There has been a mixed response to plans for an overnight visitor levy
Conflicts are looming between councils and combined authorities over the government’s plans to give mayors powers to charge a levy on overnight accommodation.
Ministers face growing calls to allow greater local say over the policy – with demands including ring-fencing revenues, giving councils a veto or granting them their own tax-raising powers.
The government announced the levy – sometimes referred to as a ‘tourist tax’ – in November to raise funds to support local growth and the visitor economy.
A Ministry of Housing, Communities & Local Government (MHCLG) consultation, which closed in February, said the powers were intended for “mayors in England, and potentially foundation strategic authorities” – a position since reiterated in March by Lords minister Baroness Sharon Taylor (Lab), who said the policy “is principally linked to the growth remit that we have given our mayors”.
An overnight visitor levy exists in many European cities, and councils in Scotland and Wales recently gained powers to introduce one. So far, the response among English mayors has been predictably split along party lines.
Many Labour-run strategic authorities, including London, Greater Manchester and Liverpool City Region, have welcomed the proposals.
York and North Yorkshire CA mayor David Skaith (Lab) said the levy “will be a total gamechanger for our region”. Referencing the authority’s research with York St John University that claimed a £2 a night charge could raise £52m a year for the region, he said it could “revolutionise how we deliver transport, support businesses, invest in infrastructure and the visitor economy”.
Meanwhile, Ben Houchen (Con) in Tees Valley CA and Andrea Jenkyns (Ref) in Greater Lincolnshire CA have said they will not take up the opportunity.
Veto powers
Some of these authorities’ member councils, however, take different views – such as Conservative-led North Yorkshire Council, which argues that constituent councils “should have a veto on whether [the levy] is introduced in their local authority area”.
In a letter responding to the government consultation, North Yorkshire’s cabinet member for open to business, Mark Crane (Con) said its own consultation with the local tourism industry had found “significant concerns over administrative burdens, potential declines in bookings due to price increases, and risks to competitiveness”.
Among 270 respondents to an online survey, 71% opposed the introduction of a levy, with only 18% supporting it. One said “it is hard enough to attract visitors already in the current economic climate”.
Cllr Crane’s letter said that “business sentiment is divided” across the combined authority. While there is “moderate support” in urban York, “in rural North Yorkshire, opposition is strong and widespread among accommodation providers”.
The letter argues that “this disparity must be addressed through inclusive decision making that safeguards rural economies and does not allow urban priorities to dominate”, saying “a ‘one size fits all’ approach would simply not work”.
As well as veto powers, North Yorkshire is calling for levy revenues to be “ring-fenced to the area in which the revenue is generated” and for a mandatory “formal consultation process” that “residents must form a core part of”.
The exact form of the levy has not been determined. But North Yorkshire leader Carl Les (Con) told LGC suggestions such as £2 per night were “not as modest as the proponents are saying” when applied to more inexpensive accommodation, which “we pride ourselves on the fact that we have a lot of”.
Cllr Les said key questions were “who’s going to do the levying?”, “who’s going to decide where it’s going to be spent?” and “who’s going to decide what it’s going to be spent on?”.
He added: “Clearly we would want to have a voice in that decision making, but equally in talking to the industry, they’re saying that they want to have a voice in it as well.”
Locally-led approach
Even at councils that support a levy – such as Bournemouth, Christchurch and Poole (BCP) Council – there are concerns about ensuring a local say.
In a letter to the communities secretary Steve Reed in December, Richard Herren (Lib Dem), BCP’s portfolio holder for destination, leisure and commercial operations, expressed concerns that mayors “could allocate revenue to infrastructure projects outside the area where the funds are raised”, with income generated from tourism “diverted to general wider growth initiatives”.
He called on the government to “extend the ability to raise a tourism levy to all local authorities” rather than just mayors.
BCP’s anxieties have some justification in the language of the government’s consultation. According to this, the government believes local leaders should be able to invest levy revenues in “pro-growth projects, including both initiatives directly related to the visitor economy and broader initiatives which have a positive impact on the region’s economic health”.
Cllr Herren told LGC “our intent is very much that it would be spent with the tourism industry and we would like to see a ring fence for that, and [the revenue] not used to prop up the other financial issues that all local authorities around the country are facing.”
He believes this approach could be “transformative for our destination economy”, making possible renewed support for areas such as tourism marketing and certain events it has recently had to reduce funding for.
BCP is calling for mayoral devolution as part of the Wessex Partnership with Dorset, Somerset, and Wiltshire councils. But Cllr Herren said that with BCP receiving “at least a million” overnight stays a year, he didn’t want to see “money raised here disappearing off to support a motorway project for growth in parts of North Somerset”.
“We obviously would have a really large proportion of the hotel and overnight accommodation within the potential Wessex area,” he said. “And we think it’s only fair that if we’re taxing essentially a sector… it’s spent on that sector in that area.” He argued that even if a mayor is a requirement for the levy, “the government could provide options within that [for it] to remain local authority-led, even at a strategic level”.
‘Too early’ to decide
There are also calls for more local control within metropolitan combined authorities – such as the West Midlands CA, where mayor Richard Parker (Lab) is “broadly supportive” of the levy.
Solihull MBC’s consultation response noted that the expectation of using levy revenues to support wider growth was “looser” than what is permitted in Scotland and Wales.
Solihull said “we would be concerned if areas that generated a significant amount from visitor levies did not receive a fair distribution from the strategic mayoral authority, particularly where the visitor economy creates pressures locally”.
Since Solihull contains Birmingham’s airport and National Exhibition Centre, the borough would expect to generate a higher revenue from it than other parts of the combined authority.
Heather Delaney (Con), portfolio holder for economy, business and skills, told LGC that “there’s a lot of talk about how a visitor levy will put more money into a local council budget, [but] actually we don’t know that that’s the case… Money collected in Solihull may well not be spent in Solihull.”
She said it was “too early” to take a firm view without more “detail as to how a levy would work, what sort of money they’re talking about charging people, and where that money would end up going”.
Sector bodies for tourism and local government have also called for revenues to stay local. ABTA and the Tourism Alliance oppose the levy, and say that if it is implemented, mayors should be “required to invest a proportion of the revenues raised to promote and develop local tourism”.
London Councils is calling to “keep the levy local”, saying the capital’s boroughs should be able to retain 50% of revenue raised in their area.
And the Local Government Association (LGA) says councils and mayors should decide “jointly” whether and how to implement a levy, and “how funding is allocated across a strategic authority area”.
The lack of a LGA cross-party position on the visitor levy highlights the extent of diverging views on it – and many concerns and practical questions remain. One thing that does seem clear is that the policy is unlikely to proceed without controversy.