UKHospitality has written to Labour metro mayors calling on them to support a cut in hospitality VAT to 10% before introducing any new overnight visitor levy, warning that the sector cannot absorb further tax pressure without risking jobs, investment and competitiveness.
In a letter sent by chief executive Allen Simpson, the industry body challenges mayors who have backed the Government’s proposed visitor levy to also support bringing hospitality VAT closer to levels seen in major European competitors.
Simpson argues that while visitor levies are common internationally, many comparable countries operate substantially lower VAT rates on accommodation and hospitality than the UK.
He wrote that France, Spain, Germany and Italy typically apply VAT rates around 10% or below on holidays and hospitality, compared with the UK’s standard 20% rate.
Hospitality cannot afford to pick up so much of the bill
UKHospitality’s central argument is that a new visitor levy should not be considered in isolation from the wider tax burden facing the sector.
The organisation has previously warned that a 5% levy could reduce GDP by £2.24 billion, cut tourism spending by £1.78 billion and put around 33,000 jobs at risk, based on modelling commissioned from Oxford Economics.
Simpson’s letter asks Labour mayors to make two commitments: first, to support reducing hospitality VAT to 10% and not implement a visitor levy until that change has been secured; and second, to back a statutory cap preventing any levy from rising above 5%.
He writes:
“Devolution is the future. But hospitality cannot afford to pick up so much of the bill.”
UKHospitality says 10% VAT would bring UK closer to Europe
The organisation has long campaigned for a permanent 10% VAT rate for hospitality, arguing it would give businesses more room to invest, create jobs and keep prices down.
Its latest intervention draws a direct comparison between the proposed English visitor levy and European tourism taxes.
At a London Assembly hearing earlier this year, Simpson argued that adding a levy on top of the UK’s 20% VAT rate could leave some stays facing an effective tax burden well above that in competing destinations.
UKHospitality says that distinction matters because ministers and mayors have repeatedly pointed to cities such as Paris, Berlin and Barcelona when defending visitor levies.
Pressure grows on Labour mayors
The intervention comes amid a widening debate inside Labour over the new powers.
Steve Rotheram has argued that a modest levy could raise millions for Liverpool City Region and help fund events, culture and improvements to the visitor economy, while other Labour figures have emphasised that mayors should be free to make different choices locally.
But Labour MP Emma Lewell has already publicly criticised the policy as “anti-growth” and warned that it comes at a difficult moment for hospitality.
UKHospitality is now seeking to turn that debate towards the wider tax treatment of the sector.
Government has already experimented with lower VAT
The Labour Government has shown some willingness to use VAT reductions as a targeted hospitality measure.
This summer it temporarily cut VAT to 5% on qualifying children’s meals and admission to certain family attractions as part of its Great British Summer Savings package.
UKHospitality welcomed that move but said it should be seen as a stepping stone towards a wider permanent reduction for hospitality.
The organisation argues that lower VAT would support jobs, strengthen high streets and help British tourism compete internationally.
A growing test for Labour’s devolution agenda
The dispute highlights one of the central tensions in Labour’s devolution programme: how to give local leaders meaningful revenue-raising powers without creating additional pressure on sectors already facing tight margins.
Supporters of the levy argue that locally raised money can be reinvested directly into destinations and infrastructure, helping tourism grow over the long term.
UKHospitality’s response is that any new levy must be accompanied by a broader attempt to reduce the sector’s overall tax burden.
The challenge now for Labour mayors is whether they can reconcile support for greater local fiscal autonomy with growing pressure from hospitality businesses for a 10% VAT rate and firmer safeguards around any future visitor levy.
