A newly formed lobby group of airline operators, Airlines for Europe (A4E), is calling on the UK government to abolish air passenger duty (APD) in a bid to boost GDP and create new jobs, even though the cost to the Treasury would be £3bn annually
The group, which includes EasyJet, Ryanair, Air France KLM, International Airlines Group (IAG), Norwegian and Lufthansa Group, accounts for more than 60% of Europe’s passenger journeys.
Thomas Reynaert, A4E’s managing director, said: ‘The UK has the highest aviation tax worldwide. This puts it at a competitive disadvantage as other European hubs take traffic and business away from the UK precisely because of APD.
‘Following the vote to leave the European Union every effort should be made to ensure the UK economy improves its competitiveness and secures its position as worldwide trading nation.’
A4E quotes economic analysis by PwC which it says shows that removing APD would boost British GDP by 1.7% and create 61,000 new jobs by 2020.
When the tax was introduced 21 years ago it was planned to raise £330m per year for the Treasury. In 2015, APD raised over £3bn, and the group claims the duty has raised £31bn in nominal terms between its introduction in 1994 and 2015.
Since APD was introduced in 1994, the cost has risen 824% by 2015. The cost of a long haul business class ticket in 2016 includes a £146 APD ‘exit tax’, a rise of 2.8% compared with 2015, when the CPI index rose by only 0.2%. A further rise to £150 will take effect in April 2017.
Reynaert said: ‘The UK spends hundreds of millions of pounds attracting foreign tourists and business people to the country and then charges them up to £146 in tax to return home. To make Britain more attractive, accessible and welcoming to visitors it is best to eliminate this tax.’
A4E points out that the tax rate for short-haul trips in the lowest class of travel has increased by 160%, from £5 to £13 since 1994, while for long-haul trips the tax rate for the lowest class of travel the increase is 630%, from £10 to £73.
The corresponding increases for travel in higher classes have been 420% for short-haul trips (from £5 to £26) and 1,360% for longer-haul trips (from £10 to £146) since 1994.
Scotland this week confirmed legislation to cut APD by 50% as a precursor to getting rid of it entirely. A4E says slashing APD will add €1.3bn (£1.1bn) to the Scottish economy and create 4,000 jobs, according to studies from Edinburgh airport.
The group also points out that after the Irish government abolished its traffic tax in April 2014 the number of Northern Ireland residents flying from Dublin increased by 52% the first year after it scrapped the tax.
