Ministers are today setting out proposals for a sweeping new “tourist tax” in England, amid mounting warnings that the policy could trigger severe job losses across the travel and hospitality sectors.
Under Labour’s latest revenue-raising plan, mayors and local authority leaders would be handed the power to add a levy to hotel rooms and other overnight accommodation.
While earlier discussions had focused on a fixed nightly charge, the proposed scheme is now expected to be based on a percentage of the cost of a stay — with no maximum cap in place.
Industry figures fear the move could push the price of holidays up by hundreds of pounds, with hospitality businesses warning that tens of thousands of jobs could be put in jeopardy.
In London, Mayor Sadiq Khan is understood to be looking at a levy of as much as 5 per cent, a move that could generate around £580 million a year. Labour mayors in Liverpool, the East Midlands, Yorkshire and the West of England have also indicated they would make use of the new powers.
Angela Rayner chaired a meeting of mayors at “No10 North” today, although she joined from London because of “other diary commitments”. She argued that money raised through the charge could be used to support local services and visitor attractions.
The idea was initially unveiled by Sir Keir Starmer, following the introduction of similar visitor levy schemes by the devolved administrations in Scotland and Wales.
Plans for a “tourist tax” appear to have gained momentum through Andy Burnham, the former Manchester mayor
Counties like Cornwall attract huge numbers of tourists who could potentially face charges
Angela Rayner will give more details of the proposals at a meeting with Mayors in ‘No10 North’ later today
But they appear to have been ramped up by Andy Burnham.
Charges of a similar nature already exist across Europe, with the revenue used to fund local services. Mayors would decide how to invest the money raised from the levy.
Mr Burnham introduced a City Visitor Charge while mayor of Manchester in April 2023, at £1 per room per night.
There have previously been estimates that a 3 per cent levy in London could raise £350million a year. But Lord Khan has now indicated the charge could be up to 5 per cent, which might bring in more than £580million.
Tory Tees Valley mayor Lord Houchen has flatly rejected the idea of a tourist tax, while Kemi Badenoch has condemned the idea.
Groups representing the tourism trade have warned about the impact of the levy and called for consistency in how the tax operates across different regions.
Allen Simpson, chief executive of UK Hospitality, told BBC Radio 4’s Today programme a new tourism tax in Edinburgh is ‘already having damaging effects’.
He said holidays in the UK are ‘already more expensive’ than they appear because of higher VAT, even before the tourist tax.
Mr Simpson added: ‘What we’re talking about here is an open-ended power for mayors to set tourism taxes at any level they want.
‘And remember that if you go to Paris, if you go to Rome, if you go to Berlin, you’re paying a small tourism tax, but it’s capped.’
He said residents in communities which rely on tourism and hospitality would see jobs put at risk.
‘I would say to those people in these communities that their jobs are now at risk,’ Mr Simpson said.
‘It will be the case that you’ll have holiday parks which can’t open in the shoulder seasons and of course people who go on holiday will just have that little bit less money in their pocket.’
Jon Hendry Pickup, boss of Butlin’s, said the levy would ‘hit those who can afford a holiday the least, the hardest’.
‘Big cities may welcome these mayoral powers, but treating every destination and hospitality business the same will leave resorts like ours to shoulder the burden.
‘We were concerned enough about the impact of a Holiday Tax when the discussion was around 5 per cent or £2 per person per night.
‘Giving mayors the power to impose a levy without a national upper limit takes those concerns to another level and risks making family holidays less affordable, damaging demand and making it harder for businesses to hire young people.’
There are estimates that a 3 per cent levy floated by Lord Khan in London could raise £350million a year
The Mayor of Londom has welcomed proposals for a levy in the capital and added that it ‘needs to happen sooner rather than later’
Stephen Cassidy of Hilton UK & Ireland said: ‘The announcement of a further and uncapped tax levy on our business, in addition to already high VAT, business rates and energy costs, will further stifle job creation and investment and is a catastrophic blow for the UK hotel sector that is already under significant pressure.
‘With 85 per cent of hospitality leaders saying higher tax burdens are limiting their ability to recruit young or inexperienced workers, government should be looking at ways to reduce business and employment costs, not imposing an uncapped holiday tax that will make it even harder for our hotel owners and hospitality businesses to open the door to work for the next generation.
‘Business needs the confidence to invest, expand and hire. We need policies that unlock growth and opportunity, not continue to hold the sector back.’
However, Lord Khan said he ‘strongly welcomed’ the Government’s plan and added that it ‘needs to happen sooner rather than later’.
He continued: ‘London’s visitor economy is a huge success story, supporting jobs, businesses and investment across the capital and the wider country, and I have long argued that London should have the same flexibility as other major global cities to raise and invest funding locally.
‘A well-designed, modest levy has the potential to provide an important additional source of funding to support growth, strengthen London’s offer to visitors and help us remain globally competitive.
‘It would allow us to reinvest in the places, infrastructure, culture and experiences that make London one of the world’s greatest cities to visit, while helping manage the pressures that come with welcoming tens of millions of visitors every year.
‘I will work closely with London’s boroughs, accommodation providers, hospitality and tourism businesses and other partners, before final decisions are taken.’
In a statement to MPs, Local Government minister Jim McMahon said: ‘The visitor levy will be set as a percentage of the accommodation cost, ensuring that charges are proportionate to the price of the stay.
‘A percentage rate model helps ensure that the levy is affordable and will mean a stay at a budget friendly hotel or guesthouse would attract a lower visitor levy than a luxury five-star hotel in London.’
Mr McMahon said strategic authorities not run by mayors will also have powers to impose the ‘Overnight Visitor Levy’.
‘The levy will enable Mayors and other local leaders to invest revenues in support of the visitor economy, experience and important local priorities,’ he added.
‘It will be for Mayors and other local leaders to decide if the visitor levy is the right decision for their areas, following a consultation.
‘The Government will provide non-statutory guidance to support those leaders who are considering introducing a visitor levy. Mayors will be able to set out their spending plans by March 2028.’
Downing Street said the Government would ‘trust local leaders to make decisions for their areas’.
A No10 spokeswoman said: ‘That’s why we’re shifting power out of Whitehall and giving communities more control.
‘More than 42million international visitors came to the UK last year, spending more than £32billion.
‘So this levy is about ensuring more of the benefits of that tourism stay in local communities, with leaders able to reinvest funding in priorities such as transport to high streets and public spaces.’
