Last week, British Airways was forced to increase its fuel surcharges due to the soaring price of crude oil, but air passengers leaving the UK (whether they are UK nationals or visitors to the UK), are facing the prospect of even higher inclusive air fares over the next year.
Jet fuel prices are already up by 45 per cent from a year ago and they may go higher. On top of this, Air Passenger Duty (APD) charged by the UK is now the highest such tax charged anywhere in the world and, incredibly, consumers are faced with the threat of even higher APD rates in April 2012.
Furthermore, in January 2012 the EU Carbon Trading Scheme will include international aviation and will cost airlines using EU airspace an estimated US$1.1 billion in the first year alone. Given the razor-thin margins that airlines operate on it is inevitable that such costs will be passed on to consumers.
This fact has been recognised by Ireland and Germany, both of which have much cheaper versions of APD and both have indicated that they will reduce their passenger taxes once the EU Carbon Trading Scheme comes into effect.
By contrast, Justine Greening , the UK’s Treasury Minister stated this week that the UK will not mitigate the cost of the EU Carbon Trading Scheme in any way since APD was not an environmental tax. Given that the previous Government “sold” higher APD to voters as an environmental tax on the basis of the Stern Report and the dire consequences of global warming, it is indeed ironic hearing a Treasury minister saying APD and the EU CTS would be treated as “separate issues”.
Cheapflights has always regarded APD as a regressive tax, hurting those least able to afford it, but at current levels it is not just regressive, it is also damaging to the UK as an international hub and an international business destination.
There is already evidence that business and transit passengers are being driven to use other (European) hubs. Instances of higher taxation being introduced have, in the past, reduced the treasury’s annual tax income. This has already been noticed by the Dutch who tried and dropped APD because of the negative effect it had on their economy.
At a time when the Government claims it wants to stimulate growth, we are seeing some of the highest tariff barriers to inward investment and tourism, let alone to consumer overseas travel and tourism. On top of that, it is resisting calls for increased airport capacity in the South East, which is badly needed to keep up with the global expansion of aviation and increased overseas trade opportunities
Hugo Burge, Cheapflights Media’s Chairman commented: “Clearly the Government needs to address the deficit. However, surely the best way to do that is to stimulate growth in the economy not to put up tax barriers that discourage growth.
“Britain is an island nation whose success has been founded on trade and an international and pioneering perspective. We are told that Small and Medium Enterprises (SMEs) form the engine room of the economy and that the UK will have the best corporate environment for such businesses to thrive – this message and the reality just don’t add up.
“At a time when we need to encourage trade and tourism and keep aspiring for the good things in life, the affordability of holidays is slipping away from most hard-working people.
“A family of four flying Economy return to Orlando, which is in the higher over nine-hour flight time fuel surcharge band, will now pay a whopping £1,024 in APD and fuel surcharge over and above their ‘normal’ fare!
“I have to ask the question, ‘Why is Britain’s perspective so out of kilter with the common sense approach of other nations?’”
(Image: ricoeurian / James Long)
