MPs Are Waking Up to the Unfairness of Aviation Tax: Will The Chancellor?

I am a realist. The Chancellor will not announce a cut in APD today. But what I would like to see from the Treasury would be a compromise - for him to establish the principle that future Emissions Trading Scheme ticket price rises are offset by reductions in APD.

The Chair of Energy and Climate Committee Tim Yeo MP wrote to the Chancellor last week, to set out his opposition to calls from airlines for Air Passenger Duty (APD) to be scrapped.

He said the Chancellor should stand up to airlines' "self-interested lobbying". He and I come from entirely different sides of the argument over reform of aviation taxes, but it is just possible that there may be some middle ground on which we can meet.

Having been almost unheard of just four years ago, APD is now gaining something of a cult status as one of the UK's least liked indirect (or stealth) taxes.

And there's good reason for this: since 2007, aviation duty on short-haul routes has increased by 140% to EU countries, and for long-haul routes by up to 325%.

According to a new ComRes poll published today, Fuel Duty, VAT and APD are now the UK's least liked taxes.

Now I don't for a second think policy-making should be decided by opinion-polling, but it explains partially why MPs - beyond the core of us with a long-standing interest in aviation - are now coming out publicly against the tax: because many constituents are staring to get vocal on the issue.

In the last six months MPs have received more than 17,500 letters from constituents asking us to take action to stop another rise in APD - which the Chancellor is expected to unveil later today.

While Mr Yeo sees the lobbying as self-interested, I would venture that the views expressed by the airlines are, at the very minimum, shared by many people who see the cost of their family holiday getting increasingly out-of-reach. And I take the view that it should, as the airline bosses urged, be axed.

Now you may not share this position, but I have yet to hear credible case that justifies either the current levels of APD, nor the Government's planned rises over the next five years. Consider that this financial year (April to October 2011), APD receipts have generated £1.6 billion - up over half a billion for the same period in 2009/10 (£1.1bn) - an increase of over 45% in tax take. What's more, the revenue that will be collected by the Treasury in five years time (£3.6bn) is well over 40% what it collects in APD in today's money, making APD one of the fastest growing taxes. The Office for Budget Responsibility even estimates APD will collect more than the bank levy! Whatever way you look at it APD is rising faster than most taxes and raising more revenue than some other taxes which should, in my view, be contributing more to the public finances.

What's more, passengers in 2012 will not just pay higher APD, but will have the additional cost of aviation's introduction into the Emissions Trading Scheme. Now this may be an area that Tim Yeo and I can agree on. If I have read his comments correctly he supports the notion of offsetting rising ETS through cuts in APD. He is quoted as saying that "countries and operators that are complying with EU ETS could be rewarded with a lower level of APD"

I am a realist. The Chancellor will not announce a cut in APD today. But what I would like to see from the Treasury would be a compromise - for him to establish the principle that future Emissions Trading Scheme ticket price rises are offset by reductions in APD. This seems like a fair way to progress. After all, the Government now acknowledges that APD is not a green tax. Just three weeks ago a newspaper leaked a letter from the Chancellor in which he acknowledged that "APD is fundamentally a revenue raising duty". What's more, British passengers already pay the highest aviation tax in Europe. It's not often that I cite member of the Government party in defence of an argument but the Conservative MEP Syed Kamall said recently that the Coalition should "lower taxes at the earliest opportunity to keep our economy growing, and APD should be a priority."

In fact, research published recently showed that Britain's aviation tax is now so high that the Treasury will collect more than twice as much in passenger taxes this year (£2.5bn) than the total of all other European countries combined. There are now just four countries in Europe other than the UK that even charge a flight passenger tax - and those that do levy a fraction of the UK's APD.

Tim Yeo tells the Chancellor that "airlines should not be let off the hook so easily". He is fundamentally missing the point - it is passengers who are paying the ultimate price and it is they whom I represent. He and I are unlikely to agree on much when it comes to APD but I welcome his thoughts about offsetting and I hope that today's announcement has some good news for the millions of people who take to the skies each year.

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