NORTH East transport chiefs have warned the Government against raising a harmful tax to plug a hole in public finances.
Fears have emerged that the Treasury might look to raise Air Passenger Duty (APD) because falling passenger numbers mean its revenue from the tax has fallen short of plans.
However, aviation bosses actively campaigning against the levy say that measure could be disastrous for regions such as the North East.
Business leaders say air links to the region, and Newcastle International Airport in particular, are crucial for the continued growth of industry and job creation here.
Losing crucial routes, such as those operated by long-haul carriers Emirates and KLM, could damage North East interests as it looks to win high value deals from abroad.
There have been suggestions the tax, levied on all plane passenger tickets, could be increased by almost 25% to combat the lost tax income from falling ticket sales.
Last month, figures from the Department for Transport showed passenger numbers have been depressed by the economic downturn.
However the aviation industry has argued it is soaring taxes which have priced people off aircraft.
Graeme Mason, planning and corporate affairs director at Newcastle International said: “We have been telling the Government for some time that increasing the rate of APD too much will suppress demand, reduce passenger numbers, and actually lower the tax take. This is precisely what has happened. APD, at its current rates, plus the effects of the economic climate, have lowered the amount of tax expected to be collected by the Exchequer. We hope the speculation that the Government will respond to this shortfall by raising the tax further proves not to be true. All this will do is further reduce demand, especially in the regions, and further reduce the amount of tax collected.
“Our suggestion would be for the Government to restrict any tax increases to the biggest, most congested airports, where demand is strongest. These will keep on growing whatever.
“In parallel we suggest a freeze or reduction in tax from the less congested regional airports. This will help stimulate demand and could lead to an increased tax take.”
North East aviation bosses and The Journal have used our A Tax Too Far campaign to lobby for a change in the current aviation tax regime, which experts believe is holding back the region’s development as an international player.
It is understood the Treasury will look to raise £3.6bn from APD in 2015/16, compared with £2.2bn, in the current financial year, leading to fears a rise will be imposed in November.
A concessionary freeze on the rate was put in place in the Chancellor’s budget when George Osborne, announced a full review into aviation tax – an opportunity the North East hopes to exploit by arguing bigger, richer hubs, should be made to pay their share.
If the feared hikes were introduced it could leave a family of four having to find an extra £60 in tax for a transatlantic trip to the US.