16 AUGUST 2010
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Last week the Prime Minister delivered a fine speech in central London to a travel industry audience on the challenges and opportunities that tourism presents. He brought along his Tourism Minister, John Penrose, but not his largely invisible (to the airline industry) Secretary of State for Transport Philip Hammond.
Sadly he missed the major point. And even more sadly the opportunity to question him was not offered.
It is useless pontificating about the need to make the incoming tourist industry work if at the very point of entry the visitor is going to be ripped off. OK technically APD (that is what we are talking about – Air Passenger Duty) is a departure tax, paid for when booking the journey, but for practical purpose it is just another cost added to the trip.
We are all aware that the UK is an expensive place to visit when actually landed on these Isles, but there can be little doubt that when our potential visitor looks at his budget and compares with the cost of visiting somewhere else, APD must be the final blow. The Dutch quickly dropped a similar plan when they realised the consequences for Amsterdam Airport. Unfair taxes drive international passengers to other gateways and hubs.
According to the Office of National Statistics over twice as many visitors arrive by air (and are taxed) than by tunnel/sea (and are not).
Mr Cameron is taking his family holiday in Cornwall, and his track record shows that he finds the British Isles ideal for the holiday break, no fancy Italian or Caribbean island for the Prime Minister. Well done. Most of his friends in Parliament would have decamped abroad, with the cost (one assumes) coming out of their pocket. For a family of four in Economy the tax to, say, Florida this year is £180 (the same for Economy Plus but £360 in Business Class). Next summer it will be £240 (£480). The tax is calculated by the distance to the capital of the country from London and therefore Hawaii is the same as Washington DC.
Many British have family in Australia and other far flung parts of the former Empire. Boarding the aircraft will cost a family of four a minimum £340 without the carrier receiving a penny. Likewise for people coming in the other direction. If you are Australian you will still have to pay our departure tax.
In his speech Mr Cameron pointed out that the UK has fallen from sixth to 11th place in the World Economic Forum’s Travel and Tourism Competitiveness Ratings between 2008 and 2009. He pointed out that China sends more tourists to Germany than to the United Kingdom and of the billions generated by tourism.
He spoke strongly of the virtues of these islands. “I want us to have the strongest possible tourism strategy,” he said and spoke of four parts to his approach. What the government does; local government and its role; the private sector; and finally what he called “others” including (hurray!) a mention of the horrendous immigration hold ups at Heathrow (which he called Customs – his speech writers ought to visit Heathrow).
Perhaps he needs to book a holiday abroad for Christmas, or invite his relations over at his expense. Suddenly the real truth of why the UK is losing its competitiveness will be brought home.
We have news for Mr Cameron. The previous government’s panic measure to increase the Treasury revenue will take us down towards the Blue Square League in terms of competitiveness. (The Prime Minister was full of sporting connections in his speech.) Ireland is already feeling the pinch and in Germany a much lesser tax burden has caused an almighty outburst by Lufthansa’s outgoing CEO.
The AERBT observation is simple. If an acceptable resolution cannot be achieved between the Chancellor and the industry by November the tax rises due at that time should be put on hold. We are fully aware that we are living in tough times, but it works both ways. The extra revenue will not compensate for the country's overall loss.
If Britain is to retain its leadership in world air transport it is vital that we get the next step right in terms of taxation. From 2012 aviation will enter the EU Emissions Trading Scheme, another financial complication with serious consequences for airlines that fail to comply.
In closing Mr Cameron said: “We’re going to bring a whole new approach – and a new attitude – to tourism. Because we think tourism is one of the missing pieces in the UK’s economic strategy. Our commitment to tourism is not new-found!”
Actions speak louder than words Mr Prime Minister. Cancel Air Passenger Duty.
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