Treasury minister David Gauke says the plan to reduce VAT on the tourism sector to 5% would cost the Exchequer £1bn in the first year. The British Hospitality Association (BHA) is pressing for the move, which would specifically see VAT reduced to 5% on accommodation and attractions. The trade body argues that the move would benefit the Treasury by £2.6bn over 10 years. But Gauke expressed concerns when questioned about the BHA proposal in Parliament by Torbay MP Adrian Sanders. The minister said: “Assessments of the impact of the BHA proposals predict a loss in revenue to the Exchequer of well in excess of £1bn in the first year alone. “The BHA argues that a reduction in VAT on tourism would pay for itself over time and increase growth and employment. Their case does not take account of the impact of such a cut on the economy as a whole, or the significant additional taxation or borrowing needed to fund the cut. “Higher interest rates and falling international confidence would undermine the recovery and have an adverse impact on families and small businesses, including businesses in the tourism sector.” A BHA spokesman said the group has held two meetings with Gauke and one with Treasury officials, and is also lobbying individual MPs, as part of its VAT campaign. Current discussions are only in relation to VAT cuts on accommodation and attractions, he added, but the group hopes to widen the argument to include meals away from home at a later date. Meanwhile, 32 companies have signed up to the campaign to cut VAT for the hospitality sector led by French lobbyist Jacques Borel, the man credited with encouraging governments in a number of European countries to reduce the tax.