Airport retailers must cut their prices, ministers have said after it emerged that they are pocketing millions in VAT discounts on duty free items by making passengers show their boarding passes at the checkout.

The vast majority of shops in airports demand that passengers present their boarding cards to be scanned at checkouts before paying for goods.

Many passengers assume that the demand is a legal requirement, but the information is actually used by stores to avoid paying 20 per cent VAT on everything they sell customers travelling outside the EU.

Some of Britain’s biggest retailers including Boots, Dixons and WHSmith have been accused of failing to pass on the savings to customers. By contrast Harrods sells all its products duty free in its Heathrow stores.