Sir Geoffrey Clifton-Brown used his speech in the debate on the Autumn Statement to call for the reintroduction of tax-free shopping for EU visitors, as British shoppers are spending billions of pounds on tax-free shopping in the EU which is money that should be coming to the UK, and he called on the Government to commission an independent review on the benefits of tax-free shopping.
Thank you, Mr Deputy Speaker, for letting me catch your eye in the debate. I am delighted to follow the hon. Member for Hemsworth (Jon Trickett). A long time ago, we were paired—most hon. Members in the Chamber will have forgotten that we had an official pairing system—which I am afraid dates him and me.
Many interesting points have been made, but one of the most interesting things I have heard is the number of Opposition Members who have been complaining about the level of the tax burden. I will assume that when they produce their general election manifestos, each will say that they will reduce the burden of tax on the people of this country. I will bet you a bottle of something nice, Mr Deputy Speaker, that when the Labour party manifesto comes out, we will see a higher fiscal burden on the people of this country than there would be under a Conservative Government.
The hon. Member for Wallasey (Dame Angela Eagle) was dead right, and reinforced the point made by my right hon. Friend the Member for Witham (Priti Patel), that fiscal drag is one of the main reasons why the tax burden has gone up so much. The top rate of tax comes in at just £50,270 and, as the hon. Lady made clear in her speech, progressively over the years, an increasing number of people will fall into that. Quite large numbers of constituents who are working hard on fairly modest wages—medium-paid police, medium-paid teachers and medium-paid people in the health service—will suddenly be thrust into the top rate of tax. As my right hon. Friend said, people know how to spend their own money far better than the state does. We want a progressive look at that to see what can be done, perhaps in the Budget.
This autumn statement will be remembered for two key events. One was full expensing made permanent, at a cost £11 billion—a big relief announced today. The second one, for individuals, is the cut in class 2 and class 4 national insurance, amounting to £10 billion. Those are two big measures. I warmly welcome the measures to boost growth, employment, productivity and, above all, investment. Boosting investment will help the long-standing productivity problem in this country. There are measures to boost growth, reduce debt and, above all, see inflation come down in the way that it has.
Inflation is a tax on every single person in this country, every business and the public sector. In short, it is very damaging to the economy as a whole, and it is good to see it come down from over 11% to just under 5% in a year. We look forward to the Chancellor’s predictions of it coming down to 2.8% next year. Even better, by the end of next year or the beginning of 2025, it may come down to the Bank of England’s target level of 2%. That is a good thing to happen to the economy.
What have we done in this autumn statement? We have cut taxes for 27 million working people from January, by reducing the rate of national insurance contributions. We have cut and simplified tax for 2 million self-employed—I warmly welcome that, as I have a lot of self-employed people in my constituency. We have cut business rates, by freezing the small business multiplier yet again, saving the average shop £1,650. That will benefit a lot of shops in my small towns in the Cotswolds. As I said, we have increased the national living wage to £11.44 an hour, up from about £5.50 when we took power in 2010. That is a terrific achievement and will benefit 2.7 million workers. One measure that will help in the Cotswolds is increasing the local housing allowance, because rents are high, and the difference between housing benefit and what people have to pay in the market is large. Having an elderly population, I am delighted that the Government intend to keep their promise on the triple lock.
I am delighted to follow my Chair on the Public Accounts Committee, the hon. Member for Hackney South and Shoreditch (Dame Meg Hillier). She recounted in her wise speech a lot of measures that we have heard in Committee hearings, which she and I attend diligently twice a week—a terrific workload. I absolutely agree with her on skills, as others have mentioned. Time after time in our hearings we have heard about skills shortages in certain sectors—IT programmers, digital collection, project managers and complex procurers—hampering the public sector in carrying out particularly big projects. I am delighted, therefore, by what the Chancellor said today about how our youngsters’ levels of education have increased so much within the G7.
I had a good visit the other day to see the acting deputy head of Cirencester College. His is one of the leading colleges in the country for the Government’s new T-levels. He now teaches 13, up from 10. His student numbers are full to the gunwales at 3,300, and he cannot take any more unless he has new buildings. It may interest the House that he warmly welcomes the Government’s new proposals on advanced British standards, because the combination of vocational and technical training produces more rounded pupils who go on to do better at university. The Government have some imaginative ideas in education, and I know that my teachers in the Cotswolds will warmly welcome the record resources going into our schools through the statement.
There was one thing missing in the autumn statement and I am sorry but I am going to detain the House for a little while on it, because it is so important. I will go through it in a little detail. I asked the Chancellor why tourist tax measures were not included in the autumn statement. On leaving the EU, Britain had the chance to become the only European country where 450 million EU residents could shop tax free. I warmly welcome the newly appointed Minister on the Front Bench, the Economic Secretary to the Treasury, my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami). I think he would agree with me on this. If he does, let us get on and do something about it, because businesses believe that this new market could be worth an estimated £10 billion in two years.
At the time of leaving the EU, the Treasury considered the option of extended tax-free shopping to EU visitors but decided it would cost too much. Britain ended the existing tax-free shopping not only for EU visitors, but for shoppers from around the world. That had consequences. By ending tax-free shopping for non-EU visitors, Britain is losing out on a multibillion-pound market where it was by far the leading destination in Europe for tax-free shopping. In 2019, Britain accounted for 45% of all tax-free shopping done in France, Italy, Spain and Britain combined, but it has missed out on this potentially huge new shopping-led tourist market which only Britain could have benefited from because we were the country that had left the EU.
Let us look at the data on the opportunity for Britain if the Government had chosen to extend tax-free shopping to EU visitors and visitors from around the world. We are now seeing something of the impact of allowing British visitors to the EU to shop tax free: our people going to the EU and shopping tax free, which they do in abundance. In the first full year of travel, in 2022, British shoppers spent around £500 million on tax-free shopping in the EU. This year, the figure is estimated to double, so that our people are going out and benefiting EU countries potentially to the tune of £1 billion. The Association of International Retail has made a very rough estimate, from the behaviour of British tax-free shoppers, of what could happen were Britain to offer tax-free shopping to EU visitors. The EU has six times more people than Britain, so if that level was replicated by the EU shoppers we allowed to shop tax free in this country, the £1 billion of tax-free shopping that our people do in Europe could be turned into up to £6 billion.
The most recent forecasting reports are truly staggering and I ask my hon. Friend on the Front Bench to listen to them. The Centre for Economics and Business Research builds on a previous report by the respected Oxford Economics. The two reports forecast that introducing tax-free shopping would boost visitor numbers by between 1.6 million and 1.7 million, increase spending by between £1.7 billion and £2.8 billion, and increase GDP by between £4.1 billion and £9.1 billion annually. I cannot understand why the Treasury will not consider this measure. The difference between the two forecasts is mainly due to timing, with the Oxford Economics study released in October 2022 and the CEBR study published a little later, in July 2023.
When the Government are looking for growth measures, why has the Treasury dismissed this opportunity so quickly, without any comprehensive cost-benefit analysis? Ministers have told us time after time that the Treasury wrongly assumes—those are my words—that tax-free shopping produces little or no behavioural change by international travellers, either in choosing to come to the UK or their spending levels. That is just so counterintuitive it is unbelievable. The Treasure forecasts a £2 billion cost in refunding VAT, with little or no benefit in terms of additional numbers or spending—again, completely counterintuitive.
The Treasury constantly repeats the claim that evidence shows that tax-free shopping is not a significant reason for people to come to this country, but the actual figures show that that is complete nonsense. Out there in the market, retail levels in London, for instance, are roughly back where they were in 2019, before the pandemic, while in other European centres, such as Paris and Madrid, they are up by 300% and 200% respectively. What is also happening is that the high spenders, people from America, the middle east and China, are not coming here to do their high-level shopping, to the disbenefit of the high-level retailers. Burberry, for example, is shifting its investment away from the UK and on to the continent. Those are some of the things that are happening out there, and they are not of benefit to us.
Why, then, was the OBR not asked to look at extending tax-free shopping to the EU? Why was it not asked to assess the policy until after the decision had been made? This meant that it had no remit to assess the forecasts of EU spending on the basis of which the decision was made. It strikes me as entirely sensible to call for an independent review of that decision, because the evidence is now undermining the Treasury’s forecast in a big way, and because those particular forecasts were never assessed by the OBR.
I am watching you very carefully, Madam Deputy Speaker, and I will wind up my speech now. Let me just repeat what I said in my question to the Chancellor. Our citizens benefit European and other countries by shopping duty free abroad, but we do not extend the same facility to shoppers who want to spend a lot of money in this country. I implore Treasury Ministers to commission an independent report as soon as possible to establish whether what a number of large businesses are saying—do not just take it from me—is true, because we in this country could be losing out in a big way.