House of Commons - Culture, Media and Sport

Select Committee on Culture, Media and Sport Eighth Report

4 FUNDING OF TOURISM

30. When the Rt Hon James Purnell MP, the then Secretary of State for Culture, Media and Sport, appeared before the Committee in October 2007, he stated that public sector funding of tourism stood at around £350 million per annum.[47] The Minister of State, the Rt Hon Margaret Hodge MP, reasserted this figure in February 2008.[48] A breakdown of the organisations through which it is channelled is shown below.

Summary of public sector funding of tourism in 2006-07

Organisation	Expenditure (£ million)
VisitBritain	49.9
VisitScotland	44.0
VisitWales	22.0
Northern Ireland Tourist Board	18.7
Northern Ireland Tourist Board to the joint Northern Ireland / Eire Tourism Ireland marketing body	12.6
London Development Agency	22.0
London Unlimited (additional marketing and promotional funding for London)	6.0
Non-London RDAs	29.8
English local authorities	126.0
Scottish local authorities	4.4
Welsh local authorities	13.0
Total	348.4

Source: Written Answer 11 December 2007, col. 393W.

31. In the devolved areas of Scotland and Wales, expenditure to promote tourism has increased significantly in recent years. In contrast, for the two biggest funding streams, VisitBritain and the English local authorities, expenditure is under pressure. Our inquiry has therefore focused on these two funding streams.

VisitBritain: Funding and future

32. VisitBritain is primarily funded by Grant-in-Aid from DCMS. In 2007-08, it received £49.9 million from DCMS, the same as that received in 2006-07. In fact, the level of funding for VisitBritain has remained relatively static in recent years, although the impact of inflation means that there has been a real terms decrease (see table which follows paragraph 34). In contrast, the income VisitBritain generates itself (from partnership marketing and other commercial activities) has increased from £15 million in 2004-05 to around £24 million in 2007-08.[49]

33. In advance of the 2007 Comprehensive Spending Review (CSR) announced last autumn, VisitBritain requested an increase in funds on four counts:

It believed that funding should at least keep pace with inflation;
It requested additional funding for VisitEngland (part of VisitBritain);
It asked for additional funds of a one-off nature to enable further progress on the Partners for England initiative (a forum for sharing best practice in the industry);[50]
It requested a £20 million one-off payment to market Britain during the London 2012 Games.[51]

34. What VisitBritain in fact received was a cut in funding, to £47.9 million in 2008-09, £45.4 million in 2009-10 and £40.9 million in 2010-11. The level of funding for this period is compared to that of previous years in the table below.

Grant-in-aid funding from DCMS to VisitBritain and its predecessor bodies

Year	Annual funding (£ million)	At 2007-08 prices (£ million)
2003-04	47.9	53.4
2004-05	48.4	52.5
2005-06	48.9	51.4
2006-07	49.9	51.5
2007-08	49.9	49.9
2008-09	47.9	46.6
2009-10	45.4	43.0
2010-11	40.9	37.7

Source: Written Answer 22 February 2008, col. 1052W.

35. The CSR settlement amounts to a cut of 18% between 2007-08 and 2010-11, even before the effect of inflation is taken into account. Moreover, it has been estimated that the settlement equates to a reduction of 50% in real terms between 1997-98 and 2010-11.[52]

36. The CSR settlement for VisitBritain met with considerable hostility from the tourism industry and beyond. A particular criticism has been the timing of the cut in the lead-up to the London 2012 Games, and this point is considered in more detail in Chapter 5. UKinbound, the trade association representing inbound tourism businesses, argued that VisitBritain had been "emasculated" and that "our competitors will be rubbing their hands with glee".[53] VisitBritain's advertising expenditure in the US in 2007 was US$1.2 million, compared to, for instance, US$8.0 million spent by Australia and US$9.6 million by the Caribbean island of Aruba.[54] The cut in funding prompted the Tourism Alliance to launch a "Take Tourism Seriously" campaign, a means to "communicate the industry's very serious concerns [about] Government policy".[55]

37. At the time of the announcement, the former Secretary of State justified the cuts by insisting that there were efficiencies that VisitBritain could achieve.[56] However, in a subsequent letter to the Tourism Alliance, the Minister with responsibility for tourism, the Rt Hon Margaret Hodge MP, referred to VisitBritain as a "thoroughly professional organisation" and one which has achieved all of its headline targets in recent years. This would appear to suggest that VisitBritain already operates efficiently, and this is certainly the view of the Tourism Alliance.[57]

38. When VisitBritain appeared before the Committee, it outlined a number of efficiency savings it has already made. Between April 2006 and June 2007, it reduced its staff from 529 to 417, while within its staffing levels there has been a reallocation of resources. This has included increases in the number of staff working in the "online environment" and "on commercial businesses".[58] Over the same period VisitBritain has also reduced its infrastructure costs from £12.3 million to £9.9 million.[59] Its Chairman told us that any further reductions would take VisitBritain to the point where you "cut into the bone". He gave an example: "I am curious to know which part of the anatomy of the one person we have in Malaysia we will cut".[60]

39. Nevertheless, when the Minister appeared before the Committee in February, she insisted that there was still room for improvement: "However efficient they are today, they can change and become more efficient tomorrow".[61]

40. It is obviously the case that non-departmental public bodies should always be looking to run their operations more efficiently. However, in the case of VisitBritain, no-one has demonstrated that there are inefficiencies in the way it conducts its operations, and certainly not of the scale to justify the cut in its resources that is proposed. Instead, we share the view that VisitBritain is generally a well-run and efficient organisation and regard the Government's attempted explanation of its decision as wholly unconvincing.

41. While recognising the tightness of this year's public expenditure settlement, we find it extraordinary that Ministers took the decision to concentrate all of the pain on the Department's funding for tourism. Indeed, we believe that there was a strong case for increasing the resources available to VisitBritain given the evidence of the economic benefits that can result and the unique opportunity provided by the forthcoming 2012 London Olympic and Paralympic Games. The decision to cut resources is simply baffling and should be reconsidered.

What now for VisitBritain

42. VisitBritain is currently undertaking a strategic review of support for tourism in the UK, at the request of DCMS. This is expected to identify how VisitBritain will operate under the reduced funding settlement and is due to be published by the end of July 2008.[62] VisitBritain has already stated that it has no intention of "salami-slicing" its operations. It believes that such an approach would reduce its competence and effectiveness. Instead, it explained that there will be some discrete areas of activity that it will abandon.[63] The strategic review of its operations will report on which areas of activity these are likely to be. VisitBritain is also hoping to increase further its non-Government funding from £24 million to £35 million by 2010-11 in order to counter the reduction in Grant-in-Aid funding.[64]

43. However, the recent increase in VisitBritain's non-Government funding has led to criticism that it is becoming too commercially focused. There are complaints that the marketing material put out by VisitBritain disproportionately reflects private sector interests, causing a distraction from the simple promotion of the UK. The British Resorts and Destinations Association argues that the marketing message should be "Britain is a wonderful place, come to it", not "Britain is a wonderful place-oh, and, by the way, how about flying with x airline or when you are here how about hiring your car from x or y hire car company"?[65] It was also suggested to the Committee that VisitBritain charges local authorities a high price for the promotion of their destination overseas.[66]

44. VisitBritain's network of overseas offices appears particularly threatened as a result of the budget cut and strategic review. VisitBritain currently operates 19 overseas offices, has representatives in a further ten, and a "virtual" (online) presence in another eight.[67] The Minister has recently suggested that the review may lead to the closure of some of these offices: "internet marketing and emerging international markets are our overseas priorities for the next five years[…]this may mean taking a close look at things like (for example) VisitBritain's physical infrastructure in established markets".[68]

45. VisitBritain presented the case for the maintenance of its overseas offices. Its Chairman insisted that it could not rely solely on the internet to promote UK tourism: "the extraordinary asset [of VisitBritain] is the people overseas[…]Knowing how to pitch attractions in different markets requires local skills".[69] He gave a specific example:

46. VisitBritain is not alone in this view. VisitScotland, VisitWales, Visit London, the Tourism Alliance and UKinbound all testified to the value of the offices in promoting the UK.[71] When the Committee visited VisitBritain's Los Angeles office, we gained an understanding of the type of activities that the overseas offices undertake:

Targeted marketing campaigns. For instance, it has recently been promoting "film tourism", a campaign to encourage Americans to visit the locations of successful films set in Britain;
Media and public relations work, including its "Broadcast Assist" programme (where VisitBritain targets key travel and lifestyle television programmes to secure broadcast coverage of a UK destination); and
Gathering confidential market intelligence from US based tour operators, airlines and other sources on future developments likely to impact upon inbound tourism to the UK.

47. In fact, budget constraints meant that VisitBritain closed down its Dublin office in October 2007, meaning that it no longer has a physical presence in Ireland. While it is too early to say what impact this has had on the number of visitors to the UK from Ireland, it has had some important organisational effects. Before the closure, VisitBritain was the sole promoter of the UK to the Irish Republic. With its withdrawal, responsibility now lies with each of the ten English RDAs, VisitScotland, VisitWales and Visit London to promote themselves independently in Ireland. VisitBritain suggests that the closure of its office was therefore a false economy, as economies of scale mean that the present fragmented arrangement is likely to cost the taxpayer more.[72]

48. Another suggested cost-saving approach for VisitBritain is sharing overseas office space with the Foreign and Commonwealth Office and the British Council.[73] An arrangement such as this has recently been agreed with the Consulate and British Council in Los Angeles. On this occasion, VisitBritain were offered what it refers to as "very good terms" for the office space, but this is not always the case.[74] The cost of VisitBritain's stand-alone overseas offices is, on average, £17.63 per square foot. In the 11 locations where it rents office space at a British Embassy or High Commission, or from the British Council, premises are £30.71 per square foot.[75] DCMS insists that additional office services and particular circumstances in particular locations negate the fairness of this cost comparison.[76] Nevertheless, these figures do lend weight to VisitBritain's argument that it is not necessarily more cost effective for it to be co-located within the British Council or other British missions around the world.

49. There is a danger that in seeking to secure greater funding from non-Government sources, VisitBritain's role in marketing the UK may be compromised, and VisitBritain should ensure it strikes an appropriate balance when agreeing commercial deals. However, on balance, we believe this is less damaging to the industry than the alternative of a blind reliance on Government funding.

50. VisitBritain's network of overseas offices plays a major role in attracting overseas visitors to the UK. We understand that a certain amount of readjustment on the part of VisitBritain will be necessary in response to its budget cut, but we urge it to prioritise the maintenance, wherever possible, of its overseas offices. The closure or relocation of office space could, in fact, prove more expensive to the taxpayer in the long term.

Local authority funding

51. DCMS estimates that English local authorities spend a total of £126 million per annum on tourism, funded by a combination of local taxes and central funding.[77] Their Scottish and Welsh counterparts spend £13 million and £4.4 million respectively.[78] However, there is some dispute about how much of this expenditure is on facilities that would be provided regardless of any effort to promote local tourism. For instance, the Tourism Alliance argues that local authority expenditure on the maintenance of parks and gardens should not be regarded as spending on tourism.[79]

52. Regardless of the precise figure, support for the tourism sector is still only a discretionary function of local government. While local authorities do not have to spend anything on tourism, 80% spend at least something.[80] However, as West Dorset District Council pointed out, funding for tourism "is vulnerable to budget reviews and reductions when there are pressing budgetary requests in statutory functions of the council".[81] For example, Torbay Council recently cut its tourism budget by £111,000 to £597,000, despite the industry accounting for nearly a third of all employment in the area.[82] West Dorset District Council also warns that budget pressures can put at risk local authorities' contributions to partnership activities and can ultimately cause economies of scale to diminish and worthwhile programmes to decline or disappear.[83]

53. There is no clear incentive in the performance assessment system for local authorities to maintain or expand facilities aimed at visitors. The Department for Communities and Local Government announced in October 2007 a new performance measurement regime for local authorities, reducing the number of indicators from over 1,000 to 198, up to 35 of which would be identified under Local Area Agreements as a focus for improvement. None of the 198 indicators relates to facilities for visitors or to the quality of "welcome".

54. As things stand, there are insufficient incentives for local authorities to invest in tourism. The fact that tourism is a discretionary function means that it is always susceptible to a reduction in funding when budgets become tight. Yet in many local authorities, tourism represents a very significant sector of the economy and investment in the industry should be seen as a necessity rather than a luxury.

SEA CHANGE FUND

55. DCMS recently announced a new £45 million fund to support culture and arts in England's disadvantaged seaside resorts. The announcement was made indirectly in response to a Report by the Communities and Local Government Committee on coastal towns.[84] Under DCMS's programme, which will be led by the Commission for Architecture and the Built Environment (CABE), £15 million will be invested each year from 2008 to 2011. It is proposed that the fund will be spent on culture and heritage infrastructure projects—such as historic high streets and public spaces, galleries or concert halls—that will then stimulate wider improvements and economic benefits in the area. Blackpool, Dover and Torbay will be the main beneficiaries in 2008, with each likely to receive up to £4 million.[85]

56. While the UK's cities have experienced growth in tourism numbers in recent years, the same cannot be said for the traditional coastal resorts.[86] The British Resorts and Destinations Association (BRADA), a body representing 60 local authorities, most of which are seaside resorts, told us that, in general, the large seaside resorts are "struggling": "the problem that seaside resorts have is that the structures that were in place for a mass market in the 1950s have not been able to change because they have not had access to the kinds of resources that have been allocated to the inland towns".[87] A survey by English Heritage found that more than three quarters of people believe that seaside resorts have become shabby and run-down.[88]

57. The Committee heard first hand about the challenges facing two beneficiaries of the fund, Blackpool and Torbay. In recent years, the number of visitors to Blackpool has decreased substantially. This has been accompanied by a decline in the average length of stay and visitor expenditure.[89] Blackpool had been in the running as a potential site for a large-scale regional casino, for which provision had been made under the Gambling Act 2005; but Manchester was the site selected by the Casino Advisory Panel. In any case, the Order to approve the Casino Advisory Panel's proposals was defeated in the House of Lords, and the Government has since decided not to proceed with a regional casino.[90] Despite this disappointment, Blackpool does have a strategy for regeneration.[91] It plans to create an "all-year-round, differentiated, quality product in Blackpool" by improving the public realm and adding value to its established attractions such as the pleasure beach, the Tower and the Winter Gardens.[92] Blackpool Council told us that, in order to create a strong, viable new product, resorts such as Blackpool require a greater level of state intervention.[93] The Sea Change Fund, despite being a relatively small amount of money given the number of coastal resorts, perhaps indicates that the Government is beginning to accept this case.

58. During our visit to Torbay we were impressed by the efforts that were being made to realise the considerable tourism potential that the area possesses. Nonetheless, it was evident that Torbay, like many traditional seaside resorts, faces a number of challenges. For instance, the maintenance of the public realm (e.g. toilets, gardens, illuminations) to the high standards demanded by tourists incurs considerable extra costs for the Council. Torbay is also attempting to reposition its tourism offer in order to attract the higher end of the market. However, higher spending visitors also have somewhat higher expectations on quality and service, a gap it is still seeking to close.

59. We welcome the new fund to support England's seaside resorts, many of which struggle to maintain visitor numbers. It is essential that the funds are spent wisely, not just to maximise the benefit to the resorts, but also to demonstrate to the Treasury that such an investment is effective and worthwhile. There are clearly limits to the difference £45 million over three years can make to England's many seaside resorts. We recommend that the Government evaluates the wider economic impact of the fund to see whether the returns justify an increase in its size.

47 Oral evidence taken before the Culture, Media and Sport Committee, 25 October 2007 Back

48 Q 483 Back

49 Q 453 Back

50 Partners for England is an initiative to co-ordinate the delivery of tourism through senior decision-makers in the public and private sectors Back

51 Q 446 Back

52 Tourism Alliance press release, 24 October 2007 Back

53 UK inbound press release, 24 October 2007 Back

54 Ev 426 Back

55 http://www.tourismalliance.com/showarticle.pl?id=195&n=2000 Back

56 Oral evidence taken before the Culture, Media and Sport Committee, 25 October 2007 Back

57 British Tourism Framework Review: The Tourism Alliance Position: http://www.tourismalliance.com/attach.pl/199/231/British%20Tourism%20Framework%20Review%20-%20The%20Tourism%20Alliance%20Position.pdf Back

58 Q 449 Back