Chancellor Rachel Reeves announced in last week’s budget that metro mayors would be able to charge visitors for overnight stays in a move long demanded by the London mayor, reports Kumail Jaffer, Local Democracy Reporter

Tourists in the West End and (inset, credit LDRS) Sadiq Khan

Sir Sadiq Khan has welcomed new powers for an overnight visitor levy which could generate up to £240million a year for the capital.

The London mayor has been consistently lobbying ministers to grant him and other metro mayors the power to impose a “tourism tax” on people staying in London overnight.

In 2024, London saw 89 million overnight stays but never had the powers to charge tourists a modest fee, unlike other advanced economies.

However, the government’s budget last week confirmed a “historic commitment to fiscal devolution” with a consultation into granting mayors and local leaders the option to introduce a levy.

“This will fund further investment in growth locally, including the visitor economy,” the budget document says.

A spokesperson for the mayor told the Local Democracy Reporting Service (LDRS): “Giving mayors the powers to raise a tourist levy is great news for London.

“The extra funding will directly support London’s economy, and help cement our reputation as a global tourism and business destination.

“It also shows what can be done when ministers work closely with mayors to devolve more powers to cities and regions.

“As part of developing our plans for the levy we will work closely with the hospitality and tourism sectors to ensure it delivers the maximum benefits for London and our brilliant businesses.”

Earlier last week, Housing Secretary Steve Reed said: “Tourists travel from near and far to visit England’s brilliant cities and regions.

“We’re giving our mayors powers to harness this and put more money into local priorities, so they can keep driving growth and investing in these communities for years to come.”

In September, a report by the Greater London Authority (GLA) oversight committee said an overnight levy would be a “promising potential revenue source that could generate revenues to support infrastructure that would benefit both Londoners and tourists alike.”

“Tourism levies on overnight stays are commonplace in other global cities and London is an outlier in not having one,” the report added.

Committee chair Bassam Mahfouz, a Labour Assembly member, also said it was a “win-win for London”.

It is yet to be seen how the levy will work in London, with City Hall yet to present a comprehensive plan.

Last month the Centre for Cities think tank suggested the mayor could either introduce a percentage rate tax on overnight stays, like New York and Toronto, or copy Japan and impose a flat rate.

Elsewhere in the budget, ministers confirmed that they have approved the delivery of the DLR extension to Thamesmead, and that it would be primarily funded by TfL and the GLA.

Sir Sadiq said: “This budget has delivered some key changes that will improve the lives of the most vulnerable Londoners. It’s the right decision to scrap the two-child benefit cap and I support the measures that will help Londoners struggling with the cost of living.

“I’m pleased that we have managed to secure some important wins for London. This includes the commitment to extend the Docklands Light Railway to Thamesmead and new powers to London to raise a tourist levy.

“We will need to examine carefully the details in the budget and discuss with the Treasury the full impact on our capital city.

“As mayor, I’ll always stand up for London, irrespective of which party is in government, as we continue to build a fairer, safer and more affordable London for everyone.”

However, the mayor’s opponents on the London Assembly claimed the Labour government has turned its back on London. Liberal Democrat group leader Hina Bokhari said: “This budget does nothing for struggling Londoners. No new investment. No funded transport projects. No serious plan to ease the cost of living crisis hitting Londoners harder than anywhere else. Even the long-trailed DLR extension comes with zero actual funding.

“Sadiq Khan has failed to get the support we needed for our city. He promised Londoners we would have the winds of a Labour government at our backs, yet he has walked away from this budget empty-handed.”

Conservative assembly member Neil Garratt added: “Did the Chancellor mention London once in her whole budget speech? An anti-London budget from an anti-London government. And what has the mayor got to say about it? With the highest tax burden in history, the main thing we’ll be getting is the bill.”

City Hall sources have also confirmed reports, which emerged in the New Statesman, that the Chancellor told Khan to “get out” of her office as he tried to negotiate for more funding for the capital.

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