Deputy Prime Minister Angela Rayner has been blocked from giving English councils the power to introduce a tourist tax on hotel stays, following opposition from Chancellor Rachel Reeves and concerns from the business community.
The proposed measure would have allowed local authorities to raise revenue from overnight visitors, similar to schemes already approved in Scotland.
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The decision comes as councils in England continue to face mounting pressure to fund local services amid constrained budgets, with growing interest in local levies targeting tourism hotspots.
Tourist tax plans face internal resistance
Rayner, also serving as Secretary of State for Levelling Up, Housing and Communities, reportedly wanted to give local councils the legal authority to apply a visitor levy on overnight stays in hotels, B&Bs, and short-term holiday lets.
Such powers have already been granted to Scottish local authorities and are due to come into force in cities like Edinburgh and Glasgow in 2026.
The proposal was met with resistance from Chancellor Reeves, who raised concerns about the potential impact on tourism, business confidence, and Labour’s broader economic message.
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By GlobalDataHospitality industry leaders also warned that a hotel tax could deter domestic and international visitors, particularly in cities still recovering from pandemic-era losses.
Scotland moves forward with hotel levies
While Rayner’s plan has stalled in England, local authorities in Scotland are preparing to roll out their own versions of a tourist levy.
Edinburgh is expected to introduce a £2 per person, per night charge from spring 2026, following the Scottish Parliament’s approval of the Visitor Levy (Scotland) Bill in May.
Glasgow and other local councils are also considering similar schemes.
The Scottish Government has positioned the move as a way for local areas to fund public services affected by tourism, such as street cleaning and infrastructure maintenance. Revenue raised from these hotel levies will be ringfenced for reinvestment in the local economy.
Councils call for fiscal flexibility amid budget strain
Many English councils argue that a local tourist tax would provide a much-needed source of revenue, particularly in cities with large numbers of seasonal visitors.
Council leaders from destinations such as York, Bath and Brighton have long advocated for the ability to introduce visitor levies, claiming that the current funding model leaves them unable to cover costs linked to tourism.
The Local Government Association has previously supported calls for greater fiscal devolution, including hotel taxes and other locally controlled charges.
With the Labour government committed to empowering regions under its levelling-up agenda, the decision to block the tourist tax powers reflects ongoing tensions between central economic policy and local government autonomy.
The debate over tourist taxation remains unresolved, with further discussions expected as councils continue to lobby for greater control over how they raise and spend money.
