London Luton Airport has issued a stark warning that a major £2.5bn expansion plan is now in jeopardy due to significant tax increases introduced by the Labour government. The project, which aims to dramatically increase passenger capacity, faces potential delays or cuts as the airport's business rates bill is projected to more than double within three years.
Tax Burden Threatens Critical Infrastructure
The ambitious proposal, approved by the government, involves constructing a new terminal and boosting the airport's annual capacity from 18 million to 32 million passengers by 2043. However, fresh analysis reveals that changes to business rates unveiled in last year's Budget could severely impact these plans. The revaluations are scheduled to take effect in April.
Luton Airport's business rates payments to HMRC are set to surge from just under £7m this year to a staggering £14.5m by 2029. This substantial financial hit has forced airport officials to reconsider future investment decisions. The airport is owned by Labour-run Luton Council, adding a layer of political complexity to the dispute.
Industry-Wide Impact and Government Pressure
The concern extends far beyond Luton. Analysis verified by City AM and conducted by the Conservative Party indicates that major airports across the UK face similar crippling increases. Heathrow Airport is projected to see its bill rocket from £117m to £244m by 2029, while Gatwick Airport officials are analysing the impact of their rates potentially doubling to £140m.
Karen Dee, chief executive of the industry group AirportsUK, emphasised the broader consequences. "An increase in their business rates of over 100 per cent could still force some to review billions of pounds of transformational investments across the UK and potentially puts thousands of jobs at risk in the longer-term," she stated. The group warns that the rise will negatively impact local economies that depend on airport supply chains, tourism, and connectivity.
Political Fallout and Calls for Policy Alignment
The situation presents a direct challenge to Chancellor Rachel Reeves, whose growth strategy relies heavily on major infrastructure projects like airport expansions to boost national productivity. A pullback in investment would deliver a significant blow to these economic plans.
In a statement, Luton Airport urged the government to align its policies. "With airport expansion at the heart of the Chancellor’s growth mission, it’s important that all Government policies align to support this ambition," a spokesperson said. "Any additional tax burden is likely to impact future investment decisions." The airport confirmed it is participating in an ongoing Treasury review into how airport business rates are calculated, with the consultation due to end next month.
Shadow transport secretary Richard Holden criticised the government's approach: "You cannot build a pro-growth economy while taxing the infrastructure that keeps it airborne. Labour’s tax policy is risking jobs and making flying more expensive."
A government spokesperson defended the policy, highlighting a £4.3bn support package to cap bill increases at 30 per cent for the largest properties, including airports. They argued that without this intervention, increases could have reached up to 500 per cent.
Despite the warnings, the large expansion at Luton is still formally scheduled to proceed. However, the stark financial projections have cast a long shadow over its future, placing the Labour government's pro-growth rhetoric on a collision course with its tax policies.
