Mayors in England are to be given the power to introduce an overnight visitor levy on tourists, under plans being announced by the government later.
Local leaders would be allowed to bring in an uncapped levy, dubbed a “tourist tax”, as a percentage of the cost of hotels, bed and breakfasts and other types of accommodation rather than a flat fee.
Hospitality leaders have warned “jobs are now at risk” because of the proposals and that families holidaying in England would feel the pinch.
But ministers are said to believe mayors are unlikely to make it too expensive with budget holidays protected by the fact it is not a flat fee.
The idea was first raised under former Prime Minister Sir Keir Starmer in November and is similar to schemes running in Scotland and European destinations.
The government will announce more details after the Housing Secretary Angela Rayner meets mayors virtually at No 10 North on Thursday afternoon.
Under the proposals, local leaders would decide how the revenue raised should be reinvested.
A government source said “it will be up to local leaders and local voters” in England “to decide what is right for their area”.
But it means a holiday in England could become more expensive if local leaders decide to implement the tax.
Leading trade body UKHospitality has hit back at the proposals, warning they are “not going to be painless”.
Its chief executive Allen Simpson claimed it would add about £100 to £120 on average to the cost of a family holiday in England, amid fears mayors would make use of the fact there is, in theory, no upper limit for the levy.
“We know, don’t we, that local government is struggling for funds – it was hit very hard by austerity,” he told BBC Radio 4’s Today programme.
“If you only devolve one tax raising power, of course local mayors are going to pull that lever until it snaps.”
He added: “It will be the case that you’ll have holiday parks which can’t open in the shoulder seasons [between peak and low season] and of course people who go on holiday will just have that little bit less money in their pocket.”
Conservative shadow housing secretary David Simmonds said: “VAT is already charged at 20% on hotels – much higher than in other countries – and now they’ll pay VAT on this tourism tax too: a Labour double whammy.”
Reform UK leader Nigel Farage said his party’s two mayors in Greater Lincolnshire and Hull and East Yorkshire “won’t touch” the levy, which he branded a “holiday tax”.
The Overnight Visitor Levy, which was outlined in the King’s Speech in May, has not been brought forward in Parliament yet.
Prime Minister Andy Burnham is framing the policy as part of his wider devolution agenda.
Under the plans, mayors and leaders of Foundation Strategic Authorities – which cover some regions without a mayor – would need to clarify by March 2028 how they would spend the new revenue.
Two cities in England already run their own voluntary schemes – a £1 per room, per night City Visitor Charge in Manchester, introduced when Burnham was mayor of the region, and a £2 nightly charge in Liverpool. These are business-led schemes where hotels choose to pool the money raised to support local tourism.
Regional mayors do not currently have the power to bring such fees in themselves. They argue it is needed to boost economic growth.
South Yorkshire mayor Oliver Coppard told BBC Radio Sheffield that Labour mayors would consult industry leaders before bringing in the levy. He said it could be spent on ares including street cleaning and night buses.
Mayor of London Sir Sadiq Khan, who will be at the No 10 North meeting, told the Standard on Thursday morning it “needs to happen sooner rather than later”. It is understood he supports a maximum 5% levy.
But Paul Swaddle, leader of Westminster City Council, responded by warning “there will be precisely zero benefit to Westminster residents and businesses” if Sir Sadiq does not share some of the cash raised with councils.
John Chappell, who runs five caravan parks in Skegness, Lincolnshire, told BBC Your Voice that many English tourist resorts have visitors on tight budgets already struggling with the cost of car travel.
He said an extra cost would “kill the industry off”.
“Tourists are the saviours of our resorts, not the demons and ill thought-out ideas like these show how out of touch with reality politicians are,” he added.
The taxes are common in Europe and the rest of the world, with New York, Amsterdam and Rome applying overnight charges to accommodation stays to fund local services. However, they are capped in several European cities.
In Scotland local authorities can charge a visitor levy on overnight accommodation. In Edinburgh, the rate is 5% for those staying overnight in hotels, bed and breakfasts and self-catering facilities – capped at five nights.
In Wales, a capped levy of £1.30 per person per night is set to be introduced in April next year, but it will be up to local authorities to decide whether to roll it out.
