'Obscene'duty free profits attacked

FERRY operators, airlines and airport operators are being accused of misleading the public about the true value of the duty-free trade and of selling goods at up to 600 per cent profit.

But the travel industry has warned that the loss of income it faces when duty free is abolished in 10 months' time will be passed on to travellers - adding significantly to the cost of holidays - and will lead to thousands of job losses.

The duty-free trade is worth pounds 1.3bn in revenue to the Treasury, and a report from the Centre for Economic and Business Research, an independent consultancy, says its abolition could cost 23,000 jobs in the UK, including 1,100 in the Scotch whisky industry and 4,700 around the port of Dover, as well as 140,000 across the European Union.

According to the Duty Free Confederation - a powerful alliance of ferry firms, airlines and drinks suppliers - the cost to the EU taxpayer will be pounds 6.3bn over five years.

In addition, the British Airports Authority predicts that it will lose pounds 123m and 4,000 jobs at the seven UK airports it runs.

However, to offset the losses, airports have been given permission to increase landing charges by up to 20 per cent. Airlines faced with this rise plus their own shortfall from on-board duty-free are unlikely to be able to absorb the costs, which would mean that a family of four travelling within the EU could pay pounds 60 more for tickets.

But the duty-free lobby has been accused of painting a "doomsday scenario". The same report from the Centre for Economic and Business Research also says there will be new jobs for businesses that do not currently enjoy duty-free concessions, such as French-based wine sellers.

Paul Jones, managing director of Le Chai Ardresien, a wine merchant based outside Calais, believes the duty-free industry can absorb its losses. "The duty-free lobby is squealing like a pig because it's going to lose its obscene profit margins," Mr Jones said. "Duty-free has always been seen as a perk of travelling. But the cost price of a bottle of whisky can be little more than pounds 1. The fact that they are selling these items at 600 per cent profit is scandalous."

He said that because tax on alcohol in France was lower than in the UK, it was still worthwhile travelling to France to buy cheaper wine and spirits in French supermarkets.

The Duty Free Confederation rejects the argument, saying that profits are reinvested. A spokeswoman said: "The vast majority of the profits are channelled into other areas, such as cheaper airline and ferry tickets."

The British Airports Authority says it spends pounds 1.5m on investment a day. "We receive more revenue from duty-free than from landing charges," said BAA's duty-free campaign manager, Liz Took.

The Duty Free Confederation is making one last plea to Brussels to reconsider the decision on the concession, saying it needs an extension beyond the June deadline to allow it to adjust to whatever takes its place.

One proposed alternative from the EU is for a "gentleman's agreement" allowing airlines or ships to charge the lower of the two duty rates in the countries they travel between. The "anti" lobby says this would be a bureaucratic nightmare.

Ferry companies say the abolition of duty-free will add to problems caused by competition from Eurotunnel, which now takes 49 per cent of tourist vehicles across to France, compared with 33 per cent by P&O Stena Line.

The charter airline Air 2000 says that it may have to withdraw from certain routes. "Many of the routes we operate from regional airports are only viable because of the revenue we get from duty-free," said spokesman Simon Tuck.