The tax avoidance breaks down as follows:

• No fuel tax £5.7bn
• No VAT £4.0bn
• Duty free £0.4bn
• Total subsidies £10.1bn
• Less Airport Passenger Duty (APD) £0.9bn

Net tax avoidance   . . .   £9.2 billion pa

No justification for tax exemptions

If aviation paid its way, £9.2 billion more would come into the Treasury. The basic rate of income tax could be cut by about 3p in the £. If the government wanted to help poorer people even more, it could instead cut over 7p off the starting rate of income tax. If Government is accurate in its forecast that air passenger numbers will increase by a factor of 2.5 over the next twenty years, then the value of the tax exemptions will have increased from £9 billion to £16 billion pa.

Alternatively, more could be spent on public services. The extra £9 billion could be available for extra spending on public services. Health, education and social services are all in desperate need of more funds. Is it right that they should be deprived while the luxury of flying to Prague for the weekend remains virtually untaxed ?

The better-off gain the most from these missing taxes. People with higher disposable incomes fly more frequently than people with lower disposable incomes. A Mori Poll, commissioned by the industry pressure group Freedom to Fly, published in 2001 showed that 2 out of 5 people had made a trip by plane in the last 12 months, but those most likely to have flown were people earning over £30,000 pa.

People on lower incomes would gain the most if the missing tax was available to be spent on improving hospitals, schools and public transport.

It should be remembered that Flying is a luxury, not a necessity. 80% of trips are for leisure purposes. Like all luxuries, flying should be taxed. Why should pensioners pay tax on fuel, a winter necessity, while the better-off pay next no tax when they fly off for a holiday in the sun or a weekend in Paris ?

Business travel is least likely to be affected by higher taxes. Only 20% of air travel is for business. Typically, business travellers already pay high fares. The demand for business travel depends on whether the financial gain from a flight is worth the cost of the ticket. That equation would not be altered by an increase in the price of air tickets due to additional tax on air transport, because the increase would not be significant compared with the existing costs of business travel and doing business generally.

West London's share of the revenue

If this tax were collected on air transport, it could make a major contribution to improving public services and even alleviating poverty. If, for instance, it were distributed among boroughs across the UK on the basis of their population, the share due to the boroughs in West London would be :

External costs

A key issue for environmentalists, academics and others is that air transport should pay its 'external costs'. These are costs that air travel imposes on society as a whole, but for which there is currently no recompense from the industry or its customers to those affected. Examples of external costs are noise, air pollution, greenhouse gas emissions, loss of countryside and road congestion. Even the government has stated that air transport should pay its external costs. (A more well-known expression for paying for external costs is the 'Polluter Pays Principle', but external costs also include items such as congestion and danger.)

It is far from easy to calculate costs for these impacts, but there are precedents for doing so and there is now an extensive body of research. The AEF estimates that the external cost of air transport are currently between £2 billion and £4 billion pa. Although these costs should be paid, we do not claim that they ought to be added to the tax of bill of £10.2bn. This is because the fuel tax proposed can reasonably be considered to include an element of external cost. This is analagous to the tax on petrol, where government considers that part of the tax is recompense for the external cost (the rest is simply revenue raising).

In fact, the last major study carried out - The True Costs of Road Transport (Maddison et al, 1996) - found that the total motor vehicle tax paid did not cover the external costs of road traffic. This is despite the perceived high tax on motorists. If motorists are not paying the real costs, how much more are air travellers avoiding their dues ?

No new runways or airports required !

The thrust of the entire airports consultation is to show how important it is to hugely increase airport capacity. To that end, the airports Consultation Documents (CDs) consist largely of evaluating a series of options for exanding existing airports and/or building new ones. However, all the alleged benefits depend on an assumption that air transport continues not to pay its external costs or its fair share of taxes.

The government has carried out further computer modelling that shows that if taxes were played, there would be no need for any new runways, let alone new airports. This completely alters the situation. Instead of debating where the extra capacity should go and how to minimise the impact, the debate should now be focussed on whether any extra capacity is needed at all. The public unrest and protests, caused by the publication of the airports CDs, could be defused. For more information, see the publication The Hidden Cost of Flying, available from AEF (contact below).

Further information