As the 29 November date for the Government’s report on its review of the much-opposed Air Passenger Duty (APD) approaches, there is increasing media coverage on the subject, writes John Barrington-Carver.
Reading some of the online comments following such coverage demonstrates the fact how much the tax is disliked by the public as well as the travel industry. It also demonstrates that there is significant public ignorance about how and why the tax came about and who is responsible for the current punitive levels. These are the highest in the world among the very few similar taxes on flying.
What is APD? It is a tax which the Government imposes on each seat sold on aircraft leaving from UK airports (with the exception of airports in the Scottish Highlands and Islands). Originally introduced by the Conservatives in 1994 at £5 and £10 for Economy and Premium Seats respectively, the duty was gradually increased under the subsequent Labour Government, particularly since 2007. A major factor in increasing APD may have been the fiscal spending draining Treasury coffers.
Perhaps linked to this, in late 2006 the Stern Report on climate change painted a dire, almost apocalyptic, picture and recommended concerted international action on reducing CO2 emissions. The science behind the report’s predictions was questioned at the time. However, despite the fact that aviation’s global carbon footprint was just 2 per cent, it served to raise UK public concern to the extent that the Bishop of London was even moved to state that “It was a sin to fly”. The report therefore conveniently and neatly set the scene for “acceptable” APD rises by characterising it as a necessary “environmental tax”. It therefore enabled the Government to double existing APD rates in February 2007.
Recognising APD’s revenue-generating potential, the Government again raised APD in November 2009 and introduced four tiers of APD depending on distance from London to a destination country’s capital city. It was raised yet again in November 2010 despite protests from tourism-dependent developing nations, UK tourism and from the aviation industry. Effectively since January 2007 and November 2010 the last Government had raised the tax on Economy and Premium seats for European destinations by 140 per cent. For long-haul flights the tax on both classes of seats has risen between 200 per cent and 325 per cent respectively.
Despite being presented as a necessary environmental tax on aviation, in practice the revenue from APD has never been assigned to environmental projects despite Government claims at the time that it was justified on environmental grounds. However, it has been reported in the Daily Mail that the current Chancellor has admitted in a letter dated 12 August to Olivier Jankovec, director general of the Brussels-based Airports Council International, that “APD is fundamentally a revenue raising duty and currently raises around £2.5bn per year”.
While APD is now admitted as being simply a revenue-raising exercise by Government, it is also increasingly being much more publicly portrayed as a whole by the travel industry as an ill-thought-out part-solution to the UK’s major fiscal problems and one which will create long-term damage to the UK economy. The Dutch ditched their APD after a year when it was obvious that it was damaging their economy financially by far more than it raised. Not surprisingly, given the current deterrent level of APD (and despite an increase in World air passenger numbers since 2009), APD is proving statistically to be a barrier to the UK and certainly to Caribbean tourist islands for passengers flying from the UK.
Furthermore, it has not produced the revenue expected, a shortfall of around £500 million being forecast by the Treasury recently.
Given the UK’s debt level and the urgent need to generate tax income, it is unlikely that it will be admitted in November that that the high level of APD is counter-productive. In its forthcoming review, having wisely held off increasing APD yet again earlier this year, the Government should definitely reconsider the input it is receiving from business, travel and aviation sources. They should certainly address the anomalies that make APD cheaper flying to Hawaii than Kingston, Jamaica. Preferably it should, if not removing the tax entirely, it should at least reduce the tax to sustainable and supportable levels that do not discourage inbound and outbound tourism as well as business travel to the detriment of the exchequer and the UK economy.
(Image: UggBoy♥UggGirl)
