APD - A lobby victory for the Caribbean
By Debbie Ransome
It was a lobby that brought together a mixed group of allies: rival airlines, travel agents, the Caribbean Tourism Organisation (CTO), the Caribbean Hotel and Tourism Association (CHTA), Caribbean governments, British-Caribbean interest groups and High Commissions.
It also took a mixture of tactics to extract the promise of an end in 2015 to the anomalies in Britain’s much-maligned Air Passenger Duty (APD), which had made the Caribbean more expensive than most US destinations.
Because of the way the aviation tax became structured over the years, charges became based on the distance to a country’s capital.
As many critics pointed out, this meant that it became cheaper to fly to Hawaii (with its capital in Washington) than to fly to Port of Spain, Bridgetown or Kingston.
On 19 March, UK Chancellor George Osborne announced that all long-haul flights will carry the lower rate of air duty currently charged on flights to the US from 1 April, 2015.
He told Parliament during the 2014 Budget presentation that “we will also reform Air Passenger Duty to end the crazy system where you pay less tax travelling to Hawaii than you do travelling to China or India”.
Explaining his rationale, Mr Osborne said that the APD “hits exports, puts off tourists and creates a great sense of injustice among our Caribbean and South Asian communities here in Britain.
“From next year, all long-haul flights will carry the same, lower, band B tax rate that you now pay to fly to the United States,” the chancellor [finance minister] added.
In effect, this means that the Caribbean will be shifted to the same tax band as the United States.
The CTO issued a post-Budget calculation indicating that the new Band B planned rate in 2015-16 would mean a £71 tax for reduced rate passengers and £142 for standard rate passengers.
That’s a far cry from the current APD rate of up to £332 being charged in Band C on Caribbean airline tickets.
The rate from the 2013 Budget is an increase to £340 APD from 1 April 2014.
Caribbean: “Complete victory”
Within hours of the budget presentation, the Caribbean Tourism Organisation (CTO) Chairman, Beverly Nicholson-Doty, described the decision as a “complete victory for the Caribbean”.
The CTO said that it had proposed the return to a two-band system as far back as 2010.
“We are pleased that the [UK] chancellor has accepted our proposal,” the CTO said in a statement.
High Commissioners in London and MPs who had helped with the lobby also lined up to hail the tax turnaround.
Jamaican High Commissioner to London Aloun Assamba told RJR News that the tax had been “discriminatory to the Caribbean, which is the most tourism-dependent region in the world”.
Black British MP David Lammy, whose north London Tottenham constituency has a large Caribbean Diaspora presence, told Britain’s black newspaper, the Voice, that the Caribbean community in London had been campaigning on this issue for years and that government had “felt the noise of the black community”.
The president of the Caribbean Hotel and Tourism Association (CHTA), Richard J Doumeng, said: "The Caribbean region has finally achieved one of its goals and will be fairly taxed in comparison to a flight to the United States."
He added: “Today we achieved a major victory, as the playing field has been levelled."
The APD was introduced in 1994 and started as a tiny £5 UK and EU rate and £10 for other flights. It increased year-on-year and was then changed to a system of four geographical bands in 2009.
It was at this stage, when the distance to a country’s capital became the basis for charging, that the Caribbean found itself in a more expensive band than the United States and, therefore, a higher tax for Caribbean flights than to fly to the west coast of America and Hawaii.
What started as a lobby to “Scrap the APD” in 2009 turned into a more subtle appeal to British interests, along the lines of suggesting a switching of the Caribbean to a more beneficial band.
The argument went along the lines that a change would work for the Caribbean tourism industry and British travel, as well as British business people on long-haul flights.
The whole APD structure became even more complicated as the UK government also started to devolve parts of the APD charging in Northern Ireland, meaning that APD could be charged at a different rate if you flew from London or from Belfast.
The Treasury held consultations on APD reform in 2011, but the recommendations failed to lead to change in the 2012 and 2013 Budgets.
“What seems to be happening is that the tax has become a huge money-making exercise for the UK government at a time of severe austerity, irrespective of the economic consequences for tourism dependent regions like the Caribbean or those UK citizens who have family ties to the region,” Caribbean Council director David Jessop wrote after the 2013 Budget.
The change of tactic clearly paid off.
Repairing the damage
However, figures issued ahead of the UK Budget indicated that some of the damage has already been done.
Updated figures from Britain’s Office of National Statistics, from the Civil Aviation Authority (CAA), the Eastern Caribbean Central Bank and the Caribbean Tourism Organisation (CTO) indicated the impact of the APD on the Caribbean for the first quarter of 2014.
The figures indicated:
- a 3% decline in UK passenger numbers to the Caribbean between 2012 and 2013, according to CAA figures
- a 15.4% decrease in traffic to Kingston, the Diaspora’s favoured port-of-call over Montego Bay, in 2013
- a 5.7% decline in UK arrivals to the Eastern Caribbean in 2013 over 2012.
Census figures indicate that about one million people Britons identify themselves as being of Caribbean heritage
Change in approach
The lobby’s change from head-on criticism to suggestions for a new tax structure is being seen as a victory for the power of a united Caribbean and Diaspora.
The anti-APD lobby brought together Caribbean Diaspora lobby groups in London with diplomats, business groups and rival companies from the aviation and travel industries.
At a December 2013 gathering of Caribbean Britons aimed at boosting the participation of people of Caribbean descent in Britain’s political system, many asking questions of the three British political parties pointed to the APD as an example of how Britain had abandoned the Caribbean.
Ruling Conservative party representative Nick de Bois had told that meeting that they needed to turn the lobby into a business case to move the Caribbean to another band.
The joint lobby group appealed to Westminster’s business sense, rather than kindness, and scored a hit with today’s cash-strapped mood in the UK, to which British politicians have appealed in recent statements on the economy.
As travel insider publication TravelMole pointed out after the budget announcement: “Although reform of APD is being hailed as a victory for the travel industry, the Budget Report made it clear the changes were designed to help British businesses strengthen links with high-growth markets and to make the UK a more attractive option for business visitors as well as for tourists.”
The tax will apply to private jets too from 2015 – also in the mood of Britain’s 2014 countdown-to-elections budget.
Diaspora and Caribbean
One of the clear messages from the APD victory was the lobbying power that the Caribbean and its Diaspora have when they work together.
MP David Lammy said the joint effort had made the difference.
“We came together – we don’t always – but we came together,” he said after the Budget announcement.
St Lucian trade expert and diplomat Edwin Laurent, in a column written at the start of President Barack Obama’s second term, pointed to similar potential in North America, saying the Caribbean and its Diaspora in the US could learn some lessons from Israel.
“Just consider the experience of the Israeli lobby, whose experience is certainly the most spectacular example of a foreign country’s successful lobbying and mobilising of domestic interest groups in the US to influence policy,” he wrote.
Tough but positive
As the APD alliance appeared to wind down, some admitted that the coming together of so many interests had been a tough road.
The Grenada Hotel and Tourism Association (GHTA) said after the UK Budget announcement: “It was not easy, as it involved lobbying by countries and regional institutions, especially the Caribbean Hotel Association and the Caribbean Tourism Organisation.”
The GHTA added: “We know that this move will definitely have positive impact on the tourism sector.”
Even though the change will not kick in until 2015, the APD announcement means that Caribbean countries dependent on UK visitors can start to plan for the 2015 tourism season, with the prospect of more UK visitors back in the picture and with those in the UK Diaspora better able to travel home.
In making the case the week before the lobby, the CTO had pointed out that the Caribbean was the most tourism-dependent region in the world.
It had described the APD as a “disincentive” to travel to the Caribbean, saying the continued increase of the APD year-on-year would continue to impose suffering on the Caribbean countries dependent on the UK market.
“Once a hotel is closed or a flight is lost, it is extremely difficult for a destination to bounce back, as there is no other way to reach the Caribbean from the UK than to fly,” a Caribbean Council for Europe statement said ahead of the budget.
“If there is no means to get a sufficient number of people to a country, there is no business case for reopening a hotel.”
Following the chancellor’s announcement, the CTO said that it would now look at all the implications of the change and advise its members in the tourism sector.
For some of the allies in the anti-APD lobby, the issue has not ended.
A Virgin Atlantic spokesperson described the two-band APD as a “very welcome simplification” to remove the distortions.
But a British Airways spokesperson said that the government should abolish the APD completely.
For the Association of British Travel Agents (ABTA), the battle is also still not over.
"Whilst today's Budget is very much a step in the right direction, ABTA will continue to call for a reduction in overall rates of APD which, at their current band A and B levels, will continue to inhibit the contribution of the travel and tourism sector to growth and employment," ABTA's CEO Mark Tanzer said.
Whatever the challenges ahead, with one year of the APD structure still intact, a tweet the following morning from a business called Property St
Vincent and the Grenadines summed up the post-2014 Budget feeling on both sides of the Atlantic.
“Good Morning World! Great news for cheaper flights to the Caribbean!”