Benjamin Elks is the Grassroots Development Manager at the TaxPayers’ Alliance.
The prime minister may or may not have much longer in Number 10 but the King’s Speech a couple of weeks ago made clear that this government is moving in only one direction. The speech consisted of a range of bills that place the state above the individual, give more powers to quangos, nationalisations, costly renewables, and, of course, a new holiday tax.
Now, the government didn’t actually call it a holiday tax; they preferred the term overnight visitor levy. We should be under no illusions though, a tax on holidays is exactly what it is. The general idea is simple. Those staying overnight whether in a tent or caravan on a campsite or in hotels or B&Bs and the like will pay an additional charge for the pleasure of doing so. The money raised can then be spent on local priorities, typically to boost tourism, support local infrastructure, or other projects to improve the local area and economy.
The move is an effort to start devolving fiscal levers to mayors and strategic authorities, not a bad concept in and of itself. Decentralising tax powers should in theory improve accountability and strengthen the link between local spending decisions and how they’re funded. The trouble is of course, that, for example, rather than giving communities control over existing levies like how high business rates should be, they’re given the power to implement new taxes instead. All that does is risk turning devolution into little more than a licence for local politicians to extract more money from taxpayers.
That being said, you can see why the idea might be appealing. Mayors and local authorities have been asked for years to do more by central government while their funding has failed to keep pace with what they’re being asked to do. Now they’re being offered the chance to introduce a levy that their residents typically wouldn’t pay themselves but would only be due from people visiting the area. A politically convenient way to raise new money without additional hikes to council tax or other fees and charges. Afterall, tourists can’t vote against local politicians who introduce them. This is born out in mayoral support for the tax. Of the 14 regional mayors in England, only three (Conservative Ben Houchen and Reform’s Andrea Jenkyns and Luke Campbell) have ruled them out. Paul Bristow is said to be considering it in Cambridgeshire and Peterborough. Of the other ten, all Labour mayors, one doesn’t know, two are considering, and seven are in favour.
As ever, though, the reality would be far from the win-win scenario envisaged by the ministers in Whitehall who drew up the plan and the mayors chomping at the bit to introduce it. For starters, the impact of a holiday tax on tourism and hospitality could be absolutely devastating.
In Wales, where councils have the power to introduce the levies from April 2027, polling suggests that 16 per cent of people who would otherwise have taken an overnight holiday in Wales would no longer do so because of a holiday tax. Of those, four per cent said they would not go on holiday at all, while 12 per cent said they would simply choose another destination. According to the TaxPayers’ Alliance (TPA) this could mean a whopping £359 million hit to the Welsh economy, hammering hotels, pubs, restaurants and communities reliant on tourism for survival. As these stats only look at domestic tourism, once international travellers are factored in, the true impact could be much more significant.
Meanwhile, polling from UK Hospitality found “18% of Brits would be stopped from booking a holiday in England by any increase in cost from the new tax. That rises to a majority (57%) if the tax increased the cost of a holiday by £50 and to 85% if the tax added up to £100 to the cost of a trip.” The World Travel and Tourism Council similarly found 28% of Brits would consider somewhere else or not holiday in the UK should the tax be £5 per night, and this rises to 39 per cent if the tax is £10 per night. Applying these figures to statistics from Visit Britain, the TPA found this could translate into reduced domestic tourism spending of between £6 and £13 billion.
These aren’t just abstract figures, they’d have real consequences for business and workers. The hospitality sector has already taken a battering over recent years. From hikes to business rates and employer national insurance to the Employment Rights Act and an increased minimum wage, there have been few occasions where they’ve faced a more hostile government. The results of this are being felt already with pubs closing at a rate of almost two per day. The rate of unemployment among young people, who often rely on hospitality for their first jobs, now stands at 16.2 per cent, an 11 year high. A holiday tax will only pour fuel on the fire.
Overnight visitor levies may seem like an easy way to generate more cash from people who can’t vote you out, but they could be the final nail in the coffin for many businesses reliant on tourism to stay afloat.