Value Added Tax

HC Deb 06 November 1980 vol 991 cc1449-50

Mr. Hicks

asked the Chancellor of the Exchequer whether he has any proposals to zero rate value added tax charged by hotels and guest houses in respect of accounts charged for the accommodation of overseas visitors: and if he will make a statement.

Mr. Biffen

No, Sir. My hon. and learned Friend the Minister of State is meeting representatives of the tourist Industries on 11 November to discuss the question of VAT on services supplied to overseas visitors.

Mr. Hicks

Does not my right hon. Friend agree that tourism operates in an international market? Does he not also agree that as a result of the strength of the pound this year, the United Kingdom's tourist industry has suffered? Given the contribution that the tourist industry makes to invisible earnings, does not the proposal merit further consideration?

Mr. Biffen

I shall say absolutely nothing—[HON. MEMBERS: "Hear, Hear".] That is one's usual objective at Question Time. I do not wish to say anything in advance of the meeting at which my hon. and learned Friend the Minister of State will discuss this question. However, I agree that it would be surprising, and a lacuna if the issue were not fully discussed at that meeting.

Mr. Adley

Does not my right hon. Friend agree that the pound earned in foreign currency by the service sector is just as valuable to the nation as the pound earned by the manufacturing sector? Does my right hon. Friend have a policy that will ensure that those engaged in both sectors have equality of opportunity?

Mr. Biffen

I understand that my hon. Friend will be leading the delegation that will be received by my hon. and learned Friend the Minister of State. I note what my hon. Friend has said. However, no country within the European Community operates a zero rating for hotel accommodation. We should be exceedingly wary about making VAT even more complex.

Mr. Maxton

If the Minister is considering zero rating VAT for overseas visitors, will he also consider zero rating for the theatre and the arts which are more important, and which also make a vital contribution as regards overseas visitors?

Mr. Biffen

The hon. Gentleman's reaction confirms the Treasury's worst fears, namely, that once one kicks aside a pebble in this area, one gets an avalanche.

Mr. Denzil Davies

If the money supply is running at 20 per cent., and if the Government believe that growth in the money supply affects the rate of inflation, does the right hon. Gentleman not accept that inflation will increase to 20 per cent. again in about 12 month' time?

Mr. Biffen

That shows great ingenuity and might well be raised at the meeting with my hon. and learned Friend the Minister of State. However, the narrow subject of zero rating hotels surely cannot give rise to such philosophic considerations.