The Managing Director of hotel chain Travelodge has written to Communities Secretary Eric Pickles to complain about the high levels of the construction tax in London, known officially as the "Community Investment Levy". The budget hotel boss's remarks give a concrete example of how taxes like the Community Investment Levy are choking off growth, destroying jobs and ratcheting up the cost of living.
This additional development charge is being interpreted by some London boroughs as a quick win revenue generator, when in reality by setting such high rates, they are actually losing out on long term growth, revenue and job opportunities. It is unviable for companies such as ours to invest in new developments as a direct result of this extortionate charge...
It is evident that there is a clear need for good quality budget hotel rooms across the capital as many of the existing B&B’s and hostels offer inadequate accommodation, poor value and extortionate prices.
However the levels of tax being proposed by a majority of London boroughs rule out future hotel development and job creation. Therefore Eric Pickles must recognise the damage that the poorly thought through CIL levels will have on future economic growth, and he needs to stop Councils implementing such harmful rates of tax.
The company says it is looking to develop 145 hotels in the capital which would create 4,000 jobs. But 95 of these, involving 2,600 jobs, are in boroughs which have already implemented a construction tax or are planning to. This puts expansion plans at risk because of the significant sums involved. For example, the two developments in Barnet will mean a construction tax bill of £668,000 while the firm's plans in Islington would mean having to find an astonishing £5.9 million for the council's tax collectors. This compares to a bill of £1.7 million under the previous system of taxing developments.
Tax gets in the way of economic growth and Travelodge's explanation of how it affects them illustrates just how it happens in practice. And it's not just Travelodge or hotels that are being held back from their potential. The effect isn't even limited to fewer jobs and less growth, either. It means a devastating cost of living, too. The hotel rooms that won't be built in London will mean higher prices for anyone who wants to stay in London, just as the housing shortage is making rents and house prices so extortionate.
If the Government is serious about getting to grips with an economy that's producing the weakest recovery in history it really needs to cut spending more and reduce taxes, not introduce new ones.