In a significant policy shift, the English government has announced that regional mayors will soon gain the authority to impose tourist taxes on visitors who stay overnight in their jurisdictions. Local Government Secretary Steve Reed articulated this new power as a means to enable locally-elected leaders to stimulate economic growth through investment, particularly by improving amenities and services that attract tourism.
This move, which comes ahead of the upcoming budget announcement, has garnered a mixed response from various city leaders. Prominent figures such as London’s Labour Mayor, Sir Sadiq Khan, and Greater Manchester’s mayor, Andy Burnham, welcomed the announcement, suggesting that it could enhance their cities’ appeal as global tourism destinations. Reed emphasized that the funds generated from such taxes could support vital infrastructure improvements, including public transportation systems and community events that can draw in more visitors.
However, not all mayors are on board with the plan. Tees Valley’s Conservative mayor, Lord Houchen, firmly expressed his opposition to the levy, claiming that he would not implement such a tax in his area. His stance is shared by the hospitality industry’s trade body, which has raised concerns that the additional tax burden could be passed on to consumers, potentially discouraging tourism rather than encouraging it.
The planned initiative aims to align England’s approach with that of Scotland and Wales, both of which are set to introduce their own tourist taxes in the coming year. Wales will implement a tax of £1.30 per night, while Scotland is looking at a 5% levy. Many major international cities, such as New York, Paris, and Milan, already benefit from similar tourist taxes, with studies indicating that reasonable fees do not substantially deter visitors.
Reed noted that local leaders possess intimate knowledge of their regions’ unique cultural and historical attractions. He asserted that empowering them with the right tools and funding will help harness England’s potential and drive investment in local economies. For instance, forecasts suggest that a £1 tax implemented in London has the potential to generate approximately £91 million annually, which could fund improvements to Oxford Street or enhance late-night public transport options.
Khan hailed this tax as a boon for London, asserting that the extra funds would bolster the city’s status as a prime business and tourism hub. On the other hand, Burnham pointed out the significant economic contribution of visitors to Greater Manchester, estimating that nearly two million tourists generate about £9 billion for the local economy. He argued that the proposed tax would facilitate necessary investments in public services, further enriching the experience of visitors.
Opponents of the tax, however, warn of potential ramifications. Lord Houchen stated voraciously that he would not entertain the notion of a tourist tax in Teesside, Darlington, and Hartlepool during his tenure. He expressed a sentiment that echoes among several stakeholders, including Kate Nicholls, chairwoman of the UKHospitality group, who cautioned that the so-called “holiday tax” could cost consumers up to £518 million. This cost, she argued, would be directly transferred onto consumers, posing threats to the already fragile economy by driving inflation.
Notably, concerns also arise regarding the implications for local governance and the distribution of tax revenues. For example, Westminster City Council leader Adam Hug emphasized the need for local councils to receive shared revenues from the tax rather than allowing mayors to retain all funds. Hug highlighted the importance of ensuring that the contributions aid in supporting vital local services, which are crucial for fostering economic growth.
The government plans to conduct a thorough consultation process running until February 18, focusing on several pertinent aspects, including whether there should be limits on the size of the levy. This initiative reflects England’s evolving stance on tourism taxation and the balancing act between fostering regional economic development and ensuring that the burden on consumers remains manageable. As discussions progress, the outcomes will determine the extent to which mayors can wield this new power to shape their cities’ future.
