Rachel Reeves has been warned that using the holiday sector as a “cash cow” will see prices passed down to customers in a predicted economic blow. Steve Heapy, chief executive of Jet2, Britain’s biggest holiday firm, said further tax rises imposed on air travel and package tour operators would hike costs for travellers. It comes ahead of Chancellor Rachel Reeves‘ highly-anticipated Autumn Budget on November 26, where she is expected to announce tax, borrowing and spending plans for the coming year.
Labour’s increases in Air Passenger Duty (APD) for flights and employer National Insurance contributions have already sparked uncertainty in the travel industry and bosses are worried measures unveiled next week will exacerbate pressure on the sector. “I would ask the Government not to continue using the airline and holiday industry as a cash cow and a bottomless pit of money,” Mr Heapy said.
“Any additional taxation on the airline and holiday industry is inevitably passed on to customers and that will put prices up,” he told The Telegraph.
“You can’t escape the fundamental laws of economics and it could be that increased prices result in reduced demand. That’s not good, because the people who will be unable to afford a holiday will be the lowest-earning members of society.”
Mr Heapy warned that such an outcome would be “perverse”, effectively reserving airplane holidays as “something for the rich and privileged”.
Many Jet2 customers “work 50 or 51 weeks of the year and treasure their holiday”, he added.
Increases in APD will come into force next April, including a £2 tax hike for short-haul international flights, an £8 rise for domestic flights and a £12 rise for longer international journeys.
But bosses including Mr Heapy and Ryanair chief executive Michael O’Leary have braced for the possibility of a further hike in the passenger tax, something Mr O’Leary said could force operators to move operations from small UK airports to economies with lower business rates.
The Ryanair CEO told The Guardian: “I hold very little faith in Rachel Reeves or the current economic strategy of the Labour government … I think you are going to see, not just in Ryanair but across the airlines, modest price increases through 2027 and 2028.”
A Treasury spokesperson said: “Unlike other sectors, no VAT applies to plane tickets and [APD] changes will add just £2 for a family of four flying economy to Spain.”