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2014 Budget: APD cut a backward step economically and environmentally

The AEF was surprised by the announcement in the Budget Statement[1] that Air Passenger Duty (APD) on long haul flights over 4000 miles will be reduced from 1st April 2015[2].

Distance bands C and D will be merged with band B, lowering the tax on all these longer flights to the band B rate. Using existing 2013 rates, this means all flights over 2000 miles will pay the band B rate starting at £67 for an economy ticket, irrespective of distance, instead of the current £83 (for band C flights over 4000 miles) and £94 (for band D flights over 6000 miles).

The Treasury estimates that this will reduce projected APD revenue by around £0.25billion by 2018, although overall, APD revenue will continue to rise due in part to confirmation in the Budget that Bands A and B will increase in line with the Retail Price Index (RPI).

AEF Director Tim Johnson said: “This is a backward step environmentally and economically.  Aviation is already massively under-taxed compared with the £10 billion that would be raised per annum if aviation wasn’t exempted from fuel taxes and VAT. APD was a means of redressing this problem but any cut  means that taxes will have to be raised elsewhere to balance government spending and maintain public services.

The banding distance also provided a link with environmental impacts. The current banding system, while not perfect, helped to reinforce this link.

Tim said “Long-haul flights contribute more greenhouse gases in absolute terms than shorter flights. It is therefore right that the duty is proportional to the distance flown and the associated emissions. Eliminating bands C and D breaks the link between environmental impacts and tax and breaches the principle of fairness.”

The Government claims that the tax cut will help business and trade but there is no evidence to substantiate this. AEF does not accept that a marginal reduction on the overall cost will provide any additional incentive:  it is highly unlikely that a senior business person, needing to fly to negotiate a multi-million pound deal, would be put off by a £30 tax differential.

–ENDS–


Contact

Tim Johnson 0207 248 2223, mob 07710 381742

The Aviation Environment Federation is a UK based organisation working to ensure that aviation takes full account of its social and environmental impacts.

Notes

1. Budget 2014 is available online: https://www.gov.uk/government/publications/budget-2014-documents. references to APD are found in paragraphs 2.160and 2.161

2. There are currently 4 bands with APD on seats in the lowest class charged as follows (for 2013):

Band A : up to 2,000 km – £13
Band B: 2001 to 4,000 km – £67
Band C: 4001 to 6,000 km – £83
Band D: over 6,000 km – £94