In this article we explore why the UK Air Passenger Duty is detrimental to not only passengers and airlines alike but also the treasury itself.
The UK’s APD is essentially nothing but a tariff on aviation both domestic and international. The 2020 rates of APD range from £13 a flight to £176 a flight depending on class of travel and distance flown. The tax raised a staggering £3.7bn in 2019.
The UK’s APD is unique in a number of respects compared to other countries. First and foremost its amount is significantly larger than other European countries.
Secondly and perhaps most strikingly, in other countries their equivalent of UK APD is spent almost in its entirety or at least partially on improving aviation infrastructure, providing incentives for greener operations, etc. Much to many people’s surprise at last year’s IATA’s Wings of Change event Charsten Spohr, CEO of Lufthansa stated he doesn’t mind industry specific taxes so much as long as those taxes are reinvested in the sector one way or another. This was followed by the entire hall overwhelmingly approving of the comments, with some clapping. And rightly so, everyone wants to tackle climate change in the best possible way. But the emphasis is on the best possible way.
The UK’s APD goes into a general pot in the treasury, which means that potentially none of it makes it back to aviation. This is a major issues as according to a 2015 report by PwC, the UK APD reduces demand by 10%. Even during normal circumstances that is a substantial amount, but for an industry gripped by a global pandemic and without targeted support packages from the UK government the APD compounds the already vast pressure our industry and jobs are under.
APD is particularly damaging for regional connectivity within the UK. Although the demise of FlyBMI and Flybe was not solely down to APD, the decline in demand because of it was a large contributing factor. However it is not only the airlines who lose out as a result of APD. As reduced demand leads to network rationalisation, whether that’s routes being cut or frequencies being reduced, it is inevitably hurting regional connectivity across the country. A country with its infrastructure as centralised as the UK, the emphasis should be on promoting regional connectivity, not restricting it.
And if shrinking consumer choice and airline failures are not enough we have the wider economic implications of a tax eating into household’s disposable income during a time of crisis. For each short-haul ticket £13 pounds could go to buying products or services with VAT paid on it and directly supporting businesses across the country.
In summary, the UK’s APD is not an aviation tax, it is a cash cow for the government to plug holes with elsewhere. It is time for this tax to be rethought in order to combat what it was conceived to combat, carbon emissions – without impacting jobs and livelihoods across the country in and outside of aviation. One way to do that would be quite simple: reinvest it.
Article picture: DOMINIC LIPINSKI/ZUMA PRESS