Labour plot holiday tax raid as air fare stealth levy could be announced in Budget

Thousands of families could see a levy on air fares known as the "holiday tax" announced.

Michael O'Leary, Ryanair's chief executive has warned that the airline may cut hundreds of UK flights if APD is raised.

He stated, "If they raise APD again on domestic flights then there will be a cut in capacity, no question."

The potential hike comes as the Chancellor faces significant budget challenges, with difficult decisions ahead to address a £22billion economic shortfall.

Industry insiders expect an above-inflation increase in APD, which could collectively raise holiday costs for travellers by hundreds of millions of pounds.

O'Leary criticised APD as "a penal tax on the poor", arguing that it disproportionately affects ordinary passengers. He emphasised that many regional routes "are not particularly profitable, they barely break even".

The Ryanair boss warned that increasing APD could undermine recent investments in regional UK airports, including Glasgow, Edinburgh, and Belfast.

He stressed the importance of stimulating inward tourism in a post-Brexit environment, suggesting that higher aviation taxes could hinder this goal.

His comments follow Ryanair's recent decision to cut 12 per cent of its capacity in Germany due to higher taxes, demonstrating the airline's willingness to relocate operations in response to unfavourable tax environments.

The potential APD increase comes as part of broader budget considerations, with the Chancellor signalling that "difficult decisions lie ahead" to address economic challenges.

The potential APD increase in the UK contrasts sharply with Sweden's recent decision to abolish its aviation tax from July 2025. Swedish Prime Minister Ulf Kristersson declared the tax a "substantial competitive disadvantage for Swedish airports".

While the UK considers raising APD, other countries are reassessing their stance.

The airline industry lobby group IATA has called such levies "counterproductive economically and ineffective environmentally".

They argue that better air connectivity boosts the economy and tax revenues in the long term However, environmentalists contend that most of Europe does not tax airlines for buying commercial jet fuel.

Tim Johnson, director of the Aviation Environment Federation, stated, "Compared to UK motorists, UK air passengers have a really good deal."

Treasury officials have reportedly requested economic performance data from the Department for Transport regarding the travel industry. They are assessing the potential impact of increasing APD and whether the sector can handle such rises.

An aviation industry source stated, "We're expecting an above-RPI increase given everything we're hearing about tax rises in the Budget."

The APD regime was overhauled in April last year, introducing a three-tier scheme based on flight distance and carbon emissions. Current charges range from £13 for short-haul economy flights to £202 for long-haul business class.

Any increase in APD is likely to be passed on to customers through higher air fares. This could significantly impact family holidays and travel plans.

A Treasury spokesman commented, "The Chancellor has been clear that difficult decisions lie ahead on spending, welfare and tax to fix the foundations of our economy."