Tax threat to cheap air fares

AIR passengers could see tax on tickets double under reported Government plans to stem the growth in air travel.

The increase would lift the duty on long-haul economy fares from £20 to £40. On domestic and European routes it would rise from £5 to £10.

Chancellor Gordon Brown was today said to back the idea as a way both to raise £800m a year for the Treasury and to bolster the Government's 'green' credentials.

But it would be seized on by the Tories as another 'stealth tax'. And budget airline easyJet pledged to fight the proposal 'tooth and nail'.

Mr Brown could announce the move in his December pre-Budget report. Or it could be set out in an aviation White Paper due about the same time.

The White Paper will also contain proposals to build extra runways at Heathrow, Stansted or both, to meet rising demand for air travel in London and the south-east.

A rise in passenger duty would let ministers to claim they were tackling demand as well as catering for it.

Hardest hit would be passengers on budget airlines such as easyJet and Ryanair, who would see some of the cheapest fares to European destinations-rise by more than 20%. Because the duty is flatrate, the proportionate impact on dearer fares would be less.

Environmental campaigners have long bemoaned the subsidy to airlines in the form of low fuel duty, which has helped no-frills airlines to grow.

Roger Hignam of Friends of the Earth said: 'Increasing air passenger duty has an unstoppable logic and we would fully support it.‘

Alternative ways to stem pollution could include a rise in fuel duty - although airlines could get around this by filling up abroad - or a tax on old 'gas-guzzler‘planes.

Air passenger duty was introduced by Tory chancellor Kenneth Clarke, along the lines of similar levies in other European countries.

Mr Brown halved the basic rate from £10 to £5 in 2001, but at the same time introduced a higher rate for first- and business-class passengers of £40 long-haul, £10 within Europe. It is unclear whether the higher rate would also double under the new proposals.

The Treasury announced in a consultation paper this year that passenger duty was under review. And aviation minister Tony McNulty recently warned airport operator BAA that the industry would have to pay for its pollution.

The number of passengers flying to and from British airportsis expected to leap from 180 million this year to 500 million a year by 2030, putting pressure on the environment but offering the Chancellor a ready source of revenue.

Any political fallout from an increase in the ticket tax on tickets is likely to be dwarfed by the protests which would follow an announcement of new runways at any of London's airports.

The issue is said to have divided the Cabinet, with Mr Brown favouring expansion at Heathrow for economic reasons. Tony Blair is thought to support extra capacity at Stansted, where fewer key voters would suffer from the disturbance.