ABTA new policy to improve mutual understanding

 Wednesday, December 7, 2022 

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Travel Matters is ABTA’s annual policy event in which we bring together the travel industry and political and regulatory decision makers to improve mutual understanding of where each stands, and what is each is seeking.

Perhaps more than ever, the worlds of politics and political economics permeate our lives, as business leaders, and as individuals. So let me start with a high level view of what industry, or at least the travel industry, needs from any Government:

First of all, what we do not need is certainty. Certainty is an impossibility; We have never had certainty; We actually rejoice in uncertainty! Because that is where innovation and risk-taking meet to create wealth for businesses and for societies.

But we do need a clear and settled framework in which to make risk decisions – where to invest, when to invest, how to structure our finances, how to balance risk and return. An erratic economic approach discourages investment, or at the other end encourages wildly speculative investment, and cannot deliver on our desire to achieve improvement in living standards, and happiness.

The last three years have seen a series of tactical political and fiscal initiatives. This has partly been as a response to two major geopolitical events: the pandemic and the Russian invasion of Ukraine, and their immediate consequences of a large fiscal deficit coinciding with soaring energy prices, inflation and interest rates.

But is has also been partly out of political opportunism, as evidenced by the now notorious ‘fiscal event’ of the former Prime Minister and her Chancellor. Unbriefed, unexplained and unbudgeted tax cuts spooked the market and sent a strong message back to politicians that they cannot act in isolation, however ideologically committed they may be.

The role of any government in our economy is to provide the bedrock on which businesses and individuals can build: security – both defence and, we now know, energy security; a functioning educational system; infrastructure – transport and broadband.  And I imagine most of us in the UK believe that we need a health and social care system that protects the vulnerable in time of need.

All of that costs a lot, paid for, ultimately, out of general taxation. And most of us accept that as a fact of life. As individuals and businesses prosper, tax returns increase and we enter a virtuous cycle. But without that foundation, tax is seen as a penalty to repay the decisions of the past with no assurance of prosperity in the future.

The challenge from industry to this Government is to move from the tactical to the strategic – to be seen to be putting in place those structures that underpin sustained investment and commitment.

So.. where do we stand today? The ‘polycrisis’, as the Economist magazine calls it, is still with us, and set to remain through next year. Their analysis of all the professional forecasts says that only 11% of forecasters see the Russian-Ukraine conflict being resolved before September 2023, with 55% thinking it won’t be resolved until after October 2024. We hope it will be over sooner, but who knows? Economic predictions can become self-fulfilling, and it seems as though we are entering a recession that may be prolonged.

The travel industry is still recovering from the dire years of the pandemic. International travel to and from the UK resumed only eight months ago, and although it’s been gratifying to see the return in demand for leisure and business travel, we are still not out of the woods.

And within the travel industry, some sectors have been hit harder than others. School travel, for instance, stopped completely during the pandemic, and its resumption is now hampered by the ending of the ‘Listed Travellers Scheme’ and our Government’s refusal fully to recognise collective passports, adding additional costs and delays.

A more general obstacle to recovery – and not just in travel – has been the shortage of skilled and unskilled labour. This led to a bumpy restart for travel over the summer, and continues to be a structural problem. The Government did take steps to alleviate the problem by changing the vetting rules for new staff, but the lack of available entry routes for overseas workers continues to hamper the industry. We urgently need to understand the Government’s policy on labour mobility – and particularly on youth mobility.

And, of course, it’s a two-way street: British nationals are restricted in the nature and duration of the duties they can perform in Europe in support of our industry’s customers. I’ve written to the new Immigration Minister, Robert Jenrick, urging him to consider the extension of the Youth Mobility Scheme to individual countries on a bilateral basis. This would ease labour shortages here and abroad, without conferring right to remain on those working under the scheme. This would be a pragmatic move, in the absence of our negotiating a wider mobility chapter within the UK-EU trade deal, which is not due to be reopened until 2025.

Throughout the height of the pandemic the then-Chancellor, Mr Sunak, made clear to me in all my interactions that he was not willing to contemplate sector-specific support – this in spite of the manifest evidence that the travel industry was the first hit, hardest hit and longest hit industrial sector.

In fact, we had to fight hard to make sure that our Members – those with retail premises and those without – were eligible for such support schemes that were in place, such as Lockdown Closure Grants; Retail, Hospitality, and Leisure Grants; and the Additional Restrictions Grants scheme.

The Government’s initial definition of retail businesses in November 2020 would actually have excluded retail agents from lockdown-related financial support, not just in England but across the UK because the same definition was picked up by Devolved Administrations too. It was only by ABTA’s working closely with DCMS and BEIS that we succeeded in changing that definition, which allowed our Members to access much-needed support when their businesses were forced to close.

We continue to make the case that many travel businesses are emerging from the pandemic in a weakened financial condition, and, having secured business rates relief for retail agents, we will continue to push for the extension of business rates support to non-retail travel businesses.

As I said a moment ago, it has been gratifying to see the consumers’ returning appetite for travel in 2022, but we should not take that for granted. Affordability is one essential component of travel, and confidence is another. The Parliamentary Bill that sets a sunset deadline of next year on UK law and regulations derived from EU legislation has the potential to de-stabilise the travel industry.

The dilution of denied boarding compensation is one area of potential consumer detriment, but more profound is the possible removal of consumer protections provided by the Package Travel Regulations. These are currently under review by both the Department for Business Energy and Industrial Strategy (who oversee the PTRs) and by the Department for Transport, who are reviewing the operation of the ATOL Scheme.

ABTA is participating actively in both reviews, and is very open to appropriate changes. The protections afforded by these regulations are essential to maintaining consumer confidence, which is in our Members’ commercial interest. Designing the system of the future, and giving the industry time to adapt to it, is not the work of months, and I urge the Government to push out the sunset deadline until both have been achieved.

As we look into that longer term, and think about the welfare of our industry, a number of challenges present themselves. The first is to make sure that the new Ministerial team understands the scale and significance of the international travel sector. It is with this in mind that we have recently published our report – commissioned alongside UKinbound – called International Travel: Powering the UK Economy.

The report makes clear that inbound and outbound travel are symbiotic, and together pre-COVID contributed £80bn of Gross Value Added to the UK economy. Outbound travel, which is sometimes unfairly seen as the cuckoo in the nest of our tourism industry, contributed £49bn of that GVA, and supported 843,000 jobs through its direct and indirect supply chains. Moreover, the outbound sector is forecast to grow by 15% from 2019 levels by 2027, given the proper political framework, outpacing the growth of the wider economy.

One way in which the Government can support that growth is by not automatically closing our borders in the event of a COVID upsurge. ABTA has always recognised and supported the priority given to public health, but the measures taken should be evidence-based and proportionate. Once a virus is established in the UK community there is little evidence that travel restrictions impede its development, and yet the economic and human cost of those restrictions is huge.

We also need Government support and collaboration to meet the challenge of climate change and, particularly de-carbonisation. We want the social benefits of tourism – I remind people that number one of seventeen UN Sustainable Development goals is ‘No Poverty’, and tourism does more than any other sector worldwide to create jobs – while minimising its environmental impact. ABTA is part of the Sustainable Aviation coalition, and we look forward to working with the new Government to accelerate the development of low carbon aviation solutions.

I’m encouraged that our new Aviation Minister, from whom we shall be hearing shortly, intends to maintain the establishment of an Aviation Council with industry, and ABTA will be representing the interests of all our Members on that, as we do on the DCMS Tourism Industry Council.

We’ve been clear coming out of the pandemic that we need to improve understanding across Government of the strategic importance of international travel for the UK economy. These Councils, which include representatives from critical government departments including the Treasury and BEIS, will help us continue to make that case.

Now is the time for the industry to act as one, and I’m delighted that the Future Travel Coalition of travel associations, set up during COVID, will continue to bring together industry leaders and allow us to represent jointly the interests of our broad sector, as well as working closely with Government to take us from polycrisis to success.

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