Impact of APD devolution to be reviewed

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A leading trade body is demanding an urgent meeting with chancellor George Osborne after yesterday’s Budget failed to address all but one issue of concern raised by the travel industry.

Lobbying on reducing VAT on accommodation and overhauling Air Passenger Duty fell on deaf ears – although there was one glimmer of hope with the announcement of a discussion paper on the air tax.

The government revealed that it is to review the impact of APD devolution to Scotland and Wales on regional airports in England.

The discussion paper will explore three options to support regional airports from the impact of APD devolution, HM Treasury confirmed.

“These options are to devolve APD within England, vary APD rates within England and provide aid to regional airports within England,” it said.

The deadline for comments is September 8.

But the surprise announcement in the summer Budget of a new national living wage of £7.20 a hour from April 2016 will have implications on costs for small and medium-sized businesses.

Another Budget announcement which is likely to have an impact on the sector is a raising of insurance premium tax from 6% to 9.5% from November, although corporation tax will fall to from 20% to 19% in 2017 and 18% in 2020.

British Hospitality Association chief executive Ufi Ibrahim, said: “While we are analysing the potential impact of the chancellor’s announcement, constructive dialogue with HM Treasury is now imperative to identify measures to counterbalance the government’s ambitious agenda with the realities of running a high service and very low margin business.”

She pointed out that hospitality and tourism created one in five jobs in the last Parliament and is the fourth biggest industry in employment terms.

“But there is more we can achieve with further support from the chancellor,” Ibrahim added.

“As an industry employing a large number of individuals earning more than national minimum wage and less than the proposed living wage, we have tried to have a constructive dialogue with HM Treasury on building towards the living wage without job losses.

“We were very surprised the chancellor made this announcement without consultation. Despite the chancellor trying to alleviate the pain with adjustments to corporation tax and employment allowances, these changes do not go far enough to reduce the impact on SMEs and mitigate potential job losses across the industry.

“On top of all these new pressures, our industry is at a serious disadvantage with other European countries where tourism VAT is on average 10%.

“We call upon the government to lower VAT on accommodation and attractions to 5% to increase our market’s competitiveness and reduce costs to working families.

“A cut to tourism VAT could supercharge the economy with over £20 billion in foreign exchange earnings and domestic spending over the next 10 years.”

Abta head of public affairs, Stephen D’Alfonso, said that a full economic review of the impact of APD by the Treasury would be the “fairest and most comprehensive way” for the government to fully assess the impact which APD is having on the UK’s competitiveness, and on UK passengers.

“We welcome that the discussion paper announced at the Budget – which seeks to lessen the impact of devolved APD at regional airports in England – clearly acknowledges the economic damage caused by APD,” he added.

“We will engage fully in the discussion paper putting forward the views of members.

“However, we will continue to urge the government to conduct a full impact assessment of APD, leading to significant reductions. That is the only way to make sure the whole of the UK has a fair and competitive rate of APD.”

British Air Transport Association chief executive, Nathan Stower, accused the government of failing to properly address the damaging impact of APD in the Budget.

“This is disappointing when detailed independent economic analysis suggests that its abolition could increase economic growth, create up to 61,000 jobs, and pay for itself through higher revenues from other taxes,” he said.

“With the Scottish government committed to halving APD following devolution of the tax, followed by full abolition, the status quo is going to become economically and politically unsustainable.

“Indeed, the Treasury has also published a discussion paper looking at possible responses in England to devolution of APD.

“The scope is too narrow and the three options for discussion are fundamentally flawed.

“The Treasury must also consider a significant reduction and abolition of APD across the UK if this review of options is to be credible.“

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