May 28, 2024

Radical APD shake-up in autumn Budget

Air Passenger Duty will be cut on domestic flights but will rise for some key long-haul business routes, including Singapore, Hong Kong and Australia.

As widely anticipated, the radical changes were announced on Wednesday in the Chancellor’s Budget.

Clive Wratten, CEO of the Business Travel Association, said it welcomed the reassessment of domestic APD but added: “The introduction of a new ultra long-haul classification will unfairly impact business travellers at a key point in the recovery of our economy.

“The Government said this was a Budget bringing in a new wave of optimism and yet business travellers will be heavily taxed to go to crucial destinations.

“We are calling on the Government to ring-fence at least 75% of APD for sustainable initiatives to help our sector deliver on its Jet Zero commitments. This must be about building a sustainable future not just grabbing taxes.”

Chancellor Rishi Sunak confirmed a 50% cut in APD on UK domestic flights from April 2023.

At the same time, a new ultra long-haul band will be introduced for flights of more than 5,500 miles.

The new rate will start at £91 per passenger for an economy flight and will be double for passengers flying in business class and premium economy.

The existing long-haul rate on economy flights is due to rise from £82 to £84 per passenger from next April and the premium rate from £180 to £185.

Sunak told MPs: “Less than 5% of passengers will pay more. Those who fly furthest will pay most.”

But ABTA Chief Executive Mark Tanzer said: “With the industry only at the beginning of its recovery, now is not the time to be announcing future tax rises on the sector.

“As it stands, APD is not – and has never been – an environmental tax; the revenues are not hypothecated or used for environmental purposes, such as investing in the development of sustainable aviation fuels, and the tax does not encourage use of newer, cleaner aircraft.

“Looking to the medium and longer term, we are supportive of fundamental reform of APD with the aim of creating fair taxation within the travel industry, which reflects the economic benefits of the sector and recognises the environmental impacts of travel.”

Murray Burnett, Managing Director of Munro’s Travel, specialists in travel management for the energy and marine sectors, said: “The business traveller will be pleased to see a reduction of APD for UK domestic air travel, especially those that fly from regional airports. However, to penalise the long haul business travellers with additional tax is unfair, especially as there are no clear indications that the Government will use the additional ADP tax to help make air travel more sustainable.

“It is a critical period for travellers within the energy industry to visit long-haul destinations such as Houston, Singapore, and Brazil to secure contracts, which will help aid the recovery of our economy.”

Andrew Crawley, Chief Commercial Officer American Express Global Business Travel, said: “APD was supposed to be an environmental tax, yet no money has been ring-fenced for sustainable initiatives.

“The Government needs to get serious by investing the proceeds of APD in the infrastructure we need to support the development of sustainable aviation fuel (SAF).

“Making SAF widely available is the only way to make meaningful progress against our net zero targets. If revenue generated from the new long-haul band is not invested in a sustainable future, it will do nothing except penalise British businesses trying to embrace the government’s own Global Britain initiative.”