What could Manchester’s new tourism tax mean for other UK cities?

The new tax on overnight stays is a step in the right direction for local funding, but with fiscal devolution more cities could benefit.

Blog post published on 18 April 2023 by Olivia Vera

Tourism taxes are common in cities across the continent

Many cities in Europe like Paris, Vienna, Berlin, Venice, and Porto charge some sort of tourist tax to visitors. In the 17 countries in the EU that tax short-term accommodation, its local governments – cities or regions – that have the power to levy the tax. These occupancy taxes allow local areas to raise revenue for promoting further tourism, preserving the environment, or funding infrastructure used by residents and visitors alike.

Attempts to implement local taxes on the tourism industry aren’t new in the UK

In the past few years, cities like Edinburgh, Birmingham, and London have expressed interest in charging a tourist tax on overnight stays. Taxing tourism is a good way for local government to raise money to fund infrastructure and support the local economy. The problem is that they don’t yet have the power to introduce these taxes as local authorities.

Manchester has found a work around to generate income from tourism

Manchester has found a way around this. This month Manchester Accommodation Business Improvement District introduced a £1 a night tourism tax for visitors staying in hotels or short term lets in the city centre, which is projected to raise around £3 million per year. This makes it the first city in the UK to implement an explicit ‘tax’ on overnight stays.

This will create a pot of money that can be spent without any strings attached. Who spends the money though varies from on the continent – in this case it is the BID, a collection of accommodation providers in Manchester city centre, that will be the recipient. The intention is that it will use the money to improve the city’s marketing abilities, attract new visitors and bring in new business to the city.

In the broader scheme of discussions around fiscal devolution, tourism taxes don’t raise very much money. But they do raise some cash that can be spent locally. In the longer term, Westminster and the devolved parliaments should bring forward legislation for local government to levy tourist taxes. In the short term, Manchester may just have found a fix.