The facts about Bed Tax

If you carry out a search for the words "bed tax" on the internet you will get a stream of stories from hotel groups claiming it will force them out of business. Tourist leaders in

far-flung corners of England and Wales claim it will bring about the downfall of tourism and the hotel market.

But what about pubs, I hear you cry? With a growing number adding letting rooms, another tax is a burden pubs really could do without. So what exactly is bed tax - and what impact could it have on the pub trade?

In 2004, the government asked Sir Michael Lyons, the current acting chairman of the Audit Commission, to run an official inquiry into the funding of local government.

An interim report published in December 2005 said tourism-related taxes should be explored, with one idea being a tax on letting rooms. Figures being mooted include a five to 10 per cent tax added onto the price of a bedroom - a figure that would also be liable to VAT.

Consultation on the proposals finished last week, and more concrete proposals are expected to be published before the end of the year.

Recent research published by purchasing consortium Beacon suggested that 62 per cent of pubs, bars and restaurants are predicting the tax will have a negative impact on their business. Even those without rooms fear it will have a knock-on effect on customers.

It's a view many in the hospitality industry agree with, and the resulting campaigning by trade associations has been robust.

The British Hospitality Association believes that the tax would be "immensely damaging" for the tourism trade. It claims such a tax would reduce inbound tourism by £220m and domestic tourism by £325m. Operators would have no choice but to pass these costs onto the customer. Why should tourists pay extra to stay in accommodation in the UK if they can get a cheaper deal abroad?

The Tourism Alliance, a group of leading trade associations including the British Beer & Pub Association and the Association of Licensed Multiple Retailers, claims such a tax "will provide a disincentive for people to stay overnight in UK destinations".

A meeting concerning the Olympics between the alliance and tourism minister Shaun Woodward held earlier this month saw the issue raised in the higher echelons of government.

The BII has supported calls to scrap the proposals.

John McNamara, BII chief executive, said: "As a member of the UK Tourism Alliance, we have lobbied to try and stop this idea becoming a formal recommendation in the final review of local government financing being carried out by the Lyons Inquiry.

"Many of our members' pubs provide accommodation to bring some extra income into their business. A bed tax would penalise these hard-working business people and mean that they have to pass the cost onto their customers.

"We all want to see tourism booming in the UK, especially with the 2012 Olympics on the horizon. This short-sighted measure could have a huge, negative impact on tourist visits from home and abroad."

However, the effect of such a tax could have a far-reaching impact on operators, not just in extra costs to consumers. Even if the additional taxes are passed onto the consumer and tourism remains at an acceptable level, another load of legislation is something licensees really don't need.

Michael Turner, chief executive at Fuller's, is particularly concerned about the impact it will have on the smaller lower-end operators. He believes this is just another stealth tax, one which will hit smaller

operators hardest. "It's much more efficient to deal with things through existing tax," he said. "It seems an idle way of raising tax. The costs to operators will be more than five per cent and it's an awful lot of additional costs that are not really worth it.

"The smaller operators will be hit the most."

He argues that it will simply create more red tape with more inspectors peering over licensees' books and more costs and regulations for licensees to deal with. Licensee Diane Horner, of the White Hart Inn in Hawes in the Yorkshire Dales, who has seven letting rooms, says she is concerned about the move.

"I'm not happy about it. We have already noticed a decline in accommodation bookings at the beginning of this summer," she said.

"We were not as busy as we would have expected and that is traditionally when families holiday. We will be like an unofficial tax collector. They seem to want to tax everything

people enjoy."

However, the Lyons Inquiry says a bed tax is far from a done deal and that it is simply under consideration.

A spokesman for the inquiry told The Publican: "We are looking at a raft of options, among others a tourism tax. At the moment we are working on a report for the end of the year. This is just one of the options we are looking at."

For more information go to www.lyonsinquiry.org.uk

It will drive up costs​

Anthony Mears, of the Ivy House, Chalfont St Giles in Buckinghamshire - which has five letting rooms - believes a bed tax will dissuade licensees from investing in accommodation in their pubs.

"It's a big investment to take on accommodation and a bed tax would make the pay-back longer. It will squeeze margins and probably drive up costs. You will have to see if you can get that margin back somewhere else," he said.

"Everyone assumes the margin is healthy on accommodation but there are initial costs and as an investment there are ongoing costs."

Views from Westminster​

Tourism minister Shaun Woodward ​ - who is also the minister for licensing - said:"Let's be clear - there are no plans for a bed tax at this time.

"A local tourism tax is one of many areas being looked into by the independent Lyons Inquiry into local government funding. If the tourism industry objects to the idea of bed tax, it is right to say so and I encourage it to make its case as strongly as possible.

For my part, I will continue to represent the interests of the tourism industry in all cross-government policy areas."

Liberal Democrat shadow culture secretary Don Foster MP​ said: "A tax on hotel beds would seriously damage the tourism industry in this country. Instead of proposing 'stealth taxes' that will put tourists off visiting Britain, the government would be better served working out how we can benefit most from the Olympics and Paralympics in 2012."

Hugo Swire, Conservative shadow culture secretary​, said: "The brilliant summer weather has shown what a great place Britain is to spend a short break or a holiday. But the great British holiday is under threat from a 'bed & breakfast stealth tax' - Gordon Brown's latest money-making ploy. There's nothing wrong with choosing to travel abroad, but no-one will benefit from making British holidays a rip-off."