The UK government is preparing to give mayors and local leaders in England the power to introduce a new tourist tax, officially called an overnight visitor levy, on visitors staying in hotels, bed-and-breakfasts and short-term accommodation. The proposal is part of a broader drive to devolve more financial powers from Westminster to regional authorities.
The change would let local leaders tax overnight visitors and spend the cash on local priorities like transport, public services and tourism infrastructure. The government believes that locations which attract many tourists should be permitted to retain a larger proportion of the money generated by tourism.
Greater Manchester Mayor Andy Burnham has been among the loudest champions of handing regions tax and spending powers. Burnham has previously proposed a voluntary charge for visitors to Greater Manchester, with the money used to fund tourism projects, and argued local leaders know best what their areas need, rather than central government.
The levy under the proposed national framework would probably be a percentage of the cost of accommodation rather than a fixed charge per night. Supporters argue the policy would end the charge being unfairly targeted at tourists visiting the country and opting for cheaper accommodation.
The policy would represent a major change in funding for local government in England. Charging visitors is normal in many European countries, but in England, central government funding and local taxation have traditionally been more important than direct charges on tourists.
The policy would be a new source of income for councils and mayors, officials say, at a time when many local authorities are under financial pressure. That extra money could go toward improvements that would help residents and visitors.
But some critics have questioned whether another blow to tourism could make domestic travel more expensive and place more pressure on an already struggling hospitality sector.
Hospitality Industry Warns of Increased Costs & Effect on Tourism
Some parts of the hospitality industry have voiced strong opposition to the proposed tourist tax, saying any extra charges could add to the cost for visitors and impact on firms already struggling financially. But industry chiefs warn hotels, restaurants and tourism operators could struggle if England becomes a more expensive place to visit.
Hospitality groups said the levy would be another cost on top of existing costs of doing business, including increased taxes and increased employment costs. Another fee would dampen demand, especially from families and budget-conscious travelers, they say.
Critics have also challenged the lack of a national cap on the proposed levy. Some European cities have introduced visitor taxes, with caps on how much they can charge, but critics say each region could charge vastly different amounts — leading to uncertainty for tourists and businesses.
Leaders in the industry have warned that higher costs for visitors could hurt jobs in communities that rely on tourism. Small cities, rural destinations and coastal towns that rely heavily on the tourism dollar could be especially vulnerable if visitors choose other options due to added fees.
Supporters say the money raised could actually help boost tourism by improving public transport, city centers and visitor facilities. They say better infrastructure can make places more attractive and provide long-term benefits to businesses.
The Government has said the final decision on whether to introduce the levy would rest with individual mayors and local authorities. This would enable areas to decide whether a tourist tax is appropriate to their economic circumstances and priorities.
The debate is part of a wider row over how to fund local authorities. Supporters say the levy will give regions more autonomy, but opponents argue tourism should not be used as a substitute for adequate public funding from the central government.
Devolution Agenda Gives Local Leaders More Fiscal Muscle
The planned levy is part of a wider drive by the government to give more powers to the regions of England. The Labour government has embraced devolution, giving mayors more say over economic development, transport and public services.
The proposed system would allow local leaders more flexibility to raise and spend money in their regions. Proponents say mayors are more attuned to the challenges their cities face and where to best put the money to have the biggest impact.
Andy Burnham has long been a champion of further devolution to regions, particularly large conurbations like Greater Manchester. His agenda has been to devolve more powers over transport, economic policy and public investment to local government.
Other mayors have also called for greater financial independence. London Mayor Sadiq Khan has backed the idea of local services being partly paid for by visitors themselves and said cities should be able to impose visitor levies.
The government believes the policy could generate a lot more money for local areas. Officials have indicated that hundreds of millions of pounds could potentially be raised nationally, depending on the number of areas that decide to introduce the levy.
But there are questions about how the system would work in practice. Local authorities would have to find ways of collecting, setting rates and ensuring businesses could meet the new requirements.
There are also fears of regional rivalry. Some businesses worry visitors will avoid places that charge a levy and go to nearby places that don't. Supporters say spending the money in a transparent way could help to ease those worries, by improving local experiences.
Devolving tourist tax powers would be a big shift in the relationship between the center and English regions, giving mayors a new financial lever but also more responsibility for local economic decisions.
Tourist Tax Debate Points to Future of British Local Government
The proposed tourist tax is part of a wider discussion about the future of funding for local government in England. Local authorities are feeling the financial squeeze more and more and policymakers are looking at new ways of giving areas new sources of income.
Supporters say that tourism puts a strain on local infrastructure and services such as transportation systems, public venues and waste disposal. They argue that the users of these facilities should pay directly for their upkeep.
The government has pointed to similar schemes elsewhere in the UK and Europe as examples of how visitor levies can work. Scotland and Wales already have tourism taxes and many European destinations operate similar schemes to fund local projects.
But opponents say the hospitality industry in England is already under pressure and the extra costs could hit businesses. They want stronger safeguards, including restrictions on fees and better transparency about the destination of the money.
The plan is a step toward handing more powers to local mayors like Andy Burnham. Local leaders should be able to raise money and spend it on the needs of their communities rather than be subject to decisions made by the central government, they say.
In the months ahead, the debate is likely to be over the details of the policy — how it would be carried out, and how far it would go. Businesses, local authorities and tourism groups will be watching how the government balances the desire for economic growth with concerns about affordability.
If introduced, the tourist levy could be one of the biggest changes to local taxation in England for years. That would give mayors a potent new financial tool, and put to the test whether visitors and businesses are willing to pay more for better local services.
