With less than a month to go until this year’s Budget, the government’s policy on aviation and tourism is looking increasingly muddled and contradictory. On the one hand we now know that government plans to invest more than £120m over the next four years to encourage millions more overseas tourists to visit the UK – an ambitious and important objective that is vital for UK tourism and jobs, given, for example, that France attracts six times as many Chinese tourists compared to the UK.
However, whilst giving with one hand the Treasury plans to take away with another. Despite the UK’s strong reliance on aviation links, we suffer from the highest taxes on flying anywhere in the world. In his Budget, the chancellor looks set to announce that the tax on flying – known as Air Passenger Duty (APD) – will rise again, by twice the rate of inflation! The sad truth is that unless the government looks afresh at APD and its tourism and aviation policy in the round, then its PR drive to encourage inbound tourism is unlikely to enjoy the success it might otherwise have done.
Recognising this, this week the employer’s organisation, the CBI has said the chancellor’s planned double-inflation increase of eight per cent would put severe pressure on the competitiveness of the aviation industry, and that any increase should be pegged to RPI. I would go even further than this. Aviation plays a crucial role providing international connectivity for our island nation. Domestic air links also fulfil an essential role for the remoter parts of the UK regions. It’s important to note that about 85 per cent of these air routes are either over water or simply economically unviable for substitution by high-speed rail – passengers on which will pay no tax.
Airports play a vital role in every region of the UK, serving as a magnet for business, providing regional connections both nationally and internationally. It is good that this is recognised by many senior politicians from both coalition parties and in opposition, many of whom actively campaign to retain air links to London. But perhaps crucially, at a time when the UK is suffering the highest levels of unemployment for 17 years, aviation supports nearly one million jobs in tourism, engineering and supplier industries spread across the UK nations and regions.
Tourism is, of course, one of the leading industries in the world. Many countries both within and beyond the EU rely heavily on tourism revenues – indeed, it is the key industry in many developing countries, and UK residents holidaying overseas help support not only jobs within the UK outbound travel industry but also the livelihood of many millions of people in developing countries every year.
In fact, tourism is the UK’s third-highest export earner and will play a vital role in rebalancing our economy. About three out of four overseas visitors come to the UK by air – for many, of course, it’s the only practical way of getting to our island nation off the north coast of the European continent. Equally aviation fulfils an essential role for connectivity with family and friends for many British residents not born in the UK.
However, APD has more than doubled in the last five years. Over the same time, the total number of visitors to Britain has fallen by two million and our European competitors are now growing their tourist numbers at our expense.
We all recognise the importance of reducing the public debt and that we must all play our part in that, but many in the UK tourism industry have firm evidence that the British economy would be better served by the chancellor taking positive steps to reduce APD to boost tourist numbers. Research by the Tourism Alliance suggests that APD suppresses the UK’s tourism earnings by approximately six per cent – this represents over £1bn per annum. More importantly perhaps, at the current time, this loss of revenue costs the UK 25,000 jobs.
I’m pleased the chancellor has recognised the damage that APD is doing to tourism in Northern Ireland and has reduced the level of APD tax on long-haul flights there. But there are many other areas of the UK that are suffering similarly and the message is simple: the tax is counterproductive and damaging to Britain’s international competitiveness.
We urge him to listen to a Fair Tax on Flying campaign, in which BATA plays a key part, and reconsider this decision, especially as aviation is now part of the EU emissions trading scheme (ETS) as from 1st January this year. ETS offers a far smarter way of addressing aviation’s environmental impact than a blunt tax that simply makes the UK uncompetitive and increasingly unaffordable both for business and tourism alike.
We therefore urge the chancellor to follow the example set by the German government that has recently announced it will be reducing its air ticket tax, already much lower than the UK APD, to compensate for the additional costs airlines will experience with the accession of aviation to the EU ETS.
APD now raises even more than the Bank Levy and will cost air travellers £15bn over the next five years. With less than four weeks to go before the Budget, the chancellor needs to ditch the increases he has planned and announce a phase-out of the tax if the government is serious about boosting UK tourism, supporting British jobs and helping inward investment.
Today, on behalf of the Fair Tax on Flying campaign, I invite parliamentarians to write to the chancellor calling for next month’s planned double-inflation increases in APD to be abandoned in order to avoid seriously damaging Britain’s tourism industry in the long term and pricing ordinary, working families out of an annual sunshine holiday.