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Government must rethink aviation strategy

The costs of airport expansion outweigh the economic benefits, new research by Friends of the Earth reveals today [1]. The environmental campaign group is calling on the Government to scrap its plans to allow airport expansion when it reviews progress on the White Paper later this year.

The Conservative and Liberal Democrat parties, who have both expressed concerns about Government aviation policy, have described the report as a valuable contribution to the debate.

In 2003 the Government published its White Paper, The Future of Air travel, which gave the go-ahead to a huge expansion of UK airports.  The then Transport Secretary, Alistair Darling, said “we need to plan ahead so we can continue to benefit from the economic and social advantages of air travel” [2].

But Friends of the Earth’s new report, “Pie in the Sky: Why the costs of airport expansion outweigh the benefits”, reveals that the benefits to the economy of expanding UK airports have been grossly exaggerated by the aviation industry and the Government, while the real economic, social and environmental costs have been practically ignored.  

Friends of the Earth’s research found that claims that airport expansion will bring enormous economic benefits are flawed for three reasons [3].

  • The economic benefits are exaggerated
  • The economic costs of environmental damage are ignored
  • The economic costs to other sectors of the economy have not been considered

Friends of the Earth’s economics coordinator, Simon Bullock, said:
“The economic case put forward by the Government and aviation industry for expanding UK airports is inaccurate and misleading. The economic advantages have been heavily exaggerated, while the costs to both the economy and the environment have been ignored. The reality is that the costs of airport expansion outweigh the benefits. The Government must urgently rethink its aviation policy and stop championing forms of growth that damage other economic sectors, people’s health and the environment.”

Chris Grayling MP, Conservative Shadow Secretary of State for Transport, said:
"I have real reservations about the Government's Aviation White Paper and the scale of expansion planned. It's no longer good enough to expand aviation purely in the name of growth. There are huge environmental implications if we expand our airports, and I don't think the Government's strategy goes anywhere near addressing these adequately."

Chris Huhne MP, Liberal Democrat Shadow Secretary of State for Environment, Food and Rural Affairs, said:
"The true cost of aviation must be taken into account with a charge on the emissions from each flight as this week's Liberal Democrat party conference has demanded. Higher green taxes would be offset by lower income taxes so that the more people change their behaviour the more they save."

Government plans to allow a massive expansion in air travel are causing mounting concern:

  • Last year the Tyndall Centre for Climate Change research published a report [4] warning that if aviation continues to grow at the current rate, it could account for 100 per cent of the UK’s emissions quota by 2050. This will make it virtually impossible to meet targets on tackling climate change as all householders, motorists and businesses would have to reduce their carbon dioxide pollution to zero.
  • An all-party committee of MPs, the Environmental Audit Committee, attacked the government’s aviation plans in June 2004. Its Chair, Peter Ainsworth MP accused the Government of being both "irresponsible and intellectually dishonest" in attempting to "massage down" warnings about emissions from air travel [5].
  • Research published by Friends of the Earth last year showed that the boom in flights from the UK's regional airports comes at a hefty cost to the economy, with some regions losing around five times more revenue than they gain from aviation [6].

Friends of the Earth’s climate campaign, The Big Ask, is calling on the Government to announce a new law in the Queen’s Speech calling requiring an annual reduction in UK carbon dioxide emissions. A climate law is backed by all the main opposition parties, most MPs and around three quarters of the public. See www.thebigask.com

Friends of the Earth is part of the Airportwatch coalition which is calling for the Government to undertake a fundamental Rethink of the aviation White Paper rather than just review progress on it later this year. see:- www.rethink.airportwatch.org.uk

Notes

1. A summary of Friends of the Earth’s report, Pie in the Sky: Why the costs of airport expansion outweigh the benefits, can be found at: www.foe.co.uk/resource/briefings/econ_aviation_summary.pdf (PDF)

 The full report can be found at: www.foe.co.uk/resource/briefings/econ_aviation.pdf (PDF†)

2. www.dft.gov.uk/stellent/groups/dft_control/documents/ ¬
contentservertemplate/dft_index.hcst?n=11653&l=2

3. The economic benefits of further expansion have been heavily exaggerated. On just one count - when more realistic assumptions around the cost of flying are put into the Government’s models, figures for net economic benefits largely evaporate.   Expansion also has major negative impacts on other sectors of the economy, which have been ignored. Of many such costs, two stand out. First the extra cost of climate change from airport expansion runs to over £20 billion. Second, the extra tourism deficit the UK will incur from new runways would mean well over a hundred billion pounds more leaving the UK economy in the coming decades.  More detailed information is in the annex below or see report summary: www.foe.co.uk/resource/briefings/econ_aviation_summary.pdf (PDF†)

4. www.tyndall.ac.uk/media/press_releases/tyndallpr21sep.pdf (PDF†)

http://www.publications.parliament.uk/pa/cm200304/ ¬
cmselect/cmenvaud/623/62302.htm

6. www.foe.co.uk/resource/press_releases/ ¬
airport_expansion_is_bad_f_03082005.html

ANNEX - Summary of "Pie in the Sky"
A fuller summary of Friends of the Earth’s report, Pie in the Sky: Why the costs of airport expansion outweigh the benefits, can be found at: www.foe.co.uk/resource/briefings/econ_aviation_summary.pdf (PDF†)

The full report can be found at:
www.foe.co.uk/resource/briefings/econ_aviation.pdf (PDF†)
Our analysis of the economic case for expansion is that it overstates net benefits in three main ways:

  1. Over-egging the pudding
    The economic benefits are exaggerated
    The claims made for the economic benefits of airport expansion by the Government and aviation industry are exaggerated. Their analysis:

    • Assumes that the cost of flying will continue to fall. However, it is doubtful that the price of oil will return to its 2002 price of $25 per barrel - it already exceeds $60 per barrel. It is also unlikely that the industry will continue to enjoy its current tax breaks of £9 billion per year as UK and EU politicians are already considering removing these huge tax breaks, or include aviation in the EU emissions trading scheme – which would have a similar effect on the cost of flying if the scheme is effective. Re-runs of the Government’s models with a constant rather than falling cost of flying show far lower figures for net economic benefits.
    • Often includes predictions of future benefits that will happen anyway, whether airports are expanded or not, such as those benefits coming from maximising the use of existing runways.
      • Overstates many components of the claimed benefits by counting:
    • Benefits that go to foreign passengers. As an example, for the proposed Stansted expansion these amount to almost £3 billion which should not be counted in an assessment of benefits to the UK economy
    • benefits that will only occur far into the future (between 2030 and 2060) and only in the unlikely event of the cost of flying continuing to fall
    • marginally slower future economic growth caused by not expanding airports as ‘a loss to the British economy’. In truth, GDP will still rise massively even if no new runways are built.
      • Ignores the fact that less spending on aviation does not mean money lost to the overall economy. Instead, it will allow more expenditure in other sectors.
      • Overstates the growth of employment opportunities associated with expanding airports and ignores the falling figures for jobs per million passengers, particularly relevant within the rapidly expanding budget airline industries.
      • Overstates the case that airport expansion encourages regional economic development.

  2. Turning a blind eye
    The economic costs of environmental damage are ignored
    Aviation is the fastest growing source of climate changing emissions. Even conservative estimates calculated by the Government put the total cost of aviation’s climate change impacts at £69.5 billion for the period 2000-2060, £20 billion more than the cost without expansion. This huge cost is ignored when aviation’s net economic impact is assessed. Other costs ignored are those associated with:
    • air and noise pollution
    • damage to built and natural heritage
    • damage to local communities e.g. the demolition of homes
    • additional road congestion

  3. Beggar thy neighbour
    The economic costs to other sectors are ignored
    Aviation imposes costs on other economic sectors which should be taken into account in any balanced analysis of the industry’s overall benefit to the UK economy. When assessing the economic benefits of airport expansion, the Government and aviation industry ignore the costs to:
    • UK industry: If the aviation sector expands as planned, it will need to buy an ever-increasing number of carbon permits when it is included – as planned - as part of the EU Emissions Trading Scheme, pushing up the cost of carbon. Unfair tax breaks and the lack of international competition may allow the aviation industry to absorb the costs, causing other sectors of the economy to be squeezed.
    • UK tourism: Although foreign visitors spent £11 billion in the UK in 2004, UK residents spent more than double this (£26 billion) during trips abroad. This creates an overall loss to the UK economy of £15 billion per year. If airports expand as planned, more people will holiday abroad which is likely to double this tourism deficit by 2030. The cumulative extra cost to the UK economy in the coming decades would be well over £100 billion .
    • The UK economy as a whole: The aviation industry benefits from tax exemptions amounting to £9 billion per year. Removing these exemptions would allow more spending elsewhere (e.g. hospitals and schools, or improving public transport) and/or lower taxes in other areas (e.g. employment tax).
    • UK horticulture: UK producers find it increasingly difficult to compete against cheap imports that are subsidised by artificially low air freight costs.
    • UK shipping and rail: Other transport sectors do not enjoy the same tax exemptions as aviation, causing artificial competition. For example, Irish Ferries recently announced 500 workers sacked, partly blaming pressure from low cost airlines.
    • Poorer sectors of society in the UK and overseas: In general it is better-off people who fly more and take advantage of cheaper flights. At the same time, it is poorer people who are more likely to suffer the effects of climate change, in the UK and abroad .
    • The UK balance of payments:
      • Around £3 billion leave the UK economy each year because of net spending on air transport services (such as air tickets).
      • Large amounts of capital leaves the UK as billions are spent on cheaper property and holiday homes in France and Spain etc.
      • Although aviation does promote investment in the UK, it is a two-way street as it also makes it easier for UK businesses to invest overseas.
      • Most aviation fuel is imported. The fuel used in 2004 was valued at around £2.5 billion – a price that will only increase with airport expansion.
    • Expenditure in other priority areas: UK taxpayers have paid and will pay millions to support airport infrastructure such as new or widened roads to serve Heathrow, Bristol and Doncaster airports. This is money which could have been spent on improving public transport in these areas.
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Published by Friends of the Earth Trust