2.1.3 – Devolution in England
Among the announcements in the Budget was a proposed “tourism tax”—a levy on overnight stays in towns and cities. It would be an optional charge that regional mayors could choose to introduce.
Several UK regions have so-called metro mayors: directly elected leaders responsible for a combined authority or metropolitan area. Their powers vary because devolution in England is asymmetrical, but they typically include responsibilities for transport, housing policy, and skills development.
Funding for these areas comes mainly from two sources: local taxation and central government grants. Some metro mayors receive additional council tax revenues to support the policy areas under their control, but most of their funding is provided through multi-year government grants, often allocated for major priorities such as transport.
In the Budget, English metro mayors were given new powers to charge tourists for accommodation within their regions. Similar measures already exist in Scotland and Wales, and in major global cities such as New York and Paris.
Whether to introduce the tax will be up to each mayor, and opinions differ. Labour mayors Andy Burnham (Greater Manchester) and Sadiq Khan (London) have both welcomed the measure. In London, it is estimated that the tax could raise up to £91 million per year. However, Conservative mayor Andy Houchen (Tees Valley) has said he will not implement it. Hospitality industry groups have also criticised the proposal; the Chair of UKHospitality described it as a “damaging holiday tax” that would undermine economic growth.
It is not yet clear whether there will be a cap on the size of the new tax. What is clear is that Labour is eager to continue devolving power within England as a means of encouraging economic investment.