The government has admitted it will collect nearly £1 billion less from Air Passenger Duty than first expected over the next five years despite a further hike in the tax next April.
This comes as air passenger numbers were revised down by the Office of Budget Responsibility, according to small print in this week’s Autumn Statement disclosed by the industry anti-APD lobby group A Fair Tax on Flying.
Figures from this year’s Budget predicted that APD would raise £19.3 billion for the Treasury over the next five years.
But the figures in the Autumn Statement predicted a revenue intake of just £18.4bn – a decline of £0.9 billion.
The Budget statement in March predicted that total projected passenger numbers through UK airports between the financial year 2011-12 up to 2016-17 would reach 628.4 million.
The Autumn Statement figures predict a drop in total projected passenger numbers to 618.3 million, a drop of 10.1 million.
In the 2016-17 year alone, passenger numbers have been revised down by 3.6 million.
The OBR explained the revenue drop by saying: “The forecast is lower than our March forecast in each year as a result of lower outturn passenger numbers, lower RPI inflation than previously assumed, as well as the weaker GDP and disposable income forecasts.”
Another rise in APD of 2.5% will be imposed from April 1, 2013.
Responding to the disclosure, Abta head of public affairs Luke Pollard said: “If the Treasury is needing to revise down its figures it is only reasonable to ask why.
“The problem is the Treasury is still refusing to commission a proper study into the wider impacts of this tax. If the Treasury is serious about creating growth in the economy it has got to review this damaging tax that is putting the brakes on the UK economy and the Treasury’s own tax projections.”
Board of Airline Representatives in the UK chief executive Dale Keller said: “Decreasing passenger numbers and Air Passenger Duty revenue forecasts are a sign that inbound tourists, in particular, aren’t happy with paying the highest air passenger tax in the world.
“As passenger numbers decrease, foreign airlines will start looking towards other European airports to expand their business. The Chancellor said that he wants to reaffirm the message that ‘Britain is open for business’.
“The government needs to recognise the damaging impact APD is having on attracting tourists and investment, instead they are bringing the shutters down on UK competitiveness”Airport Operators Association chief executive Darren Caplan said: “These recent forecasts are evidence of the growing damage Air Passenger Duty is having on passenger demand.
“While the OBR may point to the impacts of lower inflation and weaker GDP forecasts, it’s evident that lower actual and predicted passenger numbers, as a result of having the highest air passenger tax in the world, is the fundamental driver behind these decreased revenue predictions.
“The government needs to finally undertake an economic impact-assessment to assess the wider effects the UK’s eye-wateringly high levels of APD are having on our economy.”British Air Transport Association chief executive Simon Buck said: “While recognising the Chancellor’s need to address the fiscal deficit, we are particularly concerned at the ever increasing rate of APD in terms of its impact on jobs and on the British airline industry.
“Our Continental competitors have recognised the damage high taxes on flying can cause to their economies and have reduced or scrapped their taxes accordingly.
“The OBR should consider whether this over-taxation of the travelling public really represents the optimum return for UK plc or whether a reduction in the tax might actually yield a greater return in terms of increased numbers of tourists and a more attractive climate for inward investment.”
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