GTMC Sees U.K. Gov't Lowering Air Fees, Adding Rail, Stopping Heathrow Runways

The United Kingdom is likely to have lower air departure fees and a high-speed rail link from London to Scotland but no new runways in southeast England after last week's formation of a coalition Conservative-Liberal Democrat government. That is the view the Guild of Travel Management Companies outlined to EuroBTN today after studying public pronouncements from the new administration and consulting its public affairs adviser.

In addition, according to numerous media reports, new Chancellor of the Exchequer, George Osborne, is likely to announce in an emergency budget on June 22 that the United Kingdom's value-added tax rate will rise from 17.5 percent to 20 percent. This will directly increase hotel and meal costs for companies based outside the United Kingdom that have no arrangements in place to recover VAT on foreign travel.

Potentially better news for travel managers both inside and outside the United Kingdom is that the new government has pledged to review the Air Passenger Duty—effectively a departure tax—which currently costs as much as £110 for passengers on journeys longer than 6,000 miles. The incoming administration said it favors a switch to a tax per flight instead of per passenger. "That brings in freight as well as passengers, which should reduce the cost for passengers, but it's a wait-and-see," said GTMC chief executive Anne Godfrey.

However, with the government not yet having specified what rates it would set, the charges airlines pass on to passengers could rise instead of fall. The Lib-Dems, the junior partners in the coalition, previously have urged higher taxation of aviation for environmental reasons. With airlines obliged to pay the same charges for a flight, regardless of load factor, this could also encourage them to reduce frequencies, which may push up airfares.

Meanwhile, the new government stated there would be no new third runway at London Heathrow Airport, the world's busiest for international traffic. In addition, it said it has no plans to consider an additional runway at any other airports in southeast England, despite vigorous lobbying by the aviation industry. "We agree there should be additional capacity in the southeast," said Godfrey. "This is a bad decision for business travel and for U.K. plc."

GTMC is much happier that the new government appears committed to accelerating plans conceived by the previous Labour administration to build a national high-speed rail line, most likely with a connection to Heathrow. GTMC has received positive soundings from the new government it will approve the project despite pledging spending cuts to reduce the public deficit. "High-speed rail will get the go-ahead," said Godfrey.