Government must not jeopardise travel’s future prosperity

Last year we were promised that the largest tax-raising Budget of recent times would be “one and done”. After the chancellor’s speech last week, it’s obvious that won’t be the case.

Abta’s Budget representation, submitted in October, was clear: further tax rises aimed at the travel and tourism sector would be counter-productive – risking the very growth that the government’s economic strategy is reliant upon.

The travel industry is subject to international competition; planes and ships can be easily moved to meet demand and react to costs. Indeed, the chief executive of Ryanair, Michael O’Leary, has made this exact point in relation to air passenger duty (APD), which is already by some distance the highest departure levy imposed by any developed economy. When APD was increased by above-inflation levels last year, HM Treasury assured industry this wouldn’t need to be repeated. A failure to keep that promise would damage the UK’s aviation competitiveness. That would be especially counter-productive at a time when ministers are backing airport expansion, a demonstration of faith in our sector as a long-term deliverer of economic prosperity.

It is also clear that further increases to the cost of employment must be avoided. Last year’s rises in employer National Insurance Contributions and the National Minimum Wage significantly increased the cost of hiring people, and any further moves to load costs on employers would inevitably lead to job losses. We’ve already seen in our Future Travel Coalition surveys a weakening of appetite to take on new staff. 

Resist local taxation

We also urge the chancellor to resist calls for the devolution of powers to levy local tourism taxes across England. It is clear many local authorities see these powers not as a way to invest in and improve their tourism offering, which is the proper use of revenues raised from visitors, but simply as a way to plug gaps in their spending plans.

The travel industry has been remarkably resilient since Covid. I reflected at Abta’s recent Travel Convention that we’re lucky to work in an industry which meets so directly a core consumer demand; when times are good, people really want a holiday, and when times are tough, people really need a holiday. But, by no means does that mean we’re immune to the economic pressures people face.

While bookings have remained strong, there are signs that cost-of-living challenges are being felt. At a time when the industry already faces many cost pressures, not only from taxation but also to meet decarbonisation targets, there is a risk that the cumulative effect increases holiday prices and squeezes the less wealthy. After decades where travel and its benefits have been democratised, we strongly urge the government not to put in place measures that send this progress into reverse.

Hasten EU negotiations

Away from taxation, targeted measures to reduce regulatory barriers for businesses are also much needed. When it comes to helping businesses with red tape or taking decisions that facilitate growth, there are important policy areas for travel where we await detailed outcomes. Reform of business rates was announced in the Budget last year, with the government committing to supporting high street retail businesses, but a concrete way forward has not yet emerged.

Meanwhile, we welcomed the chancellor’s vocal support for a youth mobility deal with the EU at the Labour Party Conference. Of course, that – and the other travel-related topics within the UK-EU summit deal, such as enhanced use of e-gates for UK citizens – will be subject to negotiation. We urge the UK government to progress those talks as quickly as possible.

Abta research suggests there is a sizeable prize – an additional £10 billion a year to the economy and 146,000 jobs – if the sector’s potential over the next few years is realised. But that growth won’t happen if travel businesses are deterred from investing.

When the chancellor steps down from the despatch box, Abta will be looking for clear signs that this government remains committed to creating an environment for businesses to grow and be successful.