The A303: The Chancellor’s road to the few

One of the common challenges of living on the coast, or in the country, is the smaller size of the local economy. That can be partly a question of the nature of the land, or sea, and partly the smaller population of people to participate in that economy, as producers, sellers or buyers. Anything that can help expand those numbers offers an economic opportunity for working people of coast and country, and should, therefore, be something the Labour Party supports.

While some commentators consider road and rail infrastructure as the answer to improved economic opportunity, those types of enhancement only benefit a very specific location, or population, and often take decades to produce that benefit.

A better, more systemic way to enhance the economic potential, and benefit, of all communities across the UK, would be to provide decent broadband and mobile coverage. Another, even quicker approach, would be to look at enhancing tourism by reducing VAT on hotels, B&Bs and attractions, as proposed by the Cut Tourism VAT campaign. Their proposal, to cut VAT on tourism attractions and accommodation from 20% to 5%, would boost jobs and growth in all parts of the UK.

Their evidence shows that across Europe – from Greece to Germany, from Spain to Sweden – a cut in VAT has delivered results. In Ireland, a cut in tourism VAT from 13.5% to 9% in 2012 led to a significant increase in the number of international tourism receipts being taken and 20,000 direct tourism jobs being created. Cutting tourism VAT and attracting more international visitors will make a huge difference to plugging the UK’s current trade deficit.

And of course this is something that British families can also benefit from. Given the cost of living crisis they have experienced don’t they deserve a break? Don’t they deserve a level playing field with families in Europe? A recent survey by Mumsnet shows that mums think they do. An overwhelming majority (87%) feel that it is a good idea for UK rates of VAT to at least fall in line with European averages. Even better, a 2014 report by the Nevin Economic Research Institute praised the Irish reduction of tourism VAT as ‘notably progressive, impacting positively on lower-income households.”

Recently the Chancellor was asked a simple question: will the UK follow 25 other EU countries in reducing this rate of VAT? His answer, in short, was ‘no’, claiming that cutting VAT for attractions and accommodation had not led to a boost in economic activity in other countries (when the evidence suggests otherwise!)

His answer to boosting tourism is to just invest in the A303 to Devon. There is nothing wrong with improving a lifeline to Devon, a beating heart of the tourism industry, but he is missing a national opportunity, for communities of coast, country and also the nation – cutting tourism VAT, would, in the medium term increase tax revenues to the Treasury and enable the Government to invest in the A303, or indeed anywhere else, while also creating over 120,000 jobs nationwide.  And of course cutting tourism VAT will boost the entire industry in one or two years.

Thankfully Ed Balls gets it, and can see that there could be a place for cutting tourism VAT in Labour’s Better Plan, an opportunity to bring economic growth to all communities of the UK.

Hywel Lloyd is a Co-Founder of Labour:Coast & Country and previously an Advisor to Labour Defra and DCLG Ministers – he writes here in a personal capacity.