§ Mrs. Ray MichieTo ask the Chancellor of the Exchequer what investigation his Department intends to undertake into the effect of air passenger duty on air fares within the United Kingdom; what estimate he has made as to the impact on business and leisure use of air transport, particularly to the airports operated by Highlands and Islands Airports; and what evidence he has received from other European countries as to the impact of such taxation on transport.
§ Sir John Cope[holding answer 18 January 1994]: Air passenger duty is expected to increase return air fares within the United Kingdom and to other EC countries by £5; and to other destinations by £10. For the purpose of analysing the effects of the duty we have assumed airlines will fully pass on the duty to passengers in the form of higher fares. The price elasticity for business journeys is estimated to be -0.3; for non-business journeys to be -1.25. Overall, the tax is expected to reduce demand for air travel by around 2½ per cent. There is insufficient information available to estimate the impact of the tax on airports operated by Highland and Islands airports. No information has been received from other European countries on the impact of the introduction of such taxation on transport.