Lockdown costs the Treasury £2.9BILLION in lost air passenger duty

The extent of the damage done by the coronavirus crisis to Treasury coffers was today laid bare after official data showed air passenger duty as well as income tax and VAT receipts have been hammered during the pandemic. 

Office for National Statistics numbers highlighted the devastating impact of travel restrictions as fewer air passengers meant the loss of more than £2.9billion in tax.

Overall air passenger duty receipts in 2020 were just £0.9billion – down by more than three quarters on the almost £4billion generated in 2019.  

Chancellor Rishi Sunak also saw VAT receipts fall from £11.7 billion in February 2020 to £10.1 billion in May 2020 – the worst fall recorded since the 2008 recession. 

Meanwhile, income tax receipts in July 2020 totalled £18.6 billion, which was £3.8billion (17 per cent) less than in the same month in 2019.

The numbers will inevitably reignite speculation ahead of the Budget on March 3 over whether Mr Sunak will bring forward tax rises to pay for the pandemic. 

New data published today by the Office for National Statistics showed the Treasury lost more than £2.9billion in air passenger duty because of the coronavirus pandemic

VAT receipts have also taken a hammering as the pandemic has wreaked havoc with businesses

VAT receipts have also taken a hammering as the pandemic has wreaked havoc with businesses

The numbers will inevitably spark speculation over whether Rishi Sunak could hike taxes at the Budget on March 3

The numbers will inevitably spark speculation over whether Rishi Sunak could hike taxes at the Budget on March 3

The Government has been borrowing record amounts of cash during the coronavirus crisis to prop up UK plc.  

Official forecasts from the Office for Budget Responsibility (OBR) predict borrowing could reach £393.5 billion by the end of the financial year in March, which would be the highest seen since the Second World War. 

Mr Sunak has previously hinted that tax rises will be needed in the future to get the public finances back on a sustainable footing.  

An ONS analysis published today of the impact of the pandemic on tax receipts shows how badly hit the Treasury was in 2020. 

The stats body said it is ‘still too early to see the overall effect on public sector finances’ but ‘certain taxes have been immediately affected by restrictions to curb the spread of the coronavirus, reducing the income that helps pay for public services’. 

One of the worst affected revenue raisers was air passenger duty as a ban on non-essential international travel dramatically curtailed the number of people buying plane tickets.    

Air passenger duty brought in just £0.9 billion last year, down by 76.3 per cent on the £3.8billion received in 2019.

The biggest change was recorded between January to March and April to June when air passenger duty income fell by 93.6 per cent during the first national lockdown. 

There was a rally between July and September after draconian curbs were eased but the £128million generated was still down 88 per cent on the £1billion in the same three months of 2019.

Meanwhile, provisional data shows VAT receipts fell from £11.7billion in February 2020 to £10.1 billion in May 2020. 

The numbers rebounded to £12billion in December but that was still lower than a peak of £13.5billion in October 2019.  

The ONS said the ‘last time VAT receipts dropped as significantly as the provisional data indicate was in the 2008 recession’.     

Income tax receipts have also suffered a hit after increasing in each financial year between 2015 and 2019.  

The provisional ONS data for the period between April and December last year suggests that money generated through income tax was down on the same period in 2019.

The biggest fall was in July 2020 when receipts were £18.6billion, some £3.8billion lower than in July 2019. 

Income tax receipts suffered a significant fall during lockdown last year before gradually recovering

Income tax receipts suffered a significant fall during lockdown last year before gradually recovering 

The Government's stay at home message also hammered fuel duty receipts, with the numbers only recovering in August before suffering another dip

The Government’s stay at home message also hammered fuel duty receipts, with the numbers only recovering in August before suffering another dip

That July figure included £4.8billion received through self-assessment, down by 49 per cent from the £9.4billion recorded in the same month in 2019. 

The ONS said this fall ‘is highly likely to be down to the government allowing self-assessment payments to be deferred to January 2021’.

Mr Sunak is under growing pressure to find ways to boost tax revenues, with some suggesting he could end a freeze on fuel duty. 

The ONS data showed fuel duty cash fell by almost 50 per cent between March and May last year as more people stayed at home. 

It only recovered to pre-lockdown levels – generating approximately £2billion a month – in August before suffering another ‘less significant’ fall in November and December. 

Statistics published earlier this month suggest the UK is facing a double-dip recession as business activity declined. 

Closely-watched PMI data for the private sector showed a reading of 40.6 so far in January – with anything below 50 pointing to a contraction.  

Ministers have been borrowing record amounts of money during the Covid-19 crisis to keep UK plc afloat

Ministers have been borrowing record amounts of money during the Covid-19 crisis to keep UK plc afloat

Economists warned that a double-dip downturn is now firmly ‘on the cards’ after the fledgling recovery from the worst recession in 300 years was strangled by fresh action to control a surge in cases.

Figures published last month showed GDP dropping 2.6 per cent in November during the second England-wide Covid lockdown.

Any December rally will have been smothered by the harsh ‘tier’ controls in England, and the renewed blanket curbs in January.