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Published on Thursday, March 22, 2012

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year - and that parents earning up to £50,000 will be allowed to keep claiming child benefit, which will then gradually withdrawn for higher earners.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


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  • Could airport security be to blame?

    i question this drop in passenger numbers being the entire fault of APD. I am in the travel business yet have to be dragged kicking and screaming to any airport (best option for me is still Stansted, a dream compared to the other airports) I would prefer to drive than take a plane and do so all the way to Greece from time to time. It is a lovely trip staying in hotels, and seeing parts of Europe most people fly over. More and more clients are telling me they dread the trip to the airport and all the aggro involved there, starting with the check in desk, moving onto the security checks then dealing with the flight delays and being forced to accept the only option of over priced drinks and food. There was a time the airport was the start of your holiday, now it is a price you pay to get to your holiday/business destination. You want to encourage more people to fly? Improve people processing and make airports user friendly again! I for one avoid airports and flying like the plague and I am not unique. It has nothing to do with APD

    By Paul Davis, Thursday, March 22, 2012

  • APD

    If this job destroyer and tourist turn-off tax is not reformed, (don't hold your breath), we won't have to worry about extra runway capacity, we won't need it, on the contray, we could board up a couple of airports and leave them to the vandals and wino's.

    By Keith Standen, Thursday, March 22, 2012

  • the brake was applied 10 years ago!

    What brake? That was starting to be applied over 10 years ago by the last government!If you are in business today then be pleased, be happy and get that nose to the grindstone and pedal like hell! What we all have is a great opportunity to come out of this depression (a correct choice of words)that the last idiot in power got us into, both as Chancellor and Prime Minister. So stop moaning and complaining about this budget and be positive about the future because to me anyway it looks great from my perspective, but then I am not T.Cook.

    By Paul Davis, Thursday, March 22, 2012

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