§ 11.30 p.m.
§ Mr. Robert Hicks (Bodmin)
I welcome the opportunity to initiate this short debate on the current problems in the tourist industry. Tourism is a subject to which this House gives insufficient time and attention.
We should be aware of the contribution that tourism makes to the United Kingdom. It is estimated that 8.6 million overseas visitors will have come to this country in 1975—a 10 per cent. increase on last year. They will spend some £1,400 617 million of much-required foreign currency. That figure represents 4 per cent. of the total exports of the United Kingdom, or, put another way, approximately 11 per cent. of our invisible earnings.
Apart from that contribution to the nation's income, the pattern of expenditure by the tourist gives direct benefit to many sections of the community, particularly the service sector. If we analyse the £1,400 million we see that accommodation in hotels accounted for some £320 million in the current year, and dining in hotels and restaurants accounted for £150 million. Some £420 million was spent in shops; £100 million on internal transport and £110 million on other internal expenditure such as entertainment and theatres. Fares paid to United Kingdom airlines and shipping lines amounted to £300 million.
Of that expenditure, it is estimated that £100 million was paid direct to the Treasury in taxation by way of VAT and excise duties on petrol, tobacco, and drink. It is estimated that 1 million people owe their jobs, at least in part, to the industry. In emphasising this variety of economic activity that both contributes to and depends upon the industry, I am led to ask the Minister two questions.
Is the hon. Gentleman satisfied that the nation as a whole and the Government in particular are fully appreciative yet of the value of the tourist industry? I do not ask that in a flippant or cynical manner, knowing the Minister personally as I do.
The NEDC talks on 5th November showed a complete indifference to the service sector of our economy. In the subsequent White Paper the Government are committed to encouraging investment on a selective basis. Tourism is a natural candidate for investment, yet there is no mention of it.
Does the Minister believe that the Government and the industry have yet evolved the correct structures and appropriate relationships to take maximum advantage of undoubted opportunities and potential? The British Tourist Authority is primarily responsible for overseas promotion.
We have the three national tourist boards, and the English Board has a 618 regional structure. I accept that they are undertaking valuable work, but in attempting to assess their effectiveness I am concerned by two aspects. It would appear that much of the board's time is spent in close liaison with other Government agencies and what one might describe as the quasi-State organisations concerned with leisure and recreation—the Countryside Commission, the Sports Council, the National Trust, the tourist section of the Forestry Commission and others. No doubt this is necessary and there are some useful achievements. But I wonder whether this consultation and analysis is not at the expense of contact with the various facets of the private sector which actually operate the tourist industry.
I acknowledge that we live and work in an interventionist society. I accept that it was right for the Secretary of State for Trade to issue his guidelines last year. The basic theme of his statement was that we must fully develop our tourist resources, giving greater emphasis to the regions which hitherto had not been developed, and seek ways in which more projects and areas of tourist activity could be self-financing.
Surely, to achieve that latter objective it is essential that the private sector should be involved right from the earliest stages. The private sector must be consulted on a continuing basis if the necessary confidence is to be gained. I believe that there should be direct access by the private sector to the Secretary of State and not only via the statutory boards.
In raising certain specific problems I appreciate that they are not the direct responsibility of the Under-Secretary of State, but I hope that he will say what he can and will convey the points made to the various Departments concerned.
The first specific point concerns the Fire Precautions Act. This is a classic case of a well-intentioned Act, which had all-party support. When we came to implementation, certain problems came to light, primarily financial, of which the House was not aware at the time it passed the Act. The Hotels and Catering Economic Development Council estimates the cost of implementing the Act, including work already done, at about £95 million. This is a considerable sum of money and puts severe strains on the hotel industry—particularly the smaller 619 units—which, in the current economic climate, is already strained to capacity anyway.
As a consequence, in a minority of situations the expenditure has been prohibitive. There are more hotels on the market today than is normal. A number of hotels are reducing the number of their letting rooms. Others are converting into self-contained flats. Then there is ultimate closure. In Suffolk there have been 70 such closures. In Essex 50 hotels have either closed or reduced their capacity. In Sussex 100 have reduced their capacity. In Cornwall some 50 have either closed or reduced their capacity.
I regret to say that the situation does not end there. On 21st May this year I learned in answer to a Question to the Home Office that about 39,000 hotels and boarding houses in England and Wales—70 per cent. of the total—had still to be inspected by the local fire officer. Therefore, if the bedrooms are to be available to meet the growing demand, the Minister must use his influence, as the Minister responsible for tourism, with both the Treasury and the Home Office. I hope to see some movement towards either extending the implementation period or giving long-term Government loans at moderate interest rates.
The second specific question concerns the need to classify hotels as industrial buildings, thus allowing the building of new ones to be eligible for industrial building allowances. Tourism is an international market. The competition with other countries is becoming fiercer than ever. But whereas the hotel industries of all our European rivals receive Government assistance, ours is both highly taxed and in receipt of no special concessions. I should think that our current economic climate, plus the more intensive international competition, means that the extension of capital allowances for hotel building is more necessary than ever. Indeed, in March of this year, in answer to a Question to the Chancellor of the Exchequer, I was told that he estimated that this would cost the Treasury, subject to a wide margin of error, about £25 million a year.
Going back to the Government's White Paper, if we are to have selective investment, surely hotels are an excellent case. Tax allowances on hotel buildings are al- 620 lowed in all other EEC countries. Therefore, investment in hotels here depends much more on restricted cash flow and on high interest loans than it does in our European competitors, with inevitable adverse effect on prices in a highly price-sensitive market. Of course, industrial building allowances can be used only to offset taxation on profits, so that their extension to hotels would surely only encourage potentially profitable, and not indiscriminate, investment.
I appreciate that my third point, the problem of rates, affects all sections of the community, but particularly the business community. We have the Layfield Committee, but as an interim measure consideration should be given to granting rate relief to business units of up to a rateable value of, say, £800 a year, which average would include hotels with up to 17 or 18 bedrooms.
Fourth, there is the whole question of the criteria used in determining the locations to qualify for assistance under Section 4 of the Development of Tourism Act. Funds at the moment are available only to approved projects in development areas. This means that in the current financial year £1.56 million is available for the English development areas, £800,000 is available for Scotland and £682,000 is available for Wales.
The present position is far from satisfactory in that the designation of development areas is based on industrial criteria. These areas are not necessarily those which require tourist aid. The Minister should give proper consideration to investigating the possibility of creating tourist development areas independent of normal industrial development areas.
Finally, I ask the Minister to take advantage of this opportunity to comment on the availability of EEC funds. As he well knows, there is a misunderstanding at present as to precisely what sources of finance are available to the tourist industry, and in particular the hotel sector, for expansion programmes and improvement schemes. We now have the Regional Development Fund and the Global Loan Scheme, which is administered in the United Kingdom by Finance for Industry but which is, of course, financed by the European Investment Bank. Therefore, the industry would welcome guidance from the Minister on this matter this evening.
621 I hope the Minister realises that the tourist industry faces real difficulties, which have been aggravated by the high rate of inflation. However, I cannot over-emphasise that the tourist industry is anxious to respond to the Secretary of State's objectives. To attain those objectives we have to create the necessary climate of confidence. I hope that, in turn, the Minister will demonstrate by his actions and, indeed, by his attitudes that he is conscious of the industry's problems.
§ The Under-Secretary of State for Trade (Mr. Eric Deakins)
First, I congratulate the hon. Member for Bodmin (Mr. Hicks) on raising this topic tonight in an Adjournment debate. We have not had a debate on tourism for over a year. Indeed, it was his hon. Friend the Member for Ealing, Acton (Sir G. Young) who last raised this subject, in the middle of 1974, when we also had an interesting debate on it. The hon. Member for Bodmin equalled the performance of his hon. Friend the Member for Acton, who is a great expert on tourism, in the lucid way in which he set out the present state of the industry and the problems facing it.
I also welcome the hon. Gentleman's general support for the objectives of the new tourism guidelines, which are beginning to be appreciated throughout the tourist industry as being appropriate to the situation in which not only the industry but the country finds itself today. The hon. Gentleman spoke about the structure of the industry. It is a very varied industry. It includes hotels and catering and many other types of accommodation, boarding-houses, holiday centres, caravans and self-catering units, which today are increasingly used. Tourists also want to do things and look at things, so the industry must include the leisure industries, historic houses, museums and the arts. Many sectors of the retail industry are also involved.
Against that background it is difficult to have a tidy, coherent structure which can embrace all those activities and which can include big companies, private family businesses and public bodies. However, I do not believe that tidiness matters all that much. We need free and effective communications between all concerned.
622 One important element is the statutory tourist boards. I pay tribute to the efforts they have made and are making to promote tourism and to advise the Government in accordance with their statutory obligations. There is constant consultation between the boards and the Government, and the Government and the boards are also in close touch with the industry in order that it can represent its views to the Department. However, as I have said before—and I repeat it again tonight—I am willing to listen, when appropriate, to representations that are put forward by the industry.
I turn from the national scene to local matters. We also have the regional tourist boards, which do an excellent job in liaising with local authorities. Indeed the local authorities themselves play an essential part, not only in the support which they give to the regional tourist boards but also in the provision at local level of tourism facilities.
That is the pattern. Tourism is essentially a partnership between Government, the statutory boards, local authorities and private industry. The present pattern has evolved and I am sure that it will continue to evolve. If changes in private industry or elsewhere should make changes necessary in the structure, I am sure that the boards will be the first to bring this aspect of tourism to the attention of all concerned.
In his more specific points the hon. Gentleman mentioned, first, fire precautions. I assure him that both I and the Government fully appreciate the problems which fire precautions pose for the hotel industry. It is entirely to the industry's credit that discussion in the trade Press and elsewhere has rightly assumed that higher standards are necessary; and the issues have been the high cost involved with its implications for reduced profitability and, perhaps, closure of hotels, a point which was well emphasised by the hon. Gentleman.
As regards numbers of hotels, it is appropriate to note that at the beginning of 1974 the total number was 34,000. The estimated number of hotels which have closed in the four years 1970–73 is 1,600, which is about 4 per cent. The source for those figures is an NEDC report. Unfortunately, it is not possible to say in every case why hotels have closed.
623 The Government have always taken the view that it would be wrong in principle to provide grants to assist in the provision of statutory requirements affecting safety, but that does not mean that no help is available. There is tax relief for fire precautions work, and local authorities are empowered to make loans available to hotels with accommodation for up to 25 people, including guests and staff. I understand that the not inconsiderable sum of £1.4 million has been included by local authorities in their current estimates for this purpose.
As the hon. Gentleman appreciates, fire precautions are the responsibility of my right hon. Friend the Secretary of State for the Home Department. I know that he would want me to pass to him any firm evidence that is given to me of hardship caused by the Act. I can certainly give that undertaking to the hon. Gentleman.
The hon. Gentleman went on to talk about investment allowances, both here and in Western Europe. It is true, as he pointed out, that tax allowances on hotel buildings are available in EEC and other countries but not in the United Kingdom. On the other hand, the United Kingdom is a good deal more generous than many other countries in its treatment for tax purposes of hotel plant and equipment. This should be particularly helpful to hoteliers who are contemplating modernisation programmes. On balance, I do not think that it has yet been clearly demonstrated that the overall tax position for hotels is significantly worse in the United Kingdom than it is elsewhere.
We have had the Hotel Development Incentive Scheme and the substantial Government expenditure which has been associated with it, amounting to some £60 million by the time all the grants will have been paid. This has also provided an effective stimulus to hotel investment and has achieved the objective of averting a threatened shortage of beds.
There is also the real practical difficulty that any change of the kind which has been urged tonight would lead to claims for similar treatment in other parts of the commercial sector. Hence we cannot look at hotels in isolation. However, as the hon. Gentleman will be aware, this is really a matter for my right 624 hon. Friend the Chancellor of the Exchequer, and I shall bring to his attention the various points made by the hon. Gentleman. In addition, I assure the House that the position of the hotel industry, in this as in other matters, is kept under careful review.
The hon. Gentleman went on to talk about tourism development areas, which is an idea he has put forward previously, certainly in a Committee discussing regional affairs some time ago. The suggestion that we should assist tourism projects under Section 4 of the Development of Tourism Act 1969 in a way which would extend this assistance outside development areas is not new. It has been canvassed a good deal both in the House at Question Time and outside the House. Proposals have been put forward to extend it to intermediate areas, to coastal areas or, as the hon. Gentleman suggested, to special tourism development areas.
I am aware of the problems faced by hard-pressed holiday towns, and I therefore have sympathy with those suggestions. The difficulty is that the amount of money available from public funds for tourism is limited. The present policy—and I am sure that it is right—is to concentrate this assistance where it is most needed. Hence it is available to those parts of the country most in need of assistance—namely, the development areas. Even in those areas it is necessary that priority be given to local authorities which are especially economically weak and have tourism potential which can be developed. If this assistance to tourism projects is made more widely available, it will have to be spread more thinly. If that is done, it could fail to make an adequate impact where it is most needed.
The hon. Gentleman asked for some clarification of EEC aid facilities There has unfortunately been some misunderstanding about those facilities on the part of the industry. There is no prospect of getting easy money from Brussels. The idea of ample resources waiting to be claimed by hoteliers is an illusion.
The £150 million that is available to the United Kingdom from the European Regional Development Fund is for investment in industry, service industry and infrastructure over the period 1975–77. 625 The share for service industry investment will be quite small. Second, the applications which have to be submitted by the Government have to meet the criteria in the fund regulations. For example, projects must be in receipt of national aid as under Section 4 of the 1969 Act. The minimum qualifying investment is about £21,000. A service industry project must create 10 new jobs or maintain jobs that would be redundant but for the investment. Third and very important, receipts from the fund for service industry schemes are paid to the Government and not to the individual promoter of the scheme who will clearly benefit from help from public funds. Instead, the receipts will enable the Government to go ahead with more regional assistance in the future than could have been managed otherwise.
The other European funds, such as the Social Fund and the Coal and Steel Community Fund, are not very relevant to the problems of the tourist industry. They are mainly concerned with matters such as the retraining of the unemployed. There has also been considerable interest in the industry about the possibility of finance from the European Investment Bank. The EIB has wide lending powers but it has to operate within a system of priorities. At present—the United Kingdom supports this—the bank's priorities are regional development and energy. The EIB is likely to consider favourably only substantial projects which will make a 626 real contribution to employment in or the infrastructures of our assisted areas. If small hoteliers have projects in the assisted areas they can discuss them with Finance for Industry, which can act as the EIB's agent in this sector. For small and large companies the loans are in foreign currency and real exchange risks have to be taken into account.
It would not be right for me to finish without joining in congratulating the tourism industry on its fine performance in its contribution to the United Kingdom's balance of payments. For example, last year 8 million overseas visitors spent £834 million in Britain, excluding the fares paid to British carriers. The importance and value of this contribution is more than equalled by the import-saving task that the industry performs in catering for our own people who spend their holidays in Britain rather than overseas. Both tasks are equally valuable.
I assure the hon. Gentleman that the Government are fully aware of the great importance of the industry's contribution to our balance of payments and our invisible earnings. In spite of the industry's problems—and which industries do not have problems at the moment?—I hope that it will continue to succeed in both spheres.
§ Question put and agreed to.
§ Adjourned accordingly at two minutes to Twelve o'clock.