Heavy duty

How will air passenger duty affect business travellers and the UK economy, asks Bob Papworth - and is it here to stay?

Journalistically speaking, one has to be very careful what one says about Theresa Villiers, shadow secretary of state for transport and the elected member for Chipping Barnet.

She is, after all, a former law lecturer and barrister, with a first-class law degree, and therefore one who almost certainly knows a good (ie winnable) libel case when she sees one.

Neverthless, one could not help but smirk at the good woman's online biography, which lists the "important local issues for Barnet" on which Theresa has been tirelessly campaigning - not least of which is a more reliable service from London Underground.

There is, however, no mention on her website of "important national issues for the world outside Barnet" - which comes a bit of a disappointment to those us who believe there is a world outside Barnet.

Given her status as shadow transport secretary, one such topic, surely, is the whole question of air passenger duty (APD). Villiers has reportedly told one trade paper: "We are well aware of the issues."

Lower down the parliamentary pecking order, shadow transport minister Julian Brazier has said his party would re-think the current banding system, whereby duty levels are determined by the distance between capital cities, but he has avoided any suggestion that the whole APD concept needs to be re-addressed. Over on the government benches, despite increasingly vociferous representations from travel industry interests, Labour's transport minister Paul Clark has categorically stated that the government has no plans to re-think the tax.

In the upper house, in a December 3 debate, Labour's parliamentary secretary to the Treasury Lord Myners went further. "The increase in the air passenger duty is a relatively small amount of money. It is modest, but it will contribute to healing the public finances, as well as having some good environmental consequences," he told the Lords.

Maybe, but at what cost? Steve Ridgway, chief executive at Virgin Atlantic, insists: "Everyone knows the airline industry, along with the wider UK business community, will be severely damaged by these unjust future increases in APD. We are, therefore, calling on the Conservatives to see sense on this issue and commit to scrapping the planned increase for 2010 if they are successful at the next election."

Ridgway is also clear that APD should be withdrawn as soon as aviation becomes part of the EU Emissions Trading Scheme in 2012, "otherwise the UK aviation industry would be taxed twice over".

The Board of Airline Representatives in the UK (BAR UK), representing 90-plus airlines flying in and out of this country, has repeatedly made its position clear - see panel, right - and has gone so far as to write to all 156 national Olympic committees outside Europe, inviting them to express their pre-2012 concerns to their relevant British Embassy or High Commission.

International Air Transport Association director-general Giovanni Bisignani says: "The UK is a case in point of a government detached from reality. They have it all wrong. Taxes won't reduce emissions. And making travel more expensive will not stimulate the economy."

On the leisure side, the UN World Tourism Organisation, the World Travel & Tourism Council, the European Tour Operators' Association and the Association of British Travel Agents have all condemned the air passenger duty increases.

And on the corporate travel side, Carlson Wagonlit Travel's (CWT) director of public sector and industry affairs, Nigel Turner, has warned his company's clients they will be paying £30 million in APD by this time next year.

Turner's boss, CWT's UK and Ireland executive vice-president Andrew Waller, adds: "CWT believes that the proposed rises will impede economic recovery without delivering environmental benefits and we will oppose them vigorously.''

And so will Buying Business Travel. In an effort to pull together the many and varied protest strands, and to inform the wider corporate travel industry of the issues involved, we will be publishing regular APD updates throughout the year.

Nigel Turner is urging clients to sign a petition on the Prime Minister's Office website (www.number10.gov.uk) and write to their local MPs. We are urging you to contact us, so that the oxygen of publicity can fuel the fires of protest.

It might also be an idea to write to the MP for Chipping Barnet. The shadow secretary of state for transport may be aware of the issues, but she does not yet appear to be aware of the depth of feeling about those issues.

Voice your APD opinions through the columns of Buying Business Travel - full contact details can be found on Page 3 of the magazine.

APD (awfully pricey destinations, that is...)
Air passenger duty is calculated on travel distance. Band A levies apply to flights up to 2,000 miles from London (irrespective of UK departure airport); Band B applies to flights up to 4,000 miles; Band C to flights up to 6,000 miles; and Band D for anywhere over 6,000 miles.

Source: HM Revenue & Customs

Mike Carrivick, Chief Executive, Bar UK

Why are the airlines so concerned about the increases in APD? Quite simply, the sheer costs are disproportionate and will have devastating effects on travel plans and budgets for UK businesses and residents, and visitors to the UK.

APD is a discriminatory cash cow and not the green tax as it was originally sold to the UK public. Airlines fully recognise they have environmental responsibilities, but APD is not the way to handle them. Instead, emissions trading schemes (ETS) are the way forward in encouraging efficiency. Aviation will be incorporated into the EU ETS in 2012, which is a start; however, a global ETS under the auspices of ICAO would be acknowledged as having a much wider 'buy-in'.

The Treasury's initial objective is to collect an additional £520 million pounds per annum from APD. However, the revenues raised by the previous APD tariff already exceeded airlines' emissions costs by over £100 million per annum (DfT report: Aviation emissions costs assessment 2008, based on APD charges in 2006, taking into account the doubling of APD in 2007).

APD levels will have increased by a range of 140 per cent to 325 per cent between January 2007 and November 2010 and become totally disproportionate to the actual air fares. For example, London/Singapore will be taxed at £85 for a basic Economy Class fare and £170 for travellers in all other classes. This illustrates how business travellers, trying to reduce costs by travelling in Premium Economy, will be taxed at the same level as Business and First Class. Airlines are also dismayed that passengers in private jets escape the tax entirely.

The Board of Airline Representatives in the UK (BAR UK), which represents 93 scheduled airlines, continues to campaign extensively against APD. We have written to MPs in all parties advocating a change of policy and visited Treasury officials on a number of occasions.

The Treasury gives every indication of not listening. We are convinced the UK economy will suffer significantly, not least because overseas visitors will be deterred by the high costs of APD.

UK business is heavily reliant on global markets and, as an island nation, competitive access remains a vital part of trading. It cannot be in the national interest for the UK to maintain a tax that is effectively a tariff barrier against business and against flying.

As a global business, aviation requires a global solution to environmental taxation, but the isolated scheme of the UK government will make the UK a less competitive place to do business. For these reasons, BAR UK continues to campaign for the APD regime to be revised in advance of aviation being incorporated into the EU ETS in 2012, after which it should be scrapped.