Chancellor urged to abolish APD in summer Budget

Chancellor urged to abolish APD in summer Budget

Chancellor George Osborne is being urged to use next month’s summer Budget to abolish Air Passenger Duty.

The call comes from British Air Transport Association (Bata) which say abolition of the air tax will boost growth, trade and productivity, and encourage inbound tourism.

The organisation’s Budget representation, submitted on behalf of UK airlines, highlights how APD has transformed from a £350 million to a £3 billion tax in less than 20 years.

Bata also previews new analysis conducted by PwC to be published next week that updates its 2013 report on the economic impact of APD and suggests that the benefits of abolition have been understated.

The airline trade body points to a report published last month by the World Economic Forum which found that the UK is ranked 137th out of 138 countries for the competitiveness of its air ticket taxes and airport charges.

Evidence is presented showing that the next highest tax on flying levied in Europe, by Germany, raises £2.4 billion each year less than UK APD.

Osborne is also asked urged to address concerns about the impact of forthcoming devolution of APD on passengers and airlines flying from airports across England as a whole, not just one or two regions.

Airlines welcome the Scottish government’s plans to halve APD leading to full abolition, but argue that the Westminster should avoid ‘seriously flawed’ mitigations for a handful of English regional airports.

Bata also argues that a Treasury discussion paper on policy responses to APD devolution planned for the summer must include the options of abolition and significant reductions of APD if it is to be credible.

The Bata submission states:

  • Following the decision in the last Parliament to abolish APD for children, the government should now finish the job and abolish the tax for all other passengers during this Parliament.
  • In line with this objective, the government should cancel the RPI increase in APD rates on April 1, 2016.
  • The devolution of APD to Scotland and Wales raises concerns about market distortions and unfairness to passengers living in different parts of the UK. The UK government could take a lead and eliminate these concerns by abolishing APD.
  • A proposed Treasury discussion paper on policy responses to devolution should consider the widest range of policy options, including abolition and significant reductions of UK APD.

Bata chief executive, Nathan Stower, said: “The new Conservative government wants to increase trade with the emerging economies, tackle low productivity and create two million jobs over the next five years.

“The experience of other countries and economic modelling for the UK suggests that the abolition of APD would make a significant contribution to those aims.

“The chancellor should use the Budget to announce plans for the abolition of APD - the highest tax on flying in the world – during the course of this Parliament.”

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