APD reform - too little too late

APD reform: too little, too late?

In the March Budget, Chancellor George Osborne announced much that was intended to win back wavering voters - the right to use your pension pot in whatever manner you wish, a freeze in fuel duty, a penny off beer and more help for small to medium size businesses.

For anyone working in business travel, the most eye-catching - and long-awaited - announcement was the intention to reform Air Passenger Duty, which many believe has acted as a brake on an export-led economic recovery.

During his Budget speech, the Chancellor said,

"We will reform Air Passenger Duty to end the crazy system where you pay less tax travelling to Hawaii than you do travelling to China or India.

"It hits exports, puts off tourists and creates a great sense of injustice among our Caribbean and South Asian communities here in Britain."

He added, "I want the message to go out that we are backing our exporters - so that wherever you are around the world you can't fail to see: Made in Britain."

As a result of his announcement, the top two bands of duty will be scrapped from 1 April 2015.

THE Wexas INTELLIGENCE:

APD is currently levied according to a system based on distance to the capital of your destination country and the class in which you travel. There are four bands of duty, 0-2,000 miles, 2,001-4,000 miles, 4,001-6,000 miles and 6,001 miles plus; the lowest covers Europe, the second catches North America and the Middle East, the third encompasses much of Africa and South America while the last covers Asia Pacific. Someone travelling to Australia in premium economy or business class, for example, must currently pay a whopping £194 in APD.

The Guild of Travel Management Companies (GTMC), of which Wexas Travel Management is a member, said: "The GTMC in its submissions to the Treasury and dealings with MPs has been calling for the simplification of APD bands to remove the most damaging aspects of this tax and facilitate an expansion of trade with key growth markets. Without this reform APD directly contradicts the rest of UK government policy by taxing new emerging markets the most.

"In this context we welcome the announcement by the Chancellor and his recognition that it is only by encouraging the movement of those that 'do the deals' which increase our trade that we can sustain our current recovery. We hope that this will be the first in a series of reforms to APD that will enable both the business traveller and the UK economy to travel even further."

APD, which went up by the rate of inflation on 1 April this year, is expected to raise £3.2 billion for Government coffers in 2014-15 and now brings in more than the duty on spirits. It is clear that APD is now a general tax-raising measure but the harm it is doing to an economy that urgently needs to be rebalanced is obvious.

We welcome the Chancellor's efforts in reforming APD but more still needs to be done to get UK plc moving again. Wexas Managing Director Steve Allen commented that,

"This is a step in the right direction, although removing this tax would boost the UK's economy, driving GDP growth. This is what UK plc really needs." 

More News & Insights