The government is running a consultation on Air Passenger Duty (APD). The proposals are to reduce the amount of APD charged in domestic airline tickets, and introduce new ‘bands’ of taxation for international flights.
The consultation closes on June 14th 2021.
The government says that the aim of the tax rethink is to balance domestic connectivity with our environmental goals. The UK has a legally-binding target to reach net zero carbon emissions by 2050. While the government is relying on carbon offsetting and carbon capture and storage (CCS) to reach this goal, there is no doubt that reducing emissions at source is a vital part of reaching net zero, and indeed, more reliable than offsetting or CCS.
"There is no doubt that reducing emissions at source is a vital part of reaching net zero."
It is easy to make statements about maintaining our current lifestyles while also achieving our environmental goals, and much harder to convincingly demonstrate how this is possible. Decreasing the only tax currently applied to aviation will lead to an increase in the number of domestic flights in the UK. More flights means more emissions.
This is a nonsensical move by a government whose Parliament has declared a Climate Emergency.
APD is necessary
APD is currently the only way in which air travel is taxed. Airline tickets are VAT-exempt, alongside need-related items such as food and baby clothes, and there is no tax on aviation fuel, giving it an unfair advantage over other, less polluting forms of transport. Reducing APD would make an already cheap form of transport even cheaper, and make it even harder for consumers to make low-carbon choices.
To be emphatic, this is the only tax we have on flights. A progressive environmental policy would be for all goods and services to be taxed according to their environmental cost.
"Reducing APD would make an already cheap form of transport even cheaper, and make it even harder for consumers to make low-carbon choices."
The current APD bands show that APD on business and first class flights (the Standard Rate) is approximately double that for economy tickets (the Reduced Rate). We know that business and first class tickets are, on average, five times more expensive than economy and that business class emits about three times more carbon per passenger than economy (DfT figures). A better model would be for APD on business class tickets to therefore be at least three times higher than on economy class tickets.
Revenue from APD is used to fund vital services across the UK. It would be regressive to reduce the funds available for services that benefit everyone, in order to benefit a minority of flyers (less than 50% of UK residents fly in any given year) or frequent flyers (the 15% of UK residents who take 70% of the flights).
The government sees domestic connectivity as a central part of the ‘levelling up’ agenda, but for somewhere as compact as the UK, this doesn't have to mean air travel. Air connectivity is cited as bringing a number of benefits to the UK, with no mention of the negative impacts, for example the impact of noise pollution and air pollution, and the contribution of greenhouse gasses to climate change.
The argument that airports boost the local economy is not settled. Some economists believe that airports are correlated with economic growth, but do not drive it. Bringing tourists directly to the UK regions is cited as a benefit – but surely taking tourists away from the UK, which happens in much larger numbers, must be a downside?
"Air connectivity is cited as bringing a number of benefits to the UK, with no mention of the negative impacts."
Domestic air routes are not, in general, necessary to improve connectivity within the UK, because there are few UK towns that are not well connected by rail. For those towns that are particularly isolated, that can be addressed through the Public Service Obligation system or with an APD exemption, and indeed, this is already the case.
The busiest air route in the UK is London-Edinburgh, a major domestic route that is served by at least two different train lines. Reducing APD is likely to bring more people to the main routes, where low-carbon alternatives are more likely to exist, rather than improve connectivity in more distant areas.
"Reducing APD is likely to bring more people to the main routes, rather than improve connectivity in more distant areas."
The number of domestic passenger flights has declined every year since 2005. There is little evidence that APD is the reason for this. Given the timing of the decline, there's a possibility that it was caused by increased airport security. This FT analysis puts it down to a combination of 'taxes, improved train services and market economics'. Consolidation onto fewer routes and larger planes with lower fares has also played a part.
We are pleased to see that the government acknowledges that the transport sector, including aviation, has a crucial role in tackling the problem of climate change and reaching the target of net zero by 2050. UK aviation is responsible for 8% of the UK’s carbon emissions, the vast majority of which are from international aviation.
However, the method by which net zero will be reached relies mainly on technology and offsetting. The government mentions the Jet Zero Council (using technology and innovation to address emissions), SAF (sustainable aviation fuel), and CORSIA (offsetting) as its methods of reducing emissions from aviation. There is no mention of the most simple and reliable method of reducing emissions, which is to reduce demand. Demand reduction can happen now, through taxation. Yet this taxation consultation speaks only of reducing tax, which will increase demand and increase emissions, therefore increasing our reliance on techno fixes.
"There is no mention of the most simple and reliable method of reducing emissions, which is to reduce demand."
Relying on technological solutions is difficult when none of the solutions are currently in commercial use. Many commentators state that, for techno fixes to have an impact in terms of our net zero targets, they need to be ready now. Electric planes, biofuels and hydrogen technology will all play a part in reducing emissions from flying, but none are without their own environmental impact, and it’s likely that none will be put into commercial use before 2035. Short term tax breaks should not be given on a future promise of techno fixes.
Offsetting is not an effective alternative to demand reduction, and indeed has the effect of making consumers think their emissions don’t count, leading to a continuation of, or an increase in, polluting behaviour.
Proposal for domestic APD
The two proposed reforms for APD are for the return leg of a journey to be exempt from APD, or for APD to be reduced across the board.
Cutting APD on return flights would be a market distortion, discouraging people from reducing their emissions by taking the train or accepting a lift for one leg of their journey. Since there is no difference in the carbon emissions between the outbound and inbound legs of a return flight, there is no reason to remove the tax on one leg only. We agree with the government’s view that this would not be a good method for reforming APD.
We disagree with reducing APD across the board, for all of the reasons stated above.
The Scottish government replaced APD with Air Departure Tax (ADT) in 2017, with the intention of then reducing it to zero. However, after declaring a climate emergency in 2019, the Scottish government decided that removing ADT would go against their climate ambitions. This is consistent with the legislation we need to see in a climate emergency.
Proposal for international APD
Increasing the number of APD bands for international travel is a good idea, and consistent with the Climate Assembly's view that those who fly more and fly further should pay more. The proposed three band structure makes sense.
However, it’s not clear whether the top band for APD will be any greater than the current band. If it remains the same, the result will be an overall lowering of APD, which would not accurately reflect the required measures needed to discourage long haul frequent flying.
Frequent Flyer Levy
It’s disappointing to see that the government is not considering introducing a frequent flyer levy. A reform of APD and the introduction of a frequent flyer levy should not be mutually exclusive. While a frequent flyer levy is by no means the only measure we can take to reduce demand for flights, it is a fair method that has been shown to be popular with both politicians and the public.
We should be doing all we can to reduce demand for flights, both domestically and internationally. Domestically, because low-carbon, viable alternatives exist. Internationally, because the emissions from these flights make up a much larger proportion of our overall carbon output. This includes maintaining APD on domestic flights and increasing APD on international flights, as well as other methods such as introducing a frequent flyer levy, taxing aviation fuel and introducing a moratorium on airport expansion.
"We should be doing all we can to reduce demand for flights, both domestically and internationally."
It is incumbent on a government to act in the best interests of all, which includes those affected negatively by an increase in the number of domestic flights within the UK as well as an increase in international flights from the UK.
In a time of climate emergency, and on a finite planet, it is more important than ever to be a world leader on climate action. Any reduction in tax on this highly-polluting form of transport would be a mistake and would take us further away from our climate targets.
This commentary makes up the basis of the Flight Free UK response to the government's consultation on APD. To read the consultation and submit your own response, go here. The consultation closes at midnight on 14th June.
We also have an open response and invite representatives of organisations to sign our statement. Please get in touch to express your interest.