Tuesday, 24 June 2014

Looking to the future of the South West seaside town ............. part two

The Prime Minister has declared that tourism is 'the Westcountry’s mainstay industry' - but it has to “advertise itself better”:

The deadline for the Devon Tourism awards is this weekend:

Meanwhile, there has been a spate of good-news stories of late about the interest in the South West - especially its 'rural environment':

Following on from yesterday's look at issues and ideas around the tourist industry:

... there have been further reports on the growing campaign to reduce VAT on tourist business to the permitted 5%:

Campaign growing for reduction of VAT to 5% for tourism industry

By Western Morning News | Posted: June 24, 2014
By Phil Goodwin, WMN reporter,

MPs and business leaders in the Westcountry are backing a national campaign to reduce the rate of VAT for the tourism industry.

Campaigners want to see the current 20% rate slashed, and have backed the CUT Tourism VAT Campaign, which is lobbying for a reduction to 5%.

A cross-party group of 28 MPs from across the country have signed an Early Day Motion (EDM) calling on the government to reduce the rate of VAT on the tourism industry, in order to boost regional economies outside London. This comes as growing numbers of politicians want to see Britain become more competitive compared with European countries who benefit from almost universally lower levels of tourism VAT, which the EU allows them to reduce.

Adam Fox-Edwards, managing director of the Arundell Arms, a hotel in Lifton, near Okehampton, employs 20 full-time staff and 30 part-time staff. He said: “The industry will respond very quickly – a cut will bring on more people staying in hotel rooms, more people therefore eating in restaurants, bars, pubs and so on. Hopefully more overseas visitors will be coming inbound, and fewer of the UK citizens going outbound – so it’d be very good for our local economy.”

Supporters want the UK tourism industry to be able to compete on a level playing field with Europe, where 24 out of 27 countries already have reduced rates of VAT. They say the average rate of VAT applying to visitor accommodation in the EU is 10.8%, just under half of the UK rate (20%).

The UK rate is also nearly a third higher than the current European average of 15.7% on attractions. As a result, UK residents spend more in tax on domestic holidays than their European counterparts. In France the government levies just a 10% VAT rate on accommodation and admissions. Meanwhile in Ireland, the rate goes down to just 9%.

Geoffrey Cox, Tory MP for Torridge and West Devon, whose constituency includes Lifton, said: “It is going to send an electric shock of aid and assistance and support for the domestic tourism industry. That’s what we need to do, it’s a vital industry for the South West and that’s why I am urging the government to take action.”

In a recent House of Lords debate Labour peer Lord Harrison said the government does not ‘get’ tourism.

Plymouth city councillor for Labour Bill Stevens, said: “In a city like Plymouth... the largest city on the south coast, we rely heavily on tourism. We have something in the region of five million expected visitors, and growing support for the tourism industry is vital. If we can do anything to help hoteliers and people involved in the tourism industry,that would be fantastic.”

With commentary from Independent East Devon Cllr Claire Wright:

Campaign growing for reduction of VAT to 5% for tourism industry

Tuesday, 24 June 2014 1 Comment by Claire

I am really glad to see that MPs (especially consevative ones) are now backing a reduction in tourism VAT…..

At the bottom of this blog post is a reminder of the debate that took place in April, when I attempted to get support for a VAT tourism reduction at East Devon District Council! 

Now party policy looks like it is shifting I wonder whether we will see a a different view emerge among the East Devon tory leadership over the next few months? ....

Campaign growing for reduction of VAT to 5% for tourism industry - Claire Wright

And here's that blog post from April, together with comments:

Motion on cutting tourism VAT is “headline grabbing soundbites”

Wednesday, 09 April 2014 5 Comments by Claire

The conservative group unexpectedly block-voted down my motion to reduce tourism VAT at this evening’s EDDC full council meeting. The tories were so opposed to the proposal that it prompted one opposition councillor to suggest they might like to join the labour party.

I picked up the campaign from twitter. It is being backed enthusiastically by the South West Tourism Alliance, the East Devon Excellence (a group of small tourist businesses in East Devon) and many other local business people that I have spoken to.

Alistair Handyside, chair of the South West Tourism Alliance, addressed the council at the beginning of the meeting. He gave a very persuasive speech on the benefits of such a move, including:

- how all the countries in the EU have adopted the lower tax rate of five per cent, bar three (including the UK)

- that the treasury’s own research showed that it would be better off if the UK reduced the VAT rate because more businesses would open more often, as they wouldn’t be trying to avoid the VAT threshold.

My seconder, Cllr Susie Bond said she kept her speech in support very short because there was nothing in the motion that could possibly be objected to.

Tourism champion, Sheila Kerridge (con) was the first to speak. She said that the motion wasn’t the “complete picture.” There were lots of businesses under the VAT threshold and that there were many initiatives that were already boosting tourism in East Devon. She said the motion could damage small businesses that were operating under the VAT threshold.

Cllr Kerridge said that the South West Tourism Alliance was doing a great job. It wasn’t clear here whether she realised that the chair of the South West Tourism Alliance had earlier on, addressed the council to speak in support of the motion!

Cllr Tom Wright (con) said that he supported the first part of the motion (about the contribution of the tourist industry to the East Devon economy) but said that businesses were mainly affected by things like the weather. He told the council that EDDC was already doing good work promoting tourism and cited the Axe Wetlands, as well as the Thelma Hulbert Gallery, and the Manor Pavilion Theatre in Sidmouth.

Cllr Wright added that he thought it was a “pity” I hadn’t attended the recent think tank on tourism. He described the motion as a “non-starter” and suggested I was just trying to create “headline grabbing soundbites.” Cllr Wright then issued a “warning” to me that some of the tourists might have the “temerity” to buy houses here, which he suggested I would object to.

Cllr Ben Ingham (ind), who seemed barely able to stifle his mirth, said that it came as a surprise to find that on this issue he was much more right wing than the conservative group. To hear two conservative councillors objecting to low taxation was a new experience. To loud guffaws, Cllr Ingham suggested that those conservatives might like to apply to Ed Milliband to join the labour party!

Cllr Doug Hull (libdem) said he had heard Cllr Kerridge’s speech “20 times” and it depressed him. Cllr Hull urged the conservatives to look to the greater good and that although he didn’t agree with me on everything, he did so when he thought I had a good idea. He said he thought the negative words he had heard so far were “appalling.”

Cllr Roger Giles (ind) suggested that what he had heard Cllr Tom Wright say, was nothing at all to do with the agenda and that the chairman must have “had a good lunch” to be so accommodating.

Cllr Graham Troman (con) said that EDDC had already arranged small business rate relief and that a lot of small businesses were under the VAT threshold and a cut in VAT could damage them.

Cllr Twiss (con) said he was “minded to agree with Claire Wright” before adding “in an ideal world.” He then quoted from Hansard where he said that such a deal would cost millions to administrate.

Cllr Bloxham (con) wanted to know if the supporters of the motion knew what percentage of businesses in East Devon pay VAT.

Cllr Andrew Moulding (con) thought I was neglecting all the other sectors, such as agriculture and village pubs. I explained to Cllr Moulding that under EU rules only two sectors qualified for VAT reductions – tourism and fuel.

At this point I summed up, where I pointed out the level of local support for the move - the campaign is widely supported by local businesses. I asked councillors to think carefully before they voted.

I also asked for a recorded vote to take place. The conservatives voted against a recorded vote.

To much chuntering and heckling, the final vote was 23 votes against to 14 in favour. The conservatives voted largely as a block, with a few abstentions. Cllr Mike Howe DID vote in favour, however.

What a shame.

My motion speech is below

Around 10 per cent of the East Devon economy is centred around tourism. We are reliant on it for hundreds, if not thousands of jobs.

It is one of the most popular places in the country to come on holiday.

The campaign to cut tourism VAT has been running for about 20 years. During that time almost every other country in the EU has taken advantage of the option that the EU offers governments - to reduce tourism VAT to five per cent.

You might think that reducing VAT from 20 per cent to five per cent would hurt the treasury. But the evidence indicates that quite the reverse would be the case. When the treasury tested a VAT rate at five per cent for attraction and accommodation businesses in the UK, it found that revenue increased.

This is because many businesses are deliberately and quite understandably operating at a turnover of less than £70,000 which is the VAT threshold. If they breached it, they would have to raise their prices, which quite reasonably, they are not keen to do, especially at a time of economic difficulty.

The temporary closures of businesses, sometimes in peak season, to avoid reaching the VAT threshold, in itself can harm the wider appeal of the area, as it could be seen that there is less of a reason to visit.

Tourism is not like other service industries. It is very dependent on factors outside its control, such as the weather, or back in 2000, a devastating outbreak of foot and mouth, that cost the Devon economy millions of pounds.

If most countries across Europe have already implemented a five per cent charge on tourism VAT, this country is losing out. And the probability is that East Devon, which is one of the most popular tourist destinations in the country, is losing vital business to France, Spain or Germany as people seek less expensive holidays.

If you think that this proposal could open the floodgates to all sorts of other claims from businesses for a cut in VAT, don’t need to worry. EU rules stipulate that only two types of sectors qualify – tourism and fuel. This government has already cut fuel VAT to five per cent, benefiting the big energy companies.

This government’s mantra is economic growth. It is offering taxbreaks to big business and fracking companies!

Surely the case for offering tax breaks for our tourist industry, is far and away more legitimate than helping the frackers profits!

As councillors of a district that heavily relies on tourism, we should be looking to support it in every way that we can.


1. At 07:46 am on 10th Apr Susie Bond wrote:

I have to say I was staggered by the vitriol from the ruling party against a Motion which would not only have benefited the tourism industry in East Devon, but also brought us in line with the majority of EU countries. Ah well ...

2. At 08:30 am on 10th Apr Cllr Phil Twiss wrote:

In the interest of accuracy the VAT threshold you quoted is not £70,000 but £81,000 which takes many, if not most small tourist business such as B & B’s out of VAT who see no benefit at all from a cut from 20% 5% unlike their larger competitors who would; see http://www.hmrc.gov.uk/vat/forms-rates/rates/rates-thresholds.htm and many of the business you say would benefit from this measure would not if they are not VAT registered and therefore gain by the reduction, whereas those who are would. The cut would not cost millions, it would cost billions to HMRC i.e. £11-12 Billion each year as against a possible £4 Billion benefit. 
SeeHansard http://www.publications.parliament.uk/pa/cm201314/cmhansrd/cm131008/text/131008w0006.htm#13100917000153

This proposal has been in the “mix” as you stated last night for around 20 years and not even Labour whose inability to manage the Economy has damaged this country almost beyond measure did not introduce it as clearly the subsidy to one important sector of our economy who mean finding £7-8 Billion each year from somewhere else.

You didn’t respond to the question I asked you as to where you should take this from; schools, hospitals, social care?

I would of course support this measure all things being equal in the ideal world, but this isn’t the ideal world and I prefer to work with the reality of what we can do at EDDC not what we can’t or shouldn’t be doing.

In terms of what EDDC can do rather than what it practically can’t you should read the document published by the LGA called “The visitor economy: A potential powerhouse of local growth” which you can locate on their website as a point at which to start and you will notice once read that much of what they advocate EDDC are already doing.

3. At 10:49 am on 10th Apr Ruud Jansen Venneboer (Mazzard Farm holiday cottag wrote:

Many thanks for raising this Claire, much appreciated. As a small East Devon Tourism business who IS operating above the VAT threshhold, and who sees VAT + business rates take out approx. 25% of turnover (!!!!), this is hugely important for us, and contrary to what for example Cllr Tom Wright stated, significantly bigger an issue than ‘the weather’. What possibly saddens me most from the events you describe is not even the outcome of the voting, but the general and complete lack of knowledge this council appears to have of a sector which represents 10% of the local economy. And I won’t even mention the need for patronising you and others who think differently from ‘the block’.

Sadly we have known for some time that EDDC and tourism are two words which rarely appear in one sentence. As a multiple tourism award winner I have never even heard of ‘Tourism Champion Sheila Kerridge’..... I did have the ‘pleasure’ of once sitting around a table with her predecessor Cllr Brown (yes indeed, that man), and didn’t know whether to laugh or to cry at that time, faced with such unbelievable incompetence.

Maybe I should invite her to Mazzard Farm one day, and share some of the real challenges we face. That would possibly also allow me to introduce her to some of the foreign guests we welcome on a regular basis, guests who came to Britain despite paying at least 10% more for their holidays just due to one thing: VAT….....

4. At 11:13 pm on 10th Apr Damien Mills wrote:

Is English Cllr Twiss’ first language?!

5. At 08:26 am on 14th Apr Alistair Handyside wrote:

I would like to correct the figures and statements that Cllr Phil Twiss quotes. They are both inaccurate and emotive. The figures are much smaller, don’t require schools and hospital funding to be cut and after 18 months generate MORE income for the treasury than the current arrangements.

The actual figures are as follows: According to the research the direct loss of VAT from a reduction for Visitor Accommodation & Attractions is £1.2 billion. Half of this loss will be made good within the first year from savings in social security benefits and other increased taxes, principally employment related taxes, so the year one deficit will be £645 million. This will be more than made good during the second and third years. By year 3, there will be year-on-year gains for the Treasury.

On the point of the VAT threshold, there are two counter-arguments:

1. Reduced tourism VAT will grow the whole sector, so all businesses will benefit, irrespective of whether they are VAT registered or not

2. The current high VAT threshold means many small businesses deliberately stay below the VAT threshold by closing for part of the year or not expanding. Thus, the high VAT threshold is a restraint on growth. VAT at 5% will encourage businesses that are not currently registered to do so – they will then charge VAT at 5% and can reclaim VAT on purchases at 20%. This will lead to significant growth in the sector and an increase in Government income from VAT.

I trust this clarifies the position. Thank you for the opportunity to present.

Alistair Handyside, Higher Wiscombe and The South West Tourism Alliance

Motion on cutting tourism VAT is "headline grabbing soundbites" - Claire Wright

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