Labour mayors are facing pressure to publicly support a reduction in Value Added Tax (VAT) for pubs, restaurants, and hotels as a prerequisite for introducing a new levy on holiday stays. Trade body UKHospitality has urged the party's 10 regional leaders to back a cut in VAT from 20% to 10% for food, drink, and accommodation.
The call comes amid growing criticism of the proposed Overnight Visitor Levy, which is expected to add 5% to the cost of hotel stays, bed and breakfasts, and holiday lets. Critics argue that this tax, combined with the current VAT rate, could make domestic city breaks in England significantly more expensive than international travel.
Allen Simpson, Chief Executive of UKHospitality, highlighted the disparity in tax burdens. "In France, Spain, Germany, and Italy the VAT is 10 per cent or lower but here we charge a full 20 per cent," he stated in a letter to the mayors. "With this new proposal a family from Bootle visiting Manchester could face a tax burden of around 27 per cent on their hotel stay, but a trip to Berlin would incur only 14.5 per cent."
The chief executive of holiday resort chain Butlin's, Jon Hendry Pickup, echoed these concerns, warning that the levy would disproportionately affect families with lower incomes and could harm businesses, particularly seaside resorts. He suggested that the new government's initial promise of hospitality relief appeared to be undermined by this tax.
Politicians have also voiced opposition. Tory leader Kemi Badenoch criticized the levy, stating it would make it more expensive for families to visit attractions like the British Museum. Government reports have acknowledged concerns about affordability, particularly during peak holiday seasons when accommodation prices may already be higher.
Despite these criticisms, the government has maintained that a percentage-based levy is fairer than a flat fee. The Transport Secretary indicated that the implementation and management of such taxes are a matter for regional mayors, not the central government. For instance, in London, the revenue generated from the tax could be used by Mayor Lord Khan to improve public transport.