Cutting tax on domestic routes which have reasonable lower carbon alternatives sends the wrong message on climate

16th June, 2021

AEF has responded to the government consultation on aviation tax reform which closed on Monday 14th June. The consultation primarily focused on the Government’s proposal to reduce air passenger duty (APD) rates on domestic routes. It was implied – but not stated – that any losses would be balanced out with increased costs on some international routes.

AEF expresses opposition to any reduction in taxes for an already under-taxed industry. For an industry which pays no fuel duty or VAT on tickets, APD is already too low to ensure that airlines make a fair contribution to public finances. Government should be looking at tax increases, not decreases, we argue, particularly given that flights are disproportionately taken by people on higher incomes. 

Whilst we acknowledge that domestic aviation is responsible for only a small proportion of total aviation emissions, AEF highlights that lowering APD on domestic routes signals that the Government is not taking the climate crisis seriously. It gives the wrong public message when there is a unique window of opportunity for the Government to influence behaviour post-pandemic, and in the run up to the UK hosting the UN Climate Change Conference COP26 later this year. Such cuts should not be considered, we argue, in the absence of the Government’s net zero aviation policy consultation, which is yet to be published. 

We also express concern about the local environmental impacts, including noise and air pollution. This could increase as a result of encouraging people to fly domestically through lower taxes. Domestic flights will also overfly more people per kilometre flown than international flights, we highlight.

Alternatives to lowering APD that could help address the Government’s concern about differential treatment for flights between the UK and Belfast compared with flights to Dublin, AEF suggests, could include:

• Retaining the current rate for all domestic journeys but increasing it for international routes;
• Retaining the current rate for all domestic journeys that cannot feasibly be made by rail (e.g. if the rail journey can be made in a given time limit) but increasing it for international routes;
• Retaining the current rate for domestic journeys, but providing relief from other taxes such as future carbon charges for domestic air journeys powered by renewable energy.

Since the primary purpose of APD is to help ensure that the industry contributes to public finances, the Government should consider options for carbon charging, in addition to APD, our response concludes. Such charges could include: a new charge to allow Government to invest in carbon removal technologies; a levy to close the gap between the level of carbon pricing anticipated outside Europe compared with those that will be covered by the UK or EU Emissions Trading Schemes; or new taxes that increase with the number of miles flown or flights taken. A reduced rate of any carbon charge could be levied on any flights using a zero-carbon form of energy. 

To read our full response to the consultation, click here.