Opinion: We need to press home to government that APD hurts businesses

Opinion: We need to press home to government that APD hurts businesses

Luke Pollard, Abta head of public affairs

Over the last three weeks more than 300 businesses have backed a new campaign calling for lower Air Passenger Duty (APD).

Large or small, these businesses recognise the damaging impact of APD on their potential for growth and development, particularly in these challenging economic times.

Last year A Fair Tax on Flying won the support of 200,000 people all of whom wrote to their local MP to voice their concerns about the impact of APD on their families.

But those of us involved with the campaign recognised that it’s not just consumers who are affected – British businesses are also suffering as a result of the world’s highest air passenger tax being levied on all flights departing UK airports.

That’s why we launched this year’s campaign. And the early signs are encouraging. Opposition to APD is coming not just from the aviation or tourism sectors.

A total of 16 Chambers of Commerce have now added their support to the campaign – a significant indication that APD is a tax that affects businesses across many different sectors of the economy who depend on international travel to grow and expand into new markets. 

What’s more in coming weeks we hope to announce support from other significant business groups. Watch this space.

The feedback we’re getting from campaign supporters is enlightening with opposition to APD coming from both small and large businesses alike.

Many are worried about the lost business due to investors simply not wanting to fly to Britain while others highlight loss of custom caused by people being priced out of visiting the UK.

From travel agents to export companies, business associations to chambers of commerce, all are asking for a review of the current system of APD.

One campaign-backer is typical when he tells us: “After wages, travel costs are our biggest overhead. If we could see more prospects and clients, at home and abroad, we could grow our business more quickly but APD prevents us from maximising the opportunities to get in front of people.

"This government claims to be the government of business and growth but APD is just another tax that stifles small businesses.”

Growing support from businesses for APD reform mirrors the growing body of research quantifying both the damaging impacts of APD and the benefits of reform.

Most recently, PricewaterhouseCooper’s report published in February found that abolition would result in around a 0.45% boost to UK GDP in the first 12 months, averaging at 0.3% for the two and a half years after.

Or to put it another way, scrapping APD would bring about a larger amount of growth in the economy for each of the next two years than we saw in the entire UK economy last year (according to the ONS).

PwC predicts that the economic benefit of any cut would be permanent and would create almost 60,000 jobs.

It might seem counter-intuitive to reduce a tax in order to increase overall Government tax revenues but the economic stimulus generated by reducing or abolishing APD is exactly what PwC’s economic modelling suggests will happen. 

The report found that any reduction in APD would increase tax receipts for key indirect taxes (such as VAT) resulting in a net gain of £0.25 billion per annum for the Treasury.

What’s more, against the backdrop of the IMF’s recent downgrading of the UK’s growth forecast for 2013/14 by 0.3% – to just 0.7% this year and 1.5% in 2014 – it’s clear that the Government needs to look at other options to kick-start the economy. In our view APD should clearly be one of them.

That’s why A Fair Tax on Flying is making sure that the Government does not ignore the voice of businesses: we’re planning on taking our petition to the Chancellor later this year.

It’s vital that the Chancellor understands the affect APD is having upon companies throughout the UK, across all sectors and in all industries.

To date the Treasury has stonewalled when asked about its plans to review APD or its view of the PwC report.
Disappointingly, even the Secretary of State for Transport keeps dodging questions about his own Department’s views of APD, despite the fact that it’s hurting those businesses that DfT represents, most acutely.

We’re delighted with the response the campaign has received so far, but it is vital that every business affected by APD makes their voice heard and joins the movement for change.

We urge you to spend one minute at afairtaxonflying.org/business and help us make the case for fairer, lower APD.


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