How Airport Expansion Can Affect the UK Economy

The Government’s Aviation White Paper outlines the biggest single programme of expansion the UK will have ever seen. In the White Paper, the Government said that it expects the number of passengers using UK airports to nearly treble by 2030.

To meet this demand the Government said that new runways would probably be required at Stansted, Heathrow or Gatwick, Birmingham, Edinburgh, and most likely Glasgow. Nearly all the country’s other airports would see significant expansion.

The Government made it clear that it would neither pay for nor build the runways. But the White Paper has provided a charter for the aviation industry and developers to proceed with airport expansion.

The consequences of this level of expansion to the economy will be immense:

Tax implications

The demand to fly is being artificially created by the tax concessions received by the aviation industry. It pays no VAT on tickets and no fuel tax on aviation fuel. Demand can be cut by imposing a fair rate of tax on aviation. It probably requires international agreement to tax fuel on international flights, but other measures could be taken to manage demand.

The UK economy loses around £9 billion a year in taxation because aviation fuel is tax-free, and all aviation transactions are VAT-free.

Tourism

The deficit in aviation tourism amounts to £11 billion a year—that is the difference between what Britons flying abroad spent in other countries and what visitors to this country spend here.

In addition, the airport industry receives huge subsidies hidden in government funding for regional development and roads and airport infrastructure.

What the UK Government could do:

  • tax fuel on internal flights
  • increase the rate of Air Passenger Duty
  • work with other European countries to impose an Emissions Charge on all flights using European airports

Add a Comment

Your email address will not be published. Required fields are marked *