveiled by his short-lived predecessor Kwasi Kwarteng on September 23, which triggered turmoil in financial markets.
Under the new measures, the basic rate of income tax will remain at 20% “indefinitely” instead of being cut to 19%, while the Truss flagship energy price guarantee will run only until next April rather than for two years.
Corporation tax will rise from 19% to 25% in April 2023 in an about-turn already announced by Truss.
Hunt also announced the scrapping of VAT-free shopping for tourists to the UK among other changes to £45 billion of unfunded tax cuts which has seen a £32 billion reversal in little over three weeks.
Lo Bue-Said said: “How much more can businesses take? Following two years of detrimental policies that have served to cause huge disruption to the outbound travel industry, this latest government chaos is creating even further instability to a sector already struggling to rebuild itself after Covid.
“This current economic volatility is absolutely not what we need right now. What we need so desperately is a period of stability and certainty to enable business owners to plan for their future and instil consumer confidence.”
She added that the chancellor’s decision to reverse plans to reintroduce VAT free shopping for overseas tourists was a “huge knock” to small businesses which rely on the tourist pound.
“The drop in the value of the pound against both the dollar and the euro had made the UK and attractive place for tourists, especially in the run up to Christmas, and this reversal of VAT free shopping is just another reason for tourists to take their business elsewhere,” Lo Bue-Said warned.
“Inevitably, when travellers are looking at where to visit, they’ll now be more inclined to look at markets like Paris and Milan to do their Christmas shopping rather than visiting the UK.
“We know that tax free shopping is a key motivator for people deciding where to travel. This move just means yet more uncertainty for UK businesses and the high street and in reality risks putting off international visitors to the UK.”
Meanwhile, UKHospitality chief executive Kate Nicholls responded by saying: “Given the economic volatility we have seen over the past few weeks, we understand the need for the chancellor to announce these measures, designed to deliver stability and restore confidence.
“I would encourage the government to work with the UK’s hospitality sector to unlock its enormous potential to support our economy in delivering growth, creating jobs and driving the recovery.”
She added: “Prior to the energy crisis, which is proving to be so devastating, the sector was forecast to grow by 3% and there is still a real desire from our dynamic hospitality businesses to return to those levels of growth.
“However, the hospitality sector is so exposed to this crisis and has been devastated by it, which is why the energy support provided by the government to help weather this storm, remains critically important and will help protect a vital industry.
“It’s essential that the government continues to work closely with the sector as part of its review into support post-April 2023.
“One area in dire need of urgent reform is the business rates system, which is currently not fit for purpose and places an unfair burden on hospitality businesses. This is particularly pressing now, given the additional costs hospitality businesses will now be facing as a result of the freeze on alcohol duty being scrapped.”