Economy Minister Vaughan Gething spoke about Brexit, tourism taxes and freeports in an interview with Business Post. The minister was in north east Wales in a visit to Deeside’s Toyota factory and the AMRC Cymru research and development facility next to Airbus Broughton.
Mr Gething admitted the worst case scenario of an exodus of manufacturers after Brexit had not materialised but that barriers had been placed on trade that were impacting both large and small businesses in Wales. Resolution Foundation says Brexit has reduced the competitiveness of the British economy, with implications for productivity and wages.
He also defended plans for extra rules on holiday lets in Wales but added that were prepared to listen to sector voices over finding exemptions for certain operators. Mr Gething also said he would like two freeports in Wales but that talks were now held up by the current situation in Westminster.
Prior to Brexit, Airbus and other major manufacturers warned that a hard exit could put future UK investment at risk. But recently the aerospace giant announced a major investment at Broughton while companies like Toyota are also investing.
Mr Gething said: “It is entirely possible things could be worse but there are real barriers that exist. There are challenges getting people in different parts of Europe, it is not as easy and a pan-European manufacturer does have a need to move people around.
“But for people like Airbus and Toyota who have significant investments here, they want to carry on. For Airbus to replicate this somewhere else is a really big cost. But if you offered a different variation with less friction then every company would take it. Not just large firms but small a medium businesses, those non-tariff barriers are a real problem for them in the export market.
“Yes there are challenges but we need to work alongside those firms that do want to keep investing in jobs and encouraging small and medium firm to still export even if it is more difficult.”
He added: “Dealing with the Northern Ireland protocol is very important for Wales - for those links to the island of Ireland but also our links with the rest of Europe as well. The European Union will not abandon a member state so my concern is without resolving that issue it will adversely affect all of our relations with the rest of Europe. That can only be done by talking and negotiation, it can’t be done by issuing a series of threats.”
To-let rules for holiday homes:
Currently, self-catering properties in Wales must be available to let for a minimum of 140 days in any 12-month period, and actually let for at least 70 days to qualify for business rates rather than council tax. Under new proposals, properties must be available to let for at least 252 days and actually let for at least 182 days to qualify for business rates – an increase of 160%. From April 2023, a self-catering business not meeting the new threshold would incur council tax as a second home.
Tourism groups are furious about the plans and warn more than 1,000 holiday let businesses could close. They want the 182 figure reduced and various exemptions for some operators.
The minister said: “I regularly hear what people say and I don’t ignore them but we have commitments we made in our manifesto. I know people are pointing out the detail and there are conversations about exemptions and I know that the finance minister is looking at these seriously and carefully.
“The fundamental challenge of ‘are you a business or are you a residential property that does some business on the side?’ That is the challenge. There are other people whose voices aren’t very loud who do say to us ‘I’m not competing on a level playing field’ because they have an entirely different cost base. We can either live with all the inconsistencies we currently have or that we want to do something about it.”
He said: “People can’t be blind to what is happening and we are not on our own here. Just a few days ago some UK ministers launched a consultation on the impact of short term holiday lets and the visitor economy on communities in England. There are real challenges where there is a real concentration of visitors. We want to see the benefits of tourism in jobs and local spend that it delivers - and the impact for people who live in these areas so people can work locally and can plan a future in your own community, that is what we are trying to do.
“Whenever you try to strike a new balance there are people who don’t want it to happen and you understand the reasons why and yet we are committed to doing this because we think there is an issue we need to resolve and we are being faithful to the manifesto.
“We have issued the regulations and have regular discussions, Rebecca Evans has made pretty clear what is going to happen but there are points of detail to discuss and we will continue to listen and understand the impact the changes will make as well.”
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In the longer term the Welsh Government is consulting on a tourism tax on overnight stays - with money going to the local authority to spend on infrastructure and services. The sector argues that businesses are already contributing to local economies through rates, job creation and linked spending - as well as councils receiving money from the enhanced population grant, which is partly linked to visitor numbers.
Mr Gething said: “These are entirely mainstream around Europe and North America. This is not entirely alien to something we experience when we travel outside the UK. It will be important to be clear that this won’t be introduced now as there is a period of consultation to happen. Also we wouldn’t see exactly the same approach in Conwy or Gwynedd or Flintshire, they would all have their own choices to make.”
He did reject suggestions by ‘cooperation agreement partners’ Plaid Cymru that money could be spent on things like free school meals.
He said: “Our expectation is that local authorities will need to demonstrate how much money is raised and where it is spent, so can visibly see how it is supporting the visitor economy. It creates more problems if you said you were using a tourism levy to support school meals, in fact we are funding these ourselves, that is in our budget.
“But the visitor levy really is about the balance between the community that hosts visitors and the benefit they get from those visitors coming to spend their money but also the impact on that benefit, they should be able to demonstrate the money is used for that benefit.”
Freeports and nuclear:
A freeport deal was finally signed with the UK Government this summer after a long stand-off over the agreement - with both governments having joint decision making about where the port or ports will be sited.
Mr Gething said: “We reached a position with joint decision making where the Welsh and Uk governments are equals when it comes to freeport decisions, both on the prospectus and the ultimate decisions on where a freeport will be located. The Uk Government agreed it could be possible that it could be more than one site but that would require additional money, we will carry on with discussions with stakeholders. There is a hiatus because the minister has left the department. It would be my preference to have more than one site.”
On nuclear, he added: “We are very optimistic about Trawsfynydd and Wylfa and we want certainty and decisions to be made, not just on policy framework but the bigger choices by the UK Treasury. We and industry figures think Traws is the best site for an SMR in the whole of the UK and Wylfa is the next obvious place for a large nuclear facility.
“There are good objective reasons for those investments to be made here in Wales. I look forward to a government that is prepared to do so and has the ability to do so.”