North East and Tees Valley mayors given tourist tax powers

North East Mayor Kim McGuinness and Tees Valley Mayor Ben Houchen will be among the local leaders allowed to charge a new levy on overnight stays across the region.

Ms McGuinness has long advocated for such a levy and had suggested that about £20 million per year could be generated from an extra £2 per night charge on tourists booking hotels, holiday lets, bed and breakfasts, and guesthouses, with the revenue used to invest in improvements to the North East’s cultural attractions and staging more major events.

However, plans announced by housing secretary Angela Rayner today (Thursday, September 10) will require the levy to be charged as a percentage of the cost of accommodation – rather than as a flat fee.

No upper limit on the tourist tax has been set by the Government, but the Local Democracy Reporting Service understands that, while no decision has yet been made on what the North East levy will be, the mayor’s office would not impose a charge above five per cent.

Many European cities already have similar taxes on visitors and Edinburgh recently launched a five per cent charge on overnight accommodation bookings.

Liverpool charges a £2 nightly rate already and Manchester has a £1 charge, which raised £2.8 million in its first year after launching in 2023.  

However, the idea has been heavily criticised by hospitality sector leaders.

Ms McGuinness said: “I want the North East to be known across the world as a place people want to visit, stay and keep coming back to.  This weekend’s Great North Run shows the power of events to bring millions into the local economy and people from all over the world.

“A visitor levy could help us bring major international events to our region, back local businesses, improve visitor attractions, build on the 90,000 jobs already in this sector and unlock opportunities that come from a thriving visitor economy. 

“Most importantly, the money raised here would stay here, helping us invest in the future of our region rather than waiting for Whitehall to do it for us.”

Richard Bond, owner of holiday let management company Finest Retreats, warned that a tourist tax could have a damaging impact on places like Northumberland.

He said: “This is another blow to the UK’s tourism industry. Disguised as empowering local government, it’s essentially an anti-growth policy.

“For areas that introduce the visitor levy, fewer visitors could mean layoffs, or at the very least, fewer seasonal hires, especially considering these businesses are already absorbing higher National Insurance and minimum wages costs, none of which were in the manifesto.

“The UK’s tourism hotspots rely on visitor spending. If a nearby area introduces the levy and Northumberland doesn’t, being the cheaper option will mean visitors will follow and more trade and seasonal jobs will be created.

“But get it wrong and the opposite is true. This is a stark test of how much each community depends on tourism for their local economy, and frustrating for the business owners who aren’t a part of the decision yet have to shoulder the fallout.”

Mr Houchen has previously ruled out introducing a tourist tax in the Tees Valley.

When the Government announced plans to give mayors powers to levy a charge on overnight stays last year, the Tees Valley Mayor said: “I won’t be using this power. There will be no tourist tax in Teesside, Darlington and Hartlepool for as long as I’m mayor.”

He later reiterated his opposition in a social media post, saying: “Thanks, but no thanks.”

Allen Simpson, chief executive of UK Hospitality, told BBC Radio 4’s Today programme that the Edinburgh charge had already caused “damaging effects” since its introduction in July and that “jobs are now at risk” in towns that rely on the tourism industry. 

The Government said that money raised through a levy could be invested into high streets, public transport, and events, and that the decision to not make it a flat fee was about “shielding families from disproportionate costs for cheaper holidays”.

Ms Rayner added: “Our amazing towns and cities, and our picturesque rural and coastal communities welcome millions of visitors every year – local leaders should have the power to make the most of that popularity.

“This measure will give mayors the choice to raise and reinvest funding where it’s needed most. It’ll help support the local services, public spaces and attractions that both residents and visitors rely on, with decisions taken by people who know their area best.”

Henri Murison, the former Newcastle Labour councillor who is now chief executive of the Northern Powerhouse Partnership, welcomed the move.

He said: “We first made the case for this back in 2023 as part of a package of wider measures as successful visitor economies from the Lake District to cities like Newcastle or Liverpool need investment in transport, culture and public realm alongside effective destination marketing.

“Local leaders are far better placed than Whitehall to decide how that money should be raised and spent.”