Edinburgh tourist tax: Council's plans on how to spend revenue 'contrary to purpose of levy'

The Capital’s Visitor Levy could raise up to £50 million a year and the city council has said it plans to use £5m of that to borrow £70m to build new affordable homes to help tackle the city’s housing emergency.

The council also wants to allocate two per cent of the total available funds for “participatory budgeting” where local communities can decide on funding for projects to “improve the quality of life for local residents, particularly in areas that are heavily impacted by tourism”.

Edinburgh council wants to spend a chunk of the moey raised by the tourist tax on building affordable homes

Half the remaining funds would be spent on city operations and infrastructure, from street cleaning and improved lighting to sett replacement and pedestrianisation. Another 35 per cent would support the local arts and culture sector, and the remaining 10 per cent would fund tourism marketing for the city.

But in its response to the consultation on the Capital’s proposals for a Visitor Levy, the Federation of Small Businesses questioned the council’s spending priorities.

Garry Clark, FSB’s development manager for Edinburgh and the East of Scotland, said tourism businesses expected the funds to focus on improvements to the city’s infrastructure and facilities, business support, visitor attractions and destination marketing.

“However, the council’s planned spending priorities relegate investment in Edinburgh’s visitor economy to an afterthought after millions of pounds are top-sliced for spending on housing and ‘participatory budgeting’. This appears to run contrary to the very purpose of a levy as set out in the Visitor Levy (Scotland) Act.”

The FSB said the Captal’s proposed Visitor Levy had the potential to be a “force for good”, but a “rush” to introduce the charge meant there were also “serious risks”.

Mr Clark said: “A Visitor Levy in Edinburgh has huge implications for local accommodation providers but also significant potential to secure investment in the city’s visitor economy.

“Opinion has long been divided on the desirability of a Visitor Levy in Edinburgh, but a growing number of businesses are warming to the potential investment it could bring. They believe it can be a force for good, provided it is introduced in a business-friendly way.”

Despite an 18-month implementation period before the tourist tax can be introduced, the FSB also criticised the council’s timetable as being “based upon how quickly it can legally introduce the tax, rather than how much time businesses need to adapt”.

Mr Clark said: “There must be time for the new system to be developed, bugs identified and ironed out, so there is no repeat of the software problems which delayed non-domestic rates bills to thousands of city business for at least two months last year.”

And he said the FSB was also concerned that the Visitor Levy Forum proposed by the council to oversee operation of the tax had no place for representatives of Edinburgh’s 180 guest house and B&B owners, who accounted for almost half the city’s accommodation providers.

Mr Clark said: “FSB’s message to the council is to take the time to get this tax right, ensure that it works for smaller accommodation providers as well as for the large hotels, and spend the revenues where it will have the greatest impact for Edinburgh’s visitor offering.”