Restoring tax-free shopping for foreign visitors would deliver a £4.1billion boost to the economy and support 78,000 jobs, according to a major report.

The expert analysis suggests that – far from draining funds from the public purse – hundreds of millions of pounds would pour into the Treasury.

It says the cost of refunding VAT to tourists who have come to the UK for a shopping spree is outweighed by the benefits of attracting more visitors.

The additional tourists would spend money right across the economy, generating separate tax revenues as well as creating jobs.

That is the conclusion of a study conducted by Oxford Economics in November. Crucially, it thinks the Treasury has hugely overestimated the headline cost of the policy at nearly £2billion.

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