Lord Jones, the outspoken trade minister, has attacked a government plan to raise £2.5 billion through a green tax on flights, claiming that it will damage competitiveness.

His criticisms, made in a private letter last month to Angela Eagle, the Treasury minister, are a further embarrassment for Labour over tax policy.

Last week the government admitted proposed changes to vehicle excise duty would leave 43% of motorists worse off. This followed earlier rows over the abolition of the 10p tax band, changes to capital gains tax and reforms of nondomicile rules, a measure Jones also criticised when it was first mooted.

Jones’s letter to Eagle was sent on June 6, six weeks after the Treasury closed its consultation on the tax, which will replace air passenger duty (APD).

Senior aviation industry sources who have seen it said Jones warned that the tax would damage Britain’s “international competitiveness” and “our ability to attract inward investment.” Both areas are part of his remit as trade and investment minister.

He also drew attention to the possible risk of air freight companies such as Federal Express and DHL moving large-scale operations out of Britain.

The Treasury confirmed that Eagle had received the letter but declined to comment further. A spokeswoman for Jones said: “We do not comment on leaked documents nor on the content of private correspondence between ministers.”

Digby Jones, a former director-general of the Confederation of British Industry, was made a minister by Gordon Brown last July in his “government of all the talents” to appoint experts from outside the Labour party. Jones was made a peer and given the trade promotion portfolio but he has not become a member of the Labour party.

The flight levy, which the Treasury says will help to reduce greenhouse gas emissions, is proposed as a replacement for APD which has been in place for more than a decade. The duty was doubled last year, with passengers paying up to £80 for a one-way trip.

The Treasury wants to change the basis of the duty, moving it from individual passengers to a per-plane basis – including freighters, which are excluded from the scheme. This will raise £2.5 billion a year by 2010, £500m more than APD.

The tax switch, scheduled for November next year, is opposed by many in the aviation industry who say it will penalise flights using British airports and drive away both freight and passenger business.

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