The Chancellor should take the opportunity in his Autumn Statement to make holidays more affordable by scrapping APD for children under 12, says Darren Caplan, chief executive of the Airport Operators Association
It is almost 20 years to the day since the UK Treasury first started taxing flights departing from the UK.
Back in 1993, the then Chancellor of the Exchequer, Ken Clarke was looking for ways of raising revenue and so, he said, he had decided to introduce Air Passenger Duty (APD), estimating that it would raise the relatively modest sum of £300 million. Set at £5 for UK and EU flights and £10 for all other destinations, the new tax came into effect on 1 November 1994.
Perhaps if it had stayed at those levels it might not have done so much damage to the UK economy overall and to UK businesses, family budgets and the aviation sector in particular.
The trouble was that successive Chancellors just couldn’t resist further raids on the aviation honey pot. Fast forward to 2014 and APD now raises £3 billion for the Treasury and passengers on long- haul flights hand over up to £194 every time they fly, an eye-watering amount.
The UK charges people more in departure taxes than any other country in Europe – five times more on average than those European countries that still levy such a tax (Denmark, Belgium, Ireland, Malta and the Netherlands have all abolished theirs).
A family of four flying to Florida must hand over £276 to the Treasury; by way of comparison, Germany, one of the five remaining EU countries still levying APD, charges £154 for the same route. Germany, by the way, has just frozen its APD equivalent.
UK APD is the highest in the world, acting as a serious brake on business travel and tourism alike. In the tax tourism competitiveness league table published by the World Economic Forum we are 139th out of 140 (only missing bottom place because Chad’s statistics were incomplete).
Now, to be fair, following campaigning by A Fair Tax on Flying – which includes airports, airlines, travel, tourism, business and ‘destination’ organisations – the current Chancellor, George Osborne, took some steps to improve matters.
In his Budget earlier this year he announced that from 1 April 2015 the maximum levy on long-haul flights to countries like China, India and Brazil would go down from the current £194 to £142 – good news for UK business people seeking to do deals with these fast-growing economies.
But that is still a long way from good enough. If it had a more competitive tax regime the UK aviation sector could do so much more to develop trade, support tourism and attract inward investment.
So, Mr Osborne, why not take the opportunity of your Autumn Statement to give us an APD 20th Anniversary present? Even a small step would be better than nothing.
The government says its tax policies are family-friendly, and that it will be focusing on policies which can improve family life, as we approach the forthcoming general election. Well you have a great opportunity to demonstrate that. Scrap APD on flights for children under the age of 12.
According to the Treasury, you would forego about £50 million in Treasury revenues in the short-term, but it would be helping to make an annual holiday more affordable for all of those hard working families who are exactly the people that this government says it wants to help.
After 20 years, it is clear that APD has overstayed its use. It’s now time for fairer tax on flying, which will not only help UK plc and its connectivity, but will also help hard working people looking to take a break or visit family and friends in the UK and around the world.