BHA warns Westminster on Scotland VAT cut threat

Westminster could face increased pressure to cut hospitality VAT if Scotland were to push through with the move if it gained independence.

That's according to the British Hospitality Association (BHA), the Scottish Tourism Alliance and Members of Scottish Parliament (MSPs). The groups, who are in favour of a cut, have joined together to question whether Scotland would lower VAT from the current 20% to just 5% if it gains independence after the referendum in September this year.

The calls coincide with Scottish Tourism Week, taking place from 11 to 14 March.

MEPs including Mike Weir MP - who is SNP Westminster spokesperson on Business, Innovation & Skills and Energy and Climate Change - said that an independent Scotland could seriously consider implementing the move.

He said: "At present VAT is controlled from Westminster, which has steadfastly refused to implement a cut. With independence, we would have the powers to set VAT rates to benefit our tourist businesses and to boost our rural economy."

The statement comes against a backdrop of on-going pressure on Westminster to cut the VAT, which the BHA argues puts Britain's competitiveness behind countries such as France, Germany, Italy, Greece, Spain and Sweden.

The BHA also underlined its support for the cut whatever the outcome of the referendum.

She said that a similar VAT reduction in Ireland - where the industry's VAT is now at 9% - had seen a boost in tourist numbers and revenue, and an increase of 25,000 jobs. She added that hotels, attractions and tourism would become more competitive under a lower VAT rate, creating employment, cutting the benefits bill and improving the economy.

Graham Wason, chairman of the Campaign for Reduced Tourism VAT, argued that a lower rate in Scotland could prove detrimental to the rest of the UK and leave Westminster exposed.

He said: "If Scotland opts for independence and subsequently cuts VAT on tourism; it would benefit significantly at the expense of the rest of the UK. It would also attract more visitors from abroad, so earning export revenue and improving its balance of payments. In these circumstances, the mistake by the rest of the UK in not cutting tourism VAT would be exposed."

Similarly, chief executive of the Scottish Tourism Alliance, Marc Crothall, has urged ministers in both the UK and Scottish Parliament to "acknowledge the proven benefits that a cut in tourism VAT can bring", and act accordingly.

Scottish Tourism Week began yesterday, spearheaded by the Scottish Tourism Alliance. It will continue all week, and aims to highlight tourism benefits and issues in the country.

A referendum asking Scottish people if they would like to remain part of the United Kingdom or split from the union - pushed ahead by first minister of Scotland Alex Salmond - is to take place on 18 September this year.

Calls to cut VAT have grown louder in recent months following a historic Parliament debate organised by Margaret Ritchie MP and Caroline Lucas MP in February this year. Lucas called a cut "a no-brainer" thanks to the jobs she claims it would create, while Ritchie said the government's lack of action on VAT spoke of "lethargy".

Thus far, however, the Government has rejected calls to slash the rate, claiming that it would cost the Treasury up to £10b a year and hinder attempts to cut the budget deficit.

In February, David Gauke, Exchequer Secretary to the Treasury, said: "This government is yet to find any evidence of a causal link between VAT rates and tourism activity."

Parliament set to debate tourism VAT cut >>

VAT reduction a ‘no-brainer' says MP >>

Industry leaders call on Chancellor to consider VAT cut >> -

Minister dashes hopes for VAT reduction after Commons debate >> -