Government Gives Aviation Too Many Favours – says IPPR

Stop Stansted Expansion has welcomed the publication of the Institute for Public Policy Research report ‘The Sky’s the Limit’ examining the future of aviation in the context of sustainable development.

In a statement issued on the eve of the report’s launch, Norman Mead, chairman of Stop Stansted Expansion said: “It is an outstanding piece of research and analysis by a highly respected organisation. It demolishes the Department for Transport’s arguments for building new runways and calls for an end to the Government’s favoured treatment of aviation through giving it widespread tax exemptions and failing to hold it accountable for the environmental damage it causes.”

Mr Mead added: “The IPPR report also demolishes the Department for Transport’s argument that aviation is universally beneficial for the UK economy and dismisses the notion that our European competitors are stealing a march on us. Alistair Darling should take this to bed with him instead of his aviation cronies.”

Meanwhile, Stop Stansted Expansion has produced its own report analysing the economic and environmental cost of the rapid growth in aviation and the tax breaks which the aviation industry enjoys. This concludes that ending the favourable tax treatment for the aviation industry would not only provide the Government with much needed funds to invest in public services but would also slow the rapid growth in air travel which is damaging both the UK environment and the UK economy.

The Essex-based campaign group’s report was prepared in response to an invitation from the Treasury for comments on its discussion paper ‘Aviation and the Environment: Using Economic Instruments” published in March.

“Although our report is full of detailed analysis, ultimately it distils down to four relatively simple points,” commented Norman Mead. These are as follows:

1. Aviation is virtually a tax free zone at present – exempt from fuel duty and VAT – and not subject to any form of emissions tax. The price of air travel is reducing every year with an air ticket to Alicante often cheaper than a local train ticket. It is small wonder that demand is rising so fast and that aviation is the fastest growing source of greenhouse gas emissions.

2. Meanwhile, if aviation was taxed at an equivalent rate to the motor car, it would be paying about £10 billion a year in taxes rather than the £1 billion it presently pays. Analysis shows that taxation of even £6 billion a year would slow the growth in air travel from 4% a year to a more sustainable 1.5% a year. Instead of demand increasing from 181 million passengers in 2000 to 402 million in 2020, it would increase to 244 million – which existing runway capacity could comfortably handle.

3. The increase in air fares would be relatively small. Instead of ticket prices reducing by 1% a year, it is calculated that they would increase by 1% a year, in real terms. The benefits to the environment would therefore be immense. Technology and efficiency improvements are expected to bring about emissions reductions of slightly more than 1.5% a year and so there would be a very real prospect of reversing the rapid growth in damaging aviation emissions. In addition, there would be no need to bulldoze people’s homes, listed buildings, ancient woodlands or wildlife habitats to make way for more runways.

4. There would also be economic benefits. The annual tourism deficit now stands at over £15 billion – a figure which is rising every year, fuelled by cheap flights. The UK balance of payments is also in substantial deficit on aircraft and on aviation services. The case for sensible pricing of air travel is overwhelming from almost every angle.”

The Royal Commission on Environmental Pollution and the Sustainable Development Commission have also recently published reports which arrive at similar conclusions to the Stansted campaign group’s findings and which further underline the IPPR’s recommendation that it is time to end the favoured tax position of aviation.

There is increasing pressure on the Government to rethink its aviation plans – currently the subject of a national consultation which ends in June. The Government intends to publish a White Paper on aviation by the end of the year.