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Yes Prime Minister, great tourism speech, but what about Sir Humphrey’s airport tax?

Geoffrey Lipman  Aug 17, 2010

Outstanding support from UK Prime Minister David Cameron this week, stressing the importance of tourism’s export and domestic financial contribution, as well as its huge link with mega sporting events, noting shortcomings of previous policies and reaching out for public/private sector collaboration to strengthen competitiveness and help rebalance the economy.

Sadly, no imaginative links to the review of the massively unpopular and discriminatory Air Passenger Duty, which makes UK tourism increasingly less competitive and penalizes UK and foreign countries’ tourism exports. To add insult to injury, APD was cynically touted when introduced, as designed to help the environment, when everybody knows the proceeds just go into general revenues. You can imagine the Whitehall planning in the mid-90’s: We’ll call it an air passenger duty, then we can pretend it’s not part of tourism policy (which is all about culture, media, and sport). Yes, then it can be buried in transport policy and aviation. And best of all, because it’s part of economic strategy, the Chancellor will have ultimate authority, which means it’s unquestionable by any departments, and we can hold up our hands, say no special pleadings, and tie them in knots with no hypothecation mumbo jumbo language. Sir Humphrey Appleby, the Civil Servant extraordinaire in Yes Prime Minister, even in his finest moments, could never have dreamed up that one.

The PM did, however, ask for suggestions to help strengthen the impending new tourism approach of his government – so here goes.

It would be tempting to say scrap APD and its obviously adverse impact on tourism competitiveness - tempting, but naively unrealistic at a time when massive budget balancing austerity is the first national and worldwide priority. At the same time, to quote from the Telegraph earlier this year when criticizing the previous government’s plan to raise APD yet again: ”They might consider the longer-term impact of this tax rise. APD may appear to be a real revenue earner, but this does not account for the losses that will arise from falling visitor numbers, abandoned routes, lost jobs, and airline failures, or from Britons hopping from the regions to European hubs such as Amsterdam, for long-haul connections to avoid hefty taxes on flights from Heathrow and Gatwick.”

Yes Prime Minister, APD is a tourism-created jobs killer as well, at a time when unemployment is becoming a top European and global priority. There’s the real dilemma, because as you so rightly said: “Tourism is a fiercely competitive market, requiring skills, talent, enterprise, and a government that backs Britain. It’s fundamental to the rebuilding and rebalancing of our economy. It’s one of the best and fastest ways of generating the jobs we need so badly in this country.”

So why not use this APD monster you inherited really creatively - commit to reduce it progressively in line with budget deficit reduction? And at the same time - go back to the alleged policy intent and use it to underpin our sector’s huge potential to help the transformation to the green economy and to create jobs. Just take half the money collected exclusively from travelers and create a dedicated multibillion pound Tourism Green Economy Challenge Fund. Use it for low carbon green travel initiatives – air and surface transport, hospitality and related support, training, and other services - matching pound for pound real pro-environment, industry-originated projects that create new green jobs, just when and where they are most needed in a dynamic, creative sector with a proven jobs and export potential. Commit the funds only as the innovation is proposed and track publicly how routine green growth treasury income and jobs compensate for smart recycled APD funds.

And because the APD is causing so much of a furor with UK’s partner nations, because it affects their major export competitiveness - as South African Tourism Minister Van Schalkwyk has noted - the economies of many small island states depend heavily on tourists from source markets that have to travel through or from London, and as a result they do not travel at all or spend less in developing country destinations. So why not make sure that innovations around the world are part of the package, particularly in developing countries?

This would not only address the issue imaginatively but send a powerful global
leadership message about real public/private sector collaboration at a time when there is so much PR talk about it and when other countries are looking at how to clone the tax opportunity. Who knows, the UK might just give a global lead on shifting arbitrary unproductive taxation to imaginative multistakeholder investment in a greener future.

I do not make these remarks just for the sake of sounding off opportunistically. Fifteen years ago when leading the World Travel & Tourism Council (WTTC) in its formative decade, we set up a Tax Policy Centre, asked a young economist from LSE to take a look at the growing appetite of governments to over-tax the tourism industry, and actually produced a comic book from the findings – Taxing the Force. Yes a comic book, because we knew no one would read another boring white paper. Our young economist’s report laid out some very sound principles for “Intelligent Taxation” to help optimize the sector’s strategic contribution to general economic well being.

And Yes Prime Minister, it might not be a bad idea if you were to ask that now older and greener economist, Lord Stern, to get together with your Tourism Minister, Transport Minister, Environment Minister, and Chancellor to take another look at applying those principles. Throw in a multi-stakeholder industry and NGO support group, some good economic research and media sunlight on the process, and you might just find a way to turn an anti-tourism tax white elephant into a green jobs machine.

This article is the personal viewpoint of Professor Geoffrey Lipman, director,

Lipman is the former president of the World Travel & Tourism Council (WTTC). He is currently advisor to Schuman Associates Brussels, as well as UNWTO, the World Economic Forum, and Dragon Trail China.

Yes Prime Minister, great tourism speech, but what about Sir Humphrey’s airport tax?
UK Prime Minister David Cameron / Image via

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