EXORBITANT: that is the only way to describe the cripplingly high levels of Air Passenger Duty (APD) now facing everybody flying from the UK. The era of cheap flights which had done so much to make international travel accessible to the vast majority of the public is coming to a sorry end: the tax on flying to Australia is up by over 600 per cent in just six years.
The APD rose another eight per cent yesterday, dealing a bitter blow to cash-strapped households and imposing yet further costs on businesses. It gets worse: the Treasury is planning to increase APD further over the next four years, which means that a family of four travelling to Australia could end up paying up to £500 in APD tax by 2016, a preposterous state of affairs and up from just £80 in 2005.
Taxing travel inevitably means taxing and reducing trade – and given that the UK’s future lies with exporting more to Asia, Latin America and other long-haul destinations, the government’s strategy is perverse.
The aviation industry and tourism are two of Britain’s few success stories outside of financial and business services; it is strange that the government wants to clobber what we are good at. Usually business leaders don’t speak out enough on controversial matters, preferring instead to resort to dubious private lobbying. So it was good to see EasyJet chief executive Carolyn McCall, Ryanair boss Michael O'Leary and Virgin Atlantic CEO Steve Ridgway join Willie Walsh, boss of British Airways’ owner IAG, in slamming the latest rise yesterday. Often, when people of the same trade unite, they do so to conspire against the public interest; in this case, companies and consumers are at one.
Remember which decisions in the Budget triggered all the anger, and drove a collapse in the government’s overall opinion polls, as well as its perceived economic competence. Both were tax hikes, or perceived tax increases: the so-called Granny Tax, and the Pasty Tax. The lesson for our political class in general and the Tory party in particular should be clear: the public may not especially like spending cuts but it really hates paying more tax.
That is why council tax always triggers such passion – it is paid by almost everybody, and is a very visible tax that people actually have to write a cheque for. Of course, we are a horribly envious nation – and the majority want those wealthier than they are to pay more in tax. But most of the anger at the Budget came from the tax hikes on ordinary folk – and the shambles that has been the government’s handling of the proposed tanker drivers’ strike has reminded many voters of just how much tax they pay on every litre of petrol.
It is tragic that the government doesn’t get this. The public is deeply divided on spending cuts – but it is almost united in its dislike of mass market taxes that affect the bulk of the public. This is not just true of Britain: in Ireland, a new property tax is facing mass resistance – and could derail the government’s plans. Almost half of Irish households have refused to pay a new €100 poll tax – a precursor of this new wealth levy – on time. A full-scale tax revolt is looming on the other side of the Irish sea.
The problem is that governments spend too much, not that they tax too little. Electorates are at the limit of what they are willing to pay. George Osborne must urgently do more to show taxpayers he is on their side.
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