Migrant hotels housing asylum seekers will be exempt from Andy Burnham's new "tourist tax", it has emerged, deepening controversy over a levy that critics say unfairly burdens British holidaymakers and hospitality businesses. The Prime Minister recently granted regional mayors the power to impose an uncapped "overnight visitor levy" on stays in hotels, B&Bs and holiday lets, with the charge based on a percentage of accommodation costs rather than a flat fee. The Department for Housing, Communities and Local Government has confirmed the tax will not apply to taxpayer-funded migrant hotels, as these are classified as "temporary accommodation" — a decision the hospitality industry says removes any incentive for such hotels to take paying guests instead.

Labour-run areas are expected to set the levy at around 5 per cent, adding £100 to a £2,000 family holiday, while people visiting relatives in hospital could also be caught by the charge. Oxford Economics figures cited by UK Hospitality suggest that by 2030 the levy could cost the Treasury £688 million in lost tax receipts, £101 million in reduced hospitality investment, 11.9 million fewer overnight stays and 33,000 jobs, amid an overall £1.8 billion hit to tourism spending. There are currently 160 migrant hotels in the UK plus 73,068 asylum seekers in other taxpayer-funded accommodation; the Conservatives, including shadow home secretary Chris Philp and shadow chancellor Andrew Griffith, have branded the exemption "utterly outrageous" and accused Labour of taxing struggling families while sparing the asylum system.