06/12/2012 10:27 GMT | Updated 04/02/2013 05:12 GMT

Treasury Misses an Opportunity to Understand Flight Tax's Impacts

The past 24 hours have been dominated by media and political response to the Chancellor's Autumn Statement. This time last year, air passengers learned of the Government's intention to increase the tax on flights, Air Passenger Duty (APD), by twice the rate of inflation - a rise that gave the UK's air passengers a further lead in remaining the most heavily taxed anywhere in the world. On Wednesday, we learned of the Chancellor's decision to increase APD yet again by a further 2.5%.

For some people this might not seem like an unfair rise given the limited room for fiscal manoeuvre that we know the Chancellor has. But like most things - this is all about context, and that context is fourfold. Firstly, the announced rise occurs against a backdrop of rapidly growing opposition to this tax from families and businesses: 200,000 of whom wrote to their MPs over the summer to register their concern. Secondly, it occurs against the backdrop of an equally important international context: European Governments are recognising the damage that air passenger taxes are having on their own economies and are abandoning or freezing their own taxes. Thirdly, this is a tax the Treasury has already hiked with a 300% rise since 2007. Finally, APD is a brake on economic growth. It makes our goods and services more expensive, puts off foreign tourists and makes holidays abroad more costly for hard working families.

This summer has seen what can only be described as a watershed in the debate on APD. MPs and voters alike have rallied behind calls for the Government to take a new approach. The 200,000 people who - on the back of a major social media campaign by - wrote to MPs all demanding one thing: a Treasury-led impact assessment to establish beyond any doubt the consequences for the UK of our ever spiralling rates of APD. In response 100 MPs publicly backed a review. MPs even held a debate on the subject in the House of Commons. Windsor MP Adam Afriyie's comments were typical when he addressed fellow MPs: "I have received the highest level of communication from my Windsor constituents about the air passenger duty, and that says a lot."

Higher and higher APD is damaging the prospects of recovery. I believe that APD must be frozen until the Treasury commissions an impact assessment. Without such a study it is impossible to know what impact it is having and how a new approach could net more taxes, more visitors for the UK and more people in jobs.

In a recent paper published by the World Travel and Tourism Council, it was estimated that the UK's APD will cost the economy 91,000 jobs and £4.2 billion in additional revenue in 2012 alone - a much greater cost than the £2.9bn predicted for 2012 APD receipts. It is one of many research projects that have been presented to policy-makers but that appear not to be taken seriously by Treasury officials and ministers. At a time when policy-makers have little wriggle room, however, I believe that it is quite possible that a cut in APD could well deliver wider economic gains - but only an impact assessment commissioned by the Treasury itself seems likely to be taken seriously enough to be acted upon. Campaigners are not asking for a blank cheque or a tax cut with obscure promises of 'jam tomorrow', they're asking for a proper evidence-based review of the options.

The Chancellor would do well to look abroad. Just last month the German Government announced that its own air passenger tax would be frozen from January next year - and the German Transport Minister has called for the tax to be scrapped entirely. With passengers able to hop over the Channel to fly from Paris and Amsterdam airports, in particular, to avoid paying APD, there's a danger that growing numbers of passengers will do just that, further damaging the UK's recovery and incentivising passengers to explore ways of minimising their APD hit, especially on long-haul flights.

What's more, APD is already having a direct commercial consequence for UK airlines and airports. Last month, for example, Manx2 announced the suspension of flights to two destinations - a commercial decision partly blamed on the level of APD. The boss of Edinburgh airport meanwhile said recently that APD could cost them one million passengers by 2017. With just five other European countries levying any air passenger tax - and the UK charging by far the highest, the question is what it will take for the Government to listen to the concerns of airlines and airports that are already paying a high price?

As an island nation the UK relies on air travel for many sectors and industries to prosper. We need to be outward looking - encouraging inward investment and tourism. The Autumn Statement's confirmation of a rise is another disincentive to foreign businesses and travellers to visit and do business in the UK. Domestic holidaymakers are similarly penalised: it costs a family of four flying from the UK to the US £260 in Air Passenger Duty; the same family flying from France pays just £38 in equivalent taxes. If the Chancellor wants the UK to be competitive then he needs to look again at flight taxes. Hiking taxes is disappointing but refusing to commission a proper review of the impacts is even more worrying. It signals intent to press on regardless of the consequences and that is something that passengers, airlines, airports and taxpayers alike should be worried about.