The UK government could have collected an additional £5.9bn in taxes in 2023 by applying the same fuel duty rate to jet fuel as it does to petrol and diesel, according to a new briefing by green NGO, Transport and Environment (T&E). The analysis highlights the significant revenue potential and environmental benefits of taxing aviation fuel, which is currently exempt from such duties.
Unlike motorists, hauliers, rail operators, and farmers, airlines do not pay any tax on the fuel they burn. Road fuel duty is currently levied at just under 53p per litre, contributing approximately 5% of government revenues. These funds are intended to cover societal costs associated with fossil fuel consumption, including NHS expenses related to air pollution and infrastructure adaptation due to climate change.
The briefing argues that the aviation sector, which burned 11.1 million tonnes of jet fuel in 2023—nearly equivalent to the UK’s petrol consumption last year—should contribute to these costs. The study analysed the impact of applying fuel duty at various rates and found that the UK government could raise between £0.4bn and £5.9bn annually, depending on the routes covered and the tax rate applied.
To address this discrepancy, the NGO recommends that the government use the upcoming autumn budget to implement a phased introduction of fuel duty on jet fuel. It suggests starting with a 9p rate in 2025 and gradually increasing it to match the road fuel duty rate by 2030. Additionally, it proposes requiring airlines to purchase 90% of the fuel for all departing flights at UK airports to prevent the import of untaxed kerosene.
The potential environmental impact is also significant. The briefing estimates that applying fuel duty to jet fuel could save 3.7 million tonnes of CO2 emissions in 2023. This underscores the role that fiscal policy can have on consumer demand.
While the potential revenue and environmental benefits are substantial, implementing a fuel duty on jet fuel presents several challenges, including the UK’s competitiveness, potential job losses, and a lack of international coordination.
The briefing’s findings underscore the potential of taxing jet fuel to raise significant revenue and reduce emissions. However, the challenges and pitfalls of this new fiscal policy would not be insignificant, and the policy’s success would depend on careful design, international coordination, and stakeholder engagement. As the UK continues to navigate the complexities of decarbonisation, the debate over aviation taxation will be a crucial area to watch.
