July 15, 2008

Why Gordon’s Reputation is Disintegrating Around Him


Is the government going to be forced to make an embarrassing U- turn on yet another of its tax policies?

Gordon Brown's reputation for expertly managing the economy as Chancellor is disintegrating around him as Prime Minister.

We are being forced to speculate whether this government ever thinks anything through properly before leaping into the dark on new measures without serious consultation or debate.

Already embroiled in sticky situations on the 10p tax, capital gains, non-domiciles and vehicle excise duty, they are in grave danger of scoring yet another own goal over a new tax on commercial flights described as "aviation duty".

And this could pose a serious threat to hardwon long-haul flights from regional airports like Birmingham International.

And, yes, you've guessed it. This new "stealth tax" is being introduced under the guise of an incentive for greener aviation.

In fact, it will have the opposite effect. There are persuasive arguments that demonstrate just how DAMAGING this new tax will be to the environment.

The idea is that the unpopular tax on air passengers will be scrapped and replaced by a new charge on every aircraft that takes off from a UK airport.

The government thinks this will stop airlines flying with empty seats or with no passengers at all.

Simple. Wonderful! And Gordon Brown saves the world.

Or does he? The real motive is revealed in Chancellor Alistair Darling's own calculations. The new tax is expected by the Treasury to raise over pounds 3.5 billion by 2011/12, compared with pounds 971 million for air passenger duty in 2006/7 - a four-fold increase in five years.

Airlines calculate that the tax per person on a flight from a UK airport to the US or other long-haul destinations will rise from pounds 40 to about pounds 100.

If you flew from any UK airport to San Francisco via Heathrow you would incur one short-haul tax and one long-haul tax. But fly from Birmingham to Paris and you would pay one short-haul tax and enjoy a taxfree flight to San Francisco.

There will also be serious consequences for businesses that depend on air freight. Incoming freight planes will divert to, say, Germany and their goods will complete the journey to the UK by road. The result would be no reduction in aviation emissions, more lorries jamming the roads with increased emissions and hundreds of freight jobs lost to the Continent at a stroke.

Even if freight aircraft were exempted from the tax, it would make little difference because many goods are carried in the belly of passenger flights.

Hitting freight operators in this way is a ludicrous proposal when you consider that the air cargo industry creates thousands of jobs, something that should not be lost on MPs in marginal constituencies.

The aviation industry as a whole is worth pounds 11 billion to the economy and supports 700,000 jobs.

It's surprising that under the guise of responding to environmental concerns, Mr Brown is prepared to put large sections of it under threat.

There is also a serious legal complication. A letter from the US Embassy to the UK government reveals that the Americans have "deep concerns with the proposal" and threaten the treasury with legal action.

Mr Brown's ambitions are deeply flawed, environmentally, economically and possibly legally.

Can he really afford to pursue a policy that will seriously damage the UK aviation industry to the benefit of all others?

And, vitally for this region, where does this leave the proposed extension to Birmingham's runway?

John Lamb's views are not necessarily those of Birmingham Chamber of Commerce and Industry, where he is Press and PR Manager

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