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Reform Of Air Passenger Duty : A Consultation
The Government is consulting on proposals for the reform of Air Passenger Duty (APD). The main aim is to simplify APD in a way that improves the efficiency and fairness of the tax.
As the Budget makes clear, the Government’s overriding objective is economic growth. This will require greater focus on the private sector than in the past, together with reform of public services. A strong economy also demands sound public finances, which calls for a fair contribution from all sections of society, including business, toward the running of public services and deficit reduction. In considering possible reform of aviation taxation, the Government is therefore keen to stress its requirement for revenue, within a tax regime that is fair to everyone. Subject to this basic requirement, taxation of air transport should be structured as simply and efficiently as possible, so that taxes do not unduly impede consumers, business or industry.
Aviation plays an important role in the UK economy. The sector connects millions of UK consumers and businesses with international markets, enables tourism to and from the UK, and makes long distance visits between friends and relatives possible. It employs over a quarter of a million people directly in the UK and many thousands more throughout the supply chain. Many of the technological advances that have come from global aviation have also facilitated growth in other sectors of the economy.
The aviation sector is an important source of output and employment in the UK. It also contributes to UK productivity. Improvements in aircraft technology and flight management systems have enabled the rapid growth of services. This has led to shorter journey times, enabling the expansion of tourism, business, and visits between friends and relatives.
Output And Employment
The importance of a strong and healthy aviation sector to the UK economy is evident from the economic data. In 2009 aviation contributed around £18 billion to UK output and represented around 2 per cent of gross value added.
The sector employs over 250,000 workers directly and supports an estimated 200,000 additional jobs throughout the supply chain. Table 2A shows that over 90,000 workers are employed directly in air transport and over 110,000 in the manufacture and maintenance of aircraft. Almost 50,000 more are employed in ancillary services that serve air transport. The value-added achieved by workers in the sector is around one-and-a-half times the economywide average.
As improvements in air transport technology have fed through to lower costs, the main beneficiaries have been passengers and businesses. Internationally, between 1984 and 2008, the average price of international air travel from the UK fell by around 85 per cent in real terms.
Passenger numbers have increased rapidly in line with this reduction in price. Over the same period, the number of air passengers at UK airports increased by around 350 per cent. More recently, between 1999 and 2009, the number of UK terminal passengers grew by around 30 per cent.