Chancellor George Osborne has admitted that Air Passenger Duty is indeed a tax on air passengers rather than an environmental measure as originally envisaged.
The Chancellor is reported to have made the admission in a leaked letter, saying: “APD is fundamentally a revenue raising duty and currently raises around £2.5 billion per year.”
It came in a letter dated August 12 to Olivier Jankovec, director general of the Brussels-based Airports Council International, the Daily Mail reported.
Osborne has published a consultation document setting out options which could increase APD from the current level of £12 to £16 per person for economy flights of up to 2,000 miles.
The Chancellor says his intention is to “improve on the current system” by simplifying it on “a revenue neutral basis”, while extending the tax on business jets. A further rise in APD is expected to be announced in next month’s autumn statement.
Commons transport select committee chairman Louise Ellman reportedly said: “There is great ambiguity as to whether the Government is telling us that this is a green tax or a revenue raising tax.”
Treasury officials acknowledged that the Chancellor’s comments in the leaked letter represented government thinking but denied the views were “secret” or ambiguous. The appearance of the letter emerged as a report on costs to business from APD put the figure at £600 million a year.