Rachel Reeves‘ plans to hike taxes on holidaymakers would be a ‘disaster for Britain’, a former British Airways boss has warned.
Willie Walsh today led calls for the Chancellor to spare travellers from being ‘fleeced’ in the Budget by ditching her plans to hike the ‘holiday tax’.
Under Ms Reeves’ plans, Air Passenger Duty – a stealth levy on air fares also known as the ‘holiday tax’ – is set to rocket by several times the rate of inflation.
Mr Walsh, who led BA for more than a decade from 2005, was joined by other airline bosses who warned they could pull UK operations and move them to where taxes are lower if the hike goes ahead.
From April next year, APD will be hiked by 15 per cent on most fares.
This is nearly four times the current 3.8 per cent rate of inflation (CPI) and means the Treasury is set to rake in an extra £2.5billion from holidaymakers by 2030.
Analysis for the Daily Mail by global industry body the International Air Transport Association (IATA), which Mr Walsh is now boss of, shows that the equivalent of around 20 per cent of an average basic fare will be tax.
A family of four heading on holiday to Dubai or Florida next summer would pay more than £400 in tax on economy fares for the first time.
They would also pay nearly £1,000 if they wanted to treat themselves by travelling in Premium Economy, as the tax for upper classes will also be hiked.
The analysis also shows that, while the UK accounts for 3 per cent of the global air passenger market, Ms Reeves’ department rakes in about 8.9 per cent of all global aviation tax revenue.
Writing for the Daily Mail, Mr Walsh said: ‘It’s ridiculous. And this fleecing of passengers and businesses is costing Britain’s economy. Foreign investors are putting their money elsewhere.
Under Ms Reeves’ plans, Air Passenger Duty – a stealth levy on air fares also known as the ‘holiday tax’ – is set to rocket by several times the rate of inflation
A family of four heading on holiday to Dubai or Florida next summer would pay more than £400 in tax on economy fares for the first time
‘World-class service industries are being made uncompetitive. Exports and jobs are suffering.
‘Tax rises are coming – and if air travellers are sacrificed to pay even more, it will be a disaster for Britain.
‘I can tell Rachel Reeves that airlines have a choice where to fly, and right now they look at the costs of flying to the UK and they think, “maybe I’ll send my shiny new quieter and more comfortable plane to Spain instead. Or perhaps to Sweden, which has just abolished its passenger tax”.’
He also blasted Energy Secretary Ed Miliband, adding that his Net Zero plans would push up the cost of flying.
‘Ed Miliband wants airlines to use more [greener] Sustainable Aviation Fuel, but has put a guaranteed minimum price on it that makes it perpetually more expensive than jet fuel.’
Speaking at easyJet headquarters in Luton today, where the airline celebrated its 30th birthday, its boss Kenton Jarvis added: ‘If APD goes up, we will naturally pass that on, and therefore we’ll see what impact that has on demand. My guess is it’ll go down [and hit the economy].
‘So I would suggest freezing or cutting would be the way forward with APD.’
He also warned easyJet could pull operations from the UK if taxes go up too much because planes can be flown in and out of easyJet’s base in Luton, ‘but if things change, they can also operate in Basel, or Geneva or operate in Bordeaux, wherever we’re seeing good value for the airline’.
And Tim Alderslade, boss of Airlines UK, which also represents Ryanair, Jet2, Virgin Atlantic and Tui, said: ‘Any further APD increases risk hurting one of our growth success stories, making it much harder to keep flights affordable for families, businesses and international visitors.’
The hikes in APD were announced by Ms Reeves in her Budget last year but don’t come into effect until April 2026.
However, travel bosses fear she may come back for more in her Budget this month (November 26) by increasing the rate of the hike.
They would like her to at least abolish last year’s increase to keep the price of a holiday down for hard-pressed families.
The levy is charged on flights taking off from a UK airport, meaning it is paid on outbound journeys but not inbound.
Under next year’s hikes, APD on travel to short-haul destinations like Spain, Italy and Greece will surge by 15 per cent to £15 per flier.
On longer flights to hotspots like the USA, Dubai and India it will increase 16 per cent to £102, and by 15 per cent to £106 for ultra long-haul destinations such as Australia and Thailand.
These rates are just for economy passengers, with the rates for Premium Economy and Business Class tickets being even higher.
Today it also emerged that holidaymakers face a carbon tax as part of Sir Keir Starmer’s reset deal with the European Union.
Ministers have agreed to align the UK with European rules on carbon emissions to reduce trading friction with the bloc.
This means the government will be forced to adopt plans for a carbon tax on long-haul flights, pushing up the cost of fares, The Times reported.
The Resolution Foundation think tank has calculated that the move could raise as much as an extra £1.5billion for the Treasury.
This would add, on average, about £21 to the cost of a flight on top of existing APD rates.
A Treasury spokesman sought to justify the planned hikes, saying that ‘unlike other sectors, no VAT applies to plane tickets’.
They added: ‘The Chancellor has set out the context for the Budget, recognising global and long-term economic challenges.
‘It will continue to build the strong foundations to secure Britain’s future and on the priorities of the British people – cutting waiting lists, cutting national debt and cutting the cost of living.’
Ms Reeves claims she wants Britain to be world-leading. There’s one place where Britain is top of the rankings: in the cost of flying
By Willie Walsh, Director General of the International Air Transport Association
The UK budget is coming at the end of November, and everyone knows that Rachel Reeves is hunting down the back of the sofa in 11 Downing Street to find any loose change. Tax rises are coming – and if air travellers are sacrificed to pay even more, it will be a disaster for Britain.
Ms Reeves claims she wants Britain to be world-leading. Well, there’s one place where Britain is top of the rankings: in the cost of flying. Whether it’s charges to use Heathrow airport, or UK air traffic control, Britain is number one. And that’s before we come to Air Passenger Duty (APD).
APD is the highest air travel tax in the world. It raises £4.2billion a year and rising. A family of four heading on holiday to, say, Dubai or Florida next summer is going to be paying nearly £1000 in tax if they want to travel in Premium Economy. It’s ridiculous. A couple on a weekend break to Europe could be paying 10 per cent or more of the value of their tickets in tax.
To put it another way, the UK is 3 per cent of the global air passenger market, but it takes 8.9 per cent of all global aviation tax revenue. And this fleecing of passengers and businesses is costing Britain’s economy. Foreign investors are putting their money elsewhere. World-class service industries are being made uncompetitive. Exports and jobs are suffering. APD rates are already set to rise again in April. It would send a terrible signal if the budget were to increase APD even more.
‘The time has come to stop treating air passengers as a cash machine and instead make air travel a magnet for investment in Britain,’ writes former BA boss Willie Walsh
At IATA, we work with the world’s leading airlines every day. I can tell Rachel Reeves that airlines have a choice where to fly, and right now they look at the costs of flying to the UK and they think: “Maybe I’ll send my shiny new quieter and more comfortable plane to Spain instead. Or perhaps to Sweden, which has just abolished its passenger tax.”
This Government needs more joined-up thinking. The decision to support Heathrow’s expansion is positive, but not if the result lines Heathrow shareholder’s pockets with a rise in charges for a gold-plated new runway. The target to increase international visitor numbers was laudable, but became laughable when VAT-free shopping for tourists was abolished.
Ed Miliband wants airlines to use more Sustainable Aviation Fuel, but has put a guaranteed minimum price on it that makes it perpetually more expensive than jet fuel. If Keir Starmer and Rachel Reeves are serious about Britain’s global aspirations, then they must rethink their strategy.
Britain is an island that has always looked outwards to the world. That’s why Britain has built one of the world’s best aviation sectors. The time has come to stop treating air passengers as a cash machine and instead make air travel a magnet for investment in Britain. A competitive, strong airline sector will make for a more competitive and stronger Britain.
