Now that the smoking debate seems to have been resolved for the moment, and far more favourably than we initially feared, it’s time to turn our attention to the next crucial issue facing our industry – changes to the system of local government funding.

Many of you will already be familiar with the implications of these changes. The interim report of the inquiry by Sir Michael Lyons into the functions and funding of local government in England, published in December 2005, referred to proposals for ‘a local tax on hotels and similar accommodation,’ against which we lobbied Sir Michael earlier in the year.

According to the report, Sir Michael remains ‘interested in exploring this issue further’ in spite of our representations to the inquiry against a ‘bed tax’.

Last week I addressed VisitBritain’s recent release of figures on domestic tourism, particularly the reported imbalance of payments between inbound and outbound tourism, largely owing to the perceived cost of holidaying in this country compared with abroad.

Research completed by VisitBritain (as the British Tourist Authority) indicated that a visit to the UK by family of four from the USA would on average cost £1,797 (of which tax accounted for 22.5 per cent), but in France would cost £1,590 (tax accounting for 15.6 per cent).

It remains our belief that a ‘tourist tax’, or rather a tax on occupation of guest accommodation, would do more damage to an industry which continues to drive the UK economy.

While figures for spending in the UK may have slipped slightly over the last few years according to VisitBritain, the fact remains that roughly a third of all spending in the UK is on accommodation.

The suggested level of tax suggested in the inquiry’s preliminary considerations also presents a problem. Adding a bed tax at the suggested level, 5 per cent, would bring the UK up to the Danish level of taxation of 25 per cent. Denmark, lest we forget, has the highest VAT rate on accommodation in the EU.

At the moment, our present level of taxation is counterbalanced by the perception overseas that you get what you pay for in the UK in terms of quality of experience, service and product. Nevertheless, bringing the UK up to the Danish level could seriously damage the industry.

Research from a number of sources, including Nottingham University and VisitBritain, has also shown that a mere 1 per cent increase in prices is likely to lead to at least a 1 per cent decrease in tourism.

It has been suggested that this figure may be higher for domestic tourists.

The introduction of this bed tax is likely to reduce international tourism revenues by about £220m, compared with a loss in domestic tourism revenues to the tune of £325m. Would it really be sensible to introduce these proposals at a time when we are seeking to draw our own residents back to the UK holiday market?

Furthermore, the likelihood of this tax being returned to the very businesses it has been levied upon in terms of local infrastructure and services seems nominal. The imposition and collection adds another source of inconvenience and cost to smaller and larger establishments alike.

The proposed ‘bed tax’ represents another undemocratic and bureaucratic burden on an industry that at this moment needs more investment putting into it, and not more money taken out. With your support this year, we will continue to lobby to prevent its introduction.