The 'tourist tax' should be just the start of a bold approach to fiscal devolution
The Museum of Liverpool (Alamy Live News)
3 min read
The visitor economy is not a niche subject: tourism is the UK’s third-largest service export, directly contributing £58bn to the economy in 2023.
That is why for the last month I have been working with the metro mayors to table an amendment to the English Devolution and Community Empowerment Bill that would enable local areas to set a visitor levy, which could be directly invested back into the local economy.
As such, I very much welcome the announcement by the Chancellor this week who confirmed the government will grant local authorities the ability to impose an overnight visitor levy.
Tourism is a vital and booming industry right across the country. There were 38 million inbound visits to the UK in 2023, over half of those to London. In my own Liverpool City Region, 60 million people visited in 2023. UK residents also took 117 million overnight trips in this country in 2023.
Despite these impressive figures, England has been an outlier in the G7, lacking the ability for local authorities and mayors to introduce a tourist levy. Many countries across Europe and beyond have successfully implemented such levies, generating significant revenue. Paris raised €100m from its tourist levy in 2023, for example, while New York City generated $671m.
And whilst I understand some people may have concerns a levy could deter tourists, this has not proven to be the case. Interestingly, evidence suggests that most international visitors are accustomed to such charges.
Revitalising Liverpool and other tourist destinations necessitates consistent investment. Our infrastructure is in need of renewal, and we must ensure that tourism contributes positively to our local communities. The revenue from this levy should enable local leaders to create a more sustainable approach to tourism that should work to improve the experience for visitors and make cities, like Liverpool, an even better place to live.
However, I believe that this should only be the first step in a wider policy of fiscal devolution. Power in the UK is unusually centralised, with only around five per cent of taxes being controlled sub-nationally and with 96p of every tax pound in England going straight to the Treasury. Meaning local authorities rely on outdated council tax and business rates systems, which are both unfair and regressive. In Germany, for example, around 35 per cent of taxes are controlled sub-nationally.
Fiscal devolution is internationally associated with improved investment decisions, economic growth, public services and reduced regional inequality. Whereas centralisation contributes to severe regional inequalities in investment, productivity, and outcomes. Northern England has investment levels comparable to the 38th of 39 OECD countries; with the UK just above it. However, this doesn’t filter through.
The lack of financial autonomy for local governments to address local needs contributes to “overheating” in some regions, and underinvestment elsewhere. Health inequalities are a stark fallout of this – differences in healthy life expectancy between local areas reach between 23.5 years for women and 21.2 years for men.
It is also widely recognised that local leaders invest more progressively and effectively in their communities than highly centralised systems. We have seen firsthand that centralisation is vulnerable to right-wing governments reversing progressive policy – such as we saw with the cruel austerity measures imposed by the Tory government in 2010. But more simply, we know local leaders understand the needs of their area better than Westminster does, which ultimately has the power to lead to better outcomes for our communities.
This visitor levy is a fantastic start to more progressive, locally empowered decision making. It will allow areas like Liverpool City Region to have more autonomy and drive their own growth. But this is just the first step in what needs to be a more progressive and bold approach to fiscal devolution.
Paula Barker is the Labour MP for Liverpool Wavertree
