English regional mayors will be given the power to charge tourists a tax for staying overnight in their towns and cities, Local Government Secretary Steve Reed has said.
Speaking ahead of Wednesday’s Budget, Reed said the levy aims to empower locally-elected mayors to “unlock growth through investment”, such as putting on events or improving public transport systems.
London’s Labour Mayor Sir Sadiq Khan and Greater Manchester’s Andy Burnham said the new powers were good news for their cities.
But Tees Valley’s Conservative mayor Lord Houchen said he would not be introducing the new levy – and the trade body for the hospitality industry warned the cost would be passed on to consumers.
The move would bring England into line with Scotland and Wales, which will both bring in a tourist tax next year, of £1.30 per night for Wales and 5% for Scotland.
New York, Paris and Milan are among those that already charge a tourist tax, with research showing that reasonable fees have minimal impact on visitor numbers.
Reed said: “Mayors and other local leaders know their local history, local culture and the unique attributes of their places that draw visitors in.
“But they need powers and funding to enable them to harness England’s potential and unlock growth through investment.”
Research suggests a levy of £1 per day in London could raise £91m a year for the capital.
The money raised could fund investments such as revamping Oxford Street in London or funding late night buses and trams in Manchester, the government says.
Sir Sadiq said the levy would be “great news for London,” with the extra funding helping to “cement our reputation as a global tourism and business destination”.
Burnham said nearly two million people visited Greater Manchester each year, contributing about £9bn to the local economy.
He said: “The levy will allow us to invest in the infrastructure these visitors need, like keeping our streets clean and enhancing our public transport system through later running buses and trams, making sure every experience is a positive and memorable one.”
However, Lord Houchen dismissed the levy on principle, saying: “I won’t be using this power.
“There will be no tourist tax in Teesside, Darlington and Hartlepool for as long as I’m mayor. Thanks, but no thanks.”
Kate Nicholls, chairwoman of industry body UKHospitality, warned the “damaging holiday tax” could cost the public up to £518m.
She said: “Make no mistake – this cost will be passed directly on to consumers, drive inflation and undermine the government’s aim to reduce the cost of living.”
Russell Imrie, the president of BWH Hotels GB, said the tax would be a “highly negative step” that could make British hotels less competitive.
“UK should not aspire to be the most highly taxed visitor destination in Europe,” he said, adding that the levies would apply to anyone, not just tourists.
That means even British customers on weekend breaks, visiting friends and family or staying in accommodation for a hospital appointment will have to pay the tax, said Mr Imrie.
There were also signs of potential tension between council leaders and mayors, with Westminster City Council leader Adam Hug, Labour, calling for revenues from the tax to be shared with councils rather than kept by mayors.
Cllr Hug, whose council includes some of central London’s major attractions, said: “While this scheme as drafted will allow mayoral combined authorities to charge and collect the overnight levy, it is essential the government ensures mayors split the revenue with the local councils in their area to support these services, without which economic growth will suffer.”
The plans will be subject to a consultation running until February 18, which will consider issues including whether there should be a cap on the size of the levy.
