The decision to axe VAT-free shopping for tourists visiting the UK could be reviewed in future, Jeremy Hunt has suggested.
The Chancellor said the Government was “looking again at the numbers” after duty-free shopping was scrapped at the 2022 autumn statement.
Tourists used to be able to claim back the 20% VAT rate on goods bought in the UK, but last year’s decision to end this has been branded a “tourist tax”.
Conservative MP Sir Geoffrey Clifton-Brown raised the issue in the Commons following this year’s autumn statement.
“British tourists going abroad spend billions of pounds benefitting those countries, and yet we actively discourage, and figures show that we are doing so, we actively discourage high-spending tourists coming from abroad and benefitting our shops and hospitality venues.”
Mr Hunt responded: “Can I reassure him that we want to do everything possible to make our tourism and our retail industry competitive and we want to encourage international visitors.
“When we changed policy on this particular issue a year ago, it was because the cost was around £2.5 billion-a-year and we didn’t think we could afford to continue doing it, but we are looking again at the numbers in the light of the most recent data and we can see what has happened to comparative shops in Paris and Milan, and we will review that and see if it is still that expensive, and I hope it isn’t.”
Elsewhere in the debate, Conservative former cabinet minister Sir Jacob Rees-Mogg appeared to criticise the accuracy of economic forecasting by the Office for Budget Responsibility (OBR), the independent body which analyses public finances.
Sir Jacob asked: “Has he given any consideration, has the Treasury carried out an analysis of the effect on economic policy of mistaken forecasts from the OBR?”
“What I would gently say to him is that it wasn’t just the OBR that found that their forecasts were wrong, it was nearly every commentator, the Bank of England, the International Monetary Fund, and I am pleased to say that in every single case they have found that the British economy has outperformed their expectations.”
Mr Hunt also faced questions about Rishi Sunak’s decision when he was chancellor to increase national insurance contributions by 1.25 percentage points, with the aim providing extra funding for health and social care services.
The plan was later scrapped when Kwasi Kwarteng was chancellor under Liz Truss.
Abena Oppong-Asare, the Labour MP for Erith and Thamesmead, asked: “Does the Chancellor agree that the Prime Minister was wrong last year to increase national insurance?”
The Chancellor meanwhile confirmed that funding for local councils to help vulnerable families would continue in 2024.
Sir Stephen Timms, the Labour chairman of the work and pensions select committee, told MPs: “For the last three years the household support fund has enabled local councils to provide a very important safety net for families facing the greatest hardship.
“Will there be a household support fund next year?”
“Yes, there will,” replied Mr Hunt.
Robin Walker, the Conservative chairman of the education select committee, meanwhile warned the increase in the national living wage will add to employment pressures in schools and nurseries.
Mr Walker said: “Many people working in education will also welcome the nearly 10% increase in the national living wage, but it will put great pressures on both schools employing teaching assistants and our nurseries, which we are so keen to expand and support.”
He called on the Chancellor to “engage very closely with the sector and the Department for Education in making sure that we can meet those pressures”.
