Khan urges Reeves to bring back tax-free shopping
Mayor Sadiq Khan has called on Chancellor Rachel Reeves to bring back tax-free shopping for tourists to drive public revenue gains.
Khan has lobbied the Treasury to re-introduce VAT-free shopping for visitors more than four years after the previous Conservative government scrapped the perk.
Conservative City Hall member Thomas Turrell raised the issue of tourism in London at Mayor of London Questions on Thursday in a debate on the introduction of an overnight levy for tourists.
Khan has expressed his support for the levy, with the council group Central London Forward estimating that a new charge could raise more than £350m for the capital a year, as reported by the Local Democracy Reporting Service (LDRS).
The freedom for mayors to introduce the overnight visitor levy has been backed by figures from across the political spectrum.
Khan’s clash with Reeves
Khan suggested that revenues from the levy could be higher if the government brought back VAT-free shopping for tourists.
VAT is collected by the central UK government while revenues from the overnight visitor levy is set to be
Visitors would ditch plans to travel to Paris and Milan to get the benefit and stay longer in London, according to the mayor.
He said it was a “mistake” for former Chancellor Rishi Sunak to end the scheme in 2021.
“’I’ve been lobbying the government to reverse that,” Khan told London Assembly members.
“We can’t just look at the revenues raised by VAT. It’s [also about] revenues lost by tourists not staying for longer.”
Khan’s backing of VAT-free shopping could put him on a collision course with the Labour government, with the London mayor frequently clashing with Reeves on issues including transport funding.
Last year, Khan said Reeves had made a “colossal mistake” for not supporting investment in infrastructure, such as the expansion of the DLR.
The Office for Budget Responsibility (OBR) previously said the end of the perk would raise hundreds of millions of pounds more for the government, even when behavioural effects are factored in.
Hospitality and retail officials have presented opposing figures around the wider impact on the UK economy.