PR Week editor Danny Rogers looks ahead to this week’s Budget, which could bring another painful rise in aviation tax
Tuesday’s Budget will prevent Britain from taking ‘the road to ruin’ according to Chancellor George Osborne yesterday, in the latest bit of spin from a coalition government that is being careful to manage expectations downwards.
The worrying thing is that hidden in that battered Budget briefcase (will Osborne opt to use that one for the Austerity Budget?) could be plans representing a ‘flight to ruin’ for travel and tourism.
I’m talking of course about the dreaded air passenger duty (APD), which is likely to be replaced by a new per plane duty (PPD) following this Budget. And even before PPD comes in, tomorrow’s Budget may raise APD to prohibitive levels for certain destinations from November.
APD, like most political communication, has involved much smoke and many mirrors. It was originally introduced in 1994, by Conservative chancellor Ken Clarke, who said aviation was ‘undertaxed’. As Labour Chancellor, Gordon Brown originally cut APD but, under pressure from environmental lobbyists, later raised it significantly.
The levy was now positioned as an ‘environmental tax’ on air travel, but the Labour government never felt any need to show that the money raised would go on environmental initiatives. Indeed it was really just another excise-style tax on an activity – flying – which, because of global warming, was increasingly equated with nasty habits like smoking and drinking.
In recent years the trade bodies Abta and Iata have recognised that the level of APD, is a classic ‘hearts and minds’ PR battle and have lobbied hard to keep this gradually increasing burden on international flights in check.
Their efforts have been instrumental in new government’s intention to create PPD in its place, but the travel industry is in danger of losing the longer war.
As we all know, the bigger picture is that the government must do everything possible to balance the books. It will raise every tax it can without losing votes.
And PPD’s heavier taxing of long-haul air travel – particularly with a disproportionately high burden on premium cabins – is unlikely to cause the same outcry as, say, a penny on income tax.
Of course the problem is that higher aviation taxes could actually have much the same impact. It is not just those who fly on long-haul holidays who will be hit, but potentially the whole economy, and certainly the general propensity to travel.
Many of our leading airlines (big employers) such as British Airways and Virgin Atlantic are hardly trading on high profit margins at the moment and further tax hikes will only makes things worse.
They could also deter foreign investment, because not only does aviation tax hit inbound tourism, it also affects foreign companies who may wish to manufacture in the UK – Asian car brands, for example. Such was the concern in the Netherlands recently that they dropped a similar tax.
Abta is currently pressing the Government for PPD to be ‘fully consulted upon so that the poorest nations and travellers are not hit the hardest’. To be fair, it is now a much more impressive lobbying force that it was in the past. But we shouldn’t underestimate the pressure on this administration both to raise extra cash and to take tough decisions on aviation.
It should be remembered that certain (wealthy) environmentalists – Zac Goldsmith for example – have held considerable sway within the Conservative Party. That is one of the reasons why the Tories have pledged to scrap plans for a third runway at Heathrow.
So while the detested APD looks on the edge of defeat, and PPD is far from invulnerable, the wider fight against higher aviation tax looks like being the mother of all lobbying battles for the travel sector.
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