Welsh Governments own research findings are devastating for their proposed Tourism tax.
On the 20th of September the Welsh Government quietly published on its
statistics website a paper called: “Evidence review of elasticities relevant to a
visitor levy (Tourism Tax) in Wales.” (Please see below for link*)
There was on this occasion no press release, it wasn’t published in the Visit
Wales newsletters which are sent to all tourism businesses, and on the same
day that the governments ‘consultation document’ on the visitor levy (Tourism
Tax.) was published the reference to this report went through to a page that
stated “Page Not Found!”
The report’s conclusions are devastating for the proposed tourism tax.
For example, if a five percent tax was imposed the report concludes that this
has the potential for a £100 million revenue loss for the Welsh economy, and
the resultant reduction of around 2,500 Welsh tourism jobs, and their
associated supply chains.
The report uses the technical term ‘elasticities’ in the report which in non-
technical language simply explores whether an increase, or decrease in price
affects demand for a product, and is it then possible to estimate by how
much.
The report concluded that for every 1% increase in price there is a 1%
decrease in demand. Again, for example a 5% tourist bed tax would mean a
5% reduction in demand. At a stroke that would take at least £100m out of
the Welsh economy.
There are serious limitations in the official report as it did not consider the
present ‘cost of living crisis’ resulting in the biggest drop in living standards for
60 years, alongside consumer inflation raging at 10%, and business inflation
at 15%. However, the reduction in demand by consumers is forecast to be far
greater than the above figures.
Hundreds of bureaucrats will be employed to inspect, register, value,
implement and enforce the tourism tax. These bureaucrats create no
additional value to the economy and their creation will be far outweighed by
the number of tourism jobs lost, and the amount of money lost.
Also, at present there is also a debt mountain that is waiting to swallow up
Welsh businesses. Insolvencies are now at record levels. Interest rate
increases will send more businesses over the edge. The average level of debt
for those who took out ‘Bounce Back Loans’ in Wales is £27,000.
When Welsh businesses go bust Wales loses business rates, communities lose
employment, the supply chain (local shops, garages, tradespeople) all lose
business, tax revenues go down.
It is the Welsh Governments failure to consider how the present cost-of-living
crisis will impact on Welsh tourism that defies common sense. Every economic
indicator forecasts a catastrophic drop in discretionary spending, but the
public’s discretionary spending power is where the money for Welsh holidays
originates from.
Listed below are the current issues that Britain and the tourist industry in
Wales face.
One in four adults are now in financial difficulty (Financial Conduct Authority),
one in five families experiencing food insecurity (Food Foundation), budget
food items increasing in price by 17% (ONS), five million families face a
mortgage rise of £5,100 a year by 2024 (Resolution Foundation), 18 million
Lloyds customers have less than £500 in savings, 11 million behind with their
bills (Money Advice trust). In addition to these issues, we will all face the
biggest fall in our living standards for 60 years (Bank of England). Some
economic experts even predict that a ‘recession’ could be with us for several
years.
To even consider a tourism tax at the present time is economic suicide for the
Welsh tourism industry. Incredibly the Welsh government instead of trying to
help Welsh tourism at a time of great economic uncertainty are proposing to
put an extra tax on tourists visiting Wales. However, it is these very tourists
that by holidaying in Wales will help the Welsh tourism industry survive the
coming recession.
Mr Drakeford has talked about ‘unintended consequences.’ Unfortunately, the
consequences are all too clear.
in their statements about this tax the Welsh Government has never
mentioned the fact that around half a million Welsh residents who
annually book overnight holiday accommodation in Wales will also have to pay
this additional tax even though they are holidaying in their own country! Or
they could save money by going on holiday in England!
Many cash strapped tourists instead of staying overnight in Wales will simply
come for the day and then only spend on average £30. However, if they had
stayed overnight their average spend would have been £184 per day.
This governments own report clearly indicates that Welsh tourism will lose
money through a tourism tax, and already the economic indicators for the
next few years are dire. Then add into this ‘economic maelstrom’ a tourism
tax, and you have all the ingredients for a ‘self-inflicted disaster’ awaiting the
Welsh tourism industry.
Ashford Price.
Chairman.
Dan Yr Ogof
The National Showcaves Centre for Wales.
*The report referred to is on the Welsh Governments website –
https://gov.wales/sites/default/files/statistics-and-research/2022-09/evidence-review-of-
elasticities-relevant-to-a-visitor-levy-in-wales-331.pdf
