Last week on this blog I speculated as to why the government was not publishing the details of the reform of Air Passenger Duty alongside the Autumn Statement. Could it be because the documents were not ready, I wrote? Could it be because they needed more time to finalise their reform package? We now know: it was because they decided to do absolutely nothing.
It is hard to find a business leader, an MP or holiday company that does not believe that Air Passenger Duty is a damaging and unfair tax. If we ignore the constantly rising levels of flight taxes - up another 10% in April 2012 - the system it is predicated upon is unfair and outdated.
The amount of tax you pay is calculated on distance flown. But the same distance-banding says that it is cheaper to fly to Hawaii than it is to fly to the Caribbean ignoring the thousands of miles between the two. Why is this? Because the current unfair banding arrangements are based on where the national capital is and how far from London the capital is. The capital of the country which Hawaii is a part of is Washington DC; that's closer than the capital of say Jamaica.
This inbuilt unfairness was a pain in the side of the last government and the Coalition too. So it was perhaps with a fair degree of enthusiasm that back in the budget this year Mr Osborne announced his plans to reform the structure of APD. Not only would the much hated distance bands be reviewed - and the Treasury itself proposed an alternative - but other curiosities of the system would also be addressed. The Treasury promised to review the bizarre situation where buying a couple of extra inches on a long-haul flight in premium economy means you're taxed the same as if you were enjoying the comfort of a flat-bed in a first-class cabin.
Early wins for those, like ABTA and the Fair Tax on Flying campaign, pointed in a positive direction with private jets being brought into the tax regime - another long-term anomaly addressed. The crazy situation of Northern Ireland's tax regime for flights was also partially addressed. Thanks to the Republic's lower flight taxes (€3 for any departure) compared to up to £120 for departures from Belfast, were also to be addressed.
It seemed as if the Treasury understood that it was not only the fact that the UK had the highest flight taxes in the world that was making the UK less competitive but that the way APD works was also having a detrimental effect. Alas, the hope that the Treasury would have the gusto and resolve to address such an obvious and unfair tax was misplaced. Because Mr Osborne and his Treasury mandarins today announced that after many months of consultation, a near universal chorus of calls for reform from the industry, airlines, holiday companies, overseas governments and passengers alike, they opted for no reform. The offsetting of £5m worth of extra taxes from business jets against the £5m cost of lowering taxes for flights from Northern Ireland is but a drop in the ocean of the £3.4bn they expect to raise from flight taxes by 2015/16.
The Treasury had an opportunity to address an unfair tax and with it, drive jobs and growth by making the UK more competitive, more attractive to foreign tourists, a cheaper place to trade and a society where flying is not just a pursuit of the rich. They have failed comprehensively to realise the potential that a reformed flight tax system will have. They have failed to heed the sage warnings from economists, business leaders and holidaymakers that higher flight taxes put people off flying, and they have failed to seize an opportunity that would have delivered more taxes, not less, by making the tax on flying fairer.
So next time you buy a flight ticket and wonder why it is more expensive, we can all be clear - it is because Mr Osborne chose not to reform Air Passenger Duty and make the tax on flying fairer. This was his opportunity to show he was listening to the concerns of holidaymakers and business travellers. He failed comprehensively to do so. It is very disappointing.
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