Analysis conducted by the Country Land and Business Association (CLA) has found that making the VAT cut from 20% to 5% permanent for rural tourism enterprises with a turnover of up to £500,000 would add £4.5billion to the economy, over a 10-year period.
COVID-19 is estimated to have led to a drop of over £50billion in spending on domestic tourism in 2020, with rural tourism operators taking the major brunt. This is set to continue as bookings for February half-term and Easter are cancelled due to the pandemic. Even once the sector opens again, it will not return to normal as social distancing forces lower capacity rates.
Keeping the VAT cut permanent would help level the playing field with popular European destinations, including Greece (13% VAT), France (10% VAT) and Spain (10% VAT). It would also enable tourism businesses in the UK to lower their prices to the public – leading to an increase in demand and more jobs being created.
Without support, hundreds of thousands of jobs could be lost. A recent survey by the Cut Tourism VAT campaign found that a fifth of respondents said removing the temporary VAT reduction after 31st March would force them to cut 20% of their workforce, with a further 44% stating they would have to reduce employee numbers by between 5% and 20%. This equates to 310,000 jobs, which is in addition to those who have already been made redundant in the hospitality sector.
Pushes to lower VAT have previously been dismissed; reducing VAT for tourism enterprises with a turnover of up to £500,000 would lead to a 2-year tax deficit of £280million for the Treasury. However, this represents a drop in the ocean compared to the £400billion spent on COVID-19 support measures. To save the rural tourism sector and ensure its long-term sustainability and competitiveness, it is a common-sense policy to adopt as part of the Budget on 3rd March.
Mark Bridgeman, President of the CLA which represents around 5,000 rural tourism businesses across England and Wales, said:
“The rural tourism sector, as a whole, has been heavily impacted by the pandemic. With the tightening of restrictions over the Christmas period and the national lockdown looking to continue through the February half-term, many holidays have been cancelled, resulting in a loss of business for many.
“We must do what we can to support small businesses during this time, and the VAT reduction provides a solution that will benefit everyone involved, from rural tourism businesses to those in their supply chain, and ultimately the Treasury, who stand to make £4.5bn from our proposal.
Article continues below this advertisement “The CLA sees this as a fundamental move in ensuring vital cash flow and maintaining business competitiveness in the longer term.”
In the South East the CLA represents farmers, landowners and rural businesses in Kent, Hampshire, Surrey, Sussex, Berkshire, Buckinghamshire, Oxfordshire and the Isle of Wight.
