Chancellor Rachel Reeves is eyeing up the introduction of a nationwide “hotel tax” as part of efforts to stabilise public finances, despite previous promises of no new taxes.
The proposed levy, modelled on France’s tourist tax system, could potentially raise more than £1billion annually.
Treasury officials have conducted modelling exercises to assess the impact of such a tax, which would apply to both British and foreign guests.
The move has come in spite of Reeves’ earlier insistence that she would not add to the £40billion of tax rises already imposed in the autumn Budget.
Chancellor Rachel Reeves is eyeing up the introduction of a nationwide “hotel tax” as part of efforts to stabilise public finances, despite previous promises of no new taxes
PA
Under the French model, accommodation charges can range from less than £1 per person per night for campsites to over £12 for five-star hotels.
Soaring government borrowing costs over the past week have pushed the Chancellor towards considering such emergency measures, as the cost of 10-year government borrowing has reached its highest level since 2008, while the pound has dropped below $1.22.
Reeves, currently on a visit to China, risks breaking her self-prescribed fiscal rules unless she raises taxes or cuts spending in an emergency spring statement.
If borrowing costs remain elevated due to “bond market vigilantes”, which are effectively pricing down Britain, additional measures might be required, including raising corporation tax or reducing disability benefits, according to Treasury sources.
Edinburgh is planning to introduce a five per cent accommodation tax from July 2026, aiming to raise up to £50million annually for city improvements.
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Wales has also proposed a visitor levy, to be collected by accommodation providers, whose proposal of a £1.25 per night charge, according to the TaxPayers’ Alliance, would generate £560m yearly if it were applied across England.
Venice recently implemented a similar scheme, charging overnight visitors between €1 and €5 (£0.83 and £4.15).
Sir Rocco Forte, a prominent UK hotelier, has issued a warning regarding the implementation of the tax, saying: “Travel and tourism is one of the most vital parts of the UK’s economy, contributing over £250billion a year to the UK’s GDP and supporting 3.5million jobs.
“This would be a pernicious new tax charged on top of all other taxes. The UK is already not a cheap destination,” he added.
Sir Rocco Forte, a prominent UK hotelier, has issued a warning regarding the implementation of the tax, hailing the industry as “one of the most vital parts of the UK’s economy”
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He argued the tax would deter cost-conscious visitors and impact the broader tourist economy, including retailers, taxi drivers, restaurants and tourist attractions.
Emphasising that meeting fiscal rules is “non-negotiable”, a Treasury spokesman said: “We do not comment on tax speculation outside of fiscal events.”
The source added that the Chancellor has requested an OBR economic and fiscal forecast for March 26, which will assess performance against fiscal rules.
“Difficult decisions have already been taken on spending,” the Treasury source said, adding that taxpayer money would be directed towards the Prime Minister’s Plan for Change.
The source emphasised this includes “boosting growth to put more money in working people’s pockets.”