Labour mayors have been urged to back value-added tax (VAT) cuts for the hospitality sector as a prerequisite for imposing a new holiday tax. The call comes amid growing criticism that the proposed Overnight Visitor Levy could significantly increase the cost of domestic breaks for families and harm businesses.
Trade body UKHospitality has written to the party's 10 regional leaders, who are expected to use new powers to add up to 5% to the cost of hotel and accommodation stays. Allen Simpson, Chief Executive of UKHospitality, argued that while such taxes are common globally, the UK's VAT rate on hospitality remains significantly higher than in many European countries. He noted that a family visiting a UK city could face a total tax burden of around 27% on their hotel stay, compared to approximately 14.5% for a trip to Berlin, where VAT is 10% or lower.
The chief executive of the holiday resort chain Butlin's, Jon Hendry Pickup, echoed these concerns, warning that the levy would disproportionately affect families with lower incomes and could damage businesses, particularly those in traditional resort towns. He suggested that treating all destinations and hospitality businesses uniformly would place an unfair burden on places like his.
Backlash Over Affordability
Conservative leader Kemi Badenoch criticized the proposed tax, stating it would make family weekends away more expensive. The government's own report on the levy acknowledged concerns about affordability, especially during peak periods when accommodation prices can already be higher due to seasonal demand.
The Transport Secretary, however, stated that the implementation of the levy is a matter for regional mayors, not the central government. She emphasized that the policy is designed to allow mayors to raise funds from visitors to popular cities, with potential revenue in London earmarked for improving public transport.
Government officials have maintained that a percentage-based levy is fairer than a flat fee, but the debate highlights a growing tension between local revenue-generating powers and the affordability of domestic tourism for UK residents.