The government is being urged to conduct a review of the impact of Air Passenger Duty after travel industry pleas for abolition or a cut in the air tax were ignored in yesterday’s budget.
The lone concession made by chancellor Philip Hammond was to freeze the short-haul rates of APD for the eighth year in a row.
This would keep costs down for 80% of passengers, The Treasury claimed. But long-haul rates will rise again in line with inflation.
The decision drew a furious reaction from airlines although a measure to expand the use of e-gates at UK airports by travellers from more countries such as the US, Canada, Japan, Australia and New Zealand was welcomed.
A move to cut business rates by a third for two years from April 2019, with claimed savings of £900 million, will benefit independent high street travel agents.
Abta chief executive Mark Tanzer led calls for action to reduce long-haul APD.
He said: “While we recognise that the chancellor’s freeze on short-haul air passenger duty will come as some relief to the industry, another inflationary increase for long-haul will further reduce the UK’s international competitiveness, particularly at a time when Brexit means the UK should be seeking to establish new links with destinations across the world.”
Tanzer added: “We urge the chancellor to commission detailed economic modelling, and to consider cutting APD, at the earliest opportunity, to boost the UK economy.”
His comments were echoed by both British Airways owner International Airlines Group and Virgin Atlantic.
An IAG spokesman said: “It’s ironic that this Brexit budget has undermined Britain’s global competitiveness by upping Air Passenger Duty, the world’s highest aviation tax, again.
“Last year, British Airways’ passengers paid £682 million in APD. We want to offer more flights to key trading markets, like our European competitors, but APD stifles route development to new emerging markets.
“This outdated tax also costs UK jobs and growth. If Britain wants to compete on the global stage post Brexit, it should be scrapped now.
“However, we welcome the extension of e-passport gates to other countries, but this will only be effective in reducing queues if all e-gates are opened to accommodate the volume of passengers.”
A spokesman for Virgin Atlantic said: “The government has missed a crucial opportunity to lower the cost of long-haul air travel for UK businesses and holidaymakers by cutting Air Passenger Duty.
“Our customers are already paying the highest rate of long haul APD in the world – twice that of any other EU nation – simply to depart the UK.
“At a time when the value of the pound remains subdued, it’s disappointing that hard working families booking holidays for next summer will be hit with more costs, with APD now accounting for more than a quarter of our lowest fares.”
Tim Alderslade, chief executive of industry association Airlines UK, said that the budget announcement on APD “sends entirely the wrong signal as we prepare to leave the European Union”.
He added immediately after Hammond had delivered his budget speech: “APD is nothing but a tax on global Britain. Rates are already the highest in the world, with the burden on passengers travelling from and within the UK having risen over 1,000% since its introduction, and set to hit an eye watering £4 billion by 2022/03.
“The UK was only country in Europe to see a loss of direct connectivity last year, and today’s increase on business and holiday travellers will make it even harder for UK airlines to grow our international connectivity, establish new trade links and encourage more tourists to visit the UK.
“With Brexit just around the corner, it is a missed opportunity to have truly transformed the UK’s international competitiveness.
“Ministers can talk all they like about reaching out to the world but today’s increase demonstrates that their words are not matched by their actions and will remain so until they get rid of this damaging tax.”
On the expansion of the use of e-gates, Virgin Atlantic said: “Virgin Atlantic welcomes announcements that citizens from the UK’s most trusted security partners, including the United States and Australia, will be able to use e-gates at UK airports.
“This is an important first step in reducing waiting times for our customers when visiting the UK, ensuring they receive the welcome they deserve.
“With Christmas just around the corner, and another busy summer expected next year, the government must act quickly to minimise disruption to those visiting the UK.”
Heathrow CEO John Holland-Kaye said: “We welcome the government’s announcement that passengers from more countries will be able to use the e-gates at Heathrow.
“E-gates offer a world-class immigration process whilst keeping Britain’s border secure.
“The government should make this happen before the end of March 2019 to demonstrate that Britain is open for business as we leave the EU.”
UKinbound chairman Mark McVay said: “We are pleased that the budget includes several policies that will have a positive impact on the UK’s tourism industry.
“These include the welcome introduction of e-gates for more of our international visitors, improvement of transport links in our cities and digital connectivity in rural areas and funding to help restore and sustain our historic high streets.
“However, it is disappointing that there will be no change to APD and VAT regimes at this point, even though there is strong evidence that cutting these taxes will in fact generate more revenue for the government in the long term.”
Rajeev Shaunak, head of travel and tourism at accountancy firm MHA MacIntyre Hudson, said: “The chancellor didn’t grant the travel industry its number-one wish; there was no reduction in APD despite the continuing calls from the industry.
“This wasn’t really a surprise given APD generates approximately £3 billion for the UK treasury and any reduction would impact other politically sensitive areas such as health, education and social services.
“Philip Hammond has done some things that may boost the spirits of the industry.
“Personal allowances have gone up which will increase the pounds in the pocket of customers – the absence of an attack on higher rate tax relief on pensions will also help a consumer segment which traditionally spends on holidays. Hopefully this will improve confidence in what is now an increasingly nervous marketplace.
“The change to lettings relief may limit further growth of Airbnb and reduce the impact of existing Airbnb businesses. This may represent a small respite for the more traditional hotels and B&Bs they compete with.
“The decision to open ePassport gates at airports to non EU visitors may increase inbound tourism from the US, Canada, Australia, New Zealand and Japan. For firms with agencies on the high street a cut in business rates is also very welcome.
“Brexit worries combined with concerns that the forecast growth for this year is only 1.3% and 1.5% going forward may impact consumer appetite for future commitments such as large holidays.
“The sector will be hoping that a Brexit deal is done which, combined with the British love of travel, will lead to a late surge in bookings next year.”
UKHospitality chief executive Kate Nicholls said: “This was a positive budget for hospitality, recognising and acknowledging our core campaigns around employment costs, business rates and digital paying its fair share – together with a positive outcome on excise duty, latte levy and non-residential capex and investment allowances.
“We estimate the measures announced in the budget as a result of our campaigns are likely to save the trade £750 million.”
More: Abta rallies trade as it calls for 50% APD cut in Budget
APD cut needed to avoid stall in aviation and tourism growth
APD ‘so wrong’ Virgin Atlantic boss Kreeger tells ministers