The 'tourist tax' is blamed for fuelling a huge reduction in foreign holidaymakers' spending in the UK compared to before the pandemic

The controversial ‘tourist tax’ was yesterday blamed for fuelling a drop in foreign holidaymakers’ spending in Britain compared to pre-pandemic.

A report by tourism agency VisitBritain found that visitor spending in August was £3.4billion – a fifth lower in real terms than in August 2019. And the number of tourists from other countries was down by a third to 760,000.

There were 3.7million visits to the UK from all countries, down 17 per cent on August 2019.

The study found that inbound visitors spent an average of £921 per visit in August this year, down 4 per cent in real terms. Critics last night said it was proof that failure to restore VAT-free shopping for foreigners was damaging the economy and tourists were deserting Britain for other countries such as France and Italy.

Chancellor Jeremy Hunt chose not to restore the perk in Wednesday’s Autumn Statement despite tourism bosses stating it would provide a boost for British firms.

Joss Croft, chief executive of industry body UKinbound, said: ‘The Chancellor missed an opportunity to boost the economy by not backing tourism in the Autumn Statement. The tourist tax is making the UK less competitive and driving visitors and their spend to other parts of Europe.

‘International visitors have made it clear that this tax is affecting their holiday choices. The Chancellor must act now, back British tourism and scrap the tourist tax.’ 

Tory MP Henry Smith, chairman of the cross-party Future of Aviation group of MPs, said: ‘The Government’s refusal to reintroduce VAT free shopping is holding back our economy and boosting the economies of other nations. 

Our inbound tourism industry is a jewel in the economy and the removal of VAT-free shopping is putting up a barrier to high-spending tourists from choosing the UK. This is hitting our aviation, travel, and retail industries, and is damaging manufacturing and businesses.’

Hundreds of MPs, peers and leading figures from across the retail, hospitality and tourism sectors have backed the Daily Mail’s campaign to Scrap the Tourist Tax.

Among the politicians are former prime minister Liz Truss, former home secretary Priti Patel and ex-Cabinet minister Sir John Redwood, while hotelier Sir Rocco Forte, British Airways and Fortnum & Mason have also backed the call. 

Luxury retailers were given a glimmer of hope by Mr Hunt on Wednesday when he said he would review demands to end the levy, saying he would ‘carefully’ consider evidence of its damage.

Research suggests reinstating the perk could make the UK £10billion a year better off and support 200,000 jobs.

Prior to 2021, visitors to Britain from outside the European Union could claim back the value added tax charged on their shopping purchases – effectively giving them a 20 per cent discount.

But Rishi Sunak scrapped the arrangement as chancellor to save the Treasury £2billion a year.

The Treasury was contacted for comment.