Magazine Columns

Letter to MPs - Budget Puts Investment into the Wrong Sectors

Tuesday 05 May 2009, 11:37 AM

A letter to MPs from Bob Cotton OBE, Chairman, Tourism Alliance

In his Commons speech, the Chancellor of the Exchequer said that his Budget would “build on the strengths of the British economy and its people, speed the recovery, providing jobs and spreading prosperity.” One of the strengths of the British economy is the tourism, hospitality and leisure industry. It attracts over £19bn annually in overseas earnings. It is the key economic driver of many regions of the UK. It is one of the country’s largest industries, employing over 2m people and valued at more than £110bn. It is currently investing well over £5bn a year in new facilities, providing new jobs throughout the country. Its job-creating potential – at all levels - is significant. They are jobs, both full time and part time, that people want; they are jobs that can fit into any work/life balance pattern. It is curious, therefore, that despite its size and importance, tourism didn’t get a mention in the Chancellor’s speech, while other industries – creative, oil, IT, energy – did, with most of them receiving some form of fiscal encouragement from the Chancellor. Tourism was ignored. It was an opportunity missed especially as the weak pound provides the perfect hook to gain more overseas tourists and retain domestic holiday makers this summer. While Gordon Brown frequently insists that Britain must invest its way out of the economy, the Budget has done little to encourage this in tourism. For example, the hotel industry alone has invested over £25bn in the last five years, and opened over 1,000 new hotels. Yet in 2007, the government abolished the Hotel Buildings Allowance and reduced other capital allowances. The investment in tourism facilities – hotels, restaurants, attractions – is essentially long-term. Businesses must invest for the long-term and arrange appropriate long-term finance. The latest Budget has given them little incentive. At the same time, the tourism industry’s short-term needs have also been ignored. The Budget’s main focus was to look two, three or more years ahead, but there are more urgent problems. For tourism, the immediate need is to encourage more domestic holidays this year. Frustratingly, the Government is investing heavily in green and hi-tech industries to pull the economy out of the recession (investments that take many years to produce a return) rather than investing in tourism which can produce a near instant return on the Government’s investment. For example, a small investment of £20m by the Treasury in 2002 to rebuild tourism after foot-and-mouth outbreak and the attacks of 9/11 resulted in 1m extra visitors to the UK in that year alone. These visitors spent £500m and supported around 12,000 jobs. If Government wants to rebuild the economy and create new jobs right now, it needs to support real growth sectors of the economy such as tourism by undertaking initiatives such as restoring the Hotel Buildings Allowance, stanching the endless stream of new regulations and providing modest amounts of pump-priming funding for overseas and domestic marketing campaigns by the National Tourism Boards. Bob Cotton OBE Chairman -- admin

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