Ten Labour-led city regions across England have jointly pledged to limit any new tourist levy on hotel and accommodation stays to no more than five percent, after urgent warnings from the hospitality sector that unchecked charges could jeopardise thousands of jobs. The commitment, set out in a formal letter to senior government figures, represents an attempt to balance the need for local investment with the political sensitivity surrounding holiday costs at a time when family budgets are already under considerable pressure.
A Greener Approach to Local Funding
The proposed levy would give regional mayors the authority to charge visitors a percentage-based fee on every overnight stay in hotels, bed and breakfasts, and other accommodation providers within their jurisdictions. While the government had initially left the ceiling open-ended, Labour metro mayors have moved to reassure both businesses and travellers that they will exercise restraint.
In their letter to Chancellor John Healey and Local Government Secretary Angela Rayner, the ten Labour mayors described five percent as a “reasonable ceiling” that strikes an appropriate balance. “It provides a balance of ensuring that local levies are not excessive, or vary significantly between regions, while also leaving room for local variation as appropriate,” they wrote, adding that the measure would still permit meaningful investment in local economies.
The signatories represent London, Greater Manchester, Liverpool City Region, the West Midlands, the North East, the West of England, West Yorkshire, South Yorkshire, the East Midlands, and York and North Yorkshire. Each area would be required to conduct local consultation before implementing any charge, and mayors would be permitted to offer targeted exemptions, such as for campsites. However, they would not be allowed to exempt entire localities from the tax, a safeguard designed to prevent confusion among visitors and operators alike.
Budget-conscious travellers are expected to receive some protection. The government has pledged that low-cost accommodation will always attract the lowest rate, a move intended to shield affordable stays from disproportionate charges. Authorities will also need to set out by early 2028 how revenue generated by the levy would be reinvested locally.
Hospitality Sector Sounds Alarm
The hospitality industry has reacted with fierce criticism, arguing that even a capped tax adds an unwelcome burden at a time when many English resorts are already fighting for survival.
UKHospitality chief executive Allen Simpson told BBC Radio 4’s Today programme that the levy puts jobs at risk and would add an estimated £100 to £120 to the average cost of a family holiday in England. He warned that mayors could theoretically exploit the absence of a firm upper limit, pulling “that lever until it snaps.” “We know, don’t we, that local government is struggling for funds — it was hit very hard by austerity,” he said.
Simpson also raised concerns about the broader economic ripple effects, suggesting that holiday parks may be forced to close during shoulder seasons between peak and low periods. “And of course people who go on holiday will just have that little bit less money in their pocket,” he added.
John Chappell, who operates five caravan parks in Skegness, Lincolnshire, echoed these fears, telling BBC Your Voice that many tourist destinations depend on visitors with tight budgets who are already grappling with rising travel costs. “Tourists are the saviours of our resorts, not the demons, and ill thought-out ideas like these show how out of touch with reality politicians are,” he said.
A Political Fault Line
The introduction of a tourism levy has exposed clear divisions among England’s regional mayors, with party allegiance appearing to shape positions as much as local economic considerations.
Reform UK leader Nigel Farage confirmed that his party’s two mayors in Greater Lincolnshire and Hull and East Yorkshire would not implement the charge, which he branded a “holiday tax”. Meanwhile, Conservative shadow housing secretary David Simmonds attacked the policy on double taxation grounds. “VAT is already charged at 20% on hotels — much higher than in other countries — and now they’ll pay VAT on this tourism tax too: a Labour double whammy,” he said.
Reform UK’s two regional mayors and the two Conservative ones are widely expected to oppose the levy outright, reflecting sustained criticism from their national leaderships. Conservative Mayor of Tees Valley Ben Houchen previously ruled out introducing any tourist tax altogether.
Labour’s push for the charge is not without precedent within the party’s own ranks. Both Manchester and Liverpool already operate voluntary, business-led schemes — a £1 per room per night City Visitor Charge in Manchester and a £2 nightly fee in Liverpool — which channel funds into local tourism promotion. The idea itself was first floated under former Prime Minister Sir Keir Starmer in November and mirrors programmes already running in Scotland and several European destinations.
A 5% overnight charge has been operational in Edinburgh since July, though its reception there has been mixed. While some welcome the additional funding for public services, Scottish Ballet has blamed the levy for cutting performances, citing what it called the “unsustainable economics of touring in Edinburgh”. In Wales, a capped levy of £1.30 per person per night is scheduled to take effect in April next year, though individual authorities will decide independently whether to adopt it.
The government has indicated it will introduce a bill to Parliament “in due course” to formalise the levy, which would apply to both domestic and international visitors. Two cities in Scotland and several major global destinations, including New York, Amsterdam, and Rome, already impose similar overnight charges, though many of these are subject to strict caps.
Why it Matters
The tourist tax debate sits at the intersection of two competing priorities: the urgent need to fund local infrastructure, high streets, and transport links, and the very real risk of pricing out the budget travellers who sustain many of England’s most vulnerable coastal and heritage towns. The five percent cap proposed by Labour mayors shows a pragmatic attempt to head off industry backlash, but whether it is enough to protect jobs and keep destinations competitive remains far from certain. With Edinburgh already demonstrating that even modest levies can force cultural organisations to scale back their activities, and with Reform UK and Conservatives signalling outright opposition, the policy’s journey through Parliament could prove as contentious as its implementation. What is clear is that the levy will reshape the economics of domestic tourism in England — the question is whether the investment it generates will ultimately outweigh the cost to the sectors it touches.
