Many of my constituents have contacted me in recent weeks, with regards to Air Passenger Duty and Early Day Motion 174. This is my response:
Ministers do not, by convention, sign any Early Day Motions as doing so is likely to breach the Ministerial Code’s rules on collective responsibility. However, the Government recognises that recent economic conditions have been difficult for everyone and that is why it is taking action to help. As a result of the Government’s actions on personal allowances, basic rate taxpayers will gain by £210 a year in real terms in 2012-13. In addition, the recent decision to defer the August fuel duty increase to January next year, along with the action taken at Budget 2011 and the Autumn Statement, means that pump prices in the UK are now 10 pence per litre lower than they would have been under the previous government’s fuel duty plans.
The Government also appreciates the valuable role that aviation plays in enabling tourism, connecting consumers and businesses with international markets, and making long distance visits between friends and relatives possible. Whilst the recent economic environment has been challenging, we hope that the recent increase in passenger numbers will see UK airlines prosper.
The real terms increases in APD were legislated for by previous Governments. Since June 2010, despite the challenge of the budget deficit that we inherited, the Government has only legislated for increases in line with inflation. The rates rise in April 2012 does no more than maintain revenues from the duty in line with inflation over the two year period since 2010. For the majority of passengers – those flying to Band A (Europe) in economy class – APD rates have only increased by £1.
We have also sought to provide airlines and passengers with extra clarity on future rates, which should help everyone concerned. Hence Budget 2012 set out APD rates for 2013-14, and again the rise is limited to no more than RPI inflation. The real burden of APD will therefore remain unchanged for a further year.
It is also important to understand that Ministers have to strike the right balance on taxes, and that maintaining APD revenues is necessary if the Government is to meet its overall revenue forecasts and stay on course with its deficit reduction plans.
When looking at an international comparison, unlike many other countries, the UK does not levy VAT on domestic flights. More generally, in any comparison, it is important to look at the tax picture as a whole. The UK compares favourably in international comparisons of the tax burden on consumers.
The Government is also firmly committed to ensuring aviation in the UK remains affordable and will continue to monitor the situation to ensure the industry is able to compete in international markets.