The travel industry was given a reprieve in the pre-Budget report this week, although it is being warned bookings could be seriously affected from next summer.
Chancellor of the Exchequer Alistair Darling steered clear of announcing any major tax increases – at least for now.
Instead, industry experts warned that whichever party wins the next election, probably in May, would be forced to hit consumers in the pocket with increased tax and reduced spending to cut public borrowing, which this year will hit £178 billion.
MacIntyre Hudson principal Andrew Burnham said: “There are signs that the economic ‘bounce back’ we have experienced since the springtime is starting to run out of steam and we are likely to remain in the doldrums until the new government introduces a meaningful budget after the election.
“The prospects for summer and winter 2010 bookings will be adversely affected by the expected public sector cuts and tax increases, with real danger of a relapse into recession going into 2011, especially if UK interest rates rise to maintain the pound.”
Classic Collection Holidays managing director Nick Munday added it will be the industry’s best customers who will most likely bear the brunt of any increased taxation.
He said: “Any spending cutbacks and increased taxation are going to fall hard on the people with the money – and it is the people with the money who are spending it on holidays at the moment.”
However, ABTA chairman and Advantage Travel Centres chief executive John McEwan predicted the government would not be able to make the changes in time to affect summer 2010.
He said: “The consumer is going to have a high cost to bear from the middle of next year as any new taxes will come on top of the National Insurance increases and the 50% tax rate that is being introduced for high earners.”
ABTA head of public affairs Luke Pollard said although the travel trade got off lightly with no increases in green taxes, Air Passenger Duty or other business taxes, the association would work to ensure the trade is not unduly targeted later.
He said: “What we need to be making clear is that the tourism sector is very successful, if you do add additional taxation or revenue bombs, it will suffer.”