Travel trade issues mixed response to 2021 UK budget
The travel industry has given a mixed response to the budget delivered by chancellor Rishi Sunak earlier, with praise for business rates relief, but concerns over changes to Air Passenger Duty (APD).
Mark Tanzer, chief executive of ABTA said: “The budget offers some help to retail travel companies, but does not go far enough to support the recovery of the international travel industry – the sector hit hardest by the pandemic and one that is critical to the wider economic recovery.
“It is good that the government has responded to our calls to continue business rates relief by cutting rates by 50 per cent; this should help high-street travel agents.”
He added: “However, this is a sector that has faced tighter government-imposed constraints on trade than almost any other, including severe restrictions throughout the critical summer season.
“The chancellor could have done more to recognise this fact – by providing tailored recovery grants to travel agents, tour operators and travel management companies.
“Instead, while other struggling sectors – such as theatres and pubs – will get additional tax reliefs and duty cuts, there is very little in the Budget to support many travel businesses as they attempt to recover from the biggest crisis the sector has ever faced.”
With the intention of boosting air travel within the UK as part of its ‘levelling up’ ambition, the chancellor confirmed the government would cut domestic APD from £13 to £6.50 in April 2023.
At the same time, the budget also contained details of a new higher band of APD for ultra-long-haul distance travellers.
From April 2023, the international distance bands will be set at 0-2,000 miles, 2,000-5,500 miles and 5,500 miles-plus, and the applicable APD rates will be £13, £87 and £91 respectively for economy passengers.
Tanzer continued: “In addition, while we support the decision to remove double-taxation on domestic Air Passenger Duty from April 2023, it is regrettable that this cut will be partially offset with increased rates for long-haul flights.
“With the industry only at the beginning of its recovery, now is not the time to be announcing future tax rises on the sector.
“As it stands, APD is not – and has never been – an environmental tax; the revenues are not hypothecated or used for environmental purposes, such as investing in the development of sustainable aviation fuels, and the tax does not encourage use of newer, cleaner aircraft.
“Looking to the medium and longer term, we are supportive of fundamental reform of APD with the aim of creating fair taxation within the travel industry, which reflects the economic benefits of the sector and recognises the environmental impacts of travel.”
Dale Keller, chief executive of BAR UK, said changes to APD would harm the aviation industry.
He said: “It is inconceivable that the chancellor is choosing to suppress his ‘Global Britain’ aspirations and posture ahead of COP26 behind a highly flawed environmental rationale.
“The British public won’t be fooled into thinking that the government is investing their APD money to reduce CO2 emissions from air travel.
“This is another missed opportunity for the UK to lead on overhauling obsolete taxation policies that are undermining the huge investments in technology and infrastructure needed to drive the sustainable recovery of a critical sector of the economy.
“Airlines have committed globally to 2050 net-zero targets that require governments to develop pragmatic policies and implement tangible interventions - not resort to tinkering with blunt and regressive taxation that fails to meet the expectations of the public or support the sustainability initiatives of the industry.”
He added: “We welcome the solution to a longstanding anomaly where return domestic flights have been taxed higher than international flights to Europe, but why wait until 2023?
“This eventual correction should not be regarded as a tax cut but simply the government finally doing what is fair and right.
“But the notion that the world’s most heavily taxed long-haul travellers should be expected to subsidise a tax correction for domestic travellers underscores how APD remains not fit for purpose in stimulating a sustainable future for aviation.”
Andrew Crawley, chief commercial officer, American Express Global Business Travel, also raised concerns over the environmental credentials of the tax.
He explained: “APD was supposed to be an environmental tax, yet no money has been ringfenced for sustainable initiatives.
“The government needs to get serious by investing the proceeds of APD in the infrastructure we need to support the development of sustainable aviation fuel (SAF).
“Making SAF widely available is the only way to make meaningful progress against our net zero targets.
“If revenue generated from the new long-haul band is not invested in a sustainable future, it will do nothing except penalise British businesses trying to embrace the government’s own Global Britain initiative.”