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

Who depends on whom?

Yesterday bhx got their usual positive headline in the Birmingham Post "Birmingham Airport increases profits after cost-cutting" as they released their annual report.

Behind the spin we can see a picture of a business model that is not exactly going to be the jet engine which drives prosperity to Birmingham, but quite the opposite. In 2004, we showed that their predictions were faulty in terms of job creation and economic benefit:

"there are now about 1,000 fewer jobs than 1994 and there has been only a 20 per cent increase in the airport's contribution to the region's coffers over the decade."

This was after they had promised an 80 per cent increase in jobs over the decade from 1994 at both the airport and in related local industries and a 120 per cent growth in wealth generated for the West Midlands economy. Now this year they are boasting about reducing employee costs by 11% and cutting 75 jobs.

We have been sold the idea that the runway extension is vital for the region as it will bring employment and prosperity and that is why £25 million of public money is being put into subsidising it.

Now though, CEO Paul Kehoe says; "We need the economy of the West Midlands to start to recover faster than other regions. If the West Midlands starts to perform we will start to perform."

Isn't that the wrong way round? If we're putting tax payers' money into building new capacity for this environmentally damaging industry because it's so good for the economy and allows it to grow, why are they no longer promising to bring benefits, but relying on us to all start earning more and flying off to spend our money on flying abroad again (the numbers of flights was well down on last year again, as was turnover).

Are they finally admitting that the airport just takes money out and puts very little in?

Joe Peacock