George Osborne said he would scrap a tax charged on children flying out of the country, making it cheaper for families to travel.
From May 1 next year, air passenger duty (APD) will not be charged on children under 12 and from 2016, it will be abolished for all under-16s.
APD is a tax of between £13 and £194 depending on flight distance and class of travel charged on each passenger leaving the country, and which the airline industry says has a negative impact on the economy.
It is estimated the move will help to reduce the cost of holidays for families by up to £71 per child.
“I want to reduce the cost of those tickets for families,” Osborne said.
The announcement comes days after Scotland was given the go-ahead to slash its APD if it chooses to under proposals made by the Smith Commission potentially giving Scottish airports an advantage over rivals south of the border.
Flybe Chief Executive Saad Hammad welcomed the change but said more needed to be done.
“This is just tinkering at the edges and represents a missed opportunity by The Chancellor to show that he is serious about the economic regeneration of the UK regions,” he said.
He added: “The Smith Commission’s recommendations to devolve APD to the Scottish Government shows progress, and we believe its implementation would demonstrate the benefits of cutting or abolishing the tax to other nations or regions within the UK, which in turn would deliver a balanced economic recovery.”
Bmi regional chief executive Cathal O’Connell welcomed the announcement but confirmed the industry’s fight against the tax is far from over.
Mr O’Connell said: “The abolition of the tax for travellers under 12 years of age shows that the Government has finally woken up and recognised the punitive effects of APD. This is a step in the right direction, but our fight against this unfair tax must continue.
“We believe that APD – the highest such tax in the world – is holding back economic development, preventing investment and discouraging visitors.”
He added: “The fight against APD, which has risen by up to 160% since it was introduced 20 years ago, is not over. Following the suggestion by the Smith Commission that a devolved Scottish Parliament should control APD – and therefore have powers to shrink or scrap the tax – we urge a reassessment of the whole issue.”