Sure, there’s problems in the details, but the basic idea here seems very good indeed.
Easyjet will tomorrow break ranks with the rest of Britain’s airlines and come out in support of the Government’s replacement for Air Passenger Duty (APD).
The low-fare carrier will urge the Government to ignore protests from interests as diverse as British Airways, the US Government and cargo airlines and push ahead with plans to replace the current tax on passengers with one on aircraft.
What we really want to tax (yes, yes, assuming this climate change thing has anything about it at all) is emissions. In a perfect world this would mean taxing the fuel and leaving it at that, however there’s perverse incentives here: for airlines to fill up abroad and not in hte UK. That flying around with extra fuel would increase emissions over all, which ain’t the point at all.
Thus we need to tax some proxy. The plane flight itself (with adjustments for type of plane and distance flown) is a better proxy than the passengers themselves.
BA is lobbying for an exemption for transfer passengers, which make up 34 per cent of all flights coming through Heathrow, arguing that the proposed replacement for APD will make UK airlines uncompetitive.
Meanwhile, cargo airlines, which currently pay no APD, argue that the new tax will reduce demand for UK exports, particularly hi-tech goods, which are highly sensitive to pricing differentials.
Easyjet will argue, however, that transfer passengers, cargo carriers and long-haul operators should all pay, while those operating older aircraft should pay more – a particularly antagonistic stance towards US carriers, which generally operate older fleet.
While Easyjet can be accused of talking their own book (they’ve got a young and efficient fleet, fill more spaces on their planes etc) they are in fact correct. The emissions from transfer passengers, from cargo, are exactly the same as any other emissions and there’s no reason why they shouldn’t be taxed.
The basic idea is really very simple. Tax negative externalities at their social cost and then stand back and let the market sort it all out.