Better use of Air Passenger Duty

By Tim Williamson, Director of Marketing & Content Responsible Travel

Air Passenger Duty is very unlikely to ever be reduced and will certainly never be abolished. The travel industry needs to wake up to this and change the message.

Aircraft taking off

Air Passenger Duty (APD) is one of the easiest taxes for the treasury to collect as airlines administer their own payments. APD currently brings in £3bn and is forecast to bring in £4bn by 2021 – see page 58 of the Chancellor’s Autumn Statement from 2016.

The government cannot claim that APD discourages travellers from flying. The last dip in growth was down to the global financial crisis, not tax, and the Civil Aviation Authority’s figures for commercial flights and terminal passengers show strong growth over the last few years. Although credit ratings agencies, such as Moody's, are predicting that Brexit and the weakening pound will halve the growth of air travel from the UK to 3 percent in 2018, it is still growing. The government has only ever reduced APD when there was a significant drop in air travel after 9/11.

What is disappointing about APD is thinking about where it all started, and what it could have been. In 1994 the government introduced APD under the guise of an environmental tax. In reality, it was introduced because the government recognised that aviation was lightly taxed, as aviation fuel was exempt from fuel duty and VAT. In 2011, Friends of the Earth calculated that this tax saving came to as much as £9bn for the industry, making APD look very good value. Worse still; since its introduction, none of the money from APD has ever been ring-fenced or allocated to reduce the environmental impact of flying.

So how about changing the message? The industry should stop calling for the reduction or abolition of APD, which is not going to be something the cash-strapped UK government is going to consider with so much financial uncertainty around the corner. Instead, why not campaign to get at least some of the £3bn allocated to making flying more sustainable? This is surely in the long term interest of the industry and its shareholders, and something that we believe should be at the centre of the government’s new aviation strategy. The fact that airlines, apart from Ryanair, can’t make much money in the short term, cannot be blamed on a single tax. This has much more to do with the ultra low prices caused by too much competition in an over-supplied market.

Aviation is way behind the automotive industry in terms of developing alternative power. The government is incentivises the car industry and drivers to move away from fossil fuels, so shouldn’t some of the APD revenue be used to encourage the airline industry to develop and trial battery powered planes? And as a better incentive still - flights on these aircraft should be exempt from APD.
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