Autumn financial statement coming soon – so it is time for the regular industry lobby against APD ….
Airlines are, yet again, trying to put pressure on the Chancellor to cut rates of Air Passenger Duty, so flights are cheaper, more people fly (and the airlines make more money). They do this every time there is a budget or financial statement, with monotonous regularity. The airlines hope to persuade the government that aviation should be virtually untaxed, and always conveniently ignore the reason for APD – that air travel pays no VAT and no fuel duty. The Treasury has reiterated many times that this is the reason APD is charged. More flights are taken by British people spending leisure time abroad, taking cheap flights, than overseas residents flying to the UK. The net effect of further reducing APD would not only be a cut in government revenue, but an even larger UK annual tourism deficit (at £16.9 billion in 2015). APD for the longest flights was reduced in 2015, so any flight of more than 2,000 miles only pays £146. Before that, in 2014, flights over 6,000 miles paid £194. Children also now pay no APD, making holiday flights cheaper for families. Now some 53 MPs have written to Hammond, again calling for a cut in APD – playing the “need to connect Britain to the world” after Brexit card. It is estimated, and not challenged by the government, that the absence of VAT or fuel duty effectively gives the aviation industry an annual subsidy of around £10 billion (compared to the cost of paying VAT and fuel duty).
New rates of APD after 1st April 2015 compared with during 2014: (No changes to APD in the March 2016 Budget)
|Lower (standard) rate||Higher rate|
|2014||From 1.4.2015||From 1.4.2016||2014||From 1.4.2015||From 1.4.2016|
|Band A. 0 – 2000 miles||£13||£13||£13||£26||£26||£26|
|Band B. 2000 – 4000 miles||£69||£71||£73||£138||£142||£146|
|Band C. 4000 – 6000 miles||£85||£71||£73||£170||£142||£146|
|Band D. Over 6000 miles||£97||£71||£73||£194||£142||£146|
The Treasury view of APD
The airlines and the aviation industry try to give the impression that APD is an iniquitous and deeply unfair tax on those who fly.
The reality is different. It is charged because there is no VAT or fuel duty charged on flying, unlike on almost every other sector.
Below are some quotes from the Treasury, showing that they regard APD as fair, and necessary. They reiterate why they charge APD.
1. 9.6.2015 in response to demands by airlines for an APD cut:
“The Government has also helped them by cutting corporation tax rate to 20% – the lowest in the G20 (group of leading world economies) – saving businesses £9.5 billion a year from 2016.”
2. Page 10 of Treasury document “Reform of Air Passenger Duty: December 2011- response to consultation”
3. Treasury comment on the PwC report commissioned by the airlines in 2013:
The FT reports that a Treasury spokesperson said APD, which is forecast to bring in £2.9bn this year, makes an “essential contribution” towards helping meet the government’s deficit reduction plans. “We do not recognise the figures in this report or agree with the assumptions behind it,” the Treasury said. (see link)
The British Air Transport Association (BATA) press release:
Airlines urge the Government to use the Autumn Statement to remove Air Passenger Duty on air travel from UK airports.
November 10, 2016
Tories tell Hammond: cut fuel duty
By Tim Shipman and James Lyons (The Times)
November 13 2016
More than 50 Tory MPs — including six members of Theresa May’s government — are demanding a cut in fuel duty in the autumn statement.
Philip Hammond, the chancellor, has received a letter from 53 MPs calling for a cut amid claims that petrol giants are continuing to rip off motorists. They claim a 4p drop in wholesale prices has not been passed on in lower pump prices, costing consumers more than £80m. A litre of unleaded is nearing £1.20.
The MPs are calling on ministers to set up a new “pumpwatch” group to ensure that falls in the oil price and wholesale petrol prices are passed on to motorists. Crucially they have the support of six ministerial aides, who have asked not to be named, but are counted as members of the government payroll vote.
Between October 10 and November 10, the price of oil dropped nearly 15% and the price of wholesale petrol dropped by more than 5%, but petrol at the pumps rose by more than 3%, adding more than 3p a litre to the cost of unleaded fuel.
Fuel duty was frozen for the sixth year in a row in March’s budget but Charlie Elphicke, the MP who chairs the Commons all-party group on fair fuel and who co-ordinated the letter, said it was time for a cut: “The fuel duty freeze has been of real benefit to the UK economy. But it’s clear that cutting fuel duty would be an even bigger boost to hardworking families and small businesses.
“We must build a Brexit Britain that works for every family, every small firm and every driver. A Britain that works for everyone must include a fair deal on fuel prices. While fuel tax accounts for two-thirds of what we pay at the pumps, pricing transparency is also a matter of grave concern to drivers. People feel deeply that prices rise like a rocket and fall like a feather as oil prices fluctuate.
“Commercial operators in the fuel supply chain continue to go unpoliced as to how oil price changes impact on what we pay at the pumps. Falling oil and published wholesale prices are not being passed onto consumers.”
Quentin Willson, the TV motoring journalist and lead campaigner for FairFuelUK, said: “We shouldn’t allow fuel retailers to make opportunistic profits. No other country burdens business transport like this. It’s time the government talked less about cyclists and more about the tens of millions of drivers who literally drive the economy.”
Hammond will use what aides describe as a low-key autumn statement on November 23 to reinforce May’s claims that she will create a country that works for everyone. Insiders say his statement will be unlike those of his predecessor, George Osborne, who used the autumn statement as a second budget each year. However, they say Hammond shares Osborne’s concern for the motorist.
Meanwhile, May has turned official Downing Street dinners into date nights for leading business figures by inviting along their partners in an attempt to win City support for her new industrial strategy, due to be unveiled this month.
Jayne-Anne Gadhia, chief executive of Virgin Money, attended one of the first dinners held by the Mays and said it had a different atmosphere from those she went to with David Cameron. Gadhia’s husband Ash was overseas on business but she said: “I thought it was great. About half of people there did take their partners and that is really different.”
UK’s top airline bosses urge Philip Hammond to abolish tax on FLIGHTS
BRITAIN’S top airline bosses today join forces to urge Philip Hammond to abolish the passenger tax on flights.
By CAROLINE WHEELER AND CAMILLA TOMINEY (Express)
Nov 6, 2016
They say this would send a clear message to the world that the “UK is open for business”.
In an open letter to the Chancellor the chief executive officers from three of the country’s biggest airlines have called on him to scrap air passenger duty to help Britain boom after Brexit.
With less than three weeks to go until Mr Hammond delivers his first autumn statement as Chancellor, Willie Walsh, the boss of British Airways’ parent company IAG, has teamed up with Craig Kreeger from Virgin, Peter Fankhauser from Thomas Cook and Tim Alderslade from the British Air Transport Association to make the demand.
They claim axing the despised tax will increase Britain’s international competitiveness, while boosting tourism and making foreign holidays cheaper for millions of families.
Detailed economic analysis conducted by PricewaterhouseCoopers has shown that abolishing the tax would boost UK GDP by 1.7% and create 61,000 new jobs by 2020.
Abolition would pay for itself by raising revenue from other taxes such as corporation tax as well improve the spending power of tourists visiting the UK. [Heathrow and Gatwick pay almost no Corporation Tax. AW note]
It is less than three weeks until Mr Hammond delivers his first autumn statement as
Scottish First Minster Nicola Sturgeon is set halve air passenger duty between 2018 and 2021 in a bid to boost business – adding pressure on the Chancellor to follow suit.
Anyone thinking about coming to the UK long-haul on an economy fare has to pay £73 on top of the cost of their ticket.
For passengers flying business class, this figure rises to £146.
Our European neighbours pay an extra £13 for every visit to the UK, and those travelling between two UK cities will pay twice, £26 for both journeys – as APD is a departure tax levied on passengers travelling from a UK airport.
APD in the UK is more than three times the rate in France and more than twice that of Germany.
The UK sits 137th out of 138 countries with respect to air taxes and airport charges.
Nicola Sturgeon is set halve air passenger duty between 2018 and 2021
The open letter adds: “For any country, let alone an island, trading nation, a high level of air connectivity is critical for a thriving economy.
“Only aviation can connect the UK to the emerging markets that are seen as vital to our continued prosperity, and which enable holidaymakers to enjoy a well-earned family holiday, both within Europe and further afield.
“So why does the Government maintain, and regularly raise, a barrier to travel to and from the UK?”
The tax has increased by 824% between 1994 and 2015.
At the same time, competitors have been reducing or abolishing their equivalent air taxes.
The Treasury said: “We keep all taxes under review.”