Cheapflights has long opposed raising Air Passenger Duty to unsustainable levels and warned in September 2008: “Rocketing overheads for airlines and tour operators combined with an economic downturn means more hard times for travel businesses and higher prices. Those who can still afford to fly will either find less choice available or will need to dig deeper in their pockets to afford that holiday package or flight. However, many others less well-off may not be able to do so.”
Cheapflights also warned that: “Importantly, there could also be a significant ‘downstream’ negative knock-on effect on the UK’s air-travel, tourism and aviation support industries. These depend on the continued financial health of aviation in the UK and employ hundreds of thousands of workers.”
It is therefore no surprise that Travelmole, commenting on the recent Mintel British Lifestyle report, says that “foreign holidays are increasingly the preserve of the well-off”. According to Mintel, the number of overseas holidays sold last year was less than at any time since 2000. Mintel confirms what the industry already knows. Both outbound and inward tourism are hobbled by high taxation.
Apart from current economic pressures on consumers, having the highest tax on flying in the world does nothing to help the UK travel industry. It’s extraordinary that the Treasury, having hoisted APD to levels which seriously deter not only UK air travellers, but also overseas air passengers as well, are surprised that on their own admission that they are now facing a half billion pound shortfall in expected APD revenues. The Treasury’s response is to suggest putting up APD by 25 per cent!
Dare one suggest that might just have the opposite effect in the current world economy? APD is avoidable – people either don’t fly or, as is happening in Northern Ireland currently, passengers just cross the border to fly from Dublin Airport.
In the UK continental airports are also just a train or short-haul hop away. The Dutch found that out too and dumped their APD having failed to raise the revenues they expected and because of the knock-on damage their version of APD had done to their economy.
APD has always been a regressive tax (a tax that takes a larger percentage from low-income people than from high-income people). A regressive tax is generally a tax that is applied uniformly thus hitting lower-income individuals harder. APD is now positively discriminatory and as Mintel points out, combined with the effect of high fuel costs, air travel is increasingly becoming the preserve of those with high disposable incomes as indeed Cheapflights’ CEO warned back in 2006.
“If you increase the tax still further, the result will be that poorer people, who as a result of the growth in low-cost airlines and cheaper long distance fares are for the first time enjoying foreign travel, would be worse off.”
The acting profession say that when performing “less is more”. Perhaps the Treasury might try that approach instead? Since with APD at current historic highs “more” has evidently meant “less”.
By John Barrington-Carver
(Image: hoyasmeg)
