Roger Gale: How duty-free on arrival shops can help the aviation sector recover and thrive

6 Apr

Sir Roger Gale is MP for North Thanet.

Since the mid-20th Century, duty-free sales at airports have been a fundamental part of a passenger’s journey. Today, they are an inseparable part of the way our travel ecosystem functions.

In Europe, for example, duty-free sales were predicted (pre-pandemic) to exceed £13.5bn by 2022, with the UK set to retain its position as the largest market in the region.

However, this often misunderstood driver of growth and affordable travel has come under some unfair criticism recently from ardent tax-purists. To understand the impact of duty-free, you must look beyond the point of sale and consider the wider implications and landscape.

Over the years, duty-free sales have become an increasingly vital source of revenues for airports, with annual sales equating to up to 35-40 per cent of total revenue for some. This revenue has helped to provide jobs, keep ticket prices at historic lows (through subsiding airport charges) and support regional and international connectivity – ensuring that the UK remains ‘open for business’ and can support this Government’s ‘global Britain’ agenda.

Without non-aviation income such as duty-free sales, airports will have to raise landing charges, driving up airline prices for consumers and eating into airport revenue. And bear in mind that this airport revenue is a major driver of local capital investment. Profits are impacted, but so too is the community labour market. The effect on the regions outside of London would be profound as many regional airports already require support from the Government in order to operate and greatly depend upon the revenue derived from duty-free sales.

With the ongoing pressure on the whole aviation sector the suggested removal of duty-free shopping would, if implemented, be an absolute hammer blow for the UK’s travel industry and ‘UK plc’ more broadly. The travel sector is hugely important to Britain. Aviation alone contributes over £52 billion to the national economy and supports over 960,000 jobs and the UK`s airports are vital international economic gateways that enable our economy to prosper through trade, tourism, business travel and global connectivity.

Our aviation industry is on its knees as a result of the pandemic. While the introduction and successful roll-out of a range of viable vaccines has at last delivered an end in sight to the current situation that the travel industry finds itself in, most travel hubs will require further assistance to speed recovery and to help them return to being net contributors to the UK economy.

Policymakers need to be looking at ways in which they can support this critical industry. Any suggestion that puts the fastest possible recovery for the aviation sector at risk must be discounted.

Government support, while welcome, is no long-term answer either. A diverse and integrated passenger experience, which of course includes duty-free, is what will meet passenger demands and put travel hubs in the right place to not only survive but to prosper. Rather than distributing taxpayers hard-earned money in the forms of tax breaks or grants, the Government needs to implement self-sustaining measures that are not only mindful of the fiscal restraints on our economy but also allow the industry to stand on its own two feet and flourish.

Duty-free on-arrival shops, for example, would enable passengers arriving in Britain to purchase duty-free items immediately before going through customs. This easy to implement, cost-neutral proposal would drive forward investment through capital expenditure, create jobs and, according to independent research, increase passenger spend in the UK by between 20-30 per cent.

This is a proven concept, successfully deployed around the world, including by some of our closest allies, such as Australia and all of the EEA countries, that have very similar taxation principles and structures to our own.

Brexit, love it or loathe it, has presented the British travel industry with an opportunity to reinvent its future outside of the EU and forge its own path on the world stage. Fundamental to achieving this ambition is ensuring the UK retains its supremacy as the most globally-connected country in Europe – be that for trade, tourism, or overall connectivity.

Duty-free on arrival shops would not take sales away from the UK’s high street, and neither would they increase the amount of goods being sold. Rather, they have the potential to repatriate sales that currently take place at the point of departure abroad – whether within the EU or further afield. Passengers arriving in the UK would still be subject to the same limits upon purchases that they can carry with them as duty-free purchases, so no additional goods will enter the UK.

Regardless of whether this policy is implemented, these products will still be purchased – so better that they are bought on arrival in Britain. This is an opportunity to capture duty-free sales already taking place abroad, save the unnecessary carriage of goods over many miles crammed into overhead lockers, and ensure the economic benefit of those purchases are realised in all parts of the UK.

With the European Union currently considering such a proposal as part of the ‘EU Tourism and Transport Package’, it is vital the UK Government follows suit.

Duty-free on arrival shops would make a tangible difference to the UK’s travel sector by helping to kickstart economic growth, support regional development, and deliver employment opportunities. They would also raise revenues for the Treasury through Corporation Tax and increased PAYE from the jobs created. I urge my Conservative colleagues, including the Chancellor of the Exchequer, to join me in helping to turn this opportunity into a reality.

Roger Gale: Special relationship or coercion? America’s approach to extradition is not the conduct of an ally.

5 Feb

Sir Roger Gale is MP for North Thanet.

A great deal has changed in the US since the election of President Biden. After just a couple of weeks in office he has made sweeping changes to both US domestic and foreign policy, from suspending the construction of the US-Mexico border wall to rejoining the Paris Climate Agreement. However, one thing that has not yet changed is the United States’ coercive use of extradition arrangements.

This became clear just two weeks ago when Biden reaffirmed the Trump administration’s refusal to extradite Anne Sacoolas to face trial for the killing of Harry Dunn. When a spokesperson for the Foreign Office said the refusal “amounts to a denial of justice”, they surely echoed the feelings of Britons up and down the country.

Unfortunately, this is part of a long pattern of the US exploiting the 2003 UK-US Extradition Treaty to exert extraterritorial influence, often in situations related to commercial disputes rather than the terrorism for which it was intended.

On too many occasions the US has sought to extradite British citizens for alleged crimes which have taken place entirely on UK soil. According to figures from June 2020, since 2007 the US has extradited 177 people from the UK, of which at least 99 were accused of non-violent crimes.

The majority of these have been white collar business people who pose no physical threat to UK or US citizens, and yet the US authorities have been allowed to exploit the law to suit their own purpose. In return the American authorities have handed over just 67 citizens to the UK to face trial in Britain.

This coercive approach to extradition, from a country that is one of our closest allies, illustrates why we must re-examine the asymmetry in the 2003 UK-US Extradition Treaty, made law in the Extradition Act 2003, as a matter of urgency.

To extradite from the US to the UK under the 2003 Treaty the UK has to produce prima facie evidence of a crime showing “probable cause”, but to extradite from the UK to the US only requires there to be “reasonable suspicion” and an indictment from a Grand Jury that meets in secret with the defendant not present. Similarly, the legal frameworks are worded to state that the US “may” extradite when requested, while the UK “must” extradite.

This means that, in reality, a UK defendant has to go to court to prove why they should not be extradited which is a reversal of the fundamental principle that a man or woman is innocent until proven guilty. This matters because, once extradited, it is significantly harder to mount a defence within a US justice system, under which an improbable 97 per cent of indictments end in conviction, often via the also coercive “plea bargain” process.

There have been academic arguments over the impact of the differences between the impact in the UK and the US of the 2003 Treaty and whether they represent an imbalance. This debate misses the point. What matters is how the force of law is applied in practice and whether it is being used appropriately and for the reason for which it was originally intended.

The latest pressing example of the problems with the use of the current system is the case of Dr Mike Lynch, whose extradition hearing is taking place next week. Lynch was CEO of Autonomy, a successful British software company which was acquired by the US company HP for $11.7 billion in 2011. After his departure as CEO of Autonomy in 2012, HP wrote down $8.8 billion of Autonomy’s value later that year, and the US is now seeking to extradite Lynch over allegations of fraud associated with the purchase.

Lynch is a British citizen who has lived in the UK throughout his whole life. He ran a UK company under UK law that was listed on the London Stock Exchange. The alleged conduct took place in the UK, and evidence and witnesses relating to the events are clearly available in the UK, as demonstrated by the long-running civil case that was tried in the High Court in 2019-20.

Whatever the rights and wrongs of that case, Lynch demonstrably poses no physical threat to the people of Britain or America. Extraditing him to the US, where his ability to defend himself would be severely curtailed, would run contrary to the Forum Bar protection which prevents extradition if a substantial amount of the alleged activity took place in the UK. It would also make a nonsense of the British judicial system.

The UK does not use its extradition arrangements to assert extraterritorial reach. Not with the US, not with any country. It is unimaginable that the UK would pursue an American person living in the US for actions that occurred in the US under US laws and US regulations. We, rightly, only pursue people, such as Sacoolas, who have fled the UK after being suspected of committing a crime here and not those who have acted entirely on US soil.

The Forum Bar was added to the Extradition Act in 2013 to protect British citizens against an overweening American Department of Justice and it gives UK courts the power to refuse extraditions if the UK is the more appropriate place for the case to be heard. Lynch’s case will test the extent to which the Forum Bar truly protects British citizens.

As we look towards a more global Britain and an evolving trading relationship with the US we must reflect on whether we can acceptably continue to operate under these conditions. How many more Britons who have never even set foot in the US will we allow to be exposed to the whims of the American court system?

The rejection of the extradition request against Lynch is a necessary and vital step towards re-establishing balance in what is at present an unjust agreement. Ultimately, treaty reform must be a long-term consideration if this Government is finally to rectify the issue of UK-US extradition and to honour its duty to protect British citizens.