News

Squeeze on holidaymakers to be reduced by freeze on APD

A planned rise in APD in November is now expected to be scrapped in this week’s Budget as the government announces measures to offset the impact of spending cuts.

According to authoritative reports this morning the chancellor George Osborne is poised to reverse a planned increase in the air tax, which would have been the fourth rise in APD in consecutive years.

The news will be welcomed by an unprecedented coalition of travel firms and associations, that had come together under trade body Abta to oppose increasing taxes in aviation under the A Fair Tax on Flying coalition.

It was reported that the decision to freeze APD would cost the government £150 million in lost income and comes as airlines look to increase to cost of flying by adding surcharges as the cost of fuel rises.

Estimates have suggested that cuts and increasing tax revenues has helped reduced the UK’s budget deficit by £8 million more than had been previously forecast, according to Ernst and Young, giving the chancellor room to do something to ease the pain of the austerity measures.

Speaking to the BBC at the weekend Osborne said: “Having undertaken the rescue mission last year, I don’t have to come back and ask for more this year. So I can say in the Budget this week I am not going to be asking for more tax increases or more spending cuts.”

The Guardian this morning reported that the decision on APD was made specifically to help holidaymakers, who represent the so-called “squeezed middle” who are being hit by rising prices and a real cut in wages.

A planned increase in APD this November was widely expected, as were future increases, based on figures released in last year’s budget suggested the income from APD would rise from £1.9 billion to £3.8 billion by 2015.

The planned increase in APD in line with inflation this year would have seen the tax on economy short-haul fares rise by £12 with taxes in medium and long-haul flights and higher class of seats rising by more.  

Quoting a ‘Treasury source’ The Guardian said the chancellor recognised how many people were struggling and that he wanted to ease the pain of a tough year by cutting the cost of family holidays.

A move to a per plane form APD is understood to have been scrapped, although private jets could be brought into the scheme and there could also be a tweak to the current banding arrangement that sees travellers to the Caribbean pay more than those to all of the US including Hawaii.

Share article

View Comments

Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.