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The Importance of Tourism

PUBLISHED: 08:48 21 March 2011

If you want to help tourism in the UK, reduce the VAT and restore the capital allowances on new buildings, Norfolk's Brian Potter tells the chancellor.

As the fifth largest industry and the key driver in creating new jobs more effectively than any other sector, acknowledging this importance in August 2010, David Cameron was the first Prime Minister ever to devote an entire speech to tourism within the first 100 days of a new government.

This is unprecedented and gives the industry a level of priority. At the end of the speech he asked for a new Tourism Policy for the UK to be presented to him.

Seven months on to March 2011, this has been completed and the government have, through the department for culture, media and sport (DCMS), now issued a tourism policy, and it contains 50 pages of the importance of tourism to Britain and how the government plans to help tourism achieve its potential as a central part of Britain’s growth strategy.

Now, in any government tourism policy, they can really only analyse a broad strategy setting out goals and highlighting the importance of the UK’s visitor economy and our domestic tourism industry quoting facts and figures which in themselves amplify the importance of tourism.

Tourism generates £90bn of direct business for the economy each year and contributes £115bn to GDP, it is one of our biggest employers with over 200,000 businesses providing 1.4m jobs or 4.4pc of all employment, and nearly 3m in indirect employment which are those that supply goods to the industry.

Tourism is particularly labour intensive compared to many other sectors within in our economy so the industry is very effective at creating more than its fair share of jobs. Compared to other industries tourism is mainly driven by small or medium sized companies (SMEs) representing 80pc.

So whilst the government amplifies the importance of tourism it is really the grass roots which is the real key to contributing to our economy and to assist in our recovery. It’s not all words within the government tourism policy, there have been since the recent election a few positive steps to assist and revitalise tourism:

the government has joined forces with the private sector to create a marketing fund of more than £100m to promote the UK abroad and this, they hope, will generate 4m additional overseas visitors over the next 4 years, bringing in £2bn of extra spend to the UK, and to help create 50,000 new jobs across the country.

They have delivered on their pledge to undo the damage caused by the abolition of the furnished holiday lets relief in their first budget.

For the next three years the government will exempt new businesses outside London and the south east from paying employer NIC contributions on the salaries of the first 10 people they hire.

The government will cut the main rate of corporation tax to 24pc and for small companies to 20pc. It is good news that they will also consider simplifying small business taxes and cut red tape. Smaller firms which form the larger proportion of the UK’s visitor economy are often eligible for small firms business rate relief, but fail to claim it. They will consider how to make it automatic, to increase the proportion of small firms who claim this valuable tax break.

The cost of the increase in the cost of oil have effected the aviation industry, and consequently air passenger duty. The chancellor has stated he will explore changes to the aviation tax system. We would dearly love like consideration to our domestic petrol pumps with the imminent proposed tax increases to an already excessively high cost of £6 per gallon.

Our planning process, whilst imperative that we protect communities from inappropriate or over-developments, it is positive that the government has already made plans to make the planning system in England, faster, simpler, cheaper and easier to use, by removing some complicated national guidelines, eg creating a fast track approval process for any planning application that receives no objections from neighbouring properties.

However, whilst the above points are positive, the time has come to drop our very high, VAT rate. This 20pc rate makes us the second highest rate for hotels in the EU. 21 countries have pro-actively used the EU legislation over the years and introduced a reduced rate for accommodation, the average across our major competitor nations, such as France, Spain, Italy and Germany, is by comparison only 7.6pc.

From May 2009, thanks to the lobbying of the French Government for EU countries to introduce a reduced rate of VAT for restaurants, 13 countries have done so to date, with France bringing their rate down to 5.5pc. Both Labour and coalition governments have refused to consider reducing VAT despite compelling evidence that by doing so it will actually create jobs and increase the number of overseas visitors, and through this extra stimulus will add more money to the much needed government coffers.

So the appeal is not to hike petrol prices, but to reduce the VAT, and restore the capital allowances on new buildings as currently there are none.

•Brian Potter is chairman of Potters Leisure Resort at Hopton near Great Yarmouth.

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