12th December 2014

Give Boris control over London air travel tax

London Chamber of Commerce and Industry (LCCI) has suggested Chancellor George Osborne could give London's Mayor responsibility over Air Passenger Duty (APD) at London's airports to improve the capital's international competitiveness.

APD, paid by passengers when they fly, has increased by more than 325% to key economies such as China and India since 2007 - presenting a major hike in fares for both leisure and business travellers heading to new markets.

Figures from London Chamber of Commerce and Industry show that 59% of firms see APD as a major barrier to exporting, as many firms need to visit new markets to promote their business and secure overseas deals.

APD has normally been controlled centrally by the Treasury, however the APD regime is changing across the UK as last week's Autumn Statement saw the Chancellor confirm that APD would be devolved to the Scottish Parliament. The Northern Ireland Assembly has had similar powers since 2011.

Therefore, the Chamber argues that the time is right to look at London getting power over APD revenues generated at the two main airports within the Mayor's jurisdiction - Heathrow and London City - which apparently account for up to around £1bn of the £3bn generated by APD across the UK.

Colin Stanbridge, Chief Executive of London Chamber of Commerce and Industry said: "Now that Edinburgh and Belfast will control APD in their areas surely it must be the case that London will follow suit.

"We know from our members that APD is a barrier to getting them exporting and ultimately we would like to see this Treasury tax on flying abolished - a major PWC study last year found that abolition of APD would be good for UK PLC as a whole - with the economy likely to grow by £16billion.

"However in the short term, if APD is to remain 'on-the-books' then it would much more appropriate for London's Mayor to oversee London airport APD.

"I am sure that regardless of whoever holds the future Mayoral position he or she would certainly take into account the needs of the capital's business, leisure and tourism sectors when approaching the matter.

"The devolution of responsibility for this major transport tax would represent another power for London in the ongoing fight for greater fiscal devolution to the capital to help stimulate local growth".

ENDS

NOTES TO EDITOR:

1. London Chamber of Commerce and Industry (LCCI) is the capital's largest and most representative business organisation, with members ranging in size from multi-national companies to SMEs and sole traders.
2. Colin Stanbridge is available for further comment and interview.
3. Air Passenger Duty: stats

• Brought in in 1994
• APD is charged on passengers departing a UK airport*on aircraft with more than 20 seats.
• Not payable by inbound passengers who are passing through UK within a 24-hour period.
• Paid when booking ticket but collected only when passenger flies (passenger can ask for refund).
• Originally introduced as an 'environmental tax' - but does not recognise efficient aircraft (old planes same as new Dreamliners).
• 2010 change saw charge based on distance between London and the capital city of the destination country.
• The distances focused on four charging Bands - 'A' 0 - 2000 miles. Band 'D' over 6000 miles.
• From Nov 2011, flights from Northern Ireland were charged at Band A.
• £0 rate applies to flights from Northern Ireland direct to a band B, C or D destination since Nov 2011 after powers devolved.
• PWC study also claims increase in investment and exports as well as extra 60,000 jobs could result from abolishing APD.
• However Treasury estimate full abolition would result in £3-4bn in lost revenue.
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