29 July 2003
BUDGET 2003 AND AVIATION
The forecast growth in UK aviation could accentuate global warming and destroy the Government's recent commitment to a 60% cut in carbon dioxide by 2050. This was the stark message from the Environmental Audit Committee in its report, Budget 2003 and Aviation, published today. (Ninth Report of Session 2002-03, Budget 2003 and Aviation,
The Committee's inquiry was prompted by the Treasury / DfT discussion document, Aviation and the Environment, in which the Government for the first time accepted responsibility for its share of international flights and attempted to estimate the environmental costs of aviation. However, the report goes beyond the relatively narrow scope of that paper and is highly critical of the Department for Transport. It questions the assumptions on which the DfT's growth forecasts are based, and demonstrates that including the environmental costs identified by the Treasury would completely wipe out the economic case for an expansion in runways.
John Horam MP, Chairman of the cross-party Committee at the time the Report was agreed, said:
"The forecast increase in passengers - from 180 million passengers a year now to over 500 million by 2030 - will have a huge impact on global warming. The DfT airports consultation fails to take on board the new direction in policy initiated by the Energy White Paper, while the growth forecast in aviation - even on a constrained basis - will wreck the aspirations it contains."
"There is enough potential in existing airports to meet future demand - if we make rather more realistic assumptions than the DfT has done. We cannot get away from the fact that airlines pay no tax on aviation fuel - whereas 80% of the price motorists pay goes to the Chancellor of the Exchequer. The Government needs to use a range of fiscal and other tools to decouple the growth in aviation from economic growth."
John Horam and other members, including the new Chairman of the Committee, Peter Ainsworth, will be available for interviews. Journalists should telephone the Environmental Audit Committee on 020-7219-1378 or 020-7219-0248.
Key conclusions from the Committee's report
We regard the proposed growth in emissions into the atmosphere by the aviation industry as unsustainable and unacceptable. Were such growth to occur, it could totally destroy the Government's recent commitment to a 60% cut in carbon dioxide emissions by 2050.
In emphasising economic and social objectives for airports, the Department for Transport is placing a lower priority on environmental objectives and is focussed more on mitigating the environmental impacts rather than avoiding them where possible.
We are concerned that the Department should have released a major consultation which assumes that passenger numbers will increase by 4% every year for thirty years and that fares will decrease by up to 40% over the same period without a far more extensive discussion of the underlying implications of such assumptions.
In the case of roads, the Government does seem finally to have accepted the need for some form of congestion charging or road pricing framework. Yet the Secretary of State for Transport entirely refused to accept that, in the case of aviation, congestion may need to be dealt with in a similar way. We were astonished that he denied there was any parallel in this respect between road transport and aviation. He re-iterated his opposition to "pricing people off planes" and the frequency with which he used this phrase reinforced our perception that the Department for Transport is little interested in sustainability.
In our view the Government should aim to decouple growth in air travel from economic growth-as it has been attempting to do for roads. To achieve this, it must be willing to use a range of fiscal and other policy instruments to manage behaviour. This might go well beyond the need to incorporate cost externalities-as indeed the Government has accepted in the case of waste.
We regard the absence of concise, transparent, and strategic integrated appraisals as a major weakness in the consultation documents. The Department's failure in this respect conflicts with its own guidance. As a result, it is impossible to assess the overall benefits of different degrees of expansion-or the relative benefits and disbenefits of regional expansion vis- -vis expansion in the South-East.
In the absence of a robust evaluation, we are astonished at the overt bias the Department for Transport has displayed by emphasising so consistently the economic benefits of aviation. It is disturbing, for example, that the consultation document quotes figures for the positive economic benefits of tourism but entirely fails to mention that there is an overall substantial negative balance of £15 billion.
The net present value associated with the increase in the cost of aviation emissions amounts to minus £18 billion. Including this amount would entirely wipe out the economic case for an expansion in runways and result in substantial net deficits for almost all options the Department for Transport has put forward. Expansion could therefore only be justified if the Department could demonstrate substantial wider economic benefits-which it has not attempted to do.
Environmentalists argue that, by comparison with road transport, aviation is receiving subsidies of more than £9 billion through the absence of a fuel tax and VAT on tickets, and that this unfairly penalises competing forms of transport and in particular rail.
We recommend that the Government replaces the current Air Passenger Duty with an emissions charge levied on flights and which is clearly displayed on travel documentation. This should be set initially at a level which will raise £1.5 billion a year, but be subject to an annual escalator so that revenue will increase over time. In addition, it should consider the case for introducing VAT on ticket sales for domestic flights within the UK and set out the results in the next Pre-Budget Report.