Opposing cuts to air passenger duty is yet another way the London elite disregards the rest

In principle, changing the tax system to rescue on airline is a terrible idea. In practice, it might be very wise

The government has agreed a deal to rescue Flybe. While the stopgap seems to be pumping more shareholder money into the failing regional airline, a more lasting solution presents itself – tax reform.

In principle, it sounds a terrible idea. The airline is a commercial company backed in part by Sir Richard Branson’s Virgin Group. The tax in question, Air Passenger Duty, was brought in by Ken Clarke but later championed by Labour chancellor Gordon Brown as a “green levy” to curb carbon emissions from the airline industry. And Boris Johnson’s government did not do anything to rescue the much larger Thomas Cook Airlines, part of the travel group, last year. Some people caught up in that collapse are still waiting for refunds.

Bad in principle, then, but maybe wise in practice. The idea that taxation should be crafted so as to support wider social and economic objectives is at the core of all public policy. So governments give tax incentives to invest in business start-ups, such as venture capital trusts, and for people to save for pensions. And they impose taxes on activities they wish to discourage, of which Air Passenger Duty is a prime example.

But situations change. One of the huge economic issues of today is what to do about the decline of the high street, where one of the culprits is business rates. Why should high street stores have to pay thousands of pounds in rates, while Amazon pays much lower tax on its out-of-town warehouses? When there was no online shopping, rates were a rational way of raising funds. Now they have speeded up the decline of our city centres.

Air Passenger Duty was a rational response to a real concern. When it was introduced in 1994, it was £5 for short-haul flights and £10 for long-haul ones. Now it is £13 for short-haul and £78 for long-haul in economy, and £26 and £172 respectively for more expensive seats. But there are exceptions for Northern Ireland and the Highlands and Islands – places which, it is deemed, would be particularly disadvantaged by adding costs to air transport.

So the question now is whether other regions within the UK should be put onto a similar basis, and whether they are being disadvantaged too. From a London perspective this makes little sense because there are alternatives, notably rail. Taking the train from London to Edinburgh takes a bit over four hours. Add in time to the airport and the slightly longer time would be acceptable for most people. But if you are in Exeter (the headquarters of Flybe) and want to get to Edinburgh, the fastest trains take seven hours.

This is not a London problem, then. It is one for the regions. Arguably, support for air passenger duty is another example of the way in which the London elite disregards the interests of people who do not live in the capital.

A further point is that UK air duty is very high by international standards. Many countries don’t levy a charge at all. Even in eco-conscious Sweden, the duty is only €6 on domestic flights and €39 on long-haul ones. Initially this levy, brought in in 2018, did not have a huge impact on traffic numbers. But the programme of so-called “flight shaming” inspired by Greta Thunberg does now seem to be cutting air travel in Sweden. Maybe social pressure is more effective than taxation in cutting carbon emissions from air travel.

Actually, there is a way of squaring the circle. That would be to abolish the duty for all travel within the UK but to increase it for short-haul outside the UK. A return flight from Manchester to Malaga comes in at around £90 today. Adding another tenner to the tax levied on that flight might not discourage many people flying there, but it might put a few off taking the journey and would protect revenue. Cleverly done, it could actually increase the total revenue take, and maybe cut carbon emissions too.

The wider point here is that governments need to be flexible in their taxation policies as well as their spending ones. They need to raise revenue, but they also need to be careful not to put people who live far from London and the south east at a disadvantage. Much of the current rhetoric about investing in infrastructure is about diverting cash to the regions. That is great. But the government can work on the tax side, too – and this is a place to start.