As part of the autumn budget announcement, chancellor Philip Hammond said he would freeze all short-haul air passenger duty (APD) rates and those on long-haul economy fares, but rates for premium economy, business and first class tickets will increase by £16.
The news is a blow to the airlines, airports and travel companies that have been calling on the government to reduce APD by as much as half in order to protect the UK as a competitive travel market when Brexit takes place in March 2019.
Short-haul APD will remain frozen at £13 for economy and £26 for all other classes for 2019-2020, while the long-haul economy tax will be frozen at £78. Business and first-class passengers will suffer more from Hammond’s changes, with APD increasing by £16 from April 2019, a huge jump from the £6 rise they face in April 2018. That means premium long-haul seats will be taxed £172 starting in 2019.
Those using private aviation face an even harsher blow, with a £47 increase from 2019, bringing the total tax paid on private jet seats to £515.
The UK travel industry is already lashing out against the decision, with many saying it will have a severe impact on the country’s competitiveness in international markets.
Gareth Morgan, political lobyist, director at Cavendish Communications and regular BBT columnist, said: “On one hand we have Brexit enthusiasts lecturing UK business that it has become flabby, too comfortable in the EU and failing to look at faster growing markets beyond, and then a government that is increasing the taxes on those seeking to fly to those markets and do business. It makes no sense unless the government is gambling that this is a revenue raiser that business will whinge about but will ultimately absorb. Business will suck it up, but what it will also mean is that some will simply postpone that additional trip to the USA or India that they were planning and that will have a knock-on effect for the deals and jobs that would have followed.”
Glyn Jones, CEO of Stobart Aviation, said the news is especially disappointing for smaller airports such as Southend. “Smaller airports need help to compete on a level playing field, particularly with Brexit around the corner.
“Smaller airports need a reasonable return on the significant capital that is invariably invested. It’s not difficult to see what the result of increasing costs and falling demand due to Brexit could have on these businesses. An APD reduction would help address the capacity crisis, particularly in the south east, which so often exacerbates the delays passengers face.”
Meanwhile, Flybe commented: “We are disappointed that the chancellor has once again missed the opportunity to lower Air Passenger Duty. The UK's APD is among the highest in the world and it is a highly damaging tax which penalises domestic travellers. Reducing APD and supporting domestic aviation would have been in line with the government's stated aim of spreading economic growth more evenly across the UK – this is sadly another missed opportunity to act.”
Jason Geall, VP of Northern Europe at American Express Global Business Travel, said: “We are extremely disappointed by the chancellor’s decision to increase APD on long-haul business travel. On one hand the government talks about forging new trade relationships with non-EU marketplaces, while on the other it increases the cost for businesses to travel and trade. What was initially introduced as an environmental tax has become a stealth tax on trade. This is a massively shortsighted decision made by a chancellor who purports to be pro-business. Much has been said about the post-Brexit UK being an outward-facing, export-led economy; but these words must be matched by action on airport expansion in the South East, improving transport links to regional airports and the removal of APD.”
Alan Wardle, director of public affairs at ABTA, commented: “We recognise there were tough decisions for the government in this budget and freezing APD for leisure travellers is a welcome step forward. However, we believe this is a missed opportunity to decisively cut this tax. We will continue to have the highest levels of APD in Europe and amongst the highest in the world. We will continue to push for a substantial cut, which will help travellers and ensure the UK is well placed to trade with the rest of the world post Brexit.”
Adrian Parkes, CEO of the GTMC, added: “The announcement of a £1.7 billion Transforming Cities Fund to upgrade regional infrastructure and deliver local transport priorities is welcome news. Businesses outside of London and the south east will reap the benefits of this increased regional investment, which will help realise their ambitions for growth. Businesses UK-wide will be further supported by increased investment in 5G mobile networks, fibre broadband and AI, and the plans to improve mobile communications for rail passengers.
“Whilst this is encouraging to see, it is disappointing that the chancellor has taken a more short-sighted stance on APD with increases to the rates applied to premium economy and business class. For the UK to be a lead player on the global stage, UK businesses should be encouraged to travel longer distances to emerging markets. Increasing the standard and higher rates of APD on long-haul builds a very real barrier to business travel and will only serve to discourage UK businesses from developing international trade deals further afield. Duty of care and the wellbeing of employees are high on the agenda of many UK businesses when travelling long distances to secure new deals and economic value for the UK. The government needs to strike a fairer balance in supporting the growth of the UK economy both at home and abroad and should be encouraging trade development, not penalising businesses for travelling to develop new markets and win new customers globally.”