Debate Magazine

First Rule of Land Value Tax Club...

Posted on the 08 February 2015 by Markwadsworth @Mark_Wadsworth

... don't talk about Land Value Tax unless you know about land values.
The LVT campaign linked to an article in The Guardian about Business Rates. By far and away, the single largest BR bill is on Heathrow airport, if you add together the airport, the maintenance area and Terminal 5 (ignore cargo terminal), it's £150 million a year. The next biggest is Sellafield, at £32 million.
(The LVTC article appeared to suggest that Heathrow was overtaxed. Sellafield might or might not be; in terms of 'alternative use of the land they are occupying', they are wildly overtaxed, but what they are paying for is 'the right to run a nuclear power station' which as we know is worth ££billions. Even if the right is only worth £1 billion, then £32 million a year BR looks about right)
Returning to Heathrow, their BR bill is tuppence ha'penny, frankly.
What Heathrow airport is paying for is not so much the site itself (all 3,000 acres of it!) but the privilege of using London's airspace and quick transport links into London.
Acording to Heathrow's website, there are about 480,000 aircraft movements a year (one landing plus one take-off).
Check: one every forty seconds, 14.5 hours a day, 363 days a year = 473,000. Looks about right. There are different figures for the number of passengers, so let's take the mid-point 65 million.
Divide our BR bill of £150 million by 480,000 movements = £ 313 per aeroplane landing and taking off, or about £2 per passenger. Seems pretty good value to me.
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There's far more to it than just BR of course.
The biggie is actually Air Passenger Duty. Let's assume that Heathrow airport generates half of all APD in the UK (it might be two-thirds, who knows?), that's £1,600 million a year. Ten times as much as their BR bill.
Heathrow is running at capacity, so whatever taxes they pay, they are clearly not so high as to depress demand/output.
APD is a tax on transactions (the worst kind of tax); a flat per 'plane tax would be far better; but best of all is to scrap APD and hike Heathrow's BR bill to £1,750 million all-in. That's £3,300 per aircraft movement or £25 per passenger (return trip).
Relieved of the faffy and inefficient APD, airlines will be able to increase ticket prices accordingy, and the regulator would then allow Heathrow to increase its landing charges from £20 to £45 per passenger.
(Clearly, it makes more sense for Heathrow to charge per aircraft movement than per passenger. All things being equal they want fewer aircraft movements (expensive and risky) and more passengers (very lucrative, they spend money at the airport), but there you go.)


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