London mayor welcomes new 'tourist tax' powers

The levy will apply to overnight stays in London

Mayor of London Sir Sadiq Khan will be able to bring in a tourist tax on overnight visitors to the capital under plans unveiled by the government.

The capital, along with other English regions with devolved mayors, will be given the revenue-raising power as part of what local government secretary Steve Reed called a "ground-breaking step for the future of devolution".

Sir Sadiq said the levy would allow City Hall to "raise money from tourists to use that to get more tourists, to improve the tourist experience" and prevent Londoners "inadvertently suffering" from "over-tourism".

Allen Simpson, UK Hospitality chief executive, said he was "incredibly worried" about its impact on the sector.

The London mayor said: "I speak on a daily basis to those who work in tourism [and] hospitality, and one of the things we talk about is how London stays the number-one city in the world.

"The frustration many of them have is the lack of investment in the public realm... this is one way for us to guarantee being the number-one city in the world."

Sir Sadiq Khan has long campaigned for powers over a tourism tax

Adam Hug, the leader of Westminster City Council, welcomed the measure but called for "a significant portion of the money raised" to be invested within his borough due to the number of visitors it receives.

He said the levy must have a "clear link to protecting and improving local services".

"It is essential that the government ensures mayors split the revenue with the local councils in their area to support these services, without which economic growth will suffer," Hug added.

Sir Sadiq said City Hall would work in partnership with London's boroughs "but also with businesses in the tourism and hospitality sector because we want a scheme that everybody can get the best deal out of".

Allen Simpson says the overnight levy will damage the hospitality sector

Mr Allen, who leads the trade body for the Britain's hospitality sector, said the overnight levy will "push up the price of holidays for Brits inside England" and that other countries with similar taxes have lower VAT rates.

"You can't put a half a billion pound tax on a sector with no impact at all. Hotels are already worried about tomorrow's Budget and what it will mean for business rates," he said.

"Eventually you have to stop balancing the books off the back of Britain's high streets."

The government said it would be up to local mayors to set the rate of the levy and it would apply to hotels, holiday lets, bed and breakfasts, and guesthouses.

Claire Holland - the chair of London Councils, which represents the capital's local councils - welcomed the levy but echoed calls for boroughs to be given a "fair portion" of revenue raised.

Antonia Jennings, chief executive of the Centre for London think tank, said the levy brings the capital "in line with other global cities".

John Dickie, Chief Executive of BusinessLDN, supported the levy's introduction but "only if its used to promote economic growth".

"Great care needs to be taken in shaping the timing and rate of any levy to ensure it doesn't hit hiring and investment," he added.