Holidaymakers face higher air fares after John Healey revealed a new 'green tax' on imported fuels could apply to jet fuel.

The Chancellor unveiled the proposed expansion of a Net Zero 'carbon charge' on refined oil products in yesterday's Budget, which also threatens to push up prices at the pumps for drivers.

A consultation slipped out yesterday admits the new levy – known as the 'carbon border adjustment mechanism' (CBAM) – could push up prices for households.

It states: 'CBAM could affect prices paid by importers, distributors and end-users of CBAM goods – and in this case, for fuel products widely used throughout the economy, including supply chains and households.'

Under current rules, British refineries face millions of pounds in Net Zero expenses that their competitors do not, allowing imported fuel to undercut domestic industry.

But the proposed CBAM would subject imported fuel to some of, or the same, Net Zero costs as domestically refined fuel, aiming to 'level the playing field'.

The CBAM will apply to five sectors from January 1 next year – aluminium, cement, fertiliser, hydrogen and iron and steel.

But the consultation proposes extending this to products like petrol, diesel and jet fuel. The UK is a net importer of diesel and jet fuel, meaning the cost of these could soar and would ultimately be passed on to consumers.

Airlines UK boss Tim Alderslade said: 'The Budget has delivered yet another blow to airline passengers by not only further increasing passenger taxes which are already the highest in the world, but now proposing to extend costs on imported jet fuel, which the UK is highly reliant on.

'This will hit passengers at the worst possible time, pushing up fares and further eroding the UK’s competitiveness as an aviation hub that supports critical connectivity and jobs, and so we urge the Government to think again.'