UK: Heathrow capacity is ‘stifling economy’, says MPs’ report

Capacity constraints at Heathrow Airport are restricting the UK’s economic potential, a report by MPs has said.

The UK is being left behind on airport capacity provision where demand is greatest, according to the report from the All Party Parliamentary Group on Aviation.

Air passenger duty (APD) airport departure tax is “a barrier to inward business”, the report also said.

The report follows the group’s taking evidence from 60 organisations, as calls grow for the coalition Government to reverse its position and support a third runway at Heathrow.

All efforts should be made “to ensure the UK retains and grows hub capacity” at Heathrow or a new purpose-built hub airport, the group said.

The Government should undertake an economic analysis of the “impact of APD on growth and employment”.

Group chairman Brian Donohoe (Lab: Central Ayrshire) said: “Our findings advocate a new direction for UK aviation and call upon all those ... with an involvement in the sector to look again at how aviation can be part of the solution to the UK’s economic problems in a sustainable way.

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“In order to achieve the greatest possible economic and social contribution from aviation, we need two things from Government: a forward-looking aviation policy that allows for aviation growth; and a new approach to the taxation of aviation. Combined, a new approach could not only energise the sector but also provide a firm foundation for the UK’s economic recovery.

“In common with all other sectors, aviation must continue to address its carbon emissions and environmental impacts. It has already achieved significant improvements but can and must do more.

“The EU Emissions Trading Scheme is supported by this group and provides a good framework for aviation’s emissions to be reduced to the same levels achieved in 2005 by 2050.”

A Government spokesman said: “The UK is currently one of the best connected countries in the world, but does face a capacity challenge in the medium term, especially in south east England. It is this challenge that Government will seek to address in its call for evidence later this year.

“The Government launched a consultation on APD following Budget 2011 and has received extensive evidence of its impact, including on employment and economic growth.

“International aviation is not subject to tax on fuel and in contrast to the tax systems in many other countries, there is no VAT applied to departures from the UK.

“The Government is firmly committed to ensuring aviation in the UK remains affordable and will continue to monitor the situation to ensure the industry is able to compete in international markets.”

Colin Stanbridge, chief executive of the London Chamber of Commerce and Industry, said: “These cross-party findings highlight concerns we have been raising for some time both about APD and the UK’s capacity problems.

“An independent study into the economic impact of APD is badly needed. The tax as it stands is putting businesses off exporting as well as impeding foreign businesses who wish to set up a base here, both of which will be vital to the economic recovery of the UK.”

He went on: “Furthermore, the Government urgently needs to take action and deal with the issue of airport capacity in the south east. The current political stalemate is putting London’s position as a global economic leader at risk so we need decisions taken now to ensure we don’t get left behind.

“This report shows that when the political parties dispassionately review the evidence they come to a consensus on the need for action. We hope the Government and Opposition can follow this example.”