Mayors gain new tax powers

What's happened

The government has given English regional mayors the power to charge an overnight visitor levy as a percentage of accommodation costs with no statutory upper limit. Industry groups and major hotel chains have warned the uncapped power will raise prices, reduce demand and cost jobs; mayors say revenue will fund local services and infrastructure from 2028.

What's behind the headline?

What the policy actually does

• The Overnight Visitor Levy gives mayors an optional power to add a percentage charge to the cost of hotel rooms and other paid overnight accommodation. The government has not set a cap; mayors will decide rates and how to spend receipts.

Who wins and who loses

• Local authorities and cultural bodies will win predictable new revenue streams they can ringfence for transport, cleaning and events. Mayors will be able to borrow against more stable income once fiscal devolution is expanded.
• Hospitality firms and seaside resorts will lose pricing competitiveness where mayors choose higher rates. Trade bodies warn job losses and lower demand if many areas impose a levy.

The political logic

• The government is using the levy as a practical lever to shift fiscal power out of Whitehall and to let local leaders fund visible services. That helps the premiership present devolution as tangible change ahead of the autumn budget.

Operational risks and likely outcomes

• Mayors will set different rates, so the policy will create uneven costs across England. Tourists and conference organisers will prefer levy-free or lower-levy places; some holiday businesses will face pressure in the shoulder season.
• Industry estimates that a national 5% levy could reduce visits and cost thousands of jobs will drive business lobbying. Local leaders will counter by pointing to revenue examples: Manchester's small charge has funded cultural events and Edinburgh's 5% scheme is already raising money.

Forecast

• Many city mayors will set modest levies (around 1–5%) to avoid deterring visitors while funding infrastructure. Coastal and rural destinations that depend on low-cost breaks will resist the levy. The policy will therefore redistribute funding within England but will also force local leaders to defend the economic case for every percentage point they choose.

How we got here

Ministers have put fiscal devolution at the centre of policy, offering mayors new powers including shares of income and corporation tax and the overnight levy. Scotland and Wales already allow local visitor charges; pilots and local schemes in Manchester and Edinburgh have informed the policy design. The government will publish further devolution detail ahead of the October 28 budget.

Our analysis

The coverage divides along interest lines. Reuters (Andy Bruce) and BBC reporting have presented the levy as part of a wider fiscal devolution drive, noting that mayors will be able to decide spending plans by early 2028 and that the measure is optional. The Guardian emphasised the scale of devolution and cited IPPR North and Jim O’Neill on phased fiscal powers, warning of the need for strong accountability: "A bad decision or mismanaged funding from any one authority risks turning public opinion against devolution," the IPPR report said. Industry voices are loud in the Independent, Mirror and BBC pieces: UKHospitality warned of job losses and reduced demand, with Allen Simpson saying a 5% levy could cost 33,000 jobs; Hilton and Whitbread called the move "a catastrophic blow" (Independent). Local leaders quoted in the Mirror and Guardian framed the levy as a revenue tool: Brent leader Muhammed Butt said the charge should be "ringfenced for the visitor economy", and Liverpool mayor Steve Rotheram estimated modest levies could raise millions for transport and cleaning. Reuters's Centre for Cities and IPPR analyses have focused on fiscal structure and the need for phased devolution and borrowing powers; they warned against rushing powers to authorities lacking capacity. Readers should consult Andy Bruce at Reuters and Andrew Sparrow and Aditi Sriram in The Guardian for policy detail, and Allen Simpson's quotes in multiple outlets for the hospitality sector's counter-arguments.

Go deeper

• Which mayors have already said they will or will not introduce a levy?
• How will the government enforce accountability for how levy revenues are spent?

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