Tourist tax plan sparks backlash from rural businesses

Mayors across England are set to gain powers to impose an uncapped levy on overnight visitors, prompting warnings that the move could put further pressure on rural tourism businesses.

The proposed charge, widely described as a “tourist tax”, would be calculated as a percentage of accommodation costs rather than a flat fee.

Hotels, bed and breakfasts and other types of overnight accommodation would be covered by the plans.

Housing Secretary Angela Rayner is due to meet mayors on Thursday (10 September), with the government expected to outline how the new powers would work.

Local leaders would be given discretion over whether to introduce a levy and what approach would be appropriate for their area.

Ministers are expected to favour a percentage-based system in an effort to avoid disproportionately increasing the cost of cheaper accommodation.

The levy could raise hundreds of millions of pounds, with mayors able to direct the proceeds towards transport and other public services.

However, the proposal has prompted concern from the Country Land and Business Association, which says rural tourism and hospitality businesses are already facing substantial cost pressures.

CLA president Gavin Lane said: “A tourism levy sends entirely the wrong signal at a time when many rural businesses are already under significant financial pressure.”

The organisation argues that another charge on visitors would come at a difficult time for businesses already dealing with VAT, business rates and rising employment costs.

Mr Lane also questioned how the proposal fits with other measures aimed at supporting parts of the hospitality and visitor economy.

He said: “Business taxes seem as incoherent as they have ever been. Increasing taxes via a visitor levy while at the same time reducing VAT on visitor attractions and business rates for pubs and clubs seems very poorly thought through and confusing.”

The hospitality sector has already faced higher costs following tax and employment changes announced in last year’s Budget.

Mr Lane also pointed to wider financial pressure across the hospitality and retail sectors.

“The profit warnings from Greggs and Wetherspoons demonstrate that UK retail and hospitality is grappling with significant cost pressures, including 20% VAT, business rates and rising labour costs.”

The CLA says these pressures can be particularly acute in rural areas, where businesses may also have to contend with weaker transport links and digital infrastructure.

Mr Lane added: “This is compounded in rural areas with poor transport links, weak digital connectivity and restrictive planning rules.”

The government expects the levy could raise hundreds of millions of pounds for investment in transport and public services in areas receiving large numbers of visitors.

Giving mayors the power to introduce a local levy would also allow individual areas to tailor the charge to their own circumstances.

The CLA argues that adding another cost to overnight stays would come at a difficult time for rural tourism and hospitality businesses.

The government is not expected to impose a formal cap on the levy, although ministers reportedly do not expect mayors to set excessively high rates.

Mr Lane said policymakers should instead concentrate on improving the wider operating environment for tourism businesses.

He said: “Rather than introducing new costs for visitors and businesses, policymakers should focus on creating the conditions for this vital sector to thrive.”

Mayors would ultimately decide whether to introduce the levy locally and what rate to charge, while the CLA is urging ministers to focus instead on reducing the pressures facing rural tourism businesses.