Budget 2012: Chancellor accused of putting ‘reckless brake on economy’

The Chancellor’s decision to push ahead with the double inflation increase in Air Passenger Duty (APD) in today’s budget has been branded as "a reckless brake on the economy" by the Board of Airline Representatives in the UK (BAR UK).

The organisation, representing over 80 airlines, said George Osborne has ignored widespread opposition to the tax, while ABTA described the Chancellor’s decision to stick with an 8% rise in APD on April 1 as "incredibly disappointing".

Airlines said Civil Aviation Authority figures showed UK passenger number were the same as in 2004, suggesting that the tax was suppressing growth.

In a joint statement, the heads of British Airways, easyJet and Virgin Atlantic said: "At a time when the Government talks about creating jobs and growth, its blinkered insistence on further increases in APD achieves precisely the opposite.

"Youth unemployment is at record levels. Inbound tourism is a major employer of young people, but international visitors are being turned off the UK because of the exorbitant level of APD – which is by far the highest air travel tax in the world.

"Yet again, the Treasury is pressing ahead with further rises without any analysis of their effect on the wider economy. In the absence of such a study, we must assume that the Treasury knows it cannot justify this job-destroying tax in overall economic terms. APD must be scrapped."

BAR UK chief executive Mike Carrivick added: "It is a day-dream to assume that air travellers will continue to pay increased air taxes without shrinking the market.

"Hitting families and businesses with ever-increasing APD rates and restricting much needed capacity increases at key airports is a recipe for failure."

However, families should have more cash in their pockets following the announcement today that the personal tax allowance is increasing to £9.205 – giving an individual an extra £220 a year – and that parents earning up to £50,000 will be allowed to keep claiming child benefit, which will then gradually withdrawn for higher earners.

Russell Eisen, tax director at travel accountants Elman Wall, said that on the whole the Budget was "good news" for travel businesses.

Travel firms will benefit from the 1% reduction in corporate tax, also announced today, and the taxation system is to be simplified for very small businesses with a turnover of up to £77,000, who will be taxed on the amount of cash passing through their businesses rather than more complicated methods used for larger firms.

Also, the Chancellor hinted there was a possibility research and development allowances would be enhanced, which would help businesses investing in websites and reservations systems. "Much rhetoric but, as ever, we’ll need to see the detail over the next few days," said Eisen.

Osborne also acknowledged the need for more airport capacity in the southeast of England to avoid Britain being "left behind by China, Brazil and India." He said a report on airport capacity would be published this summer.

Virgin Atlantic chief executive Steve Ridgway responded, saying: "The Chancellor has said this is an unashamedly pro-business Budget. To ensure the UK plc. is not left behind the rest of the world, the Government must confront the lack of airport capacity in the south east. We look forward to an urgent and open debate with Government on all options, which must include Heathrow."

By Linsey McNeill