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

Tax cuts for the most under-taxed??!!

I was amazed to find Jerry Blackett calling for airport taxes to be cut in the Birmingham Post on March 14. How unfortunate it is that at a time when people are losing their jobs and facing tax rises on everyday items he should be defending the already under-taxed aviation industry.

The figures he quotes for losses to the economy are dwarfed by the subsidies the aviation industry already receives and the money that is taken out of the economy by people flying abroad.

VAT has just gone up to 20%, as people must be very aware, yet how much VAT does the aviation industry pay? None on anything! They don't pay VAT or any other tax on fuel, they pay no VAT on buying aircraft, servicing of those aircraft or meals served on aircraft. With this lack of taxation, public money being proposed to be put into paying for Birmingham Airport's runway extension and no suggestion that the industry is liable for the environmental damage it causes, in fact they get a very good deal indeed.

Compared to car travel, aviation benefits from an annual tax subsidy of around £9 billion and how many people actually benefit from this? The country suffered from an annual tourism deficit of over £15bn in 2009, down significantly due to the recession. Perhaps a further adjustment is needed for people to spend more money in this country and bring more money into the treasury.

At a time when people are losing their jobs because of cuts to public services, we should not be giving any further money to activities that benefit so few people. The majority of people don't fly and would rather that those who do pay their fair share of tax.

See Fair Tax on Flying for more info

Joe Peacock