easyJet, the Caribbean and APD
Last week, Baroness Benjamin introduced a debate in the House of Lords about APD- Air Passenger Duty. Lady Benjamin, better known as Floella to most people, was concerned not so much by the tax itself but the inequity with which it is applied. There seemed complicit acceptance that it would remain despite the fact there is a chance we could be taxed twice as, next year, the EU carbon offsetting comes in as well.
The inequity which most Caribbean countries have highlighted to the British government is that the tax applies in bands. The nearest point of that country determines the band into which APD is charged. The complaint from the Caribbean is that you pay the same tax going to New York as you do to Hawaii in the USA. Countries in the Caribbean are smaller and therefore some fall into a higher band. They claim this is unfair and the government is not unsympathetic to this. My bet is that the bands will be redrawn and the Caribbean will have a fairer tax band.
The debate however stands a good chance about being highjacked by this unfairness rather than whether the tax is helpful at all to the UK economy. Last week, easyJet produced some research from Frontier Economics in response to the government’s consultation exercise on APD. It said raising the tax by £4 on flights could remove £2.6 billion from the treasury coffers by turning off visitors from coming here. Ian King, the Business Editor of the Times called the claim “risable” especially coming from a low cost airline where policy seems to be to use hidden charges wherever possible.
Frankly the government isn’t going to be concerned if it loses £2.6 billion in potentially fewer tourist numbers if the tax raises about the same. After all the tax will deter people from holidaying in the expensively taxed areas and may even persuade some to holiday at home and thus keep money in our economy rather than exporting it. So airlines and concerned bodies had better think this argument through a bit more thoroughly.