Rachel Reeves, the Chancellor, is reportedly considering a new “hotel tax” on overnight stays, raising fears that British families and foreign tourists alike may be charged more for holidays in the UK.
According to Treasury insiders, officials have been modelling an accommodation levy similar to those imposed in parts of Europe, including France and Venice, in a bid to shore up the public finances.
Early calculations suggest that if a modest nightly charge were rolled out across England—akin to proposals in Wales—revenues could exceed half a billion pounds annually. Adopting a French-style tiered system, which applies higher surcharges to luxury properties, might push that total above £1 billion.
Critics, however, say that the UK is already grappling with soaring costs for businesses and consumers. The proposal would be on top of the separate “tourist tax” restricting foreign visitors from claiming back VAT on retail purchases, as well as increased air travel levies.
Sir Rocco Forte, the hotel magnate, has labelled the initiative “pernicious”. He argues that while tourism is a vital economic engine, steepening accommodation costs risks denting visitor numbers, pushing holidaymakers to cheaper destinations, and reducing overall tourist spending in Britain.
“The UK is already not a cheap destination,” Sir Rocco said. “Adding another charge will only deter cost-conscious visitors, who might spend less in shops, restaurants, and other attractions if accommodation becomes more expensive.”
Pressure to introduce new revenue streams stems from volatile bond markets and rising government borrowing costs. The Chancellor, currently visiting China to promote growth, is under intense scrutiny for her commitment to “non-negotiable” fiscal rules, especially if debt servicing costs remain near multi-decade highs.
Treasury sources suggest that Reeves is reluctant to repeat the £40 billion worth of tax increases announced last autumn, but may have few alternatives if high borrowing costs threaten the budget’s stability. Possibilities under discussion include raising corporation tax or cutting welfare, alongside any potential tourist levy.
Although the Treasury refuses to comment on “tax speculation outside of fiscal events,” it has pointed to the upcoming Office for Budget Responsibility forecast on 26 March as the next key milestone. If public finances show further strain, the Chancellor may need to deliver emergency measures during the spring statement — a move that many fear would dampen growth prospects even further.
Until then, officials will continue to study various scenarios for plugging gaps in the Treasury’s coffers. Hoteliers, tourism operators, and consumers, meanwhile, remain on edge about the possibility of higher holiday bills just as the weak pound could have made Britain more attractive to international visitors.