“This is a new era of fiscal devolution in England,” declares the government’s consultation on its plan to give the country’s Mayors the power to raise a visitor levy – also known as a “tourist tax” – in their areas. How is it going to work? How will the money be spent?”
The consultation document says the levy could be raised on people who pay to stay overnight in anything from a hotel or bed and breakfast to a religious retreat or a yurt on a glamping site.
It also states that Mayors “should be able to invest visitor levy revenues in pro-growth projects” ranging from public transport and public realm improvements to “housing to allow employees to live closer to their places of work”, to supporting visitor attractions such as concerts or exhibitions.
The word “modest” is used to describe the size of levies collected in cities in other countries. In Rome, it is between four and ten euros a night, depending on the accommodation’s star rating, for up to ten nights. In Edinburgh, where a visitor levy will come into effect next summer, it will be five per cent of the accommodation cost, charged before VAT, for a maximum of five nights. Take note that residents of Edinburgh who stay in their own city’s hotels will have to pay it too.
The consultation document says that in England the levy could follow either of these examples: it could be set at a percentage of the accommodation cost or as flat rate on each person for each night they stay or on each room that is hired. The former is more more complex, the latter, regressive, as, like all flat-rate taxes, it means the wealthiest feel paying it less. And, of course, it would need to be set at a level that didn’t do more harm than good to the visitor economy by being set too high, resulting in potential visitors being put off.
There’s also the matter of who should get to spend the money raised, which in London has been estimated at potentially around £250 million. The government says Mayors would set the rate but is seeking views about how much of it they should retain and spend on what they think best, and how much they should give to local authorities in their areas – in London’s case, the 32 boroughs and the City Corporation.
Should a minimum revenue share for local authorities be set? This, the consultation says, would “ensure the impacts overnight visits have on local services is recognised”, but limit the ability of Mayors to “tailor shares to local priorities”. But maybe “tourist tax” takings could be allocated “based on the number of visitors in each local authority, or be agreed locally as part of the introduction of a levy”.
What London’s boroughs might get out of the levy is already of keen interest to them. Writing for On London, Brent Council leader Muhammed Butt said he strongly believes the visitor levy “must be flexible, designed by London boroughs, and its proceeds spent on the priorities of local people”.
He continued: “What works in Brent won’t necessarily work in Bexley or Bromley. And local leaders are best placed to balance the benefits of a levy against any risks to local tourism, adjusting the approach if needed.” If the boroughs are to be responsible for the levy being collected, he wants them “round the table” when it is designed.
The matter was also raised at the last Mayor’s Question Time by Gareth Roberts, who is both the London Assembly member for the South West constituency, covering Richmond, Kingston and Hounslow, and leader of Richmond Council.
As I reported in On London Extra, he asked Sir Sadiq Khan if he would be “seeking to ensure there’s equitable distribution amongst the boroughs of such revenues” or keeping it all for his own use. Speaking to BBC London yesterday, Westminster leader Adam Hug has made the same request. The Mayor told Roberts he was sure that whatever arrangement was made would “have the support of the boroughs”. We shall see.
In the meantime, there have been perhaps predictable complaints from UK Hospitality, though BusinessLDN deputy chief executive Muniya Barua told me in our pre-budget True London podcast conversation that although the timing of the measure might not be ideal, given how the hospitality sector has “been through the wringer” due to the pandemic and rises in the minimum wage and National Insurance, the principle of devolving the tax to London was a sound one.
She said the key would be the levy’s implementation and the importance of of it not having an adverse effect on a sector she described as “really critical to the vibrancy and attractiveness of London”. The consultation will continue until 18 February 2026.
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