PLANS to freeze an unfair tax on the region’s air travel have emerged amid mounting pressure on the Government to scrap it completely.
Chancellor George Osborne is expected to announce the freezing of Air Passenger Duty (APD) in tomorrow’s Budget.
APD has long been pinpointed as a significant constraint on the North East economy.
The Chancellor is expected to use the tax to trim the cost of holidays abroad as soaring oil prices, in the wake of Middle East unrest, have raised concerns over the impact on the UK’s tourism industry.
However, business leaders from the region said the freeze was not enough and called for the tax to be scrapped completely, or reformed.
Lobbyists against the tax have taken up the cause on a national scale, following The Journal’s Tax Too Far initiative – the first campaign against APD launched by any regional paper in the country.
Yesterday opponents of the tax received fresh support as an alliance of 70 international travel firms wrote to the Chancellor criticising the duty as “a burden” on the competitiveness of the UK for meetings, conventions and tourism.
Over recent years aviation leaders from the North East have maintained the duty has held the region back.
Last night Graeme Mason, planning and corporate affairs director at Newcastle International Airport, said: “There is a growing coalition against any further increases in APD, and we have made a case for the reduction from regional airports. It is now a case of wait and see.”
The proposed freeze on APD is expected to cost the Government an estimated £150m a year. However, business leaders have said the benefit to the economy would far outweigh that.
The duty goes up in line with inflation each November, and research has shown, when coupled with rate rises, the duty has increased by 2,600% since it was first introduced in 1994.
The move comes in the same month Ireland scrapped its own version of APD to protect passenger numbers, and conclusive evidence emerged from the Netherlands of the disproportionate impact the levy has on regional airports. Figures show traffic to the country has increased by 4.7% after it abolished its version of APD in 2009.
Significantly, passenger numbers soared by 20% at regional airports Eindhoven and Maastricht, showing the potential benefit removing the tax could have for destinations such as Newcastle International Airport.
The UK has the highest rate of APD of any country in Europe.
Mark Stephenson, policy adviser at the North East Chamber of Commerce (NECC), said: “NECC has repeatedly called on the Government to reform APD because it places extra burdens on businesses, in particular exporters.
“Reforming the way APD is levied will help the Government to rebalance wealth creation around the UK, in particular by stimulating private sector growth in regions such as the North East.
“We will wait with bated breath to see whether or not the Government addresses APD and delivers on its promise to help rebalance the economy, protecting net importing areas such as the North East in the process.”
The measure expected to be unveiled by Mr Osborne could save a family of four around £4 on a trip to a European destination or as much as £36 on a long-haul flight to Australia.
Higher charges are applied to business and first-class tickets, which is where business leaders say the North East is being hurt.
US-based Business Travel Coalition chairman Kevin Mitchell, who helped organise the letter to Mr Osborne from travel firms, said: “Demand is clearly being impacted by this growing tax burden. If not reversed soon, the UK will acquire a long-term and hard-to-shake image of being too expensive a destination for many business-travel related activities.”
