London could raise up to £350 million (€403 million) a year from a tax on overnight visitors, a significantly higher amount than earlier estimates.
These latest figures come from Central London Forward (CLF), a partnership representing 12 inner London boroughs (Camden, the City of London, Hackney, Haringey, Islington, Kensington and Chelsea, Lambeth, Lewisham, Southwark, Tower Hamlets, Wandsworth and Westminster), and are based on a 3% levy on the cost of a hotel room or short-term rental in the capital.
Previous estimates, made after the UK government announced last year that mayors would be given the power to impose a tax on overnight stays, put the figure at around £240 million (€276 million) per year – almost a third lower than the new projection.
London’s mayor, Sadiq Khan, welcomed the move, calling it “great news”. He added that the revenue raised would “directly support the capital’s economy and help cement our reputation as a global tourism and business destination”.
According to the latest figures analysed by the Local Democracy Reporting Service (LDRS) – a public-service news agency funded by the BBC to scrutinise the work of local councils and public bodies – the 12 CLF boroughs could raise around £275 million (€316 million) a year, while other London authorities could generate an additional £77 million (€89 million).
Westminster alone could raise over £95 million (€109 million), according to them, while Camden, Kensington and Chelsea, and Tower Hamlets would each generate more than £20 million (€23 million).
While this is great news, how the funds will be divided among the boroughs may be trickier. Discussions on the subject are currently ongoing. The central London boroughs are campaigning to retain a significant share of the funds to help offset the pressure that tourism places on public services.
Adam Hug, and the chair of the CLF, as well as the leader of Westminster City Council, argued that, given their role as the capital’s tourism engine, they should receive at least half of the revenue raised by the CLF.
CLF points out that 71% of London’s hotel rooms and 67% of its short-term rentals are located in its member boroughs. The organisation argues that this justifies a 50% share of the proceeds.
In addition to the existing hotels in London, a further 196 are currently in various stages of the planning pipeline, which would add an extra 29,500 rooms, according to the LDRS. Short-term rentals are also expected to increase by around 2%, equating to an additional 1,249 rooms over the next five years.
The CLF acknowledges the economic advantages of tourism, but also highlights the increased spending required to maintain infrastructure and public services without receiving any compensation.
The Labour councillor added that, “local authorities work to keep the streets clean, well-maintained and safe. We invest in new public realm projects, from the transformation of Regent Street to upgraded public toilets in my own borough. We also work with businesses to provide the support they need to grow.” Hug emphasised that many of these services are currently funded by residents themselves, a situation he hopes will change.
A percentage-based levy, similar to those used in cities such as New York, Berlin and Edinburgh, would treat visitors more fairly than a flat nightly charge, suggested the CLF.
While the precise design of the tax has yet to be agreed, and negotiations are likely to be complex, supporters all agree that the measure could deliver a significant boost to the capital.
A spokesperson for Sadiq Khan said that the government is currently consulting on the structure of the levy.
“Once that process has concluded, we will outline our plans for developing the levy in London, including how we engage with local authorities and the hospitality and tourism sectors, to ensure it delivers maximum benefits for London,” they said.
