Cut Tourism VAT

Cut tourism VAT, boost british jobs


Tuesday, 26 May 2015

The Long View on Tourism VAT – A personal perspective from Eric Marsh, George Hotel

I joined the hospitality industry soon after my 17th birthday in 1960, except that at that time it was known as the catering trade, and although I enrolled on a university course I attended a technical college; I started three days late with a mere three “O” levels, and three years later was awarded a National Diploma in Hotelkeeping and Catering.

I had gone into catering because my father, an automotive engineer, travelled a lot and reasoned that “people must eat and they will drink”. My first job was at The Dorchester Hotel in London’s Mayfair. (I had also been offered the alternative option of a post at the recently opened Hilton next door on Park Lane, but I did not think that style of operation had much of a future…).

So why am I telling you this, in a piece about VAT on tourism? Because it was then and there that it all started.

In 1966 Prime Minister Harold Wilson’s government introduced “Selective Employment Tax” (S.E.T.) and, as the name implies, it was targeted at the workforce of the service industry to subsidise the manufacturing industry: a levy was charged on all employees, payable by their employer, but the levy from the service industry was then donated to the manufacturing industry. The theory was that the subsidy would “help exports”, notwithstanding the fact that tourism is itself a major UK export, albeit often played down with the rider “hidden”.

As a receptionist at The Dorchester in those days I clearly recall quoting room rates (typically upto 20 guineas a night!) “exclusive of Selective Employment Tax” and then explaining to a confused overseas client  just what SET was.

In due course the tax was succeeded by the Heath Government’s introduction of Value Added Tax in the early 1970’s. Like SET, it was largely a blanket tax, providing government with tax revenue, much of which still goes to contentious beneficiaries. However, if one looks back at its origins – “to subsidise manufacturing from the proceeds of the services industries” – there appears a strong case that, with transformation from SET to VAT, there should have been a cessation of the bias in favour of manufacturing but against services.

That tourism is a major UK export there is no doubt; equally it is amongst the UK’s largest employer, and, incidentally, it is one of UK’s most dependable employers. But tourism could be an even greater exporter and employer. There is conclusive proof than a reduction in VAT on selected tourism products would result in an increase not only of government VAT revenue but tourism workforce benefit and welfare.

I endorse and recommend BHA’s drive to move in that direction.

Eric Marsh, Proprietor, George Hotel, Hathersage, S32 1BB

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