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Exclusive: Two Central London Councils Have Told Rishi Sunak His Tax Plans Will Cause "Irreversible Damage" To Their Economies

Westminster council is home to Oxford Street and Regent street which attract millions of visitors a year (PA)

3 min read

The leaders of two central London councils have written to the chancellor warning that plans to axe tax-free shopping could cause “irreversible damage” to their economies.

Earlier this week, the Treasury quietly announced that the UK was withdrawing from the VAT Retail Export Scheme at the end of 2020, meaning overseas visitors will no longer be able to reclaim VAT on items such as clothes, handbags and jewellery.

The decision has attracted anger from many luxury retailers, who warned that the move could cost the UK economy more than £5.6 billion and 70,000 jobs as international shoppers go elsewhere.

And in a letter seen by PoliticsHome, Cllr Elizabeth Campbell, head of Kensington and Chelsea council, and Cllr Rachael Robathan, head of Westminster City council, have said the chancellor must reconsider his decision “before it is too late for our already struggling retail and hospitality industries”.

The two councils are home to luxury shopping and tourist destinations such as Oxford Street, the West End, the museums, and department stores Harrods and Selfridges.

Westminster attracted 24 million visitors in 2017 and generates around £3.6 billion of gross value added per year, while Kensington and Chelsea can see as many as 55,000 visitors a day in peak times.

The letter warns that the proposal to end tax-free shopping could be “magnified” in Central London as it “relies on tourism for much of its economic activity.”

“As a result of this decision, Britain will now be the only country in Europe not to offer tax-free shopping to international visitors,” it continues. 

“It will undoubtedly have massive negative implications for our tourism industry, hitting hotels, restaurants and cultural attractions across the whole of the UK as high-spending tourists instead choose to go to other European capitals.”

Such a move would also “undermine” British competitiveness, hinder the countries economic renewal and see spending in the UK redirected elsewhere, the councillors add.

And, though international visitors can still ship goods home from the UK tax-free, they argue this is not a ”satisfactory substitute” as it “takes away from the attraction that spontaneous shopping

“We would therefore urge you to review this decision as a matter of urgency before irreversible damage to our hospitality and retail industries is done,” the letter concludes.

A Treasury spokesperson said: “We’re continuing to support thousands of businesses across the capital through business rate holidays, protections against evictions, government-backed loans, and an extended 15% VAT cut for the tourism and hospitality industries.

“The changes to VAT RES were subject to full consultation, and will bring our systems in line with international norms. VAT-free shopping is still available because retailers are able to offer it to overseas visitors who purchase items in store and have them sent directly to their overseas addresses.”

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