Richard Branson's £5 Billion Heathrow Offer Rejected

The UK Transport Department made it clear that the Government was committed to developing a new aviation policy framework that would examine all the options with the "exception of a third runway at Heathrow."

Sir Richard made his offer in an interview with The Sunday Telegraph, coupled with a warning that thousands of jobs would be created elsewhere if there was no rethink with the emphasis on expanding in the American and Australian markets.

The Virgin Atlantic founder was not surprised by the ministry's statement but his offer raised the stakes in an issue that has seen business and union leaders unite on expansion at Heathrow.

Airlines and travel agents are today adding to the Government's aviation headache with warnings that passenger taxes are pricing families out of flying and are damaging the economy.

The heads of four airlines – IAG, the British Airways parent, easyjet, Ryanair and Virgin Atlantic – in a rare demonstration of unity say the latest duty increase next month will add up to £500 to the cost for a family to fly to Australia and £440 to the Caribbean.

The chief executives of the airlines – Carolyn McCall of easyjet, Willie Walsh at IAG, Michael O'Leary of Ryanair and Steve Ridgway at Virgin – urged the Chancellor to suspend increases planned over the next four years and commission an independent study into the "economic effects of this job destroying tax."

The warnings are backed by the publication today of a study suggesting the tax is costing 91,000 jobs and removing it would provide a £4.2bn boost for the economy. Research by the World Travel & Tourism Council blames the duty for the slowdown in tourism and travel and says the British tax is the highest of its kind in the world.

Passenger taxes, introduced by the Government both for environmental reasons and as a tax raising measure, will be included in the aviation policy review. A draft consultation document, promised in the spring, will "address the environmental impacts of flying" and "maintaining the UK's aviation hub status."

Critics argue that airlines and the travel industry are being subsidized because they are not meeting their full share of costs. Lobby group AirportWatch points out that airlines benefit from duty and VAT free fuel, a concession that was worth £11bn in 2010-11.