Revealed: airlines' £10bn government fuel subsidy

The Government has been urged to abolish a £10bn-a-year "hidden subsidy" to the airline industry to bring it into line with hard-pressed motorists struggling with higher petrol prices.

Although the aviation industry claims it is being badly hit by the soaring price of oil, it still enjoys a double boost denied to drivers because it does not pay fuel duty or VAT on the fuel for its planes. New figures suggest this subsidy is worth £9.92bn at current levels of fuel tax.

The proposal will be strongly opposed by airlines, which have already warned that passengers face surcharges of £30 a ticket this summer because the cost of aviation fuel has doubled in the past year.

With hauliers and fishermen protesting that their livelihoods are at risk and motorists feeling the pinch as the economy slows, the Liberal Democrats argue that the airlines should no longer get special treatment.

"This is a massive public subsidy for an industry that is one of the fastest-growing contributors to climate change," said Norman Baker, the party's transport spokesman, whose written Commons questions revealed the scale of the perk. "Ordinary motorists continue to pay fuel tax, so why should aviation continue to be exempt?"

He said it was wrong that drivers had to pay 58p per litre in fuel duty, plus VAT of 17.5 per cent, while the aviation industry only paid air passenger duty of £1bn a year.

Mr Baker called on the Government to push for an international agreement to tax aviation fuel to put the industry on a "level playing field" with other modes of transport. The figures show that the amount of aviation fuel used in the UK has risen by 50 per cent – from 8.45 million tonnes to 12.69 million tonnes – since 1997.

The Liberal Democrats' move was welcomed by Friends of the Earth, which is lobbying the Government to beef up its Climate Change Bill ahead of a Commons debate today. Martyn Williams, the group's parliamentary campaigner, said: "Words are not enough – ministers must take firm action to wean us off our fossil fuel dependency and to tackle climate change, improve energy security and stop the country being held hostage to rising fuel prices."

At first glance, extra tax revenues from the airlines might look attractive to the Chancellor, Alistair Darling, as he struggles to balance his books after finding £2.7bn to compensate losers from the abolition of the 10p rate of income tax. However, he is wary about similar calls for a windfall levy on the oil companies, believing that business needs certainty about the tax system so that it can plan ahead. He has already alienated some business leaders over plans to streamline corporation tax and the treatment of foreign residents with non-domicile status.

Imposing higher tax on aviation fuel could be seen as a "green tax" but the public's appetite for paying a price to help the environment appears to be waning as the global credit crunch bites. The Chancellor is already facing a revolt by Labour MPs over his plans to raise retrospectively by £200 a year the vehicle excise duty paid on cars up to seven years old. Critics say drivers of family cars will be hit.

Last September, David Cameron backed the idea of imposing VAT on aviation fuel for domestic flights and a new airline passenger tax linked to the carbon impact of each flight. Although the Tories remain committed to "green taxes", which they would use to cut taxes on families, some Tory insiders say Mr Cameron's enthusiasm for them has cooled because the public has "reached its limits" on tax levels as the economic picture darkens. He will set out his latest thinking on the environment in a speech this week.

The aviation industry is stepping up its campaign for lower taxation by governments, warning that airlines around the world could go bust amid the oil price hike, the twin threat of recession and inflation and lower disposable incomes.

It is pressing the EU to scale down its plans to include aviation in its emissions trading scheme (ETS) to combat climate change, which will be finalised this summer. Peter Hartman, chairman of the Association of European Airlines and chief executive officer of KLM, said: "ETS was designed at a time of $40 [per barrel of] oil. We now have $130 oil – and it could go higher. ETS was designed at a time of 6 per cent growth. We now have 3 per cent – and it will go lower. Meanwhile, we are becoming more and more energy-efficient."

The International Air Transport Association (IATA) warned that the industry will be forced into red by the fuel crisis. It predicts worldwide losses of $6.1 bn (£3bn) this year if oil remains at its current price. "Airlines are struggling for survival and massive changes are needed," Giovanni Bisignani, IATA's director-general, told its annual meeting in Istanbul last week. "Governments must stop crazy taxation, change the rules of the game and fix the infrastructure. [The] labour [force] must understand that jobs disappear if costs don't come down."

Additional reporting by Ben Russell

Sport
The giant banner displayed by Legia Warsaw supporters last night
football
News
i100(and it's got nothing to do with the Great British Bake Off)
News
news
Sport
footballPremiership preview: All the talking points ahead of this weekend's matches
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
Angelina Jolie with her father Jon Voight
people
Arts and Entertainment
Tulisa as a judge on the X Factor in 2012
tvLouis Walsh confirms star's return
Life and Style
fashionClothes shop opens on Bill Clinton Boulevard in Pristina
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
News
i100
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Project Manager - Pensions

£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

Project Coordinator - Cisco Partner - £110 p/d

£110 per day + competitive: Orgtel: Project Coordinator (SC Cleared), Cisco Go...

KYC Analyst, Birmingham - £200-£250 p/d

£200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...

Test Manager - Banking - Yorkshire - £450 per day

£400 - £500 per day: Orgtel: Test Manager - Banking - West Yorkshire - £400-£5...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone