Monday 20 January 2020

Not a coherent policy

For an independentista like myself, the question of devolving Air Passenger Duty (APD) is a complete no-brainer: of course, it (along with all other taxes) should be the responsibility of the Senedd rather than Westminster.  Supporting the criticism of foot-dragging by the UK Government which was made last week by the Welsh Finance Minister is easy enough.  Supporting the apparent policy of reducing the tax is, however, an entirely different question.
Clearly, the Welsh Government sees a reduction in the tax as being of economic benefit to Wales and a means of incentivising greater use of Cardiff airport.  Leaving aside the implicit assumption that ‘Wales’ is equivalent only to the southern part of the country (people living in the middle and north of Wales are likely to continue to find Liverpool, Manchester and Birmingham more convenient and attractive even if Cardiff does offer a small tax advantage), the issue is whether deliberately encouraging an increase in the number of flights taken is in line with the same government’s commitment to carbon reduction.  It clearly is not; increasing the volume of the most carbon-intensive form of transport is not compatible with a commitment to de-carbonising the economy.
The original purpose of APD wasn’t raising revenue at all, it was an early attempt at a ‘green’ tax on an environmentally costly mode of travel.  In practice, it’s a blunt and clumsy instrument which takes no account of the relative efficiency of different engines and aircraft and has had little effect on the continuing growth in air travel.  It’s a half-hearted attempt to address the anomaly under which no fuel duty is paid on aviation fuel (unlike other fuels), but imposing such a tax unilaterally would lead to even more environmentally damaging practices such as an increase in ‘tankering’ (where aircraft fuel tanks are filled with more fuel than required in low duty airports in order to avoid refuelling in high duty airports, and end up using more fuel in total to carry the extra weight).  Aviation taxation unquestionably needs to be reconsidered, but it’s hard to see what the Welsh Government acting alone could effectively do beyond a bit of tinkering at the edges – what’s needed is collective international action.
Merely reducing or abolishing the tax – which is what seems to be Welsh Government policy (aided and abetted apparently by opposition parties) – is encouraging a race to the bottom, in which airports in different tax jurisdictions compete to see who can do most to encourage carbon-intensive activity in pursuit of immediate economic benefit.  Joined-up thinking it is not.


dafis said...

It is highly debatable whether this airport duty does anything at all other than raise money for the public purse. It would need to be levied at a significantly higher level ( yes, HIGHER) to have the alleged green "deterrent" effect and at that level it would merely act to return air travel to the preserve of the seriously ( or more) wealthy while us peasants who only fly intermittently would get priced out of that "privilege" altogether. Given that many of our most strident green advocates are also scions of well to do families perhaps it is all just a hoax to ensure that the rest of us know our place ? I don't think so, although that could have been an unintended consequence. As for the policies and postures adopted by our colonial government here in Wales, "race to the bottom" is a frequent characteristic of their decision making whether by accident or design!

John Dixon said...

"It would need to be levied at a significantly higher level ... to have the alleged green "deterrent" effect..." Absolutely. And yes, a higher level of tax would reduce flying by pricing some people out entirely. But there are two other questions there which relate not just to flying, but to a whole range of other things. Firstly, as long as income and wealth are unfairly distributed, ability to purchase certain goods and services will always be distributed unequally as well, so how do we decide which goods and services should be available to all and which should be rationed by price? And secondly, part of the issue with flying is that the price paid doesn't cover the full environmental cost of the activity (that applies to a lot of other things as well, of course - flying is simply one of the more obvious examples), so do we choose to increase the price so that those doing the flying pay the cost, or do we choose to pay that cost through general taxation meaning that even those who never fly pick up part of the cost? We cannot simple pretend that the cost isn't there. These are not easy questions, and I can't do them justice in a brief comment here.

Spirit of BME said...

“All tax is theft” as the saying goes, but like dentistry it is here too stay and we have to live with it.
APD was introduced simply because the aviation sector has seen big growth and is easily collected by companies for free. Little Spliff Cameron was much influenced (not hard to do) by the book “Nudge ”,which I read and basically came up with the scam that to get people to pay taxes with a smile on their face, you have to get them to feel guilty about their activity and offer them redemption. It is quite a brilliant idea and Spliff applied this to many other areas.
In the last century we saw a Road Tax (now called Vehicle Tax) applied to pay for the roads (I think not!), but the biggest “green tax “is paid on petrol where over 50% of the price goes to HM Treasury. Here HMG has failed to apply increases to duty, due to lack of cojones or not really being wedded to the environment debate.
Aviation kicks out 2% of the world Co2, but that is only one fifth of what the fashion industry produces, but no government call to people to only spend £50 p.a on clothing, neither a push to stop funding of population growth by giving parents money from the public purse.
So, APD is just another scam to get you to pay and feel less bad.

dafis said...

Spirit of BME makes a good point about "guilty pleasures " taxes. Also the comment about fashion/clothing with its huge "one season/year" element that encourages people to discard garments way before "dump by" date. I still have perfectly serviceable kit that's about 20 years old. As for for child allowances, this Tory rabble had a chance to do some good in amongst all the nastiness of Universal Benefit in that they could have restricted Child Allowances to 2(or possibly 3)children, but obviously not retrospectively! Or are Tories still prolific breeders and need the extra cash to go towards the school fees ?