In a rare show of solidarity, UK airlines have sent a pre-Budget (21 March) letter to the Chancellor appealing for urgent action to alleviate the damage being caused to the airline industry and to the UK economy as a whole, writes John Barrington-Carver.
The open letter follows the publication of research last week by the World Travel & Tourism Council (WTTC) that found that removing Air Passenger Duty (APD) entirely would result in an additional 91,000 British jobs being created and £4.2 billion added to the economy in just 12 months.
In contrast, APD earned the Treasury about £2.6 billion in 2011/12 and is causing many passengers to change their holiday travel patterns either re-routing via European airports or taking advantage of UK departures on cruise ships.
It is not only British travellers who are affected. Over the past two years overseas visitors are apparently becoming increasingly aware of the higher APD rates. Virgin’s Steve Ridgeway recently said: “Any further rises could be hugely damaging for UK business and tourism, as while APD has been steadily climbing since 2007, the number of visitors coming to the UK by air has fallen 15 per cent.”
The government’s planned APD rise (1 April) will mean that a family of four travelling Economy Class to Florida will pay £260 in APD this summer, up from just £80 in 2006.
Compared with seven years ago, APD rates have risen by 160 per cent on short-haul flights, and up to 360 per cent on long-haul flights. These increases dwarf the 18 per cent rise of inflation over the same period.
The coalition of airlines says: “To have made this decision without undertaking a comprehensive economic assessment seems to be at odds with the Treasury when it says that it seeks evidence-based solutions to taxation issues.”
On top of APD, the cost of jet-fuel is rising in line with crude oil prices and the EU Emissions Trading Scheme is likely to add further costs to air travellers’ fares. In 2006, Cheapflights’ then CEO David Soskin said of the planned doubling of APD in 2007: “This is a slap in the face for the UK’s less affluent travellers. It will do nothing to stop global warming and is merely another stealth tax in an attempt to plug the huge gap between the Government’s profligate spending and its income.”
At the time, the Labour Government had positioned APD as an environmental tax when, in fact, it has been since admitted that it was a revenue earning duty pure and simple.
In contrast to the current industry-wide vocal opposition to APD, there was very little at the time, certainly not in the form of a coalition of airlines.
It remains to be seen in tomorrow’s budget whether the Chancellor has listened at all to the WTTC study results and to the UK airline industry. All the signs are that he will not relent or commission an independent study on the effects of APD.
(Image: davidcjones)
