Date published: 2007/03/12
The Tories have finally gotten around to publishing the "Greener skies" "consultation" document on their website, after trumpeting it all weekend in the media.
As it happens, the document does not add much to the chatter in the media, but at least it is now in black and white.
One of the important sections in the document has the heading "Distributional and social aspects of aviation":
1.18 Policies aimed at constraining rapid aviation growth are often characterised as being socially regressive by “pricing people off planes” and penalising those who cannot currently afford air travel. However, the picture that emerges from an analysis of aviation demand suggests that additional capacity will mainly be taken up by wealthier frequent flyers, predominantly to short-haul destinations in the UK and Europe.
1.19 Evidence in this area is not conclusive, and the EAC has criticised the government for failing to address the distributional impact of forecast demand growth: "whether, for example, that almost everyone will make at least one air journey a year by 2030, or that those who currently do travel by air will do so far more frequently".
1.20 However, evidence on the current mix of passengers supports the conclusion that a tax on aviation would not be regressive. For example, about half of the population do not fly in any one year, 80% of flights are taken by those in the top half of the income distribution, and the average income of leisure flyers is almost double the national average.
1.21 The British Social Attitudes survey showed that in 2003, over half of those in semi-routine or routine jobs had not flown in the previous year, while nearly half of those in higher managerial and professional jobs had flown three or more times.14 The Civil Aviation Authority concludes that "the wealthiest and most professional groups take a disproportionately large number of leisure trips abroad".
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1.23 As a recent study by the Institute for Public Research (IPPR) concluded; "Leisure air travel remains highly skewed towards the better off... Any tax on aviation would be relatively progressive."1.24 This conclusion is supported by analysis by the Institute for Fiscal Studies of the recent doubling in Air Passenger Duty. They predict that the tax increase will have a roughly equal negative impact across the income distribution as a percentage of income. In absolute terms the negative impact is predicted to be significantly larger on richer groups.
1.25 Of course this conclusion is based on an analysis of who flies at the moment. One of the positive developments of recent years has been the democratisation of air travel, with an increasing proportion of the population able to afford holidays abroad. There is a danger that a significant increase in the cost of flights in the future might put air travel out of the reach of those on low incomes. If the opportunity to explore the world and experience other cultures is to be available to everyone in future generations, we need to find a policy approach whose side-effect is not to make air travel the preserve of the better off. One potential approach is discussed later on in Section 4.
What a shock, rich people travel more than poor people, who would have thought it. But for anyone (in particularly the allegedly socialist IPPR) to promote the idea that aviation taxes would hurt the rich more than the poor is deluded. If you are right at the edge of being able to afford to fly, then any increase in taxes will make it less likely that you will fly. The drop from 1 flight per year to 0 flights per year for a poorer person is much more significant than a drop from (say) 5 flights to 4 flights for a richer person, even if the economists of the world would claim that the richer person is worse off because of having to pay more tax in absolute terms.
Leading on from this, the document concludes that "Any reforms to aviation taxation should ensure that the distributional impact is not regressive". In particular we have:
4.14 One potential policy that could address these concerns would be to introduce an annual 'Green Air Miles Allowance' so that people who flew more often were taxed at a higher rate. This allowance could be related to the number of miles flown, or to the number of flights taken. For example, everyone could be entitled to one short-haul return flight per year at the standard rate of tax, but additional flights would be charged at a higher rate.
This is the only "big idea" in the document, the rest is just rehashed proposals that others have made in the past. Of course it is completely arbitrary and rather patronising that the Tory ruling elite have decided that the peasants can have "one short-haul return flight per year" and nothing else. How many air miles have (the extremely rich) David Cameron and George Osborne done in the last year? At least they admit in this document that there is a cost associated with this idea:
4.17 It would clearly not be possible or desirable to implement such an innovative policy idea without extensive consultation. As explained in the next section, we welcome submissions on whether such a policy could be implemented in practice without imposing undue complexity and administrative costs.
In particular, there would need to be a central database. This database is bound to be extremely expensive to create and maintain. This belies another claim in the document, that "Any new environmental taxes should be replacement taxes, not additional taxes". There is no way this can be the case, because someone has to pay for the database. But at least the Tories have admitted there will be a cost associated with this proposal. Unfortunately nobody in the media has challenged the Tories about the actual cost of implementation.
Unfortunately the document contains no statement one way or the other whether business flights (or governmental flights) will be included. It makes no sense that they are included (they are the responsibility of your organisation, not you), but if they are not included then that will make it much easier for people to avoid the tax. For example, there are people who live in France and commute to England once a week by plane. In future they would just get their company to pay for the flights so that it becomes a business expense, and in turn they would have a cut in their official salary.
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