Uncapped levy on hotel stays risks ‘jobs bloodbath’, hospitality industry warns
Daily Telegraph 09/09/26
Andy Burnham is to hand mayors the power to impose unlimited taxes on tourists that could see families paying hundreds of pounds more to holiday in England.
Officials stunned the hospitality industry late on Wednesday by announcing that English mayors and other local leaders will be able to impose an uncapped “overnight visitor levy” on anyone staying in hotels, holiday lets and bed and breakfasts.
Bosses said they had been led to believe that the levy would be capped, as is the case in Wales. However, England will now follow the Scottish model, where there is technically no upper limit on what can be charged.
The tax will apply to all overnight visitors to towns and cities that decide to impose the levy, applying to each night of the stay. British families going on staycations and professionals travelling for work will have to pay the fee.
Funds from the tax will help to prop up crumbling council finances. The Telegraph understands that Angela Rayner’s Ministry of Housing, Communities and Local Government will announce the details of the policy as soon as Thursday.
Industry sources expressed fury at the proposals, which were briefed to mayors last week, warning that they would undermine the Government’s efforts to get young people back to work.
“There will be a jobs bloodbath at a time when they’re trying to get young people into work,” said the chief executive of one leading hospitality firm.
The Tories also criticised the plans.
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.”
Lord Houchen, the Tees Valley Mayor, said: “The overnight visitor levy is just a back door created by the Labour Government to tax businesses even more than they already do. This will add cost to do business, cost jobs and make it more expensive for families to holiday in the UK.”
Sir Keir Starmer first proposed introducing local tourist taxes in 2025.
Ms Rayner was a key supporter of the proposal, as was Andy Burnham, when he was the mayor of Manchester, where such a levy is already in place. Lord Khan, the Mayor of London, has also welcomed new powers in the capital.
In Scotland, Holyrood passed an act allowing overnight visitor levies in 2024. Edinburgh was the first to introduce the tax this summer, setting it at 5pc of the overnight rate. It is then capped at five nights.
UK Hospitality has warned that copying Edinburgh’s tourist levy would amount to a £1.6bn tax raid on the sector.
It would also add £100 to a family holiday and trigger tens of thousands of job losses across a sector that is already struggling with billions of pounds in extra taxes from surging business rates and National Insurance.
More than 100,000 jobs have disappeared from hospitality since Labour came to power.
It was unclear on Wednesday night if the number of nights the levy would apply to would be capped, as is the case in Edinburgh.
Mr Burnham’s plan to allow uncapped taxes on visitors will allow mayors to prop up crumbling local authority finances and invest cash back into the area.
Local authority finances are in crisis, with a record 35 councils now relying on £1.5bn of emergency government financial support to balance their books.
It will also open up a new revenue-raising stream for England’s 14 regional mayors, who do not have the power to raise council tax bills – a decision still made at local council level.
The majority of mayors have said they intend to use the tax powers to give back to their communities.
It is thought that the levy-raising powers will eventually be extended to all so-called strategic authorities under Labour’s regional devolution plans, which are temporarily on hold.
The introduction of tourist tax powers represents one of the first concrete steps in the prime minister’s devolution drive.
In its initial plans, the Government had said that it acknowledged “the importance of a levy being affordable, especially for family holidays and the need to provide stability and certainty for accommodation providers”.
It said “as such, it may be appropriate for some limits to be placed on local decision-making”, suggesting a “cap on the maximum tax rate could help to support business” and prevent “excessive rates that could negatively impact visitor numbers”.
Struggling to keep staff employed
Hospitality chiefs warned on Wednesday evening that they were already struggling to keep staff employed following the sharp rise in taxes and minimum wage under Labour.
Stephen Cassidy, the senior vice president at Hilton UK & Ireland, said: “There’s no doubt that employers faced with higher employment costs and higher costs of doing business are choosing to hire candidates with experience, and that has an impact on getting less people into work.”
He added: “The cost of operating a hotel has risen considerably, and wage cost levels plus taxation clearly have weighed heavily on that cost structure, and of course, hiring is just more costly. Vacancies are down. As a consequence, young people are increasingly caught in the experience trap.”
Allen Simpson, UK Hospitality boss, said Labour’s £26bn National Insurance tax raid on employers was the “single biggest contribution to job losses” in the sector.
Mr Burnham has said he is “on a mission” to reverse the near one million young people who are Neets – not in employment, education or training.
Many young people traditionally had their first job in the hospitality industry, typically in pubs, bars or restaurants.
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.”
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