Air tax rise grounded for a year

Next month's inflation-rate rise in the controversial Air Passenger Duty (APD) airport departure tax will be delayed until April 2012, Chancellor George Osborne announced today.

He said the Government would now seek to impose the tax on private jets.

But plans to replace APD with a per-plane tax have been shelved for the time being after Mr Osborne announced that all the options being pursued had turned out to be illegal under international law.

First introduced in 1994, APD has been increased on a regular basis, with a hike last November putting rates up as high as £170 per passenger for those going on the longest flights.

Mr Osborne said the Government was consulting on reform of APD and he cited the difficulties of the current scheme by telling MPs that APD assumed that the Caribbean was further away from the UK than California.

Mike Carrivick, chief executive of the Board of Airline Representatives in the UK, which represents 86 airlines, said: "The Chancellor's decision on APD is a welcome development but does not go far enough.

"The UK travel industry already pays the highest aviation taxes in Europe and the existing APD levels do not take into account the EU Emissions Trading Scheme (EU ETS) which airlines will pay into from January 2012. Other EU countries have reduced or are removing existing taxes prior to the introduction of EU ETS."

He added: "For air travellers to pay twice is wholly unjustified. Collectively, these taxes run contrary to the Government's intention to increase tourism into the UK and will deter many of those wishing to visit the UK for the Olympics and Paralympics in 2012."

Carolyn McCall, chief executive of budget airline easyJet, said: "The decision to tax passengers on private jets is a step in the right direction, as is the decision to postpone any rise in the APD.

"However, the continued omission of transfer passengers from APD undermines what the coalition promised to achieve by replacing it with a fairer, greener per-plane tax.

"By removing this subsidy to foreign transfer passengers, four out of five British travellers would be better off. EasyJet supports the Government's desire to be the 'greenest Government ever' and will continue to campaign in favour of a fundamental review of APD."

Responding to the Budget, easyJet's chief executive, Carolyn McCall, said she welcomed the decision to postpone any rise in APD but said it would have been "fairer" to have turned it into a tax on planes.

On a visit to easyJet's headquarters at Luton Airport last July, Prime Minister David Cameron said he thought it was "right to tax planes rather than people".

Commenting on today's Budget, Mrs McCall said: "The decision to tax passengers on private jets is a step in the right direction, as is the decision to postpone any rise in the Air Passenger Duty.

"However, the continued omission of transfer passengers from APD undermines what the coalition promised to achieve by replacing it with a fairer, greener per plane tax.

"By removing this subsidy to foreign transfer passengers, four out of five British travellers would be better off.

"EasyJet supports the Government's desire to be the 'greenest Government ever' and will continue to campaign in favour of a fundamental review of APD."

Virgin Atlantic Airways chief commercial officer Julie Southern said she was pleased with the APD freeze but added that Britain still had extremely high air taxation compared with many other countries.

Simon Buck, chief executive of the British Air Transport Association, said APD should be reduced "to help boost Britain's economic recovery", while Airport Operators Association chief executive Darren Caplan said Mr Osborne should "emulate the decisions of European competitor nations and reduce or abolish APD in the UK".

Manny Fontenla-Novoa, chief executive of the Thomas Cook Group holiday company, said: "APD is a phoney tax under the pretence of being green. The Government should have had the courage to revise this stealth tax so that British people do not have to continue to face unfair taxes on their hard-earned holidays."

Friends of the Earth transport campaigner Richard Dyer said the APD freeze was "very disappointing".

He went on: "Aviation is a major contributor to climate change but it gets off lightly by not paying fuel tax or VAT."