Introduced as part of upcoming budget announcements, the measure represents a notable shift in government policy. Only two months ago, ministers had publicly stated there were “no plans” for such a tax, a point critics say undermines trust and signals a policy U-turn. With many parts of England still struggling to rebuild from the economic effects of the pandemic and inflation, hoteliers and business owners argue that any additional charges on travel could significantly dampen domestic tourism.
A New Burden on Domestic Tourism and Local Economies
According to multiple reports, Chancellor Rachel Reeves intends to amend the English Devolution and Community Empowerment Bill to allow directly elected mayors, such as Sadiq Khan in London and Andy Burnham in Manchester, to introduce the new tax. These overnight charges, modelled on European-style tourist levies, are expected to generate hundreds of millions in additional revenue for local authorities.
The proposal has provoked a strong reaction from within the industry. UKHospitality, the leading trade body, warned that the measure could lead to an effective 27% tax rate on overnight stays once VAT and the new levy are combined. This would place England among the highest-taxed destinations for accommodation in Europe.
“Brits take over 89 million overnight trips in England, and stay for a total of 255 million nights. This is a bill we will all have to pay, and will only serve to ramp up prices and drive inflation.” said UKHospitality Chair Kate Nicholls.
Critics argue that while cities such as Paris and New York charge a tourism tax, they typically offer lower VAT rates on hospitality, a balance not currently planned in the UK. In Scotland, for instance, Edinburgh is due to introduce a 5% levy from July, while Wales plans a flat-rate charge of £1.30 per person per night by 2027.
Policy Shift Raises Questions About Trust and Timing
Opposition figures and trade leaders have also criticised what they describe as a policy reversal. In September, then-tourism minister Chris Bryant told MPs there were “no plans to introduce a tourism tax,” a position reiterated in official correspondence with stakeholders.
The new approach has been branded a “cash grab” by some Conservative mayors. Ben Houchen, Mayor of Tees Valley, said he would not implement the tax even if granted the authority, calling it a move that would “hammer hard-working people and our local hospitality businesses”.
Supporters of the levy argue that England is an outlier among G7 countries in not charging a tourism tax in major destinations like London. They say the funds raised could be used to improve public services, transport, and infrastructure, directly benefiting the communities that host tourists.
Nonetheless, questions remain about the potential impact on small businesses and price-sensitive travellers. “We need to get consumers spending,” said Nicholls, “But this, on top of the huge damage from last year’s Budget, would only mean people cut back more – and more jobs are lost.”
Government representatives have so far declined to comment directly, with a Treasury spokesperson stating only that the upcoming Budget will focus on “cutting waiting lists, cutting the national debt and cutting the cost of living.”
