Labour mayors are being urged to support VAT cuts for pubs, restaurants and accommodation if they proceed with plans to impose a five per cent overnight visitor levy on hotel stays, bed and breakfasts and holiday lets.
The party’s ten regional leaders are expected to use powers granted by the Prime Minister, but hospitality businesses have warned that the charge could make breaks in England more expensive than holidays abroad.
UKHospitality chief executive Allen Simpson has written to the mayors calling for public backing for a campaign to reduce VAT on food, drink and accommodation from 20 per cent to 10 per cent.
Mr Simpson said other European countries combined lower VAT rates with visitor taxes. “In France, Spain, Germany, and Italy the VAT is 10 per cent or lower but here we charge a full 20 per cent,” he wrote.
He added that a family travelling from Bootle to Manchester could face a tax burden of about 27 per cent on a hotel stay, compared with 14.5 per cent for a trip to Berlin.
The appeal came after Jon Hendry Pickup, chief executive of Butlin’s, warned that the levy would affect families on lower incomes while adding to the pressure on businesses.
“The Holiday Tax impacts UK people taking a UK break, hitting those who can afford a holiday the least, the hardest,” he said.
Mr Hendry Pickup also argued that applying the same approach to every destination would place an unfair burden on seaside resorts, while larger cities could welcome the additional powers.
Conservative leader Kemi Badenoch criticised the proposal, saying it would make family trips to attractions such as the British Museum more expensive.
The Government’s own report on the levy acknowledged concerns about affordability, particularly during school holidays, when accommodation prices can rise through seasonal or dynamic pricing. It nevertheless said a percentage charge was fairer than a flat fee.
Transport Secretary Heidi Alexander rejected the idea that the policy amounted to a national tax, saying it would instead give mayors and leaders of foundational strategic authorities the ability to raise a small amount from visitors to popular cities.
She said London mayor Lord Khan could use the proceeds to improve the capital’s public transport system.
