Finance Bill may offer power to cut Air Passenger Duty, says PwC

A provision in today’s Finance Bill may offer the Northern Ireland Assembly the opportunity to cut Air Passenger Duty, say business advisors, PwC.

After months of consultation there will be virtually no change to the controversial Air Passenger Duty (APD), which could mean an increase in the cost of travelling to and from Northern Ireland.

On 15 September, Treasury announced the end of APD on long-haul flights from Northern Ireland to protect the region’s only direct flight to the USA. While this took effect from 1 November, APD still applies to flights to the rest of the UK and Europe.

However, today’s Finance Bill promises legislation to end APD on long-haul flights from the region and this could open the door to the Assembly seeking to extend this to domestic air travel.

In a report into the impact of APD - published today - PwC partner and tourism specialist, Stephen Curragh, says further increases in APD threaten Northern Ireland’s competitiveness:

“Last week, the Chancellor’s Autumn Statement announced that APD will increase by around 8% from April and today’s Finance Bill signals no change to that proposal.

“Cutting APD on the Belfast-Newark route was a welcome start, but the overwhelming burden of APD still falls on business, tourism and families who use short-haul and European flights.

“It is widely accepted that the regular increase in APD is impacting on the entire UK tourism sector and this is likely to be even greater in Northern Ireland where the high level of APD makes local airports uncompetitive with Dublin.

“Legislating to axe APD on long-haul routes offers the Assembly an opportunity to argue for the legislation to give them the power to set and vary APD on domestic routes.”

After widespread consultation with travel industry stakeholders, the Government today rejected any changes to the way the tax is calculated. Under the new rates from April 2012, passengers in economy class flying no further than 2,000 miles from the UK will see their APD rise from £12 to £13.

Passengers in business class and first class will face APD of £26 on short-haul trips.

It was also confirmed that HM Treasury will not offset revenues raised through the Emissions Trading Scheme (ETS) against APD. This means that those airline passengers will effectively be taxed twice from January 2012.

The report, Helping economic takeoff – devolving air passenger duty, says that there is widespread support in Northern Ireland to give the Assembly the power to set APD, or even for local airports to be exempt from APD.

Flights departing from ten airports in the Scottish Highlands and Islands are already exempt from APD. However the Scottish Government would now like the power to set and vary the rate of APD for Scottish airports not already exempt and Stephen Curragh says Northern Ireland should use today’s promised legislation to get similar power.

“Increasing NI’s connectivity to the rest of the world in terms of air routes is vital to expand our tourism and business opportunities.

“And while the level of APD may seem relatively affordable, the cumulative effect is mounting.

“Taking advantage of today’s announcement would let the Assembly reduce the duty on routes from NI to GB and the rest of Europe. In terms of promoting tourism, direct investment and trade, these routes are just as important as the one to New York."

Contact details
Email: Stephen Curragh
Tel: +44 (0)28 9041 5495