Only a few days to go: We’re raising £25,000 to keep TheyWorkForYou running and make sure people across the UK can hold their elected representatives to account.

Donate to our crowdfunder

Taxes on Small Businesses — [Ms Nadine Dorries in the Chair]

Part of the debate – in Westminster Hall at 3:04 pm on 18th October 2017.

Alert me about debates like this

Photo of Glyn Davies Glyn Davies Conservative, Montgomeryshire 3:04 pm, 18th October 2017

Thank you, Ms Dorries, for calling me to speak in this debate and, indeed, for your generosity in doing so after I was a couple of minutes late in arriving.

I congratulate my hon. Friend Derek Thomas on bringing this matter forward for debate. I took great interest in his comments about business rates. I cannot say a great deal about business rates, because they are a devolved matter in Wales and it would not be appropriate for me to speak about their effect in Wales here in Westminster. However, I must say that the dramatic changes in terms of revaluation really have put the most horrendous pressure on some of the most important businesses in my constituency.

The one issue that I will raise today is VAT on tourism. It is not a new issue; it has been discussed many times before. However, I want to make sure that it stays on the Treasury’s to-do list, so I have come along to this debate to talk about the impact of that tax on small business.

In Montgomeryshire, and I am sure in most rural areas of Britain, tourism is a massively important industry and a hugely important part of the local economy. Very often, the competition to an area such as my constituency is from overseas. In a lot of overseas countries, which people can choose to go to for their holidays or to visit for a day or a week, the level of VAT is much lower than it is here. The differences might be measured in relatively small amounts of money, but the point is that it is competition and other countries can advertise by saying that they have a lower level of VAT than Britain. The impact of our level of VAT is negative and it is particularly damaging to rural areas that depend on tourism.

As for my constituency, a lot of people know about Powis castle, Lake Vyrnwy and the Lake Vyrnwy hotel, which is a huge attraction, as well as the Montgomeryshire canal and the Welshpool to Llanfair light railway. Those things are why people come and very often they are the reason people come to Montgomeryshire to set up all sorts of businesses. The point that I am making is that tourism is massively important to my constituency, and I am sure that the same is true of every other rural part of Britain.

As I have said, the issue of VAT on tourism, which is at 20% in Britain, has been under discussion for many years and addressing it has been very much part of the work of the all-party group on the tourism and hospitality industry in Wales. Lowering it is one of our major campaigns and has been for a long time. The ambition is to make certain that VAT on tourism is not forgotten. Addressing this issue needs to be part of the Treasury’s considerations.

It would be very enjoyable for me if the Minister stood up today and said that in the Budget in November, the Chancellor will say that he is contemplating a cut in VAT on tourism, but I am not absolutely sure that that will happen. However, it is important that we keep this issue as a consideration for the future. I know it is not a straightforward issue, and that there may well be administrative costs and that we could be accused of having different levels of VAT. We need to know what the benefit to businesses would be of lowering VAT on tourism. Instinctively, we believe there will be a benefit when the competition is lower, but we need to know what that benefit might be.

What I am asking for more than anything else is that the Treasury keeps this issue under consideration, and that we have a proper understanding of and a continuing inquiry into what the benefits of any VAT cut would be, because as we leave the European Union, the freedom to take decisions relating to VAT will change things; it will give us a lot more freedom. Something that I would like to do as a celebration of our leaving the European Union and the ensuing freedom that we will have to vary our VAT is to announce that we are either removing or greatly reducing VAT on tourism in Britain. The economic benefits of doing so would be huge and I hope that it is something the Treasury will keep under consideration.