Carmichael renews calls for tourism tax cut

Orkney and Shetland MP, Alistair Carmichael, has spoken out in a parliamentary debate on fiscal support for coastal tourism and hospitality to call for renewed consideration on a cut to tourism VAT. During the debate on Thursday Mr Carmichael noted a range of challenges facing isles tourism businesses including the ferry fleet, labour shortages and the recent introduction of the short-term let licensing scheme, and said that tourism and hospitality tax changes could be an important way to boost coastal communities.

Speaking in the debate, Mr Carmichael said:

“There are a number of significant challenges. In Scotland, we have an ageing ferry fleet. For island communities, that has been problematic for the past few years, and sadly it is only getting worse. The availability of labour in the local community causes real difficulty, especially in a seasonal economy. People moving into work in island communities need accommodation at a time when people are coming to stay in the same accommodation, so housing availability in our island and coastal communities is a significant issue, and Government-led provision could make a real difference to businesses’ ability to grow.

“The regulatory burden unfortunately seems to get greater every year. In Scotland, we now have the short-term let licensing scheme. I have not yet seen figures for it, but my sense is that we may see, especially in the smaller outer isles in Orkney and Shetland, a lot of people walking away from the provision of bed and breakfasts or self- catering accommodation as a consequence of the licensing regime.

“Goodness knows it is difficult enough for someone operating a business in Kirkwall and Lerwick to get work done, but if they are operating in one of the outer isles—in Sanday, Stronsay or North Ronaldsay, or perhaps in Unst, Yell or Fetlar in Shetland—that becomes yet another extra burden and cost. The farther the accommodation is from the centre, inevitably the fewer weeks in the year it can be let and the fewer people coming to stay in the community. Again, at the end of the day, is it worth it? The balance is sadly tipping in the opposite direction, towards saying no.

“These people are self-starting and entrepreneurial and do a lot to bring economic growth to their communities, and there are certain levers that the Treasury could use to help them grow their businesses. The single most important change I hear advocated by those businesses, time and again, is the reduction in value added tax. We have seen a small example of that already with the reduction to 5% during the covid pandemic. It would be interesting to know what analysis the Treasury has done of the tax take in that time—albeit everybody was operating in a much-reduced market.

“At a time when we want to grow the economy and are relying on that to spread the benefits of growth throughout the country instead of hoarding them here in London, surely that is something that must commend itself to the Government.”