Tax aviation fuel to fund rail fare freeze, say campaigners

16 August 2022

Campaign for Better Transport is calling on the Government to introduce a fuel tax on domestic flights and use the money to fund a rail fare freeze for 2023.  

The transport charity says that taxing kerosene on domestic flights at the same rate as it taxes petrol and diesel for car drivers would help cut carbon emissions from domestic aviation and raise £1.53 billion, enough to fund a rail fare freeze to encourage more people to travel by rail. 

The call comes as rail passengers await tomorrow’s (17 August) Retail Price Index (RPI) announcement. July’s RPI is used by the government to set the following year’s annual rail fare rise and is expected to around 12 per cent. Whilst Ministers have pledged to spare passengers a double-digit fare rise next year, it is still unclear how much fares will go up. 

Paul Tuohy, Chief Executive of Campaign for Better Transport, said: “It’s absurd that the Government chooses to place no tax on aviation fuel, yet heavily taxes petrol and diesel for drivers. Taxing kerosene would help reduce domestic flights and save carbon, and the money raised could pay for a rail fare freeze next year to make the trains cheaper and encourage more people to use them.” 

With 13 per cent of all UK flights starting and finishing in the UK, the charity is calling for more to be done to reduce domestic aviation. As well as a kerosene tax, the charity is calling for the Government to commit to switching half of domestic flights to rail and making train tickets cheaper to compete with budget airfares. 

ENDS

For further information please contact the press office on 07984 773 468 (calls only no texts) or communications@bettertransport.org.uk 

Notes to Editors 

  • In the UK, kerosene currently costs £0.83 per litre. Taxing kerosene at the same level as fuel duty for cars (£0.58 plus 20% VAT) would raise £0.79 per litre. 12.96% of total aircraft kms are domestic, which uses 1.94 billion of the 15 billion litres of aviation fuel used annually for UK airports. Taxed at £0.79 per litre, this would raise £1.53 billion from domestic flights. For more information see the full calculations. 
  • Countries which already tax kerosene on domestic flights include Argentina, Australia, Armenia, Azerbaijan, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, DRC, Dominica, Ecuador, Ethiopia, Guatemala, Hong Kong, India, Indonesia, Japan, Jordan, Kenya, Laos, Mexico, Myanmar, Nepal, Norway, Paraguay, Peru, Philippines, Rwanda, Saudi Arabia, South Africa, Sri Lanka, Switzerland, Taiwan, Tanzania, Tchad, Thailand, Uganda, US, Venezuela and Vietnam. 
  • The EU has proposed a new kerosene tax for aviation to be introduced by 2023 for both private and commercial flights with no exemptions for intra-EU flights. 
  • Regulated rail fares, including season tickets on most commuter journeys, some Off-Peak return tickets on long distance journeys and Anytime tickets around major cities, make up almost half (45 per cent) of all fares and increases are set by the Government. In recent years, fares have risen each year by either RPI or RPI+1%, based on the previous July’s RPI figure. In 2022, fares rose by RPI.  
  • The Government continues to use the Retail Price Index (RPI) to calculate annual fare increases, rather than the accepted and more accurate measure of inflation, the Consumer Price Index (CPI). RPI over-estimates real inflation so consistently that the Office of National Statistics ceased using it as an official measure in 2013 and the Government has already switched to CPI for most other sectors. In July 2018, the then Transport Secretary, Chris Grayling, indicated that future fare rises would be pegged to CPI, but gave no date for the switch. Had CPI been used to calculate this year’s increase, fares would be going up by 2.1 per cent instead of 3.8 per cent. 
  • There is mounting evidence to suggest that a rise in rail fares leads to a reduction in passenger numbers. A 2003 report by ITS Leeds found that for suburban rail, a fare increase of five per cent leads to a three per cent reduction in patronage, and for inter-urban rail a fare increase of five per cent leads to a 4.5 per cent reduction in patronage. This calculation was done at a time when commuters were a very large proportion of rail travellers and were a fairly captive market. Since widespread working from home has become established during the pandemic, commuter journeys are now much more discretionary, on a par with leisure travel. Hence fare increases will lead to an even larger reduction in patronage. A recent Institute of Economic Affairs report stated that “Even if rail companies hike fares, they may still receive less revenue than pre-pandemic, as a high proportion of what were compulsory commuter trips with a low elasticity of demand are likely to become discretionary with a higher elasticity of demand. For example, an elasticity of −0.5 would still allow the railway to generate more total revenue from a ticket price rise, but elasticities of −1 and higher lead to an absolute loss of revenue.” 
  • Campaign for Better Transport operates in England and Wales. Campaign for Better Transport’s vision is for all communities to have access to high quality, sustainable transport that meets their needs, improves quality of life and protects the environment. Campaign for Better Transport Charitable Trust is a registered charity (1101929).