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TOURISM and travel comprise the world's biggest industry. It is Britain's second biggest. And we are number six in the world league of foreign earners from it. So you might imagine that tourism and travel would be just the sort of industry that Michael Heseltine's department would want to boost by encouraging innovative investment and training. You might imagine that the Treasury was adapting tax policy to favour large foreign earners. And you would certainly assume that the Government's budget for supporting tourism was rising at least in line with inflation.

Not so. The government bodies that support tourism - the British Tourist Authority and the English, Scottish and Welsh Tourist Boards - do not come under Mr Heseltine's trade and industry department but receive their funding from the Department of National Heritage. Last year the Treasury announced a new tax which foreign visitors will pay when they leave the country by air - yes, we will have to pay the pounds 5 or pounds 10, too - but were the tourist implications considered? As for Government support, funding for the English Tourist Board is being cut by 35 per cent over three years.

All this suggests that we do not think of tourism as something that just happens: nice when we have a couple of weeks abroad, irritating when a tourist bus jams the entrance to the car park. This is confirmed by a survey in which the World Travel and Tourism Council asked 'opinion formers' around the world to list 14 industries in order of economic importance in their own countries. Only in France and Argentina did respondents put travel and tourism top. In Britain we put it eighth. And in the US (where tourism is the second largest industry) and Japan (where it is the third) they put it bottom, at 14.

Since we do not think of it as a business, it is hardly surprising that we are not doing particularly well. Our earnings from foreign visitors are climbing, though we are losing world share in a rapidly expanding market. But there is a worse problem: we Britons increasingly take our holidays abroad, with the result that our trade account on tourism, in balance in 1983, deteriorated to a deficit of more than pounds 3bn last year.

There is an obvious 'could do better' message here. Any sensible industrial policy would not worry about declining industries such as shipbuilding or coal-mining, but would focus instead on growing ones such as travel and tourism. What might that policy be?

If you are the British Tourist Authority you say 'give us more money'. It has a relatively new chairman, Adele Biss, whose background is in public relations, but whose public speeches (one of which recently drew a response from our travel editor, Simon Calder, and led to heated comment in our Letters columns) have emphasised the 'industry' aspect of the business. She also chairs the English Tourist Board, though the two bodies have separate chief executives.

Money may well come into it - the grants for the BTA, at pounds 33.2m, and for the ETB, at pounds 11.3m, are tiny both in public finance terms and relative to the size of the industry. But I suspect that the problems are as much in structure and intent as cash. For example, one has to ask whether it is right to have one body (the BTA) whose job is to bring more foreign visitors to these shores, and another, (the ETB) whose job it is to keep British holiday-makers in England. The distinction may be sensible, but it does feel a bit odd.

Indeed, should 'England' be sold as an entity? It probably is sensible to have tourist boards for Wales, Scotland and Northern Ireland, but England is not really a homogenous product. The attractions of London are very different from those of, say, Blackpool.

More serious, I suspect, is a failure to think of the UK tourist industry as an economic resource. This is not to call for some national tourist strategy: if we did, we would be sure to get it wrong. Rather it is to say that we should look in a tough-minded way at the attractions (and the reverse) of the UK, and at the amount we earn from different aspects of tourism. Then we could start to intervene, in a limited, orderly way, to improve performance.

For example, much of our tourist strategy has been to get people out of London - it is crowded and the facilities elsewhere are underused. But cities are great places for spending money, and London is a world-class player in the extraction-of-money league. Visitors in London spend twice as much per day as they do when they are outside. From a purely economic point of view we ought to try to keep people in London for as long as possible.

This is partly a matter of information. We need to look at the sort of tourists we want to attract: people who will spend money. Normal human courtesy, of course, should make us welcome the Czechs and Poles who bring their own food and camp at Shepherd's Bush. We should welcome foreign students because in the long run we may benefit. But day-trippers from France won't spend anything. The people we should be seeking to attract are the high-spending brigade from East Asia. Remember, if you are from Tokyo, London seems cheap.

More important, we need to look at the quality of our product: what irritates and upsets visitors. We should ask how much our handling of the queues at Heathrow actually costs the country in lost revenues: how many people skip the occasional visit because of the hassle.

Once we have the economic information in the right form (and there is some), then we can formulate policy to boost revenues. The City of London's successful strategy for maintaining its share of international financial business is a good model. It is: don't plan, but react very quickly to any problem or change in circumstances. For example, the City did not suffer seriously from the IRA campaign last April because within days of the second big bomb it established a traffic exclusion zone.

Reacting to things that upset tourists will mean being brutal in promoting the interests of the tourist industry. This does not mean heavy-handed intervention - it will always be a fragmented business. Nor does it mean 'heritage-style' flag- waving. The problem is not so much one of promotion, but of quality control.

On a long view the market is coming our way, as the developed world's population ages. We have the right product for the older market: sensible 60-year-olds would rather go to the opera than lie on a beach. But it will only come our way if we accept that our second biggest business is, well, our second biggest business.