The Scottish Government will introduce a new Bill to allow councils to institute a flat rate visitor levy.

Local authorities currently have the power to implement a so-called tourist tax on visitors to the area, but can only do so as a percentage of the cost of stays in hotels and other forms of accommodation.

But public finance minister Ivan McKee announced on Tuesday a Bill would be lodged in the new year to allow for a flat fee to be introduced, in the hopes it would pass before the end of the parliamentary term in March.

In a statement, the minister said: “The visitor levy empowers councils by giving them a new way to raise money for investment in tourist services and facilities.

“Our aim has been to give councils the flexibility to design a levy that works for their areas, while ensuring businesses can easily understand what it means for them.

“The Act passed last year was an example of partnership working between the Scottish Government, local government and tourism businesses.

“Through regular discussions with our partners, it became clear that further flexibility would be welcomed.

“That is why we have decided to legislate next year, to ensure local visitor levies work effectively for everyone.”

Scottish Tory economy spokesman Murdo Fraser said that while it was a “relief” the Government had “finally listened” to calls for the flat rate, the levy would still hurt local economies.

“Whilst that is an improvement, this legislation is still going to impose enormous costs on, and damage to, a sector of the economy which is already struggling with too high a cost base,” he said.

“The introduction of the SNP’s visitor levy has been handled in the most cack-handed fashion, with no real assessment of its impact, no clarity about how it will be collected, and a series of farcical U-turns about what powers councils would have.

“This announcement finally confirms the flexibility to set a flat rate on the visitor levy, but it won’t alter the extra costs and red tape being imposed on businesses and travellers – including Scots moving around the country for work or family reasons – or provide any assurance that these funds will benefit local communities.”

Marc Crothall, the chief executive of the Scottish Tourism Alliance, said the move showed the Government’s willingness to “act on feedback from business” as he pushed for councils to pause their plans for a tourist tax.

“It will overall be easier and less costly for accommodation providers and local authorities to administer, and importantly more transparent for our visitors,” Mr Crothall said.

“We now look forward to working constructively in partnership with the Scottish Government to deliver meaningful reform of the visitor levy charging model, which we have championed from the very start.

“In the meantime, we urge all local authorities to consider pausing any plans for a visitor levy scheme as this plays out in the Scottish Parliament over the next few months. Change is coming just down the line.”

UKHospitality Scotland executive director Leon Thompson said the current legislation is “unworkable” and welcomed the Scottish Government’s “pragmatic” approach.

A senior official at the UK’s official forecaster has said he does not believe the chancellor was being misleading when she said the state of the public finances were “very challenging” in the run-up to the Budget.

Prof David Miles from the Office for Budget Responsibility (OBR) told MPs Rachel Reeves’s comments ahead of announcing her tax and spending plans were “not inconsistent” with the situation she faced.

Reeves has rejected claims she misled the public about the country’s finances after the OBR’s economic forecasts revealed they were better than widely thought.

However, Prof Miles said despite the forecast, the chancellor still faced a “very difficult Budget and very difficult choices”.

He said the OBR raised concerns with Treasury officials about leaks to the media in the run-up to the Budget, adding: “I think it was clear that we didn’t find this helpful. We made that clear.”

But he said the watchdog was not “at war” with the Treasury.

A political row has broken out over the information shared with the public over the past few weeks over the health of the economy and the choices required to be made by the chancellor.

Last week’s Budget included a total £26bn of tax rises, with £8bn set to be raised by extending the freeze on income tax and National Insurance thresholds for a further three years. The two-child benefit cap was also scrapped.

In the build-up to the Budget, Reeves repeatedly talked about a downgrade to the UK’s predicted economic productivity that would make it hard for her to meet her borrowing rules, fuelling speculation that the income tax rates themselves would be raised, which would break a manifesto pledge.

On 4 November, she used a rare pre-Budget speech in Downing Street to warn the UK’s productivity was weaker “than previously thought” and that had “consequences for the public finances too, in lower tax receipts”.

However, it has since emerged that the OBR, which assesses the government’s tax and spending policies, had told the Treasury on 31 October that it was on course to meet its main borrowing rule by £4.2bn due to the downgrade in productivity being offset by higher wages, which increase the government’s tax receipts.

The Conservatives have claimed the chancellor gave an overly pessimistic impression as a “smokescreen” to raise taxes in order to increase welfare spending, with leader Kemi Badenoch claiming she “lied to the public”.

The £4.2bn buffer was less than the £9.9bn Reeves had left herself at the previous Budget, and Prof Miles told a committee of MPs, still “posed a significant” challenge to the government, which wanted to increase the figure overall.

The so-called headroom chancellors have left themselves – essentially a buffer to fall back on – has been smaller in recent years. Prior to November 2022, chancellors tended to create a £20bn-£30bn buffer.

Questioned by MPs over the chancellor not mentioning the surplus in the forecast, Prof Miles said the £4.2bn, while a positive number, “was by a tiny margin”, adding that the OBR was not actually looking for it to be interpreted as “this is very, very good news, there is no hole to fill – as people were saying”.

“I don’t think it was misleading, for my own view, for the chancellor to say that the fiscal position was very challenging at the beginning of that week.

“The chancellor was saying that this was a very difficult Budget and very difficult choices needed to be made. And I don’t think that that was in itself inconsistent with the final pre-measures assessment we’d made, which, although it showed a very small positive amount of so-called headroom, it was wafer thin.”

Prof Miles added that the £4.2bn buffer would also have been reduced to minus £3bn because the OBR’s forecast did not take into account the welfare and winter fuel payment U-turns made by the government.