• Motion on cutting tourism VAT is “headline grabbing soundbites”

    9th April 2014 | News | Claire
  • 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.