No 10 quashes Rayner's demand for tourism tax

Telegraph

3 days ago

Downing Street has backed Rachel Reeves and rejected Angela Rayner's proposal for a tourist tax.
After her dispute with the Chancellor over councils charging visitors to use hotel rooms, the Deputy Prime Minister has been lobbying the Treasury to allow councils and regional mayors to be given new powers to charge 'Barcelona-style' taxes.
She has teamed up with Labour mayors, including Sir Sadiq Khan and Andy Burnham, in calling for more 'fiscal devolution' and called it 'deeply disrespectful' to councils that Westminster dictates their budgets.
But Ms Reeves is opposed to the idea and has refused to grant any further tax-raising powers, The Telegraph reported on Monday.
She strongly objected to the idea of local authorities raising their own money beyond the council tax already charged on properties.
Labour sources said the difference in opinion was at the heart of their rift on tax policy, and that Ms Rayner had long called for more devolution from Westminster.
Downing Street has now said that there are 'no plans' to introduce tourist taxes, in an apparent rebuke of Ms Rayner's position.
'Places can already choose to introduce a levy on overnight stays through working with their local tourism sector, using the accommodation business improvement district model,' Sir Keir Starmer's official spokesman said on Tuesday.
'Tourism obviously plays an important role in the UK's economy.'
'Transformative' impact
Pressed on whether Ms Rayner had been lobbying in favour of the policy, and why her department had discussed it with some local authorities, the spokesman added: 'There are no plans to introduce it.
'Obviously, the Government regularly consults on a wide range of issues.'
The issue is the latest in a series of disputes between Ms Rayner and Ms Reeves on tax policy.
Earlier this year, The Telegraph revealed a leaked memo written by Ms Rayner suggesting a range of tax hikes to the Treasury.
The ideas were rejected by Ms Reeves, who let it be known she is solely responsible for tax policy.
Councils and mayoralties have been pushing for tourist levies for some time, believing that they could have a 'transformative' impact on their areas at a relatively low cost to visitors.
Manchester and Liverpool have both introduced a flat rate charge of £2 per night on hotel stays within their 'business improvement districts', but are barred from making the tax city-wide by Westminster.
Many European cities, including Barcelona, Lisbon and Amsterdam, charge a flat rate or percentage-based tax on hotel stays.
The hospitality industry is opposed to a similar system being introduced in the UK, arguing that Britain's 'tourism competitiveness' has been eroded by higher rates of VAT than in many European countries.
Ms Reeves is understood to agree with the sector that further taxes on their profits should be kept to a minimum after the hike in employer National Insurance rates in last year's Budget and new workers' rights rules that would be costly to implement.
One hotelier in Dorset said a tourism levy would cost them £600,000 a year, and that travellers would go elsewhere to avoid it.
But Sir Sadiq told a podcast last month that tourists 'don't mind' paying a 'small levy' in European cities.
He said: 'We could spend more money improving the public realm, which would encourage more tourists to come but also improve the quality of life for residents in London.'