Labour announces ‘tourist tax’ to boost England’s cities
Local mayors will be allowed to charge a “tourist tax” on overnight stays, the government has announced, as part of a drive to pump more money into England’s cities and regions.
Mayors will be given the power to impose a “modest” fee on visitors staying in hotels, B&Bs, B&Bs and holiday homes.
Officials said the measure would put British cities on par with other tourist destinations around the world, including New York, Paris and Milan, which already impose a similar tax.
It comes just a day before Rachel Reeves delivers her long-awaited Budget in the House of Commons on Wednesday, where she is expected to introduce a series of tax increases to plug a multi-billion pound gap in the public finances.
London mayor Sadiq Khan, who along with Manchester’s Andy Burnham has been a strong advocate of the measure, welcomed the announcement and said it was “great news for London”.
He added: “The extra funding will directly support the London economy and help strengthen our reputation as a global tourism and business centre.
“This also shows what can be done if ministers work closely with mayors to devolve more powers to cities and regions.
“As part of developing our plans for the tax, we will work closely with the hospitality and tourism sectors to ensure it brings maximum benefit to London and our brilliant businesses.”
Meanwhile, Mr Burnham said: “I’m proud that nearly two million people from around the world choose to visit Greater Manchester each year. “The money they spend contributes around £9bn a year to our economy and supports more than 100,000 jobs.
“The tax will allow us to invest in the infrastructure these visitors need, such as keeping our streets clean and then improving our public transport system by running buses and trams, ensuring every experience is positive and memorable.”
A 2017 research report by the Greater London Authority estimated that a 5 per cent tax on the cost of accommodation could raise £239 million a year in the capital.
Announcing the measures ahead of the budget, local government secretary Steve Reed said: “Tourists are traveling from near and far to visit England’s wonderful cities and regions.
“We’re empowering our mayors to take advantage of this and allocate more money to local priorities so they can continue to spur growth and invest in these communities for years to come.”
However, there are fears that such a tax would have a negative impact on the hospitality industry and could deter British tourists from city holidays.
UKHospitality has previously warned against introducing a tourist tax, saying earlier this year such a tax would lead to unsustainable costs and “make us less attractive to visitors”.
Kate Nicholls, the group’s chief executive, said: “The idea that a tourist tax will fix the public finances is completely wrong and will only serve to damage the UK’s tourism and hospitality sectors.
“The UK already ranks incredibly poorly for our competitiveness in tourism due to its high VAT rate.
“This will only make us less attractive to visitors with a tourist tax compared to our European rivals, most of whom set VAT at around half our 20 per cent rate.”
He added: “The potential estimated cost of the tourist tax, if imposed on hospitality businesses, could push the additional costs they face to over £4bn. This is simply unsustainable.”
But the Department for Housing, Communities and Local Government said research showed “reasonable” charges had a “minimal” impact on visitor numbers.
The money raised is intended to be invested in transport, infrastructure and the visitor economy to potentially attract more visitors.
The UK is currently the only G7 country where local authorities are prevented from imposing tourism taxes.
The plans will be subject to a consultation process that will last until February 18 and will consider issues including whether to impose a cap on the amount of tax.
