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Airport Expansion BriefingSeptember 2002 "Catering for unconstrained growth should not be an option for a Government that pledged to put environment at the heart of policy-making" Bill Eyres, Chair SERA Introduction In April next year the Government intends to publish an Aviation White Paper. In the White Paper the Government will outline its 30 year aviation policy. The Regional Air Studies, which were released for consultation at the end of July, outline options for airport expansion. The consultation period finishes at the end of November. The Government will announce its final plans for airports around the country as part of its White Paper. (The White Paper will cover the whole of the UK as aviation is not a devolved function). Although ministers have been keen to stress that the proposals in the seven Regional Air Studies are only options, the scale of the what is being proposed has taken many people by surprise. In the Regional Air Studies, government argues there are three main reasons why significant expansion of airport capacity could be required: passenger numbers could double by 2020 and triple by 2030; the UK needs to stay ahead of its European competitors; without expansion the economy will suffer. For free copies of any of the Regional Air Studies ring 0845 100 5554. Or check them out on the DfT website: www.airconsult.gov.uk The Scale of the Expansion The Government forecasts that passenger numbers could double by 2020 and treble by 2030. But these forecasts are based on certain key assumptions: air fares will fall by 1% per year in real terms; there will be no significant switch to rail; and that the level of subsidy - £7 billion per annum - received by the air industry will remain about the same. There are two ways in which government could manage demand. It could simply refuse to build the required number of runways and airports or it could use fiscal measures by cutting the subsidies received by the aviation industry that currently stimulate much of this demand. "the use of the Government's UK air traffic forecasts does not imply a commitment to the 'predict and provide' approach; that would only be the case if Ministers were to decide to provide airport capacity to meet unconstrained demand without regard to the consequences." Department for Transport The Main Options
Environmental Impact of Aviation - at a glance Global Pollution
Local Pollution Noise
Switch to Rail? Not practical at present! But, in due course? 45% of the air trips made in Eurocontrol countries are less than 500 kilometres 7. Within 10 years, Germany hopes to have switched all its internal flights to rail. After the UK high-speed rail link opens, Frankfurt is but 4 hours by train. With a favourable pricing regime, rail could be an attractive option. The Case for Demand Management Is managing demand feasible? Very much so in the case of the UK aviation industry because of the £7 billion1 annual subsidy it receives and which artificially stimulates demand. There is no tax on aviation fuel; no VAT on the purchase of planes; no VAT on airline tickets; and the industry does not cover the environmental and social costs it imposes on society. The £1 billion a year the industry pays in Air Passenger Duty does not cover its environmental costs. In any case, shouldn't the aviation industry, like all other industries, be contributing to general taxation as well as covering its environmental and social costs under the "polluter pays" principle? It is argued correctly that the UK could not unilaterally tax aviation fuel - that would require European or international agreement. But there are fiscal measures - such as the imposition of a noise tax or a general aviation tax - that the UK could impose to cut or eliminate the £7 billion subsidy. Emissions trading is also an option to be explored. Wouldn't constraining demand damage the economy? The Regional Air Studies are based on an economic study commissioned by the Government, but 90% paid for by the aviation industry, carried out by Oxford Economic Forecasting (OEF)2. It argued that if aviation growth was restricted to 31/2% a year, instead of the unconstrained 4% per year, by 2015 Gross Domestic Product would be nearly £4 billion a year lower. But the OEF report has been widely criticised. It did not factor in the annual subsidy received by the industry and therefore could not compare the cost of providing jobs in aviation with that of creating jobs in less heavily-subsidised industries. Its findings are not supported by the SACTRA Report on Transport and the Economy 3, the most authoritative work on the subject. SACTRA found that, in a mature economy like the UK's, the provision of new transport infrastructure, such as roads or airports, did not play a big role in economic regeneration except in very specific places. It argued that, if all the other factors, such as the availability of skilled labour, were right, then new transport infrastructure might have a role to play. Critically, this site-by-site work has not been done in the case of the Regional Air Studies. Wouldn't demand management push up fares and price poor people off planes? Fares would go up. But it would have little relevance to the poorest people, few of whom travel by plane at the moment or are likely to over the coming decades. Just under 50% of the population fly each year Of those, only 11% come from social classes D and E 4. Even on low-cost flights, 75% of flights are taken by social classes A, B and C 4 These percentages are unlikely to change over the coming decades. Nearly all the predicted increase in the passenger numbers over the next 30 years will be accounted for by wealthier people: "Britons buying second homes abroad are creating such a massive demand for air travel that an airport the size of Stansed would have to be built within a decade just to cater for them." (The Times, 12.8.02). Higher fares resulting from the ending of the £7 billion subsidy would hit frequent flyers the hardest...and they are not poor people. On the positive side, an extra £7 billion going to the Exchequer could enable him to cut income tax by 2p in the pound - providing people on less than £10,000 with an extra £71 a year, and those earning between £10,000 and £20,000 with £271. If the money was paid instead in personal allowances, the increase for people on less than £30,000 a year would be £286. Alternatively, the £7 billion could be used to fund improvements in basic public services, such as health, education and housing. Wouldn't business suffer? Business people only account for 24% of passengers. Government estimates this will increase to no more than 30% by 2030. But business travel is not regarded as price sensitive as most companies put convenience before cost. Higher fares would be designed to hit the frequent leisure traveller. And what about tourism? Currently the aviation industry is being subsidised to fly British tourists out of the UK. There is deficit of £11 billion a year in aviation tourism - that is, the difference between what Britons flying spend abroad and what visitors spend here 5. In other words, the UK is subsidising the aviation industry at the expense of its tourist industry with the consequent knock on effect on jobs. References: 1 Flying into Trouble, Aviation Environment Federation et al, 2002 This briefing was produced by SERA, the Labour Environment Campaign affiliated to the Labour Party. SERA can be contacted at 11 Goodwin St, London N4 3HQ. Tel 020 7263 7389. email: enquiries@sera.org.uk |