Northern Ireland Affairs Committee
Oral evidence: Promoting the tourism industry in Northern Ireland through the tax system, HC 577
Wednesday 2 December 2015
Ordered by the House of Commons to be published on 2 December 2015
Written evidence from witnesses:
– British Beer and Pub Association
– British Hospitality Association
– Northern Ireland Hotels Federation
Members present: Mr Laurence Robertson (Chair); Oliver Colvile; Mr Nigel Evans; Lady Hermon; Kate Hoey; Danny Kinahan; Dr Alasdair McDonnell; Nigel Mills; Ian Paisley; Gavin Robinson.
Questions 88-183
Witnesses: Janice Gault, Chief Executive, Northern Ireland Hotels Federation, and Ufi Ibrahim, Chief Executive, British Hospitality Association, gave evidence.
Q88 Chair: Thank you very much for joining us. It is good to see you. As you know we are conducting an inquiry into promoting the tourism industry in Northern Ireland through the tax system, so we are very grateful to you for coming to give evidence. Could you very briefly introduce yourselves and make any opening statements you would like to make?
Janice Gault: I am Janice Gault from the Northern Ireland Hotels Federation, and Ufi is going to make the opening statement for us.
Ufi Ibrahim: I am Ufi Ibrahim; I am the Chief Executive of the British Hospitality Association. We represent 40,000 hospitality businesses across the United Kingdom and many have interests in Northern Ireland. I want to make two points, if I may, as an opening remark. The first is that tourism is one of the fastest growing export industries in the world: up from 280 million international trips in the 1980s to over 1 billion last year, and by the end of this year we will be looking at over 1.5 billion international trips worldwide. It is already the third largest service export of the United Kingdom, and yet it is one of the few, if not the only, export industry in the United Kingdom to be subject to a domestic tax.
My second point is that we are a highly price-sensitive, internationally competitive activity and, unlike most of our main EU tourism rivals, the United Kingdom Government’s stance on tourism VAT is, so far, not to exercise their right to cut tourism VAT. This affects our competitiveness in the United Kingdom and, therefore, means that we underperform. That is most prevalent when you look at the fact that we have been losing market share in 17 of our top 20 key source markets into the United Kingdom over the past few years. Our tourism deficit still stands at £14 billion in the United Kingdom, and of course the situation is particularly acute in Northern Ireland, which shares a land border with the Republic, where there is a reduced rate of VAT.
Q89 Chair: You refer to the domestic tax, VAT, which is applied throughout the industry. It may be applied to people visiting Northern Ireland from Germany or France or wherever, but it would be applied to people who travel around Northern Ireland who would not be classed as visitors. Is there a difficulty caused by that in setting different tax rates?
Ufi Ibrahim: I do not think I have understood your question; do you mean having a differential rate for those inbound rather than domestic?
Q90 Chair: Let’s say it was reduced to 9%. It would be for everybody who used hotels in Northern Ireland, for example, so it would be applied to people who perhaps might go from Londonderry to Belfast as well as people who went from Germany to Belfast.
Ufi Ibrahim: Yes, the tourism deficit of the United Kingdom—the £14 billion—is a reflection not only of the fact that we are not as competitive as we should be in terms of attracting more inbound visitors into the United Kingdom but also of the number of UK citizens traveling out of the United Kingdom. I know that Janice will be referring to figures showing the shift of people from Northern Ireland, for example, to the Republic of Ireland for certain activities because of the differential rates in VAT. It is a double-edged sword. The anti-competitive taxes that we have in the United Kingdom are affecting us in terms of trying to create more staycationing or more domestic activity within our tourism economies, but also in terms of bringing people into the United Kingdom.
Q91 Chair: Would you like to present that case now, Ms Gault?
Janice Gault: The current situation would be that everybody would avail of a reduced VAT rate: about 52% of our tourism is domestic, so it would apply both ways. The real issue for us is that we are not promoted as part of the United Kingdom in tourism terms beyond the island of Ireland. We are promoted as an island destination. Therefore, if you are sitting in, for example, Taunton, the village next to you is in a different VAT regime, and that is really the problem for us. Once you leave Ireland you are promoted in an overseas market as a one-island destination, and that presents one of the biggest challenges that we have.
We are currently sitting in a situation where, if you were going for an all-Ireland tour as either part of an escorted trip or as an independent traveller, the VAT differential that you face is 11%. Within that lies the issue that we have with regard to VAT. We are dominated by the domestic market, as many countries are, and domestic tourism is a vital part of your economy. A tourist by definition is somebody who leaves their natural environment for a period of longer than 12 hours, so therefore if I travel from Londonderry to Belfast and stay overnight, I am a tourist. I suppose the argument that we have is if I travelled to Donegal, which is 20 miles down the road, I am only paying 9% VAT. The visitor on any level does not see this, so that is quite an important fact of us.
Q92 Chair: We heard from the Cut Tourism VAT campaign people last week, who were campaigning for a 5% rate. Given what the Government is trying to do in terms of balancing the books, that might be a little bit ambitious. Would you think that a 9% rate to match that of the Republic might be more realistic? What is your take on that?
Janice Gault: The realistic position is that if there was a reduction of any level we would be happy. The concern would be that introducing a further reduced rate in terms of the mechanics of that and the cost involved might present a greater problem to the Treasury, and it is certainly an argument they have put up in the past. Therefore, 5% would be a rate that they would go for. Do not forget that the current VAT rate in the Irish Republic is 24%; they are trading 15% below their standard VAT rate. The VAT rate in the south on hotel rooms has varied from a high of 13% down to the current 9% since 1986. They are about to celebrate 40 years of that particular pleasure.
Q93 Lady Hermon: It is very nice to see both of you here this morning. Before I ask the questions I was going to ask, could I just seek some clarification, Janice? You have made a very bold statement in your introduction, and I just want to tease out the details of some of them. I took down very carefully what you said; you said, “The real issue is that Northern Ireland is promoted as an island destination.” Promoted by whom?
Janice Gault: By Tourism Ireland.
Q94 Lady Hermon: By Tourism Ireland—and you are suggesting that is the real issue.
Janice Gault: The real issue is not promotion; the real issue is the cost differential. You are asking somebody to go out and promote two different products in terms of tax. We are joined together as an island; therefore, even in London we are promoted by Tourism Ireland as the island of Ireland.
Q95 Lady Hermon: Is the VAT rate explained to visitors?
Janice Gault: The VAT rate is not explained to visitors, so if you are charging £100 for a hotel room, £17 of that goes straight to the Treasury. If you are in the south and you are charging €100, it is about £9. There is quite a considerable difference. If you were looking at that, the tax regimes are different, and they are not the only tax regimes that are different, I hasten to add: APD is different. Therefore, you have two economies that have been joined together but are being promoted in a different manner.
Q96 Lady Hermon: You also made a statement towards the end of your contribution that the visitor does not see that. That is what you meant; the visitor does not see the differential in VAT rates.
Janice Gault: The visitor just sees the flat price, so if we were to try to recruit the same net moneys from the visitor, we would have to put our prices up, and we do have to in some cases. If you pay your £100 north and south, or your €120, depending on the exchange rate, you effectively as a net business are ending up with less money.
Q97 Lady Hermon: Is it a criticism that Tourism Ireland is promoting Northern Ireland within the island destination? Should it be promoted differently or by a different body?
Janice Gault: It is not a criticism; it is a fact. That is the way that we are promoted.
Q98 Lady Hermon: Yes, I do not disagree that it is a fact, but is it a criticism?
Janice Gault: It is not a criticism. You have tasked somebody with promoting an island, but you are asking them to promote something that is running on two different tax regimes. One is very favourable to the business climate of tourism, while the other, arguably, but in our case definitely, is not so.
Q99 Lady Hermon: Presumably you have written extensively to HM Treasury?
Janice Gault: We have written to them on three separate occasions and have got the same letter back.
Q100 Lady Hermon: Over what timescale?
Janice Gault: This has always been an issue, but in May 2011, when the then southern minister Michael Noonan made the decision that they were going to reduce VAT further on hotel bedrooms and expand that particular levy to cover out-of-home meals, we wrote at that time, because it became apparent that it was really going to present a huge challenge to us. Many people forget that the reduction in VAT is very little to do with VAT. In the Irish Republic it was to do with job stimulation, job creation and the protecting of businesses: it was not to do with VAT. The same thing applies to APD. APD was to stimulate growth and increase access. When you are an island your choice is that you have an aeroplane, a boat or you are relying on people who are incredibly good swimmers. We do not have that particular option.
Q101 Lady Hermon: Therefore, would the campaign be to both reduce APD, in terms of Northern Ireland, and VAT?
Janice Gault: I gave evidence to this Committee about seven years ago, and I said this is a bit like presenting a woman with a box of chocolates and saying, “Only choose one flavour.” It is a better business environment and you have written it is about using tax to promote tourism. If you want to have more tourists, there are particular levers that guarantee that. Dublin airport is about to celebrate a record year; the Irish Republic is about to celebrate a record year and year-on-year growth. One of the reasons for that is a significantly better taxation system. It is not even a question of the value of that: it is the understanding that you are able to visit, that businesses are supported and the tax regime promotes the business of tourism.
Q102 Lady Hermon: Do you mind if I just come back to the three letters to the Treasury. You have described one of them, and that was because the Irish Republic had decided to drop its VAT rate considerably, and more recently the other two letters—
Janice Gault: We recently wrote when the Chancellor was re-elected. I wrote and said perhaps it would be something he would consider when he was looking to balance the books. We got a return letter from David Gauke to say that it was not in their immediate plans: it was not something that they had considered. It was, basically, a re-wording of many different things along with the pressure of the Treasury, which we appreciate but in many cases people look at the cost of doing something; we look at the opportunity missed. We do think that fiscal reduction, particularly in tax, is an opportunity missed.
Q103 Lady Hermon: Does the correspondence from the Treasury at any stage mention the EU directives?
Janice Gault: The first one did mention the EU directive.
Q104 Lady Hermon: It would have to be a common rate of VAT across the EU.
Janice Gault: There has to be common rate, and that has been applied. We understand that VAT is a consumption tax, so therefore it is charged at the point of consumption. Our argument would be two things: first of all the export. If you are a tourist island, it is export. If I am producing widgets in Bangor—
Lady Hermon: Which is a very good place to produce widgets.
Janice Gault: It is a lovely place to produce widgets, particularly with the Pickie Pool, which you can visit in between making them. However, it is very difficult for me to compete against somebody in Bundoran who is able to sell them to the customer at 11% less. That would be one of our primary arguments.
One of the reasons that this VAT reduction has spread throughout Europe is the shared land border. Spain went with reduced IVA a number of years ago, so if someone is sitting in somewhere like Girona and is charging VAT at 7%, as it was at that time, and I am sitting in the part of France that joins on to it and charging 20%, I am automatically at a disadvantage. Europe has seen that; therefore, the VAT reduction has spread throughout Europe and it has also increased in its remit. In France they reduced it on food a number of years ago, but again it was the pressure of having a land border with another destination that was competing on a different playing field.
Q105 Kate Hoey: Are you implying that the fact more tourists and holidaymakers go to the Republic of Ireland or stay in hotels there is all down to the change—the increase in VAT and so on?
Janice Gault: It is down to a different methodology of dealing with tourism.
Q106 Kate Hoey: Given that every independent country in the world has its own systems, do you think it might be something to do with the fact that Ireland is promoted as one country when in fact it is two? Furthermore, there is the question of the Belfast agreement giving tourism to Northern Ireland to Tourism Ireland, rather than Tourism Northern Ireland being able to promote Northern Ireland anywhere, including in Great Britain but anywhere in the world. Reversing this may not change the VAT system but it would change the clarity around what country a tourist was going to.
Janice Gault: It is a very difficult question to answer, because it is as much a political question as anything else.
Kate Hoey: I thought you might say that.
Janice Gault: The issue for us is if I am sitting in Korea and I am looking at Ireland, I do not see two different countries.
Kate Hoey: However, the reality is it is two different countries, but Tourism Ireland does tend to say it.
Ian Paisley: I think Korea might get that point.
Q107 Kate Hoey: Yes, they might. Does it surprise you that someone from Tourism Ireland at a conference, when someone asked to go to the Giant’s Causeway, started to tell them first about how you go to Dublin, and then how you can get up from Dublin to the Giant’s Causeway, perhaps in a day? Does that surprise you?
Janice Gault: It depends where the person was from. 87% of the access to the island of Ireland comes through Dublin, so if that was a direct access route—
Q108 Kate Hoey: No, this was not in Ireland; this was outside Ireland. They were being told that was the way to go to the Giant’s Causeway.
Janice Gault: If the person was coming from a destination such as North America, and they were not coming from New York—
Q109 Kate Hoey: You can fly to Belfast, can’t you?
Janice Gault: Only on 138 seats, five days a week.
Q110 Kate Hoey: I am aware of all that. I am simply trying to say that sometimes the VAT and tax issue might not be all of the reason why this is happening.
Ufi Ibrahim: May I interject? The first thing to note is that the way that consumers make decisions about where to travel today is very different from the way that they used to make decisions a few years ago. It is no longer just the marketing of the tourism board that helps to make somebody in Korea decide that they want to go to seemingly what they believe is one country, albeit two separate nations. That is not the way it works.
According to research by Amadeus, Google and others, for example, we know that consumers tend to look at eight or nine websites—once they have even decided whereabouts they want to go. They then actively undertake a search online to see where they should go, where they should stay, and they really do boil into either specific experiences or to specific destinations such as the Giant’s Causeway, for example. They say, “That’s where I would like to go.” Then they begin to do the search around which hotels to stay in, so it is experience first, activity second and then hotels. That is the point at which, for example in accommodation, the differentials in cost become apparent to the consumer to say, “That’s interesting. If I were to stay in Dublin, for example, the price would be considerably different from the price if I wanted to stay in Belfast.” That is the point.
That is why many EU countries have gone even further in changing their VAT rates, understanding that it is not only a real competitive driver in terms of getting leisure tourists to choose their destination versus a rival’s destination, but now, for example, in Spain international events have been zero VAT rated. If you want to go and host a big international conference in Spain, and we know that international events are very big business, that is now at a zero VAT rate in order to push that competitive edge.
Q111 Gavin Robinson: Thanks, once again, for coming in. I think that was a very important point that you just made, Ufi, so I’m going to come back to that, if I can. Last week when we heard from Cut Tourism VAT, Mr Wason accepted that he was being facetious when he said that he was not coming to Northern Ireland because it was too costly for tourism. However, they went further and made the point that, when they were advocating a cut in VAT, they were doing so for cultural attractions and hotels. Therefore, on behalf of the British Hospitality Association what comment would you make regarding whether the burden is too preclusive for Treasury if it includes hospitality as well, or do you think there is a good argument for including cultural attractions, hotels and the hospitality sector?
Ufi Ibrahim: I would have to say, just for the record, that the British Hospitality Association is one of the leaders of the Cut Tourism VAT campaign, and we have been working with the campaign for many years. Our position, which I am sure Graham iterated last week, is based on the economic evidence that has been provided to us by a series of experts who have looked into the potential impact on the Treasury of a VAT rate over the tourism board.
I must also say for the record that the British Hospitality Association represent restaurants as well as other food service businesses. In an ideal world, we would absolutely advocate that the first step should be to cut tourism VAT across the board for all tourism services. However, based on the evidence provided to us by the experts who have undertaken the studies, Deloitte, Nevin Associates, Graham Wason and of course Professor Adam Blake looking at the CGE modelling, the cost to Treasury of a VAT rate reduction across the board, including restaurants, would be considerable. Moneys would not be paid back, even within a 10-year period, so we would be looking at a cost of £9 billion plus to Treasury. If you start with a VAT rate reduction only on accommodation and attractions as a first phase, however, the cost to the Treasury falls to £500 million[1] and payback does come within two years, along with growth of Exchequer receipts of £4 billion over a 10-year period.
Based on that evidence, this is why we have been promoting to Treasury the opportunity to start by reducing the rate of VAT on accommodation and attractions because there is a feasible, suitable and achievable business case there. Furthermore, moneys would then come into Treasury as a revenue over and above the investment that has been made, which would then set the ground, we hope, for the second phase of VAT rate reductions, which would be extended then to restaurants for example, as is the case in France.
Q112 Gavin Robinson: More broadly, when you go on a foreign trip and you are coming back through the airport, very often there is the opportunity to claim VAT back. Is that only on purchases of items or does that apply similarly to hotel stays, restaurant spends and so on?
Ufi Ibrahim: Hotel stays, as non-VAT rated, are treated slightly differently, because you can get that back at certain hotels as well, and I guess VAT reclaimed on shopping also. However, that only applies to some international business travellers coming into the United Kingdom; it does not apply to your international leisure traveller, for example. It will not help to address the competitive advantage or disadvantage that we are facing in Northern Ireland and the rest of the United Kingdom.
Q113 Gavin Robinson: Thank you, that is a helpful clarification. Janice, the point is well made about somebody choosing to travel to a destination and then, at that point, searching for hotels within their budget as opposed to looking at hotels in various destinations, seeing which is cheaper and then deciding to go to one destination over another. As I said, it was suggested facetiously last week that Northern Ireland would be a nice place to visit if it was cheaper. It was accepted as being a facetious point, but have you on behalf of your association and your members detected or encountered visitors who have said, “We were in two minds about coming to Northern Ireland because of the cost”?
Janice Gault: We have encountered it both in individuals and in group travel. A lot of group travel will avoid Northern Ireland, or will chose to stay in the south. With five counties touching on the border, you have the opportunity to do that. Quite a large amount of our international business would be tour-operator based, and a lot of them would make the decision to spend less time in Northern Ireland, and that would have been an ongoing feature. It has improved in recent times, but not to the level that we would like it to.
Q114 Gavin Robinson: Have you carried out an analysis of that, or do you have a paper that can substantiate the experience that is there with group travellers?
Janice Gault: We did some significant work, particularly in Germany, to find out why people were not staying. There was a mixture of reasons, of which cost was one, and they made the point that it was considerably difficult for them to look at a model and stay in Northern Ireland. That has changed slightly, but we still feel that we are significantly behind in terms of what are called in our business “promotable visitors”: people who choose to come to Northern Ireland and stay.
Q115 Gavin Robinson: Would you be able to share that work on the German visitor experience with us as a Committee?
Janice Gault: Yes.
Q116 Gavin Robinson: Finally, last week we had the opportunity to ask about the intentions of your members should there be a reduction of VAT. Have either of you carried out an analysis of your members as to whether they would retain any reduction themselves, whether they would use it to invest and grow their business or sustain their business, or whether they would decide directly to have a reduction for their visitors?
Janice Gault: I think there would be a mixture of the three different mechanics. Some would pass back an amount of the savings, others would use an amount to re-invest in their businesses, and some would use it to look at further promotion, but they certainly would be prepared to pass an amount back to the consumer. Last week, in terms of the evidence, it has been shown that if hotels retain some of it and use it to invest and train, in the longer term it is more fiscally beneficial to the Treasury.
Ufi Ibrahim: The British Hospitality Association has carried out surveys in that respect with its members, and one of the surveys where we had 200 respondents I have here to share with you. Over 90% of those 200 businesses said that if a 5% VAT rate was achieved some or all of it would be passed on to the customer. 82% said that they would invest more in their products and facilities. 67% said they would employ more people. 57% said that they would be able to invest more in training; this was a particularly prevalent point among SMEs, who find it very difficult at the moment to find readily available working capital to invest in training. Finally, just under half, 48%, said that it could have a positive impact on overall wage levels across the whole board of the employee base.
Q117 Gavin Robinson: Those must have been multiple-choice questions, because your percentages go well beyond 100. Did people give a first preference rating to any of those choices?
Ufi Ibrahim: One could say that 82% said that they would invest more in products and facilities, but overall 95%, which is the highest, said that they would reduce the cost to the customer, which is very important.
Q118 Gavin Robinson: Many would do all of them: almost 50% would do all of them.
Ufi Ibrahim: Sorry, that was 95% who said they would reduce the cost to the customer.
Q119 Gavin Robinson: Yes, but not as a sole action. They would do that and they would reinvest and employ more staff. It is a range of options.
Ufi Ibrahim: It is a range of options, but 95% say that it was most likely that they would pass that differential on. I may also say that Butlin’s, Merlin Entertainments, Premier Inn and other large organisations within our membership pledged to pass through the VAT reduction very soon after the rate was reduced.
Q120 Gavin Robinson: Janice, have you had a chance to assess with your members the prospect of a reduction in corporation tax in Northern Ireland and what further impact that would have? Does that lessen the resolve for this reduction in VAT tourism?
Janice Gault: Very few of our members pay corporation tax, so it would not. Having said that, they do welcome it as a change to stimulate the economy. People often separate tourism and hospitality; there is an inherent marriage, so if we have more business, they will use more hospitality and they will bring people in. Some of them may stay overnight, others may go out for meals, drinks and other things in their local community, and we see that as important. However, most hotels put their profits back into refurbishing their properties. If you look at the majority of our members’ accounts, you will we see that the level of corporation tax is relatively low, but we see this as a really good way of attracting additional business.
Q121 Dr McDonnell: One of the points that jumped out at me was that the Treasury has claimed that a cut in VAT to 5% would cost £2 billion, yet some of your evidence has suggested that is not quite true. Where do you think the assumptions that have been made by the Treasury are wrong?
Ufi Ibrahim: My view is it would be very helpful if Treasury were willing to have constructive dialogue with us as an industry so that we could look carefully at the base of the economic assumptions that have been taken and identify the differentials between the outputs of the research. Unfortunately, we have not been given an opportunity to have that constructive dialogue with the Treasury, which is something that we are very disappointed about. As the fourth largest employer in the United Kingdom, we think Treasury should at the very least agree to have our economists in and look at the differentials of our research.
Janice Gault: It is also the ways in which it is calculated. You have taken everything that you are not going to get, so you have taken the 15% that you are not going to get in terms of collection and you have not taken any of the multipliers on the other side. That is one of the differences in the modelling that has been looked at. There were some studies done on APD in Northern Ireland, and what you would not gather in terms of APD was all taken in, but nothing is taken into the dynamic nature of it: the additionality that it would bring. Traditionally, the Treasury have taken what they would not gather in terms of tax, but not looked at the multiplier, or the changes, or the additional business that would come about.
Q122 Dr McDonnell: Can you be more specific? We talked earlier about the 9% VAT rate in the south. I know there are suggestions and anecdotal evidence about people moving to a hotel in Dundalk instead of one in Newry or moving to Donegal instead of somewhere in Derry, but can you give us some guidance, in other words? If the VAT rate was reduced, would it have an impact or would it just reduce VAT? Have you any indication that more people would stay in Northern Ireland if we just reduced the price by, say, £5 a bed?
Janice Gault: We looked at this in 2013: what a VAT reduction would mean for jobs. We looked at it in terms of direct jobs and in terms of the multiplier effect, and we came up with a figure of an economic benefit and an economic loss. We have not measured it in terms of the exact numbers of people, but if you look at the two figures of the two different jurisdictions, out-of-state visitors to Northern Ireland sit at just over 2 million and out-of-state visitors to the Irish Republic sit in the region of 8 million, so there is a considerable difference in the number of visitors.
Q123 Dr McDonnell: Surely that is to do with tradition: a product in the Irish Republic has been developed 30, 40, 50 years before there was any serious concentration of tourism in Northern Ireland.
Janice Gault: That is one of our exact points; it has been allowed to develop over the last 40 years, and hotels have been allowed to develop at a lesser VAT rate and, therefore, have been allowed to invest and have been allowed to put money into other areas such as marketing, training and things like that. We have not been afforded that opportunity. We face an uphill battle. We had 25 years of a considerably testing time in terms of overseas promotion. We now face a fiscal challenge, which is also presenting a range of difficulties.
Q124 Dr McDonnell: What do you see in the longer term if the discrepancy continues? Do you still see it as being a struggle? Do you still see it as being impossible? Do you still see it as surmountable?
Janice Gault: It is a struggle, but we are a very tenacious industry. We have done well and we have grown. We would like to reach our true potential. There are two big worrying factors. Number one is the south continuing to attract significantly more overseas visitors than us, and secondly there being a bit of a difficulty on the domestic front: that is domestic Northern Ireland and domestic Republic of Ireland. That covers everything from the actual visitor down to the wider issue of what you would call hospitality. If I am sitting and I am booking a range of activities, I am given the choice between Enniskillen and somewhere in Donegal. At this moment in time, the wedding business is a business that is significantly suffering on domestic trade. It is going to be more difficult for us to continue to promote. We have got to have something that allows us to promote more significantly and also that allows us to invest. Those are the challenges. There are other factors involved in this, but the fiscal system certainly does not help.
Ufi Ibrahim: I have to add that today a customer could be from anywhere around the world, and the truth is that they can go anywhere around the world. In fact TripAdvisor has some fantastic statistics, which they presented to us in June this year at our summit. They showed that a consumer going on to TripAdvisor and just looking around, scoping and exploring destinations, did not go, for example, from Belfast to London. They could switch from Belfast to Istanbul to Tokyo. The range of destinations that they are exploring is very diverse because the world is their oyster: they can choose where to go.
That choice is going to continue to grow, and as more and more destinations around the world become more and more competitive in order to attract a growing share of the growing export market of the tourism industry, the situation will continue to get worse regarding the opportunity cost of us not reaching our full potential in terms of the volume of visitors we can get into the United Kingdom and into Northern Ireland. This is a global market; it is not only restricted to small areas of the world, and it is a really important point to understand that.
The fact that according to the World Economic Forum the United Kingdom is 140th out of 141 countries in terms of our tourism tax competiveness, which does not even include VAT yet, is highly concerning. When you add VAT on top of that and you look at the fact that our market share has been declining in the UK year on year now since 2011, that is of great concern because others are becoming more competitive—and aggressively more competitive.
Q125 Dr McDonnell: On that point, we are looking primarily but not exclusively at Northern Ireland. Are there regional differences within the UK in terms of the decline or in terms of the growth? In other words are there some areas growing and some areas shrinking?
Ufi Ibrahim: Yes; London has been booming. London in now the most visited capital city on the planet. It is wonderful to have that, and it is the second year in a row that London has broken the record for the number of visitors coming from international shores to visit. However, we want that for all areas of the United Kingdom. We want that for Northern Ireland as well and coastal regions, for example: areas in the UK that need regeneration and ambition so that the young people growing up in this country can look forward to great career progressions. That is what we want. For us, it is of great importance that the success of London is going to be experienced in all other areas of the country.
Q126 Dr McDonnell: Surely at the core of tourism is the need for the visitor to feel good. I am amazed in this city, when I am in London. I speak to staff in the hotel I stayed in last night, last week, a fortnight ago, a month ago. They are from Spain, the Caribbean and everywhere, and the one thing that is coming out is that they love London: they enjoy being here, they want to be here and they want to tell me to come back. I’m here on political business, for want of a better description, but it is like the taxi drivers. Surely, Janice, part of our problem is that we do not have the confidence in our own product. Surely the difficulty is that we are almost apologising for the Northern Ireland tourist product. I am saying this bluntly and maybe a bit unfairly, but we are not overconfident about it.
Janice Gault: We are not overconfident, and we are a bit like a teenager, I suppose, in comparison with the south in that they are a much more mature market. It is quite difficult to apologise to somebody if you do not have them in Northern Ireland. Our problem has never been when we have got them there; our problem has been getting them to visit. Once you get someone there, the tourism barometer shows them to be very happy with the product. They find the people very friendly, they find the food very good and they find the ease of getting around very pleasant. The problem for us has been attracting people.
14% of our visitors are from overseas; that represents about 400,000 people. That is from everywhere else on the planet, and our problem has never been when we have got them there; our problem has been getting them to come, and that has been the ongoing challenge for us. We have great ambassadors. Marketing within tourism is a job for everybody: from the person who picks you up in the taxi to the person you buy your newspaper from. That is the one thing we often forget in the tourism industry: you touch 123 different sectors. You have the ability to affect them positively. Every hotel has telephones, does washing, does laundry and buys products, but certainly in terms of an ambassadorial role, once we have people on site, let me assure you we have no difficulty in impressing them.
Q127 Mr Evans: I am going to be a bit blunter than Alasdair—I’m going to give it a go, anyway. You are quite right to say that you have an uphill struggle and it is because, I suspect, when people have an image of Belfast part of their brain goes back to the Troubles: the bombings and the shootings. It was a war zone for so many years—for decades. Clearly, that is not the case any more, and your uphill struggle is to convince people that it is safe to go there and it is a lovely place to go. It has got nothing to go with the 11% differential on VAT to be honest. I have just gone on an InterContinental hotel website, and if I was to go and stay there tonight it is a lot cheaper to go and stay in Belfast than it is in Dublin. It is over €100 in Dublin. I can go for £60 in Belfast, so it is probably a cheaper product in Belfast compared with Dublin anyway.
Janice Gault: It is a bit like comparing London with Plymouth or London with Southampton. If you go to somewhere like Donegal, or to a degree Galway or Cork, you will find a much more comparative price. I agree that there are issues with regard to our history and we have had a 30-year ad running on TV that has not helped, but we feel that there is an opportunity for us to rise above that and create a more vibrant economy. As much as this is the case for Northern Ireland, this is also the case for other rural destinations in Britain.
If you look to your capital city and see it as being the flagship, that is fantastic. Paris, for example, is probably the most expensive city in Europe to stay in in terms of hotels. However, the French Government recognised that and realised that rural tourism beyond Paris was being challenged, so they made the decision to introduce a VAT reduction to help the situation.
Our argument is that we are faced with a number of challenges, one of which you have quite rightly pointed out. Having VAT at 20% certainly does not help the situation, and that is one difference that we have. We are attached to somewhere that has recognised that a VAT reduction and a more effective tax system does help your tourism product grow, and they have proved it. They have proved that you can grow your tourism product.
Q128 Mr Evans: You have mentioned the fact that people can go on the internet now and choose between going to Northern Ireland and indeed lots of other countries around the world. Has an analysis been done of the first thing that people have in their mind when Northern Ireland is mentioned as a tourist destination? Are you able to gauge how far the Troubles have knocked Northern Ireland sideways as an issue when people are choosing whether to go there or not?
Janice Gault: It depends where you are based. My definition of this is very crude: it is the BBC News definition. The further down you are in the news, the better off we are. In the last four years to my knowledge we have been the number one item on the news on 12 occasions. Thankfully, five of those have been attributed to Rory McIlroy—another fine County Down person—so that is very important, and another one has been attributed to the Titanic. The further you go away from Northern Ireland the less the Troubles impact, and for some people, in a bizarre way, they are an impetus to travel. People, particularly from Europe, find it an intriguing thing to go and look at.
Q129 Mr Evans: I would be fascinated by that, because to be honest I would be amazed if the carnage that was wrought in the streets of Paris recently does not dent their tourism attraction.
Ufi Ibrahim: When you look at evidence of these shocks in the tourism market, it is remarkable how resilient tourism is. Markets tend to recover quite quickly given the nature of the shocks that we are talking about. Some markets take much longer to recover. Egypt, for example, will be a case in point because there are ongoing shocks, and that is a much deeper- rooted problem. If you take past evidence as an indicator of the future, I think Paris will recover quite quickly.
The other point, particularly in terms of the differential between the room rate in Dublin and Belfast for the same property, is a very sad confirmation that the hotel in Dublin is at a very high level of occupancy, because it is based on yield management, which implies that the hotel in Belfast in unfortunately not performing very well. That is a case in point of the problem that we have here. As I said, this is a highly price-sensitive industry. A lot of studies have been carried out looking at the price elasticity of our products, and it is very clear that the tourism taxes and the VAT rate have a direct impact on the decision of where people do go.
Q130 Mr Evans: You are making my argument for me, to be honest, by saying that there are fewer people filling hotels in Belfast than in Dublin, and therefore the price is a lot higher. I am just wondering whether the VAT difference is going to make any difference at all.
Ufi Ibrahim: It does, and I can tell you why. When you have a property and you are running a business, you need to have revenue to be able to invest in marketing your product. It becomes a vicious circle, and if you do not have high occupancy, the command to charge good rates and a large volume of demand coming in, you are not going to be able to invest in growing your business further. That is specifically the point; you can take that and apply it across the economy. We have seen evidence that where VAT rates have been reduced for tourism we have seen exactly that happen. Spain, Germany and the Republic of Ireland are all boasting significant growth thanks to and following on from a differential in rates of VAT applied to accommodation and attractions.
Q131 Mr Evans: Has the introduction of Airbnb blown apart this whole thing anyway? I have again gone on the website and you can have a whole house in Belfast for £50, tonight.
Janice Gault: I am sure that would particularly impress the Chancellor, as he is unlikely to see 20% of that particular transaction. To clear it up further, within Northern Ireland, all tourist accommodation has to be certified under our legislation. If you go to the Airbnb site you can effectively register anything without at any time having to indicate whether you have a licence or not. Airbnb sits in the shadow economy, and therefore the Treasury will get absolutely nothing from the vast majority of those particular transactions.
Q132 Kate Hoey: Having said that, Airbnb do some very good deals and I am a very happy customer sometimes.
Janice Gault: They do and I do not deny that, but you are competing on an unfair playing field. Airbnb do not have to meet the same legislation—
Q133 Kate Hoey: Yes, but just as tourists make up their mind on these other things, they are going to make up their minds on whether they can get a cheaper deal or not.
Janice Gault: Precisely, but in London it has been shown that Airbnb is more expensive than hotel products in recent times.
Ufi Ibrahim: Furthermore, I believe that Airbnb’s European HQ is registered in Dublin, are they not? They go to every extent and extreme to avoid having to pay any tax whatsoever. They would probably not be a very good case for us to compare with an industry that has been doing its duty to pay taxes, comply with regulation and uphold the safety and reputation of all its customers and the economies within which they are operating.
Q134 Nigel Mills: Can I just take you back, Ms Ibrahim, to the information you gave us—that people choose where to go, and then once they have chosen where to go they try to decide what to do and exactly where to stay? Isn’t the big issue that, if I wanted to fly to Northern Ireland, my first point of comparison is that I will find my return flight looks quite expensive compared with going to other places because of that particular tax? Isn’t the issue here for us to try to fix that so that people are not put off from flying in the first place, before we worry about what they might do once they have arrived?
Ufi Ibrahim: There is no doubt that APD is detrimental to tourism, but the differential between a change in APD and VAT is that VAT also has a big impact on helping to encourage many domestic residents to stay and explore more of their own country. As Janice said, domestic tourism is very important to Northern Ireland, and reducing APD is not necessarily going to have a big impact on helping to encourage many domestic staycationers to stay at home and to explore more of the nation.
When you see the differential in the rates of sterling, for example, and you have seen a huge flood of people this year—record levels—leaving the United Kingdom to take their vacations abroad, this is all based on price differentials and the momentum that customers have to say, “Now is a great time for us go elsewhere because our pound commands greater returns.” APD will help to achieve that as well bring people into the UK, whereas VAT will also be speaking to the domestic tourist, and they are very important for us in the UK.
Q135 Nigel Mills: It depends if you count domestic tourists in Northern Ireland as including people from the rest of the UK.
Janice Gault: We do not. GB visitors account of 26% of our product. Of those 26%, roughly 60% of them are visiting family and friends. That is the actual figure that you have within that amount. Domestic visitors for us are people from Northern Ireland, holidaying in Northern Ireland. They are our biggest market, our second biggest market is GB and our third biggest market would be the Republic of Ireland.
Your APD question is well placed, but we would feel that APD, again, is a more flexible regime. In the south they looked at the APD in terms of all their other products, and the airlines were told, “If you increase the routes and you bring in more visitors, we will reduce APD.” It was reduced originally to €3 and then it was scrapped. As a result of it being scrapped Dublin is about to experience its best year ever in terms of tourism. You can effectively now get from Dublin to Australia in 18 hours. They have become an international hub and a lot of that has been driven by an efficient tax system. That is not simply APD: that is the other things put in place to support it.
Q136 Nigel Mills: Ms Ibrahim, you cited the World Economic Forum study that had us 140th out of 141 on price competitiveness, but isn’t it right that that study cites APD as the reason for that lack of competitiveness? It does not mention VAT, does it?
Ufi Ibrahim: That particular index in the World Economic Forum data looks at tourism taxes including air passenger duty and fuel taxes. It does not currently include VAT because not all countries around the world charge the same levels of VAT; therefore, it is more difficult for them thus far to be able to do that measure. However, we as an organisation have certainly looked at comparative studies, particularly across Europe, to understand what the scenarios are in our own rival continent. There it is very clear that we are only one of three countries in the European Union who do not apply a reduced rate of VAT. We could also create a ranking of our own, which we have done, and I am sure that our Cut Tourism VAT colleagues presented that when they were here last week. We do not necessarily need to look only to the World Economic Forum data, but it is very valuable to look at that as well because it gives you the worldwide view. When we look here to our biggest rivals in Europe, France, Germany and others, we can see that we are performing very poorly indeed.
Q137 Nigel Mills: In that study overall, can you tell us where the UK ranks for the overall tourist attractiveness?
Ufi Ibrahim: Interestingly five years ago, when David Cameron set out his vision for tourism for the United Kingdom, he said that we should be within the top five most competitive countries in the world. In terms of the number of tourists visited, one would look to the United Nations World Tourism Organisation arrivals figures. We were then sixth, we are now eighth, so we are going down rather than up.
Q138 Nigel Mills: However, the study you cited in evidence, saying that we were 140th out of 141, had us where overall?
Ufi Ibrahim: We are now within the top five of the most competitive countries in the world, which is very good. I think we are now fifth in that study. However, to clarify, that is based on the fact that we have some of the world’s most outstanding natural, cultural and historical assets. In terms of tourism assets, this country is very rich. We have fantastic potential to grow a tourism base here. In terms of the human assets that we have such as skills, even though we have a skills shortage, all of these factors help to complement our competitiveness. When you look to the other areas related to policy, for Government prioritisation we fall down to less than 30—around 35th or 36th. In terms of the conduciveness of Government policy to help our industry grow, we fall to 63rd, and it goes down and down to the case in point of tourism taxes, where we are 140th out of 141.
Q139 Nigel Mills: However, you realise, if you are in the Chancellor’s shoes, you see that we are fifth overall and have the most visited city in the world, and the proposal for a tax cut will cost a lot of money and largely mean not taxing lots of rich foreign businessmen to come to London to eat and drink here. Then you have got 75 other bids from all manner of industries from manufacturing to car-making to whatever else saying, “If you cut our taxes we can grow.” You can see why they might look at different things and think that they are the higher priority, can’t you?
Ufi Ibrahim: On that point, it is very interesting, because we find that the Chancellor promoting, for example, the big tech giants like Airbnb, who, effectively, do not pay any taxes at all, contradicts your suggestion. It is not only about the success of London. There is the whole of Great Britain outside of London, and Northern Ireland. We want to see all of those economies grow, and the VAT rate added on to all the other issues that we have, such as APD and other taxes, has a big impact on our ability to be able to grow to the full extent that we could achieve growth based on the UNWTO figures, where we are seeing the global tourism population booming.
Janice Gault: The point that you make about businessmen eating and drinking, they can, effectively, claim VAT back. They do not pay any VAT anyway, so the business market coming into London, which is a big amount of tourism, the VAT question for them is not an issue. They can claim back the VAT on their hotels and they can claim back the VAT on a significant amount of entertainment. Therefore, if the VAT is 20% it does not make any difference to that particular market.
Chair: Okay, thank you very much. It has been a useful evidence session and we are grateful to you for all the information you have provided. Thank you very much.
Examination of Witnesses
Witnesses: David Wilson, Director of Public Affairs, British Beer and Pub Association, and Colin Neill, Chief Executive, Hospitality Ulster, gave evidence.
Q140 Chair: We will move as quickly as we can. We are constrained by time because, as you will be aware, we have got very important business in the Commons later, so we will seek to finish this session at 11.15 am at the latest. Just before we start, it is not a declarable interest but I want to declare, in the view of the fact we have got the British Beer and Pub Association here, that my sister is a pub holder in Gloucestershire. I just wanted that on the record. It is the Village Inn in Twyning, Gloucestershire. One or two Members have already been. Gentlemen, you are very welcome. Thank you very much for joining us. Perhaps I can invite you to introduce yourselves and make very brief opening statements if you wish.
Colin Neill: Thank you, Chair. I will begin, and thank you for the opportunity to present to the Committee today. I am the Chief Executive of Hospitality Ulster. I should also declare that I am a board member of Tourism Northern Ireland, or the tourist board as most people would know it. However, I am not here in that capacity today. Hospitality Ulster is a membership organisation and we have strategic alliances with the BBPA and the British Hospitality Association, and work closely with our counterparts in the Hotels Federation.
We are a membership organisation working right across the spectrum: hospitality is pubs, bars, hotels, restaurants, visitor attractions, airports and sporting locations. It is a very diverse membership from five-star hotels, Michelin restaurants and world-famous bars right through to your local restaurant and community pub. Northern Ireland being what it is, the majority of the industries are small to micro-businesses; it is the nature of Northern Ireland.
You have had lots of facts and figures today, so I will add a few more, just to keep it interesting. The hospitality industry in Northern Ireland sustains 60,000 jobs, with 45,000 of them in food and drink. 60,000 is one in 20 jobs. We are the eighth largest employer in Northern Ireland, with a higher GDP than agriculture. We pay £653 million in wages, £88.4 million in tax and we are worth over £1 billion to the Northern Ireland economy. Just picking up on an earlier query, we do pay some corporation tax. Collectively we pay about £70 million. It breaks down as pubs at about £16 million, hotels at £19 million and restaurants at about £35 million, so although it is not all of our people, the corporation tax is still an important issue for us as well as the roll-on effect of that with more money in the economy and more employment.
You have already heard that tourism employs around 45,000 people, with a target to go to 50,000 at least within the next five years and to raise our revenue to £1 billion. It is a very important element of the Northern Ireland economy, and it is recognised as being so by the Assembly. As mentioned, we would be supporters of a VAT reduction on accommodation, food and visitor attractions. I will hand over to my colleague David.
David Wilson: I am David Wilson; I am the Director of Public Affairs for the British Beer and Pub Association. Our members brew about 90% of the beer that is brewed across the UK and they own or manage about 20,000 of the nation’s 50,000 pubs. As Colin said, the vast majority of those pubs, particularly in Northern Ireland and around 85% across the UK, are small businesses. The beer and pub industry is worth about £21 billion to the UK economy. We employ almost 1 million people in total: 600,000 direct jobs with another 300,000 through the supply chain.
Interestingly, UK-wide, 46% of those employees are under 25, so we are a significant employer of young people, although it is interesting in Northern Ireland that the figure is lower, at 30%, so there is clearly more potential within Northern Ireland to drive employment growth around young people through expanding and growing the pub market. Food is really important to the modern-day pub; we now serve 1 billion meals a year in British pubs and it is key to a lot of pub profitability and sustainability.
We have seen three very welcome successive beer duty cuts, which a number of you in this room have helped us to campaign for to persuade the Chancellor, which is a very targeted way of supporting the pub. I would say that your remit as a Committee is looking at tax across the board, and we would certainly encourage you to support further duty cuts, because they are a good way—a very targeted and cost-effective way—of supporting pubs. However, we also call for a review of the impact of VAT, because it is the biggest tax of all the taxes that pubs face.
We have looked at this, and a couple of months ago, Oxford Economics did a report for us on the tax burden in total that pubs carry in the UK, and I am happy to share that with the Committee later. The total figure for the UK is £7.3 billion. That is quite a lot of money paid by pubs in tax. £3.7 billion of that is VAT, far and away the largest amount, and more than half of the total tax take, the Revenue receives from pubs. It is clearly a big issue, but there are big costs attached to that, and all the modelling that has been done by us and other organisations demonstrates that it is a huge cost to the Treasury.
That is why, I suspect, we have had similar rebuffs from Mr Gauke and the Chancellor when we have asked for the issue to be addressed, because in the short term it does create a very big hole in the revenue. We understand that, and we also know that we would call for a graduated reduction because we know how important VAT is as an issue, particularly in Northern Ireland because of the specific issue around differential that you have already discussed this morning and last week.
Q141 Chair: With regards to the pub industry in Northern Ireland, how easy is it to classify the information? In other words, how do you know how much beer is sold to a tourist as opposed to somebody who lives next door to the pub? How do you classify it to make the case?
David Wilson: That is a good question. We do not measure it, but we know that in high-tourist areas the pub is a significant visitor attraction in its own right. What VisitBritain tell us is that for one in three of all visitors to the UK as a whole it is within the top three things they want to do when they come to this country. I am sure it is even more so in Northern Ireland, because of the atmosphere that you get and the people you meet in local pubs. That is one of the reasons why people visit places: to experience the culture, and the pub is, in my view, one of the best places to experience that culture wherever you are in the world.
Colin Neill: Tourism Northern Ireland shows that visiting a pub is one of the highest visitor attractions, and they do surveys about visitor spend. You can never go down to the pound notes, but you can trend where the spend is.
Q142 Chair: It is difficult to get a figure to support the case for tourism, isn’t it? It is more difficult for pubs than hotels, for example.
David Wilson: Yes it is, although 50,000 rooms across the UK are in pubs, so a lot of inns. This is less so in Northern Ireland, as I understand, but certainly across the UK pubs are realising that rooms above pubs are becoming more popular, and they are getting better at marketing them. They are investing in them so that the facilities are more attractive. We know that it is a challenge to encourage people to stay in pubs, but it is often a good-value alternative to hotels, particularly in rural areas where you may not have a lot of choice available to you.
Q143 Ian Paisley: Good to see you here, gentlemen. Last week we took evidence, and it was reported to us that, yes, there should be a reduction in VAT on accommodation and a reduction of VAT on visitor attractions, but definitely not food. Could you make the case for us today as to why we should push on the food and hospitality sector, and could you indicate to us, Colin particularly, the impact this would have in terms of wages and in terms of jobs?
Colin Neill: If you take Northern Ireland, the food and beverage sector is the highest in terms of spend at 33%. When we say beverage, alcohol is not included in this argument; it is a totally separate argument because it is a fully separate animal. It is a really important visitor spend, particularly when you take in the context of Northern Ireland. Over 50% of our tourism is domestic tourism. Our discretionary income in Northern Ireland is £97 a week compared with the UK average of £192 a week. I live 20 miles from Scotland, as I often say, albeit there is a stretch of water—I live in Larne—and there it is £190 a week disposable income, so we have an incredibly price-sensitive market.
To holiday at home, food and drink would be a big chunk of that spend; therefore, it has a real disproportionate issue the dearer we are with it. Lots of people forget too that when you buy food in a restaurant the full 20% of VAT goes to the Chancellor, because food bought raw is zero rated, so you are passing it all on. In other products you are passing on the differential of what you paid in VAT and what you have added in value to the issue.
Q144 Ian Paisley: If the reduction were to take place and it were to affect not beverages but food—let’s focus on that—do you think that would have an impact on jobs and would it be positive?
Colin Neill: It most definitely would. Look at Southern Ireland as an example, and take their percentage rises in the three areas and apply the percentages across. We are starting from a lower level that is impacted by our history and our standing in world tourism as a trouble spot, although I must admit that if you talk to my eldest son, who is 28, he has no memory of the Troubles and has no concept of it.
We have that moving rapidly away, thankfully, but if you take the actual rising figure in the Republic of Ireland and if you applied it to job creation, when you take their 9% right across the board, they have seen a 19% increase in jobs. We are talking over time here; this was 2011 until 2015, but if we see the same trend and increase, that could create about 8,500 jobs across the sector. If you proportion that again to 45,000 in food and drink, you will see that we would be heading towards maybe 50,000.
David Wilson: We pointed to a study that was done for us by Oxford Economics, which looked at the impact of different rates and reductions, and even a modest reduction of 5% to 15% on food in pubs would create an estimated 150,000 new jobs across the UK. Food in pubs is very labour-intensive activity, so if you grow that offer, you are able to offer more covers and the pub is fuller more often. Clearly you then need to employ more people directly. There are a lot of direct employment implications straight away.
Q145 Ian Paisley: Tell me how you think Northern Ireland is perceived as a cost destination? If you are planning a visit to Northern Ireland, what will you pick up in terms of people’s perception about the cost?
Colin Neill: It can be perceived as more expensive, particularly if you look at the Republic of Ireland, which is always a very direct element. You can even look at our own people, if you take the domestic numbers, choosing to go to the Republic of Ireland, and it is a cost-sensitive market. We have seen visits to the Republic of Ireland from Northern Ireland grow; in 2012 it was 1.3 million and it is now up to 1.7 million visits. We are voting with our feet. It is cost, and we are going the other way. The actual visits from the Republic of Ireland have been falling, their length of stay has been falling and their visitor spend has been falling, and all that indicates that people are assessing on the cost basis. There is an element as well of people checking the price of a room on different websites and all sorts, but they also read the reviews. I have just come back from Copenhagen at the weekend, and most of the reviews I read said that you need a mortgage to buy a pint, so that does feed through. It is not just the headline price.
Q146 Ian Paisley: Was that Copenhagen?
Colin Neill: Yes, they have one of the dearest VAT rates for tourism, and I would argue that they are not really in the tourism market.
Q147 Ian Paisley: In terms of events, do you find that people, because of the price of food and this cost-sensitivity issue that you have identified, are maybe booking their celebratory events such as weddings, parties or stag dos away from Northern Ireland as a result of the cost issue?
Colin Neill: Absolutely. As I said, it is always anecdotal in some of the figures, because getting trading figures out of members is always a challenge, but if you look at the headline figures you can follow the trends. Food and beverage in Northern Ireland this year has been consistently in Belfast about 5% down month on month. Outside Belfast it has been something between 7% and 12%. The closer you get to the border with the Republic of Ireland we are seeing people migrate across. Indeed, I will not name them because it will go on record, but the chamber of commerce of one town/city I visited had just come back from their overnight workshop and it was in Donegal. I thought that ironic given that, if you are a chamber of commerce trying to promote your own area, you would stay within your own area.
Q148 Ian Paisley: At least we are staying in Ulster.
Colin Neill: The exchange rate will always play a role in this and that is beyond us: sometimes it is in our favour and sometimes it is not, but you compound that with an 11% differential in VAT. It now makes having your wedding reception a third cheaper in the Republic of Ireland.
Q149 Gavin Robinson: Good morning to you both. Mr Wilson, what do you believe the rate of VAT should be?
David Wilson: We are not specifically calling for a specific cut. We are asking for a review, partly because we understand the economics are very challenging, but we do think that the case for a phased reduction could be made. We have presented the figures to the Treasury and what a cut to 15% on food in pubs would mean. We know there are challenges with that, because it is very difficult to target food served in pubs specifically. We would have to have a rate that was applicable to other food establishments, and that adds to the cost. It is not as targeted or as effective a measure for us, from our perspective, as, say, a beer duty cut would be.
Beer is so important to pubs and the life of pubs that, if you cut duty, you automatically, as we have seen, see investment by the brewers and other pub owners in the pub estate. It directly affects and improves the pub, whereas a VAT cut would have that effect, but it is a significant cost with a longer payback time. We do not specifically support the 5% campaign, because we recognise that is a huge challenge.
Q150 Gavin Robinson: One of the issues raised with us last week by the Cut Tourism VAT campaign was that, as a country, we can have a standard rate of VAT and potentially two additional rates—be they reduced or, I assume, increased. We already have one of 5%. The point they were making was that it would be difficult to create an argument for an entirely standalone new rate. Are you not persuaded by that?
David Wilson: It is difficult, because it cuts across one of the other Treasury objectives, which is simplification. We see that with consumers. There is not much tax transparency when people go to buy a meal or have a pint in the pub. They do not know how much of what they are paying is going into tax. One of our objectives, if I am honest, as a campaign organisation is to promote how much is going to the Exchequer so people will realise we pay the second‑highest beer duty rate in Europe, second only to Finland. We pay 14 times more for our beer in the UK as they do in Germany. That seems crazy.
We try to promote that through more tax transparency but, when we are talking about proposals to Treasury, it means they can and do argue, “You are adding to the complexity.” However, we would say that with the technologies now at point of sale, you can differentiate. You could create an environment that enabled those sorts of transactions to take place, where you separate the food element in the pub from the alcohol and the drinks and charge a lower rate for the food that is served in pubs. Clearly, it needs a bit of work; it needs time to develop. However, that is doable—and it has certainly been done in other countries, where they have reduced it.
Q151 Gavin Robinson: Mr Neill, have you settled on a preferred figure?
Colin Neill: Ideally, we would like to be the most competitive in Europe. Ideally, we would like to see the 5% level. We compete on a world stage. The further out we go, the smaller our markets are. If you offered me 9%, I would break your arm. If you offered me 5%—it is about what is achievable.
Again, we are not opposed to a phased approach. If we got accommodation first and had to fight a bit more for food, we would accept that and go through. We have a very holistic approach on this, and that is why we have alliances with different parties who work at different elements of it. Our membership and our offer in Northern Ireland is much wider.
On the argument about the simplification of VAT, separating out food and beverages and all of that, it is not that difficult. We already do it. Pubs and hotels have to do it for their business rates, which business rates are apportioned on a model of expenditure and receipts—a turnover model, as we call it. We have to do that anyway. It could easily be done.
Q152 Gavin Robinson: Regarding that distinction about the substantive rate of VAT and the two subsidiary rates, are you taken by the argument that the creation of a new 9% rate for the UK as a whole would be more problematic, but 5% would be more costly, if the hospitality sector were included?
Colin Neill: Having additional rates would not be problematic. Other than an information campaign for sales, most customers do not care what it is in taxes. What are they paying? Is that room or that meal X pounds? They will not worry whether we have to give 20% or 5%.
Q153 Gavin Robinson: Of course, customers just want to see a reduction in cost, but the Treasury are concerned about the implications for their take. You wrote the Chancellor a wonderfully well-crafted love poem on Valentine’s Day.
Colin Neill: Given that I penned it myself, I would not say it was a love poem. I would rather just call it an ode.
Gavin Robinson: In response to your love letter or poem—
Lady Hermon: Ode.
Colin Neill: Ode—yes, please. Thank you, Lady Hermon.
Gavin Robinson: It was an ode to George on Valentine’s Day. Has the Chancellor shown you any skirt or is he remaining coy?
Colin Neill: No, he has not responded to me in person. I feel jilted.
Ian Paisley: You shouldn’t take it personally.
Colin Neill: We have taken the approach in our lobbying that we have concentrated a lot of our energy on the Northern Ireland Assembly and then worked through our strategic partners in the BPA and BHA to go after the Chancellor. Rather than us all writing to him and getting the standard return letters, we have obviously had Members and the Minister for Enterprise, Trade and Investment writing to the Exchequer on our behalf. The Northern Ireland Assembly have passed a motion backing our position—and, indeed, it is cross‑party.
In the transcript from last week, I noticed it said that Sinn Fein were not in support. Sinn Fein actually are on board as well. In our evidence pack you will see a comment from Sinn Fein. We have the backing of Northern Ireland. Indeed, even on the facts and figures, the Treasury will always push back on private‑sector facts and figures, so we have lobbied and successfully got the Northern Ireland Assembly to carry out the research and come up with the facts and figures to present. It would be our devolved Government presenting it to central Government, which is a much stronger case.
Q154 Gavin Robinson: Last week, we heard that the Treasury position was becoming more positive in response to the Cut Tourism VAT group, whereas Janice Gault from Northern Ireland Hotels Federation was indicating that she has had three similar letters over a period of four years. From either of your perspectives, do you see the Treasury getting to a better place on this or largely giving the same responses to the request?
David Wilson: There is definitely some momentum behind the campaign, but the response we have had from the Treasury—we obviously include a VAT ask every year as part of our pre‑Budget submission—remains the same. Ministers will say that they keep all taxes under review—and I am sure that is true—but we have certainly not picked up any warmth to the argument.
We need to keep making the case. The challenge, particularly from a Northern Ireland perspective, is that this policy would have to apply UK‑wide, which means the cost, even though you can make stronger arguments, I would argue, in Northern Ireland than anywhere in the UK, would have to be borne across the whole UK. That is a really difficult judgment call for the Chancellor.
Colin Neill: I would come in on that and say that I have been part of the Grow NI campaign for corporation tax devolution, and for many years the early letters were, “Go away.” Then they started to make arguments, rather than just saying, “Go away.” Then they started to argue about the figures. It is a war of attrition. We are in the trenches and we are coming for them.
Gavin Robinson: Love has that feel.
Q155 Oliver Colvile: First of all, thank you very much for coming to see us. I am quite curious to understand why you claim that Northern Ireland is the one place that should end up having this. After all, I represent a city called Plymouth, which is about to commemorate 400 years of the Mayflower leaving to go and found the American colonies. Frankly, we have a significantly better argument for that, because we want to make sure we get as many American people to come and visit the West Country as we possibly can.
Colin Neill: I would like to come in there. I have never said that we are the one place. We have a very good argument, and I would agree that Plymouth has a very good argument. We should join forces and argue together.
Q156 Oliver Colvile: You would probably be better served, if I may put it to you, by trying to get the Government to devolve responsibility for VAT to the Northern Ireland Assembly and the Executive. Of course, the price of that would be a reduction in the block grant the English or British taxpayer is paying to Northern Ireland. Is that something you have thought about?
Colin Neill: All of our legal advice is that Europeans’ interpretation of European law prohibits a reduced VAT rate in one jurisdiction, like the United Kingdom. It is all or nothing. Obviously, it would affect the block grant, as corporation tax devolution will. It really is a UK‑wide campaign.
Q157 Oliver Colvile: You might have a better idea than me, but, as I understand it, the Northern Ireland Executive is not very keen to end up reducing corporation tax because of the implication that could have on the block grant—or am I being particularly uninformed?
Colin Neill: No.
Ian Paisley: They campaigned hard to get it, and they are looking forward to reducing it.
Colin Neill: We have a date set and a rate set: 2018 at 12.5%
Ian Paisley: There are a lot of companies moving from Plymouth to Northern Ireland.
Q158 Oliver Colvile: There are not that many to move. I would also say to you that, if you are going to reduce the VAT element, where would you end up increasing tax elsewhere? We still have to make sure we reduce—and, in fact, get rid of—this deficit by the end of this Parliament. Where else could we end up? Would you like to see income tax go up or corporation tax go up or what?
Colin Neill: I would like to see all tax come down, as I am sure the Conservative Government would as well.
Q159 Oliver Colvile: Yes, but we have to deliver public services.
Colin Neill: Yes. This is part of a process. Obviously, we are in an era of austerity. It is also about looking at how we create jobs. That is an important element of this argument. It is also a job‑creation tool. It could make a significant impact in lots of the regions outside London. As I mentioned earlier, London does not really have a tourism challenge; however, you cannot judge your policy on London.
France decided to reduce their VAT to help the regions, to help the likes of Plymouth, Scotland and us. This is a longer game and, at the end of the day, it will create employment; it will make us far more competitive; and it will stop our tourism product being reduced. That is what we are seeing at the moment.
David Wilson: From the Beer and Pub Association’s perspective, we would not want to see a return to a beer‑duty escalator or an increase in beer duties to cover any revenue lost that you would get from a VAT reduction. First of all, it would not cover that loss because the sums involved are much greater, but equally that would be counterproductive. It would damage pubs with a measure that is meant to promote them—particularly food in pubs. That would certainly not be beneficial to our members.
Q160 Lady Hermon: Following the Chairman’s example, I should just explain that my son and his lovely fiancée run a small restaurant in Bangor in sunny North Down. I do not discuss this inquiry with them, but nevertheless I should put that on record. What priority does the current UK Government—the Conservative-majority Government—give to tourism across the UK?
David Wilson: From our perspective, we are very satisfied with the workings of VisitBritain and VisitEngland, for the bulk of our members. We work really hard with the GREAT campaign and the priority they have given linking the work our ambassadors are doing overseas with promoting exports as well. There is a very strong business argument for the GREAT campaign, and I am pleased that the funding for that has been secured—and, indeed, increased.
After some years of persuading Ministers in the previous Administration, we launched the Pubs are GREAT campaign, because we recognised that visitors to the UK do want to go to great pubs—and they want to know how to find them.
Q161 Lady Hermon: Can I clarify what you mean by “the GREAT campaign”? Is that the GREAT Britain campaign?
David Wilson: Yes. You can opt in to the campaign with various subgroups. There are things like Inward Investment is GREAT and Exports are GREAT. For us, there were two elements. One is that we promote the heritage of beer. There is a Heritage is GREAT campaign, which includes some of our world-renowned beer brands. However, we also promote Pubs are GREAT through our website, working with VisitBritain. It is for people who are working out where they are going to stay, already having decided that they are coming here, to encourage them to visit pubs.
Q162 Lady Hermon: Does the GREAT campaign extend to Northern Ireland?
David Wilson: Yes.
Lady Hermon: Is it the GREAT United Kingdom campaign? That is the point I am making.
David Wilson: Yes, it does cover Northern Ireland. In fact, they are at great pains to ensure the work they do overseas is promoting every element of the UK, including Northern Ireland.
Colin Neill: Could I comment, Lady Hermon, on the priority given to tourism?
Q163 Lady Hermon: Yes, you have been in this business a very long time and you have been able to compare the approach taken by various Governments in recent years. Instinctively and by experience, what level of priority do you feel this particular Government attaches to tourism right across the UK?
Colin Neill: We have moved from a twilight industry to one they now mention. It is in discussion, but it is still not ranked up there. It is not seen as IT and all of these types of things. It is not seen as, “You need lots of people and skills,” which you do.
It reflects on Great Britain and Westminster as well as Northern Ireland but, to quote one of our Ministers in Northern Ireland, I would say the problem with our industry is that we are everyone’s friend and no one’s family. What he meant by that is that lots of Departments share bits of us, but nobody owns us. I suppose what I would like to do is put ourselves up for adoption, because we are really good. We bring about £85 million to the family pot, so we are well worth having as a child.
Q164 Lady Hermon: Having said that, in Northern Ireland, with the devolved Administration, tourism is allocated to a specific Minister within the Executive, and it is well looked after within that portfolio.
Colin Neill: Lady Hermon, with respect, we still struggle. Although Enterprise, Trade and Investment looks after tourism, so many pieces of our legislation fall into other Departments, such as skills. It is even small things. Our licensing falls under the Department for Social Development; our entertainment licensing falls under DoE. Getting those joined up is incredibly difficult.
I was fortunate. Under the better business regulation that Enterprise, Trade and Investment carried out, when Minister Foster was there, I chaired the pilot working group to look at reducing red tape. That was really effective, until it disappeared into the ether of everybody else’s Departments. Then it got into the old thing: “It did not come from our Department. It is nothing to do with us.” There is a huge challenge in tying that together.
In the Northern Ireland context, with the reduced number of Departments, in the Department for Economy and Skills I hope we will see the skills come across as well. However, we do have a huge challenge. In the Northern Ireland context, I would like to see one of the junior Ministers carry the actual title Minister for Tourism, so we have one point to go and bite at their ankles.
Q165 Lady Hermon: A witness in one of our previous evidence sessions made that point. There should be a specific Minister here in Westminster tasked with the sole purpose of promoting tourism. It does come within the remit of a particular Minister at present, but sometimes the word “tourism” drops off the headed notepaper or the website. You would say there should be a dedicated Minister both in Northern Ireland and Westminster.
Colin Neill: Yes. We have a higher GDP than agriculture.
Lady Hermon: You mean in terms of Northern Ireland.
Colin Neill: Yes, in terms of Northern Ireland. We should have someone who is charged with that because, if you think about Ministers who have multiple briefs, most Ministers’ titles will not carry all of their remit. That would take two or three sides of a business card. However, it tends to be the ones that are mentioned that are the ones seen as the priority. If we had someone like that, it is a very visible demonstration that this is an important industry.
Lady Hermon: This is both at Stormont and Westminster.
Colin Neill: Yes.
David Wilson: It is a championship role. We have a Pubs Minister. In theory, he has a relatively limited remit. In practice, if we go to the Pubs Minister and say, “This is an issue for pubs. Can you raise it with ministerial colleagues across Whitehall?” he is able to do that. You can use that mandate to work across Whitehall. The Minister for Tourism and Sport, as we currently have, also has the capacity to do that. I am more relaxed about the title. It is more about an awareness across Departments about the enormous potential that tourism has—particularly DEFRA, which is our sponsor Department, because beer is classed as food. We are part of the DEFRA family, if you like.
There is a lot they can do and a lot of funding they have to promote rural tourism. We need to encourage them to do more of it, because there is a lot more scope for things to be done, particularly around promoting the provenance of food and drink. That is something visitors are particularly interested in in a growing way: craft drinks, craft beers and craft spirits.
Q166 Lady Hermon: What explanation does your pubs Minister, or indeed the Government, give for the UK being one of the only three countries within the 28 countries in the European Union that have not used their ability to reduce VAT within the permitted levels of the EU Directive? Why on earth has the UK Government made no effort to do that? Why should we want to rank alongside Denmark? You have just explained that Copenhagen charges extortionate prices for a pint of beer.
David Wilson: We are a very successful economy. If you are the Chancellor, you make judgment calls—and you keep all of the taxes under review. That is a sensible position. We need to continue to make the case. The numbers are big. The direct impact in the short term is very large. Certainly, when we were in recessionary times, it would not make any sense at all to take that kind of gamble with the public purse. As we move into growth, our arguments become more compelling perhaps, because we are talking about the potential to employ particularly large numbers of young people, whereby we can tackle youth unemployment in areas where it is particularly high.
Q167 Lady Hermon: Of course, the evidence we have received about the Republic of Ireland is that its experience was exactly the opposite. During the economic crisis in the Republic of Ireland, when everything crashed, going from being the Celtic tiger to being linked in the same sentence as Spain and Greece, Ireland cut its VAT. Ireland did buck the trend—and it paid off. The argument to the Treasury should be, “This is what Ireland could do. This is an example of where it worked.” Is that not the argument that should be made by the pubs industry?
Colin Neill: It is the argument we would make, Lady Hermon. We have suffered in the Westminster context, because Dublin and the tourism world never really suffered. You wonder whether there even was a recession in London. Our challenge there is that Westminster is insulated by London doing well. They are seeing tourism boom out of the front door here whereas, once you get to Northern Ireland and Scotland, they struggle.
Q168 Lady Hermon: Could I move on to a completely different issue? I know, Colin, you are not here in your capacity as a member of what you refer to affectionately as the old tourist board.
Colin Neill: I still think of it as the tourist board and the water board. I come from that age.
Q169 Lady Hermon: A previous witness this morning used the expression that the real issue is that Northern Ireland is promoted as an island destination. Tell me about the remit of the Northern Ireland Tourist Board. Do you agree with that statement? It seemed a very bold statement that was made.
Colin Neill: It can help the complexity of the issue when marketing. It must be complex for Tourism Ireland in their marketing, tragically, to get it across.
Obviously, the remit is that Tourism Northern Ireland, or the tourist board, market into the Republic of Ireland and then Tourism Ireland market outside that as one island. If I keep my Hospitality Ulster hat on, because I will get in trouble if I talk as a board member—
Lady Hermon: We would not want that. Talk with your preferred hat on, as part of Hospitality Ulster
Colin Neill: It is a challenge marketing something that has a different currency and different cost elements and stuff, when you are marketed as one product. The further you go away from Ireland—and, indeed, Europe—Northern Ireland becomes part of a bigger marketing strategy. I remember I was in a taxi in New York and the taxi driver asked me where I came from. I started out with “Belfast” and that did not work. I said “Ireland”, and he said, “Is that near London?” It is a complex element.
As an industry body, given that GB is one of our largest markets, we would prefer to see that marketed by the Tourist Board, probably, yes. Then at least we would have control of our domestic market, which is our largest—ours, the Republic of Ireland and Great Britain—and that would make more sense. With that said, however, I understand that part of it is a political decision. There are lots of elements we have to accept, coming from where we come from, trying to get effective government. There are compromises needed to do that. I come to it more as, “Let us make it work. Whatever we have, let us sweat, sweat the asset, make it work and lobby hard that we get our fair share of whatever Tourism Ireland draws in.
There is a lot of talk about what is better. Is it APD or is it a mix? We would be in favour of reducing the APD, but it does have counter-effects—and we are already losing a lot of local tourism, where they jump on a plane as well. People also need to remember that Dublin is effectively one of our airports. As an international hub, with a number of out‑of‑states coming through Dublin, we need to get something in place that says, “Turn left,” and draw them in as well. We also have the ferry connections and so on.
Our stance on the wider tourism element of APD and stuff would be that we need a tourism visitor transport strategy, one that looks at our ferries, planes and trains—everything that makes access easy. We need to look at, “Is there someone flying into London? Okay. Is Heathrow then the hub? We need to be dragging them from there. Are they flying into Dublin? How do we bring them in?” We also need to look at how we optimise our own airports, which would be my members as well.
Q170 Danny Kinahan: I need to declare—I probably should have done earlier—that my wife runs weddings and things at the house, but I also get income from the Hilton Hotel on my land.
Colin Neill: I am writing these down to make sure they are members.
Q171 Danny Kinahan: Thank you very much. When you opened, you talked about the percentage of VAT that was paid by those larger companies, I am assuming.
Colin Neill: Corporation tax.
Q172 Danny Kinahan: Yes, corporation tax. Those are presumably all of the big hotels. Most of what we are talking about are the small‑ and medium‑sized businesses, and they do not pay VAT.
Colin Neill: Or corporation tax. Most of our small operators will be paying VAT.
Q173 Danny Kinahan: If it is below the threshold, they can claim it back.
Colin Neill: The problem is that, say, when you buy food, food comes in zero‑rated. There is nothing to claim back there, which is a clean 20% of your menu price you are paying in tax, whereas if you buy in wood for the fire or oil, there is a differential in VAT you can claim back. We are caught heavily on food. It is a very high proportion.
Q174 Danny Kinahan: You are asking for a review. Should we maybe be looking for something for the small‑ and medium‑sized enterprises so it is them claiming it back? I am going to get shot by the bigger companies. Is that something we should be looking at—that only a certain level is paying a smaller VAT?
Colin Neill: Again, it is tied up in what is legal, what is allowable and general accountancy procedures. There is an element where you can opt to pay a set rate of VAT and when you are lower it transfers across. However, it is still ends up being a sizable chunk of your revenue stream.
Interestingly, I now have members who have a couple of restaurants in Belfast and are now opening in Dublin. When you ask them, it is because the VAT rate and the tax regime are far more competitive, so it is more sustainable for them. Rather than opening in Belfast, it is easier to go to Dublin; it is easier to manage from Northern Ireland.
Q175 Danny Kinahan: You talked about transport strategy. One of the briefs we have says that tourism increased by 15.8% in Ireland, and you are expecting the same in Northern Ireland. However, if you fly in mainly to Dublin, are you not more likely to stay in Dublin? Should it not be a bed strategy we have to get people to stay in the north?
Colin Neill: Lots of people who fly into Dublin go to Killarney and Cork. They have a huge tourism industry with huge hotels. It is not unreasonable to say that, if you are going to drive the 100‑odd miles to Killarney, you will drive the 100‑odd miles to Northern Ireland. It is about how we attract them there and having the provision to keep them there.
Again, one of the challenges on cost, as mentioned earlier, is that most of the tour operators operate out of Southern Ireland. They have built up over the years there, because we have not had the ability to have the tourism product as such. They bed‑night in Donegal and then bed‑night again over the border. You will see them: they will do Giant’s Causeway, Titanic Belfast and then be back in Drogheda or somewhere to bed‑night, because it is cheaper on the accommodation.
Q176 Danny Kinahan: That is exactly what I was raising, because the impression I am getting is that people tend to stay in Ireland rather than Northern Ireland.
Colin Neill: Again, if you are operating as a tour operator, you can save money by operating outside Northern Ireland.
Q177 Dr McDonnell: Very quickly, it is good to see you both. I thank you for this. It is an excellent publication. All credit to you and your organisation for producing it. Forgive me; I had to nip out. I may be duplicating or covering ground already covered, but the thing that interested me—there obviously has to be some answer—was that the Treasury claims that a cut of VAT to 5% would cost between £9 billion and £10 billion, whereas Mr Wilson’s organisation suggests it might cost £2 billion. Where are they getting it wrong?
David Wilson: The £2 billion figure you quote is the total fiscal impact, which takes into account the extra revenues you get from extra employment. It balances off the initial cost. The higher figure is the Treasury sum they will quote for the initial outlay—this is the point Janice made earlier—but it does not take into account, over time, the increased revenue you get back.
Q178 Dr McDonnell: You are saying it is down nine but up seven. It will come up by seven.
David Wilson: I am not sure where they get the £9 billion from. Our Oxford Economics data said a 5% cut—just on food in pubs—would cost £5 billion as the initial direct impact. This is on the chart in the submission. They then get back £3 billion, so the net cost is short of £2 billion. But, as a result of that, you get nearly 500,000 extra jobs.
Colin Neill: At the end of the day, these are always people working out models and so on. However, it is interesting to note that the Government of the Republic of Ireland estimated the cost would be £350 million and it came in at £107 million. There are always huge differences. Treasuries will always err on the safe side of the model.
Q179 Dr McDonnell: The other point is more directed to you, Colin. The argument is that cutting VAT would reduce prices and would make us more competitive. Have you any guarantee in that direction? Would your members not put themselves first?
Colin Neill: Pocket the money and go on holiday.
Q180 Dr McDonnell: Would they pocket the money and take off to Spain?
Colin Neill: I wish they were on those sorts of margins. There are all the models and extrapolations of numbers, and they vary greatly. I am always a great believer in looking at somebody who is doing it. In the context of the Republic of Ireland, it has pretty much the same geographical location and pretty much the same offer. It is still saying we have a lower level of tourism, but the experience of the Republic of Ireland is that about 50% was passed on and 50% was reinvested. That has been seen throughout the last four years—and, indeed, the Republic of Ireland Government are now happy with that.
They did give a nod to Dublin hotels in the last Budget to say, “We are watching to make sure you do actually use this to stimulate growth.” Dublin’s trouble is a capacity issue at the moment. That is what is driving their price. They do not have enough rooms, and there is a quicker yield in building apartments than there is in building hotels. That is what is taking up space in Dublin.
There is real evidence from the Republic of Ireland on this. If you just use their percentage figures along the line of 50/50, that is a fair assumption. Not everybody is going to pass it all on, but you do need that spare capacity to reinvest and keep this going. Visitor numbers in Republic of Ireland went up 15.8%. If we were to get that, applying that percentage to our baseline at the moment, it would be an extra 711,000 visitors. The total revenue was up 13.25% in the Republic of Ireland. If we apply that to our current figures over the same time period, you would see about another £99 million.
Again, on jobs, which is a really important issue within this, because this is also about job creation, the Republic of Ireland has seen a 19% increase in job creation. Again, that would translate into about 8,500 additional jobs over a similar timeframe.
If you take the Republic of Ireland, they are doing this. They have experienced this and they have now committed to keeping the lower rate indefinitely. Albeit we have historical issues, so our baseline is still lower, it is not unreasonable to transfer those percentages across and say that this is how we see it could work.
David Wilson: If I may, there is also the issue of economic confidence within the sector. Certainly from a duty‑cut perspective, as I mentioned earlier, the immediate effect of getting rid of the duty escalator and having cuts in beer duty was increased levels of investment and confidence. People in our industry can plan ahead; they can invest in that new pub kitchen they have been wanting to put in but were not sure the viability of the pub was going to be sustainable. If you know duty rates are coming down, rather than always going up, you can start to plan and invest more confidently. That is reflected in the assumptions we make about the extra employment numbers that were being created.
Q181 Dr McDonnell: I have another question to ask, but this strikes me. Anecdotally, how much of pub business is regulars, locals, and how much of it is tourism?
Colin Neill: It will vary, obviously, depending on what your tourism offer is in a particular location. A big chunk will be friends and family. I often talk to some of our members about the tourism market, and they say, “I do not get tourists.” You start to ask, “Do you get anybody in with friends and family from Canada?” “Yes.” I often talk about it as visitors, because our industry understands a visitor better than a tourist. Sometimes a tourist has to look foreign to be foreign in our industry. Obviously, in Belfast, because that has a higher density of tourism product, you will get a bigger chunk there.
That varies around the regions. The issue of VAT accessibility and stuff will help to share that. Northern Ireland is really strong on its cultural tourism. Culture is the people to me. We are one of the few places where you can go and be part of the night, rather than observe the night. We have a fantastic offer. To use a line, we are pregnant with opportunity. However, it is now about removing the barriers to that.
David Wilson: A lot of pubs are becoming food destinations in their own right, because food is growing as a source of profitability for the sector. Where pubs have the capacity to install new kitchens, create new covers and expand, that is where the growth opportunities are.
Q182 Dr McDonnell: Colin, are we not caught in Northern Ireland between a rock and a hard place, in that we do not have the capacity for the big event and we are see‑sawing between that and low occupancy? This is maybe off your pitch and on to the hotel or bed pitch. On the one hand, we have a fair amount of under‑occupancy, but then, if there is a big event, we do not have the capacity to cope with it.
Colin Neill: It is totally on our pitch, too, because lots of our members would be hotel members. We share them with the Northern Ireland Hotels Federation. We do have challenges on bed nights. If you take in Belfast, particularly with the development of the Belfast Waterfront conference centre, as it will be now, you are seeing people stepping up there. We are seeing lots of applications for new hotels to build on that. Obviously, the challenge with major events, when you bring something major outside Belfast, is that there is an issue of capacity.
I suppose it is a bit like the chicken and the egg. Before you are going to invest in your 100‑bedroom hotel, you want to know that the long-term product is going to grow and be there. That is one of the challenges. If you take the tour operators, if you are running a coach you need, in principle, 53 bedrooms. You will approach a hotelier and say, “Next July or August, I am coming”—to Belfast or anywhere in the Province—“and I need that reserved.” If you only have 60 rooms, you are not going to reserve that. We need to be able to invest in 100‑bedroom hotels to have the capacity to say, “No, you can stay.” To get that market, we need to know we have a competitive VAT rate—and the tour operators will not continue staying outside the Province.
Q183 Chair: We will have to wind up. It has been a very interesting session. Time is against us. Thank you very much indeed for your evidence. Thank you.
Colin Neill: Not at all. Thank you.
Oral evidence: Promoting the tourism industry in Northern Ireland through the tax system, HC 577 7