Mayors to be given power to impose tourist tax

The levy will be decided by local leaders and charged as a percentage of the cost of accommodation to overnight visitors, rather than a flat fee, which the Government argues will protect budget holidays.

The tax would have no upper limit, though Government sources said local leaders were unlikely to make it too expensive, with most indicating it would be a few per cent.

In London, officials are yet to make a decision on how the scheme will work, but it is understood the charge will be no higher than 5%.

Housing, Communities and Local Government Secretary Angela Rayner will meet mayors in No 10 North before further details of the policy are announced on Thursday.

Plans for the tax were first announced under Sir Keir Starmer following similar schemes introduced by the devolved administrations in Scotland and Wales.

Prime Minister Andy Burnham reiterated his commitment to the policy in July as part of his wider devolution agenda, and the Government expects mayors to be able to impose the levy by the end of this Parliament.

Charges of a similar nature already exist across Europe, with the revenue used to fund local services. Local leaders would decide how to invest the money raised from the levy if they choose to introduce one.

Downing Street defended the plans on Thursday amid questions over its impact on cash-strapped households already struggling to afford a holiday and businesses during low season.

No 10 insisted the “overwhelming majority” of hospitality firms would not be “directly affected” by the policy because the charge only applies to overnight accommodation and would be at the discretion of local leaders.

“We’ve been clear that any levy should be proportionate and charged as a percentage of accommodation costs, rather than a flat fee, in order to protect budget holidays,” a spokeswoman said.

“And local leaders will be in charge of how it is applied, including flexibility for local exemptions.”

The official added: “The fundamental principle behind this is that we trust local leaders to make decisions for their areas. That’s why we’re shifting power out of Whitehall and giving communities more control.”

Allen Simpson, chief executive of UK Hospitality, warned that a similar levy introduced in Edinburgh in July was “already having damaging effects” and said jobs could be at risk in communities that rely on tourism and hospitality.

“I would say to those people in these communities that their jobs are now at risk,” Mr Simpson told BBC Radio 4’s Today programme.

“It will be the case that you’ll have holiday parks which can’t open in the shoulder seasons and of course people who go on holiday will just have that little bit less money in their pocket.”

Andrew Griffith, the shadow chancellor, said: “An unlimited tourist tax would be hugely limiting for the chances of the young people who might otherwise be employed in tourism and hospitality.

“Propping up dodgy town hall finances on the back of even higher youth unemployment would be utterly wrong.”

A Government source said: “We have always been clear that while central government will set the framework for this power, it will be up to local leaders and local voters to decide what is right for their area.”