Exiting the European Union (Excise)

Published date : 03 February, 2021
Allow me to begin by saying how utterly bizarre I found some of the earlier contributions to the debate. It was as if the impact of these changes was all a bit of a jolly lark, extending no further than the ability to stagger off the return leg of a cross-channel booze cruise armed with nothing more than a blue Brexit passport and a clinking tote bag of bottles to take home. The businesses that understand the issues at stake, and those who work in them whose jobs are at risk due to this change, will, I am certain, be looking on aghast.

Tax-free shopping has played a major role in attracting visitors to our shores ahead of other potential tourist destinations. It supports a very large number of jobs in retail and in the manufacture and production of high-quality and luxury products and produce. Its removal will cost jobs and harm direct and indirect tax revenues—all benefits that will simply be exported offshore.

That affects our airports, which, despite the economic support currently on offer, remain under the cosh as a result of the pandemic. Airlines UK estimates that, without Government support, UK airports are set to lose around 600 routes as a result of the pandemic, a situation that will only be compounded by the effect of these changes on their revenues. Amid that, terminal sales and tax-free shopping, already a key component of the economic health of our airports, will take on heightened significance.

My constituency includes Aberdeen airport, which is of massive strategic importance, supporting the activities of the oil and gas sector. The airport’s operators estimate that these changes will risk a loss in revenue for the airport of £1.6 million annually and put at risk some 45 retail jobs. Retail sales account for up to 40% of revenues in some regional airports—revenues that obviously support jobs but are also there to support investment in facilities and in incentivising airlines to open up connections to new destinations. Without the ability to earn those revenues, there will be fewer passengers, fewer routes, fewer jobs and fewer opportunities for wider economic development outside the perimeter fences of our airports, with growth hindered in the regions they serve and, in consequence, lower tax revenues overall for the Government.

As has been said, tax-free shopping is also hugely important as a driver for tourism. My hon. Friend the Member for North Ayrshire and Arran (Patricia Gibson) set out succinctly the benefits to all parts of the economy from tourism activity and the way that the spend is spread around when tourists are here. The Office for Budget Responsibility estimates that of the 1.2 million visitors who benefited from tax-free shopping in 2019, approximately 20,000 to 30,000 fewer will visit Great Britain every year because of this change in policy, and it is an absolute given that those who do will spend less. All told, the outcome of these changes puts at risk an estimated 40,000 jobs and over £1 billion-worth of investment.

David Lonsdale, the director of the Scottish Retail Consortium, who was mentioned earlier by my hon. Friend the Member for Paisley and Renfrewshire North (Gavin Newlands), has been clear on this. He said:

“This decision would leave the UK as the only European country not to provide a tax-free shopping scheme to encourage tourism. There is a good reason no other European nation has taken this step, and we urge swift reconsideration.”

While some of us cannot believe the UK Government’s stupidity here, others cannot believe their luck, and it is little wonder that the French financial newspaper Les Echos has argued that the UK is in danger of shooting itself in the foot.

The UK Government need to reverse the abolition of the airside VAT exemption and allow the introduction of arrivals duty-free. That would allow the industry to restore some profitability more quickly and avoid the competitive loss to foreign airports. Most airports in other parts of the world have been doing arrivals duty-free for up to two decades. Crucially, we must retain the VAT retail export scheme.

There have been precious few Brexit benefits to date, and of those that were promised, very few have been delivered. It seems ridiculous that instead of banking some of the very few potential benefits, including duty-free, the UK Government seem hellbent on exporting them instead. It is clear that the very real concerns raised by business across a range of sectors have not been adequately addressed or heard. The Treasury must reconsider.

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