Government admits it failed to consider impact of new tax on airports

THE Government has admitted it failed to consider the impact a damaging new air tax would have on regional airports.

THE Government has admitted it failed to consider the impact a damaging new air tax would have on regional airports.

Air Passenger Duty (APD) was hiked at the beginning of this month and will rise again next year, with the increases passed on to passengers through ticket prices.

Airport bosses say they lost half a million customers last time the tax was increased, and are calling for a Government U-turn to prevent a repeat situation during the recession.

Business leaders have warned the new price bands will lead to key routes being lost to the region, which would have a devastating impact on the North East economy. That has led to The Journal’s A Tax Too Far campaign, with aviation chiefs in the region saying they will be hardest hit by the hikes.

Now, documents unearthed by The Journal show the Impact Assessment carried out by Downing Street when considering whether to increase APD – as opposed to a per plane tax – made no consideration of the effect it will have on airports like Newcastle International and Durham Tees Valley.

And we can reveal Minister Angela Eagle – who oversaw the Impact Assessment – has admitted there are “anomalies” in the system.

A 7,200-mile flight to Hawaii attracts less duty than a flight to Jamaica – 4,600 miles away – because Washington is closer to London than Kingston.

Ms Eagle, a Treasury minister at the time, told a Commons committee looking at the Finance Bill that the APD banding structure made the system easier to administer for all concerned.

But she added: “That does not mean to say that anomalies do not arise from a rough-and-ready rather than an absolute approach. We have gone for the rough-and-ready approach.

“I understand the points that are being made about some of the anomalies with capital cities, particularly Washington in relation to destinations in other US states and in Caribbean countries.”

Ms Eagle, now Pensions Minister, also said: “However, I suppose that a rough-and-ready calculation is precisely that, and one can always find anomalies.”

Graeme Mason, head of planning and corporate affairs at Newcastle International, said: “Rough and ready is not what this region deserves when so much is at stake. The Government still fails to understand the impact that the APD increases will have on marginal regions and marginal air services.”

APD is levied on how far the capital of the destination country is from London and there are four bands, all of which rose in November, having previously doubled in 2007. The tax on an economy short-haul flight to Europe or North Africa has risen from £10 to £11 and in November next year to £12.

But an HM Revenue & Customs (HMRC) spokesman said: “To analyse the impact of APD on individual airports would have required a significant amount of data that is not currently available to us, some of which is commercially sensitive, such as information on air fares, airline pricing strategies, and airport plans, to name but a few.”

Ed Anderson, executive chairman of the Airport Operators Association, said: “The structure is indeed rough and ready but cannot disguise the fact that the tax is being increased at a time when aviation, and the wider economy, is suffering from the effects of the recession.”

 
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