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The aviation sector has reacted with dismay after industry pleas to adjust or abolish Air Passenger Duty were ignored in the Budget.
A policy paper from the treasury in the wake of Chancellor George Osborne’s eighth budget confirmed that the air tax on long-haul routes would rise again from April 1, 2017 from £73 to £75 and from £146 to £150 depending on the class of travel.
The proceeds would contribute to the government’s deficit reduction objectives.
While small firms will benefit from business rate cuts while others will gain from further reductions in corporation tax, the Chancellor’s refusal to act on concerns about the impact of devolved APD grew strong industry criticism.
Abta said: “While short-haul APD will be frozen, Abta is disappointed that the Chancellor used today’s Budget to raise Band B APD by inflation, rather than to address the uncompetitive level of APD overall.
“With devolution of the tax to Scotland gathering pace, and the Scottish government committed to a forward-looking 50% APD cut, we need urgent action from the Treasury to bring APD down across the whole of the country to ensure a competitive, fair rate.”
This theme was echoed by the boss of Newcastle airport, which is among those likely to suffer most when APD is cut in Scotland.
Chief executive, David Laws, said: “We are disappointed that our concerns regarding devolution of APD to Scotland have not yet been addressed, as we are already seeing airline behaviour changing in response to the prospect of lower APD north of the border.
“Airlines are making plans for new flights from Scottish airports rather than airports in the north of England, so that in a sense we are suffering from ‘planning blight’.
“That said, we understand that a decision on this matter is yet to be made. We therefore continue to call upon the prime minister to honour the promise made in 2015 to protect English regional airports, by matching any reductions in Scotland at non–congested airports across the rest of the UK.
“The consequences of unmatched reductions in Scotland would be so serious that ‘do nothing’ continues to be simply not an option.”
American Express Global Business Travel vice president and general manager, Jason Geall, described the budget as positive form British business from a travel and transport perspective due to planned investment in roads and railways.
But he added: ”It was once again disappointing that the chancellor neglected to address Air Passenger Duty.
"It now seems likely that MSPs will halve the tax north of the border when the Scotland Bill becomes law.
“This will create an unfair playing field, putting airports and airlines in the north of England at a severe competitive disadvantage. I would urge the government to revisit this matter in the short term.”
A spokesman for industry lobby group A Fair Tax on Flying agreed, saying: “UK levels of APD are the highest in Europe and continue to pose a challenge for UK families and businesses. Today’s budget statement was a missed opportunity to cut this damaging tax.
“APD is being devolved to Scotland where the Scottish government is set to halve it. In light of this, we urge the chancellor to cut APD by at least 50% across the entire country.
“Families in Southampton or Swansea should not have to pay more tax to go on holiday than families in Stirling.”
Flybe chief executive, Saad Hammad, said: “If the chancellor needs the overall £3 billion levied through APD, then we urge him to raise it more fairly by cutting the charge to Scottish levels at regional airports and establishing a higher levy or ‘congestion charge’ at the congested airports in London such as Heathrow and Gatwick.”
He said UK APD, the highest aviation tax in Europe and one of the highest in the world, disproportionately penalises domestic UK travellers on a per mile basis compared to European short-haul and long-haul.
“It is surely high time the UK government listened to the needs of regional passengers and took positive steps to reforming or abolishing this tax without further delay,” said Hammad.
British Hospitality Association deputy chief executive,Martin Couchman, said: “We were disappointed not to see a reduction in National Insurance and a delay in the introduction of the Apprenticeship Levy which would have been helpful in reducing the total impact of the National Minimum Wage and the introduction of National Living Wage in April this year.
“Devolved powers to regions to improve transport and connectivity will support job creation and local tourism.
“We are pleased that English counties and regions will get elected mayors. Tourism should be a top priority for these mayors especially in coastal and rural areas.
We were also pleased to see the support for tourism and cultural activity with the announcement of cathedral investment, tax breaks for museums and travelling exhibitions.”
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