Heathrow capacity 'harms' economy, say MPs

George Osborne: "We are absolutely clear we do need additional airport capacity"

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The restriction of capacity at Heathrow is harming the UK's economic potential, a group of MPs has said.

A report by the All Party Parliamentary Group on Aviation said efforts should be made "to ensure the UK retains and grows hub capacity" at Heathrow or a new purpose-built hub airport.

It comes as the government rejected calls for a third runway at Heathrow.

Chancellor George Osborne said the government understood there was a need for additional airport capacity.

On Tuesday, Transport Secretary Justine Greening said the government remained opposed to a third runway at Heathrow, despite calls from Conservative MPs for a change of heart.

The coalition agreement between the Conservatives and the Liberal Democrats rules out any expansion of Heathrow before the next election, while Labour also currently opposes the idea of a third runway at the UK's largest airport.

'Trading nation'

How vital is the future of Heathrow to the UK economy?

But a consultation on future air capacity in south-east England has twice been delayed amid reported divisions within the coalition and Conservative ranks.

The chancellor said more airport capacity was needed in the south east but exactly where "is not a decision you can make right here, right now".

"Over the next few months we will be talking to people about where that capacity should be," Mr Osborne said.

"I am very clear; we are an open trading nation and just as we don't want to shut down our ports or our railways, we don't want to shut down our airpsace."

The All Party Aviation Group, which brings together MPs from across the parties with an interest in aviation but has no formal parliamentary role, said the UK was being left behind on aviation capacity.

It has taken evidence from 60 organisations and its chair, Labour MP Brian Donohoe said the findings "advocate a new direction for UK aviation".

He said: "In order to achieve the greatest possible economic and social contribution from aviation, we need two things from government: a forward-looking aviation policy that allows for aviation growth; and a new approach to the taxation of aviation.

"Combined, a new approach could not only energise the sector but also provide a firm foundation for the UK's economic recovery.

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

The group, which received advice and administrative assistance from the Fair Tax on Flying campaign - an alliance of more than 30 travel organisations who think tax on air passengers is too high - said Airport Passenger Duty is "a barrier to inward business".

The government should undertake an economic analysis of the impact of the tax "on growth and employment," the MPs said.

A government spokesman said: "The UK is currently one of the best-connected countries in the world, but does face a capacity challenge in the medium term, especially in south east England.

"It is this challenge that government will seek to address in its call for evidence later this year."

He added: "The government is firmly committed to ensuring aviation in the UK remains affordable and will continue to monitor the situation to ensure the industry is able to compete in international markets."

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