September 30, 2010
A new study shows just how much of our balance of payments deficit is due to well-off people holidaying abroad and how equalising aviation with other taxes would help both our economy and poorer people.
An argument constantly used by the aviation industry and by some politicians is that we should not put up the price of air because that would stop poor people flying. We have never accepted this argument, knowing from CAA statistics that it is mainly better-off people who fly anyway. Research by Airport Watch and Friends of the Earth member, Jeremy Birch, has brought together statistics from a range of sources and the analysis overwhelmingly confirms our view.
* The tourism deficit has risen rapidly over the last decade to some £12 billion pa (but fell back due to the recession in 2009).
* The best off 10% of households accounted for 38% of the deficit on tourism. This is more than the lowest 7 deciles, ie the poorest 70% of households.
* Socio-economic classes D/E account for 33% of the population but only 10% of air travel.
* A/B/C1s accounted for 65% of leisure flights in 1987 and 73% in 2004.
These statistics show that (artificially) low air fares have not ‘democratised’ air travel. They mainly – and increasingly – benefit well-off people.
While air travel is only part of the foreign holiday ‘package’, it is clear that low air fares are a major contributor to the tourism deficit. But, as constantly emphasised by AEF, air travel is, in effect, subsidised because it avoids taxes such as fuel duty, VAT and environmental charges.
Birch recommends that the price of air travel is raised, either by increasing APD (air passenger duty) and/or by imposing environmental charges. Poorer people (as a group, not individually) would be rebated by using some of the revenue raised to offset the extra cost of the few flights they do make. But because they make only a small proportion of flights, most of the revenue would be available for other purposes.
He suggests that some of the revenue is used to support the British tourist industry. But it should be noted that the British tourism would be helped by higher prices for air travel, even without such support, because UK citizens would holiday more in the UK if tax imbalances were removed.
Birch suggests that the remainder of the revenue could be used to pay off the deficit. This and the benefits to the UK tourist industry would be a boost to the UK economy in these troubled times.
AEF wants to ensure that politicians base their policies on evidence rather than propaganda from the aviation industry. We were therefore disappointed to hear new Labour leader Ed Miliband argue that aviation growth should not be constrained (Guardian article).
Such a position implies that either other sectors should make up for aviation’s shortfall with even bigger cuts in emissions or that we will fail to meet our climate targets.