Hunt prepares to hike business air travel taxes to fund budget giveaways

UK Chancellor of the Exchequer Jeremy Hunt is considering raising air passenger duty on business travel as a potential revenue-raising measure to help pay for personal tax cuts in the budget on Wednesday.

Air passenger duty on business class travel is currently charged at £13 ($16.5) for domestic flights, £26 for flights up to 2,000 miles (3,200 kilometers), £191 for flights up to 5,000 miles and £200 for flights longer than that, with some small increases already due to come in on April 1. But Hunt is now considering a further rise alongside options such as scrapping the non-domiciled tax status and extending a windfall tax on oil and gas company profits, according to people familiar with the matter.

The chancellor is having to consider such measures because of a desire to cut personal taxes to give the Conservative Party a poll boost ahead of an election expected later this year. He’s looking for ways to raise funds because he starts from a weak economic position: the Office for Budget Responsibility has estimated he has only £13 billion of headroom against his fiscal rule to get the national debt falling within 5 years, a margin near historic lows.

Air passenger duty — including that raised from standard-class seats — raised £3.2 billion for the government in 2022-2023 financial year.

Hunt and Prime Minister Rishi Sunak are expected to cut income tax or national insurance by at least one percentage point in the budget on Wednesday. They want to go further with their tax-cutting, but were making final decisions about the package this weekend having considered latest economic estimates from the OBR. 

Other policies Hunt is expected to announce include a British ISA to boost investment in the domestic equity market, a requirement for pension funds to disclose their exposure to UK assets and extra funding for the manufacturing sector.