The government is expecting to take in less money from air passenger duty over the next five years despite continuing to increase the tax.
Forecasts had shown that the Treasury was expected to bring in £19.3 billion from APD between 2011-12 and 2016-17 but last week the independent Office of Budget Responsibility (OBR) downgraded this to £18.4 million – a reduction of £900 million.
Campaigners against APD, including the Fair Tax on Flying alliance, said this reduced forecast showed the damage that the tax was continuing to have on passenger numbers and the wider UK economy. UK air passenger numbers had been forecast to be 628.4 million during the five-year period but this has now been revised downwards to 618.3 million – a reduction of 10.1 million.
Chancellor George Osborne confirmed in his autumn statement last week that APD would go up by 2.5 per cent from April 2013 – on top of the 8 per cent rise in April this year. The treasury also plans to increase APD further in 2014 and during the following years.
Simon Buck, chief executive of BATA, said: “While recognising the Chancellor’s need to address the fiscal deficit, we are particularly concerned at the ever increasing rate of APD in terms of its impact on jobs and on the British airline industry.
“Our continental competitors have recognised the damage high taxes on flying can cause to their economies and have reduced or scrapped their taxes accordingly.”
The travel industry is continuing to call for an independent review into the economic impact of APD which MPs in the House of Commons have also voted for. But these calls have so far been resisted by the Treasury.
Dale Keller, Chief Executive of the Board of Airline Representatives in the UK (BAR UK), added: “As passenger numbers decrease, foreign airlines will start looking towards other European airports to expand their business.
“The chancellor said that he wants to reaffirm the message that ‘Britain is open for business’. The government needs to recognise the damaging impact APD is having on attracting tourists and investment, instead they are bringing the shutters down on UK competitiveness.”