Aviation: Passenger Duty

Debate between Baroness Benjamin and Lord Sassoon

Monday 23rd January 2012 Lords Chamber

[Baroness Benjamin]

To ask Her Majesty’s Government what criteria they took into account when deciding to increase the rate of air passenger duty, in particular in respect of flights to the Caribbean.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the new rates of air passenger duty, or APD, which take effect from 1 April 2012, were confirmed in the Autumn Statement following a freeze in APD rates in 2011-12. Over the two-year period 2011-12 to 2012-13 APD rates, including those for flights to the Caribbean, will rise in line with the retail prices index. This increase, which does no more than keep pace with inflation, is necessary if the Government are to meet their overall fiscal projections.

[Baroness Benjamin]

I thank my noble friend the Minister for that Answer, but he is aware that air passenger duty is less if you fly to Hawaii than to Barbados, even though that is nearly double the distance. However, the Caribbean is the most tourism-dependent region in the world and the distortions created by APD rates are damaging to Caribbean countries—loyal friends and supporters of Britain. Would the Government consider amending the rates of APD to the Caribbean islands if they nominated Bermuda, an associate member of CARICOM, as their capital, bringing their banding into line with the US, their major tourism competitor? If not, what plans do the Government have to provide economic support to the Caribbean now that its livelihood is threatened?

[Lord Sassoon]

My Lords, in the current economic climate, air passenger duty is clearly a burden on all businesses whether in the Caribbean, the UK, or wherever else they are based. That is why we had a one-year freeze, although it is right that aviation should make a fair contribution. However a banding structure works, it is bound to have anomalies. It is the case, as many noble Lords will know, that because the banding works in essence on where the capital city is, the anomalies are indeed there, as my noble friend says, but whenever there are bandings there will be anomalies. We listened to the case that was made very well by the Caribbean authorities, including the tourist organisation, during our full consultation last year. We have no plans to make any further changes, other than those set out in the response to the consultation, but I hear very clearly what my noble friend says about how challenging the situation remains.