New pollution tax could hit air travel

The Treasury has published a discussion document on how economic measures could be used to encourage the industry to account more for its economic impact.

Possible changes include taxing aircraft by capacity, noise ratings or fuel efficiency as well as lobbying internationally and in the European Union for exciseÿtaxes on aviation fuel or the imposition of VAT – both at present barred underÿlegally binding international conventions

ÿBritain already imposes a tax on passengers using air travel which cheap no-thrillsÿairlines complain already distort their fares and damage the economic interests of more remote parts of the UK, such as the Highlands and Islands.

But aviation critics point out surface transport does pay taxes on fuel – an unfair disadvantage in competing with air alternatives.

The document asks whether taxes should be varied between aircraft and airports to achieve the maximum effect in reducing noise, pollution, greenhouse gas emissions and congestion on the ground.

It points out current external environmental costs run at £1.4bn a year and will rise to nearly £5bn annually, suggesting the size of possible taxationÿset to coverÿdamage costs.

Brown may refer to the consultation in his Budget speech. Heÿwill not commit himself ahead of conclusionsÿbut may signal an intention to act next year.

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