CUTTING VAT on the tourism industry to five per cent would boost Bournemouth's economy by £16m a year, it is claimed.

Campaigners say the cut, from the current 20 per cent, would create 542 jobs in the town.

The Campaign to Cut Tourism VAT also claims the reform would improve the UK’s balance of trade by more than £20bn over 10 years. But one of the town's MPs said the time is not right for the reform while the government is still running a large deficit.

Graham Wason, chief executive of the Campaign to Cut Tourism VAT, said: “There is a clear and compelling economic argument for reducing the VAT on tourist attractions and accommodation. It will halt the long term decline in UK’s tourism balance of payments and improve the UK trade balance by £20bn over 10 years. “As the third largest services export earner, tourism deserves much greater recognition for its contribution in lowering the UK trade deficit.

“The UK is currently ranked 140 out of 141 countries for price competitiveness in tourism – and it’s about time that tourists were given a better deal when holidaying in the UK.”

The campaign welcomed the Cole Commission report highlighting the importance of export-led growth. It pointed to analysis by Nevin Associates that said the VAT reduction would reduce the UK’s balance of trade deficit by £632m in year one, £1.1bn in year two and by £20.1bn over 10 years, at 2015 prices.

But Bournemouth West MP Conor Burns, who sits on the culture, media and sport select committee, which has considered the issue, suggested the reform would have to wait.

“It carries an up-front cost and it would be several years before the revenue benefit would outweigh the revenue decrease,” he said.

“With the government still spending some £90bn more than we’re bringing in each year in tax revenue, I think it’s an idea whose time will come when the government books are in balance again.

“Whilst I continue to advocate it and support it, I wouldn’t want to artificially get people’s hopes up.”

The campaign argues that tourism is price-sensitive and a reduction in VAT would dramatically increase the country’s foreign exchange spending from overseas visitors, who account for around 40 per cent of spending on accommodation and attractions.

It also says there would be less spending by UK residents on holidaying abroad.