The aviation industry is reluctantly realising it needs to cut its carbon emissions, and work is under way, through ICAO, on a “market based measure” by which the industry could pay for carbon emissions. This, like the EU ETS, would be by being able to buy carbon permits from other sectors which had managed to make actual carbon cuts. A hard-hitting article from Tom Burke casts serious doubt on whether this sort of carbon pricing and trading could ever work effectively. He fears many high carbon industries pay lip-service to the concept, in the full knowledge that it will never work sufficiently well to curtail their activities, and it delays the need for any real action. He says: “The intent is to create the impression of an industry in favour of urgent action whilst actually slowing that action down”…. [with the carbon price remaining too low] … “If only governments were brave enough to put the carbon price up higher and faster, they will lament, we would get there sooner. This is hocus-pocus. They know full well governments will be deeply reluctant to put up consumers’ bills.” … “There is no chance that the world will agree on a global price for carbon in the forty years we have to keep the climate safe…. Their purpose is clear, to set a trap for unwary policy makers and environmentalists. Shame on those who fall into it.”
SOMETHING IS HAPPENING HERE
August 17, 2015
by Tom Burke
Environmentalists have long been vulnerable to their own passions. At times this can make us sound shrill and self-righteous. On other occasions it can blind us to political traps. The oil industry is now busy setting a big one for us. It is camouflaged under a call by the industry’s leaders for ‘clear, stable, long-term, ambitious policy frameworks’ to tackle climate change.
Who could quarrel?
This call was set out in a letter to Christiana Figueres, head of the UNFCCC, at the end of May. In case you missed it, it was repeated in a letter to the Financial Times on June 1st. They were specific about what they wanted. Governments should, ‘introduce carbon pricing systems……[and] ….create an international framework that could eventually connect national systems.’
Let me summarise. They want a global carbon price.
Environmentalists have long been beguiled by the pollution syllogism. It runs like this: pollution is sinful; sin must be punished; taxes are punishment, ergo, tax pollution. There is no joy in heaven like that at a sinner repenting.
It would be easy to confuse oil companies calling for a carbon price with sinners repenting. They are not. They are up to something altogether more subtle. The European companies who signed the letter, their American peers declined, have woken up to the existential threat to them posed by climate change.
A brutal combination of rapid technology development and unusual global weather events is reshaping the politics of climate change. The weather events ramp up the pressure on governments to act. Rapidly falling costs for low carbon technologies lower the political risk of doing so.
To have a good chance of avoiding dangerous climate change the world must get to net zero carbon emissions by 2100. That is for emissions from all sources including agriculture and deforestation. For the global energy system it means getting to carbon neutrality much earlier – at or soon after 2050. This goal collides directly with the oil companies’ business model.
Three beliefs define the oil companies current comfort zone. 1. The world needs their product. 2. Governments are on their side. 3. Energy technology change takes decades.
The accelerating surge of investment in renewables and storage as prices collapse undermines two of them. Obama and Clinton choosing to pick a fight over climate change, with the Pope’s blessing, in an election year is sawing away at the third.
Changing your business model is no simple task even for a small company. For behemoths like the oil companies writing to the UNFCCC it may be impossible. I cannot think of an example in corporate history of companies this large doing so voluntarily. In recent months a more alarmed conversation has begun within the oil companies’ leadership.
Its first product is a decision to buy time to think about how to deal with the collision between their business model and a safe climate. Hence the call for a carbon price. The intent is to create the impression of an industry in favour of urgent action whilst actually slowing that action down.
It is a tenet of economic dogma that putting a price on carbon is the most efficient way of dealing with climate change. The oil companies are counting on the weight of orthodox economic opinion supporting them.
The call for a carbon price is a shield with which to defend themselves from calls for faster change. If we are not decarbonising fast enough, they will argue, it is not their fault. If only governments were brave enough to put the carbon price up higher and faster, they will lament, we would get there sooner.
This is hocus-pocus. They know full well governments will be deeply reluctant to put up consumers’ bills. Ask Amber Rudd. This is simply a stratagem to re-balance the political equation. Politicians are to be caught between the pressure to protect the climate and the pain of doing it with a carbon price. You do not have to be a cynic to believe that faced with this kind of dilemma most politicians will do very little.
There is a further subtlety to this plan. Calling for a global carbon price will mobilise hostile, if covert, opposition from every finance ministry on the planet. Few national prerogatives are as fiercely protected as the right to raise (or lower) taxes. Sixty years of building a Single Market have not persuaded the nations of the EU to surrender any taxation prerogatives to Brussels.
Keeping the climate safe means persuading 190 nations to coordinate their energy policies. After thirty years of trying we are still some way from succeeding. Yet, by comparison with coordinating their tax policies this is straightforward. There is no chance that the world will agree on a global price for carbon in the forty years we have to keep the climate safe.
Oil company CEOs lack neither intelligence nor experience. They have not overlooked the political problems of calling for a global price on carbon. They are counting on them. Their purpose is clear, to set a trap for unwary policy makers and environmentalists. Shame on those who fall into it.
Tom Burke, London -August 10th 2015
[ ‘Something is happening here/But you don’t know what it is/ Do you, Mr Jones?’ is a line from ‘Ballad of a Thin Man’ by Bob Dylan ]
Tom Burke is the Chairman of E3G, Third Generation Environmentalism, and an Environmental Policy Adviser (part time) to Rio Tinto plc. He is a Visiting Professor at both Imperial and University Colleges, London.
More details and fuller biography at http://www.e3g.org/people/tom-burke
Comment from an AirportWatch member:
“For more than 12 years I have felt as if I was almost a lone voice amongst environmentalists in describing carbon pricing and emissions trading schemes as a complete sham and an excuse for doing nothing. God bless Tom Burke. He has hit the nail on the head with this article.”
Energy round-up: carbon markets have failed
By Stephen Devlin
In theory, the world has the solution to soaring emissions – it’s called carbon pricing.
Carbon pricing is an attempt to reduce carbon dioxide emissions by charging polluters to cover their external costs. Most economists and policy-makers argue the only efficient way to do this is through establishing a market for carbon. This is done through an emissions trading scheme (ETS): a fixed number of emissions permits are issued and a cap is set on the total emissions allowed.
Those who then pollute more – oil and gas firms and others [airlines, as another example] who find it harder to make cuts, for example – can cover their higher emissions by buying more permits from those who make reductions easier. But it’s also possible to cover emissions by purchasing offsets from foreign ETS.
In fact, a new report released by the New Zealand government reveals that almost all of their emission reduction obligations for 2014 were met by paying for offsets in transition countries such as Russia and Ukraine, cheaper options because emissions cuts are easier to make there.
The problem is that many analysts believe these foreign emissions reductions would have happened anyway. Cutting waste from coal or pipeline leakages, for example, is win-win for industry as it also keeps their costs down. As a result, the impact of New Zealand’s ETS is close to zero. This also applies to the EU ETS, in which about a third of total emissions reductions come from international offsets.
Not only has this overestimated emissions reductions, it may have also contributed to the collapse of carbon prices. In both New Zealand and EU, markets remain far below the estimated cost of carbon. The actual social cost of carbon emissions is far higher than emissions permit prices imply. This also undermines long-term incentives to innovate as it’s much cheaper to just pay for your pollution.
But reforming emissions trading schemes has been a headache so far. Companies benefit from low prices as offsets depress the market and windfall profits – as permits are issued for free – and those unused can be sold on. Chances are they are not looking to give up paying far below the actual cost of pollution and making a profit from selling excess permits, too. At least in other carbon markets this problem is tackled by auctioning permits.
Financial incentives are a powerful force, but for carbon pricing the market design is flawed.
Read more »
The Airports Commission has claimed,in its final report (1st July) and the media has uncritically repeated, that a new north-west runway at Heathrow would deliver up to £147 billion benefit for the UK (over 60 years). Now the AEF (Aviation Environment Federation) has done some critical analysis of the Commission’s various documents and figures, to elucidate what the actual economic impact on the UK economy might be. This is complex stuff, and making sense of the various facts (often in different documents at different dates) is not for the faint hearted. However, AEF shows that claims of £147 billion do not take into account the environmental or surface access costs associated with a new runway. The Commission’s own economic advisers have criticised the analysis (not done with the usual “WebTAG” model used by government) for double counting and questionable assumptions in relation to the indirect benefits associated with increased seat capacity. Using WebTAG, it appears – using the Commission’s own data – that there could be a net cost to the UK economy of – £9 billion over 60 years. Not a benefit at all, once all environmental and surface access costs are factored in. With some ‘wider economic benefits’ included, the benefit over 60 years would still be only £1.4 billion (not £147 billion), as quoted in the Commission’s own final report.
AEF briefings: Airports Commission’s climate and economic analyses
The Airports Commission has claimed, and the media has uncritically repeated, that a new runway at Heathrow would deliver ‘up to £147 billion’ benefit for the UK. But this figure is based on analysis that takes no account of the environmental or surface access costs of expansion. Indeed, the Commission’s own specialist economic advisers have criticised the analysis for double counting and questionable assumptions in relation to the indirect benefits associated with increased seat capacity.
The results generated by using the Government’s methodology for cost benefit analysis meanwhile, are dramatically different: the Commission’s own figures, based on this methodology, suggest that building a third runway at Heathrow would result in a net £9 billion loss to the UK once all environmental and surface access costs are included. With some ‘wider economic benefits’ included, the benefit over sixty years would still be only £1.4 billion, as quoted in the Commission’s final report.
In our briefing on the economic impacts of airport expansion, available to download below, we look at how the Commission has presented its analysis of the costs and benefits of a new runway.
We have also published our assessment of whether the Airports Commission addressed our earlier concerns regarding a ‘carbon gap’ in the Commission’s analysis.
Download AEF briefings:
The Airports Commission’s economic fudge: How the economic case for expansion dissolves once climate change limits are accounted for
The Airports Commission’s final report – has it closed the carbon gap?
Some extracts from the AEF report:
“The dominant narrative in the Airports’ Commission’s case for a new runway focuses on the economic benefit that it would bring to the UK, and the media presentation of the Commission’s work has largely repeated this storyline, quoting the Commission’s headline figure of ‘up to £147 billion benefit’ [link P 24] , with the addition that the environmental impacts will nevertheless make it controversial politically. But in fact the economic case for expansion rests on a highly selective presentation of the analysis undertaken by the Commission which gives a misleading impression about the strength of the economic case.”
“Alongside [the conventional “Webtag” which is the Government’s recommended methodology for assessing the costs and benefits of proposed transport schemes] the Commission also commissioned analysis using a methodology it describes as a “novel” approach to capturing possible indirect GDP and GVA benefits as a result of expansion. This “Computable General Equilibrium (CGE) model” relies on the assumption that aviation growth has ‘spillover’ effects in the form of increased trade, business growth, productivity improvements, and job creation. Among the papers published with the final report was a note [https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/438981/economyexpert-panelist-wider-economic-impacts-review.pdf ] from the Commission’s expert economic advisers providing comments on the Commission’s approach to estimating wider economic benefits. This welcomes the attempt to adopt complementary approaches alongside WebTAG but expresses a number of concerns about the findings generated by the CGE model.
too much weighting being given to the assumption that increased seat capacity will lead to wider benefits (for example in terms of increased trade), given that the direction of causality is in some cases unclear:
likely double counting between the direct and wider impact channels in the PwC calculations; and
inexplicable results, such as GDP impacts of more than twice the size of the direct welfare and wider economic benefit gains (while it might be expected that they would be lower).
The conclusion of the reviewers is that “While the content of the model itself has been well tested, the same cannot be said of the front end, where an increase in capacity is converted into an increase in trip-making, trade, tourism and finally productivity. Furthermore the interpretation of the result – what exactly do they mean and is their basis transparent – is an issue. Overall, therefore, we counsel caution in attaching significant weight either to the absolute or relative results of the GDP/GVA SCGE approach (PwC report) within the Economic Case”.
“Since WebTAG is the appraisal that Government guidance requires to be undertaken, it might be expected that the Commission’s WebTAG analysis would be central to its economic conclusions. In fact, however, the results were not included in headline figures or statements to the press and were instead presented in a table on page 147 of the Commission’s final report. These indicate that under a carbon cap (the ‘CC’ figure), the benefit of the recommended new Heathrow runway (in the third column) would be only £1.4 billion over sixty years. ”
[Also interesting information, on pages 3 and 4 of the AEF report, on gaps in earlier documents by the Commission that were finally filled in, in a letter to Lord Deben of the CCC on the day the final report by the Commission was published (1st July 2015). Also showing how some figures by the Commission relate to their “carbon capped” forecast and others to their “carbon traded” forecast. And they said the omission of calculations for the carbon capped scenario (as requested by the CCC) was problematic as the initial figures suggested that carbon costs would ‘dominate’ the appraisal. [That means the costs of carbon would be so high, that the runway would have a negative impact on the economy, rather than a positive impact].
Also by the AEF:
Read more »
A Thomas Cook Boeing 757-300 that took off from Gatwick on 31st October 2014 dropped an emergency escape chute [about 25 kg weight?] as it approached Gatwick, for an emergency unscheduled landing. The plane’s escape slide fell off at 3,000 ft as it was approaching the airport, and was later found stuck in a tree (location not specified). A report by the AAIB said several minor issues combined to loosen the slide release mechanism of the slide as the plane was taking off. A crank handle had not been in the right place. During the take off the cockpit instruments showed that the right over-wing escape slide container was not secure. With no sign that the slide had actually come loose, the crew continued with their take-off. The pilot circled around for 40 minutes, with landing gear, flaps and airbrakes deployed to burn off excess fuel and get the plane down to a normal landing weight before returning to Gatwick. As the plane descended to 3,000 ft, some of the cabin crew and passengers heard a number of bangs or felt the airframe shuddering. Two passengers reported seeing a white object falling from the right hand side of the aircraft. It was later discovered that the emergency slide had struck the body of the plane and one window before it fell.
Boeing 757 escape slide falls off during flight
14 August 2015 (West Sussex Gazette)
A plane’s escape slide fell off at 3,000 ft as it was approaching Gatwick Airport.
The Boeing 757-300 was making an unscheduled return to Gatwick after a problem during takeoff.
A report by the Air Accident Investigation Branch (AAIB), published yesterday (Thursday August 13), said the incident happened aboard a Thomas Cook flight from Gatwick to Egypt on October 31 last year.
Several minor issues are thought to have combined to loosen the slide release mechanism as the plane was taking off.
The plane was on the ground, travelling at about 70 knots (80.6 mph) when the cockpit instruments showed that the right over-wing escape slide container was not secure.
With no sign that the slide had actually come loose, the crew continued with their takeoff – as recommended by the Boeing quick reference handbook. However, after consulting their airline, they decided to return to Gatwick.
The pilot circled around for 40 minutes, with landing gear, flaps and airbrakes deployed to burn off excess fuel and get the plane down to a normal landing weight before taking it back to Gatwick.
As the plane descended to 3,000 ft, some of the cabin crew and passengers heard a number of bangs or felt the airframe shuddering. Two passengers reported seeing a white object falling from the right hand side of the aircraft.
It was later discovered that the object was the emergency slide, which had struck the body of the plane and one window before it fell.
On final approach, the pilot noticed that the autopilot seemed to be having trouble keeping the wings level.
He switched off the autopilot and took control. Although he could control the aircraft, he reported that it needed a ‘significant amount of left aileron’ to stop the plane rolling to the right.
This issue has been noticed before in cases where the slide carrier has opened in flight. The quick reference handbook recommends reduced flap settings to manage the problem while coming in to land, but only in cases where the slide has come loose but is still attached.
Boeing have now been advised to update the handbook to extend this advice to any 757-300 with a wing slide alert warning showing.
The plane landed safely. The slide itself landed in a tree, and was later recovered by the investigators.
Investigators discovered that a crank handle which controls the panel latches had moved to the release position.
The report said it was likely that someone had accidentally moved the handle slightly out of position, so that a slight additional factor could move it the rest of the way.
The AAIB found that a component missing from one of the flaps, and another that was loose, would have caused increased vibration on the plane.
“It is possible that the flap system vibration and resonance resulted in a gradual movement upwards of the crank handle over a period of time to the point whereby it allowed the slide carrier and panel to open with its locking devices in the released condition,” it said.
“Once open, it was in the air flow with the slide itself now no longer restrained within its pack. Thus it eventually unravelled in the slipstream flailing about against the fuselage until its attachment material failed allowing it to detach and fall to the ground.”
Safety improvements, which were already being brought in when the incident happened, include alignment markings on the panel, which will make it easy to spot if the crank handle is slightly out of position.
During the investigation, it emerged that airlines and airport fire crews do not use a universal system to identify the various exits from a plane.
This could cause a serious problem during an emergency evacuation if, for example, fire crews needed to warn cabin staff not to use a particular exit.
The AAIB has now recommended that the European Aviation Safety Agency and other air safety regulators should bring in a standardised system.
The slide may weigh about 25 kg. link
Read more »
The Financial Secretary to the Treasury, David Gauke said he was concerned and disappointed that airport retailers were pocketing millions of pounds in VAT discounts without passing the savings to customers. And that this should stop. Stores at airports demand that passengers present their boarding cards at checkouts before paying for any goods, in order to avoid paying 20% VAT on everything they sell to customers who are travelling outside the EU. Most of these stores, including Boots and W H Smith, do not pass on the savings to passengers. The Independent says this ruse is also used by so-called “duty-free” shops to boost their profits on alcohol sales, thereby making profits of up to 100% on each alcohol sale they make to travellers leaving Europe. UKinbound chief executive said visitors to the UK already have the impression that the UK is an expensive destination – and this is not helping. The airports charge retailers huge rent, to have the privilege of a store in the captive market that is the airport departure lounge. Exact figures are hard to come by and not publicly available, but Heathrow alone last year made around £400m in rental income from its airport 345 concessions and stores. Unlike on the high street Heathrow does not charge its stores a set flat rent – but rather a % of their net sales. On average each retailer is paying over £1m a year in rent. If airports did not charge so much rent to their shops, they would not be as profitable. This story confirms the adage of airports being “shopping malls with a runway attached”.
Airport VAT scam: Treasury ministers demand end to rip-off charges and to pass savings on to passengers
Mass revolt across Britain as thousands refuse to show their passes after huge VAT scam is exposed by The Independent
By OLIVER WRIGHT and SIMON CALDER
12 August 2015
Treasury ministers have demanded an end to rip-off VAT charges by some airport stores as the grassroots passenger rebellion against the racket gathers pace.
The Financial Secretary to the Treasury, David Gauke, told The Independent he was concerned and disappointed that some of Britain’s top retailers were pocketing millions of pounds in VAT discounts without passing the savings to customers.
The practice, where stores demand that passengers present their boarding cards at checkouts before paying for any goods, was first revealed by this newspaper last week.
The information is used by stores to avoid paying 20 per cent VAT on everything they sell to customers who are travelling outside the European Union. Most of these stores, including Boots and W H Smith, do not pass on the savings to passengers.
The Independent can also reveal the ruse is used by so-called “duty-free” shops to boost their profits on alcohol sales.
Mr Gauke said the intention behind VAT relief at airports was to help passengers and not to line the pockets of retailers – and called for the practice to stop. “The VAT relief at airports is intended to reduce prices for travellers not as a windfall gain for shops,” he said.
“While many retailers do pass this saving on to customers it is disappointing that some are choosing not to. We urge all airside retailers to use this relief for the benefit of their customers.”
Since the practice was exposed last week thousands of people have taken to social media to say they will now refuse to show their boarding cards at airports stores to stop the profiteering.
Many passengers claim to have been misled by airport shop staff who told them presenting a boarding card was obligatory – and even required for security purposes.
On 11 August travellers reported a confusing picture, with some stores agreeing to sell goods without the need for a boarding card while others refused. “I just bought a toothbrush and toothpaste from Boots and they sold it to me even when I refused to give them my boarding card,” said Andrew Buurman, who was travelling to Boston with his daughter. “Then I tried to buy some sun cream from World Duty Free and they refused to sell it to me without a boarding card.”
A former Boots worker said: “I used to work at a UK airport [and] I remember a colleague asking a manager once why we were required to ask for boarding passes. She explained it was so we could pay less tax on transactions where customers were flying outside the EU, though she also said we weren’t to tell customers that.”
But VAT appears not to be the only tax saving that stores are failing to pass on to customers. The Independent has established that some airport shops are making profits of up to 100% on each alcohol sale they make to travellers leaving Europe.
Most so-called “duty-free” stores in UK airports now operate a single pricing policy for the majority of alcoholic drinks they sell regardless of where passengers are travelling in the world, which is not illegal. While this represents a modest saving on high-street prices for travellers within Europe it creates a profits bonanza for stores on sales to passengers leaving the European Union.
For every one-litre bottle of spirits sold, the stores save around £11.06 in alcohol-specific duty charges as well as avoiding paying VAT. For each bottle of wine sold they save £2.73 per litre and £3.50 on champagne.
But little of these savings are passed on to customers. World Duty Free, which has concessions at Heathrow, for example, charges customers £16.49 for a bottle of Absolut Vodka compared to a high-street price of around £20 – a saving of less than 20 per cent. Most high-street retailers operate on profit margins of around 25 per cent, meaning that World Duty Free is making a profit even on the alcohol it sells to EU travellers. For non-EU travellers the store could be making as much as £9 in profit on each bottle sold at £16.49.
A spokeswoman for World Duty Free confirmed that it was a requirement that passengers who purchase any goods from the store produce “a valid transport document”.
The Money Saving Expert founder, Martin Lewis, called on travellers to refuse to let airport retailers scan boarding passes.
Speaking on BBC Radio 2 to Jeremy Vine, he said: “What we need to do, if we want to get them to change their policy, is quite simple: those of you who are going away this summer outside the EU, when they ask for your boarding pass, say, ‘No, sorry, I’m not going to give it to you: it only gives you a reduction. Unless you pass that on to me I’m not going to give it to you. Please tell your bosses.’”
Mr Lewis said travellers should ignore claims by retail staff that showing a boarding pass is obligatory: “You’re not protecting the sanctity of Britain by giving them your boarding pass – you’re enabling the commercial company to get a reduction on its tax bill.”
A spokeswoman for the campaign group 38 Degrees said: “It’s time for retailers like W H Smith and Boots to pass their savings on to their customers, rather than using them to line their shareholders’ pockets.”
Q&A: Simon Read’s guide to airport sales taxes
Q | What is duty free?
A | The term refers to the old excise duty charged on cigarettes and alcohol and certain other items.
There was no duty due on items bought outside the country – up to certain low limits – which meant holidaymakers could bring home a bottle of booze and a box of fags bought abroad, often at airports, without having to pay UK duty or tax.
That all changed in the 1990s after a number of European nations campaigned for duty-free sales within EU states to be scrapped, which they were in 1999.
Q | What’s happened since then?
A | “Duty-free” now strictly refers to cigarettes, tobacco and some spirits which are bought by British travellers to take to countries outside the EU, and brought in from outside the region. At airports you’ll see that items are labelled “available for non-EU destinations only”.
Q | So what’s the current row about?
A | It’s around the so-called “tax-free” prices that many airport shops offer. This is the price of an item before VAT has been added at 20 per cent. The problem is that many airport shops offer items for sale at the same price as they do in the high street – despite no VAT being due on any items you pay when travelling outside the EU.
It means that if you pay £6 for a bottle of sun cream, for example, the retailer doesn’t have to pass on the £1 VAT included if you’re heading outside the EU. Yet it charges you the full amount, including what it would normally pay in VAT. In other words, it pockets the tax element to boost its profits.
The total extra tax retained by retailers adds up to tens of millions each year. Campaigners say they should share that effective windfall with consumers, passing on at least some of the tax benefit to shoppers.
UKinbound chief executive Deirdre Wells has joined the debate by urging shops not to be greed, saying: “We are very concerned to hear that some retailers are not passing on the VAT refund which is due to visitors from outside the EU.
“The UK already suffers from a perception that it is an expensive destination – and this is not helping.
“Retailers need to recognise the important contribution which inbound visitors bring to the UK and make them feel welcome, not pocket the tax refund which is rightfully theirs.”
The government’s financial secretary David Gauke has also urged airport shops to do the decent thing, saying: “The VAT relief at airports is intended to reduce prices for travellers, not as a windfall gain for shops.
Airport VAT: How I unearthed the great boarding pass scam – and led the charge to end it
By OLIVER WRIGHT
16 August 2015
Every time my boarding card had been requested at the checkout it had perplexed me
It is a scene repeated thousands of times a day at airports up and down the country.
Travel bag over your arm, carrier bag in one hand and the toothpaste, suncream and plug adaptor you’ve forgotten to pack balanced precariously in the other. You get to the checkout, put your goods on the counter and take out your card to pay.
The sales assistant looks at you somewhat contemptuously. “Have you got your boarding card?” she says – not as question, but as a weary command.
You put down your carrier, rummage around in the side pocket of your bag, pull out a crumpled piece of paper and hand it over compliantly. It’s far from the worst thing in the world but it makes the whole experience of travelling by air just one notch more unpleasant.
The question that has always perplexed me is: why? Over the past few years, every time I’ve gone abroad, I’ve made a mental note that when I get back I’ll investigate. And every year, by the time I get home I’ve forgotten about it.
But this year was different. I did remember, and on a quiet day in the office I decided to try to unravel what was going on.
I ruled out security, on the grounds that it made no sense at all, and phoned up Her Majesty’s Revenue and Customs to ask them if they knew why passengers had to present their boarding cards at the checkout in airports.
A few days later they got back to me. There was no legal reason, they said. But airport stores could claim back the VAT on purchases made by people flying out of the EU – as long as they had the evidence in the form of a scanned boarding card.
On the face of it, that seemed pretty outrageous to me. We, the passengers, were not getting the savings: the stores concerned admitted to me that they charged the same at the airport as on the high street. But here they were, making millions of pounds a year by inconveniencing us and taking the 20 per cent VAT saving for themselves.
More to the point, it seemed like a scam that needed to be written about. I phoned the Consumers’ Association (who run Which? magazine and usually champion these kinds of issues) to ask what they thought. But they couldn’t have been less interested. “We haven’t done any research into it,” they told me. “It’s not something we can talk about.”
“But I can send you what HMRC say,” I offered. But it was to no avail. “Look, we will not be commenting,” I was told firmly.
When I pointed out to them that this seemed a bit odd, given their self-proclaimed role protecting consumers, they told me I was being rude. Hmm.
Dispirited, I phoned up Paul Lewis of Radio 4’s Money Box Live as well as our own travel editor, the brilliant Simon Calder. What did they think? Both of them were as outraged as I had been. Yes, it was a story, they said, and agreed it was worth writing about.
So we did. Last Saturday morning The Independent put the great VAT scam on its front page – and gratifyingly kicked off a campaign of gentle civil disobedience. Friends reported seeing people buying a copy of the paper – which they had been attracted to on the news stand – and then refusing to hand over their boarding card when they paid for it.
Twitter was predictably but rightly outraged. Facebook went into “share” overdrive.
Then other papers starting picking up the tale. The Daily Telegraphcommissioned an online poll of its readers. The Daily Mail, never one to pass on a good consumer-outrage story, joined the fray. Five days later, when ministers intervened to call for the practice to stop, the BBC decided that it too should report the story.
The message was simple: why should we all be inconvenienced just so that stores can take money off us that should rightfully be ours? And now, a week on, Boots has climbed down and said it will end the practice.
WH Smith and Dixons are still attempting to hold out. But resistance is futile. Anyone who has been in the country this week and who listened to news on the radio, watched the television or read a newspaper now knows about the practice and how to stop it.
As one traveller remarked on Twitter: “At Heathrow, a joy to watch old men loudly refuse to show their boarding cards. Truly, our own Arab Spring.”
As one commentator below the article commented: … “this illegal activity is anti-competitive. i.e a company landside at Heathrow has a competitive disadvantage with a company airside. This is permitted by HMRC providing an illegal opt out and should be stopped. It’s a rip off, anti competitive and illegal.”
Airport VAT scam: Are high airport rents, rather than greedy retailers, to blame?
11 August 2015 (Independent)
By Oliver Wright
The VAT wheeze is, in a way, a ‘victimless’ sleight of hand that helps them turn a profit while still paying sky-high rents
Why is it that a respected retailer such as Boots would knowingly indulge in the slightly underhand practice of pocketing VAT savings without passing on the benefits to its customers?
The answer may lie in the prices retailers themselves are charged for the privilege of opening a store in the captive market that is the airport departure lounge.
Exact figures are hard to come by but Heathrow alone last year made around £400m in rental income from concessions, including food outlets, in its airport stores. Unlike on the high street Heathrow does not charge its stores a set flat rent – but rather a percentage of their net sales.
This rate varies from retailer to retailer and the figures are not publicly available. But Heathrow has 345 concessions which means, on average each retailer is paying over £1m a year in rent.
Clearly some stores will be paying more than others but if you are a company like Boots, which has a presence in every terminal, you are clearly going to have to sell a lot of toothpaste and sun cream if you are still going to turn a decent profit after you’ve paid your rent.
So what to do?
Customers would be rightly peeved if they felt they were being charged a premium for goods bought at the airport. And Heathrow itself strictly controls what prices stores charge it as seeks to promote itself as a shopping destination that provides value for money.
So the VAT wheeze is, in a way, a “victimless” sleight of hand that helps them turn a profit while still paying sky-high rents. But consumers should not be fooled: their purchases are what makes the airport business such a profitable one.
The airport VAT ‘rip-off’ explained: What’s going on, which shops are involved and how to fight back
By CAMILLA CANOCCHI FOR THISISMONEY.CO.UK
13 August 2015
What is going on?
Passengers shopping at UK airports before boarding flights are used to showing boarding passes to staff at shop tills, usually under the impression that they are legally obliged to scan them.
But last weekend, many rebelled against some airport stores after it emerged the only reason they were asked to show boarding passes was for retailers to benefit from tax discounts which they do not then pass onto customers by lowering prices.
Most goods sold by airport stores to passengers travelling outside the European Union are exempt from 20 per cent VAT.
Retailers such as Boots and WH Smith are accused of including the VAT in the price charged to customers as prices at the airport are very similar or the same as on the high street.
On Tuesday, David Gauke, financial secretary to the Treasury, intervened and demanded airport stores pass on the VAT relief to travellers by cutting prices.
Who should be entitled to a discount and which goods should be cheaper at the airport?
People travelling outside the EU should not have to pay 20 per cent VAT on goods purchased at the airport.
Goods ranging from soft drinks, cosmetics, electricals and snacks carry VAT and therefore they should be cheaper at airports for customers travelling outside the EU.
But most food, books, magazines, newspapers, children clothes and other items will not be cheaper because they are exempt from VAT.
So do you have to show your boarding pass?
Yes and no.
You do not need to show your boarding pass if you buy most goods such as cosmetics, soft drinks or electronic goods.
However, you need to show it at duty-free shops if you buy alcohol, cigarettes or tobacco as these goods are subject to different taxes from the Government.
A spokesman for the HM Revenue & Customs said: ‘There is nothing in VAT law to require the production of a boarding pass to purchase goods in airport shops, but without such evidence the supply cannot be zero-rated as an export.’
This means that if you refuse to scan your boarding pass at the till, the store will not be able to claim back the VAT.
Which shops are ripping you off?
Retailers such as Boots, WH Smith and Dixons all charge similar prices on the high street and airports. This means that prices at the airport are set as if they are inclusive of VAT at 20 per cent.
For example, a bottle of Nivea sunspray at UK airport branches of Boots sells for £8. Boots can reclaim £1.60 VAT on every sale to customers travelling beyond Europe, but it does not pass on that discount to the customer.
If shops are showing two prices – one including VAT and one without – then they probably not ripping you off.
A Burberry checked cashmere scarf that costs £335 on the high street is priced at £279 at the airport.
Staff at the luxury fashion brand at Heathrow airport over the weekend said boarding cards had to be shown to benefit from VAT-free prices.
Are duty-free shops ripping you off too?
Only cigarettes, tobacco and alcohol are ‘duty-free’ goods. It means that the shops selling them, like World Duty Free, do not pay duty or VAT. This is because they are treated as exporters by the taxman.
Normally these stores display two different prices – one with and one without the excise duty, so shoppers travelling outside the EU are supposed to make savings.
Airport shops refuse to pass on VAT savings: WH Smith, Dixons and Boots under pressure after refusing to change their prices
• Pressure building over ‘duty free’ shops pocketing VAT saving at airports
• WH Smith, Dixons and Boots are under fire but still won’t change prices
• More than 2,000 people signed a petition calling for an end to the ‘scam’
• Passengers have protested by refusing to hand over boarding passes
• By CLAIRE DUFFIN FOR THE DAILY MAIL
13 August 2015
Pressure was mounting last night on airport retailers to pass on tax savings to customers.
Experts joined consumers in calling for fairer prices at airport duty-free shops after it emerged that stores were using passengers’ boarding passes to benefit from tax exemptions to the tune of millions of pounds.
Until now, it was widely believed that the travel documents were required in shops for security reasons or passenger surveys.
In fact, the purpose is to allow stores to escape paying 20 per cent VAT on any products they sell to people travelling outside the EU.
Purchases made by such passengers are exempt from VAT and shops ask to see boarding passes so they can prove to HM Revenue and Customs that goods have gone out of the EU.
But many airport shops charge all passengers the same, regardless of whether VAT is due.
Boots, Dixons and WH Smith – identified as the worst offenders – have so far refused to change their prices.
Some shops charge similar prices at airports as they do on the high street. For example, a bottle of Nivea sunspray at airport branches of Boots sells for £8. Boots can save £1.33 VAT on every sale to those travelling beyond Europe, but it does not pass on that discount to the customer.
Last night, more than 2,000 people had signed an online petition urging retailers to ‘end the airport sunscreen scam’. Addressed to Boots president Simon Roberts and Stephen Clarke, chief executive of WH Smith, the petition calls for VAT savings to be passed on to passengers ‘rather than using an underhand method to reduce your tax bill’.
And at airports, passengers have protested by refusing to show their boarding passes after learning it was not a legal requirement. The Retail Ombudsman – set up in January to help shoppers settle disputes – said it had been so ‘inundated’ with complaints that it is taking on more staff to handle them all.
WH Smith said it was too difficult to introduce ‘dual pricing’, but the claim was undermined by the fact that several retailers already have.
Lord Harris, chairman of the National Trading Standards Board, said airport shops that failed to pass on the tax relief were ‘quite clearly profiteering’.
He suggested retailers should have two queues with different prices for customers travelling inside the EU and those going further afield.
Boots pledged late on Wednesday to stop asking for boarding passes while it reviewed the situation. But it has refused to change prices, along with Dixons and WH Smith – despite a plea from the Treasury for airport stores to pass on the VAT relief to travellers as is intended.
Dixons said it offered ‘one single, great-value price across products; underpinned by our price promise’.
Boots said: ‘Rather than offering different prices to some customers travelling outside the EU, we want all customers to benefit from consistently low prices.’
WH Smith has said that ‘any VAT relief… is reflected in our single price and extensive promotional offers provided to all our customers’.
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Delayed airline passengers are potentially missing out on millions of pounds of compensation, according to an investigation by Which? It found more than 9,000 flights are delayed for 3 hours or more each year, with an average of 97 passengers on each flight. Passengers travelling within the EU who are delayed for more than 3 hours could be entitled to compensation up to €250 (£217) for flights up to 923 miles, and €400 (£347) for trips between 932 and 2,175 miles, and €600 (£521) if the journey is over 2,175 miles. By contrast, average ticket price for low cost airlines is about £80 or so (£60 – £170 or so). Those protected by the Denied Boarding Regulation have to be flying with an EU-based airline or flying from an EU airport. Which? director of campaigns Alex Neill said people should assert their rights, hold their airline to account for those delays and claim the compensation that they are owed. Only 38% of the 7,000 Which? members surveyed had made a claim. Travel expert Simon Calder said the rules on compensation were “very, very complicated”, with the process of claiming not always being straight forward. He also said airlines generally did “everything to fight it if they believe there’s a chance they’re not responsible” and many who claim just give up. At Gatwick 0.8% of flights (2,134 in total) were delayed last year by 3 hours or more. At Heathrow it was 0.5% (2,192 in total). All those claims could dent the airlines’ profits.
Delayed airline passengers ‘missing out on millions in compensation’
Delayed airline passengers are potentially missing out on millions of pounds of compensation, according to an investigation by Which?.
The consumer group found that between June 2014 and May 2015, 37 million passenger journeys to or from the UK were delayed by 15 minutes or more.
About 900,000 people could be eligible for compensation, but only around 38% of them ever claim, Which? found.
Passengers delayed for over three hours are entitled to up to 600 euros (£422).
Those protected by the Denied Boarding Regulation have to be flying with an EU-based airline or flying from an EU airport.
More than 9,000 flights are delayed for three hours or more each year, the group said, with an average of 97 passengers on each flight.
Which? director of campaigns Alex Neill told BBC 5 live: “We want people to assert their rights and hold their airline to account for those delays and claim the compensation that they are owed.”
Which? surveyed more than 7,000 of its members to find out more about their experience of flying from a UK airport.
Only four in 10 people (38%) said they claimed compensation following a delay.
Half of those delayed said they received no support or information about the delay from the airline.
Travel expert Simon Calder said the rules on compensation were “very, very complicated”, with the process of claiming not always being straight forward. He also said airlines generally did “everything to fight it if they believe there’s a chance they’re not responsible”.
Asked why so few claim, he told BBC Breakfast: “It’s partly because people don’t know. The airlines aren’t very good at telling you your rights and I think lots of people simply give up.”
He added that if a passenger thinks they are owed compensation and the airline won’t “play ball”, they can go to a lawyer or claims company, but they will typically charge a third of any compensation given.
Passengers travelling within the EU who are delayed for more than three hours could be entitled to up to 400 euro (£282) in compensation, which rises up to 600 euro (£422) if the journey is over 2,170 miles.
But delays caused by “extraordinary circumstances” are not eligible for compensation under EU regulations.
The consumer group’s calculations are based on Civil Aviation Authority data.
Gatwick named worst offender for flight delays over three hours
8.8.2015 (City AM)
Delayed airline passengers could be missing out on millions of pounds in compensation, according to an investigation from watchdog Which?.
Read more: Decline in Brits abroad as holiday makersopt to stay home this summer
From June 2014 to May 2015 more than 9,000 flights in the UK were delayed for three hours or more with 2,134 flights at Gatwick making it the worst offender.
The investigation found that around 900,000 passengers were eligible to receive compensation for their disrupted journeys – but only one in four did.
Passengers travelling within the European Union delayed for over three hours could be entitled to between €400 – €600 (£425) in compensation.
Read more: British Airways is shrinking its hand luggage allowance to reduce risk of delays
Which? executive director Richard Lloyd said:”Flight delays are a disappointing and stressful reality for people travelling abroad this summer. The last thing you need is a long wait at the airport, but sadly this is going to be the case for many holidaymakers.We are urging people to hold their airline to account and claim the compensation they are rightly owed if they have a lengthy day.”
Worst UK airports
The average delay for flights at Gatwick was 16.8 minutes according to data sourced from the Civil Aviation Authority, with 0.8 per cent of flights more than three hours late.
Heathrow actually had more overall delays (2,192) but just 0.5 per cent were for more than three hours.
||Flights > 3 hours late
||Total no. of flights
||Approx no. delayed flights
Worst airlines for short haul flights
Vueling, Monarch and Thomas Cook accounted for 700 delayed short haul flights during the monitored period.
||Flights > 3 hours late
||Total no. of flights
||Approx no. delayed flights
|Thomas Cook Airlines
|Aurigny Air Services
Worst airlines for long haul flights
For long haul flights, Pakistan International Airlines, Air India and American Airlines were the worst offenders and together accounted for over 700 flights.
||Flights > 3 hours late
||Total no. of flights
||Approx no. delayed flights
|Pakistan Intnl Airlines
Telegraph article on averate price of plane tickets per airline. 21.10.2013
||Average ticket price including fees (£)
|Norwegian Air Shuttle
|Fly Thomas Cook
Scots miss out on millions as only four in ten make airline delay claims, report
8.8.2015 (Herald Scotland)
SCOTS are missing out on millions of pounds in compensation for flight delays as a new survey revealed only four in ten bother to make a claim.
A Which? report reveals that some 1000 flights in Scotland were delayed for three hours or more in the past year, with over 90,000 potentially eligible for compensation.
But the consumer watchdog found that only 38% of people were claiming compensation for delays.
The Which? survey further shows that half of those delayed said they received no support or information about the delay from the airline.
Which? are urging people to hold their airline to account and claim the compensation they are rightly owed if they have a lengthy delay.
Under European Union directive 261, passengers delayed for more than three hours are eligible for between £170 and £420 compensation, depending on the length of flight.
The highest level of payout is for passengers held up more than four hours. It applies to all flights from UK airports, and inbound flights on European airlines.
Passengers are not eligible for compensation if flights are delayed by bad weather, strikes or security alerts.
The consumer organisation’s investigation found that around one in five flights leaving or arriving in Scotland were delayed by at least 15 minutes.
Some 4.1 million passenger journeys leaving or arriving in Scotland were delayed by 15 minutes or more in the year to May, this year, which equals 41,000 flights.
Based on the 210,000 flights which went to or from Scottish airports over a year, Logan Air was proportionally the worst performer with 215 flights delayed by over three hours, Which? said.
The worst Scottish airport for delays was Glasgow with 0.5% of its 75,780 flights held up for three hours or longer, closely followed by Edinburgh with 0.4% and Aberdeen with 0.3%.
Across the UK, some 9,000 flights were delayed for three hours or more, with around 900,000 passengers potentially eligible for compensation under the Euro rules, Which? said.
The Which? study analysed over 1.7 million flights across the UK to work out the worst offenders based on the proportion of flight that were delayed for three hours or more.
It found that UK passengers on short haul flights are most likely to experience delays of over three hours if travelling with Vueling, Monarch or Thomas Cook, who together accounted for over 700 delayed flights amounting to 68,000 passenger journeys.
For long haul flights, UK passengers were more likely to be delayed by three hours or more with Pakistan International Airlines, Air India or American Airlines who together accounted for over 400 affected flights amounting to 40,500 passenger journeys.
Easyjet, BA and Ryanair, the three largest airlines operating in the UK who operated nearly half (48%) of all flights during the year accounted for four in 10 (44%) delays over three hours, Which? said.
Which? executive director Richard Lloyd, said: “Flight delays are a disappointing and stressful reality for people travelling abroad this summer. The last thing you need is a long wait at the airport, but sadly this is going to be the case for many holidaymakers.
“We are urging people to hold their airline to account and claim the compensationthey are rightly owed if they have a lengthy delay.”
A British Air Transport Association spokesman said in response to the report: “Airlines hate delays just as much as their passengers. That’s why the vast majority of the 300,000 plus flights carrying over 21 million passengers in and out Scottish airports departed within 15 minutes of their scheduled departure time last year.
“When passengers are affected by significant delays, airlines provide care and assistance, as well as information on their rights to compensation.”
Which? used Civil Aviation Authority punctuality data, the Office of National Statistics International Passenger Survey and its own surveys in its latest research.
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Slough Council has backed Heathrow’s runway plans, and entered into a deal with Heathrow to try and get the maximum benefits. Slough Council says its deal will “unlock £1.5 million in direct financial support denied to neighbouring councils.” Slough’s Deputy Leader James Swindlehurst has refuted suggestions that its partnership with Heathrow is anything less than the strong package he promised in January to mitigate the worst impact of airport expansion for communities closest to Heathrow. This has meant that Slough has secured funds for mitigation while neighbouring councils have been left with nothing. “Councils like Hillingdon, who have not negotiated with the airport, have no funds being allocated to them.”
Cllr Swindlehurst says the agreement provides a guaranteed minimum of £100,000 per year for 15 years where Heathrow and the Council will allocate the money to fund specific improvement projects in selected wards. That would only follow approval of the Development Consent Order for a 3rd runway, but Cllr Swindelhurst says additional funding pledges specifically mentioned in the agreement are in addition. Hounslow is now in talks with Heathrow, to get a financial deal. Hilliingdon has refused to enter into financial negotiations.
Slough’s deal with Heathrow “unlocked funding denied to other councils”
7.8.2015 (Colnbrook Views)
by admin on 7 August, 2015
Rather than “selling out” Colnbrook, by entering into a deal with Heathrow, Slough Borough Council says it has unlocked £1.5 million of direct financial support denied to neighbouring councils.
Has supporting Heathrow’s case to expand damaged chances of securing a reasonable package from the airport to mitigate the worst effects? No, quite the opposite, says Cllr Swindlehurst, Deputy Leader of Slough Borough Council. But others disagree.
Slough’s Deputy Leader James Swindlehurst has refuted suggestions that its partnership with Heathrow is anything less than the strong package he promised in January to mitigate the worst impact of airport expansion for communities closest to Heathrow.
Instead, Slough Council negotiated a package worth £1.5 million of direct financial support for measures to improve the neighbourhoods most affected by current airport operations and by the expansion of Heathrow. And this has meant that Slough has secured funds for mitigation while neighbouring councils have been left with nothing:
“Councils like Hillingdon, who have not negotiated with the airport, have no funds being allocated to them – so the above alone demonstrates that Slough has worked hard to obtain funds for both mitigation and community benefit, as set out in Cabinet at the start of 2015.”
Cllr Swindlehurst made his comments in response to a series of questions put to him by Colnbrook Views.
We asked: could you explain, for the benefit of Colnbrook Views readers, how you can reconcile the commitments made in January/February with the reality of what this agreement with Heathrow actually entails?
“Your question suggests that the Council’s Heads of Terms agreement with Heathrow is somehow at odds with the Cabinet’s comments that we were determined to secure mitigation measures and benefit for our affected communities as part of any support for Heathrow’s expansion. This is not the case.”
Cllr Swindlehurst says the agreement provides a guaranteed minimum of £100,000 per year for 15 years where Heathrow and the Council will allocate the money to fund specific improvement projects in Langley Kedermister Foxborough, Upton and Colnbrook with Poyle wards.
While that funding will be triggered following approval of the Development Consent Order for a third runway, he also insists that additional funding pledges specifically mentioned in the agreement are in addition.
Cllr Swindlehurst did not respond to criticism that the Council had in effect accepted a “gagging order” by signing an agreement that binds it to public support for a third runway until the Development Consent Order is signed. Slough’s approach differs markedly to other local authorities.
Hounslow Borough Council, opposed to expansion, is currently in talks with Heathrow over a financial deal while it is considering its official response to the Davies Commission Report.
Hillingdon Borough Council on the other hand has refused to enter into financial negotiations.
Christine Taylor of Stop Heathrow Expansion said last week that that is a good thing:
“A comment was made to me in a recent Heathrow meeting that ‘Hillingdon residents were missing out’ because the borough did not engage with the airport. Personally I’m grateful that our local authority is not being lured into this trade – selling our children’s future for a few bob to balance the books now.”
Perhaps mirroring discussions in Colnbrook itself as to whether it is damaging to accept similar offers of funds to good causes that could be seen as endorsing a third runway and the associated mitigation and compensation offered, the jury remains out on that one.
However, as part of the settlement reached for Terminal 5 (which Hillingdon also opposed), the fully independent Hillingdon Community Fund was set up to channel £1 million of funding to nearby community projects EACH year for 15 years – ten times what has been agreed by the new deal.
Slough Council secret deal with Heathrow includes gagging order, making it impotent in fighting for a better deal from Heathrow for 3 – 4 years
Residents of Colnbook, close to Heathrow and due to be badly affected by a 3rd runway, submitted a FoI request to get the details for the secret, but legally binding, deal done between Slough Borough Council and Heathrow airport. The details of the deal are worrying. As well as finding out that Colnbrook, and help for the residents, do not feature in the deal, it has emerged that Slough Council has accepted what amounts to a self-imposed gagging order, unable to criticise Heathrow for the next 3 to 4 years,until Heathrow is granted a Development Consent Order (DCO). As well as a boost for investment in the town and improved access from central Slough to the airport, the secret agreement sees Heathrow commit to supporting the Council’s representations to Government to seek compensation for lost business rates, put by the council itself at up to £10 million earlier this year. In return, however, Cabinet is legally bound to giving public support for the airport until final permission, is granted. A Development Consent Order is at least three years away, possibly four. Residents expected that their council would have argued for “world class” compensation and mitigation.
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Colnbrook was “sold down the river for a pittance”; details of Slough Council’s secret Heathrow agreement now revealed
The people of Colnbrook, about a mile west of Heathrow’s northern runway, have been trying to find out about the deal done by their council, Slough, with the airport – if there is a 3rd runway. Slough Borough Council has been reluctant to publish details, but has now been forced to do so. As Colnbrook residents feared, though they had been given assurances by the Deputy Leader, there is no provision to look after them. People are angry at what they see as deception of Colnbrook residents by Slough Council. A ward councillor, staunchly opposed to a new runway, has now provided the full legally binding agreement signed between the council and the airport. It shows that far from providing a package of mitigation for communities closest to the airport as repeatedly claimed by the council, Colnbrook is not mentioned once. There are no benefits for them. The deal sees a boost for investment in the town from Heathrow, including secret plans to “unlock” new commercial land in the borough regardless of whether a third runway is approved or not. It commits over half of the first year’s mitigation fund to paying for a study into relocation of the Grundon incinerator. It also only contains a period of 5 hours at night with no flights. There is also a gagging clause on the Council for years.
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The Scottish government intends to remove Air Passenger Duty (APD) from flights departing from Scottish airports, in the hope of attracting more flights. Scottish ministers hope cutting APD would encourage more direct flights from Scotland and reduce the need for connecting flights via Heathrow and Amsterdam. Air travel is already very under-taxed, paying no VAT and no fuel duty. The Scottish Government says it will halve APD during the Scottish Parliament’s next term, which will run until around 2020. That will mean about £200 million in lost tax to the government, and the Scottish government has to reimburse the UK Treasury. Scottish ministers want APD cut completely “when public finances permit.” There is to be a new policy forum to look into the implications of removing or reducing APD, and a policy consultation this autumn. The forum will include some environmental groups, as well as aviation lobbies. There would be increased CO2 emissions from Scottish aviation if there was a 50% cut in APD, and even more so with no APD. The Scottish government will have to explain “which other sectors of society will pick up the shortfall and at what cost.” More cheap holiday flights for Scottish people is likely to increase the tourism deficit, with more money flowing out than is brought in by in-bound tourists.
Anti-aviation groups to help shape new flying tax
6.8.2015 (The Scotsman)
by Alastair Dalton
GREEN groups will help shape a new Scottish air tax which will replace air passenger duty (APD) when it is devolved, ministers announced today.
Finance secretary John Swinney said environmental organisations would be included in a new policy forum which will hold its first meeting today.
Such bodies have been vehement critics of the polluting nature of aviation, but ministers argue that cutting APD will encourage more direct flights from Scotland and reduce the need for connecting flights to hubs such as Heathrow and Amsterdam.
The Scottish Government has pledged to halve APD during the Scottish Parliament’s next term, which will run until around 2020.
That is expected to cost £200 million in lost tax, which ministers will have to reimburse the UK Treasury.
The move would follow the transfer of powers from Westminster to Holyrood under the Smith Commission proposals.
Ministers have also pledged to abolish the tax – which starts at £13 per passenger for UK flights – “when public finances permit”.
A policy consultation on the changes will be launched this autumn.
Mr Swinney, who will jointly chair the forum with infrastructure secretary Keith Brown, said: “The APD stakeholder forum brings together interested parties – from those in the aviation industry to environmental groups and tax practitioners – to provide expert input into how a replacement tax could work.
“We want to be consultative and collaborative, as we have been with the new fiscal levers already devolved to Scotland.
“The forum, and this autumn’s policy consultation, allow us to take the next step and begin the process of designing and developing a Scottish APD to help deliver our objective of sustainable economic growth.”
The forum will also include the aviation industry and tax experts.
Mike Robinson, who will represent Stop Climate Chaos Scotland and umbrella body Scottish Environment LINK on the forum today, said: “At least we are in the room, even though we will be outnumbered.
“It shows the Scottish Government is willing to consider the bigger picture.”
However, Mr Robinson expressed concerns about the impact of an APD cut on long-distance trains, and questioned how ministers would offset the increase in greenhouse gases he said it would cause.
WWF Scotland director Lang Banks said: “Any conclusions of the Scottish Government and this forum must take into account the impacts on the climate.
“The Scottish Government’s own analysis shows that cutting APD by 50 per cent would increase Scotland’s climate emissions from flying.
“If ministers insist on going ahead with its plans to increase climate emissions from flying, then it will have to explain which other sectors of society will pick up the shortfall and at what cost.”
Friends of the Earth Scotland director Dr Richard Dixon said: “We are supporting the idea of a more sophisticated approach which would penalise frequent flyers so the changes in taxation would not lead to a massive rise in carbon emissions.
“This frequent flyer levy, which we would have been arguing for if we had been able to attend, is supported by a range of campaigning groups.”
Scottish Greens finance and economy spokesman Patrick Harvie backed the levy.
He said: “This would acknowledge the enormous environmental impact of aviation, while recognising that most of the growth in flights isn’t due to people taking an annual family holiday – it’s due to a wealthy jet-set minority, who are coming to treat air travel as casually as hailing a taxi.
“Ending APD would increase climate change emissions by 60,000 tonnes a year.
“If the Scottish Government is remotely serious about its climate change commitments, it needs a replacement tax that will cut pollution without making aviation unaffordable for everyone but the wealthiest.”
But Mr Brown said: “UK APD has been the most expensive tax of its kind in Europe and continues to act as a barrier to Scotland’s ability to secure new direct international services and maintain existing ones.
“Devolution of APD to the Scottish Parliament will provide the opportunity to put in place new arrangements which better support the Scottish Government’s objective to help generate new direct routes and increase inbound tourism.
“Our plan to initially cut APD and then abolish it when public finances permit is a fundamental component to improving Scotland’s international connectivity.”
Edinburgh Airport, where the forum announcement was made, said it was anxious to know when APD would be cut to plan expanding its route network.
Chairman Sir John Elvidge – a former head of the Scottish civil service – said: “Our report earlier in the year showed very clearly that APD is placing a drag on Scotland’s economic growth, costing jobs and millions of pounds in lost revenue.
“We’ve long supported its devolution and are keen to work with the Scottish Government to ensure the process is as smooth and as quick as possible.
“Clarity around the timing of any reduction in APD is vital for route development and we hope that this forum will be able to provide that.”
John Swinney to head air passenger duty stakeholder forum
By Press Association, 6 August 2015 2.42pm.
A new group charged with considering how the air passenger duty (APD) levy could be replaced in Scotland has been set up by ministers.
Deputy First Minister John Swinney and Infrastructure Secretary Keith Brown are to jointly chair the first meeting of the new Scottish APD stakeholder forum this afternoon – hailing it as a new milestone in the reform of the charge.
Meanwhile, the Scottish Government has also revealed it will launch a consultation on a Scottish APD in the autumn.
Powers over APD are to be devolved to Holyrood as part of the new Scotland Bill, which has been brought in at Westminster after the Smith Commission on further powers recommended the change.
The Scottish Government is committed to halving the levy paid by air passengers within the first term of the next parliament, with a view to abolishing it completely when “public finances permit”.
Research for Edinburgh Airport has already suggested that cutting APD in half would result in 700,000 more passengers going through Scotland’s airports in the first year alone.
Mr Swinney said: “Scotland’s airports are busier than ever and the Scottish Government wants to see that success grow further to the benefit of passengers, business, tourism and our wider economy.
“The APD stakeholder forum brings together interested parties – from those in the aviation industry to environmental groups and tax practitioners – to provide expert input into how a replacement tax could work.
“The forum and this autumn’s policy consultation allow us to take the next step and begin the process of designing and developing a Scottish APD to help deliver our objective of sustainable economic growth.”
Mr Swinney made the comments as he and Mr Brown visited Edinburgh Airport, where they met chairman Sir John Elvidge.
Sir John said: “Our report earlier in the year showed very clearly that APD is placing a drag on Scotland’s economic growth, costing jobs and millions of pounds in lost revenue.
“We’ve long supported its devolution and are keen to work with the Scottish Government to ensure that the process is as smooth and as quick as possible.”
Mr Brown said: “Scotland is already an attractive destination for business and inbound tourism, and we want to open up Scotland to key and emerging markets to capitalise on the opportunities that exist.
“Devolution of APD to the Scottish Parliament will provide the opportunity to put in place new arrangements which better support the Scottish Government’s objective to help generate new direct routes and increase inbound tourism.”
Airline chiefs welcomed the plans to first reducing, then scrapping APD.
Sophie Dekkers, easyJet’s UK director, said they had “long-campaigned for the removal of air passenger duty”.
She added: “When APD is halved passengers in Scotland will quickly feel the benefit, with easyJet and other airlines adding more services to existing destinations and launching flights to new destinations from Scotland.”
Paul Simmons, chief commercial officer of flybe, said: “We believe that the abolition of or the reduction of APD in Scotland will have two key impacts, firstly, some international routes which are currently marginal when we assess them and therefore not flown are likely to become viable.
“Secondly, there is likely to be a price reduction for the consumer on domestic flying and the real possibility of additional frequencies.”
Kate Sherry, Ryanair’s deputy director of route development, said: “One need only look to Ireland to see the effect scrapping APD has had, with tourist traffic rising by almost 10% since APD was abolished in April 2014 and the VAT received from the additional tourist spend far exceeding the loss of APD.”
Treasury opens consultation on protecting regional airports from impact of devolving APD
In the Summer 2015 Budget, the Chancellor has announced a short consultation (ends of 8th September) on options for supporting English regional airports from the impacts of Air Passenger Duty (APD) devolution. Sootland may remove APD, and so may Wales. Airports in the north of England are concerned they could lose passengers, to cheaper Scottish flights. The consultation sets out three options for changes to APD. The first is devolving APD within the UK, with powers over APD devolved fully or partially to local authorities within England. The second is varying APD rates within England, so central government would retain powers over APD for the English regions. The rates of UK APD would be varied according to specific criteria, resulting in different rates in different parts of the country. The third is to provide aid to regional airports within England, which have been adversely affected by the devolution of APD. This could be through the Regional Air Connectivity Fund, mainly for the smallest airports and those with up to 3 million passengers per year may be permitted investment aid only in ‘case specific circumstances’. Many airports likely to be affected could be too large to be eligible for aid.
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Levy on frequent leisure flyers proposed to make airport expansion unnecessary – if the tax on flying was fair, no new runway would be needed
Plans for a “frequent flyer” tax to curb demand for leisure flights and make a new runway in south-east England unnecessary have been unveiled by an influential group of transport campaigners, environmentalists and tax experts. These include the Campaign for Better Transport, the New Economics Foundation, the Tax Justice Network, Greenpeace and Friends of the Earth among others. In a letter to the Observer – in order to remove the alleged “need” for a new south east runway – they put forward the concept of allowing each person one tax-free flight per year, but increasing the rate of tax for people who fly frequently. The levy would rise with each successive flight. This would mean that instead of APD (£13 per return flight to Europe) there would be a higher rate of tax for frequent fliers. Their analysis shows that 15% of the UK population take 70% of all the flights, while half of us don’t fly at all in any given year. Rather than a new runway being vital for business, the reality is that it would be used for the better off to take more leisure flights (holidays or visiting friends and family). The proposed levy would mean the number of flights would be cut to a level that would make a new runway unnecessary. The authors of the scheme have also shown that this change to the taxation of air travel would also ensure the UK could comply with its obligations under the Climate Change Act.
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Government confirms APD devolution to Scotland
The UK government has published a document, “Scotland in the United Kingdom: An enduring settlement”. It sets out the Smith Commission Agreement on devolving powers to Scotland. This states: “The power to charge tax on air passengers leaving Scottish airports will be devolved to the Scottish Parliament. The Scottish Government will be free to make its own arrangements with regard to the design and collection of any replacement tax, including consideration of the environmental impact. ….if such a tax is introduced by the Scottish Parliament to replace Air Passenger Duty (APD), the Scottish Government will reimburse the UK Government for any costs incurred in ‘switching off’ APD in Scotland. … A fair and equitable share of associated administrative costs will be transferred to the Scottish Government. ….The clause includes provision for appointing the day when APD will be switched off in relation to Scotland.” Abta and the Airport Operators Association (AOA) have responded the plans to devolve APD to Scotland by demanding consistency across the UK. They claim this will affect the competitiveness of regional airports in the north of England.
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On the tourism deficit, that is likely to be increased by cutting or removing APD:
The ONS (Office for National Statistics) produces information each month. For example http://www.ons.gov.uk/ons/dcp171778_411258.pdf
and get all the tables for this publication in the data section of this publication .
This table gives all the figures, for each month, for the past few years.
Tourism deficit widens as UK residents spend more on trips abroad
22.5.2015 (Travel Weekly)
Tourism deficit? UK loses £1bn a month as residents splurge their savings on holiday
Britain is losing billions each year from UK residents spending their money abroad on holidays, while overseas visitors to the UK spend less.
Since the beginning of 2013, 129m UK residents have visited an overseas country – spending a total of £76.8bn. This equates to £594 being spent for each UK resident’s visit abroad, according to data released by the Office of National Statistics.
Meanwhile, overseas visitors have spent £46.6bn in the UK since the start of 2013. 73.9m overseas residents have visited the UK in this time period, with £631 being spent per visit.
There are more visitors to the UK – but they are spending less
In the first three months of 2015, 6.9m people visited the UK. This is up from 6.8m in the same period of 2014, and 6.3m in 2013.
The amount of money they spend, however, has fallen. The UK’s 6.9m visitors in 2015 spent less than the 6.3m in 2013.
Some 31 per cent of the people visiting the UK in the first three months of 2015 were on holiday, while 29 per cent were visiting for business purposes, and 32 per cent were visiting family or friends.
This distribution has changed little over the last two years, but the biggest change is in those visiting friends or relatives in the UK – up from 30 per cent in the first three months of 2013 to 32 per cent in 2015.
Brits abroad are mainly on holiday – unlike visitors to the UK
Europe is by far the most popular destination for Brits to go on holiday – with 72 per cent of 2015’s overseas visitors going to the continent.
Over the first three months of 2015, 8.3m UK residents went to Europe. Some 630,000 travelled to North America, while 2.5m travelled elsewhere in the world.
While under a third of people visiting the UK are here for holiday purposes: 55 per cent of Brits visiting other countries were on holiday.
Just 14 per cent of Brits visiting oversea countries were travelling for business, while 28 per cent are visiting family or friends.
Expenditure: who benefits?
In the first three months of 2015, UK residents spent £6.8bn in overseas countries – compared with £3.5bn spent by people visiting the UK.
This is a difference of £3.3bn, a “tourism deficit” which has been expanding over recent years. The gap stood at £2.4bn in the same period for 2013.
British residents have spent more per head abroad than those visiting the UK over the last three months – with the average UK resident spending £590 per visit abroad. This compares with overseas residents spending an average of £515 per visit to the UK.
House of Commons Library publication: Tourism: statistics and policy
“Britain usually runs a large tourism trade deficit because we are far more likely to travel abroad for our holidays than most other countries. Currently, less than 40% of our total holiday spending goes on domestic tourism – roughly a 2:1 trade deficit. And these recent figures are probably rather optimistic; before the effects of a low pound, recession and a volcanic ash cloud had taken their toll, the average for 2006-08 was just 31%. We’re worse than our neighbours too: just 21% of us holiday at home, compared to 28% on average for other European countries. But 29% of us holiday abroad compared to just 16% in the rest of Europe.17 ” Page 17
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London City airport is to be put up for sale by GIP by the end of the year, who want to capitalise on the rising global demand for air travel. GIP owns 75%, with Oaktree Capital owning the remainder, but both have agreed to the sale. GIP also has the main stake in Gatwick airport, and Edinburgh but say they are not selling these now. It is thought the airport might fetch as much as £2bn, which the FT says would be a multiple of over 60 times the company’s EBITDA in 2014. GIP bought the airport for about £750m in 2006 from Dermot Desmond; he had paid £23.5m for it in 1995 from Mowlem. The airport is trying to get planning consent for work to increase the annual number of passengers to 6 million per year by 2023, (4.1 million in 2014) but this has been blocked by Boris, due to noise. London City is appealing against this and may hear the outcome next year. City airport has already been granted permission to increase ATMs from 70,000 to 120,000 per year. It is widely believed that GIP would sell Gatwick soon, after the government makes a decision on if/where there might be a new runway. Last month, GIP said it would be prepared to give a legally binding promise that it will not sell out for a quick profit if the government decides to opt for a runway at Gatwick.
London City Airport could fetch £2bn after being ‘put up for sale’
Global Infrastructure Partners wants to sell the airport in the next few months, according to reports
By Andy Trotman
London City Airport could fetch £2bn after being put up for sale by US investment firm Global Infrastructure Partners (GIP), according to reports.
The owners of the international airport, located in the Royal Docks in Newham, are currently hiring advisers with a view to selling the site within the next few months.
“The market demand for quality airports is very high,” Michael McGhee, director for transport at GIP, told the Financial Times.
GIP owns the majority of London City Airport, holding a 75pc stake, but Oaktree Capital, which owns the other 25pc, has agreed to the sale, the FT claimed.
GIP also owns 42pc of Gatwick Airport and Edinburgh Airport but is not believed to looking to sell those assets.
The firm did not return calls for comment.
GIP bought London City Airport in 2006 for around £750m from Irish businessman Dermot Desmond.
The airport, which was developed by engineering company Mowlem in 1986, boasts a single 1,500 metre runway and due to its proximity to the City, mainly serves business travellers. It handles planes that fly to European destinations such as Amsterdam, Dublin, Madrid and Florence.
It welcomed a record 3.6m passengers last year, up 8pc on 2013.
However, expansion could be difficult. London Mayor Boris Johnson cited noise concerns when he blocked planning permission to increase the size of the site to accomodate 6m passengers. The airport is awaiting the result of an appeal against that decision.
It is the 15th busiest airport in the UK.
London’s City airport up for sale
A £2bn price tag would represent a multiple of just over 60 times the company’s earnings before interest, tax, depreciation and amortisation in 2014 — although people familiar with the business noted that the airport’s adjusted earnings that year were significantly higher.
GIP bought the airport for an estimated £750m in 2006 from Dermot Desmond, the Irish financier, who paid just £23.5m for London City in 1995 from Mowlem, the UK construction group.
However, the airport’s value could be limited by its battle to get planning permission for a £200m development that would increase the number of passengers the airport handles to 6m by 2023. It won planning permission from Newham council in February, which was then blocked by Boris Johnson, the mayor of London, the following month over noise concerns. London City is appealing against the mayor’s decision and expects to hear the outcome next year.
Permission would enable it to extend the terminal as well as construct a new taxiway, aircraft stands and arrivals building. It would also help open up the airport to new destinations, such as the Gulf, the Middle East, Russia, north Africa and the US east coast. The airport has already been granted permission to increase the number of flight movements from 70,000 to 120,000 a year.
Last month, GIP said it would be prepared to give a legally binding promise that it will not sell out for a quick profit if the government decides to opt for expansion at Gatwick over Heathrow, which was recommended by the Airport Commission in July.
Full FT article at
London City Airport challenges Boris’ decision to block its expansion plans, over ‘noise ghetto’ fears
Boris Johnson blocked London City Airport’s expansion plans in late March, as he said it would create a “noise ghetto” for people living under the flight path. Now, as expected, London City Airport has appealed to the Secretary of State for Communities and Local Government, Greg Clark, against the decision. On March 26th Boris ordered Newham council to reject the plans on the grounds of noise disturbance and because the airport was intended for business rather than leisure. Under the plans, take-offs and landings were expected to increase from 70,000 a year to 111,000,with passenger numbers doubling to 6 million by 2023. It would also be able to accommodate larger planes, (and be more profitable). This coupled with the airport’s plans to use new PBN technology to create a much narrower and concentrated flight corridor over Wanstead, Leytonstone and Leyton had prompted fears that noise could become an issue. The airport says it is appealing because of the jobs it creates, and its economic impact. The decision by Greg Clark could take 5 months.
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Boris turns down London City Airport expansion plans on noise grounds
Boris Johnstone, the Mayor of London, has refused London City Airport’s plan to expand on noise grounds. In a letter he has instructed Newham Council, who had approved the application, to refuse it. The Mayor says the application does not “adequately mitigate and manage its adverse noise impacts.” Newham’s decision was always dependent on the Mayor’s approval. London City Airport wanted permission to build new taxiways to permit larger planes to use the airport. It also wanted more car parking spaces. The decision will be a bitter blow to the airport as it will now no longer be able to bring in the larger planes it wanted to serve new destinations. John Stewart, chair of HACAN East, which campaigned against the expansion plans, said “The airport is paying the price for being so cavalier about noise. Quite simply, Boris did not believe its claims that it was dealing adequately with noise. We salute his decision”. The decision appears to be final, and it is unclear whether London City Airport can appeal to the Secretary of State. They may do so.
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London City Airport expansion plan gets go-ahead but campaigners say it will create ‘noise ghettos and misery’
Newham Council has granted planning approval London City Airport’s plans for an extended terminal, a new taxi-way and additional parking stands for larger aircraft. A new six-storey four-star hotel with up to 260 bedrooms will also be built on site. The expansion will increase the number of take-offs and landings at the airport from 70,000 a year to 111,000 and will almost double the number of passengers to 6 million a year by 2023. The number of aircraft stands will increase from 18 to 25, and the newer, larger planes they will accommodate will expand the airport’s reach from destinations in western Europe to Russia and North Africa. It has been described as a boost for London’s aviation capacity, while the arguments for and against a new runway at Heathrow or Gatwick (or neither) continue. There are claims for a large number of jobs, and Newham believes many will be for their residents – and there are claims of huge economic benefit for the local and UK economy. The expansion involves the tripling of the size of the terminal to 51,800 ft square and will see the number of flights increase from 38 to 45 during peak morning and evening rush hour times. Building work, subject to final planning approval being given by Boris, is expected to start by the end of 2015, with the first new aircraft seen on the runway in 2016.
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Campaigners against a 3rd Heathrow runway have questioned the independence of the Airports Commission and its chairman, Howard Davies. It has been revealed that he is a board member of Prudential, an insurance group which invested in property near Heathrow, just months before the Commission recommended a 3rd runway. He chairs its risk committee, which reviews and approves group investment policies as well as advising the board on risks in the company’s “strategic transactions and business plans”. The Guardian reports that Prudential embarked on a £300m spending spree on properties around Heathrow, just as the commission prepared to deliver its final report, on 1st July. Prudential has an asset management business, M&G. In 2013 it bought the Hilton hotel at Terminal 5 for £21m and an earlier investment with planning permission for a large hotel close to where the proposed 3rd runway would be built. In May and June 2015 M&G bought more property including cargo depots and a business park a short distance from Terminal 4. Howard Davies also, till September 2012, advised the GIC (Singapore), which owns 11.2% of Heathrow. The Teddington Action Group say Davies’ links with Prudential undermines the impartiality and credibility of the Commission’s recommendations.
Independence of Airports Commission questioned over chair’s Prudential role
Howard Davies sat on board of insurer, which spent £300m on properties around Heathrow as commission prepared to deliver report
By Harry Davies (Guardian)
Campaigners against the expansion of Heathrow have questioned the independence of the Airports Commission after it emerged that its chairman is a board member of an insurance group which invested in property nearby months before the commission recommended construction of a third runway.
While chairing the commission, Sir Howard Davies sat on the board of Prudential, which embarked on a £300m spending spree on properties around the airport in west London just as the commission prepared to deliver its long-awaited report in July.
The commission’s final report, which concluded expansion at Heathrow is the “clear and unanimous” choice and urged the government to act quickly, has reignited a fierce battle between rival airports, environmentalists and senior politicians.
FTSE-listed Prudential has a multimillion-pound portfolio of Heathrow investments through its M&G asset management business, which includes its 2013 purchase of the Hilton hotel at Terminal 5 for £21m and an earlier investment with planning permission for a large hotel close to where the proposed third runway would be built.
In the two months before the Davies commission delivered its final report, Prudential’s property business made further investments in £300m of commercial property around the airport, including cargo depots and a business park a short distance from Terminal 4.
Sir Howard Davies says Prudential’s risk committee ‘has no involvement in investment decisions made by M&G funds on behalf of clients’ and denies seeing ‘any details’ of holdings by the funds.
Davies chairs Prudential’s risk committee which reviews and approves group investment policies as well as advising the board on risks in the company’s “strategic transactions and business plans”.
Zac Goldsmith, the Conservative MP for Richmond Park and London mayor contender, said Davies should never have been made chairman of the commission. “News that [Davies] has also been earning hundreds of thousands of pounds from a company that has been investing heavily in Heathrow property surely puts an even greater question mark over the validity of the commission’s work,” said Goldsmith.
Teddington Action Group http://www.teddingtonactiongroup.com/ has raised concerns about Davies and potential conflicts of interest. The spokeswoman for the local residents’ campaign group claimed the links between him and Prudential undermined the impartiality and credibility of the commission’s recommendations.
“It is outrageous that somebody who is meant to be independently advising on whether there is a need for increased airport capacity has ties with a company involved in Heathrow,” she said.
A spokesman for the commission defended the review, saying: “The Airports Commission is content that its process has been robust and that it has acted impartially throughout.”
Davies told the Guardian that the committee had “no involvement in investment decisions made by M&G funds on behalf of clients” and denied seeing “any details” of holdings by the funds.
A spokesman for Prudential said its board members have “no role in individual investment decisions”.
Davies – who becomes chairman of 73% taxpayer-owned RBS in September – http://www.theguardian.com/business/2015/feb/26/sir-howard-davies-returns-financial-roots-rbs-city – did not declare his financial interests in Prudential in the commission’s register of interests, including shares and more than £370,000 in fees received while chairing the body.
The commission required Davies to declare financial interests in companies “dealt with” by the commission. In a document published in June, he declared smaller shareholdings in British Airways parent company IAG and aircraft engine maker Rolls-Royce, which he had sold off in 2013.
Davies said his position at Prudential was in the public domain and published on the Airport Commission’s website along with roles he held at Morgan Stanley and a New York-based hedge fund.
All details on the Teddington Action Group website at
with letter from the Treasury solicitor, replying to the TAG claims here
and the letter from TAG to the Secretary of State at DfT here
Wikipedia on Conflict of interest:
More on Howard Davies’ possible conflicts of interest
Patrick McLoughlin was appointed to be Sec of State for Transport on 4th September 2012. link That was the same day that Justine left.
This Guardian article implies the Airports Commission was set up by George Osborne. 2nd Sept 2012 Link
The Airports Commission’s formation was announced by Patrick McLoughlin on 7th September when he said: “The government has asked Sir Howard Davies to chair an independent Commission ….” Link
So the planning for that must have happened at least two months earlier – ie. by early July. At that time Justine Greening would have been at the DfT. So it seems the appointment of Howard Davies was done by Osborne, and not the DfT?
Link with Singapore’s GIC
Government of Singapore Investment Corporation (GIC) own 11.2% of Heathrow Airport Holdings. Link and HAL link
“In 2009 [1.2.2009] Davies was appointed as advisor to the Investment Strategy Committee of the Government Investment Corporation of Singapore (GIC). Two years later he joined its International Advisory Board. Davies resigned from both positions in September 2012, on appointment to the chair of the Airports Commission.” Link
GIC said: “We welcomed our new advisers, Sir Howard Davies on 1 February 2009, and Dr Martin Leibowitz on 1 April 2009, to provide insights on global investment policy matters to our Board Investment Committee. ” Link
The sale of Gatwick airport was agreed in October 2009 and completed in December 2009. Link
Howard Davies joined the GIC ( Investment Strategy Committee of the Government Investment Corporation of Singapore ) in 2009 (month not specified but it must have been by December).
Airports Commission website
At the start of the Airports Commission, they introduced the members etc on 2nd November 2012. Link
That gives a short list of the activities of the other commissioners. Not Howard Davies himself.
There are no other documents from the Airports Commission, on its website, other than its (operating protocol – nothing on Howard Davies in that) at its start. See Link for links to its earliest documents.
The only document showing any shares or interests of Howard Davies,in relation to the Airports Commission was dated 29.6.2015. This was disclosing the IAG shares and the Rolls Royce shares, in response to the challenge by the Teddington Action Group. Link
It is possible there are documents held by the DfT etc, on earlier conflicts of interest – on the setting up of the Airports Commission. That would appear unlikely, as they did not pick up on the much publicised conflict of interest that emerged about Geoff Muirhead. Link
Links between Davies and companies that will benefit from an expanded Heathrow
Today we are publishing information which uncovers previously undisclosed relationships between the Airports Commission chair Sir Howard Davies, and companies that stand to gain from an expanded Heathrow:GIC Private Ltd and Prudential Assurance.
The Singapore based company GIC Private Ltd (formerly known as Government of Singapore Investment Corporation) first acquired joint control of BAA plc, owner of Heathrow, in April 2006 by buying a 10% stake. It was reported in 2014 that GIC owned 11.2% of the shares in Heathrow Airport Holdings.
In letters to TAG, a Treasury solicitor has acknowledged that Sir Howard was an advisor to GIC, (Davies’ role included advising them on “new growth opportunities”) but claimed he relinquished this role when taking up the appointment of chairman of the Airports Commission in 2012.
The Commission’s lawyers confirmed to TAG that Sir Howard has been a non-executive director of Prudential Assurance since 2010. It has been reported that Prudential, through its investment subsidiary M&G Real Estates, acquired hotels around Heathrow (Hilton and Shiva Hotels) in 2013.
M&G are reported to have applied for, and been granted, planning consent for the re-development of the Heathrow Summit Centre. In June 2015, it was reported to have restructured its interests to take full ownership of Heathrow Corporate Park.
Sir Howard is waiting to take up the chairmanship of the Royal Bank of Scotland. RBS is the lead banker for companies that own Gatwick and Heathrow. The Airports Commission’s first task was to discern whether the south-east needed more airport capacity.
Lawyers for the Commission denied grounds for presumed or apparent bias but admitted Sir Howard’s interest in RBS had not appeared as a Declared Interest on the Airports Commission’s website. Sir Howard also failed to declare his links to GIC Private Ltd and Prudential Assurance.
A spokesperson for TAG said: “The Commission’s work has been held up by the Government as a truly independent review of the country’s future aviation strategy. For communities living in the shadow of Heathrow who face even more noise and toxic pollution if Heathrow expands, the revelations that the Chair of the Commission has links to a number of companies who stand to gain from an expanded Heathrow is astonishing. £20million of taxpayer’s money has been spent on the Commission and we now demand answers: what information did Sir Howard declare prior to his appointment and how much did the Government know when they appointed him?”
12 June 2015 – TAG give notice of their intention to seek a Judicial Review of the Commission’s work in respect of the following:
1. that potential conflicts of interest had arisen due to Sir Howard’s accepting the Chairmanship of the Royal Bank of Scotland (the banker for companies which own Gatwick and Heathrow airports).
2. that the Commission’s May 2015 consultation on air quality was rushed and insufficiently publicised, so they had not had a fair chance to respond.
22 June 2015 – RBS announces a delay to Sir Howard taking up his new post as Chair of the Bank until after he had completed his work with the Airports Commission.
1 July 2015 – The Airports Commission publishes its final report recommending a new third runway be built at Heathrow Airport.
2 July 2015 – The Airports Commission’s solicitor responds to TAG’s pre-action letter of claim:
• Denying that Sir Howard had a legal interest in RBS while Chair of the Commission stating “No resolutions have yet been passed to put him on the board of RBS or make him chairman. He therefore has no formal employment or other contractual relationship with RBS during his tenure as Chair of the Commission“.
• In responding to TAG’s assertion that Sir Howard’s interest in RBS had not appeared as a Declared Interest on the Airports Commission’s website, the Commission’s lawyers admitted that this was an oversight which had been rectified. Then, in seeming contradiction to its suggestions that Sir Howard had no legal interest in RBS, states “The fact of his future role was widely reported in the press at the time and has thus been in the public domain since then“.
• Furthermore, in seeking to demonstrate that a conflict of interest was not possible, the Airports Commission’s solicitor writes: “A protocol was put in place to ensure that RBS did not share any information relating to its aviation work with Sir Howard at any time during his tenure as Chairman of the Commission“.
10 July 2015 – TAG writes further letter to Airports Commission stating that Sir Howard’s involvement with GIC Limited and Prudential Assurance gives rise to allegations of apparent bias as a fair-minded observer would conclude that there was a real possibility that Sir Howard has been biased. TAG’s letter also highlights that Sir Howard’s Declared Interests makes no mention of his involvement with the two companies – despite this being revised by the Commission in March and then again in June 2015 to include his new post at RBS.
27 July 2015 – Response from Treasury Solicitor which:
• Confirms Sir Howard joined GIC in 2009 and was appointed to its International advisory board in 2011 but claims he resigned in 2012 upon being appointed chairman of the Airports Commission.
• Admits that Sir Howard is a director of Prudential and that M&G is a subsidiary of Prudential. It is admitted that Sir Howard owns shares in Prudential although it is denied that Sir Howard has any remuneration directly from M&G’s investments.
• The Solicitor does not respond to the point that these positions were not listed in Sir Howard’s Declared Interests on the Commission’s website, but instead states that they were in the public domain – via Wikipedia.
The attached letters between TAG, the Department for Transport and the Airports Commission revolve around pre-judicial review action TAG launched on 12 June, questioning Sir Howard’s acceptance of the Chairmanship of the Royal Bank of Scotland, RBS.
Document 1 – 12 June 2015 TAG pre-action protocol letter to Airports Commission and Department for Transport
Document 2 – 2 July 2015 Treasury solicitor’s response to pre-action protocol letter on behalf of the Commission.
Document 3 – 10 July 2015 TAG follow-up letter to Airports Commission
Document 4 – 27 July 2015 Treasury solicitor’s response to TAG’s letter of 10 July 2015
150331-Register-of-Interests-Form-Howard-Davies.pdf (March 2015)
150629-Register-of-Interests-Form-Howard-Davies.pdf (June 2015)
GIC announces changes to its Board
01 Nov 2012
[It contains no mention that Howard Davies is meant to have stepped down in September 2012].
GIC today announced that Dr Richard Hu Tsu Tau will retire from the GIC Board with effect from 30 November 2012.
Dr Hu’s association with GIC started when he was appointed a director of the GIC Board in 1981. He was then Chairman and Chief Executive of Shell Group of companies and his appointment to the GIC Board, the first from the private sector, paved the way for other such appointments.
He also succeeded the first GIC Managing Director, Mr Yong Pung How, in 1983. In December 1984, Dr Hu stepped down as Managing Director and in 1985, he was appointed Minister for Finance. He held this cabinet position till 2001. In addition to being on the GIC Board, Dr Hu was also the founding Chairman of GIC Real Estate, the real estate arm of GIC, from 1999 when it was corporatised as a separate entity. Over the 10 years till 2009, under Dr Hu’s stewardship, the real estate group developed from a department investing mainly in US office properties to one of the most globally diversified real estate investors in the world.
Attached is a copy of the letter of appreciation from Mr Lee Hsien Loong, Chairman of GIC, to Dr Hu on his retirement from the Board.
Mr Lim Siong Guan, Group President, GIC, said, “On behalf of GIC, I would like to thank Dr Richard Hu for his invaluable contributions to GIC over the last 31 years as a Board director. GIC has benefitted tremendously from his keen insights, his steady hand and his ready help which has enabled GIC to hone its investment skills, as well as to develop its perspectives and leadership. ”
GIC also announced three new board appointments:
a) Mr Hsieh Fu Hua, with effect from 1 November 2012.
Mr Hsieh is currently an adviser to PrimePartners Group and a Director of United Overseas Bank Limited.
b) Mr Loh Boon Chye, with effect from 1 November 2012.
Mr Loh will assume the appointment of Deputy President Asia Pacific at Bank of America Merrill Lynch on 1 December 2012.
c) Mr Gautam Banerjee, with effect from 1 January 2013.
Mr Banerjee is Executive Chairman of PricewaterhouseCoopers (PwC) Singapore until his retirement on 31 December 2012.
Attached are short biographies on Messrs Hsieh, Loh and Banerjee.
Mr Lim added, “We are pleased to welcome Mr Hsieh, Mr Loh and Mr Banerjee to the GIC Board. They add to the private sector leadership and investment experience among Board directors, and GIC looks forward to tapping their experience and networks of contacts.”
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The election of Jeremy Corbyn as leader of the Labour Party could scupper plans for a 3rd Heathrow runway, as he has now declared his opposition to it. The three other Labour contenders, Andy Burnham, Yvette Cooper and Liz Kendall, all support the plan to expand Heathrow. Jeremy Corbyn appears most likely to win the leadership contest. If the Conservative party needs to get a Heathrow runway approved in Parliament, he may need Labour to be behind it. When the Airports Commission issued their final report on 1st July, Labour supported a Heathrow runway and wanted a quick decision by the Government to get on with it. But now Mr Corbyn said: “A third runway at Heathrow would mean 4,000 homes demolished and 10,000 people displaced. It would cause massive increases in noise and air pollution and inflict misery on hundreds of thousands of Londoners. UK air pollution is already above EU limits, and 30,000 people are dying every year because of it”. He wants better transport links to airports, betteru se of existing capacity, and more even spread to the regions. Of the London Mayoral candidates, Tessa Jowell, Gareth Thomas and David Lammy back Heathrow, and Sadiq Khan, Christian Wolmar and Diane Abbott are against.
Labour today confirmed they will back Heathrow expansion – but the party are not completely united on the issue.
Today the Airports Commission, also known as the Davies Commission, has recommended that a third runway should be built at Heathrow. It was thought the Commission might leave room for expansion to take place at Gatwick. However after three years of investigation, the Commission has concluded that it is “clear and unanimous” that Heathrow is the best place for a new runway to be built. Only if noise and air pollution conditions are met.
Labour have decided to back this expansion. Michael Dugher, Shadow Transport Secretary, is thought to personally be in support of the runway. Before the party officially declared their position at PMQs this lunchtime, Dugher said:
“Labour has always been clear that more airport capacity is vital to Britain’s economic success and we need action if we are to maintain our status as Europe’s most important aviation hub.
“We will scrutinise the Airports Commission’s final report carefully. If the recommendation can meet a number of tests, including consistency with our climate change obligations, we will take a swift decision to back Sir Howard Davies’ proposals.”
On a similar note, Labour MP Louise Ellman, who chair of the transport select committee, said she strongly supported the Commission’s recommendations:
“Sir Howard’s findings echo those of the committee I chaired in the last parliament, when we concluded that a third runway at Heathrow was necessary for the UK to maintain its status as an international aviation hub.
“A new runway at Heathrow would also help to meet the current capacity shortfall, and provide a much-needed opportunity to improve connectivity from airports across the regions and nations of the UK.”
Harriet Harman confirmed Labour’s support for a third runway at PMQs today, telling Cameron that if he were to bring forward legislation supporting the Davies Report’s findings, Labour would vote in favour. Cameron said the Government would come to a decision by the end of the year. The PM face pressure from current London Mayor Boris Johnson and the likely Tory candidate for the job in 2016, Zac Goldsmith, to oppose a third runway.
However, Labour, like the Conservatives, are divided over the issue. London Mayoral candidates Diane Abbott, Sadiq Khan and Christian Wolmar (who is also a transport expert) are all opposed to expansion.
Khan, former shadow justice secretary, came out against a third runway recently despite having previously backed the proposition. The MP for Tooting has argued that expansion should be ruled out on the grounds of “awful air quality”, noise and inadequate infrastructure. Of all the candidates in the race (excluding Wolmar, who has never been an MP) Abbott is the only one who voted against a third runway at Heathrow under Gordon Brown.
Not all mayoral candidates are anti-expansion; Gareth Thomas has declared his support for a third runway.He argued: “I think Londoners support airport expansion and understands the number of jobs it can bring to the area. There is a vociferous minority opposing expansion, but I am not sure they representative of what most Londoners think .”
Tessa Jowell is thought to be in favour of expansion but has previously said she was waiting for the publication of the Davies Commission until she declared her official position. She has yet to make a statement on this. Similarly David Lammy has offered his tentative support for the proposals
London Mayoral candidates:
Labour Mayoral candidate David Lammy backs Heathrow 3rd runway, as “good for London and good for Londoners” http://labourlist.org/2015/07/labour-back-heathrow-expansion-but-the-party-are-divided-over-the-issue/ …
London Mayoral candidate, Tessa Jowell backs Heathrow runway, and wants a speedy decision – but knows H3R unpopular http://www.independent.co.uk/news/uk/politics/tessa-jowells-support-of-heathrow-expansion-means-she-cant-win-london-mayor-contest-say-opponents-10337657.html …
Labour candidate for Mayor of London Sadiq Khan:”I will do everything I can to stop Heathrow expansion” 1.7.2015 https://shar.es/1sSFDI
Labour mayoral candidate Diane Abbott, against Heathrow runway. Has been for some time. http://www.politics.co.uk/blogs/2015/06/16/labour-mayoral-hopefuls-clash-over-heathrow …
Diane for London @DianeforLondon
#LondonSelects “one of the most important things to cut air pollution in London is to stop the building of a 3rd runway” @HackneyAbbott
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