As tourism leaders from around the world converged on London last week for the World Travel Market there was widespread condemnation of the changes to the Air Passenger Duty (APD) introduced on the 1st November. More than 100 countries voiced their disapproval of the tax, but the government insisted that they have no intention to listen to any of the criticism, maintaining that the tax is an environmental measure.

With a general election likely in May 2010 the Tories have said that they will scrap the current APD and replace it with a per plane tax. What effect is this likely to have on the industry? In principle, the per plane tax will be fairer but the Tories are unlikely to reduce the overall tax revenue. Depending on the levels set, one consequence could be fewer routes offered by airlines as less efficient routes are dropped.

However, whichever party forms the next government, the taxation of tourism is unlikely to stop with the APD. It’s possible to make a parallel between the travel industry and the wine trade. As Jamie Goode writes in his excellent wine blog, the biggest threat to the wine trade in the UK is the moral panic regarding alcohol that the government is happy to see escalate. The result is that government feels justified in imposing huge duty increases on drink in the knowledge that people will still drink and revenue will rise accordingly.

In much the same way, the current UK government has been happy to portray travel as a fundamentally bad thing. This enables them to justify imposing large tax increases on something the public now see more as a necessity than a luxury.  Unfortunately, for the travel industry, its lobbying power is significantly inferior to that of the drinks trade.

As successive governments shy away from raising income tax to cover the rising national debt, sectors are targeted to make up for the shortfall. Unfortunately, travel has been in the cross-hairs for some time in the  UK. There’s every chance that the future in the UK will start to resemble the US, where it is hard to make it from the plane to your hire car without incurring several taxes. Airlines have so far borne the brunt of government tax policy, but hotels and car hire companies may be next on the list.

A piece on air passenger duty on the BBC News. It appears the government were unwilling to offer anybody to appear in defence of APD. The only voice in favour of APD was a rather geeky member of the Green Party. It doesn’t look like they could find any passengers to say “no, I think APD is a great idea”.

A parliamentary debate on APD took place on Thursday. In the government corner was  Sarah McCarthy-Fry (Parliamentary Secretary, HM Treasury; Portsmouth North, Labour, wafer-thin majority) and in the other corner were members from all parties . McCarthy-Fry got into a bit of a muddle regarding connecting flights, but nobody managed to land a significant blow. Most concentrated on the anomolies of the banding and in particular the Caribbean issue. There was little mention of the damage to the economy and the jobs that will be lost.

McCarthy-Fry did manage to come up with the following gem, ” The decision to reform APD rather than proceed with a per-plane tax was taken after considering the potential impacts on regional connectivity and on air freight and the knock-on effects on employment, as well as the need to ensure greater stability in tax policy in times of economic uncertainty and to avoid the disruption and costs associated with the transition to a new tax.” Which can be translated as we decided to protect the freight industry, whilst doing all we can to destroy the travel industry. Thanks Sarah.

The British government seems intent on whipping up its very own perfect storm for the travel industry. Not content with extortionate visa costs, spiralling passport fees and regular rises in airport passenger duty, they’ve burdened the country with so much debt it looks unlikely that sterling will ever see its previous peaks again.

The most pressing concern for the travel industry is the huge rises in airport passenger duty scheduled for November 2009 and November 2010. Previous rises in APD may have had limited impact, but next November’s rise could well be the tipping point. A couple considering a quick week in the Caribbean will find the £190 APD  a significant obstacle in the way of their booking.

Will petitions have any influence on government thinking? It’s very unlikely. The country is flat broke and the government sees APD as a useful source of income. Everyone knows APD isn’t the environmental tax it was originally heralded as, but the government doesn’t really seem to care. Unfortunately for travel, the environmental lobbyists are a lot stronger than our uncoordinated bunch.

A lot has been made of the recent reductions or abolitions in APD in Holland, Belgium, Spain and Greece. But it is hard to compare the UK to these countries. Spain and Greece are much more dependent on tourism for their economies than the UK. Holland and Belgium are limited in their ability to tax flights because airports in neighbouring countries are within short travelling distance. If Holland drops APD, Belgium is then under severe pressure to follow suit. Also if flights are expensive in Holland, the Dutch will just get in their cars and spend all their Euros in France and Germany. At least by flying, the government gets some of their holiday money. You can only really compare the UK to other islands and tellingly Australia has also increased its passenger tax from AU$9 to AU$47.

But there are two things that the lobbyists need to look to in the Dutch decision. One is their research that despite income from the tax of around €365m, it actually cost the economy more than $2bn in lost revenue. The other is that passenger figures and job losses announced by Schiphol had some bearing on the decision.

So how does the travel industry fight APD? I think it needs to do the following:

• Concentrate on the financial impact on the UK economy. A lot has been made of the financial impact to Caribbean islands, but this will cause few concerns for British MPs. If you can prove that the cost to the UK economy of APD will be greater than the financial benefits, it suddenly becomes harder to justify.
• Use the big guys more. That means more public statements from Virgin’s Branson and BA’s Walsh.
• Turn it into a political debate. The UK election is less than a year away. If the Tories put it in their manifesto that APD would be abolished, it would be popular with “Middle England”. They would be under pressure from the environmentalists and would also be under pressure to show how they would pay for it, but the benefits could outweigh any potential pitfalls.
• Use the mainstream media. There was a particularly scathing piece by Steve Keenen in The Times this week about passport fees. And the comments in their recent APD article show that the tax is not very popular with the voting public.

I fear it’s going to take a bit more than a petition to get the APD down to sensible levels.

So, the budget has come and gone and with no mention of APD, it looks increasingly likely that the planned increase will go ahead.

TravelMole says that the industry has acted with “anger and dismay” at the news. Virtually every head of every major travel business and airline in the country has condemned the planned increase for November. The increase is starting to look increasingly nonsensical, yet I have seen very few of these travel VIPs put forward a very convincing argument against the increase.

There has been a lot of talk about how it is unfair and unjust and how a family of four will have to pay £600 more for a holiday to the Caribbean in premium economy. But nothing has really hit home and sounded particularly convincing.

The Dutch government has scrapped APD because it said that despite generating €300m annually, it was actually costing the Dutch economy to the tune of €1.3bn. The planned increase in APD will surely have an adverse effect on the UK economy, but this is rarely mentioned. Has anybody put a figure on how much it will cost the economy? I haven’t seen it. How come the Dutch can come up with a figure and we can’t?

Very few people have highlighted the muddled thinking of a government that gives the go-ahead to a third runway at Heathrow, yet threatens Heathrow’s dominance as a hub with its tax policy.

The Dutch decision wasn’t just an attempt to give their economy a bit of a fillip, but also an attempt to take some business out of the UK and make people go Dutch. Why has more not been made of this? Why has nobody put a figure to how many UK jobs are threatened?

Everybody (apart from Alistair Darling) knows that the increase in APD is a bad thing. It’s just a shame that few industry figures have managed to say anything much more headline-grabbing than that.