Heathrow boss: Budget tax raid would force us to raise ticket prices

The boss of Heathrow has warned Andy Burnham against using business as a cash cow at his maiden Budget this autumn, after the airport’s tax bill more than doubled in the space of a year.

Thomas Woldbye said the aviation sector is one of the most heavily taxed industries in Britain, and that uptick in his airport’s bill to HMRC would lead to “feed through to passengers through higher ticket prices”.

“We are one of the highest taxed aviation industries in the world,” he told CityAM. “We have a record high air passenger duty.”

“We have national insurance…. and we are, I think, the biggest payer of business rates in the country,” he added saying the group’s property tax bill had jumped by £50m this year.

Woldbye’s remarks followed Heathrow revealing its tax bill for the first half of the year more than doubled to £129m from £62m the previous year. The west London hub said hikes to employer national insurance and business rates at consecutive fiscal events had eaten into its profit for the six months to June, which dropped five per cent £69m.

Burnham and his new Chancellor John Healey already face having to plug a major shortfall in the public finances in their first Budget this autumn, after the new Prime Minister unveiled a flurry of pledges which have not yet been factored in to official forecasts.

A CityAM analysis found there to be at least £22bn of outgoings – including several promises made by Keir Starmer to which Burnham has committed – that will need to be covered by tax rises or spending cuts in the upcoming Budget.

The findings have reignited fears in the business community that the new-look Treasury will target them for a third consecutive year, having had to foot major hikes to national insurance, living wage and business rates at the last two fiscal events.

Any higher tax bill for Heathrow would make travelling through the hub even more expensive, Woldbye said, as the airport would have no choice but to pass the added cost onto airlines and passengers.

The airport is already the most expensive in the world, and faces having to raise prices further to help fund a planned £49bn expansion that includes building a third runway. According to initial Civil Aviation Authority estimates, Heathrow’s passenger charge may double to £52 per traveller to pay for the megaproject, which is being fully funded by the private sector.

The doubling of Heathrow’s tax bill has come despite it being handed a last-minute business rates reprieve by Rachel Reeves in April. The former Chancellor ring-fenced £900m for Heathrow to help stem the tide of her property tax overhaul, as part of a wider transitional relief package for affected businesses.

Without the relief, Heathrow would have faced a £1.5bn business rates bill over the coming three years.

Separately, Woldbye also poured cold water on plans for the third runway to be built in two phases. As part of an eagerly anticipated planning update published last month, the government opened the door to a rival proposal to roll out the megaproject over two phases, with a shorter runway being built in the first instance after which ministers could chose whether to proceed with the full expansion.

The plan’s proponents, who are being ring-led by hotel tycoon Surinder Arora, argue the approach will keep a lid on costs and make it easier to deliver within the government’s ambitious timeline.

But Woldbye said the two-stage proposal “does not give you the capacity you really need to operate an efficient airport”.

“You would spend very close to the full amount, or at least 80 per cent of the total cost, but you would only get 50 per cent capacity,” he added. “Hence, the price per passenger, which is what is important to our airlines, would actually be higher in that scenario.”

Arora said: “This is another example of Heathrow telling the airlines what’s best for them rather than listening to their needs. That is why we have worked with the airlines to deliver an alternative solution, that brings capacity earlier and avoids building over the M25 and at a more effective cost than HAL.

“Thomas is right that increased taxes will feed through to passengers via higher ticket prices. The question Heathrow must answer now, is why won’t increases in airport charges also feed through to higher ticket prices.”