Examination of Witnesses (Questions 106
- 119)
TUESDAY 27 NOVEMBER 2007
MS ROS
PRITCHARD, MR
KURT JANSON,
MR TONY
MILLNS AND
MRS BRIGID
SIMMONDS
Chairman: Good morning, everybody. This
is the second session of the Committee's inquiry into tourism.
We are focussing in the first part this morning on the Tourism
Alliance. I would therefore like to welcome Ros Pritchard, Chairman,
Kurt Janson, Policy Director, Tony Millns, Chief Executive of
English UK and Brigid Simmonds, who is well known to the Committee.
Could I ask Adrian Sanders to begin.
Q106 Mr Sanders: The UK experiences
8% annual growth in inbound tourism, yet has a growing tourism
deficit believed to be around £18 billion. Which of these
figures best reflects the state of the industry?
Mr Millns: The latter one, Adrian,
I think. The position is mixed and complex but the UK is increasingly
in a competitive disadvantage against the rest of the world. If
you look at 2005, for example, we had new destinations, such as
China, Turkey, Austria and Australia, coming into the top ten
for tourism receipts and arrivals; so there is an increasing crop
of new destinations which are competing with us. We are finding
increasingly that there are a number of disadvantages to the UK
in terms of things like the cost and ease of getting visas. We
are two or three years ahead of the rest of the world, apart from
the US, in introducing biometrics, which in Russia, for example,
means that people are having to travel long distances to record
the biometric information to get visas. We have got high rates
of things like air passenger duty, VAT on accommodation, and we
are also in a position where I think our welcome to the world
is less good than it should be. You only have to note the position
of Heathrow and the quality of service at Heathrow; it is not
a good welcome to the UK. Overall I think our view on inbound
is that there is a very competitive world situation. The UK is
in danger of slipping down the world tourism rankings and the
most worrying figure in fact is the decline in spend per head
of visitor. We are tending to lose the high-spending North American,
Arabian and Japanese markets; and we are gaining numbers from
relatively low-spending new European destinations—particularly
Poles visiting friends and family and not spending anything like
as much as, say, North Americans. So the danger is that in the
tourism industry we will see profit margins decline that will
make it then difficult for businesses to invest in quality, in
new attractions, in new forms of service, and the result will
be a decline in competitive position. I think that is our overall
synopsis.
Q107 Mr Sanders: That is a pretty
depressing start, is it not?
Mr Millns: It is not helped, of
course, by the Government's position on funding for the National
Tourist Board and the marketing of Britain, which concerns the
Tourism Alliance greatly.
Q108 Mr Sanders: I think that is
something we will be definitely be looking at later on. In those
circumstances what should the industry's priority be?
Ms Pritchard: The industry's priority
is to work on our competitive position as a destination both to
increase inbound tourism and, equally importantly, our domestic
tourism because both are absolutely vital to the tourism industry.
Tony has already mentioned improving the welcome, the visas, our
tax rates and also the welcome service at the gateways. We also
need smart regulation to keep the business competitive and concentrating
on its customers. We need to look at the cost and admin burden.
We also need regional consistency and coordination of the way
regulation is applied from local authority to local authority
and region to region; but also in the marketing of Britain and
England and the coordination of local authority, RDA and the National
Tourist Board. It is a big package of issues that needs to be
addressed simply to maintain our competitive position.
Mrs Simmonds: I have nothing else
to add. It is absolutely vital to us that there is national coordination
of marketing of England and, indeed, the UK. I think our major
concern at the moment is that DCMS have cut the budget of VisitBritain
hugely on top of that, and they claim that £350 million is
spent on marketing, which we know to be totally untrue. In fact
James Purnell came in front of you as a committee and said that.
Yet when you break that down, out of that figure we have got,
£120 million for example is spent by local authorities and
of that only £24 million is actually spent on marketing;
£20 million of that figure is the Irish Government spending
money on marketing Ireland. The RDAs may have a view on what they
spend on marketing but you will remember that is not actually
the key role of the RDAs; their key role is much more to do with
economic development and inward investment. Because the 1969 Development
of Tourism Act is so out-of-date there is no way of coordinating
this nationally.
Q109 Mr Sanders: Responsibility you
think lies where, with Government, to promote tourism through
agencies like VisitBritain; or could the industry itself perhaps
do more to market itself?
Ms Pritchard: I think the responsibility
is shared. I think there is a role for the public sector and a
role for the private sector. In that 40% of tourism spending is
not spent in tourism business, it is right that the public sector
is involved. 80% of tourism businesses are SMEs and micro-businesses.
They cannot and will not market or engage with new markets. They
cannot do that. The private sector will market tactically. Their
marketing spend they will expect to give them a direct return
to the bottom line. The public sector has an important role on
the strategic marketing opening up new markets and creating the
environment where tactical marketing will get the return to the
country, where both the Exchequer and the private sector will
win. It has got to be a shared responsibility.
Q110 Mr Sanders: This is a problem
both on a national level and on a local level; it is cause and
effect. If public money is used to promote where does the return
come into the taxpayer? On a local level if the local authority
promotes tourism and increases the number of visitors where does
the extra income come apart from perhaps in car park charges or
deckchair charges?
Ms Pritchard: And business rates
and taxation.
Q111 Mr Sanders: Business rates do
not go to the local authority, they are collected nationally and
go into a national pot and then are redistributed by central government.
There is no correlation between a business rate locally and what
that local authority receives. It is one of the great big myths
about local government since it was taken out of local government
hands. There is no correlation on a local level. On a national
level where is that correlation between what is better—to
have additional numbers of tourists coming into the UK, or to
have the same number of tourists but who spend more money in the
UK? Is it numbers, or is it spend per tourist that is important?
Mrs Simmonds: It is a mix of both.
We hear the words "place shaping" among government everywhere.
Tourism has got to be part of place shaping. Look at the investment
you get locally in local businesses. Yes, the money does not go
to the local authority—although the local authority is going
to have the ability to raise up to 2% in additional businesses
rates with the forthcoming bill—but the money and the feel-good
factor has got to go into that local community, and it has got
to go into revitalising our seaside tourism resorts and all those
areas which are seeing a decline in visits. We are an industry
worth £85 million. That is the value of tourism to the UK
economy.
Mr Millns: I think partly also
you could say, because of the tax revenue from that £85 million
of spending, central government is able to fund local government
to some extent through the spending assessment. So where a local
authority is spending on things that may be general amenities,
whether they are parks, gardens or whatever, which are also enjoyed
by tourists, there is some funding that comes from the general
tax taken from tourism through central government and back to
local government. You are quite right to say it is not a direct
correlation.
Q112 Mr Sanders: We visited Canada
and the Canadian Tourism Board has a direct hypothecated bed tax
for the marketing of tourism. For every dollar they spend on marketing
they expect $5 back in terms of visitor-spend, which is a very,
very narrow ratio compared to the pittance we spend on marketing
and the pounds and pounds that come back in tourism spend. Would
it help the industry if it had an hypothecated tax in order to
market itself overseas and within?
Mrs Simmonds: This has never been
a Government that believed in hypothecation. When we had proposals
for the bed tax the proposals were that the money would go to
the local authority and there was no requirement that the local
authority spent that money on tourism. Like anything else, I think
we would have to reconsider and possibly come back to you on whether
we thought it could work as hypothecated. Hypothecated taxes that
went directly to help the marketing of the area obviously would
be something that would be attractive; it is just that there has
never been any real evidence that the Treasury was interested
in doing that before.
Ms Pritchard: There is also the
issue that a bed tax is not based on the usual unit of accountancy.
Whereas taxing somebody on their turnover would have accounting
systems and accounting standards, it is fairly obvious that you
can work it out. A bed tax, where you are taxing on your unit
as a bed night, is a very, very expensive way to tax. We looked
at the research across Europe. For example, in Italy they dropped
the bed tax because their research showed it was costing more
to collect it than it was generating. It is very, very important
to look at the experience across Europe. In Germany, where different
Länder have different levels of bed tax, they are actually
creating a very bizarre competitive position, whereby some Länder
are dropping their bed tax to compete against the neighbour Länder.
It is not a simple "let's collect the money". If you
take, for example, my sector where your bed-night could be a family
of six in a tent, is it right that they are paying six times the
businessman in the hotel? It is not an obvious direct link and
it could have all sorts of other issues that would need to be
considered.
Mrs Simmonds: The other issue
is that we have the second highest taxed visitors in the world.
Visitors pay more in the world to come here than almost any other
destination. If you then added to it by putting on a—-
Q113 Mr Sanders: How do you work
that out?
Mrs Simmonds: In tax terms.
Q114 Mr Sanders: When I go to France
I pay a toll to use the motorways—that is a tax. Do you
include that?
Mr Janson: The World Travel Tourism
Council did a taxation barometer which had the UK as the second
most highly tourist-taxed destination in the world. This comes
out of air passenger duty, which basically no other country in
the world has; full VAT rate on accommodation; and full VAT rate
on restaurants. This is what makes up the bulk of tourism taxation.
We already have a very highly taxed regime for visitors coming
into the country. Visitors are paying their way. They are paying
taxes. The problem we have, as you pointed out, is that the taxes
that are being gained from the tourists already are not being
recycled back into the maintenance and upkeep of local attractions
and facilities. That is not to say we should tax the visitors
more; rather that the tax which has already been paid should find
its way back to enhancing the attractions and benefits which attract
people here in the first place.
Q115 Chairman: May I just clarify,
James Purnell gave evidence to this Committee the day after they
announced the funding levels for VisitBritain and he told us three
times that the Government is spending £350 million on supporting
tourism. I understood that that would include the amount local
government was spending, the amount the RDAs was spending and
funding from central government. Why do you contest that figure?
Where is it wrong?
Mrs Simmonds: Actually what he
said to you, as I understood it, was that £350 million was
spent on marketing.
Q116 Chairman: No, he said on supporting
tourism.
Mrs Simmonds: A lot of that spend
is spent on providing local toilets, on providing tourism information
centres, on providing things which, yes, you could count as tourism
spending but it is certainly not (and our argument is a lot to
do with) money spent on marketing, particularly when we have got
the 2012 Games coming and tourism is meant to be making £2.1
billion out of having the Olympics here. It seems absolutely daft
to use that as a reason why you should cut funding overall. You
see how the Comprehensive Spending Review has worked out. Local
authorities have also had their budgets cut; tourism is not a
statutory service for local authorities; and therefore it is almost
the first thing that is going to see even more cuts at a local
level, so it almost a double whammy.
Mr Millns: We would actually like
to do some more analysis on the £350 million. Margaret Hodge
meeting with us the other day was not able to give us that analysis.
It looks as if we will have to do it for the Government. When
we have done it we would be very happy of course to share it with
the Committee.
Q117 Philip Davies: You have been
very critical of DCMS, sticking the boot into them on a few things,
saying that they have "failed to ensure that new legislation
does not adversely affect tourism interests [...] that, as a result
of this failure [...] the industry has been undermined by an `increased
fiscal and regulatory burden"; that its settlement for VisitBritain
showed a "lamentable understanding" and a "lack
of joined-up thinking". Do you have a good working relationship
with the Government?
Mrs Simmonds: Yes, we do! We certainly
have a good working relationship with ministers, the staff and
the Department. This is about policy and the decision of policy.
The Treasury sets the guidelines; the Department takes the decision
on where it makes the cuts. It decided to give £50 million,
for example, to the arts; we certainly would not disagree with
that; we are hugely supportive of the arts but they gave £50
million to the arts because no funding had been provided as part
of the Olympic funding for the Cultural Olympiad. They freely
admit that was the case. On the back of that we have had to see
this 18% cut. Our argument is about policy and how the priorities
are set within DCMS. It is certainly not about the Department
and who we work with. We have had some very good examples of things
that have worked well. To pick up your other point, we have also
had issues in the past where, for example, when they first put
up visa charges DCMS were not even consulted because no-one thought
that the issue of visa charges and the effect on tourism was important
enough. It was all about security of people coming into this country.
Q118 Philip Davies: You say that
they have not represented the interests of the tourism industry
effectively. Could it not be argued that really it is you who
have not represented the interests of the tourism industry effectively
because you have not managed to make any inroads on the Government
Department that looks after this area?
Mrs Simmonds: You could almost
argue that because we are actually a successful industry—there
are parts of the industry that are very successful, you look at
hotels in London, for example, at the moment—that we are
almost being taxed as an industry because of that success. If
you look in other areas, the Government is removing the Hotel
Building Allowance, which is of huge concern because it is grandfathered
over 25 years. At the other end of the market they are cutting
the tapering on Capital Gains, which is going to have a huge effect
on small and medium-sized businesses. It is almost as if the rug
is being taken from under our feet in this particular area, and
any success that we have had is being taken away and there is
a refusal to market tourism in the future. Yet look what we face
in terms of the economic position and the possible position on
consumer spending. 15% of our visitors come from the United States
and look at the effect on the dollar. Looking forward, it is actually
very short-sighted.
Q119 Philip Davies: You mentioned
the Hotel Building Allowance, can you give some other examples
of the fiscal and regulatory burdens that your members face that
you have a particular problem with, and where you would like the
Government to do something about it?
Ms Pritchard: I think one of the
biggest issues, particularly for the many, many micro-businesses,
is the pace of change and keeping up with it. There has been a
lot of new employment legislation. Every six months we are seeing
change. We are seeing different attitudes in the tribunals. The
husband and wife team with two members of staff cannot keep up
with the amount of paperwork required to stay ahead of the requirements,
even though they will have a fantastic relationship in a small
business with their team. Health and safety, if you ask a lot
of businesses, is a minefield. You can have some of the safest
businesses but have they documented their risk assessment, their
safe systems of work sufficiently, the small business, to keep
pace with changes in the law? Nobody is arguing against health
and safety; the issue is about the way the law is implemented
and the way it is communicated to small businesses. It is one
of the key areas. Take the liquor licensing changes. There are
enormous costs going onto small businesses, a lot of paperwork,
and from their point of view no real big difference at the end
of it. Most of them did not change their hours; they are just
under a new system that costs them more and more paperwork.
Mrs Simmonds: Some of them actually
had to give up having a liquor licence because they were being
charged for having a liquor licence for just beer in the fridge
in a small bed and breakfast in the same way they would be charged
if they were a pub in London.
Ms Pritchard: We used to have
cider being sold in reception on the camping parks, so when people
ran out they went and bought some more, but they do not do it
any more because it is not worth the cost of the liquor licence.
Where is the change? Where was the society's evil we were trying
to address there? There are all sorts of minor areas where, if
you take them together, you can get members of the industry (and
I have had members) sell up because they have had enough of the
red tape and the grey men. Looking at entrepreneurship, my members
tend to be rural and regional businesses, small businesses, it
is that general burden. What they need is support rather than
a stick all the time from Government; because the perception is
that Government does not understand what they are trying to do.
| 
