As expected there are many aspects to the recent 2010 Emergency Budget announcement which may have an affect on you and your family's financial arrangements and many people may find that they have to make some significant choices in lifestyle changes in the future.
George Osborne’s first Budget was always going to be a painful one. With the public sector debt exceeding £900 billion and the Budget deficit for 2010/11 expected to be in excess of £150 billion, there was inevitably a need to raise taxes and cut expenditure.
The previous
Labour Government had already laid the foundation for some of the tough tax measures that will apply for tax year 2010/11 but it remains to be seen how many industries will feel, and indeed deal with the aftermath of consumer reactions. An interesting, if as yet unexplored area is the travel industry, and in particular cruise holidays which have enjoyed unprecedented growth over the last few years. Even in the face of deepest recession cruiselines somehow continued to thrive, launching new multi-million pound ships and ever exotic itineraries and ports of call. With yet more ships on order, and pre-budget, growth in this sector of the travel market set to continue, it will be of interest to watch how the cruiselines react.
2010 budgetary highlights include the raising of personal allowance by £1,000 from 6 April 2011 to £7,475 which will only benefit basic rate tax payers, the raising of the VAT rate to 20% from 4 January 2011, the 50% additional rate of income tax on income over £150,000, the reduction and loss of personal allowance once income exceeds £100,000 and the freezing, for this year, of the higher rate threshold.
Low-cost airlines and traditional carriers are concerned by the suggestion from George Osborne that he will also overhaul Air Passenger Duty. Air Passenger Duty, or APD is a charge levied on each passenger flying out of Britain and is set to increase in November in a move aimed at raising an extra £3.8 billion a year.
Osborne will not repeat the rise introduced by the Labour government, but is considering a system which would see the charge levied on a per aeroplane basis.
Such a shift would benefit low-cost airlines, who tend to pack more passengers into their planes because they do not have spacious business class seats and offer lower prices. But larger airlines will almost certainly oppose the change, because it would increase costs in areas that do not affect low cost carriers, including freight and transfers.
So taking into consideration that ‘middle’ income families will be affected by tax changes and they form a large chunk of the mass cruise market, it is almost certain that the demand will be for ever cheaper deals. Holidays are a luxury and tend to be one area where cut backs are made when people need to rein in their spending. This will put pressure on travel agents and cruise specialists to drop prices, cutting even further any small profit margins they have. In turn, travel agents and cruise specialists will look to cruiselines to increase their commission placing cruiselines in a position where they will need to operate on ever tighter budgets will could effect service and product in the long run.
Another impact of the 2010 Emergency Budget could result in an increase in demand in cruises departing from the UK. If the additional Air Passenger Duty is introduced later in the year, it is without doubt that airlines will hike up flight costs to cover it. Over the last few years we have seen more and more cruiselines introducing itineraries which depart from british ports – predominantly Southampton but with a handful also from Dover and Harwich. An increase in flight prices could see even more demand in ‘no-flight’ holidays, good news for UK ports. An increase in demand should see more choice of sailings, possibly with new departure ports (potentially from the north of the UK), an even wider range of cruiselines, itineraries and durations and more year round options.