'A kick in the teeth': Andy Burnham accused of raid on struggling families with new tourist tax

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The uncapped tax will be added to the cost of holidays in England - after VAT has been added. Labour run-areas have said they are likely to initially set it to five per cent but there are concerns it will increase in years to come.

It would add £100 to the cost of a £2,000 family break.

The plans have been roundly criticised and economists have warned it will likely lead to an overall £1,8bn cut in tourism spending, 11.9m fewer nights spent in accommodation and 33,000 jobs lost. These figures were compiled by Oxford Economics and cited by trade body UK Hospitality.

The plans have been blasted as “hugely damaging” and a “kick in the teeth” for the hospitality industry.

Premier Inn owner Whitbread and Butlin’s are among major businesses to criticise the plans and have urged the Labour Government to rethink the policy.

Read more: Labour mayors pledge to cap Burnham's 'tourist tax' raid at 5%

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Hotel giant Hilton said the move was a “catastrophic blow” for businesses and would “stifle” hiring.

On Thursday, the Government unveiled plans which will allow local leaders to charge a levy on the cost of accommodation to overnight visitors.

It is understood the levy would have no upper limit, though Government sources said mayors were unlikely to make it too costly, with most indicating it would be a few per cent.

But hospitality chiefs have warned they believe the uncapped proposals could cost the UK hospitality and tourism industry as much as £1.6 billion.

Industry group UKHospitality claimed it believes “33,000 people could lose their jobs as a result of this tax”.

Mayor of the West of England, Helen Godwin, insisted on LBC this morning that the tax "would not go through the roof."

She said receipts from the levy would spent on "improving the public realm" and "supporting businesses and workers."

However it is understood that the levy would not be ring-fenced to go back into tourism and that Mayors will be able to use the money as they see fit.

Ms Godwin added: "It will be a mixed bag but it will go directly back into the sector."

Plans for the tax were first announced under Sir Keir Starmer following similar schemes introduced by the devolved administrations in Scotland and Wales.

Charges of a similar nature already exist across Europe, with the revenue used to fund local services. Local leaders would decide how to invest the money raised from the levy.

However, businesses have said the move would directly hit holidaymakers and could harm tourist hotspots and resorts.

Jon Hendry Pickup, chief executive of Butlin’s, said: “Big cities may welcome these mayoral powers, but treating every destination and hospitality business the same will leave resorts like ours to shoulder the burden.

“Giving mayors the power to impose a levy without a national upper limit takes those concerns to another level and risks making family holidays less affordable, damaging demand and making it harder for businesses to hire young people.”

The Federation of Small Businesses (FSB) called the tax a “kick in the teeth” for the hospitality industry and said the decision for the levy to be uncapped was “disappointing”.

Tim McKenzie, the national chairman of the FSB, said: “Imposing an uncapped visitor levy in England is a kick in the teeth for the hospitality industry, at a time when small businesses firms are dealing with a deluge of cost rises.

“Running costs have already increased for 91% of small hospitality firms over the last year. These businesses employ thousands and are key to keeping their local economies going – yet the levy risks pushing many to the brink.”

A spokesman for Whitbread said: “This is hugely damaging for hospitality, which is a key pillar of the UK economy and where many of our young people get their first job.

“Measures like this risk undermining the industry’s ability to invest, create jobs and support economic growth.”

Stephen Cassidy, senior vice president at Hilton UK & Ireland, said: “The announcement of a further and uncapped tax levy on our business, in addition to already high VAT, business rates and energy costs, will further stifle job creation and investment and is a catastrophic blow for the UK hotel sector that is already under significant pressure.

“Business needs the confidence to invest, expand and hire.

“We need policies that unlock growth and opportunity, not continue to hold the sector back.”