Mayors are set to receive authority to implement a fresh tourist levy on overnight accommodations. The government announced plans to grant local authorities the ability to enforce a nominal fee on guests staying in hotels, B&Bs, guesthouses, and vacation rentals. Comparable measures are already in place in major cities like New York, Paris, and Milan.

This initiative aims to empower mayors to generate funds for local initiatives such as transportation and infrastructure projects. Notable figures like Andy Burnham of Greater Manchester and London Mayor Sir Sadiq Khan have praised the move. However, industry leaders in hospitality have criticized it as a burdensome holiday tax that will likely be transferred to customers.

The development coincides with Rachel Reeves preparing to unveil her highly anticipated budget, addressing tax and expenditure plans to address public finance deficits. Steve Reed, the Local Government Secretary, highlighted the significance of leveraging tourist traffic to support local priorities and sustain growth in communities.

Regional leaders, including Sir Sadiq, expressed optimism about the levy’s potential benefits for London’s economy, enhancing its status as a global tourism and business hub. Meanwhile, Mr. Burnham emphasized the economic contribution of nearly two million annual visitors to Greater Manchester, underscoring the levy’s role in enhancing visitor experiences through infrastructure enhancements.

Kate Nicholls, chief of UKHospitality, condemned the government’s decision as a detrimental holiday tax that would escalate costs for travelers and potentially inflate prices across the hospitality sector. She warned that the levy could substantially raise the effective VAT rate for UK holidaymakers, potentially making it one of the highest consumer tax rates in Europe.

Nicholls cautioned that the added costs would inevitably be passed on to consumers, fuel inflation, and contradict the government’s efforts to reduce the cost of living. A consultation on the levy’s specifics will remain open for feedback until February 18.