What’s wrong with increasing taxes on flights?
I will start the Flightmapping.com blog on the hotly debated topic of the recent doubling in Air Passenger Duty (APD).
Nothing wrong with “polluter pays” principle
Before I launch into my tirade against Gordon Brown, and his hugely ill judged tax raid, I should start by saying that I have absolutely no objection whatsoever to the “polluter pays” principle, or to the broad notion that the aviation industry needs to do more to clean up its act. Furthermore, I might derive most of my income from the sale of flight tickets, but I don’t think that my involvement in this industry should give me any reason to bury my head in the sand on what is clearly a very important topic. And, just for the record, I do think more should be done to encourage a modal shift from short-haul flights to high speed trains, and often travel by train up to Scotland, when I could perfectly easily fly.
So, why do I feel so strongly about the recent increase in APD, when all that Gordon Brown has done is restore this tax back to the levels that it was at when Labour came into power in 1997? Considering how many other stealth taxes have been introduced, wasn’t it always an anomaly that flights were one of the few things which had effectively been de-stealthed?
Bad application
Gordon Brown’s first major folly was to announce a rise in APD, and then to apply the extra charge immediately to all flights from February 1, including those which had already been booked. There is no plausible explanation for the necessity to apply the APD rise with such haste. It worryingly smacks of extreme government desperation for extra cash, and it has also created a totally unnecessary sense of ill feeling amongst both airlines and passengers, who are having to stump up extra money for flights they reasonably believed had already been paid for. To borrow an analogy from Easyjet’s managing director Andrew Harrison, this state sponsored thievery is no different to the manager of the local off-licence calling round to your house, and demanding £1 for every bottle of beer or wine you have bought from them, but have not drunk yet.
Bad timing
Environmentalists have often been heavily critical of airlines for not wanting to address the environmental impacts of their emissions, and for a long time, these criticisms were entirely valid. However, over the last few months, many of the UK’s major airlines have started to respond to public opinion, and to work together on a number of different schemes to offset their carbon emissions. Some tour operators had also been looking at voluntary carbon offset payments to add to their booking processes, whereas the no-frills airlines had tended to concentrate on extolling the virtues of their ultramodern, highly efficient fleets.
Whilst it might be perfectly true to say that airlines have been dragging their feet on these issues, discussions between them and the Department for Environment, Food and Rural Affairs (DEFRA) were clearly very well advanced at the time that the APD increases were announced, but Brown’s short sighted idiocy has totally scuppered these delicate negotiations. The airlines have now called off the talks with DEFRA, and we are left with the worst possible scenario – passengers being rinsed of huge amounts of cash, little of which will go on green causes, alongside bitter airlines who feel they are paying more than enough for any environmental damage they cause.
Bad reasoning
The typical carbon cost of a one way European flight is in the region of £1 (if we go by DEFRA’s own figures). With APD now set at £10 on European flights (giving a 1000% markup to the government), it should be perfectly clear that the recent tax increases have been brought in for the sake of swelling government coffers, with the environment being used as a convenient smokescreen.
By all means, it is perfectly reasonable that a largely discretionary commodity like airline tickets should make a fair contribution to the general Exchequer, but airline passengers should not be deceived in any way shape or form into thinking that this is done for environmental reasons.
Some anti-aviation campaigners have often wondered why flight tickets are not subject to VAT. Whilst much of the reasoning for this goes down to the international nature of most air travel, there have been some moves within Germany to levy VAT on domestic flights. Whilst this sounds like a perfectly plausible suggestion, environmentalists conveniently forget that domestic flights are already disproportionately taxed, and APD is applied on the return journey as well as the outbound flight. Airlines will also readily point out that comparisons between the cost of aviation fuel, which bears no duty, and the petrol or diesel used in cars, are not entirely fair, considering that no other form of public transport pays fuel duty either.
Bad for the environment
The basic environmental theory behind increasing APD is that by making flights more expensive, people will be less inclined to travel by air, and that the “rapacious” demand for cheap flights can then be curtailed. Whilst this argument might be true in a broad sense, any seasoned commentator on this issue will easily point out how tax increases alone are an extremely blunt instrument. Airlines like Easyjet have also repeatedly called for the hypothecation of these taxes, i.e. that revenue raised from air passenger duty should be used towards environmental improvements. Whilst there will never be a perfect taxation system (notwithstanding the fact that emissions trading also has its flaws), there are a number of very legitimate concerns about the current application of APD, namely:
- Discrimination against the UK tourism industry, and the shortest flights. UK domestic flights now attract a duty of £10 each way - which works out at a whopping £80 for a family of four to travel from Belfast to London for the weekend. This means that, in addition to the existing perceptions about it being expensive to stay in the UK, there is an even greater financial incentive to take flights to more distant destinations within Europe.
- There is no accounting for more efficient aircraft. Unlike road duty, APD is applied at a fixed rate, whether passengers are travelling on a full Flybe Q400 from Birmingham to Edinburgh, or a half empty and ageing KLM Fokker 70 from Glasgow to Athens via Amsterdam. The latter might produce up to ten times the emissions, yet the former is taxed at the same rate - and as if that wasn’t enough, taxed again on the return journey!
- Damage to emerging markets. The definition of long-haul is based on continental boundaries, rather than flight duration. This particularly penalises emerging economies like Morocco and Egypt, which are only marginally further away from the UK than Spain or Greece respectively.
- Unfair scapegoating of airlines. Whilst it might be true that air travel generally causes more emissions per mile travelled than other modes of transport, these differences are often over-exaggerated, especially considering the relatively high rates of occupancy on most no-frills airlines, compared to intercity trains, which often run half-empty outside of peak hours.
Bad precedent
If our bookings for January are anything to go by, then these latest APD changes have done little to dampen the public’s enthusiasm for cheap flights. No doubt environmentalists and politicians would argue this justifies even more tax rises, rather than trying to think through a more coherent long-term green policy. Considering that both global warming and air travel are inherently international issues, then we really do think this is one area that countries need to work together on.
With the newly re-branded Conservatives trotting out the “go green, vote blue” mantra, we have every reason to suspect that flights will be an easy target for both Tony Blair’s immediate successor, and for whichever government holds the reins of power after the next general election. The environment is clearly going to be more of a winner than it ever has been, but no politician should pretend that all environmentally conscious voters have windmills on their roofs and cycle to work.
Countless surveys have shown that most people will accept paying more for commodities like flights, if that means that the extra revenue raised will be spent on environment projects, but politicians should also not forget just how much the no-frills airlines have truly democratised the skies, and brought about many travel opportunities which have never previously existed.