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Moved by Lord Rooker
4: Clause 1, page 1, line 11, at end insert—“( ) The Secretary of State may provide by regulations for Birmingham City Council to raise a hotel occupancy levy and to provide financial assistance equivalent to the proceeds of the levy, after costs of administration, to the Organising Committee as part of the local contribution for the purpose of delivering the Games.”
My Lords, I beg to move the revised Amendment 4, which, as the Chairman has said, is on a separate sheet. There is a modest change from the original draft, plus my name is now against this amendment because of my noble friend Lord Hunt’s absence.
The amendment raises the issue of a levy or bedroom tax. I am not sure that I would call it a probing amendment; I do not understand why we have never done this before. The fact is that, the broader the tax base right across the piece, the less high taxes have to be. It seems a common-sense arrangement. With this Bill and the Commonwealth Games, there is an opportunity for the Government to do something that Governments—including the one I was a member of—do not do enough, and that is to pilot schemes. From the briefing I have been given, I understand that most members of Core Cities in England and Wales are lobbying the Government for a hotel occupancy tax. This is a devolved matter in Scotland and there is an expectation that Edinburgh will soon introduce such a tax. In some ways, this puts pressure on what I might call the English Government to do the same.
In a way, it is a golden opportunity. 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. I know people will argue that we do not want more new taxes, but the broader our tax base is, the less high taxes have to be—that does not mean we have to tax everything.
We are not reinventing the wheel here: this is done around the world. We all travel and we do not think twice about it. The tax might be lost in the hotel bill—it is always incredibly modest—but it usually goes locally and helps local authorities with all the extra costs and issues they have as a result of being a tourist attraction. I would have thought that this was a golden opportunity for someone in the Government to make a name for themselves by piloting this scheme, which will be a good idea, and see how it goes just for the Games.
My Lords, I support the spirit of partnership between local and national fundraising for this specific, ring-fenced purpose, as described by the noble Lord, Lord Rooker.
The numbers are quite interesting: it is estimated that £1 a night for the three-year period from 2020 to 2022 might bring in £4.5 million to £5 million per year, which could possibly amount to £15 million of local contributions being raised—the gap is probably £40 million. At least 8% of what is required locally by these boroughs could be raised in this way.
I know that the proposal is unpopular in certain spheres, particularly among those who count tourism and visitor numbers as vital to their economy—as we do in Birmingham and Solihull, which are popular conference and holiday venues, and we want to develop that. However, in deciding where to stay, a hotel price can vary from £20 to £25, depending on the day of the week, so £1 a night does not seem too burdensome. A small charge could also help motivate people to supporting a national and an international Games, which could make them feel good and even make them want to come back and attend the Games themselves.
I ask the Government to give this serious consideration as a partnership between local commitment and national taxation.
My Lords, I had no intention of speaking in this debate, but I rise having represented the West Midlands for 15 years in the European Parliament. As a non-aligned Member, I would still like to call the noble Lord, Lord Rooker, my noble friend, because this is an eminently sensible idea. The proposal, as outlined and supported by the right reverend Prelate the Bishop of Birmingham, builds on that in asking for a pilot. I urge the Government to think about it. The only thing that I would suggest, coming from a working-class background in the East End, is to make it a bit more attractive by, instead of £1, making it 99p.
As my noble friend Lord Rooker said, this sort of tax works in thriving economies in other parts of the world. Many tourists and many participants in sports and events in our cities do not begrudge the payment because they see where it is going. I urge the Government not to dismiss this out of hand, to embrace the suggestion of a pilot scheme and then to come back to your Lordships’ House.
My Lords, I too rise to support this amendment, moved by my noble friend Lord Rooker. However, I do not underestimate the difficulties of a tax like this. My noble friend became a very distinguished Minister, but many years ago, when he and I were aspiring Ministers in Opposition, we both had some responsibility for writing various proposals into an election manifesto. As well as being partly responsible for the transport manifesto, I regularly wrote in this suggestion that there should be a bedroom tax in major cities payable by tourists and business people—in those days, I was radical enough to suggest that congestion charges and workplace parking charges might be a good idea too.
The first time I proposed this, in the run-up to the 1987 election, the then shadow Chancellor—I have forgotten who it was, because, as the Minister said, Ministers, like shadow Ministers, come and go—spoke to me in horrified terms about this proposal for, as he put it, hypothecation. “We can’t have hypothecation”, he said. “It undermines the duties and responsibilities of the Treasury”. Well, I pointed out that undermining the duties and responsibilities of the Treasury might well serve the country in a way that he had not thought of.
Subsequently, in 1992, I made a similar proposal. Obviously, I was regarded as being more important in 1992 because a junior shadow Treasury Minister was dispatched to tell me that on no account could this appear in the manifesto because of the dreaded word “hypothecation”. So I do not underestimate the difficulties. However, as the right reverend Prelate pointed out, there is a considerable funding gap with the Commonwealth Games in 2022—figures of up to £40 million have been mentioned. So if we do not raise the money in this way, it will have to be raised in other ways.
Of course, it will not be just the Treasury that will object to the proposal; I have no doubt that the hotel and catering industry will have something to say about it. But, again, as my noble friend suggested, in many parts of the world these sorts of taxes are accepted and paid without demur. Many of us have had the opportunity over the years to visit New York, where there is a 7% tax on all visitors. It has not dissuaded tourists and business people from visiting that great city. In Europe itself, there is a 3% tax in Vienna, and many Italian cities have a tourist tax of anything up to 5%. I am not sure whether we will be allowed to visit Brussels after
Well, it would be the George V, in that case, for the noble Lord.
Again, for the United Kingdom, this proposal would not be particularly revolutionary. As a result of escaping the dead hand of the Treasury, the Scottish Parliament is now looking at Edinburgh being the first city in the United Kingdom to charge this tax. We wish the Scots well—certainly I do—and I hope that the habit will then spread south of the border.
One of the contributors to this debate talked about the fluctuation in hotel room rates. For the hotel business to pretend that such a tax would deter business people or tourists would be misleading. I looked up the room rates at the Crowne Plaza in Birmingham this week—
My noble friend asks if I pay. Well, I would not normally stay at the Crowne Plaza unless there was a pretty severe domestic dispute chez Snape—which has not yet happened, but one never knows.
The Crowne Plaza tonight will charge £122.04 for a standard room. I am not sure how the 4p comes about, but it does. On
I hope that the Minister will listen to this, stand up to the bully boys of the Treasury—they exist whichever Government are in power—and insist that the funding gap to which I have referred is closed so far as the Commonwealth Games in Birmingham are concerned. Given the widespread fluctuation in the cost of hotel rooms, this would be a comparatively painless way to close that gap.
My Lords, before the Minister launches off to fight with his own Treasury bat, I just want to say that amendments such as this are very attractive, especially for a party that looks to local government being slightly more independent and having more power. The question here would be about the limitation of the charge. Have the Government done any research on this, or anything that would tell us what it would cost to get it? What would the benefit be at a given rate? This is a genuine argument and there are examples of doing this in the UK. If it can be done and set at a rate that makes a real benefit but does not affect the actual uptake of rooms, there is a very good argument for it.
My Lords, I will say a quick word because my noble friend Lord Snape has said what I wanted to say, and it is a rule of mine that I do not say something again if it has been said. However, the logic seems to be with this proposal. It seems to need a bit of imagination to implement something that has not yet been done. There may be a struggle with the Treasury and others, as it may cut across normal conventions, but it would help to raise a significant proportion of the funding shortfall. I therefore challenge the Minister, when he rises to reply to this debate, that if he is going to pour cold water on the proposal—
That is the opposite stage instruction from:
“Exit, pursued by a bear”.
Never mind; that was too complicated.
To put it simply, if the Minister pours cold water on this, would he like to come up with one or two other proposals for how the local people can raise this £40 million?
My Lords, I am grateful for those contributions. The noble Lord, Lord Rooker, and the right reverend Prelate are a difficult combination to face. The noble Lord was asking me to make a name for myself by opposing the Treasury and announcing a new tax from the Dispatch Box, while the right reverend Prelate said, “It’s only £1—that’s very little”. This is really a question of “Lead me not into temptation”, but I wonder how long that £1 would stay as £1.
The issue here relates to the actual amount of the budget for the Games and how it can be paid for. As we now know, there will be a £778 million investment, to be split approximately 75:25 between central government and Birmingham City Council and a number of its key partners. I was not quite clear what the noble Lord, Lord Griffiths, meant about the funding shortfall; I understand that the city council’s contribution to the Games budget was considered by a meeting of the full council earlier this year. The spending based on that budget will be tightly monitored across all the Games partners to ensure control—an issue which I know the noble Lord, Lord Rooker, talked about at Second Reading. We are confident that the budget announced is sufficient to deliver a strong Games for the city but I absolutely agree with the points raised at Second Reading, and earlier this afternoon by the noble Lord, Lord Rooker, saying that Parliament should be provided with more information regarding the Games budget. This will be forthcoming.
I am grateful for this opportunity. I mentioned £40 million, as did my noble friend Lord Snape; the briefing papers that we received from Birmingham mentioned £40 million. It seems that when the local authorities calculate their 25%, they will be £40 million short of that. This provision is intended to bridge that gap.
I understand now. The 25% comes from Birmingham City Council and its partners; it also involves revenue raising in various ways so none of it is certain. However, my point remains that the city council is looking at different ways to do that and I will come on to that in a moment.
This is not a completely uncontroversial proposal. I do not want to go into the detailed arguments about the hotel levy today, but 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. In May, a report on tourism tariffs by the All-Party Parliamentary Group for Hospitality expressed reservations about the likelihood of tourism levies having a long-term, positive benefit on tourism infrastructure. The report concluded that:
“Further studies need to be commissioned on the economic impact and viability of a tourist tax”.
The noble Lord, Lord Rooker, suggested that this should be a pilot, which goes some way to answering that although it would be limited in scope. The noble Lord also mentioned the Scottish Government, who will consult this year on the principles of a locally determined tourist tax, prior to introducing legislation which would allow local authorities to apply such a tax. We will certainly be looking at the benefits of that.
I have to say that matters of taxation are for the Treasury to consider. Treasury Ministers have been in correspondence with Birmingham City Council regarding its options for meeting its required contribution to the Games. That is the right place for those discussions, not this Bill, which provides the framework for the successful operational delivery of the Games. The Government are aware that the city council is actively considering a number of options for local revenue raising, including within existing powers, and stand ready to look at the details of any proposals that the city council wishes to put forward.
I hope that is not cold water, though it may be lukewarm. I hope that noble Lords are reassured that the Government remain committed to working with the city council on its plans for delivering its required financial contribution to the Games. I would therefore be grateful if the noble Lord felt able to withdraw his amendment.
When my noble friend on the Front Bench invited the Minister to make a name for himself, I was reminded of an occasion in early 2002, when I was young in this House and the Home Office Minister. At the Dispatch Box in a debate, I was challenged by someone on the opposition side. My answer was that, in my short, five-year experience as a Minister the Treasury had wrecked every good idea I had come across. An exchange took place between my boss—now my noble friend Lord Blunkett—and the Chancellor. I survived another six years as a Minister, but I was never invited to join the Treasury team. When these things get discussed we are always told, “It’s the Treasury; you cannot touch it”. Then, on Budget Day, the Chancellor stands up and says something that the department had no idea was coming. It is a good idea, so it is for the Chancellor to own. In this case, we are out of scope for the Budget, but this gives an opportunity. If it is a bad idea, you do not do it: that is the idea of a pilot and the opportunity for a pilot in taxation does not come along very often.
I do not want to set hares running, but I have a feeling that this would not go amiss in a couple of the national parks. There are sometimes complaints that there is no gateway or passport for visitors to them; hotels are the means of extra revenue. As I say, the broader the tax base, the less high taxes have to be. This is an opportunity for a pilot. We will obviously seek further and better particulars and come back on Report, when this might be worth looking at further. In the meantime, I beg leave to withdraw the amendment.
Amendment 4 withdrawn.
Clause 1 agreed.
Amendment 5 not moved.