Wednesday, 19 March 2014

Rent seekers completely ignoring reality, as per usual.

From City AM Forum:

The deficit needs paying down and Air Passenger Duty is regarded as a relatively painless way of achieving this.

However, an in-depth analysis by PwC found that APD abolition would actually increase government revenues, as other indirect taxes rise from the resulting economic bounce. In the long term, it’s also estimated that 60,000 new British jobs would be created.

The Treasury refutes these findings, but continues to stonewall calls for it to undertake its own study into the economic impact of a reduction or abolition of APD.

APD rises also sit at odds with government rhetoric on ensuring the UK is “open for business”. Levying thousands of pounds on business delegations visiting the UK undermines this aspiration. And flyers are motivated if nothing else than by price.

Unfortunately, they have no evidence to back any of this up and PwC's report is just drivel.

Fact is, London airports are running very near capacity and most flights are full, there is no scope for more 'job creation' until we allow airports to expand, so like in any monopoly/rationing situation, ticket prices are set by "what the market will bear" and the airlines pay the APD out of their gross income inclusive of APD.

Of course, APD is a bad tax in itself, and would be best replaced by simply regularly auctioning off the very limited number of landing slots to the highest bidders, regardless of where the planes came from or are going.

This would easily raise as much money as the APD with no distortions whatsoever - as the article says, people flying to Schiphol and then changing to a long haul flight is a complete waste ot time and resources - but with a payment per slot, regardless of where the plane is headed would solve this once and for all.

Reality check: if airlines had to pay £5,000 for landing and each take-off from Heathrow or Gatwick, that would raise over £3 billion a year. So for a return flight in a 400-seater plane, the total tax would be £50 per passenger; the use of smaller planes and short flights would thus be discouraged, job done. AFAIC, they could exempt all other UK airports, most of which are not running at capacity.


The Stigler said...

completely agree.

APD is just a sin tax. It has no bearing on environmental costs - it's stuck on the flight to induce a sense of guilt about making Gaia cry.

Ralph Musgrave said...

“The deficit needs paying down” Ahrrrrrrr.

That’s what 95% of the population thinks. The reality is that the deficit needs to be whatever brings full employment without excess inflation. That will sometimes be a large deficit. Sometimes it will be a small one. And sometimes it will be a surplus.

There is no, repeat no predetermined or given optimum size for the deficit (apart from the above point about employment and inflation).

And anyone who thinks that deficits necessarily increase the debt just doesn’t understand basic public sector or central bank book-keeping.

L fairfax said...

Is it cheaper to go to Schipol first?
I just checked and to go to Colombia it is more expensive (of course it won't be the same for everywhere but it is not true for at least one journey).

Anonymous said...

LF: yes, it's cheaper to go to Amsterdam first if you want to fly BA in business class. This will involve going back to London (on the same plane that takes you to Schipol, so there is no risk of missing it) before taking your long haul flight.

If you don't live in London, or don't want to fly BA, then you need to factor in the cost of a hotel in Amsterdam, or good travel insurance.

Since there are no direct flights from Amsterdam to Bogota, and neither does BA fly there, it won't be cheaper. It may be cheaper to take the Eurostar to Paris and then Air France though.

L fairfax said...

Thanks for that. It is £100 more to go to Paris first (not including the cost of getting to Paris) which makes me wonder if APD is as bad as people say.
I did spend sometime comparing flights from other European countries and surprising a lot of them are more expensive than the UK despite supposedly lower taxes.

Lola said...

RM. Excuse my directness, but "The reality is that the deficit needs to be whatever brings full employment without excess inflation. That will sometimes be a large deficit. Sometimes it will be a small one. And sometimes it will be a surplus. is tripe.