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Regional airports seek tax change to boost traffic levels

A new rift has emerged within the aviation industry over taxation of air tickets. To coincide with the close of a government consultation on Air Passenger Duty (APD), a group of regional airports has announced that it is calling for an additional charge to be imposed for use of congested London airports, specifically Heathrow and Gatwick. Airports such as Manchester have failed to achieve the levels of growth that they had hoped and planned for, and they are calling for help in filling some of their spare capacity.

APD, levied on all flights departing from UK airports, was first introduced in 1994 to help account for the fact that no tax is levied on aircraft fuel. Yet APD falls a long way short of fully offsetting this benefit. While the total tax take from APD in 2011-12 is forecast to be around £3 billion, in October 2009 the Treasury estimated that if airlines paid fuel duty at the same rate as motorists, and if VAT was applied to air tickets, the Government would raise an additional £10 billion per year – an effective subsidy which, given increases in VAT and in fuel costs, is probably now closer to £12 billion.

AEF would support steps towards closing this gap. Any measures that resulted simply in a redistribution of aviation activity, however, would similarly redistrubite their environmental impacts. For a congestion charge to deliver any environmental benefits, it would, like the London congestion charge on road users, need to be set at a level that encouraged people to make greener travel choices, and not simply to switch airports.