Gordon Brown is considering an increase in the controversial Air Passenger Duty as part of a big investment in air transport to be unveiled in early December.
A White Paper on air travel is expected at around the same time as the Chancellor's autumn statement. While the White Paper will propose allowing the building of at least one new runway in the south of England - either at Heathrow or Stansted - the Chancellor believes he must increase the tax on air travel to appease the green lobby.
Senior sources say he is in favour of upping Air Passenger Duty, levied on every flight departing from British airports. This ranges from £5 per passenger for European economy travel to £40 per passenger for club class outside Europe. It raises over £800m a year for the Government. The air industry is strongly opposed to the tax. BAA, which runs Heathrow and Stansted, has called for its abolition.
Toby Nichol, a spokesman for easyJet, said it "would scream very loudly" if the duty was increased. "It's a blunt and unfair tax and it hits low-cost airlines the hardest," he said.
The Chancellor is also believed to be in favour of building an extra runway at Heathrow rather than Stan- sted, an option preferred by Tony Blair. The Prime Minister feels there would be less political fallout from an expansion of Stansted, while Mr Brown has looked at the economics and believes the economy would be at least £16bn better off if the expansion was at Heathrow.