Flight tax (Airline Passenger Duty -APD) affects nearly all of us when ever we take a flight from the UK.
Flight tax was introduced in 1994 and has, like many taxes, risen sharply since its introduction. When first introduced passengers paid between £5 and £40. Now it is between £13 and £188 with further increases in the pipeline. How much you pay depends on the length of your flight and the class of your ticket (to qualify for the £13 rate lowest class rate, the seats must be spaced at less than 40 inches, otherwise it is £26).
It is opposed quite vocally by four major airlines, British Airways, Virgin Atlantic, Easyjet and Ryanair. Who are so opposed to it they have gone as far as co-operating with each-other to campaign for its abolition.
So what is it for?
The arguments for the tax centre on revenue, as the primary benefit, and environmental issues.
On the revenue benefit, as the UK is currently strapped for cash raising revenue is high on the Government’s agenda. APD is considered an important way of doing so, currently raising around £3bn per year. Any environmental benefits are a secondary. But amazingly it is only very recently that the treasury thought charge the passengers of private jets APD and even then any airplane under ten tones and with less than 20 seats is exempt.
The environmental campaign think that APD helps combat global warming. Richard Dyer of Friends of the Earth is quoted as stating: “Air Passenger Duty plays an important part in tackling aviation’s significant impact on climate change..” The logic being that the increase in the cost of traveling by air reduces its attractiveness to the consumer.
The argument against
The argument against, led by a powerful lobby by the four airlines, have centred around its negative impact for the British tourist (by which we can only think that they are referring to the negative effect on the airlines) and for tourism into the UK. In the past Michael O’Leary has been quoted as saying that 30 million less tourists over 5 years have come to the UK as a result of the tax. This sounds like a rather arbitrary figure, but in Ireland the tax has been reduced, due to fears of the negative impact on tourism.
Willie Walsh describes it as an “unfair tax on family holidays” and a “poll tax on flying”.
From an environmental viewpoint, the newer planes like the A380 and Boeing Dreamliner (when its teething troubles have been sorted out) claim significant reductions in fuel efficiency. The Dreamliner has been designed to be 20% more fuel efficient than the 767 it replaces and the A380 makers claim a decrease in fuel consumed per passenger and cargo when compared to the latest 747. Interesting in the case of the A380 if airports could accommodate a plane with longer wings, a 10% increase in fuel efficiency – and thus reduction in carbon emissions could be made.
A restructuring of the tax towards promoting fuel efficient aviation may have more kudos from an environmental perspective.
What is happening now?
In a recent salvo from the four airlines it was claimed that scrapping the tax would result in a net tax gain for the Government and the production of around 60,000 new jobs over the period of years from now to 2020. The boost to the UK economy could be as much as 0.46 of the GDP. In an economic environment where we are bumping along around zero and negative growth, this may seem quite attractive.
But the study, carried out by Price Waterhouse Coopers was paid for by the four airlines, so the results have to be viewed with this in mind.
On the environmental side, the Government’s position appears muddled. On the one hand, it appears to recognise that the demand for air-travel is continually rising and is in consultation to increase capacity of the airports in the UK to cater for that demand. Any rise in capacity will naturally, without improvements in the environmental efficiency of the planes themselves, increase carbon emissions. The current environmental benefit, if any, of taxation is simply in reducing demand. So are they really trying to cut tourism into the UK? Hopefully not.