Tourism Levy

Question

14:57:00

Asked by

To ask His Majesty’s Government what evaluation they have made of the potential benefits of a tourism levy to alleviate funding pressures facing seaside and coastal communities.

My Lords, the Government have no plans at present to introduce visitor levy powers in England. The spending review allocated place-based funding that aims to benefit many seaside and coastal communities.

My Lords, I thank the Minister for that encouraging reply. Will he ensure that powers which might be required to enable local authorities to develop such a tourist tax will be included in legislation extending devolutionary powers, so that local authorities can work with businesses and other civic institutions to help regenerate our poorer seaside and coastal communities—encouraging them particularly in the hospitality, arts and cultural sectors?

I am grateful to my noble friend for his question. I pay tribute to his consistent campaigning on this issue and on behalf of these communities in general, and to his expertise in this matter. He has led several reviews into it. We have been engaging with stakeholders to understand their proposals and will continue to do so, but we have no plans to introduce visitor levy powers in England. I hope he will have seen in the recent spending review that the Government announced communities funding for up to 350 places. Of the 75 places that were listed, 17 are on the English coast. We also announced funding for an additional 25 neighbourhoods over the next decade. Of the 20 additional neighbourhoods, eight are coastal. I hope that goes some way towards addressing the issues that my noble friend sets out.

My Lords, I am sure that the Minister’s words will be greatly reassuring to the hospitality industry. However, in light of the important contribution that is made by the visitor economy to both wealth creation and jobs, can the Minister give the House an assurance that if any proposal were to be brought in, it would be for a fixed amount and not a percentage of room rate, that it would be modest and that it would be fully consulted on through DCMS? Further, given the heavy burden already being borne by the hospitality industry, will he study the example and possible mistakes of the Scottish system? I declare an interest as a former chair of VisitScotland.

I cannot give the noble Viscount assurances on something we are not actually considering doing, so I am afraid I cannot give him what he wants. As he says, different places in different countries choose to raise revenue from overnight visitors in different ways, depending on whether they are seeking to attract them, accommodate the results of their visit, or deter them from coming—different scheme designs do different things. We have no present plans to introduce such a levy.

My Lords, the tourist levy initiative is not just about seaside towns, important though those are. Manchester has introduced a voluntary charge; others are following. Are the Government at least looking at the recommendations of the Cultural Policy Unit’s report on this levy, which argues that it could provide an additional but potentially significant regional funding stream for arts and culture, but that to maximise impact and revenues, it would need to be legislated for?

I am grateful to the noble Earl for his question but, at the risk of repeating myself, we have been engaging with stakeholders to understand their proposals, and we will continue to do so, but we have no present plans to introduce visitor levy powers in England. The noble Earl will be aware that councils and local businesses can choose to raise revenue by setting up business improvement districts; for example, Bournemouth has a coastal business improvement district with the objective of attracting visitors, improving and developing the visitor experience, and building prosperity. That levy will raise over £2 million over five years.

My Lords, I understand that Edinburgh has become the first city within the United Kingdom to impose a city-wide visitor levy, which will come into effect next year. But it appears that HMRC now proposes to impose VAT upon the levy; it seems intrinsically unfair that a tax is imposed upon a tax. The matter appears currently to be shrouded in doubt—can the Minister clarify the position?

I do not know the position on that. I will happily check and write to the noble Baroness.

My Lords, I do not want to trespass on my noble friend’s usual reluctance to comment on anything that might appear in a future Budget, but is it not part of the devolution agenda to allow combined authority mayors—or, for that matter, the Mayor of London and other existing mayors—to make use of this as a tool to help regenerate their various services that tourists use and enjoy, as is commonly the case elsewhere? Could he also perhaps reflect on his earlier answer about business improvement districts? There, if I understand it, the levy is on existing businesses, not on the people who might use the services concerned. Can he say whether this is under active consideration in terms of the Government’s devolution agenda?

I am grateful to my noble friend for his question. As he says, there are devolved Administrations who have proposals in this regard. We have been engaging with them to understand their proposals. Obviously, we will continue to do so but, as I have said, we have no present plans to introduce such a levy.

My Lords, talking about business improvement districts, there is no better sector to help improve any town centre or business district than hospitality, which was hit very hard in the recent Budget by national insurance contributions, minimum wages and, indeed, business rates. How will this tourism tax help hospitality businesses continue to grow and invest in our town centres and seaside resorts?

I do not know what tourism tax the noble Lord is talking about because, as I think I have made clear, we have no plans to introduce what he is describing. He talked about the recent Budget. In the Budget we introduced a number of policies to help this sector, including freezing the business rates small business multiplier, together with a small business rates relief. This will exempt over a third of properties from business rates. We have also taken steps to reverse the decline of high streets, where one in seven shops now lies empty, by empowering local authorities through high street rental auctions to bring empty units back into use, and committing to permanently lowering business rates for retail, hospitality and leisure properties from 2026.

It seems pretty clear that a tourist tax is emerging as a form of generating revenue. Edinburgh, as was said earlier, is imposing one next year, and there are two voluntary levies, in Manchester and Liverpool. It seems to me that the Minister should certainly look at this in a couple of years’ time to see whether it is feasible. But does he agree the key will be that it supports culture, and indeed the hospitality businesses on which it is levied, and does not simply become just another tax that disappears into the council’s coffers?

The noble Lord is talking about something that, again, we have no present plans to introduce.

Will my noble friend bear in mind that cities as diverse as New York, Paris and Berlin have tourist taxes and that there is no noticeable lack of tourists in any of them? Would this not provide a valuable source of income, particularly for elected mayors, for example? Dynamic pricing—I understand that is what it is called—means that the price of a hotel room can vary by up to £100 a night, depending on the number of potential customers; a fiver or so will not make much difference in those circumstances.

My noble friend rightly points to different cities that have different systems in place. I think I said that different places in different countries choose to raise revenue from overnight visitors in different ways, depending on whether they are seeking to attract them, to accommodate the results of their visits or to deter them from coming. As I have said a number of times, we have no present plans to introduce visitor levy powers in England.

My Lords, I do not believe that it is desirable to impose further costs on visitors to our seaside and coastal towns; nor will it incentivise them to come in greater numbers. We need to encourage visitors to these areas, not to discourage or tax them—as, happily, the Minister seems to be saying. A far better incentive for our seaside towns would be for the Government to reverse the devastating tax increases that they imposed recently on the hospitality industry, particularly with regard to national insurance. Given the hit to employment in that sector, do the Government have any revised plans to help with this difficult situation?

The noble Baroness rightly talks about the importance of the visitor economy. The Tourism Minister has set a goal to grow inbound tourism to 50 million visitors annually by 2030. To help achieve this, DCMS has established a new visitor economy advisory council, which is currently helping to co-create a visitor economy growth strategy, due to be published in the autumn. The strategy endeavours to share the benefits of tourism across every nation and region, including coastal and seaside areas. The noble Baroness speaks about national insurance increases; it is only a few weeks since we stood here and she supported all the spending in the spending review that that national insurance is funding, so she probably needs to make up her mind whether she supports the spending or does not support the tax that pays for it. As I have already said, we introduced a number of the policies in the Budget to help this sector, including freezing the business rates small business multiplier, together with the small business rates relief. This will exempt over a third of properties from business rates.

My Lords, one of the problems that face seaside towns is that homeless people tend to prefer to be there rather than inland. Do the Government have any plans to make sure that the cost of looking after homeless people is shared more fairly and does not fall to such a large extent on seaside towns?

As I said, the Government announced significant place-based funding in the spending review. Part of that MHCLG funding was targeted specifically at helping homeless people.