Passengers of popular airlines like Ryanair, Easyjet, Jet2, and TUI might soon find themselves facing a new tax that could potentially generate £6 billion yearly for the UK economy. Campaigners are advocating for a jet fuel tax to help bridge the substantial £22 billion fiscal deficit left by the Conservative government. Independent think tank Transport and Environment (TandE) UK recently revealed in their analysis that implementing a “fair” fuel duty equivalent, similar to other industries, could significantly boost public revenues by £400 million to £5.9 billion per year.
Contrary to common belief that aviation fuel is exempt from taxation, TandE UK is urging the chancellor to impose fuel duty on all flights within the legal jurisdiction, suggesting an initial rate of 9p per litre starting from next year. The proposal includes gradually increasing the levy annually until it aligns with road fuel duties by 2030. It is anticipated that airlines might pass on this tax burden to passengers, potentially resulting in higher ticket prices.
Matt Finch, the UK policy manager at TandE, highlighted the urgent need for revenue generation, stating, “With a £22bn black hole staring the country in the face, the chancellor needs to pursue any and all avenues to raise funds. The baffling lack of meaningful taxation of the aviation industry is a slap in the face of drivers, farmers, and our ailing rail system, all of which have paid their fair share for decades,” as reported by Birmingham Live.
British Airways, holding the position as the UK’s largest airline by fleet size, international flights, and destinations, while easyJet leads in passenger numbers, is a major player in the aviation sector. Tim Alderslade, chief executive of Airlines UK, countered the proposal, stating that the aviation industry already contributed £3.85 billion in air passenger duty to the exchequer last year. He also mentioned that the phasing out of UK ETS free allowances for airlines could potentially raise between £1.6 billion and £4.1 billion from 2026 to 2033.
Alderslade further emphasised the industry’s commitment to achieving net-zero emissions by 2050, citing the UK’s status as a key economic enabler within the aviation sector. He highlighted the collaborative efforts between government and industry to lead the transition to a net-zero future without compromising passenger comfort or the sector’s economic significance.
This proposed jet fuel tax could mark a significant shift in the aviation industry’s financial landscape, affecting both airlines and passengers alike. The debate over balancing environmental concerns, revenue generation, and industry sustainability continues to evolve as stakeholders navigate the complexities of taxation and regulation in the aviation sector.