John McLellan: Tourist tax might not raise any money for city

Under our current system of government one of the ironies is that no matter how successful a city becomes the last people to feel the benefit are those who live here.

A tourist tax in Edinburgh might raise £15m (Picture: Lisa Ferguson)

If Edinburgh’s economy thrives and more business are created, the amount the council receives in business rates goes up, but then the Scottish Government adjusts its block grant and the local authority is no better off.

It’s pretty much the same story for domestic rates because a rising population doesn’t mean a bigger pot of cash for the council to invest in services. Quite the opposite. As for that hoary old chestnut of private schools, the city doesn’t get to keep the money if more pupils go into the independent sector. It’s one of the reasons that despite Council Tax bills now going up, the local services we receive do not seem to be improving. Edinburgh’s roads are now in as bad a state as I can remember even though we have not had a particularly severe winter.

Now, apparently, the SNP-Labour administration would have us believe that a Tourist Tax is the answer and will produce their plan to introduce a new levy “within weeks”, according to council leader Adam Mcvey. There are no details about how it might work, other than a claim it would raise about £15m.

How this figure has been reached has not been explained, although it looks very like a back-of-a-fag-packet calculation based on about £1 for each of the 14 million overnight stays by visitors in 2015 quoted in the latest Edinburgh by Numbers report. What we don’t know is who would be taxed, who would collect it, how expensive or practical it would be to gather and therefore how much the city would actually get.

Nor do we know how it would be administered and on what it would be spent or, crucially, whether or not Edinburgh would actually get to keep the money.

Going by the Scottish Government’s instincts and track record with business rates, the answer to the last question would be no and all the time and effort assembling and launching a system would result in a further reduction in the Government’s block grant.

Admittedly, this is conjecture and a consultation has been promised to get the views of tourism businesses before producing a plan. But in the case of the British Hospitality Association which represents hoteliers, the council can save itself some time because of its repeatedly expressed vehement opposition. The question then is which tourism businesses should be entitled to outvote the one sector likely to be in the front line?

I have no ideological opposition to a tourist charge, especially if it led to a reduction in Council Tax and took more of the funding of the Festivals out of general taxation. But is that what Cllr McVey and chums have in mind?

First and foremost, any additional income cannot be allowed to mask the deep inefficiencies which still plague council services, so as well as staying in Edinburgh it would have to be ring-fenced from the city’s day-to-day administration.

In fact, an entirely new funding model may have to be found, perhaps through a new Edinburgh Tourism Trust, to ensure cash is not just sucked into the vortex of the general budget while the Scottish Government continues to cut its grant, council taxes continue to rise and services never get better.

So if he can guarantee all that, get the BHA on side and then persuade his minister Fiona Hyslop that she’s been wrong all along to reject tourism taxes, then maybe Cllr McVey will have something to present.