Labour’s regional mayors in England have pledged to cap a new fee on visitors’ overnight stays at 5%, after hospitality bosses warned it could put jobs at risk.
Local leaders are set to gain new powers to charge an uncapped levy, dubbed a “tourist tax”, as a percentage of the cost of hotels, bed and breakfasts and other types of accommodation.
But the Labour mayors in 10 city regions said they would voluntarily limit the charge if they do apply it, adding that they had listened to concerns over costs.
Reform UK’s two regional mayors and the two Conservative ones are likely to oppose any levy given criticism from their national parties of the policy.
In a letter to Chancellor John Healey and Local Government Secretary Angela Rayner, the Labour metro mayors said 5% represented a “reasonable ceiling” on the tax.
“It provides a balance of ensuring that local levies are not excessive, or vary significantly between regions, while also leaving room for local variation as appropriate,” they added.
They added this would still allow for “meaningful investment” in local areas, whilst stressing any future levies in their areas would be “subject to local consultation”.
The letter was signed by Labour mayors in London, Greater Manchester, Liverpool City Region, West Midlands, North East, West of England, West Yorkshire, South Yorkshire, East Midlands and York and North Yorkshire.
The government had earlier pledged to protect budget holidays “by making sure low-cost accommodation always pays lowest levy” and said the extra cash could be invested in high streets and local transport.
While Labour mayors have backed the new levy, others have expressed caution or signalled they will not bring it in.
Local leaders, including heads of Foundation Strategic Authorities where there is no mayor, will need to clarify by early 2028 how the revenue raised should be reinvested.
They will also be allowed to offer exemptions, such as for campsites.
However, mayors will not be allowed to exempt whole localities within their regions from the tax, to avoid creating confusion for visitors and businesses.
The government said it would introduce a bill to Parliament “in due course” to bring in the levy, which would apply to both Britons and people visiting from abroad.