The hidden tax that this week’s budget ignored | thearticle

George Osborne’s mantra that “we’re all in this together” asked voters to accept austerity as the price for rebuilding the country’s finances. During his Budget speech, the new chancellor,

Rishi Sunak, promised “we will get through this together”, but this time the implication was that the government’s financial generosity will help businesses and the general public through

the coronavirus crisis. One firm that we already know won’t make it is Flybe. The airline collapsed after bookings declined thanks to the virus and it failed to secure a rescue package from

the government. Its bankruptcy is a particular blow to connectivity across the UK because the company serviced routes between regional airports that were often neglected by other carriers.

The schedules in some airports, like Southampton, Exeter and Belfast City, were dominated by the airline. Their survival will depend upon attracting replacement operators, at a time when the

aviation industry faces unprecedented difficulties, and they will not be helped by the Chancellor’s refusal to cut or abolish Air Passenger Duty (APD). Flybe cited the levy, which airlines

pay on all flights that take off from the UK, as a major reason for its failure. That claim might be questioned by some industry experts, who highlight years of unwise choices by the

company, including its investment in a fleet of expensive Embraer Jets and its decision to compete in routes that were already served adequately by other airlines. But it is vital for

Britain to retain regional air travel and APD certainly doesn’t make that easier. While rail services offer a viable alternative to flying in some parts of the country, the north of

Scotland, the islands and Northern Ireland all rely in the main upon air travel for their links with the rest of the UK. The Scottish Highlands and islands enjoy an exemption from APD, but

that doesn’t apply elsewhere. In countries like France or Spain, geography lends itself to railways, and governments have invested heavily in infrastructure since the 1970s. The British

mainland is decades behind and it is often impractical or unfeasibly expensive to take the train. For Northern Ireland or the islands, it is not even an option. Economically, good transport

links between regions are indispensable, but there’s a political element to this too. When he became prime minister, Boris Johnson appointed himself Minister for the Union and said he was

determined to become “a leader for the whole United Kingdom”. That ambition was dented when he brokered a deal with the EU that effectively establishes a customs and regulatory border

between Great Britain and Northern Ireland. It is a particularly sensitive moment in the UK’s constitutional history and losing connections that make it more integrated and cohesive will do

nothing to protect the Union. When business links between Great Britain and Northern Ireland, in particular, are damaged once the Withdrawal Agreement comes into force, that effect will only

be intensified if air travel between the province and other regions of the country is more difficult too. It might seem like nit-picking to complain about this particular duty, given that

the Chancellor announced a budget full of spending commitments and promises to invest in infrastructure. And anything that encourages air travel is controversial, at a time when the

government is supposed to be focused on cutting carbon emissions. Yet, setting aside the needs of the aviation industry, APD acts as a hidden tax on doing business in parts of the country

where there is no alternative to air travel. An executive travelling from Nottingham to London can easily take the train, but if they want to get to Belfast, then flying is the only viable

option. The loss of Flybe and its flight from the East Midlands Airport to Belfast City has turned a quick hop over the Irish Sea into a half-day odyssey. Northern Ireland’s business groups,

including the CBI, the Institute of Directors and the Chamber of Commerce, appealed directly to the Chancellor to axe APD, in order to rescue air connectivity in the province. In a Budget

that Sunak says offered “the biggest sustained fiscal boost for thirty years,” this wasn’t a big ticket item, but it could have made a real difference to companies in the regions. This

government says it espouses One Nation Conservatism that can deliver for the whole UK. A simple policy change, helping to protect links between the regions, would surely have amplified that

message. For the Chancellor, a failure to cut — or abolish — APD was an opportunity missed.