Alistair Carmichael, MP for Orkney and Shetland, led a debate yesterday evening on the VAT charged on the Tourism Sector. Mr. Carmichael secured the debate in which he praised the hard work of everyone involved in the sector and called on the Government to support more local and rural areas by letting them keep more of the money the tourism sector brings to the UK economy.
Speaking in the debate, Mr. Carmichael said:
“In Orkney and Shetland we have a number of disadvantages due to our geography and the size and sparsity of our population, which are all things that, when it comes to tourism, make us an attractive destination. They are the things that make people want to come to see us in the Northern Isles. For us, tourism is an enormously important industry, and it is one that has grown massively in recent years.”
Mr. Carmichael went on to say:
“It is argued, with some force, that the reduction in VAT can lead to higher employment levels and better wages, which in turn leads to increased income tax receipts. The increased profitability of businesses, some of which are currently marginal and probably not even paying much tax at all, provides the opportunity for greater returns in corporation tax. Eventually, this feeds through to higher expenditure in other sectors—this is the so-called ‘tourism multiplier’.”
Responding to the debate the Financial Secretary to the Treasury, Mel Stride MP, said:
“At the heart of the right hon. Gentleman’s ask is clearly a reduction in VAT, particularly with regard to food and beverage, attractions and accommodation— the areas that he cited when he mentioned the VAT directive and the derogations in items (7), (12) and (12a). The Government recognise the strength of feeling on this matter. We have met campaigners over many years, and I have engaged extensively with Members right across the House. We will keep VAT and VAT on tourism under review, but unfortunately there are some issues from which we cannot hide away. One of those issues is the fact that, if we are to make a change, under the current arrangements with the European Union that change would have to be UK-wide. It would therefore come with quite a hefty price tag.”
Responding after the debate, Mr. Carmichael said:
“I welcome the Minister’s engagement with the substance of the issue, and the constructive way in which he approached this debate. I never expected him to immediately stand up and change his mind, but it is important that we start this discussion, and to make it easier to continue to make the case for this meaningful change for the tourism industry.
“I was encouraged by the wide range of support I received for my debate from parties across the House of Commons, and I firmly believe that this was not so much an event on its own, but the start of an ongoing conversation which, I hope, will eventually convince the Minister to back this important campaign.
“The Treasury ought to now conduct their own analysis on the long term impact of a tourism VAT cut, because if they come back with the same figure as Nevin Associates projected for the Campaign to Cut Tourism VAT, an extra £5.3billion for the Treasury over 10 years as well as a thriving tourism sector, then the Treasury will have little reason to not get on board with this proposal.”