Travel and aviation leaders slam Budget APD increase

Aviation, corporate travel and tourism leaders have roundly condemned Chancellor Jeremy Hunt’s announcement of a one-off increase in Air Passenger Duty (APD) on non-economy flights in today’s Budget.

The Chancellor announced the increase in his Budget address to MPs without giving details, but Treasury documents show APD rates will rise as expected this April, with one-off increase in premium and business-class rates only from April 2025.

Clive Wratten, chief executive of the Business Travel Association (BTA), nonetheless called it “disastrous for the economic welfare and well being of British businesses and their employees.”

MoreChancellor confirms 2p cut in national insurance rate

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He argued: “Contrary to common misconceptions, business travel is not just for the wealthy. This tax will hinder growth for small and medium enterprises through limiting international collaboration opportunities.

“It will hit charities, academics and researchers alongside businesses of all sizes combating rising costs in every area.”

Wratten added: “There is no mechanism for ensuring the monies from this tax will go into innovation in the airline sector or into Sustainable Aviation Fuels. This is just another tax on British businesses.”

This is just another tax on British businesses

Tim Alderslade, chief executive of Airlines UK which represents UK-registered carriers, said the increase in APD “goes against the Prime Minister’s commitment not to discourage flying through taxation.”

He argued: “Hitting passengers with stealthy tax rises will only make the UK even less competitive on the global stage, with aviation taxes and airport charges already among the highest in the world.”

Alderslade suggested: “The government should instead focus on supporting the industry’s transition to net zero which the US and EU has made billions of pounds of support available for, unlike in Britain.”

Abta chief executive Mark Tanzer noted: “The headline news of a 2p National Insurance cut may put some money back in people’s pockets but [the] total tax take will remain high.”

He insisted: “The increase in Air Passenger Duty on non-economy-class flights must not become the thin end of the wedge.

“Abta’s research shows travel and tourism can grow faster than the rest of the economy over the next few years but only with the right policy framework. Any additional or new taxes on aviation have the potential to be a drag on our sector when the UK already has one of the greatest air travel tax burdens in the world.”

However, the Abta chief welcomed the Chancellor’s extension of the government’s Covid recovery loan scheme which provides access to government-backed finance for SMEs.

He noted: “Abta has been speaking regularly to government about the pressures facing Abta members and we continue to urge the government to work with banks to ensure leniency around repayment timelines to help businesses recover from the pandemic.”

Tanzer added: “We will continue to strongly communicate to both government and opposition parties the importance of our sector in wealth creation, economic contribution, employment and trade.”

Advantage Travel Partnership chief executive Julia Lo Bue-Said, welcomed the cut in national insurance but described the Budget as “otherwise pretty underwhelming”.

She also noted the £200 million extension of the Growth Guarantee Fund “will be welcomed by many travel agents looking to develop their businesses, as well as the threshold increase for VAT”, though she argued: “Businesses are still saddled with loans at high interest rates.”

However, Lo Bue-Said said: “We’re hugely disappointed the Chancellor has once again penalised passengers with a rise in APD for non-economy flights.”

Jacqueline Dobson, president of the Scottish Passenger Agents’ Association (SPAA), described the decision to raise APD as “disappointing”, saying: “This is a short-sighted move that will damage the ongoing recovery of the travel industry and the wider economy, especially in Scotland.”

She noted: “The level of APD is already one of the highest in Europe.

“Business travel is essential for many Scottish businesses. Increasing the cost of flying will make it harder for them to compete globally and attract investment and talent to Scotland.

“It will also discourage high-value inbound visitors who contribute significantly to our hospitality and cultural economies.”

Dobson said: “We urge the UK government to work with the Scottish government and the industry to find a fairer and more sustainable way of taxing aviation.

“We need a system that supports the growth and recovery of the travel sector, while also addressing the environmental impact of flying and encouraging the development of greener technologies and fuels.”

The UK government should not underestimate the importance of leisure travel and the adverse impact this will have

A Virgin Atlantic spokesperson accused the government of “penalising families travelling in premium, as well as business travellers” by raising APD on non-economy fares and said the increase “undermines the competitiveness of the UK economy”.

The spokesperson suggested: “The UK government should not underestimate the importance of leisure travel and the adverse impact this will have.”

Joss Croft, chief executive of the UKinbound association, welcomed the Chancellor’s cut in national insurance and continued freezes on fuel and alcohol duty announced today.

But he hit out at the failure to restore VAT-free shopping for international visitors to the UK, calling it “a huge missed opportunity that would stimulate growth and bring massive and much needed additional export revenue to the UK”.

Richard Toomer, executive director of the Tourism Alliance coalition, suggested: “There was nothing in this Budget to help address the UK’s position as 116th out of 117 price-competitive tourism destinations according to the World Economic Forum.”

He argued: “No restoration of VAT-free shopping means we’ll continue to miss out [as] a shopping destination. Nothing on business rates increases due in April [and] despite high-profile campaigning from many in the industry for a lower VAT rate for hospitality, none was forthcoming.

“Air Passenger Duty will go up on all non-economy tickets – doubling down on a tax which is already the highest in Europe.

“And the abolition of the Furnished Holiday Lets scheme will likely mean a reduction of holiday properties in some key destinations. This will have a knock-on impact on the many local businesses and workers who rely on tourists.”

Karen Dee, chief executive of the Airport Operators Association (AOA), described the rise in APD as “bad news” and the Budget as “a missed opportunity for aviation”.

She said: “It’s disappointing to see the Chancellor increase Air Passenger Duty for business travellers when data show this group is still to recover to 2019 levels.

“It’s difficult to see how this squares with the government’s previous commitment not to increase aviation taxes.”

Dee argued: “Business travellers are responsible for increasing foreign investment in the UK, for opening new markets for our goods and services, and creating jobs across the country. We should be encouraging them to come to the UK.”

She noted the reinstatement of tax-free shopping for international visitors had been “a key recommendation of the aviation sector” and said: “The Chancellor could have sent a strong signal that the UK wants people to visit and spend their money here.

“Tax-free shopping would benefit the whole country, creating jobs, increasing footfall on high streets and boosting the economy.

“However, the UK remains at a competitive disadvantage to our EU neighbours and international travellers will continue to spend their money elsewhere as a result.”

Dee also criticised the Chancellor’s failure to act to reduce business rates, noting most airports will see significant increases in the amount they pay in business rates from 2026 due to a revaluation.

She said: “This is yet another burden on airports at a time when they are still recovering balance sheets from the pandemic and when they are making investments in massive capital projects like next generation security and decarbonisation.”

Ben Edgar-Spier, head of regulation and policy at Sykes Holiday Cottages, slammed the Chancellor’s decision to end tax relief on holiday lets claiming: “Holiday let owners have been unfairly scapegoated in the guise of controlling rising house prices and availability.”

He argued: “Short term rentals are the economic lifeblood of many parts of the UK, driving spending and supporting local businesses.

“It’s illogical to these short-term let businesses over those with empty second homes which contribute nothing to local economies.”

Edgar-Spier suggested: “There are potentially hundreds of factors at play when it comes to housing and rental prices, with nearly 1.4 million empty homes in England or 16 times the number of holiday lets.”

He noted “only 178,000 [new] homes were completed across England last year against a target of 300,000″ and said: “Putting pressure on holiday let owners will not solve the housing crisis but risks impacting businesses that support tourism spend and employment in communities across the country.”

Martin Ferguson, vice president of public affairs at American Express Global Business Travel, suggested that rather than increase APD the Chancellor should use the revenue from it to encourage Sustainable Aviation Fuel production in UK.

He described the APD increase as “hugely disappointing” and said: “The government has broken its vow not to increase taxes that discourage air travel.

“For the government of an island economy, post-Brexit, to make it more expensive for businesses to travel and trade is very short sighted.”

Ian Sinderson, chief executive of travel management company  ATPI, urged the government to stop treating the travel industry as a “bottomless pit of potential taxation” and instead create a more competitive market for airlines and travellers.

“British businesses have faced significant headwinds post-pandemic, leading to a cut in business travel spend and slow business travel industry recovery, which is estimated to make up 1% of the UK’s GDP,” he added. 

“Increasing Air Passenger Duty in the UK for business travellers – which already sees some of the highest APD rates in the world – may force more travellers to opt for economy tickets or forego travelling for business altogether, which would be catastrophic for this recovering industry.”

Murray Burnett, managing director of Scottish TMC Munro’s Travel, said: “The increase will impact the cost of travel for business clients, who rely on international flights to conduct their operations and trade. 

“Some industry experts are estimating that the change will increase long haul business class rates by 12%. This measure may have a negative impact on the competitiveness and productivity of the Scottish economy, especially in the energy sector, which is already facing challenges due to the pandemic, the Brexit transition and with the announcement in the budget that the windfall tax will be extended.

“We would like to see the UK and Scottish governments support the business travel industry, which is vital for the recovery and growth of the UK.

“We hope that the government will listen to the voices of the business travel community and work with us to find a sustainable and balanced solution for aviation that does not penalise our customers and partners.”

Not Just Travel co-founder Steve Witt, responding to the 2p cut in National Insurance, said: “Any move that helps put more money in the pocket of the consumer is a good thing. 

“This will help build confidence and create more disposable income. Given holidays are always in the top three desirable products and spend, it is likely to help boost the travel industry. 

“Measures that raise consumer confidence and spending are always a positive step for the travel industry.”

In an overview of tax legislation issued alongside the Budget, The Treasury said: “The government will legislate in a future finance bill to increase APD rates for 2025 to 2026.

“The reduced rates for economy passengers will increase in line with forecast RPI, rounded to the nearest pound. This means that economy, domestic and shortfall rates will remain frozen.

“The standard and higher rates will also increase by forecast RPI and will also be further adjusted to account for recent high inflation.

“The new rates will apply from 1 April 2025.”

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