BA fights against travel tax

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BRITISH AIRWAYS will today step up the campaign against the threatened imposition of value-added tax on domestic travel by warning that the move could result in a sharp drop in the number of passengers and the closure of some regional air services.

Sir Colin Marshall, BA's chairman, and Robert Ayling, managing director, will press home the message at a reception this evening for MPs attending the Conservative Party conference in Blackpool.

BA also plans to issue leaflets to all its domestic passengers urging them to write to their local MPs objecting to any addition of VAT to air, sea and rail fares in next month's Budget.

The airline, which carries about 5 million domestic passengers a year, estimates that levying VAT at the full rate of 17.5 per cent would add pounds 20 to a standard Apex return and pounds 40 to a business-class return. Introducing VAT at 8 per cent would result in an 18 per cent decline in leisure traffic equivalent to 500,000 passengers a year.

'Air fares would rise, demand would fall and services would have to be cut,' the leaflet says. 'Scotland, Northern Ireland, the north of England and Cornwall would be worst hit.'

British Rail has already warned the Government that imposing VAT on train fares could slice pounds 200m off its passenger revenues, restrict investment, threaten jobs and damage the environment by encouraging more people to switch to cars.

BA intends to spell out much the same message in its lobbying and leaflet campaign. The annual BA reception is one of the fringe highlights of the Tory conference and traditionally attracts a bevy of Cabinet ministers.

The fact that BA has chosen to lobby so hard on the issue of VAT on travel suggests that the Chancellor, Kenneth Clarke, has identified it as a genuine possibility as he seeks to cut the budget deficit.