England Tourism Tax Plan Centers on Fiscal Devolution
The Taxman In England Is Almost Entirely National
Most people in England assume that the money they pay for local services is raised and spent locally. The numbers do not support that assumption. According to the latest OECD data, just 6 % of national taxes in the United Kingdom are collected below the level of the national government. That share is far below the European Union average. That is the lowest share in the G7. The government’s own document describes England as one of the most centralised countries in the developed world, with only a small proportion of taxes raised and retained locally A country that collects almost everything in one place and allocates it from that same place behaves differently from one where cities keep what they raise. The argument now opening about a tourist tax is, underneath the name, an argument about that difference.
The Ministry of Housing, Communities and Local Government has now published its plans for a visitor levy, or tourism tax, in England. The plans are explained in a formal response to the consultation process that was launched at the end of last year. The document gives the instrument its official name: the overnight visitor levy, or OVL. It also sets out the case the government intends to make for it. That case is about the structure of the state before it is about holidaymakers. The levy is not described in the paper as a standalone tourism measure. It is placed inside a wider programme of moving tax-raising powers — fiscal devolution, in the language of the document — away from central government.
The document also puts a date on the process. Ministers say visitor levy powers in England should be in place by March 2028. [2] By that point, mayors should be able to set out plans for how they will use the money the levy raises. The trigger for all of this was a consultation launched at the end of last year, and its formal response is what has now been published. The gap between that consultation and the promised powers is therefore measured in years, not months. Local leaders who want the revenue will have to wait for the clock. What the timetable does not settle is how much money the levy would raise, or at what rate.
Who Should Hold The Purse
The plans rest on OECD research. That research found that enhanced fiscal decentralisation (shifting tax and spending control from central to regional or local governments) is associated with higher economic growth and regional convergence — convergence meaning that poorer regions catch up with richer ones. The same research puts a figure on the relationship. Doubling the share of tax or spending controlled by subnational governments is associated with an increase in national GDP per capita — economic output per person — of 3 % on average. [2] Two words carry the weight here: associated with. The finding describes a relationship between decentralisation and growth, not a guaranteed return. For a government deciding where tax money should be collected and kept, that distinction is the whole argument. A correlation is not a receipt.
The plans then compare the United Kingdom with countries that collect far more of their tax locally. In France, Japan and the United States, much higher shares of tax collection sit below the national level. Higher local tax collection is associated with greater local investment and economic dynamism. The United Kingdom sits at the other end of that comparison. France, Japan and the United States are not emerging economies testing an idea; they are large, established ones with long-standing local taxation. The comparison places England’s arrangement next to theirs and leaves the distance visible.
The foreword to the paper is signed by Jim McMahon, the local government minister, and James Murray, the Treasury minister. [3] They describe the overnight visitor levy as just the first step in the government’s fiscal devolution programme. Their stated aim is to put power, responsibility and accountability back in the hands of local leaders across the whole of the United Kingdom. Within England, they call the levy the first step towards implementing the blueprint set out in the cabinet statement, which is intended to shift power out of Westminster. The levy is not the only instrument in that programme. Alongside it sit plans to devolve a portion of income tax and to enable mayors to retain some of the business rates — the property tax paid by commercial premises — generated in their areas. The ministers present all of this as a commitment to creating a state that is accountable to local people.
Bristol Says Yes, North Somerset Asks Questions
In the west of England, the response has been largely positive. Helen Godwin, the Labour mayor of the West of England, said people are used to paying a visitor levy themselves when they go on holiday to other countries. [5] Now, she said, is the time to look at making sure the region can invest more in what matters through a small charge on overnight stays here, with common-sense exemptions where they are needed. She said funds raised through a tourist tax could be spent on improving services such as late night public transport. [5] They could also go towards sprucing up public spaces in Bristol and Bath. Things like this become possible sooner, she said, if new funding is raised through an overnight visitor levy. A few quid here and there can add up to some big change, in her words. [5]
Council leaders in the region went further in a joint statement. The statement came from the leaders of Bristol, which is Green-led, and of Bath and North East Somerset and South Gloucestershire, both of which are Liberal Democrat-led. They said the region needs and deserves more investment to become even better. [8] The ability to raise revenue through a small charge on overnight stays, they said, is something they have long campaigned for. [8] They committed to working closely with businesses across the tourism and hospitality sector. [9] Their stated aim is a levy designed in a way that actively supports the industry, helps destinations thrive and delivers benefits for local communities. [8] In that formulation, the businesses the levy would fall on are partners rather than payers
Sources
2. Ministry of Housing, Communities and Local Government
3. HM Treasury
4. UK Cabinet
5. Labour Party
6. Green Party