The Chancellor is set to give mayors and regional authorities the power to impose a tourism tax.
Rachel Reeves is to allow local leaders to introduce a tourism tax (Image: Getty)
Holidaymakers will have to pay an extra tax to stay in a British hotel, Rachel Reeves is set to announce in her Budget. She is expected to give mayor-led regional authorities the power to impose a tourism tax, adding up to 5% to the cost of a hotel room or Airbnb-style rental. The goal is to provide more funding for mayors to grow local economies with transport and infrastructure schemes.
But UK Hospitality, the trade body representing hotels, restaurants and bars, said the tax will mean “more jobs are lost”, with British tourism industry already suffering as a result of tax rises and an increase in the minimum wage. Kate Nicholls, Chair of UKHospitality, said: “If this is true, it would be another shocking U-turn from a Government who committed in the House of Commons only two months ago that it would not introduce a tourism tax, and in fact promised the industry the same thing in writing.
“I know the Government is worried about the cost of living, but this holiday tax is little more than a higher VAT rate for holidaymakers. 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.
“It would effectively hike our VAT rate to 27% at a time when Ireland has cut VAT on hospitality to 9% and Germany already has a VAT level of 7%.
“We need to get consumers spending. 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.
“Hospitality cannot foot the bill for the rest of the economy yet again.”
The Chancellor has said she wants to fund measures to grow the economy, including infrastructure projects, but has been forced to abandon plans to increase income tax, leaving her searching for more ways to get money to regional authorities.
It would be a u-turn from the position set out by Sir Chris Bryant MP, then the Tourism Minister, who told the House of Commons in September: “We have no plans to introduce a tourism tax.”
However local government secretary Steve Reed has been pushing the Chancellor to give local authorities more tax-raising powers, including a tax on hotel rooms.
