Vince Cable: UK govt under “a lot of pressure” to cut VAT on tourism

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By a Newsnet reporter

Graeme Dey MSP has made fresh calls for a cut in VAT in tourism in Scotland following Business Secretary Vince Cable’s admission that there is huge pressure on the UK Government to cut VAT for the industry.

Despite the budget passing and no cut being made, Mr Cable – while on a visit to northern England – refused to rule out a VAT cut in the future following calls from Labour councillors for action.

The Business Secretary told the Blackpool Gazette:

“Part of the problem is there is a lot of pressure to cut VAT for particular sectors.

“I’m not saying it will never happen but the Chancellor didn’t mention it in his Budget, it’s not something coming in immediately.”

Mr Dey, MSP for Angus South, has long campaigned for a cut in VAT in the tourism sector, which would bring Scotland in line with Ireland and a number of other European countries.  

23 EU states apply a reduced rate of VAT to their tourism and hospitality sectors.  In the Republic of Ireland, restaurants, hotels and leisure services are liable for a lower 9% rate of VAT, the usual Irish VAT rate is 23%.  In Scotland, all tourism and hospitality services are liable for the UK’s standard VAT rate of 20%.  

The tourism and hospitality industry believes that the higher rate of VAT applied in the UK places the sector at a significant disadvantage compared to our European neighbours.

Earlier this week, Sandra Dawes, chief executive of Visit Britain, admitted that UK government taxation policy was inhibiting the competitiveness of the industry.

Ms Dawes said:  “Our view is putting up the price of a trip to Britain is inhibiting our competitiveness. Aviation capacity takes longer to fix and there are things the industry can do around value for money, tour operating capacity and how the country is marketed.

“But the policy levers [taxes and visas] are in the hands of the [UK] government.”  

Mr Dey said:

“This is a matter which London presently controls and it is imperative that Westminster listens to the demands of the industry.  It is encouraging that Labour councillors in England are now echoing the SNP’s calls and that Mr Cable is aware of the increasing pressure.

“Scotland’s tourism and golf sectors are currently at a competitive disadvantage with the likes of Ireland because while Ireland has reduced its VAT rate, Westminster has prevented us from doing the same thing.

“Tourism, including golf tourism, is hugely important to Scotland and we need to be able to compete on a level playing field.

“The UK government should act soon and either cut VAT, or devolve control of VAT as the parliament here is far more in touch with the needs of Scotland.”