There is no defence for air passenger duty; it is a regressive tax which hurts the poor and does nothing for climate change
Such has been the tax-raising, big-spending nature of the Budget and its aftermath that those who prefer low taxes and a small state have to find the rays of light where we can.
The Chancellor’s willingness to cut the domestic rate of air passenger duty should be seen in this light – it is a worthwhile tax cut and will reduce the current market distortion between domestic flights and other modes of transportation. Furthermore, because all air passenger duty is imposed on departures within the UK, it would remove the unfairness of international passengers paying the duty only once (when they left Britain) while domestic travellers paid duty on both outbound and return legs of their journey.
With domestic rates to be cut and short-haul rates to be frozen (even if long-haul rates are set for an increase), it would be churlish not to offer two cheers for the policy.
But, before we can discuss what rate the duty should be, how about the Chancellor asks a more fundamental question – one that, with the UK tax burden at a 70-year high, perhaps should be being asked about more British taxes: why does it exist at all?
Air passenger duty was created in 1994 as a pure revenue stream, but since then the supporters of the levy have been seeking a better more noble aim for it. There was a short period where the levy was defended as a progressive tax – only those wealthy enough to fly, so the argument went, would be significantly impacted by the levy.
It is hard to imagine this claim holding water, considering that poorer families who struggle and sacrifice to save up the money to travel abroad pay just as much as the wealthy flying in the seat next to them. In fact, a 2013 report by Deloitte ought to have put paid to this claim, finding that the duty was a regressive tax and “impacts disproportionally on poorer households”.
Next up was the environmental argument. One might think that here the supporters of air passenger duty were on firmer ground. Efforts to use changes to air passenger duty in the past have been opposed by environmental groups on the basis that it will remove a “polluter pays” element from the tax system.
This hardly seems logical. Air passenger duty is paid by the passenger (and even then only those over the age of 16), and is only levied on seats filled, not the carbon emissions of a flight. To put it a different way, a flight in 2020 that was likely only a fraction of its usual capacity would still have spewed out broadly the same amount of carbon as it would have done when flying full in 2019 – yet the tax take from the flight would have been vastly less.
The argument for extending the cuts to domestic rates to the other categories is a strong one. The impacts of what has been described as “sky-high” levels of air passenger duty by Airlines UK have meant that potentially 45 new direct international routes, often from those regional hubs that the government claims to want to do so much to level up, have been rendered unviable. Cutting the other rates could bring needed economic growth to these areas.
Frankly, wherever one sits on the political spectrum, the air passenger duty does little for you.
If you want a progressive tax system, then you’d look more at a tax that reduces the costs for those sitting down the back while hitting harder those who jet about to Davos on private jets.
If you care about the environment, then surely you’d prefer a proper single carbon pricing system which captures the true cost of the flight. And if you are someone who supports low taxes, then an opportunity to reduce a tax burden likely to be higher than any time since Clement Atlee was in No10 would be an attractive option. But whichever you are, your message for the Chancellor should be the same: Abolish this tax.