The Times : 17 February, 2003
By Ben Webster
NO NEW runways would be needed in Britain if aviation fuel was taxed at the same rate as motor vehicle fuel and air tickets were subject to VAT, government figures say.
The Government will start to consult the industry this month on a range of taxes and other economic measures designed to reduce the industry’s impact on the environment. Green groups say that the industry receives a hidden subsidy of more than £9 billion a year because of its exemption from fuel duty and VAT, and its receipts from duty-free sales outside Europe. They say that the industry’s tax status inflates demand by keeping air fares artificially low.
Last year the Government proposed building five or six new runways in Britain, including at least three in the South East, to cope with a predicted trebling in passenger numbers to 500 million a year by 2030.
Hundreds of thousands of homeowners face the blight of aircraft noise and pollution after ministers proposed a short, third runway at Heathrow, up to three more runways at Stansted or a new four-runway airport at Cliffe, in north Kent. A second consultation paper outlining options for one or two new runways at Gatwick will be published this month.
However, the Government’s growth estimate, published last July, assumed that air fares would continue to fall by 1 per cent a year because airlines would not be expected to pay any extra tax. The Department for Transport has produced another estimate after making new assumptions as suggested by a coalition of environmental groups, including the Council for the Protection of Rural England and Friends of the Earth.
If a 46p per litre tax on aviation fuel and 17.5 per cent VAT on fares were phased in over the next two decades, passenger numbers would rise by only 75 per cent, from 180 million in 2000 to 315 million in 2030. Existing runways have enough spare capacity to cope with this rate of growth, though not all passengers would be able to fly from their first choice of airport and many would have to travel further to fly cheaply.
Brendon Sewill, a former Treasury adviser and chairman of the Gatwick Area Conservation Campaign, said the new analysis showed that Heathrow would be full by 2030 with 85 million passengers, Manchester would become Britain’s second-busiest airport with 51 million, Gatwick would be near capacity with 41 million and Luton would have risen to 11 million. But Stansted, although doubling in size to 26 million passengers a year, would have plenty of room for growth.
Mr Sewill said that the extra taxes would have a minimal impact on fares because they would be cancelled out by the industry’s anticipated 30 per cent efficiency gains by 2030. However, bargain fares offered by budget airlines, which have forced economy class prices in Europe down by 30 per cent in the past year, would disappear.
Mr Sewill said fares would return to their 2000 levels but added that the analysis undermined claims by Alistair Darling, the Transport Secretary, that tickets would rise on average by £100 by 2030 if no new runways were built. “People would still be able to afford to fly but the growth in travel would be more modest,” Mr Sewill said. “The countryside would be saved and the Government would have £9 billion a year to spend on schools and hospitals.”
But Freedom to Fly, an aviation industry lobby group, said that the environmental cost of aviation was closer to £2 billion than £9 billion. A spokesman said: “It would be wrong to compare aviation and motoring taxation because fuel duty pays for the road network. Also, VAT does not apply to any form of public transport so it would be discriminatory to impose it on airlines alone.”
The industry says that British airlines would be disadvantaged unless a fuel tax was imposed internationally. While the US is opposed to any new aviation tax, the EU supports a green tax.
