English mayors are set to be granted new powers to implement an uncapped "overnight visitor levy" on tourists staying in hotels, holiday lets, and bed and breakfasts. This move, championed by figures like Andy Burnham, aims to provide mayors with a new revenue stream to fund transport, public services, and infrastructure, addressing the financial challenges faced by many local authorities.
The levy will be charged as a percentage of the accommodation cost, rather than a flat fee, to protect budget holidays. While the specific rate will be decided locally, there will be no national upper limit, similar to the Scottish model where Edinburgh has already introduced a 5% levy capped at five nights. This flexibility is intended to allow mayors to tailor the tax to their specific area's needs, with expectations that they will avoid rates that could harm local tourism.
The hospitality industry has reacted with strong criticism, warning that an uncapped tourist tax could lead to significant job losses and increase the cost of family holidays. UK Hospitality has estimated that copying Edinburgh's model nationwide could result in a $£1.6$ billion tax burden on the sector and potentially add $£100$ to a family holiday. Industry leaders fear this will exacerbate existing struggles with rising business rates and employment costs, undermining efforts to get young people into work. Critics, including the Conservative shadow chancellor and Tees Valley Mayor Lord Houchen, have labeled it a "jobs bloodbath" and a "back door" to taxing businesses.
The government's initial plans had suggested a potential cap on the maximum tax rate to support businesses and prevent excessive rates. However, the current proposals indicate that local leaders will have broad discretion. While the policy provides a new revenue stream for England's 14 regional mayors who lack the power to raise council tax, the controversy highlights a tension between local government funding needs and concerns about the economic impact on the tourism and hospitality sectors.
Funds raised from this tax are intended for local reinvestment, with mayors expected to outline their investment plans by March 2028. Potential uses include improvements to transport, visitor infrastructure, public spaces, cultural events, and tourism promotion. London Mayor Sadiq Khan supports the initiative, with analysis suggesting a 3% levy in the capital could generate over $£350$ million annually.
