AVIATION AND THE ECONOMY

Read this page and you'll see why the Regional Aviation Studies which led to the government 'White Paper' should be dismissed out-of-hand as economic gobbledegook.

Ludicrous claims about the economy
The studies make huge claims about the contribution of aviation to the economy. These claims need to be examined closely. They do not stand up to careful scrutiny.

Regional Air Studies based on flawed study
To prepare for the White Paper, the Government commissioned a study from the normally reputable Oxford Economic Forecasting (OEF) to look at the contribution of aviation to the economy. The study, The Contribution of the Aviation Industry to the UK Economy, was published in November 1999. It emerged that over 90% of the costs of the study were paid for not by the Government, but by the aviation industry. It is hardly surprising, therefore, that the study read more like a lobbying document for the aviation industry than an objective study, intended to inform an important national debate. See rigged study (archived file from 1999).

Contribution to the economy
The OEF study argued the industry 'contributes' £10.2 billion to the Gross National Product (1.4% of the total). But this is irrelevant to the debate on the growth of air travel. The fact that air travel is part of the economy does not mean that the economy would be smaller if there was less air travel. If billions of £s was not spent on flying, it would be spent on other goods and services.

Misleading estimates of economic loss
The OEF study went on to argue that many of the expanding industries are particularly dependent on air travel. It concluded that, if the number of passengers were not allowed to grow beyond 1998 levels, £20 billion would be lost to the economy by 2015. But this assumes that business travel would be constrained as much as tourist travel. Everyone, including OEF, knows that if there were constraints, it would be almost entirely unnecessary leisure travel that would be constrained. Essential business trips would be unaffected.

Ignoring subsidies
OEF ignored, and failed to factor in, the considerable subsidies the industry receives. Yet the overall tax subsidy to the aviation industry is estimated at over £9 billion per year - see aviation and tax briefing. The word "subsidy" does not appear once in the study. Any student of economics knows that subsidies distort the economy and can lead to a reduction of economic welfare. This was confirmed in an independent report by consultants Berkerley Hanover, commissioned by the local authority group, SASIG. It is nothing short of outrageous that a group of 'professional' economists in OEF should ignore this vital issue.

Environmental and social costs
There are large environmental and social costs imposed by aviation. These amount to more than £10.5 billion per year across the European Union and over £2 billion pa in the UK. The OEF study made no mention of these costs, despite the fact that they are critical when assessing the economic impact of aviation.

Fictitious links between aviation and the economy
The OEF study ignored its own findings that they may be no link between aviation expansion and economic performance and went on to base the whole report on the assumption that there was one ! The report estimated that, for transport as a whole, every 10% increase in the provision of transport services in the UK between 1979 and 1998 increased overall productivity by 1.3% - about £800 million a year. From this false assumption, all OEF's predictions flowed about the contribution of aviation to the economy.

Hyping up benefits - ignoring costs
The OEF study and the regional aviation studies take every opportunity to talk up possible economic benefits of air travel, while ignoring the corresponding costs or dis-benefits. For example, they talk about the economic benefits of bringing foreign tourists into the UK. But they fail to mention the much greater costs to our economy of UK citizens flying abroad. See aviation and tourism briefing. They talk about the benefits of foreign business people bringing investment into this country. But they totally ignore the cost to the economy of UK business people taking money and investment out of this country.

Conclusions
The Regional Air Studies are based on a flawed study commissioned by the Government but paid for by the industry. It is so flawed that it undermines all claims the Government may make about the aviation industry contributing to employment, the economy and economic regeneration.

The OEF Study was criticised by respected economists and lobby groups. Many called for the study to be withdrawn. Instead, government civil servants commissioned OEF to do the economic studies that accompany each of the regional aviation studies !

Links to more detailed pages on economics and the air studies

Links to related pages