The Liberal Democrats has become the first main political party to call for a cut in the rate of VAT on domestic tourism from 20% to 5%.
The party adopted the new policy to reduce VAT on visitor accommodation and attractions at its annual policy-making conference in Bournemouth.
The move comes amid lobbying by UK tourism and hospitality organisations who claim such a measure would create 123,000 jobs and almost £4 billion of extra revenues for the Exchequer over 10 years if adopted nationally.
Lib Dem leader Tim Farron said after the decision: “Local hotels, B&Bs and tourist attractions are the backbone of our economy and I think they need more help and support.
“I would like the government to reduce VAT for tourist attractions and accommodation to boost UK exports, create more jobs and support our local economy.”
Eluned Parrott, member of the Welsh assembly for South Wales Central, who proposed the motion, said: "This policy will level the uneven playing field, help small businesses, grow the economy and create jobs over time whilst delivering a net benefit to HM Treasury, and its popular too. It's a win, win, win."
The campaign to cut tourism VAT is supported by more than 125 MPs from across the political spectrum.
An All Party Parliamentary Group for the Visitor Economy has been established and is co-chaired by Nigel Huddleston MP (Conservative) and Margaret Ritchie MP (SDLP).
The aim of the group is to enhance the local economy by promoting measures and incentives, including a reduction of VAT on tourism, which would increase visitor numbers and investment in all parts of the UK.
The UK has the second highest rate of VAT on hotel accommodation in the European Union and is one of only three EU member states that have not reduced VAT on accommodation and attractions.
Campaign chairman and Butlins managing director, Dermot King, said: “The evidence behind the benefits of a reduction of tourism VAT to businesses, the national economy and British families has never been clearer and I am pleased to see the Liberal Democrats taking up the cause.
“We now need to win the hearts and minds of the British public who don’t realise that they are being taxed harder than almost anyone else in Europe for simply going on holiday in their own country.
“We hope that the Chancellor will consider making this reduction, part of the comprehensive spending review now underway.”
Ufi Ibrahim, chief executive of the British Hospitality Association, the organisation behind the campaign, said: “This decision by the Liberal Democrats reflects the growing political support for our campaign.
“Tourism is the UK's only major export subject to 20% VAT - double the rate of the EU average. Growing numbers of MPs are joining our call to Treasury for a cut in VAT on tourism exports.
“The UK's tourism deficit has been in excess of £10 billion for far too long. It's time to ensure tourism taxes do not deter more Britons from enjoying the UK staycation, and do not impede our ability to attract greater numbers of international visitors, especially beyond London.”
An analysis by Nevin Associates concluded that a 15% cut in VAT on tourism would reduce the UK’s balance of trade deficit by £20 billion over 10 years and increase the tax take by £3.9 billion, according to campaigners.
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