The government will not cut APD in the “foreseeable future” because of the UK’s huge financial deficit, according to former transport minister Lord Adonis.
But Labour politician Adonis added that the travel industry has to keep campaigning against the aviation tax otherwise chancellor George Osborne may be tempted to raise the rates of APD to even higher levels.
“With a deficit of £120 billion, anybody who thinks the chancellor will give you a tax holiday is not living in the real world,” Adonis told delegates during a panel discussion at the ITM Conference in Windsor.
“But you are right to keep campaigning so that APD does not increase even faster. The issue is whether it rises faster than inflation. No government is going to cut it in the foreseeable future.”
The treasury introduced its latest increase in APD in April with a further rise set to take effect from April 2014.
Drew Crawley, commercial director for British Airways, said the industry’s battle against APD had not been helped by a “fragmented approach to lobbying”.
“Last year, there was a bill of £2.75 billion from APD,” he said. “We should continue to lobby for its removal although given the political landscape we accept it would be a difficult decision to make.”
The panel, which also included Airplus CEO Ron DiLeo and Tim Daniel from International SOS, was unanimous that APD would remain.
Adonis said that the fact that Heathrow was operating at 99 per cent capacity did not help the industry’s argument that APD was reducing demand for business travel.
“Airlines are clamouring to get into Heathrow so we are not faced with the issue of APD crowding out business travel,” he added.
“The tax has to be paid one way or the other – do people want to have higher income tax instead? Hoping to get a free lunch for this part of the economy is not realistic. People are more concerned about income tax and VAT.
“If you remove £1 billion from APD – would any increase in tourism travel fill the gap in tax terms?”