Controversial plans to revisit a tourism tax in Birmingham – including a hotel tax, airport levy and workspace parking levy – have been labelled ‘bonkers’ by a local councillor.
The city council has revealed that it will need to borrow £50 million in order to pay for the Commonwealth Games – a figure it will be paying off for the next 40 years.
The new taxes would help to pay for the Games, set to take place in 2022.
Speaking at this week’s (February 14) Resources Overview and Scrutiny Committee, Clive Heaphy, Chief Finance Officer, and Guy Olivant, Major Developments Lead, admitted that the council would need to add to its debt in order to finance part of the Games.
So why are they talking about new taxes?
Birmingham City Council and its partners are expected to pay for 25 per cent of the Games costs – approximately £145 million – with central government set to provide the remainder of the funding.
This £145 million will be made up of a combination of contributors, with the West Midlands Combined Authority expected to stump up around £25 million, while the Greater Birmingham and Solihull Local Enterprise Partnership will be providing around £20 million.
A further £19 million will be coming from corporate capital resources, meaning the remainder – a potential £80 million – will need to come from the city council.
Papers from the meeting show that the council plans to borrow around £50 million to help meet the costs, while possibilities for the remaining £30 million – including the proposed taxes and contributions from other local councils and universities – are still being explored.
And what does the opposition think?
Cllr Meirion Jenkins (Con), said that plans to introduce further taxes to Birmingham to pay for the Games were ‘bonkers’.
“If we are seriously talking about funding these Games by adding to taxes in the city, then I think we’ve gone stark raving bonkers,” he said.
“We’re paying the highest taxes now that we have in 50 years – we have public debt at £1.8 trillion, and people call that austerity.
“The idea that we would disadvantage Birmingham by having a workplace parking levy, make our hotels uncompetitive, bearing in mind you already pay 20 per cent VAT on a hotel room?
“I mean I know that in the USA they have various state and regional taxes, but they never amount to more than about 11 per cent. We’ve already got a 20 per cent tax on every hotel room, and we’re now putting an additional levy on top of that?
“I think it’s absolutely crazy to introduce additional taxes to the city or the region.”
During the meeting it was confirmed that £40 million of the money that will be borrowed will have an ongoing impact on the council’s revenue budget going forward, potentially for the next 40 years, which was something that councillors had been assured would not be considered for the funding of the Games.
In addition to this, papers have confirmed that there is a ‘substantial risk’ that partner contributions will fall short of the £75 million mark needed to fund the Games by as much as £30 million, thus leading to the proposals over increased taxes.
So how likely is it that we will pay the new taxes?
Summing up, chair of the committee Cllr Sir Albert Bore (Lab) said that it was these two things that most concerned councillors about the current proposals, with doubts over whether the proposed taxes could be legislated for at all.
“I think the concern here is two-fold,” he said.
“One, that we are looking for £50 million of potential borrowing, some of which may be offset to other organisations. But there is a revenue contribution on that which is now in the long-term financial plan, which was not what we were told originally.
“The second thing is that there is substantial risk of that £30 million coming forward, and it talks here about funding opportunities (taxes).
“And I’m with Meirion here – we will not be able to deliver short-term on these – particularly if there’s a requirement for primary legislation – because we’re not going to get primary legislation.
“Therefore, that issue of risk, in my mind, has grown alarmingly, and we are as a council potentially facing some very substantial risk figures here, both in terms of the level of the risk but also the level of the capital to which that risk refers.
“And I think it is quite probable we will have to come back to this, and we may need to come back to it before the city council takes the budget.”