Budget special: Industry reaction to Chancellor’s air tax freeze

Airlines have accused the government of still not listening hard enough to the industry following yesterday’s freeze on air passenger duty by Chancellor George Osborne, delaying the planned rise for a year.

In his Budget speech to the House of Commons, Mr Osborne revealed he plans to launch a consultation into air passenger duty, which he says he is still hoping to replace with a per plane tax in the future.

Mr Osborne said the government had tried every possible option to introduce a per plane tax, but he said they were all illegal under international law. However, he said he would continue a campaign to change the law.

He also revealed he has not ruled out altering the banding system to more accurately reflect distances flown, adding that these would be included in the new consultation.

It will also look at extending air passenger duty to private jets. Mr Osborne said: "The wealthy should not escape a tax that families have to pay when they go on holiday."

The Board of Airline Representatives in the UK, representing 86 airlines, welcomed the Chancellor’s decision to delay any increase to aviation taxes until 2012 but said the Government had not gone far enough.

Chief executive Mike Carrivick said: “The UK travel industry already pays the highest aviation taxes in Europe and the existing APD levels do not take into account the EU Emissions Trading Scheme (EU ETS) which airlines will pay into from January 2012. Other EU countries have reduced or are removing existing taxes prior to the introduction of EU ETS.”

He added “For air travellers to pay twice is wholly unjustified. Collectively, these taxes run contrary to the Government’s intention to increase tourism into the UK and will deter many of those wishing to visit the UK for the Olympics and Paralympics in 2012.

"This unfair tax will further erode the tourism industries of countries abroad, many of which are in developing nations.”

BAR UK is calling on the Chancellor to reduce APD levels once the EU ETS comes into effect.

Virgin Atlantic welcomed the Government’s decision not to proceed at the moment with a per plane tax. Chief commercial officer Julie Southern said: "This would have damaged UK connectivity, its environmental credentials were unsound, and it could have been subject to international legal challenge."

Virgin also hailed the decision to freeze APD as a ‘welcome respite’ for holidaymakers. She added: “Although this move by the Chancellor is a very welcome first step, Britain still has the highest air taxation of all European and G20 countries and APD receipts are forecast to increase by over 1 billion in the next four years.

 “We agree that Air Passenger Duty can be further reformed to increase UK competitiveness whilst delivering the right environmental signals, and we look forward to responding to the consultation on the banding system.”

Post Office Travel Money welcome the review of the tax bands. Head of Travel Money Sarah Munro said: "The planned Air Passenger Duty price band review will be an opportunity to resolve the current anomalies that have put destinations like the Caribbean Islands at a disadvantage.

"However, despite a reported drop in tourism from the UK, Post Office sales suggest that hotel discounting has already played its part in keeping the market for Caribbean holidays resilient. Today’s budget news should boost that confidence further.

 “This year our bureaux de change are reporting an 18 per cent sales rise for the East Caribbean dollar, the currency used in St Lucia and Antigua, compared with the same period in 2010.   A fall of over seven per cent in the value of the EC dollar since last March will also help to put more cash in holidaymakers’ pockets.”

 Business Travel Coalition chairman Kevin Mitchell repeated his call for APD to be reduced to make the UK more competitive. He said: "The current levels of duty still represent a huge problem and they must be radically reduced to bring the UK back into competitive alignment with other countries for meetings, incentive trips and conventions."

Representatives from 70 tourism businesses around the world petitioned the Chancellor earlier this week for a reduction in APD.

"The next order of business is to expand the coalition of concerned parties outside the UK and deepen communications with UK government officials,” added Mitchell.

By Linsey McNeill