Proposed Visitor Levy

[Clive Efford in the Chair]

I beg to move,

That this House has considered the proposed visitor levy in England.

It is a great pleasure to see you in the Chair, Mr Efford. It is also great to see the Minister in her place; we have a very highly regarded Minister to respond to the debate. She is a Ministry of Housing, Communities and Local Government Minister, but she will be responding on behalf of the entire Government, as Ministers always are when responding to debates in Parliament.

This subject touches on a number of Departments: the Department for Culture, Media and Sport is the sponsoring Department for tourism, but the debate is also relevant to the Department for Business and Trade, because of the trade considerations and export earnings; the Department for Transport, for obvious reasons; the Department for Work and Pensions, as tourism is one of the biggest employers in the country; the Home Office, which issues the visas; the Foreign Office, which is responsible for our international relations and soft power; the Cabinet Office, which owns the GREAT campaign; and, of course, the Treasury, which takes an overall view of taxation and is responsible for ensuring economic growth.

The proposed visitor levy is another measure that was not in the Labour manifesto—indeed, up until very recently, Ministers were actively saying that they would not introduce it. There has been limited debate on it and, although there has been a consultation, it was on how, not whether, the levy should be implemented. There are many different aspects to think about. There are the effects on the cost of living—it would push more people to take holidays abroad rather than staying at home—and the effects on youth unemployment and local economies. I am sure colleagues across the Chamber will make a number of those points; they are relatively straightforward points to land. I will focus on one that is not quite as easy to land, but that I think is just as important: the role of inbound international tourism into our country, the contribution that makes to the economy and the necessity not to hamper that.

There is a natural inclination among humankind to want to see more of the world. As societies, and the world as a whole, get richer, one thing we can guarantee is that travel and tourism will grow—in fact, they grow faster. For every 1% of world GDP growth, we see between 1.5% and 2% of growth in world tourism. Travel and tourism become an ever-enlarging part of the world economy, and—this is relevant at a time when we often worry about structural changes coming to labour markets—they are largely, although not entirely, AI-proof. Travel is also just a good thing. It brings people together for everything from family reunions to forging new business relationships and partnerships. Travel is good for the soul: people can discover new places, people and experiences, and there is opportunity to unwind and to see the world differently—literally—and as a result are able to think differently.

Domestic tourism is good for all those reasons. Of course, it is also very important for individual colleagues’ constituencies and their local economies.

Is the issue not also about the way the economy is balanced? The truth is that some areas of the country, including Hartlepool, will struggle to bring people in with their tourism offer compared with others. A tax such as this actually drives money and investment away from areas that need it most. Is that not why such a holiday tax is bad for constituencies such as Hartlepool?

That is one of a number of worries I have about this proposal; I am grateful to the hon. Member for putting it in such a rational and straightforward way.

I was coming on to say that international inbound tourism scores even more highly because, counterintuitively, tourism into this country is an export. In classical Keynesian economics—if I may appeal to the Government side of the House in that way—it is an injection into the circular flow of the economy. It is not spend that is displaced from some other activity; it is a net increase in economic activity in our country, which means that it is a net creator of jobs.

For the Exchequer, tourism is particularly attractive because tourists are on average very low users of public services. However, while they are here, they spend money not just on their travel and accommodation, but on their food and beverages, their purchases and activities, and on all those things they are paying tax and contributing to the Exchequer.

It is important to reflect that in the United Kingdom tourists face a VAT rate of 20% on their spend, whereas in Germany it is only 7% and in Spain, France and Italy it is 10%. Does the right hon. Gentleman agree that the Labour Government need to reverse their job-killing national insurance contribution hikes, which have had a massive impact on our hospitality industry up and down the country, including in my constituency?

I do agree; the hon. Member makes some very good points about national insurance contributions, which I will go on to talk about further. He also makes some very good points about looking at the set of taxes as a whole—we cannot just look at a bed tax or a tourism tax without thinking about all the other taxes. However, if I may, I promise him that I will come on to those matters later.

Inbound tourism is something that we are rather good at as a country. How could we not be, when we have great cities such as London, Manchester, Edinburgh, York, Bath and Brighton, as well as the lakes, the Peaks, the moors, the dales and the beautiful South Downs, part of which I have the privilege of representing? There is also our literary heritage, not least Alton and the village of Chawton in East Hampshire, the home of Jane Austen. Britain is also the birthplace of more sports than most of us could name if we were prompted to do so in 60 seconds. There is also the draw of screen “on location” sites, as we have recently seen in the “Starring Great Britain” campaign, west end theatre, live music and much more.

There is also the small matter of the English language—and believe it or not, even the weather actually acts in our favour. The fact that so much more of our inbound tourist infrastructure is indoor means that our tourist season is much longer, and we have considerably less seasonality in our tourist numbers, than many of our competitor nations.

All those things help to explain our success. We are the seventh or eighth biggest country in the world by tourist arrivals, but we are even higher—third in the world, in fact—for tourist receipts. Of course, that is particularly driven by London, which is a very high-value market, but overall, tourism is our third largest services sector by export earnings, and comparable to goods sectors such as automotive and pharmaceutical.

We do inbound tourism well, then; but tourism is also a competitive market and the reality is that we are not doing as well as we used to. We are doing well, but worse. Over the last 30 years, the UK’s market share of world tourism has tumbled. It has come down by something like half.

I will just pick up on that point about competitiveness and competitive advantage. Is it not the case that those much-visited cities—Paris, Rome, many cities in Spain and others throughout Europe—have measures such as this proposed levy, yet they have not seen decreases in tourism? How is that a competitive advantage point for us? Is it not actually the case that tourists want the culture, events, activities and even investments in policing that this sort of measure could fund?

I do not know if the hon. Gentleman heard the earlier intervention by the hon. Member for Torbay (Steve Darling), who made the point—quite rightly—that we cannot look at a single tax in isolation. I will come on to discuss that point, and I will invite the hon. Member for Uxbridge and South Ruislip (Danny Beales) to look at the maths on what happens when we add up all the taxes together and compare the cities that he has just mentioned with cities in this country.

We have lost market share, and it turns out that reaching the big target that the Government now have, to reach 50 million arrivals in the next few years, will involve—believe it or not—us losing more market share. Therefore, the great big ambition is for us to lose share of the global market for tourism. We should be much more ambitious than that.

Governments of all sorts and all flavours have acknowledged the importance of tourism, verbally and in writing. I will not go through all the sector deals and so on that there have been through the years. We now have, or at least anticipate, the visitor economy growth strategy from the current Government. However, I do not think—and I am not making a party political point here, because this applies to multiple Governments—that any Government in this country in my lifetime have ever given attention to this sector commensurate with its importance and potential.

The visitor levy became law in Scotland in September 2024, allowing Scottish local authorities to apply a 5% charge on overnight stays. It is due to be implemented next year in my constituency and is estimated to bring in £1.7 million annually. Last month, I met Loch Lomond and The Trossachs National Park Destination Group to hear their concerns about the tourist trade. While I suspect the right hon. Member disagrees with a levy, does he agree that, if a levy is to be introduced, it should clearly be invested in a manner that benefits and strengthens the local tourist economy, in consultation with trade—not just to fill a black hole in council budgets?

The hon. Gentleman is a wise man, and he anticipates a point I will come to very shortly.

Under the previous Government, candidly, there were increases to air passenger duty, rises in visa charges, the introduction of the electronic travel authorisation at a price of £10, and of course the loss of VAT-free shopping for tourists. The new Government are not just carrying on with those things, but adding cumulatively to those costs at a significantly greater rate. They are doubling the price of the ETA, which will now be £80 for a family of four. In fact, ETAs and visas are now both considerably above European price levels—considerably so, in the case of visas. On ETAs, unlike others, we do not give even a discount, let alone an exemption, for children or for people over 70. The Government have also cut the marketing budget for VisitBritain by 41%.

On top of all that, they now propose to bring in a bed tax. What is that bed tax? We do not know. It could be many things. It could be per room or per person. It could be a fixed percentage of the room rate, a fixed amount or tiered fixed amount. If it is a tiered or fixed amount, what amount? In truth, however, whatever amount is set initially is probably pretty irrelevant. Let us not forget that air passenger duty started at a rate of £5 and £10 and now ranges between £15 and well over £200. Will children be discounted or exempt?

The consultation talks about giving powers to a mayor; what about places that do not have a mayor? What will the scope be? Will it include sleeping in a tent? Will it include holiday camps, static caravans, scout camps, school trips, pilgrimages, hostels, homestays or sleeper trains? We do not know the answers to any of these questions right now.

Will the right hon. Gentleman give way?

The hon. Gentleman knows the answer!

I wanted to add one important category that he did not list, which is short-term lets and Airbnbs.

That was my next sentence!

He will know that in my constituency there is a very high concentration of Airbnbs—I have not read his speech in advance—which have contributed to antisocial behaviour, rubbish put out on the wrong day, and even breaches of leases, which can cause fire safety and insurance issues. I welcome the introduction of this levy, partly because it will help to collect a contribution from the short-term lets in my constituency.

Mr Efford, that really was my next sentence, because there are questions about short-term lets, and about second homes in Cornwall and so on. On the short lets issue—whether rents are being pushed up is sometimes another concern with short lets—this levy is not going to solve that problem. The Government will need to do something structurally different if they want to address those short lets questions.

UKHospitality talks about this tax being

“the wrong policy at the worst time”.

One of my worries is that entrepreneurs in the tourist industry in North Yorkshire and elsewhere are on their knees due to post-covid issues, national insurance, rates and a whole range of factors. Would my right hon. Friend agree that, whatever the merits of this policy, the levy must be paused until those businesses are back on their feet and start investing again?

I do agree. My right hon. Friend and I have been in multiple debates in the main Chamber talking about exactly those issues, both for tourism and for the wider hospitality sector.

There are some arguments in favour of an overnight visitor levy, some of which have come up already. The main one is summed up in the sentence,

“Visitor levies provide local government with a financial incentive to grow the visitor economy.”

That has truth to it, and there is definitely an argument for making hospitality more hospitable through more investment in the visitor economy—in facilities, events, policing and so on. The sector needs more money going into sales and marketing if we are to realise our potential, so there might be an argument for this measure if the money were truly ringfenced—if it were only being spent on truly incremental items. Even then, we would still get the problem where hotels over quite a wide area pay it but the events, attractions, extra policing and so on all take place somewhere else. That might apply in Hartlepool, for example, as has been mentioned. It will certainly be the case in London—a hotel in Brent Cross is not going to feel the benefit of some extra things being put on in theatreland in the west end.

Of course, though, the money will not be ringfenced. Even if it is nominally ringfenced in year one, do we honestly believe that in year five it will still be ringfenced? Of course it will not.