Clause 42. — (Selective Employment Tax.)

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 29th June 1966.

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Photo of Mr Norman Miscampbell Mr Norman Miscampbell , Blackpool North 12:00 am, 29th June 1966

I beg to move Amendment No. 325, in page 48, line 27, at the end to insert: Provided that in respect of any person who is employed in the hotel and catering industry the tax shall be one penny. The Committee will be familiar with many of the arguments which they will hear during the next hour or so. That familiarity should not blind us to the persuasiveness of those arguments; equally, it should not dissuade us from looking for a moment or two at the background against which we are discussing the hotel and catering industry.

The facts, as I say, are familiar and I shall be brief. We are in a chronic economic and balance of payments crisis, and this industry which has been selected for taxation is the greatest dollar earner that we possess. It is the fourth largest earner of foreign currency and the largest earner of dollars. The import content is almost nil. To bring steaks into this country for a few shillings and to sell them for £1 is one of the most lucrative ways of earning foreign currency that one can think of. It is also an industry which is in direct competition with hotels abroad.

The basis of these dollars and foreign currency is our hotel and catering industry. Without it, nothing else will work. We can develop the beauties of the countryside; we can exhibit in New York pictures of beefeaters to our hearts' content, but in the end, if our hotels are not providing the accommodation and opportunities for people to come and stay, all will fail.

I have mentioned the positive returns from this industry. The figures are significant. Foreign earnings total £320 million a year, including dollar earnings of over £100 million. The growth rate, at about 13 per cent., is far in excess of the normal growth rate in British industry. Three million people come to Britain every year and their spending power more than balances to the 5 million people who go abroad from this country.

3.45 a.m.

It is in the number of Britons going abroad that the greatest warning exists, because there is a great difference between the growth rates of what we spend at home on holidays and what we spend abroad. On holidays in this country we spend in hotels and other holiday places about £450 million. The figure we spend on holidays abroad is now about £350 million and growing rapidly, whereas the rate of growth of the amount we spend on holidays in our own country shows no great increase.

What happened in France is a warning. The French largely priced themselves out of the market. Frenchmen now find it cheaper to go to Spain and elsewhere than to holiday in France. Not only is France failing to attract tourists, but—far worse—many French people are choosing to go abroad for holidays.

This is a warning to us, because the real competition with our holiday resorts comes from resorts abroad. The prices are highly competitive. In today's Daily Mail there is an article about a trip to the Costa Brava for under 30 guineas. One could hardly believe it possible.

Nevertheless, figures not much larger—45 guineas or 42 guineas—are quoted for 10 days or 14 days in Spain. Such figures are becoming comparable with what a person will spend on holiday here. If more people decide to go abroad, my argument is reinforced because we not only gain positively from attracting tourists from abroad but gain negatively by keeping our own people at home.

If a concession is made, I hope that it will not be a Government decision to look at each hotel to see how much foreign content it has in its earnings. That would not cure the difficulties. The great problem is to ensure not only that we attract tourists from abroad, but persuade our own people to stay in this country for holidays. Every £1 spent abroad is, in effect, another import.

What of the future? By 1970, 4½ million tourists are expected. They will come only if the hotel rooms are there; if they know that they can make a booking; if they do not have the experience, which, I understand, is occuring at present, of Americans who are trying to come to London and Southern England and cannot get accommodation. This is something which concerns the Government. I suspect that if these Americans tried to go to many other parts of the country they would find equal difficulty in getting hotel rooms of the standards which they require, to which they are accustomed, and which, I am sorry to say, some of our overseas competitors are providing more rapidly.

About 30,000 new hotel rooms are required in the next four to five years. What chance have we of getting such an increase in view of the restrictions that are at present being placed on the hotel industry? I shall not go into the question of the building restrictions, for I should be out of order. I just mention the investment allowances which are not available to hotels, another imposition on top of the tax that we are discussing.

Sir Geoffrey Crowther, head of one of our most distinguished groups of hotels, wrote a letter to The Times. He is listened to with respect and does not write letters to The Times in the hasty way in which they are sometimes written. Writing with care and deliberation, before this tax threatened to land on to the shoulders of the hotel industry, he said that he thought that Trust Houses Ltd. would not be able to continue its expansion, and that he could not see where new hotels were coming from.

If that was the position in February, how much worse must it be now, with an extra tax on the industry. It is difficult to make an accurate assessment of the likely burdens on the industry, because labour content of hotels varies. One cannot tell how the tax on the services that are used by the hotels will affect them, but the lowest figure which I have obtained from any responsible source is about 5 per cent.—and it may range as high as 8 per cent.—on the cost of hotel accommodation if the tax is imposed. One hotel thinks that the tax will increase its wages bill by 8·6 per cent., with a 5 per cent. overall cost increase. The figure of 8·6 per cent. on the wages bill is not surprising when one remembers the very high proportion of hotel outgoings that are inevitably occasioned by wages—side-effects will come as the tax bites on all other forms of services on which the hotels are so dependent.

It is inevitable that the hotel industry will be subject to seasonal variations in its bookings, especially in the tourist areas—not just the seaside areas but, say, the Scottish Highlands. Hopes for a new hotel in North Wales, and for new hotels in places like Canterbury and great tourist resorts, have been expressed.

The tax will bite most heavily on those who are in that unfortunate position because they must employ enough people in the summer to meet the peak demand, and then those taxed employees must be kept on through the leaner winter months so that they will be there in the following spring. Undoubtedly, the tax will be a severe burden, and it will be all the more severe on those paying for employees out of season.

Anyone who knows anything about hotels knows that in many cases part-time workers have to be used in large numbers. They have to come in at differing times. It is easy for the Government to say that part-time workers must come in under the new tax, but anyone having to employ a series of part-time workers will have the burden hot and heavy at the end of the day when he has to pay for each one of them.

Not only is there the present and proposed level of taxation, but our hotels have to bear the other imposts put on them during the last two years under Socialist Governments. It is proposed to put this tax upon an industry of great potential and great present foreign earnings. What were the two grounds on which the Chancellor recommended the tax to the House in his Budget speech? He has said recently that the raising of revenue was the most important. That was one of the reasons he gave. The second was the redistribution of workers from services to manufacturing industry. Can it possibly be said that it is sensible to impose this tax on the hotel industry? Is it sensible to raise revenue from our fourth greatest foreign currency earner and our biggest dollar earner? The answer be "No".

If one then asks—this was first put as the most important reason for the tax—whether it is likely to send workers from hotels into manufacturing, one is confronted by the paradoxical situation that at present, to man our hotels and keep them going at all, we are importing labour from abroad. Every hon. Member with any concentration of hotels in his constituency knows that one constant plea is, "We have a foreign worker. His work permit is coming to an end. Can you possibly do anything for him? We need him. We cannot run our establishment without him".

How can it be sensible to impose this tax on the ground that we want more people driven out of hotels and catering establishments and into manufacturing? It does not make sense from the standpoint of revenue raising. It does not make sense if the object is to drive people out of services and into manufacturing.

For these and other reasons which I have given, I hope that the Committee will reject this tax as it relates to the hotel industry and accept this Amendment.