Andy Burnham came under fire last night over accusations that he was preparing a fresh hit on household budgets after backing a new holiday tax.
The Prime Minister has handed selected regional mayors the authority to introduce an uncapped “overnight visitor levy” on stays in hotels, B&Bs and holiday lets across England.
In the face of objections, Mr Burnham decided the charge should be calculated as a percentage of accommodation costs rather than imposed as a fixed nightly fee. The levy will not be capped, with Labour-controlled areas expected to set it at around 5 per cent.
Business leaders branded the plan a “kick in the teeth”, warning it could threaten tens of thousands of jobs and leave holidaymakers facing an estimated £1.6billion in extra costs by the end of the decade.
Shadow Chancellor Andrew Griffith told Our News Outlet: “Just days ago, Andy Burnham said his was a ‘cost of living Government’. Now he is launching another tax raid on hardworking families.
“His tourism tax will hammer the hospitality industry – which has already taken a beating from Labour’s business rates hikes, jobs tax and employment red tape – driving up the cost of the family holiday and discouraging people from holidaying in the UK. The Government’s own consultation shows people don’t want this tax. But Labour want more money to pay for more benefits.”
Figures from Oxford Economics, cited by UK Hospitality, suggest that if the full effects of a 5 per cent levy are felt by 2030, the consequences for consumers and the wider economy could be significant.
Although Labour mayors could raise millions of pounds for town-hall budgets, Oxford Economics estimates the policy would cut Treasury tax receipts by about £688million. It also forecasts a £101million fall in direct investment by hospitality and tourism firms, 11.9million fewer overnight stays, 33,000 lost jobs and an overall £1.8billion drop in tourism spending.
Andy Burnham, pictured on Thursday, was accused of launching another raid on struggling families last night after he approved a new holiday tax
Counties like Cornwall attract huge numbers of tourists who could potentially face charges
If a family paid £2,000 to stay in a hotel room or rented cottage, a 5 per cent tax would add £100 to the cost of their break.
Tina McKenzie, national chairman of the Federation of Small Businesses, said: ‘Imposing an uncapped visitor levy in England is a kick in the teeth for the hospitality industry, at a time when small businesses are dealing with a deluge of cost rises.
‘Allowing levies to be brought in as an uncapped percentage rather than flat fee is hugely disappointing.’
Allen Simpson, chief executive of the UK Hospitality trade body, said: ‘If you only devolve one tax-raising power, local mayors are going to pull that lever till it snaps.’
He told BBC Radio 4 that holidays in the UK were already more expensive than in other countries because of Britain’s 20 per cent VAT rate, and that tourism taxes in the likes of Paris, Rome and Berlin are capped. Travel association ABTA said the move would ‘further damage the competitiveness’ of local tourism, while Whitbread, which owns Premier Inn, called it ‘hugely damaging’.
Mr Burnham introduced the UK’s first holiday tax when he was Greater Manchester mayor, imposing a £1-plus-VAT city visitor charge per room, per night in 2023 while his close ally Steve Rotherham set a £2 rate in Liverpool last year. A 5 per cent charge took effect in Edinburgh at the start of the summer, for stays of up to five nights, while a visitor levy of £1.30 a night is coming to Cardiff in April.
But the plans announced by the Government yesterday go further, giving England’s 14 regional mayors the power to introduce an uncapped levy from 2028.
Popular areas such as the Cotswolds, which do not have a mayor, will be given the powers to charge after a future reorganisation of local authorities.
A No 10 spokesman said: ‘The fundamental principle behind this is that we trust local leaders to make decisions for their areas. That’s why we’re shifting power out of Whitehall and giving communities more control.’
Asked if she accepted the move would hit low-income families, Communities Secretary Angela Rayner said: ‘This is an opportunity for those areas to celebrate the tourism that comes to their areas, but then redirect that into their local area.’
The charge will be set as a percentage of the accommodation cost in hotels and guesthouses, not including food or drink.
A summary of responses to last year’s consultation found that 60 per cent of respondents opposed the percentage rate model, with only 21 per cent in favour.
Angela Rayner, pictured this week, said: ‘This is an opportunity for those areas to celebrate the tourism that comes to their areas, but then redirect that into their local area’
Mayor of London Sadiq Khan, pictured in January, claimed yesterday that high taxes will not have an effect on tourism
Most (47 per cent to 33) also opposed letting mayors set the level and more than half (58 per cent) wanted a maximum rate – but ministers overruled the objections.
Labour’s London mayor Lord Khan, who will be in for a particularly large windfall given the number of hotel rooms in the capital, claimed that high taxes did not deter tourists.
But Reform’s Dame Andrea Jenkyns, mayor of Greater Lincolnshire, vowed: ‘I vehemently oppose the visitor levy/tourist tax. And as a regional mayor I will never implement this.’
The party’s Hull and East Yorkshire mayor Luke Campbell has also ruled out imposing the tax, as has Lord Houchen, the Conservative Tees Valley mayor.
Tory mayor for Cambridgeshire and Peterborough Paul Bristow said: ‘The UK economy is struggling – hospitality is being impacted by NI rises, tax hikes and other costs. This is not the time to put extra costs on staying overnight.’
