UK government urged to reconsider tax-free shopping for tourists

Ditching duty-free shopping for tourists is ‘nonsensical’, says former Tory minister

Shoppers carry purchases in Selfridges bags on Black Friday in central London, November 25. AFP
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A former Conservative minister has urged the government to rethink its decision to scrap VAT-free shopping for tourists, calling the move “nonsensical”.

Lord Ed Vaizey of Didcot said removing the tax levy would generate rather than lose money for the Treasury.

It supported all the stated aims of the “numerous” recent governments, Lord Vaizey said.

VAT-free shopping for tourists was axed by the government in January 2021, only for former chancellor Kwasi Kwarteng to reintroduce it in the disastrous mini-budget.

Then his successor, Jeremy Hunt, made another about-face and reversed its reinstatement.

But pressed at Westminster, Tory frontbencher Viscount James Younger of Leckie confirmed there were no plans to reconsider VAT-free shopping.

“The Office for Budget Responsibility’s assessment of the withdrawal of the previous VAT-free shopping schemes showed that this would raise a significant amount of revenue and have a small and limited behavioural effect on tourists’ decisions to visit the UK," Lord Younger said.

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Lord Vaizey said: “Is the minister aware that, far from costing the Treasury £2 billion ($2.4 billion) a year, reintroducing tax-free shopping would net the Treasury some £350 million a year?

“Tax-free shopping supports many important industries in our country, such as Harris tweed.

“The introduction of tax-free shopping is supported by the left-wing Mayor of London and the left-wing SNP [Scottish National Party].

“Will the minister reconsider the Treasury’s nonsensical decision to abolish it?”

But Lord Younger said evidence from the tourist authority VisitBritain showed the main draw for tourists visiting the UK was its “rich history and heritage and vibrant towns and cities, and less so shopping”.

Labour peer Lord David Watts said: “Do the government understand that it may not affect the number of tourists who come to the UK, but they will stop spending in the shops and that will be lost revenue?

"Will the minister not reconsider this matter?”

But Lord Younger said the benefit was “pretty marginal”.

"As far as I can tell from walking around London, the visitors are still flooding into Britain," he said.

"We also need to look to next year, when we have the Coronation, and remember that we must look after the visitors who come here."

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In a dig at the economic turmoil seen under the short-lived leadership of Liz Truss, Labour former minister Lord George Foulkes of Cumnock said: “Can the minister tell us whether the effective devaluation of the pound against the euro and the dollar is a subtle way of attracting tourists?”

Lord Younger said: “It is fair to say that the value of the pound has helped in bringing tourists to London.”

Labour frontbencher Lord Denis Tunnicliffe said: “While it might not have been the primary driver of tourism into the UK, tax-free shopping certainly incentivised extra spending during people’s stays.

“It was right to scrap the chaotic mini-budget, but can the minister understand the frustration of retailers who have argued for years for the scheme’s return, only to have their reward taken away because the Conservative Party crashed the economy?”

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Lord Younger said: “I have some sympathy for retailers. We admit that they will see some falling off of business, but I have made it quite clear that this is very much focused on London and Bicester Village.

“Having said all that, I live near Bicester Village and the queues going in on Sunday were enormous.”

Bicester Village is a designer shopping centre in Oxfordshire popular with Chinese visitors.

Lord Younger found an unlikely ally in Green Party peer Baroness Jenny Jones of Moulsecoomb, who said: “Perhaps I can come in and defend the minister for a moment. We should actually be thinking about shopping less.

“I am so sorry to say this to a bunch of such dedicated shoppers, but we should make do with less and understand that the climate crisis means we should perhaps want to possess less as well.”

Lord Younger said: “I am almost tempted to agree but, no, we want to encourage people to shop.”

Updated: December 15, 2022, 10:43 PM