The crisis in local authority funding is fuelling growing demands for local tourism taxes on hotel guests.

Councillor Gerald Vernon Jackson, chair of the Local Government Association (LGA) board for culture, tourism and sport, and former Liberal Democrat leader of Portsmouth Council, told the English Tourism Week conference in London on Monday: “The major challenge is council budgets.

“There is real pressure on council budgets and it’s not going to get better. The money we get from Council Tax has been cut 75%. The central government support grant has not just been cut, some councils now have to pay [money] to subsidise central government.”

Vernon Jackson told the conference: “In every hotel in California you pay a bit of tax to go to the local tourism economy. I don’t think it puts people off going to California.

He suggested introducing “local taxation on visitors staying in hotels” so long as “it is ring-fenced for tourism”, insisting visitors would be “unlikely to look [at a hotel invoice] and say, ‘I wouldn’t have come if I knew there would be £1 or £2 a night on the bill’.”

Shadow tourism minister Kevin Brennan agreed: “What is going on has gone beyond efficiency cuts. We call on the government to end the cuts to local authorities or they will affect local economies, [and] the tourism industry is a jewel in the crown of our economy.”

Kate Nicholls, chief executive of new industry association UKHospitality – formed by the merger of the British Hospitality Association (BHA) and Association of Licensed Multiple Retailers (ALMR), due to be completed at the end of March – said: “A tourism tax keeps bubbling up and we keep knocking it down. It’s like Whack-a-mole.

“The problem is there would only be a small number of businesses paying the tax, with no guarantee they would see the revenue come back [to the sector].

“Many hotels would not be able to pass it on to their customers, when the sector is already paying £40 billion a year to the government.”

She said: “If we had a system that dealt with the digital disrupters, that would be different. But hypothecation is very difficult to make work.”

Nicholls insisted: “A time when the industry is struggling is not a time to burden a sector that is supposed to be a sunrise sector.”

However, Marketing Manchester director of tourism Nick Brooks-Sykes said: “Most local authorities are looking at this. We are in a crisis we have never seen before.

“Unless someone brings back central government funding, you have no other option if you want to fund a destination management organisation.

“We’ve been discussing a tourism tax for three years now. The hoteliers themselves realise something needs to be done.

“Manchester will increase its bed supply by 50% in the next three years. How do you keep track with that supply? Hoteliers recognise the need to discuss how to put a levy in place.”