Volcanic fallout sets tone for APD hike

With UK airspace being closed due to Icelandic volcanic ash and reported economic decimation of over £1bn already, is this a preview of what will happen when the Government’s mammoth Air Passenger Duty hike comes into force on the 1st of November?

If there was ever any doubt of the importance and necessity of air travel, this incident underlines it perfectly.

The grounding of aircraft for just four days has developed into a major international crisis: you’ve got Gordon Brown attending a COBRA meeting about it and EU ministers holding emergency talks in order to try and get some airspace opened. As the Eyjafjallajökull volcano continues to spew ash into the atmosphere the government has decided international mobility is so important that Lord Adonis is putting plans afoot to fly people into Spain and have the Royal Navy bring them back to the UK.

Cabinet office minister Tessa Jowell said;

“This is obviously a serious crisis, it is putting thousands and thousands of people to enormous inconvenience and anxiety”

In the recent budget in March, Labour pencilled in a blockbuster rise in the Air Passenger Duty (APD); an escalating tax that has already risen by 320% in the last 4 years. This tax seeks to price families out of going on holidays in order to cut carbon emissions. It’s a serious tax, Tessa, and it will put thousands and thousands of families to enormous inconvenience and anxiety.

We are told that this tax rise is necessary not because air travel is a particularly major pollutant, but because in future it will represent proportionally more emissions as other forms of transport become emissions free. Whilst this is true, to suggest aircraft are hideous pollutants now is pure fantasy. In fact, emissions associated with air travel are more prominently the vehicles at the airport than the actual aircraft themselves.

Jet engines produce very little emissions, but green lobby groups claim that the little they produce affects the environment more due to dispersal at altitude.

The APD has been hammered as pointless because it does nothing to stop airlines running half empty 747′s instead of more full newer aircraft. In fact you could say this will happen more, given that long haul flights will still be necessary but less people will be able to afford them.

Lets take a look at how much this greedy government want to siphon off. In real terms, for a family of four travelling in economy class, the APD rise means the following:

• When travelling 6000 miles or more, they will have to pay an additional £340 – up from £80 in 2006.
• When travelling 4000 miles or more, they will pay £300 – up from £80.
• When travelling 2000 miles or more, they will pay £240 – up from £80.
• When travelling less than 2000 miles, they will pay £48 – up from £20.
• If the family travelling 6000 miles or more decided to opt for extra legroom and upgraded to premium economy class, the APD will be a staggering £680 – up from £160.

To me, the APD is nothing more than a stealth tax that epitomises Labour’s government. They snuck it in a budget a few years ago, put a delayed implementation on it, added a yearly escalator and we’ve heard little about it since. It certainly confirms that Labour is the party of the many and not the few because this tax hammers everyone from all backgrounds and financial means – apart from multi-millionaire government cronies like Sir Philip Green and Lord Sugar whose private jets remain untaxed.

This duty currently returns about £2bn in revenue for the government and this rise – none of which will be spent on green issues – means that although the Government will reap  a reported £3.5bn there will be serious collateral damage to the economy.

Air routes will be cut, jobs will be lost, airlines will go bust (if the strikes don’t get ‘em first). Less visitors will come to the UK and less people will pass through our airports. Tour operators may see significantly less long haul business unless from the outset they seek to bypass the tax and route longer haul flights via European airports instead.

Speaking of Europe, the Dutch have previous experience of Air Passenger Duties which should have been taken into account by the government. They implemented it and it reaped €300m per year – but ended up costing their economy €1.2bn. So they scrapped it in 2008. Ironically, one of the main beneficiaries of the British APD will be Schipol in Amsterdam as it becomes the new European long-haul hub.

The government may not be doing so, but private businesses are cost cutting and will see this tax as another reason not to use the UK as a base or to host events here. Of course, there’s always the civil service with their unlimited, taxpayer funded platinum credit cards to keep the economy going (click the link to see who one of the main culprits is).

For those travellers for whom flight is essential, well, they’ll have to suck it up like motorists do when Fuel Duty goes up. This means they will have less money to spend elsewhere in the economy and more money will end up being paid directly to the government. But don’t forget what Labour did when demand for petrol reduced and tax revenue went down by £400m in 2008. The following year they put the duty up to compensate.

A policy like that with the APD could kill off the air travel industry very quickly and with airlines already feeling the squeeze their journeys through the next few years could be very turbulent indeed.