Some advice for the government on their new tourism policy Pt. 2 – support for the tourism industry

British governments operating under the neoliberal consensus of the last thirty years or so have avoided developing industrial policy, believing that it is not the job of governments to ‘pick winners’ (see the recent Forgemasters furore), but that markets will select those business and sectors most deserving of reward.  This approach has not been universal however, and it may be that the time has come for our government, not just to promote the interests of the tourism industry, but to learn from the role tourism  has played in development and economic growth in countries operating outside of the narrow policy horizons of Westminster. 

Spain has used tourism in two ways since the fall of Franco that might be constructive when thinking about the role of tourism now in the UK.  Firstly, tourism was a key way of bringing foreign exchange and investment into the country when it was close to economic collapse.  Taking advantage of innovations in travel, especially air travel, and construction technology, the Spanish government built resorts and supported a tourism industry with preferential taxation and legislative treatment , succeeding in positioning Spain as a mass tourism destination.  Secondly, the Spanish government and the European Union have funded the development of agro-tourism in the country, attempting to diversify economies where agricultural production has become economically unsustainable.  This has been achieved not through the market mechanism, but by the diversion of public funds to support specific policy aims in tourism and economic development.  We know that these development haven’t been unproblematic – resort development in the south of Spain has been an environmental nightmare in places, and supporting farming communities to develop facilities and skills for a new tourism sector has been costly – but they show how government can support tourism directly.  In the first example, taxation and legislation regimes were implemented that favoured tourism development creating a medium-term economic fix.  In the second example, tourism has been used as a development mechanism, helping the transition from and old economic model to a new one.

Looking more widely across Europe, it is clear that the majority of countries have viewed tourism as a high value industry, worthy of specific state support.  Only the UK, Denmark and Germany apply to the top rate of VAT (sales tax) to their tourism industry.  This puts tourism service providers in the UK at a competitive disadvantage from the start.  The majority of countries in Europe, for example, have a rate of 0-8% tax on accommodation – in the UK it is now 20%.   A reduction in taxation on key elements of the tourism industry would increase demand, but also support vital secondary spending in destinations, which would ensure that the positive impacts of this tax change would be felt by businesses and citizens more widely.

Taylor & McGlynn published a fascinating article in 2009 called ‘International Tourism in Cuba: can capitalism save socialism?’ – this begs the question, of whether tourism can save the capitalist economy of parts of the UK? 

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Following the collapse of the Soviet Union and the communist bloc in 1989, Cuba lost 75% of its international trade.  Faced with this, Fidel Castro said “‘‘We have to develop tourism. It is an important source of foreign currency. We do not like tourism. It has become an economic necessity.”  This turn to tourism, supported by a relaxation on development laws and new initiatives supporting entrepreneurship and destination development and marketing, took place at the same time as the government implemented severe austerity policies to rein in public spending – hoping that this new sector would grow, create jobs and save the country from economic crisis.  Sound familiar?

 By 2000, tourist arrivals to Cuba had doubled, and revenues from tourism grew from $1.1bn to $2.25bn per year.  By 2003, tourism was responsible for more than 50% of Cuba’s exports and was the main engine of a newly resurgent economy.  “Cubanos used to declare, sin azucar, hay no paı´s (without sugar, there is no country). Now, they say, sin turismo, hay no paı´s (without tourism, there is no country)”.

So, what advice am I offering here?  Well, we know that Eric Pickles, Secretary of State, has a picture of Che Guevara on his wall.   

 It is almost unbelievable that for the last fifteen years the tourism industry has failed to spark the imagination of government.  In a period where radical thinking is needed to recalibrate the relationship between the state and the economy in many areas, there is an opportunity to develop a form of industrial policy that benefits the tourism industry and places it at the center of both growth and sustainable development.

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