THE BLOG

Sky High Tax on Flying To Soar Further

21/03/2013 15:25 GMT | Updated 20/05/2013 10:12 BST

Disappointingly, but not unsurprisingly, yesterday the Chancellor stuck to his short-sighted plans to increase the UK's Air Passenger Duty (APD) for yet another year. It flies in the face of new evidence from PwC pointing to the economic benefits of abolishing APD, and the World Economic Forum Report published just two weeks ago which highlights how uncompetitive passenger taxes have made Britain.

Of course you'd expect someone who represents the UK's airlines to oppose today's rises. However, opposition to APD goes much wider than just the aviation industry. In the last eight months 100 MPs have called on the Chancellor to undertake a Treasury-led review of APD, backed by many of the Chancellor's own Conservative backbenchers. It's incredibly disappointing that he has refused to listen to them. Last month the chairman of the Conservative's influential 1922 Committee went as far as to call for the abolition of APD.

So what is the new evidence that points to the need for urgent Government action on APD? The PwC's review published in February outlined significant economic benefits to abolition. It is estimated that almost 60,000 jobs could be created between now and 2020, and according to the report, would most likely lead to a net revenue gain for the Government, raising a £500 million in extra tax receipts in each of the first two fiscal years. This month, the World Economic Forum (WEF) report found that the UK is now officially one of the world's least competitive countries when it comes to the ticket taxes levied on passengers. The report ranks the UK 139 out of 140 countries for flight tax competitiveness based on 'ticket taxes and airport charges'. MPs Brian Donohoe and Paul Goggins penned an interesting joint article on this last week.

Yesterday's decision cements the UK's APD in pole position as the country with the world's highest air passenger tax. We've already seen the commercial damage this has done to the aviation industry: Air Asia X ceased their route from Gatwick to Kuala Lumpur specifically because of the rising levels of APD, and Southampton, Glasgow Prestwick and Bristol Airports are just among the many which have lost routes because of the high level at which the tax is levied.

With such a significant and direct impact on the sector, the apparent intransigence of the Department for Transport is almost as disappointing as today's APD rises. Last month, the Secretary of State for Transport Patrick McLoughlin MP said "it's not something I'm going to express a view on": I for one hope his department does take a view on APD given the evident damage it is having on the transport sector, not to mention the wider economy.

Businesses, airlines and ordinary passengers will continue to suffer when the new rises come into force on April 1st. Surely, the Chancellor cannot continue to ignore the overwhelming evidence about the damage this tax is doing? I urge the Government to look at the new evidence, listen to the hundreds of thousands of people who have contacted both the Government and MPs on the issue and take action. The status quo of year-on-year rises is not sustainable.