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