THE BLOG

Help Boost Jobs and Growth in the Budget: Cancel the Planned Increases in Air Passenger Duty

14/03/2013 11:23 GMT | Updated 13/05/2013 10:12 BST

As Chief Executive of the Airport Operators Association I spend a lot of time talking and listening to politicians and civil servants across Whitehall.

What has struck me forcibly in recent weeks is that, almost whatever the subject of the meeting, the mantra is the same. Again and again I am told: "we have to prioritise jobs and growth" and often the next sentence is "we have to find ways of getting new spending on infrastructure".

With the UK teetering on the brink of a triple dip recession, perhaps that is not surprising - but what I do find surprising and disappointing is the reluctance of the Chancellor, George Osborne, to take one action that would undoubtedly boost jobs and growth, with all the additional spending coming from the private sector. When he gets up to deliver his Budget next Wednesday, the Chancellor could use just ten words that would start to get us on the right path: "I have decided to cancel the planned increase in Air Passenger Duty".

By taking that simple step, Mr Osborne would send a powerful signal that he understands the damage that regular increases in this duty are having on the aviation sector and now appreciates how much the UK economy would benefit from a change of course in this area. Such a move would have support across the political spectrum, as well as public backing too. Last year, as part of the A Fair Tax on Flying campaign coalition (www.afairtaxonflying.org) - of which the AOA is key member - 200,000 people wrote to their local MP, urging the Government to look in to the high levels of Air Passenger Duty (APD); and a further 100,000 travellers from overseas wrote to the Chancellor direct, to air their feelings on this.

With a more competitive tax regime, the aviation sector would play an even more prominent role in developing trade, both with existing markets and - especially important - with emerging markets such as China and India too, supporting tourism and attracting inward investment. Crucially, fairer aviation tax would help to ensure that the UK stop losing key routes, as airlines realise that the Government is putting an end to the self-inflicted wounds that come from the eye-wateringly high and ever-spiralling levels of APD.

There is mounting evidence of the damage APD is doing. Last week's World Economic Forum survey shows that the UK has become one of the least competitive countries in the world for ticket taxes and airport charges (only Chad was placed lower), below countries such as Senegal and Mali. Absolutely central to this is that, with APD, the UK holds the record for the world's highest flight tax.

The duty has increased between 160% and 360% (depending on flight distance) in the UK since 2007 and its top rate is already 8.5 times the average of those other countries in Europe which still levy a charge. Holland, Belgium, and Denmark have all abandoned their aviation taxes, citing the negative effects on their economies. Over here, Price Waterhouse Coopers (PwC) recently released a report which - using UK Treasury modelling techniques - shows how lower APD can actually result in more tax revenues being produced thanks to the additional economic activity stimulated.

So my message to Mr Osborne is clear: take a first step to boost jobs and growth next week by cancelling any planned increases in APD until the Treasury has conducted its own independent economic study into the overall effects of the duty on the economy. We are confident that, as with the PwC Report, such a Treasury study would show that a more competitive rate would quickly help to deliver some much-needed good news for the UK on the economy, jobs and growth.