Select Committee on Culture, Media and Sport Fourth Report


II. TOURISM IN CONTEXT

Tourism: the hidden giant

11. Tourism is a massive industry. In the year 2000, it is estimated that the total revenue generated by tourism in the United Kingdom was around £64 billion.[15] This means that the tourism industry is approximately twice the size of the software and computer services sector—the largest of the so-called "creative industries"—and about four times the size of agriculture in terms of revenue generated.[16]

12. Tourism is a key source of employment in this country, in large measure because it is an exceptionally labour intensive industry. The tourist trade accounts for the equivalent of 1.9 million full-time employees in the United Kingdom or 7 per cent of the workforce.[17] This compares with a total estimated employment figure of just over 1.3 million for all of the creative industries—including software and computer services, publishing, music, television and radio, advertising, design, the performing arts and the film industry—combined.[18] Employment from tourism is spread right across the country: although London is the largest tourism market in the United Kingdom (particularly for overseas visitors), London accounts for slightly more than 275,000 of the nearly two million people employed in tourism.[19]

13. Tourism is a growing industry in this country and across the world. In recent times, tourism has been responsible for one in four new jobs created in this country.[20] This growth has helped to compensate for decline in other sectors. In many areas where manufacturing industry was a major source of employment, tourism has become a very significant source of employment as manufacturing industry plays a reduced role in the economy and becomes less labour-intensive.

14. Tourism is a vital industry for the country as a whole, but it is of especial importance for the rural economy. In rural Britain, tourism generates £12 billion a year and supports an estimated 380,000 jobs and 25,000 small businesses.[21] For many households and businesses, tourism is a source of supplemental income; when this income declines or is lost, the extent to which that affects the overall financial position of that business or household becomes evident. In many parts of rural Britain, tourism is a mainstay of the economy. For example, in Cumbria, tourism accounts for 47,000 direct and indirect jobs, representing 20 per cent of the total Cumbrian workforce.[22]

15. In many rural areas, tourism has become a more significant source of income and employment as agriculture has declined. Visits to the countryside have become a more significant component of tourism in the course of the 1990s.[23] Rural tourism generates almost twice as much revenue as livestock farming.[24]

16. Rural tourism and agriculture are inextricably linked with each other and with the wider rural economy.[25] The appeal of the countryside as a tourist destination depends in considerable measure on the landscape shaped by agricultural endeavour; visitors wish to see a living, working countryside.[26] Equally, many farmers recognise their dependence upon tourism.[27] Large numbers of them have been encouraged to diversify into farmhouse accommodation and farm tourism.[28] Ms Anderson understandably referred to the "close relationship between the farming community and the tourism industry".[29]

17. Tourism in rural areas is also linked to other elements of the local economy in addition to agriculture. For example, tourism provides the anchor customer for many rural coach companies.[30] It was made clear to us repeatedly that the tourist industry is not only intrinsically important to the rural economy, but that tourism helps to maintain other businesses in rural areas, for example, small shops, garages and small bus and taxi companies. Cumbria County Council considered that 40 per cent of businesses in that county were at least partially dependent on the tourist industry: a fifth of firms responding to the Cumbria Employer Survey 2000 stated that some of their workforce were dependent on tourism, including a third of manufacturing firms.[31]

18. Despite its size, tourism has had a low profile both economically and politically; it is the hidden giant of the British economy. Tourism suffers from an information deficit. This is partly because the tourist industry is not a distinct entity like many economic activities, being defined by the purchaser—the tourist—rather than the product. Tourism is not a standard industrial sector recognised in the national accounts framework: instead, elements of sub-sectors such as hotels, restaurants, bars, cafes, museums, sport and other recreation activities have been grouped together with elements of the transport and travel trade to produce an estimation of the value of tourism. The Department for Culture, Media and Sport is still in the early stages of an attempt to map the wider economic impact of tourism activities.[32]

19. Tourism is an internationally competitive business and British tourism's share of the world market is declining.[33] One effect of this declining competitive position is a tourism trade deficit: British tourists are spending more abroad than is spent by visitors from the whole of the rest of the world in this country. At the same time, expenditure by British tourists in Britain is not increasing as fast as their expenditure abroad.[34] There were particular difficulties for the tourist sector catering for overseas visitors even before the outbreak of foot and mouth disease.[35] The strength of sterling, particularly against the Euro, has made this country a relatively expensive destination.[36] Transport delays following the Hatfield rail crash and floods affecting parts of Britain are other challenges that had to be faced even before the current situation.[37] The recent slowdown in the economy of the United States of America was also affecting Transatlantic business from the beginning of the year.[38]

20. Tourism is also comparatively weak, notwithstanding the size of the sector, as a result of the fact that British tourism is subject to very considerable seasonal fluctuations in demand.[39] This characteristic is particularly strong in the case of rural tourism.[40] The common pattern for many businesses is to build up reserves during the summer months to survive and retain staff during the leaner winter months. Needless to say, this seasonality means that unexpected reductions in demand in the spring and summer are especially damaging and have profound implications for business survival and staff retention in the winter.

21. Above all, tourism suffers from the fundamental weakness of being fragmented. It is divided between many sectors, such as museums, commercial visitor attractions, restaurants and many different types of accommodation, not all of whom perceive a shared interest. Many of the businesses in tourism are exceptionally small: of the 250,000 tourist businesses in the United Kingdom, 80 per cent have an annual turnover of less than £250,000.[41] The lack of a cohesive tourism lobby has had profound consequences for its treatment by successive Governments and for the handling of tourism issues before and during the current crisis.

Public sector support for tourism: a history of under-investment

22. It has long been recognised—in principle—that the special characteristics of tourism and its revenue-generating potential justified specific public sector support. Ultimate responsibility for such public sector support has been the responsibility of a succession of Government Departments, including the Department of Trade and Industry, the Department of Employment (from 1985 to 1992), the Department of National Heritage (from 1992 to 1997) and the Department for Culture, Media and Sport (since 1997).

23. Governments have claimed to recognise as a particular priority the support of overseas marketing and promotion for tourism, recognising that a private sector dominated by so many small businesses cannot be expected to promote its business overseas alone. The British Tourist Authority (BTA) was established under the Development of Tourism Act 1969 to encourage people living overseas to visit Great Britain.[42] The Scottish and Wales Tourist Boards were subsequently granted powers to undertake separate promotional activities overseas, which are coordinated with the work of the BTA.[43] The Authority's remit formally only extends to Great Britain, but it also undertakes work on behalf of the Northern Ireland Tourist Board by agreement.[44]

24. In the decade to 1996, the budget of the BTA was subject to incremental increases broadly in line with inflation.[45] In 1996, this Committee's predecessor, the National Heritage Committee, argued that the level of return on expenditure on the BTA in the form of increased expenditure in the United Kingdom (and thus increased VAT receipts) justified a large increase in the BTA's budget. That Committee recommended that the Government's financial support for the Authority should be quadrupled over five years to £100 million per year.[46] Ms Anderson claimed that there had been a "year-on-year increase" in the Authority's funding under the present Government.[47] The BTA's grant-in-aid was indeed increased by £1 million in 1999-2000 and in 2000-01, but, prior to the outbreak of foot and mouth disease, the Government had planned to freeze the BTA's grant-in-aid in cash terms—and thus reduce it in real terms—in the current financial year and in 2002-03 and 2003-04.[48] Ms Anderson justified this planned freeze on the grounds that "we felt at the time that that was sufficient for the BTA to do the job they were doing".[49] The grant-in-aid provided to the British Tourist Authority has in fact fallen between 2000-01 and 2001-02 by £1.5 million, but we were assured by the Department for Culture, Media and Sport that this reduction was wholly due to a change in an accounting convention, whereby funding for the London Tourist Board was now channelled to that body through the Greater London Authority rather than through the British Tourist Authority.[50] The case for ending the freeze on the BTA's grant-in-aid remains very strong, especially since the BTA retains responsibility for promotion abroad of London as a tourist destination, regardless of the fact that it is no longer engaged in funding the London Tourist Board. In any case, this Committee endorses the view put forward by the National Heritage Committee in the last Parliament that the BTA was and remains seriously under-funded.

25. Although the BTA was facing a standstill budget before the outbreak of foot and mouth disease, the BTA had fared better in terms of public funding for several years than the public body charged with the promotion of English tourism. From the time that the Department of National Heritage assumed responsibility for the English Tourist Board—established, like the BTA, as a statutory public body under the Development of Tourism Act 1969—the grant-in-aid for the English Tourist Board declined from a level of £16.2 million in 1992-93 to £10 million in 1996-97.[51] The then Government stated in 1993 that the case for supporting the English Tourist Board's work "to promote tourism at home is less clear" than the case for supporting the BTA and that resources ought to be directed primarily through Regional Tourist Boards.[52]

26. In 1998, we questioned whether the fundamental economic importance of tourism was fully reflected in the priorities and objectives of the re-named Department for Culture, Media and Sport.[53] In response, the Government affirmed that tourism was "at the heart of the work of the Department" and the Department subsequently launched a new Tourism Strategy—entitled Tomorrow's Tourism—in February 1999.[54] In consequence of this Strategy, two Tourism Summits have been held, on 1 March 2000 and 6 March 2001 respectively, to bring together Ministers from eight Government Departments whose activities affect tourism.[55]

27. Since 1999, a new body, the English Tourism Council (ETC), has been charged with responsibility for driving forward the quality, competitiveness and growth of England's tourist industry.[56] The ETC was established with the aim of being a leaner and more strategic body than its predecessor, the English Tourist Board.[57] The new ETC was relieved of the direct marketing and promotional roles of its predecessor, with the aim of enabling it to concentrate more effectively on its research and policy formulation functions.[58] In 1999, the Tourism Society expressed concern to this Committee that the new body had been designed more by reference to the needs of the Government than with a focus on the customer.[59] We remarked then that "it remains to be seen whether the strategic gains within Government [from the creation of the ETC] will off-set the loss of a clearly identified national marketing arm for English tourism".[60]

28. In the same Report we recommended that the Department for Culture, Media and Sport undertake "a thorough analysis of the benefits which could arise from additional investment in the ETC".[61] The Government subsequently announced plans to allocate an additional £2 million to the Council in 2002-03 and an additional £2.5 million in 2003-04 "to assist it to deliver its strategic remit".[62]

29. Despite these small planned increases in support for the ETC, its grant-in-aid before the current crisis was below that for the Wales Tourist Board and the Scottish Tourist Board.[63] The expenditure funded by the Government for the respective tourist boards in 1999-2000 was as follows: £19.4 million for the Scottish Tourist Board; £15.4 million for the Wales Tourist Board; and £11.7 million for the English Tourism Council. Furthermore, the allocation to the English Tourism Council includes all allocations to the Regional Tourist Boards from public funds.[64] The levels of spending by tourists (excluding day trips) for the respective nations is as follows: £2.5 billion in Scotland; £1.4 billion in Wales; and £24 billion in England.[65] The grant-in-aid for the Scottish Tourist Board was the equivalent of £3.77 per head; the grant-in-aid for the Wales Tourist Board was the equivalent of £4.03 per head. The equivalent figure for English domestic tourism was 20 pence per head of population.[66] These figures and the planned freeze of expenditure on the BTA leave no doubt that there has been a sustained problem of under-investment by the public sector in tourism that has affected English tourism in particular.

30. This Committee does not believe that the constituent countries of the United Kingdom other than England are in any way over-funded for the promotion of tourism. Indeed, the tourist boards of those countries might well make the case for more funding for this purpose. However, the long-term disparity of funding for the promotion of tourism for these countries compared with that for the promotion of England is almost grotesque. That Scotland and Wales should be receiving grant-in-aid per capita some twenty times greater than that available to the ETC is clearly unacceptable. Nor are we convinced by the argument that a good deal of responsibility for promotion of England resides with regional organisations since England as a country has as much right to be promoted as a tourist destination as other countries of the Kingdom.

31. The transition from the English Tourist Board to the ETC was designed in part to release additional public funds for the regions.[67] A key component of the new strategy launched in 1999 was to place greater reliance on the role of the ten Regional Tourist Boards. The Boards are financially independent membership organisations that receive about 25 per cent of their funding from the Exchequer.[68] The Boards generate about 50 per cent of their income from commercial activities and the remainder comes from "regional stakeholders" including local authorities.[69] The Boards are responsible for a range of activities to develop and promote sustainable tourism in their region and they work with local authorities and other agencies to coordinate their marketing and promotion work.[70] The marketing effort of Regional Tourist Boards is necessary because of the extremely fragmented nature of the industry.[71]

32. Although the Regional Tourist Boards receive direct support from the ETC, that support is overwhelmingly in the form of funding for specified projects, and the Boards do not have discretion over how the majority of ETC funding is spent. Moreover, Regional Tourist Boards are normally expressly prohibited from spending the money they receive from central Government, through the ETC, on marketing or public relations.[72] That prohibition limits the scale and scope of tourism promotion undertaken by the Boards because such activity is funded only from funds generated by the Boards themselves.[73]

33. The ETC recognises that the role of the Regional Tourist Boards will change and stated that "there is a need [in the] longer term to look at the actual positioning and tasks and roles of the Regional Tourist Boards", particularly in relation to marketing budgets.[74] The ETC has provided strategic information to the Regional Tourist Boards "so that they can make better use of the promotional funds they have".[75] The majority of the promotional work undertaken by the boards is for domestic markets, but they also coordinate and fund overseas marketing of their respective regions, which is limited by the extremely small funds available for those activities.[76]

34. The ETC's strategic role relies to some extent upon the information collection and analysis role of the Regional Tourist Boards. The ETC and its predecessor progressively decentralised information collection and management so that Regional Tourist Boards and local authorities are now responsible for much of that work. That role has become particularly important during the foot and mouth outbreak, during which the ETC's information about the situation on the ground "came primarily from the Regional Tourist Boards who were telling us how serious things were".[77] However, the low level of information technology provision in the tourism industry has been a hindrance to that activity.[78] The ETC confirmed that, prior to the current foot and mouth outbreak, only six out of the ten Regional Tourist Boards provided web sites, and the Council recognised the importance of encouraging and supporting information technology development in tourism, referring to the "critical importance of new media to the success of the industry".[79]

35. The Regional Tourist Boards rely in turn on the network of Tourist Information Centres to provide front-line marketing of local tourist attractions and facilities. Tourist Information Centres are provided by local authorities and offer face-to-face contact for visitors seeking information. The Centres not only market and provide information about the local tourism industry, but also have an important role in collecting information from visitors and feeding that information back through the regional and national networks.[80] However, Tourist Information Centres are hampered in their role as gatherers and disseminators of information by the relatively low proportion of such centres that are equipped with information technology.[81] The North West Tourist Board stated that, although the network of Tourist Information Centres had responded well to the demands from consumers, "the level of information and communication technology infrastructure is varied and thus [makes] comprehensive data provision very difficult".[82] The East of England Tourist Board stated that only 60 per cent of Tourist Information Centres in its region had e-mail facilities and said that that limitation had "made information gathering and dissemination quite cumbersome and labour-intensive".[83]



15  Evidence, p 50. Back

16  Creative Industries Mapping Document 2001, Department for Culture, Media and Sport, March 2001, p 10; Tourism Recovery Briefing, p 8. Back

17  IbidBack

18  Creative Industries Mapping Document 2001, p 11. Back

19  Evidence, p 108. Back

20  Q 148; Evidence, p 50. Back

21  Evidence, p 57. Back

22  Evidence, p 30. Back

23  Tourism Recovery Briefing, p 6. Back

24  In 1999 the total value of rural tourism was £12 billion; the revenue generated by livestock and products, excluding poultry and associated products, was £7.3 billion, Tourism Recovery Briefing, pp 6, 8. Back

25  QQ 35, 99, 157. Back

26  QQ 35, 77. Back

27  Evidence, pp 30-31. Back

28  Q 157; Evidence, pp 43, 97-98. Back

29  Q 157. Back

30  Evidence, p 92. Back

31  Evidence, p 31. Back

32  Q 163. Back

33  Tomorrow's Tourism: A growth industry for the new Millennium, Department for Culture, Media and Sport, February 1999, p 3. Back

34  HC (1996-97) 108-I, para 10. Back

35  Evidence, p 97. Back

36  Evidence, p 109. Back

37  Evidence, p 97. Back

38  Evidence, p 7. Back

39  Tomorrow's Tourism, p 9. Back

40  Evidence, p 2. Back

41  Department for Culture, Media and Sport, http://www.culture.gov.uk/tourism/index. Back

42  HC (1996-97) 108-I, para 12; Evidence, p 1. Back

43  Q 69; HC (1996-97) 108-I, para 12; Evidence, p 1. Back

44  Evidence, pp 1, 23. Back

45  Department of National Heritage Annual Report 1993, February 1993, Cm 2211, p 69; Department of National Heritage Annual Report 1995, March 1995, Cm 2811, p 9. Back

46  HC (1996-97) 108-I, para 21. Back

47  Q 159. Back

48  Department for Culture, Media and Sport Annual Report 2001, Cm 5114, March 2001, p 156; Q 194. Back

49  Q 176. Back

50  Cm 5114, p 156; Q 194. Back

51  Cm 2811, p 9; Cm 5114, p 163. Back

52  Cm 2211, p 69. Back

53  Fifth Report from the Culture, Media and Sport Committee, Objectives and Performance of the Department for Culture, Media and Sport, HC (1997-98) 742, paras 6, 8, 17. Back

54  Fourth Special Report from the Culture, Media and Sport Committee, Objectives and Performance of the Department for Culture, Media and Sport: Government Response to the Fifth Report from the Culture, Media and Sport Committee, Session 1997-98, HC (1997-98) 1079, p ii; First Special Report from the Culture, Media and Sport Committee, Review of Reports, Recommendations and Responses, 1997-2000, HC (2000-01) 57, p xxiv. Back

55  Ibid; Q 162. Back

56  Evidence, p 60. Back

57  Tomorrow's Tourism, pp 15-16; QQ 122, 161. Back

58  Annual Report of the English Tourism Council for 1999-2000, pp 4-5. Back

59  Sixth Report from the Culture, Media and Sport Committee, The Department for Culture, Media and Sport and its Quangos, HC (1998-99) 506-I, para 39. Back

60  IbidBack

61  HC (1998-99) 506-I, para 42. Back

62  HC (2000-01) 57, p xxviii; Q 120. Back

63  Public Bodies 2000, Cabinet Office, January 2001. Back

64  IbidBack

65  United Kingdom Tourism Survey 2000Back

66  HC (1998-99) 506-I, para 42. Back

67  Q 150. Back

68  Ibid; HC (1998-99) 506-I, paras 58-59; Evidence, p 114. Back

69  Evidence, pp 34, 114. Back

70  Q 122; Evidence, pp 34, 114. Back

71  Q 93. Back

72  Evidence, p 114. Back

73  Evidence, pp 69-70. Back

74  Q 118. Back

75  Q 133. Back

76  Q 86. Back

77  Q 114. Back

78  Evidence, pp 69, 70, 97, 115. Back

79  QQ 134, 135. Back

80  Q 82; Evidence, pp 76, 79. Back

81  Evidence, p 70. Back

82  Evidence, p 69. Back

83  Evidence, p 115. Back


 
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