Clause 24 - Rates of air passenger duty

Finance Bill – in a Public Bill Committee at 11:00 am on 16 January 2024.

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Question proposed, That the clause stand part of the Bill.

Photo of Gareth Davies Gareth Davies The Exchequer Secretary

The clause sets the rates for air passenger duty for 2024-25. The rates were announced at the spring Budget and will take effect from April this year. The Government are uprating air passenger duty in line with forecast RPI rounded to the nearest pound. That will help to ensure that air passenger duty receipts are maintained in real terms and that airlines continue to make a fair contribution to our public finances. As is standard practice, the Government gave the industry more than 12 months’ notice.

The short-haul international rates will remain frozen for 2024-25, benefiting over 70% of passengers. Following the 50% cut in air passenger duty for domestic flights in 2023-24, the rate for those flying in economy class will increase by just 50p to £7. The long-haul and ultra-long-haul economy rates will increase by £1. The long-haul and ultra-long-haul rates for premium economy, business class and private jet passengers will also increase. Overall, this means that air passenger duty rates will be frozen in real terms. I commend the clause to the Committee.

Photo of James Murray James Murray Shadow Financial Secretary (Treasury)

As we heard from the Minister, the clause makes changes to air passenger duty. It increases the domestic reduced rate by 50p and the domestic standard rate by £1. In band B, the reduced, standard and higher rates will increase by £1, £3 and £7 respectively. In band C, the reduced, standard and higher rates will rise by £1, £2 and £6 respectively.

The new domestic band for flights within the UK was introduced by the Finance (No.2) Act 2023, and I would like to interrogate those figures more closely. The Minister may remember that we debated the new air passenger duty regime at the fourth sitting of the Finance (No. 2) Bill Committee on 18 May last year, when I asked him to explain the impact of the new domestic band on UK flights by helicopter and private jet. He helpfully clarified that there was no air passenger duty other than on fixed-wing aircraft, which meant that the duty did not apply to helicopter flights—news I am sure would have been met with relief in Downing Street. He also confirmed that private jets making domestic UK flights would be subject to a different, higher rate from other UK flights—perhaps he managed to slip that through without the Prime Minister noticing.

Let us consider the impact of clause 24 on domestic air travel. The truth seems to be that air passenger duty is going up on all UK domestic flights except for those taken by private jet, for which the tax is being frozen. At the same time, there is no change that we know of to the arrangements for helicopters, as they remain outside the air passenger duty regime. Can the Minister confirm that what this clause proposes in terms of domestic air travel is a tax rise on all flights within the UK except those made by helicopter or private jet, whose passengers will see a tax freeze?

Photo of Gareth Davies Gareth Davies The Exchequer Secretary

I am grateful to the hon. Gentleman. I remember very well the exchange at the last fiscal event, and I note that since then, the leader of the Labour party has developed a new passion for flying in private jets courtesy of foreign Governments.

Let me try to address the hon. Gentleman’s concerns and explain what is going on here. The industry is notified of air passenger duty 12 months in advance. It is uprated by a forecast of RPI and those rates are then rounded to the nearest pound. He asked a very reasonable question about how that shakes out in terms of the actual rates. It largely depends on how they are rounded to the nearest pound; the actual rate is determined by whether the figure is rounded down or up. He pointed out particular types of aircraft and particular bands. In the instances that he described, the rates have been rounded down; others have been rounded up, which is why other rates have gone up. He is right that helicopters are not part of the APD regime, but they do incur fuel duty, and buying a helicopter incurs VAT.

Photo of Debbie Abrahams Debbie Abrahams Labour, Oldham East and Saddleworth

Just to clarify, if notification is given 12 months in advance, does that mean that there will be a more progressive approach to taxation for private jets in this Budget?

Photo of Gareth Davies Gareth Davies The Exchequer Secretary

The Bill implements the rate changes that were announced at the spring Budget last year, based on a forecast RPI, as I have described, but the principle that the hon. Lady talks about is absolutely right. We have in this country an established principle that the further someone flies, the more they pay. Long-haul flights are subject to a greater rate than short-haul flights, as are private jet flights, for which the rate is increased.

Photo of Gareth Davies Gareth Davies The Exchequer Secretary

The rate on private jets is significantly more than any commercial flight passenger will pay.

Question put and agreed to.

Clause 24 ordered to stand part of the Bill.