The Prime Minister said more needs to be done to promote Britain as a tourist destination as an alternative to an “expensive” VAT reduction.
He was asked about the British Hospitality Association-backed Cut Tourism VAT campaign to reduce VAT on tourism businesses from 20% to 5% during a radio interview yesterday (19 August).
Cameron said: “It’s a difficult one this. We introduced the new VAT rate because we had to deal with this budget deficit. When I came to be Prime Minister we had the biggest budget deficit of virtually any country anywhere in the world - it was a similar size to Greece. So we have to deal with it.
“You can’t only deal with it by cutting spending, you have to look at taxes as well, so VAT was one of the taxes that went up. There are always good cases for cutting VAT on individual items.
"The leisure industry and the hotel industry make a good argument but as do a lot of industries - people say to me why not cut VAT on repairing houses - so there are lots of arguments for cutting VAT. So people have to come up with a very good one before it gets accepted.
“In terms of tourism and hotels and the rest of it, I think Britain has a massive opportunity here. They’ve seen the value of our currency has gone down as we’ve had these economic difficulties, so it’s cheaper to come to Britain, it’s a great country to come to visit.
“I think we need to do more to promote Britain as a destination. That’s why we have this ‘Great’ campaign - we’ve seen the posters all over the world encouraging people to come and visit. And crucially when people come to visit we need them to visit outside London and get them to travel around the country and come to great cities like Manchester.
“So I think there’s lots of things we can do to encourage tourism to make sure Britain becomes a great destination that don’t involve cutting VAT, which would be expensive.”
Graham Wason, chairman of Cut Tourism VAT, said: “Earlier this year Cut Tourism VAT presented findings to HM Treasury, that according to their own economic model, a reduction in tourism VAT would be one of the most efficient means of generating GDP gains at low cost to the Exchequer.
“It is not true that lots of other industries make a strong case for cutting VAT - tourism is one of only a limited number of sectors that is permitted to have a reduced VAT rate. As an industry we have the strongest case for a reduction and we will be bringing this directly to the attention of the Prime Minister.”