Angela Rayner's push to allow regional mayors to impose a tourism levy has drawn sharp criticism, with warnings that the policy could cost thousands of jobs and billions in economic output. The plan, first introduced in Manchester in 2023, is part of a wider drive to give local leaders more fiscal powers.
Taxing overnight stays
The Government has described the ability for regional leaders to charge visitors staying overnight as "the most significant step in making fiscal devolution a reality." Officials said that ten regional mayors have committed to keeping charges at 5% of overall, standard fees or below.
However, UKHospitality has estimated that the levy could result in 33,000 job losses and a £2 billion hit to the economy. The criticism comes as businesses in the sector continue to recover from the impact of the COVID-19 pandemic.
Concerns over enforcement
It has also been reported that evading the tourist tax could carry a maximum penalty of 14 years in prison. Proposed measures target accommodation providers in England who might try to sidestep the levy, with legislation designed to prevent property owners offering reduced rates to friends that would lower the tax paid on temporary stays.
The plan has been criticised for adding to pressures on hospitality firms, which were already affected by increases to the National Living Wage and employer National Insurance contributions announced by Rachel Reeves. Ministers are said to be puzzled by the number of young people without jobs, given that hospitality is a common entry point into the workforce.
Contrast with other measures
The move appears to contradict the Prime Minister's stated aim of supporting businesses. At the Budget, the Chancellor announced that the threshold at which small companies start paying rates will rise from £12,000 to £18,000. Separately, Andy Burnham announced a 20% cut to business rates for pubs, social clubs, and live music venues in England.
Critics argue that such supportive measures are undermined by the introduction of a new tax, which they say complicates life for businesses that often depend on seasonal revenue. The reported prospect of prison sentences for non-compliance has been described as excessive.
