Exclusive: Mayors can use tourist tax to ramp up borrowing, Burnham tells business

Andy Burnham, the former Labour mayor of Greater Manchester, defended his new uncapped "tourist tax" by asserting it will enable mayors to increase borrowing, City AM has learned. During meetings at Labour’s Business Day, business organizations were informed that the overnight stay levy would allow mayors to take on additional debt and invest in infrastructure and public assets.

This strategy aims to address concerns about the potential negative impact of new charges on tourists. However, hospitality industry representatives are warning banks against providing loans to mayors due to the uncertainty surrounding the tax's future. The holiday tax, announced by the former Sir Keir Starmer government, will be charged as a percentage of accommodation costs rather than a flat fee.

Hospitality bosses have criticized the tax for placing a significant burden on customers and warned that it could deter tourists and harm the hospitality industry. During a recent discussion, London’s deputy mayor for business, Howard Dawber, argued that the new tax could facilitate borrowing for infrastructure projects, such as extending the Bakerloo Line, by allowing mayors to issue bonds or utilize property tax increases.

Hospitality industry leaders, including Allen Simpson of UKHospitality, contend that lending against the tax would be a poor financial decision since there is a real possibility that future governments may abolish the levy, leading to potential defaults. The government maintains that the new powers are part of an effort to devolve authority from Westminster to local governments and that the funds raised from the tax will be invested in the local economy, including high streets, public transport, and tourism-related activities.