Lord Sadiq Khan is pushing for the quick introduction of a “tourist tax” in London to be charged at up to 5% of the cost of a hotel room.

City Hall is drawing up proposals for the new levy and how the hundreds of millions of pounds that it is expected to raise would be used to boost tourism in the capital.

Lord Khan said: “I strongly welcome the Government giving London the power to introduce an Overnight Visitor Levy.

“This needs to happen sooner rather than later.”

He added: “London’s visitor economy is a huge success story, supporting jobs, businesses and investment across the capital and the wider country, and I have long argued that London should have the same flexibility as other major global cities to raise and invest funding locally.”

However, he risks a row with business chiefs who have called for the new levy to be set at a flat rate of £2 to £3 rather than a percentage of the cost of accommodation, given hotels are far more expensive in London than many other cities.

The Standard understands that the tax will be set at no more than 5% of the cost of rooms.

Lord Khan added: “A well-designed, modest levy has the potential to provide an important additional source of funding to support growth, strengthen London’s offer to visitors and help us remain globally competitive.

“It would allow us to reinvest in the places, infrastructure, culture and experiences that make London one of the world’s greatest cities to visit, while helping manage the pressures that come with welcoming tens of millions of visitors every year.”

There are also concerns in the hospitality sector that the funds raised will not be used to increase tourism.

But the London Mayor, who was meeting Communities Secretary Angela Rayner with other mayors in No10 North in Manchester on Thursday, insisted: “I will work closely with London’s boroughs, accommodation providers, hospitality and tourism businesses and other partners, before final decisions are taken.”

Ministers backed a percentage rather than flat rate charge to protect budget holidays and cheaper hotels.

In Scotland, Edinburgh has introduced a tourist tax of 5% of the cost of a room, which will be charged on the first five nights of a visitor's stay.

Glasgow is also bringing in a 5% levy, and Aberdeen 7%.

Berlin applies a 7.5% tourist tax on the cost of the accommodation.

But hotel prices are far higher in London than in Scotland, Berlin and many other European cities and a 5% levy would put on average £11.50 a night on the cost of staying in the capital, with the average hotel price being £230, according to industry research, though this varies depending on the time of year.

In Paris, the tourist tax is fixed for different types of accommodation, including 3.25 euros (£2.86) for an overnight stay in a two-star hotel and 8.45 euros (£7.43) for a four-star hotel.

Lisbon has a flat four euros (£3.52) levy, up to a maximum of seven nights, or 28 euros (£24.67) for all types of accommodation.

Reacting to Lord Khan’s move, the leader of Westminster City Council voiced concern that London could lose out to other rival capitals.

Councillor Paul Swaddle said: “The reality about an overnight visitor levy is that in Europe, VAT is significantly lower and the total tax burden is lower. Our hotels across the West End and elsewhere in Westminster need to be competitive to keep us a global visitor attraction.”