How can Liverpool’s airport survive Labour’s stance on air passenger duty, asks Neil Hodgson
LIVERPOOL John Lennon airport leaders are confident they can persuade the UK Government into a similar U-turn on Air Passenger Duty (APD) to their European counterparts.
Despite an unequivocal refusal last week by Transport Secretary Lord Adonis to budge on the APD aviation tax, JLA believes it can put a credible case to drop the levy when a European-wide system is introduced in 2011.
Passengers currently pay £10 APD on domestic flights or short-haul journeys leaving the UK and £40 for longer journeys, towards the impact that air travel has on the environment.
But the Government believes the aviation industry does not contribute enough and plans to impose stringent increases of about 113% by November next year.
Under the Government's plans, the tax will rise to £85, for example, on a ticket to Australia and £60 to the US by November, 2010.
Budget airline Ryanair, Liverpool JLA’s biggest carrier, is incandescent at the impact the tax is having on the industry, even before the introduction of any proposed increases.
It agrees with JLA that the tax is discouraging travel and harming the aviation industry.
Ryanair spokesman Stephen McNamara said: “Gordon Brown should now follow the example of the Belgian, Dutch, Greek and Spanish governments, stop taxing tourists and start welcoming them.”
He added: “Ryanair has already announced a freeze on growth from the UK. Britain’s traffic and tourism losses will continue to collapse if the Government’s £10 APD tourist tax is not scrapped urgently.”
Earlier this year the Dutch government agreed to scrap their APD system after considering research by its domestic airlines and airports that showed passengers were crossing Holland’s borders to airports where APD was not levied.
Airline industry body the International Air Transport Association (IATA) is also urging the Government to abandon planned rises in APD.
It has warned that the levy is damaging an industry already on its knees, adding that the UK and Ireland are the only countries to have such a tax.
Airlines and unions have united in calling for a government rethink saying the plans will put tens of thousands of jobs at risk and damage the UK's position as a global hub as more passengers start to use European airports where there is no tax, pointing out that there are 200 fewer routes operating from the UK this summer compared with last.
Julia Simpson, head of corporate communications at British Airways, said: “It is a crazy tax that the Government should scrap.
“A family of four travelling to Australia is going to be facing a bill of £340 before they have set foot on the plane and paid for their tickets.”
However, the calls have so far met firm resistance from the Government.
Speaking at a Transport Select Committee last week, Lord Adonis, whose love of railways is no big secret, said the level of APD “broadly meets the environmental costs” of flying, which have been estimated at more than £2bn.
And he warned the industry that it must pay its way or it will be “doomed”.
He said: “To be quite frank, I don’t think aviation has a credible future unless it is able to make a bigger contribution to meeting its environmental costs.”
He confirmed that the changes this autumn would mean “passengers flying farther, contributing more to emissions, will pay more”.
And he reaffirmed his support for a North-South high speed rail link which would reduce the need for domestic flights, including Liverpool’s ambitions for a London link.
There is little prospect of an incoming Conservative government repealing or easing APD.
Chris Grayling, Shadow Home Secretary, Minister for Merseyside and former Shadow Secretary of State for Transport, supports the need for a high-speed rail link and insists that the aviation industry must pay its way.
He said: “We are concerned about the impact tremendous expansion of aviation is having on climate change.
“We believe green taxes should be higher in order that other taxes should be lower and that we should tax things that pollute.”
And he said the nation’s chronic borrowing requirements make it highly unlikely that the aviation industry will be cut any slack if the Tories take power.
“The current financial situation has made the tax position very difficult and we will have to balance the books some time.
“Many things we would like to do on tax we are constrained from doing.
“A Conservative Government would not get rid of APD.
“Public finances are so spectacularly bad, no-one will be able to make immediate promises on tax.
“We are borrowing, as a nation, far more than we should, and the freedom of any new Government on cutting APD is going to be extremely limited.”
But Neil Pakey, deputy chief executive of Liverpool JLA owner Peel Airports, believes the industry can make a credible case for the abolition of APD.
He says the Government has not taken into account the introduction of the European Emissions Trading scheme in 2011, which will impose a taxation system for aviation across the board.
And he said Lord Adonis’s remarks have confirmed APD’s role as a green tax, so argues that a Europe-wide scheme would lead to duplication, meaning UK passengers would “fly once but pay twice”.
“I have listened carefully to Lord Adonis’s remarks and the message he gave was the one prime purpose of APD is to cover the environmental impact aviation makes.
“Now it has been confirmed APD is an environmental tax it should be abandoned when the European version comes in.
“We have been arguing for a level playing field between the UK and other European countries because only ourselves and Ireland has an APD. Other countries have made things easier for their regions by abandoning their APD.
“But once the European Emissions Trading scheme comes in, in 2011, we will have a level playing field with Europe and will not be disadvantaged in trying to attract business into the regions.”
He added: “We have always said aviation should cover its environmental cost, but we think APD is the wrong instrument.
“The Dutch abandoned their APD because research showed it was uncompetitive. Other countries have done the research and that is why they have done their U-turns.
“No one has done that exercise in this country, so we have asked the industry – the Airport Operators Association (AOA) – to get some independent research together.”
He said the AOA has now commissioned that research which should be published within two to three months.
“Once we get this research, we will be knocking on the Government’s door again.”
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