11 December 2012

No change for Airport Passenger Duty, it’s going up.

George Osborne confirmed in the Autumn Statement that increases to APD proposed in the Budget would go ahead despite warnings it could damage tourism and the ec

George Osborne chose to ignore pressure from British Airways, Easyjet, Ryanair and Virgin Atlantic to axe Airport Passenger Duty and confirmed the planned rise for April 2013 in his Autumn Statement.

The tax, introduced in 1994 by Ken Clarke has risen from it's original £5 for a short-haul and £10 flight to the current £13. The duty will not be increased in 2013 for short-haul flights and increases on the other bands are a modest £2. The main issue seems to be around the longer haul band rates which are considerably higher.

The tax was originally introduced in 1994 by Ken Clarke who felt the airlines were under taxed, not having to pay duty on fuel and VAT on any other function of running an aircraft. The original rate was £5 per person for a short haul flight, £10 for any other flight. The 2008 budget increased the complexity of the tax by introducing 4 distance bands and separate pricing by class of travel. Any higher class of travel currently doubles the tax payable from that of economy. The 2013 changes also add a higher rate for those with private luxury jets which is 4 times the economy rate.

The economy class rates are shown below:

| | Destination examples | 2012 rate | 2013 rate | || | Band A (up to 2000 miles) | Europe, Turkey, Tunisia, Canaries, also Iceland, Ukraine, Libya, Russia (Moscow) | £13.00 | £13.00 | | Band B (2001-4000) | USA, Canada, Egypt, Bermuda, Dubai, Israel, Russia (East of Urals) | £65.00 | £67.00 | | Band C (4001-6000) | Mexico, Barbados, BVI, Brazil, South Africa, Thailand, Vietnam, Zambia | £81.00 | £83.00 | | Band D (over 6000) | New Zealand, Australia | £92.00 | £94.00 |

The tax already brought in revenues of £2.6bn in 2011/12 and the Office of Budget Responsibility forecast that APD would generate £3.8bn by 2016/17.

The airlines argue against increases in the tax saying there were 7.4 million fewer passengers in the UK in 2010 while European airports handled over 66 million more. They say the higher taxes are damaging the UK's role as a transport hub. Air Asia X cited APD as the reason it chose the Paris airport Charles de Gaulle instead of Manchester for a new route to Kuala Lumpur.

According to Nick Barton, managing director of Stansted Airport: "The UK is now only one of six European countries still imposing this tax and we charge twice the amount of the next most expensive country, Germany.”

It looks unlikely that APD will be reduced any time soon though the subject was debated in the Commons on 1st November and a motion calling for a comprehensive review of APD was passed unanimously.

The difference between the current and next years rates of duty and can easily be covered by shopping around and comparing travel insurance. Don't forget to declare any pre-existing medical conditions as failure to declare a pre-existing condition will invalidate your insurance and insurers do check when you make a claim. We also have specialist pages covering pre-existing-medical-conditions-travel insurance.