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Predict and provoke

Feb 20th 2003
From The Economist print edition

The skies are almost as congested as the roads. Time for a rethink there too?

AS MINISTER for aviation, Chris Mullin learnt, he says, two things: that the
demands of the aviation industry are insatiable, and that governments usually
give way to them. That reflects the post-war “predict and provide” approach
to much of transport policy. Since 1989, when an avalanche of public protest
buried an ambitious white paper on road-building, the bulldozers have been
held back. But in aviation, the old thinking survives.

Now, as the government prepares to give the go-ahead to at least one, and
possibly as many as half a dozen, new airports, the conventional approach is
under scrutiny as never before. At least three new runways will be needed in
the south-east to meet future demand, according to the government's
consultation paper (see map). But the possible sites listed for
expansion—Stansted, Heathrow or a new estuarial airport at Cliffe in
Kent—are bitterly contested. Thanks to an injunction that forced the
government to include Gatwick too, it has extended the consultation process
until May; a final decision should come later in the year.

At first glance, the case for new runways appears overwhelming. Aviation
contributes £10 billion ($16 billion) to the economy annually and supports,
directly or indirectly, more than 700,000 jobs. Government forecasts say that
as many as 500m passengers will be using British airports in 2030, nearly
three times the current numbers. The strain is particularly acute in the
south-east, notably at Heathrow, where runway capacity already falls short of
demand. If no new runways are built, the government's airport study for the
south-east claims, rather implausibly, that as much as £15 billion a year
could be lost. Restricting air travel would result in higher fares, possibly
as much as £100 per ticket, by 2030. Turning passengers away from British
airports would directly benefit competitors on the continent, the aviation
lobby argues.

Yet the case for expansion is less than clear cut. Predictions of passenger
demand are based on falling airfares, faster growth by low-cost airlines, and
a big hidden subsidy from the taxpayers. Challenge those assumptions and
things look very different. A report due next month from the Institute for
Public Policy Research, a leftish think-tank, says that if aviation was
properly taxed and bore its full environmental costs, no airport expansion
would be needed at all.

The tax regime is certainly odd. Aviation fuel is tax-free, a concession
worth nearly £6 billion a year; there is no VAT payable on tickets (another
£2.4 billion a year); and duty-free shopping chips in a further £400m. The
net benefit of this set-up is a subsidy of roughly £40 per passenger per
flight—four times more than they pay in tax. If aviation also had to meet its
full environmental costs, as the government's 1998 transport white paper
suggested, the sums would look different.

The Aviation Environment Federation is concerned with the environmental
impact of aviation. Airport Watch campaigns against irresponsible airport
development.

Unfortunately, there is no international agreement on the environmental
burden imposed by aviation—estimates for the cost of the CO2, nitrogen and
sulphur oxides, hydrocarbons, water vapour and other gunk spewed out by
aeroplanes ranges from £1 billion to £6 billion a year. Nor are there any
practical plans for making the polluter pay. A Department of Transport study
suggests environmental taxes ranging from £3 for an economy fare short-haul
flight, say to Berlin, up to £20 on a long-haul flight to San Francisco. But
such levels would have little effect. Bodies such as the Royal Commission on
Environmental Pollution argue that air travel is so polluting that current
rates of growth are simply unsustainable in the long term.

It is not just cost that could make the forecasts wrong. High-speed railways
in Japan, France, Germany, Italy and Spain have proved competitive with air
for distances of up to 400 miles. Eurostar has already captured 65% of the
market to Paris and 45% to Brussels. This is good news for greens, because it
is during take-off and the initial climb that planes burn the most fuel.
Short flights are therefore disproportionately polluting—with around twice
the external environmental costs of rail, by some estimates.

Another weakness in the aviation industry's case is that a fifth of all
passengers using London's airports each year are simply transferring from one
plane to another. This number rose from 3.5m in 1992 to 21.5m in 2000, and
could reach 60m by 2030, according to the official forecasts. That clearly
benefits the airports and airlines. How the country gains, though, is less
clear. Connecting passengers pay no passenger duty, and spend little money
during their stop-overs. Fewer transit passengers might in theory reduce the
number of destinations on offer, but London has by far the biggest range in
the world anyway, so a dent would have to be big to make a real difference.

In short, the gap between commercial benefits and environmental costs is
narrower than ministers have admitted. To persuade voters that a big
expansion is needed, the aviation white paper later this year will need some
pretty compelling arguments.
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