Public Affairs: Avoid losing control, avoid disingenuous arguments

I am not sure who is ultimately behind the campaign to lower VAT on the hospitality sector, but whoever it is has committed many of the sins of such a campaign – not least, losing control of it.

Firstly, the campaign is disingenuous from the outset, for two reasons: a) it is making the case for a reduction in VAT rather than rates (or equivalent) on the grounds that a VAT reduction would not be perceived to cost money from the public purse (nonsense, of course); and b) it is arguing the case on the grounds of “tourism”, yet in fact the main beneficiaries would be restaurants serving local people. To be clear – any tax break means less revenue to the Treasury and thus lower public spending; and, in particular, a tax break to the hospitality sector would not create wealth but would serve in fact as a subsidy for eating out (but remember, only in direct proportion to the amount customers spend, thus rich customers gain more than poor ones – note all Assembly parties supported this, and only one had any reservations).

Secondly, the campaign makes the old mistake of failing to understand, or even attempt to look at, political reality; in particular, failing to grasp the inherent motivations of those in government. Don’t forget, this is the government (in Whitehall) which raised VAT in the first place; this is a government committed to cutting the deficit (and already failing to do so, before any further tax breaks); and this is a government which was keen on specific tax differentials for NI yet failed to deliver them (remember Sir Humphrey’s “all kinds of administrative reasons and legal difficulties”).

Thirdly, it is my understanding that all three devolved Assemblies are being targeted to pass motions. This may be disingenuous too (it is easy to look tough on issues beyond your control), but is also almost certainly foolish since none of those Assemblies is controlled by either of the parties in the UK’s governing coalition. This makes the whole issue confrontation- rather than consensus-driven.

Fourthly, most obviously, control has been lost of the campaign. It has been presented in the media as a specific attempt to cut VAT for a certain sector in Northern Ireland; yet my understanding (see above) is the campaign is UK-wide and devolved Assemblies are only being used to make the point. In NI, it was presented as a means to match the lower rate in the Republic of Ireland – but that is hardly an issue in East Anglia! This is where the tangle of “tourism” versus “hospitality“; “devolved” versus “UK-wide“; “VAT” versus “rates” all goes a bit wrong.

This is to leave quite aside the point that representations have already been made to the Treasury on the issue – and were rejected. This is hardly surprising. Such a tax break would cost a lot of money (increased further when we remember that it would also delay repayment of the national debt and cost at least another 2p for every pound not recouped), it would not create any wealth to make up for this (because really it’s about “hospitality”, not “[foreign] tourism”), and most relevantly of all it would lead to whole host of other “sectors” (and even actual “industries”) demanding similarly favourable treatment.


2 thoughts on “Public Affairs: Avoid losing control, avoid disingenuous arguments

  1. james McKerrow says:

    Adjusting tax rates for strategic reasons is what governments do. They also do it for electoral purposes. Adjusting VAT on the hospitality industry does not hit the mark in encouraging overseas visiors in the way cutting APD ang government support for improving the tourist offer does.

    Far more important is devolving Corporation Tax powers to the NI Assembly, and what the Assembly would do wih those powers. For my money we have to get real about encouraging the Private Sector to grow, particularly businesses with export potential. I am behind hard working people and those who want the opportunity to work hard-that requires job creation against the background of job losses in the Public Sector.

    Cutting Corporation Tax will not only attract inward investment, it will also free up money in local firms for investment. It will increase the private sector and hence jobs, and will. Increase overall profits.

    Two important pre-requisites for a succesful transfer are a fair basis, that is a consequent loss of Block Grant that we will grumble about, but will generally accept, and a clawback arrangement that feeds back money as the Private Sector grows.

    Now that security no longer dominates Public Sector policies, i.e, denying Shorts money for investment but covering major losses to keep people employed and off the streets, reestablising our affluence really does lie in our own hands. Forget cuttiing VAT on the hospitality industry and concentrate on Corporation Tax.

    Cllr James McKerrow, North Down

  2. james McKerrow says:


    Rivetting, attracting much attention and wide range of comments ….. On the other hand confirms LBJ’s view of who gets the warm feeling when you deliver an address on the economy!


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