Air Passenger Duty is unlikely ever to be reduced and will never be abolished, the industry needs to wake up says Tim Williamson, director of Responsible Travel
APD is one of the easiest taxes for the Treasury to collect as airlines need to administer their own payments. It currently brings in £3 billion a year and is forecast to bring in £4 billion by 2021 – see the Chancellor’s Autumn Statement from last year.
You can also hardly say APD is inhibiting travel from the UK. The last dip in growth was down to the global financial crisis and not UK tax.
CAA figures for commercial flights and terminal passengers show strong growth over the last few years and, although ratings agencies like Moodys predict Brexit and the fall in the value of the pound will halve the growth predictions of air travel from the UK to 3% in 2018, air travel is still growing.
With high-season bargains galore on sites like flymeanywhere.com it’s also hard to see APD pricing people out of the market as the Taxpayers’ Alliance claimed recently.
What is disappointing about APD is thinking about where it started and what it could have been.
APD was introduced in 1994 under the guise of an environmental tax. In reality it was introduced as the government of the day recognised that aviation was lightly taxed. Fuel duty and VAT are not charged on aviation fuel.
In 2011 Friends of the Earth reckoned this equated to a £9-billion saving for the industry, making APD look very good value.
From its inception, none of the money from APD has ever been ring-fenced or allocated to reduce the environmental impact of flying.
So how about changing the message? Stop going on about reducing or abolishing APD, which is not something a cash-strapped government is going to consider with so much financial uncertainty around the corner.
Instead, why not start to lobby to get at least some of the £3 billion allocated to making flying more sustainable? This is surely in the best long-term interest of the industry and its shareholders. We think it should be at the centre of the government’s new Aviation Strategy.
The fact that airlines, apart from Ryanair, can’t make more money is more down to ultra-low prices caused by too much competition in an over-supplied market than this single tax.
Aviation is way behind the automotive industry in terms of developing alternative power and the government is actively incentivising the car industry and drivers to move away from fossil fuels, so shouldn’t some of the APD funds be used to incentivise the airline industry to develop and trial battery-powered planes? Flights on these aircraft should be exempt from APD.
Tim Williamson is a director at Responsible Travel. He was formerly customer director at Monarch Airlines and TUI UK.