A controversial ‘green’ levy that adds hundreds of pounds to family holidays is a simple tax grab on hard-pressed households, the Chancellor has admitted. Air Passenger Duty has been dressed up as an environmental measure designed to discourage air travel. But in a leaked letter, George Osborne says: ‘APD is fundamentally a revenue raising duty and currently raises around £2.5billion per year.’
Last night one senior aviation figure said: ‘The cat is out of the bag with this admission. It’s a tax grab, pure and simple.’
Mr Osborne is expected to announce a rise in APD for 2012 in next month’s autumn statement. At present, a family of four flying economy to Florida pay a total of £240 tax.
APD was introduced by the Tories in 1994 as a straightforward way to raise money but was swiftly rebranded as a ‘green signals’ tax by Labour. The idea was to discourage plane use, but it is loathed by many who have seen it vastly inflate air fares.
Mr Osborne’s admission that the tax, divided into four bands according to the length of flights, is nothing more than a way of raising cash comes in a letter dated August 12 to Olivier Jankovec, director general of the Brussels-based Airports Council International.
The Chancellor says his intention is to ‘improve on the current system’ by simplifying it on ‘a revenue neutral basis’, while extending the tax on business jets. There has been mounting criticism by airlines and consumer groups of Government plans to retain the controversial tax.
Travel expert Bob Atkinson of travelsupermarket.com said: ‘British families are facing pressure on the amounts they pay for their air fares because of increases in flight tax, the forthcoming EU emissions trading scheme and the soaring cost of fuel.’
Willie Walsh, chief executive of British Airways’ parent company, International Airlines Group (IAG), has previously said increasing APD would have ‘a huge negative effect’, accusing ministers of using the air tax to reduce the economic deficit.
Louise Ellman, who chairs the Commons transport select committee, said: ‘There is great ambiguity as to whether the Government is telling us that this is a green tax or a revenue raising tax.’
The Labour MP said that in recent years APD had been modified ‘to provide green signals. Now it’s not clear’.
Mr Osborne has published a consultation document setting out options which could increase APD from the current level of £12 to £16 per person for economy flights of up to 2,000 miles.
That could mean a family of four flying economy to Spain seeing their air tax rise from £48 to £64.
But for many middle-class families who upgrade to ‘premium economy’ or above, the tax would soar from £24 to as much as £32. A family of four would see their air tax increase from £96 to £128.
Currently, passengers who travel between 2,001 and 4,000 miles face a £60 tax in economy, totalling £240 for a family of four heading to Florida.
For journeys of 4,001 to 6,000 miles, such as the west coast of America, the tax is £75 per head in economy. Flights in excess of 6,000 miles, for example to Australia, are taxed at a rate of £85 in economy and £170 in premium economy and above.
Last night Treasury officials acknowledged that the Chancellor’s comments in his leaked letter – describing APD as ‘fundamentally a revenue raising duty’ – represented Government thinking. But they denied the views were ‘secret’ or ambiguous.