Around the campfire: Heathrow taxes you

As schools are poised to re-open in the UK, many people are thinking about when they might be able to travel again without breaking the law or being required to go into a two-week quarantine. UK households are also in the fortunate position of being able to afford a break – the Bank of England says that in January alone this year households stashed £18.5 billion into bank accounts as they saved cash they might otherwise have spent on restaurants, retailers and other businesses. That’s a lot of cash – the six months to February 2020 saw them save a monthly average of £4.8 billion.

This week’s UK Budget avoided any hasty measure to claw back some of the £407 billion that has been (and is being) spent on dealing with the pandemic. Meanwhile, the private sector is already making stealthy hikes to try to recover all the losses it made last year.

Take Heathow Airport. In 2019, almost 81 million people passed through Heathrow; last year traffic collapsed by 73% and just 22.1 million used Heathrow. Heathrow lost £2 billion last year. Heathrow is owned and operated by BAA Limited, which itself is owned by an international group led by the Spanish transport company Ferrovial.

Heathrow has just said it is now adding a new charge to all outbound flights. It calls this extra charge a “United Kingdom Exceptional Regulatory Charge”. All passengers now flying from Heathrow will find themselves paying an extra £8.90. This will go on the bill to airlines, who will no doubt pass it onto their passengers. Even if only 50 million passengers take an outward bound flight, Heathrow will gain an extra £45 million. In July 2019, the union Unite threatened a strike over a refusal to award them a 4.5% increase; meanwhile, the CEO, John Holland-Kaye, got a 103% pay rise, taking him to £4.2 million.

Will other UK airports start charging this Covid-loss tax? They say not, but as passenger numbers collapsed everywhere, it must be tempting.

Passengers will no doubt meekly accept this tax – a tenner on the cost of a seat, it doesn’t ‘feel’ like a lot. That’s the nature of taxes – a little bit here and there and one hardly notices. But having imposed it, will this Covid-19 surcharge ever be removed? I doubt it. Covid-19 (or variants thereof) will no doubt always be with us, and so will the flight surcharge/s. Taxes stick around longer than their original justification. You should think yourselves lucky there’s no flu seat surcharge.

Income tax was first introduced in the UK in 1799 – and was then regarded as a ‘temporary measure’ to cover the cost of wars against Napoleon. Repealed in 1816 after the Battle of Waterloo it was reintroduced in 1842 by Sir Robert Peel to deal with a massive public deficit. Income tax is still a ‘temporary’ tax; it’s just automatically renewed each year on 5 April as part of the annual Finance Bill.

The UK now has a welfare state in which the bills for all kinds of public ‘services’ are shouldered by the government, i.e. by the taxpayer. Governments everywhere have pumped – whether freshly printed or borrowed the effect is the same – trillions of dollars into the financial system. This is a very peculiar time. The world economy has been at a standstill for a year, yet the price of a barrel of oil is now almost what it was in September 2019, pre-pandemic.

So who says that inflation is not a worry? All kinds of ‘extras’ are now being charged; hundreds of pounds for a Covid-19 test before you fly and now a tax on your seat from Heathrow. With oil prices now almost as high as they were pre-pandemic, the costs of everything are rising. When I next travel from Heathrow I will be taking my Glint card, ready to pay the next Covid-price gouge in gold.

Until next week.

Jason