Aviation tax reforms inconsistent with wider UK climate ambitions

A Treasury plan to cut aviation taxes to boost connectivity within the UK is inconsistent with the government’s wider climate change objectives, and there may be better ways to boost domestic connectivity without sacrificing climate targets, the Chartered Institute of Taxation has said.

In its submission to a Treasury consultation on aviation tax reform1, the CIOT expressed concern that the proposal to cut Air Passenger Duty (APD) on domestic flights failed to take into account the scale of the measures that will be required by the aviation industry to support the government’s target of achieving net zero by 20502.

The Institute has recommended that the government reform the tax so that it acts as a lever for incentivising the development of green fuel, such as linking the level of APD paid to the type of fuel used. The development of green fuels is highlighted in the government’s 10 point plan for a green industrial revolution3.

The CIOT also recommended that the government:

  • Publish a climate change tax policy ‘roadmap’, with the aim of ensuring tax policy changes can be assessed against the government’s 10-point plan
  • Further explore alternative ways of improving regional connectivity, such as investment in rail and links to other forms of transport4. In its response, the CIOT said that it was concerned over a lack of evidence in the consultation to show that reducing APD would have a positive effect on regional connectivity
  • Target discounts and exemptions on routes where alternative modes of transport are unavailable or unviable to protect remote communities, such as the current Public Service Obligations (PSOs) for flights in the Scottish Highlands and Islands, rather than introduce blanket discounts

The Institute has also said that the review of aviation tax should act as an incentive for the UK and Scottish governments to work together to resolve the issues that have prevented the tax from being devolved to the Scottish Parliament, and to set a clear timetable for its resolution. This would provide certainty that the tax will be devolved to Scotland, having been legislated for in 20175.

Jason Collins, chair of the CIOT’s Climate Change Working Group, commented:

“The government has set itself ambitious and welcome net zero targets, but the proposals in this consultation fail to fully grasp the scale and depth of change required to achieve these. Cutting taxes on flying would appear to run counter to those aims.

“APD needs to be set at a level that ensures the aviation sector contributes its fair share to the achievement of the net zero targets, and that people and businesses make economic decisions consistent with that, such as the development of greener flying fuels and support for lower carbon forms of transport like rail.

“In this way, the tax system can be used to send signals to businesses and consumers about the scale of change required. This may be harder to achieve, but it is essential to the challenge of achieving the government’s 10-point plan for a green industrial revolution”.