Thursday, 27 October 2011

Is Aviation a Net Contributor to the Exchequer?

Twitter is not the place for complex arguments about economics, but we were challenged by John Morris from Birmingham Airport over what we said in the Birmingham Post about the claims that the airport is good for our economy today.

We have produced an in-depth report for the DfT's consultation on aviation, which revealed that last year aviation was responsible for a net loss of over 85 000 jobs in the region, so obviously they were not happy with such a negative story going in the press at this sensitive time.

John Morris claimed that "aviation is a net contributor to the exchequer, unlike other public transport." so let's examine that a little:

Firstly, the UK needs some aviation so shutting it down does not make sense, but the benefits aviation can yield have already been realised and further expansion yields little extra benefit, but a lot more costs including more noise, more emissions and more outbound tourism. The business benefits are flattening off (as probably evidenced by the business share of passengers dropping as passenger numbers increased overall) but the outbound tourism costs are linear with increase of passengers.

Secondly, let's look at what a "net contributor" is and on what basis this can be claimed. He implies that they receive no revenue from the government but instead pay some tax including APD. However, they also forego payment of tax and duty on fuel, VAT on tickets, and can claim back VAT even though they don't pay it (zero rated rather than VAT exempt). They also receive subsidies in other forms (e.g. they rarely pay for the full costs of extra surface access infrastructure that enables passengers to get to the airport). So they can only be a "net contributor" if you ignore all the ways in which they are not taxed and the ways in which the government pays costs that rightly should be paid for by the aviation industry.

Thirdly, aviation is not a form of public transport by any reasonable definition, so you cannot compare it as like-for-like with trains, trams or buses.

I'm afraid they really don't understand what planet we're on:

Joe Peacock


Anonymous said...

Why isn't aviation public transport?
Other public transport gets similar tax breaks...would you take it off that too, and if not, why not?
As the Airport has all planning consents and can grow beyond 27 million passengers, would you really see other new developments elsewhere, and jobs leave the Midlands?
How come nobody else, apart from other career activists, seems to agree with you? If we are so bad for business, how come business supports us?

John Morris

Anonymous said...

And another thing. Has anyone calculated what the growth in cheap (subsidised) holiday flights has cost in both jobs and revenue in this country?

Anonymous said...

When you find a cheap, subsidised flight, let me know!

Birmingham Friends of the Earth said...

Ok John, the only thing aviation has in common with trains and buses is that the passengers sit in rows, and face (generally speaking) the front.
Public transport is deemed to be what the ordinary person needs to go about their necessary daily business, getting to school, work, hospital, the shops, important local services etc. That is the reason why buses and trains do not pay VAT.
Cars are deemed to be a personal choice. Hence the fuel tax etc.
Planes are also deemed to be a personal choice. You do not need them to get your daily shopping or get to a job.  Hence the taxpayer is not required to subsidise them in the same way, as not being in the same way a public good.
We are not advocating restricting people's right to travel, only to travel by a means that is not paying tax at the right level.
We are protecting the rights of people who will be unfairly affected by the noise and air pollution cause by aviation. We have always been consistent on this and other aspects on environmental justice and sustainable development, such as living within planetary boundaries and not damaging the rights of people all over the world now and in the future to enjoy the same quality of life by using up all the resources and polluting the atmosphere.
Aviation fuel costs around 44p per litre, and petrol costs 124p per litre (or did in December last year),so in a world where oil is running out, do you really feel it is fair that the use of fuel for air travel is subsidised to this extent?
As for jobs leaving the Midlands, we completely disagree that it would be the case and we argue against public subsidy into any airport; we are not just being NIMBY about this one.
While some high profile business people buy into your arguments about the benefits, it is by no means all, hence the 3rd runway at Heathrow being cancelled. WWF have released a report on why flying less means more for business, which has been well received by many top business people:
Large companies are signing up to reduce the numbers of flights they take now and technology is making it much easier to conduct business without always having to travel.
As mentioned already, business flights are a small proportion of those taken, as most are for leisure purposes.

Joe Peacock

Anonymous said...

Joe. We may never see eye to eye on this, I suspect. What is most telling for me is that you have unilaterally decided on a definition of public transport. I suspect this is more to do with some sort of class envy than a carefully formulated environmental argument.

Many 'ordinary' people use flights for their holidays abroad, or to visit family overseas. In future what would they do under your regime?

Many 'ordinary' business people fly because it offers a more cost-effective option, compared to rail, where some prices are kept high to manage capacity (a problem likely to get worse until HS2 delivers more capacity).

Aviation accounts for just 2% of global Co2 emissions. It may be a minor problem, but aviation has a plan to reduce emissions...just look at the new Boeing 787 Dreamliner and the improved fuel consumption.

I have no doubt that you have a real concern for the planet...but aren't there 7 billion more pressing problems?