Backlash at the bed tax: Rachel Reeves plans to bring in an overnight tax on top of your hotel or Airbnb bed for the night - costing Brits up to £500million
Rachel Reeves faced a furious backlash over plans to impose a ‘bed tax’ on hotel stays and holiday rentals.
In a move which could cost British holidaymakers more than £500million in additional tax, the Chancellor is set to give mayors new powers to charge tourists for overnight stays.
While the plan could bring in hundreds of millions of pounds for London’s Sir Sadiq Khan and Manchester’s Andy Burnham, hospitality chiefs warned it would cost jobs.
And Ms Reeves was accused of presiding over ‘another shocking U-turn’ just two months after one of her ministers ruled out introducing a tourism tax.
Under the proposal, first reported by The Times, the Government would amend the English Devolution and Community Empowerment Bill - currently making its way through Parliament - to enable mayors to impose the charges.
Ministers hope that most of England will have mayors by the end of the decade, and the powers would be granted to them - rather than councils.
The Government is said to believe England has become an outlier among similar countries for not having a tourism tax, with the devolved governments in Scotland and Wales also introducing one.
Edinburgh will become the first place in Scotland to charge the tax from next summer, with anyone booking a hotel, B&B or holiday let subject to a 5per cent levy.
Chancellor Rachel Reeves was accused of presiding over ‘another shocking U-turn’
UKHospitality warned that imposing the same rate of tax in England would cost the public £518million in additional tax.
It said the combination of 20per cent VAT, a 5per cent holiday tax, as well as the VAT charged on the tax itself, would create an effective 27per cent VAT rate for consumers on their holidays - one of the highest in Europe.
The trade body said that while many cities in Europe charge a tourism tax, they also charge a lower rate of VAT for hospitality.
Kate Nicholls, chair of UKHospitality, said: ‘If this is true, it would be another shocking U-turn from a Government who committed in the House of Commons only two months ago that it would not introduce a tourism tax, and in fact promised the industry the same thing in writing.
‘I know the Government is worried about the cost of living, but this holiday tax is little more than a higher VAT rate for holidaymakers. Brits take over 89 million overnight trips in England, and stay for a total of 255 million nights.
‘We need to get consumers spending. But this, on top of the huge damage from last year’s Budget, would only mean people cut back more – and more jobs are lost.
‘I hope the Government will reaffirm the commitment it gave in Parliament just two months ago and not introduce a holiday tax.’
The Conservatives also lambasted the plan, warning it would hurt already struggling hospitality businesses.
Shadow business secretary Andrew Griffith told the Mail: ‘A tourist tax would be to kick our hospitality and leisure businesses when they are already down.
‘The land of the £7 pint is already expensive thanks to Rachel Reeves and tourists have a choice.’
Tory Tees Valley Mayor Ben Houchen made clear he would shun the opportunity, branding it a 'cash grab'.
He tweeted: ‘This is another cash grab that would hammer hard-working people and our local hospitality businesses.
‘I won’t be adding to the burden that local businesses already face and never will. If Rachel Reeves gives me this power, I will NEVER use it.’
A Treasury spokeswoman said: ‘We do not comment on budget speculation. The Budget later this month will build stronger foundations to secure Britian’s future and focus on the priorities of working people: cutting waiting lists, cutting the national debt and cutting the cost of living.’
