Labour’s “tourist tax” could rip billions out of Britain’s holiday sector, deter millions of people from taking trips, kill jobs and stop cash-strapped families taking staycations together, the Government has been warned. Sir Keir Starmer’s Government has been urged to ditch its pledge in the King’s Speech to give mayors the power to hit visitors with an “overnight visitor levy” which has horrified the industry. The Tourism Alliance has condemned the plan as the “wrong tax at the wrong time”.

An analysis by the Taxpayers’ Alliance (TPA) warns that domestic tourism could be devastated if a tax on overnight stays is rolled out across the whole country.

Pointing to research by the World Travel and Tourism Council which found 39% of Britons’ would “consider somewhere else or not holiday in the UK” if they faced a £10 tax per night, the TPA set out a worst case scenario if such a levy was in force across the nation.

It warned this could “cause the UK economy to lose over £13billion and result in a loss of 42million domestic overnight visits”. Even a £5 tax could cost the country “£9 billion and result in a loss of 30 million domestic overnight visits”.

Experts stressed that tourist taxes are used to control visitor in locations where numbers threaten to spiral out of control – but the UK needs to encourage more people to holiday here.

Allen Simpson, chief executive of UKHospitality, said: “The warnings from the Taxpayers’ Alliance reflect exactly what our sector has been saying for months, a holiday tax risks delivering a significant hit to domestic tourism at the worst possible time for both the businesses and holidaymakers. The evidence is clear that even relatively small additional charges would deter millions of people from taking a UK break, with many opting to stay at home or travel overseas instead.”

He added: “The Government’s own ambitions rely on a thriving, accessible visitor economy. A holiday tax does the opposite – it risks pricing families out, reducing demand, and undermining the very growth ministers want to see. There is still time to rethink these plans and work with the industry on policies that support, rather than suppress, domestic tourism and economic growth.”

There is particular concern about the impact of charges on families who may already be under financial pressure. The National Caravan Council warned that “additional overnight levies would disproportionately impact families choosing lower-cost accommodation”.

Eddy Leviten, executive director of the Tourism Alliance, voiced similar concerns, saying the TPA’s analysis “underlines a very real danger”.

He said: “This is the wrong tax at the wrong time. Households are already being squeezed by rising fuel costs and stubborn inflation, and a new tourism levy will simply make a UK break feel even less affordable. We don’t want a hotchpotch of different taxes landing on visitors depending on where they happen to stay.”

Mr Leviten said the industry is still waiting for the Government to set out its long-term tourism strategy and cautioned that the new tax “comes at the worst possible moment for jobs too when employers are already absorbing the hit from the National Insurance Contributions increase and a raft of other cost pressures”. He added that adding to the tax burden “risks pushing businesses to cut hours and headcount”.

“Tourism taxes have their place, but they’re typically used to suppress demand in destinations that are overrun – the exact opposite of our situation,” he said. “We need to be driving visitor numbers up, not pricing people out.”

There is also strong opposition to a new tax from the Federation of Small Businesses.

Executive director Craig Beaumont said there was already “huge pressure” on families and the “last thing ministers and mayors should be doing is pricing them out of domestic breaks”.

He added: “This flies in the exact opposite direction of the Chancellor’s recent moves to make this a much-needed summer of fun for everyone.”

Bed taxes, he warned, would drive people “towards low-cost flights out of the country” and “create a significant admin burden for small hotels, B&Bs and guest houses at a time when the hospitality and tourism sector as a whole is being pummelled by a barrage of increased costs”.

Luke Petherbridge of ABTA, the trade association for travel agents, called for Labour to scrap its plans, saying: “[We have] long expressed concern about the cumulative impact of taxes and charges on UK travel and tourism, which is already uncompetitive on cost grounds. A new visitor levy will only make matters worse. For this reason, we do not believe the Government should proceed with giving powers to levy visitor levies to local mayors.”

Jonathan Eida of the TPA said: “Taxpayers will be alarmed by the enormous damage a holiday tax could inflict on Britain’s hospitality industry and wider economy. At a time when families are already struggling with the cost of living, piling extra charges onto holidays risks pricing people out of breaks in the UK altogether, while hammering businesses, jobs and local economies. Ministers should scrap these plans entirely.”

Shadow Chancellor Sir Mel Stride said: “Labour’s holiday tax threatens to be another hammer blow for the embattled hospitality sector and another worry for hardworking families. Businesses have already taken a hit from Labour’s Jobs Tax, employer red tape and business rates hike.

“Now tourists could be deterred by new charges, and driven to holiday overseas or call off their trips altogether. It’s wrong to punish Brits for wanting to holiday in their own country.”

A Government spokesperson said: “This is speculation because the final design of the visitor levy has not been decided. We’re clear that the levy will ensure areas benefit even more from tourism and mayors will have more money to invest in local priorities.”

Levies are on the way in Scotland, where visitors to Edinburgh will face a 5% charge from July 24. Aberdeen plans to introduce a 7% levy from April 1 next year.

In Wales, local authorities will be able to introduce a charge of £1.30 per person, per night to “improve local tourism” from April next year