Don’t bet the House on hotel tax to fund Games
BIRMINGHAM City Council is to continue with attempts to convince the Government to let it impose a ‘hotel tax’, to help pay for the Commonwealth Games.
But it may struggle, because the Government already expressed doubts about the idea.
If the council isn’t allowed to introduce new taxes then it will have to find the entire £184.7 million it has promised to contribute to the games on its own. The total cost of the Games is £778 million.
A hotel tax could mean charging visitors to Birmingham £1-a-night for the privilege of staying in a city hotel, potentially raising £15 million over three years to help fund the Games.
The problem for the council is that it doesn’t have the power to force anyone to pay a hotel tax. It would require legislation for this scheme to go ahead.
Last year, it attempted to achieve this through an amendment to the Birmingham Commonwealth Games Bill, a set of laws introduced by the Government.
West Midlands-based members of the House of Lords sympathetic to the council tried to introduce amendments that would have allowed a hotel tax (or hotel levy as it’s also known) to be imposed.
They included Jeff Rooker, the former Labour MP for Perry Barr now known as Lord Rooker. He told the House of Lords: “We could use this Bill to ring-fence a tax for Birmingham and Solihull, as the local authorities that will be most affected, although there are hotels in Sandwell as well.
“If the Government used this Bill to pilot a hotel occupancy tax for ring-fenced money for the Commonwealth Games and put a time limit on it, after the Games we could look at how it worked and review the impact and effectiveness of the tax.” The Bishop of Birmingham, the Rt Rev David Urquhart, also backed the idea, as did Lord Snape, the former West Bromwich East MP, and Lord Cashman, the former West Midlands MEP, though he suggested the tax should be 99p-a-night rather than £1. But Government Minister Lord Ashton, a Culture Minister at the time, warned supporters of a hotel tax that the Treasury was unlikely to agree to the idea.
He said: “It is not quite as straightforward as some people may think.
Tourism in this country pays a much higher rate of VAT than our competitors in Europe.”
As often happens in the Lords, once the Minister made it clear that the Government would not accept the amendment, it was withdrawn without a vote.
It was a similar story when Lord Hunt of Kings Heath tried again, during a later House of Lords debate on the Bill.
He insisted: “We have a heavensent opportunity to try a pilot in Birmingham to see how it works. We hope it would raise resources towards the Games. We would see what impact it had on the hotel market and the economy of the city as a whole. I cannot see what there is to lose in allowing the city council to be a pilot in those circumstances.”
This time Lord Ashton said that Birmingham City Council needed to provide more details before the Government would consider allowing the tax to be introduced.
He said: “We are in frequent dialogue with Birmingham City Council but, to date, no detailed case has been put forward to evidence the need for an additional power. “However, I understand that Birmingham City Council is now undertaking detailed work, with expert advice, on various options for revenue-raising to offset the costs of the Games, including the use of existing powers or the introduction of a new tax, such as a hotel tax.
“We and Her Majesty’s Treasury await the conclusion of that analysis and stand ready to look at the details of any proposals put forward by the council.”
Once again, the amendment was withdrawn. This was in July 2019. So the obvious question is, what has happened to the analysis Birmingham was apparently working on?
The December general election means that the Bill (strictly speaking, a brand new Bill – but identical to the old one) has to begin its passage through Parliament again.
And in theory, this could allow the city council’s friends in the House of Commons or House of Lords to attempt to introduce a hotel tax once again.
But it seems that the plan has been pretty much abandoned. This was revealed by Neil Carney, programme director for the Commonwealth Games, and Guy Olivant, the council’s major developments lead, when they briefed the council’s resources overview and scrutiny committee in November.
Minutes of the meeting reveal the Committee was told: “Some work has been done looking at alternative sources of funding, eg hotel tax, workplace parking levy and airport levy, and concluded that where there was a requirement for primary legislation there would be a timing problem to make any material impact in time for funding the games.”
But the authority says it still hopes to levy the hotel tax. Rather than adding an amendment to the Commonwealth Games Bill, it now hopes that the required laws can be introduced through another method. A Birmingham City Council spokesperson said: “We, along with our Games partners, are focused on ensuring Birmingham 2022 both delivers a strong and lasting positive legacy as well as value for money.
“There is a clear desire from a number of local authorities for councils to be given revenue-raising powers, as illustrated by a Core Cities campaign calling for a national debate on the issue.
“The council continues to consider and discuss these options with the Government.
“We are aware that Edinburgh is close to securing consent to trial such powers, so we are keen for the Government to consider giving Birmingham City Council similar powers on a trial basis, ringfenced for the Commonwealth Games.”
As often happens in the Lords, once the Minister made it clear that the Government would not accept the amendment, it was withdrawn without a vote