Archived press release

UK taxpayers 'subsidise' airlines by 300 each every year

13 March 2006

UK Taxpayers are effectively subsidising airlines to the tune of £300 per person every year, new research by Friends of the Earth reveals today [1].

The UK airline industry receives an effective subsidy of £9.2 billion a year [2] because airlines pay no tax on fuel used, virtually no VAT and benefit from duty free. Because of this, other taxes like income tax and national insurance have to be higher. This effective subsidy makes it possible for low cost airlines to offer such cheap fares.

Friends of the Earth is calling on the Chancellor, Gordon Brown, to increase Air Passenger Duty (APD) in this month's Budget to start to address the impact of increasing passenger numbers on climate change. Aviation is the fastest growing source of carbon dioxide, the principal gas that causes climate change. UK aviation emissions grew by 12 per cent in 2004 alone [3]. The call is part of Friends of the Earth's climate campaign, The Big Ask [4]

The environmental campaign group says that the Chancellor must increase Air Passenger Duty (APD) by £10 as an interim measure pending the introduction of other environmental taxes. This would raise an additional £900million per year and stop the current real-terms fall in the cost of flying and slow down growth in the number of air passengers. Despite a number of promises to make aviation pay for its environmental impacts, APD has actually been cut under Gordon Brown [5].

Friends of the Earth's Aviation Campaigner Richard Dyer said:

"Each UK taxpayer is effectively subsidising the aviation industry by £300 a year. It's little wonder that air fares are so cheap. The Chancellor must put an end to these unfair and damaging tax breaks, and take action to make airlines pay for the impact that their activities are having on our climate. Increasing Air Passenger Duty in the Budget would be a welcome first step to reducing the growth in flights which threaten environmental disaster."

Passenger numbers using UK airports rose by eight per cent in 2004 to 217 million. Since 1987, passenger numbers have doubled at London airports and tripled at regional airports. The Government forecasts that passenger numbers could more than double again by 2030 [6]

Aviation - UK domestic flights and international departures from the UK - is responsible for around 6 per cent of the country's total carbon dioxide emissions.

Last year the Tyndall Centre for Climate Change research published a report [7] warning that all householders, motorists and businesses will have to reduce their carbon dioxide pollution to zero if the growing aviation industry is to be incorporated into Government climate change targets for 2050.

Airlines claim that increasing the cost of flying would stop poorer people flying. However three-quarters of people using budget airlines are in social groups A, B and C - the better-off in society, so raising APD is progressive taxation [8].

Notes

[1] Average calculated thus:- £9.2billion effective subsidy divided by no. of UK tax payers, 29million

[2] Calculation of the effective subsidy

No tax on fuel: the Treasury stated in 2002 that if airlines paid duty on aviation fuel at the same rate as that paid on petrol - then 45.8 pence per litre - this would raise £5.7 billion a year. Tax on petrol has since risen slightly to 47.1 pence per litre

Very little VAT: airlines pay no VAT on purchase or servicing of aircraft, fuel, baggage handling, meals etc. Nor is there any VAT on airline tickets. Charging VAT on all flights leaving UK airports would rise around £4 billion a year

Duty free: although abolished within the EU, duty free on flights outside Europe remains, and costs the Government around £0.4 billion a year

Air Passenger Duty: this brings in £0.9 billion a year

Virtually no VAT £4.0 billion

Duty free £0.4 billion

Total £9.2 billion

[3] DEFRA figures

[4] As part of it's the Big Ask campaign, Friends of the Earth is calling for a new law that would require the Government to cut UK carbon dioxide emissions by three per cent every year. The measure has the support of the majority of MPs in the House of Commons. More info www.thebigask.com

[5] Most rates of APD have remained the same under Labour (thus falling in real terms) the rate for European economy class flights was cut from £10 to £5 in 2000

[6] Information from CAA press release 25/04/05

[7] www.tyndall.ac.uk/media/press_releases/tyndallpr21sep.pdf (PDF)

[8] `The Sky's the limit' - IPPR 2003

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Published by Friends of the Earth Trust