GEORGE Osborne’s Budget will contain a raft of measures designed to mitigate the soaring cost of fuel.
The chancellor has scrapped plans to raise air passenger duty (APD) for the fourth time in three years, City A.M. understands.
He had been expected to increase the tax on holidaymakers and business travellers in line with the retail price index (RPI) measure of inflation.
That would have brought the APD on a business class ticket to Australia to £179, a £9 increase.
But with airlines already planning to raise their fuel surcharges in response to surging oil prices, the chancellor decided to remove the increase from Wednesday’s Budget.
The decision to freeze APD at current levels – essentially a real-terms tax cut – will cost the Treasury around £150m, although Osborne could mitigate the cost by widening the APD net to include private and corporate jets.
Meanwhile, Osborne is expected to scrap a planned above-inflation increase in fuel duty, which would have added up to 5p to a litre of petrol.
Yesterday, he said he was “looking very carefully” at whether he could afford to “do something” about the duty hike.
The chancellor is keen to neutralise attacks from Labour opponent Ed Balls, who has put rising fuel prices at the centre of an attack on the rising cost of living.