1.  The forthcoming Budget on 17 March 2004 provides the first opportunity since the publication of the Air Transport White Paper, The Future of Air Transport, to show the Government's commitment to the polluter pays principle.  Environmentalists were dismayed at the Department for Transport's willingness to provide additional airport capacity to meet forecast demand.  This decision will seriously undermine Government efforts to reduce greenhouse gas emissions; will generate significant development pressures in the over-heated South East; and threaten the tranquillity of the countryside.

2.  The aviation industry benefits from massive tax exemptions which stoke demand for air travel. As has now been well documented, aviation pays no tax on fuel or VAT on tickets and aircraft parts.  Collectively, these exemptions amount to a subsidy of £9.2 billion per annum.  With air travel forecast to increase from 180 million passengers per annum to 500 million by 2030 - this subsidy is expected to increase to a staggering £17.5 billion by 2020.  It is a scandal that the industry receives such benefits at a time when public finances for investment in public transport are limited because of a tight spending round.   

3.  Last year the Treasury and DfT consulted on using economic instruments in aviation to address environmental concerns.  No new economic measures were introduced when the White Paper was published, although there are proposals for the UK to promote the use of emissions trading at a European level during its Presidency in 2005.  DfT officials recently admitted to the House of Commons Environmental Audit Committee that the UK 'ploughs a lonely furrow' when it comes to introducing economic instruments at an international level.  

4.    The Air Transport White Paper said, '...the Government will continue to explore and discuss options for the use of other economic instruments for tackling aviation's greenhouse gas emissions...  We reserve the right to act alone or bilaterally with like-minded partners if progress towards agreements at an international level progress too slow' (paragraph 3.42).  The White Paper does not define what would constitute being too slow.

What CPRE will be looking for in the Budget on aviation

5. CPRE believes the Chancellor should use the Budget to show that the Government is serious about making the aviation industry pay for the external costs it imposes on society.  This should involve:

• a clear commitment to end unfair tax exemptions (and not just introducing emissions trading) for aviation by leading action at a European level during the UK's Presidency of the EU in 2005;
• the UK leading the world in tackling climate change by putting the ending of tax exemptions in aviation on the agenda for the G8 Summit which the UK will chair;
• instructing BAA to introduce slot auctioning at airports in order to make the more efficient use of airport infrastructure, in line with Government policy; and
• raising Air Passenger Duty (APD) above the rate of inflation as an interim measure to ensure air transport pays for more of the damage it inflicts on the environment.  This could be subsequently withdrawn when tax exemptions, slot auctioning, and charges (for example on noise and emissions) were in place. 

How CPRE will assess the Budget on aviation: our traffic light assessment

Green light - good news
The Government commits to use its Presidency of the European Union in 2005, and its Chairing of the G8 Summit, to end tax exemptions in aviation both at the European and International level.  In the meantime, Air Passenger Duty is raised above the rate of inflation.  The Government also instructs BAA to introduce slot auctioning by 2006 in order to make more efficient use of existing infrastructure.  

Amber light - slow progress
The Government maintains that it will keep the use of economic instruments in aviation under review, but sets out the conditions (and a deadline) by which it will take unilateral or bi-lateral action to ensure aviation pays for the environmental damage it causes.  APD is raised in line with inflation.

Red light - a bad day for the environment
The Government says that it will keep the use of economic instruments for aviation under review.  No economic instruments are introduced or deadlines discussed for their establishment.  APD continues to fall in real terms.