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Holidaymakers could be forced to pay a ‘hotel tax’ as part of frantic efforts by Chancellor Rachel Reeves to stabilise the public finances.
Treasury officials are understood to have carried out ‘modelling exercises’ to work out the impact of introducing a similar ‘tourist tax’ to that applied in France, where a nightly accommodation charge ranges from less than a pound per person per night at a campsite to up more than £12 in a five-star hotel.
The move comes despite Ms Reeves’ insistence that she has no plans to add to the £40billion of tax rises she imposed in the autumn Budget, which have been blamed for crushing the UK’s growth prospects.
Soaring government borrowing costs over the past week mean that the Chancellor – currently on a much-criticised visit to China – risks breaking her own fiscal rules unless she raises taxes or cuts spending in an emergency Spring statement.
If borrowing costs remain high as a result of the so-called ‘bond market vigilantes’ effectively ‘pricing down’ Britain, other measures could also be required, such as increasing corporation tax or slashing disability benefits.
The country-wide ‘hotel tax’ – which would be paid by foreign and British guests – follows proposals for a new visitor levy in Wales, which would be paid by visitors and collected by accommodation providers. Edinburgh is planning to introduce a tax on accommodation from July 2026, charging guests in the Scottish capital a 5 per cent levy to stay overnight in an effort to raise up to £50million a year towards improving the city.
According to calculations by the TaxPayers’ Alliance, if the Welsh plan of charging a levy of £1.25 a night for each person was applied across England it would raise £560million per year: but adopting the French model could raise more than £1billion.
Last year Venice started charging overnight visitors between €1 and €5 (£0.83 and £4.15) and day tourists a fee of €5 (£4.15) per day. If the trip is booked at the last minute, the fee is increased to €10 (£8.30).
Holidaymakers could be forced to pay a ‘hotel tax’ as part of frantic efforts by Chancellor Rachel Reeves to stabilise the public finances
Treasury officials are understood to have carried out ‘modelling exercises’ to work out the impact of introducing a similar ‘tourist tax’ to that applied in France
The country-wide ‘hotel tax’ – which would be paid by foreign and British guests – follows proposals for a new visitor levy in Wales, which would be paid by visitors and collected by accommodation providers (stock image)
After a week of turmoil on the markets, the cost of ten-year borrowing for the Government hit its highest level since 2008, while the pound dropped to below $1.22. A falling pound boosts tourism by making the UK cheaper for foreign visitors.
The measure would be on top of the separate ‘tourist tax’ under which foreign visitors are no longer able to claim back VAT on their purchases – a move that has infuriated British retailers.
Last night hotelier Sir Rocco Forte, one of the UK’s most prominent businessmen, warned about the damage which would be caused to the UK tourist industry by an extra tax.
Sir Rocco said: ‘Travel and tourism is one of the most vital parts of the UK’s economy, with the industry contributing over £250billion a year to the UK’s GDP and supporting 3.5million jobs.
‘Apart from the very smallest businesses, everyone trying to make a living in this area is being hit by the Government’s increase in employers’ National Insurance and the whole industry is suffering from the refusal to restore tax-free shopping for tourists.
‘The Government has also hit tourism by raising the levy on air travel.
‘So it beggars belief that a new tourist levy could be imposed on top of that.’
He added: ‘This would be a pernicious new tax charged on top of all other taxes. The UK is already not a cheap destination, and this can only deter cost-conscious visitors who will increasingly choose to go elsewhere.
Hotelier Sir Rocco Forte, one of the UK’s most prominent businessmen, has warned about the damage which would be caused to the UK tourist industry by an extra tax
It is thought Ms Reeves (pictured with Prime Minister Sir Keir Starmer) is considering a tax
‘Visitors are also likely to spend less while they are here, given that their accommodation will be more expensive. That will hit the entire tourist economy – retailers, taxi drivers, restaurants and cafes, museums, galleries, tourist attractions – anywhere that visitors currently spend money. The truth is that the Government has imploded the economy with the last Budget and is desperate to raise revenue.
‘In other countries where there is a tourist levy the money raised is ring-fenced for projects to enhance the tourism experience or tourism infrastructure.
‘Doubtless the Treasury simply plans to use the money to fill the black hole it has itself created in the public finances.’
A Treasury spokesman said: ‘We do not comment on tax speculation outside of fiscal events.’
A Treasury source said: ‘Meeting the fiscal rules is non-negotiable.
‘The Chancellor has been clear that she will not repeat the likes of the October Budget. The Chancellor has asked the OBR to produce an economic and fiscal forecast on March 26. This will provide a clear assessment of our performance against the fiscal rules. We will not give a running commentary.
‘Difficult decisions have already been taken on spending and the Spending Review in June will root out waste in public spending and ensure that taxpayer money is focused on the Prime Minister’s Plan for Change. This includes boosting growth to put more money in working people’s pockets.’