Air Passenger Duty

Baroness Ritchie of Downpatrick Excerpts

Wednesday 23rd October 2013 Commons Chamber

[Ms Margaret Ritchie (South Down) (SDLP)]

I commend the motion standing in the name of the hon. Member for South Antrim (Dr McCrea) and welcome both the Economic Secretary to the Treasury, who is no longer in her place, and the shadow Minister, the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), who is also no longer in her place, to their new roles.

I want to address air passenger duty in the context of the UK Government’s broader tourism and transport strategies. When it comes to tourism policy, it really is a tale of two Governments. Last week the Irish Government announced in their budget that they will be retaining a 9% rate of VAT for the tourism sector and entirely scrapping their air passenger tax. The UK Government, however, have presented us with the highest airport taxes in the world and raised VAT to 20%, with no dispensation for the tourism industry. Although I commend the Irish Government and hope that those measures bring more visitors across the island, this clearly puts businesses in the north of Ireland at a huge disadvantage. The UK Government urgently need to look at introducing similar measures, particularly in Northern Ireland, to enable our businesses to compete on a fair footing with businesses in the rest of Ireland. I hope that this debate will spur them on to do just that.

The rate of APD in the UK is the highest in the world and has risen by over 300% over the past five years. We in Northern Ireland are particularly vulnerable to that excessive duty owing to our reliance on air travel, which is dictated by our location, as has already been referred to in the debate. The rate is choking growth in the sector by having a severe impact on visitor numbers and is hurting our whole economy, especially those businesses that rely on exporting goods.

The motion refers to the recent PricewaterhouseCoopers report, which contends that lowering APD would be, at worst, budget neutral and would almost certainly boost growth and create jobs. Such evidence supports the measures taken by the Irish Government to get rid of their equivalent duty rate, and I find it hard to see why the UK Chancellor cannot respond with similar measures to support the UK economy—or at least, as suggested by the Transport Committee, commission research into the matter. Perhaps the Exchequer Secretary will deal with that issue in his response.

Obviously, the Chancellor would point to the devolution to the Assembly of long-haul APD, which was particularly welcome. However, domestic flights make up the vast bulk of flights out of Belfast International and Belfast City airports. There is also the slightly bizarre situation in which flights to London, Manchester and Glasgow are taxed at a higher rate than those to Newark, New Jersey.

Another point that should be emphasised is that the APD cut for long-haul flights was not some generous Treasury handout, but has to be paid out of the Northern Ireland block grant; as a former Minister for Finance, the hon. Member for East Antrim (Sammy Wilson) will know all about that. It was the decision of the Northern Ireland Executive to prioritise growth and tourist numbers by cutting the tax and we in Northern Ireland should be given a similar dispensation over the short-haul rate. Our geographical location makes us especially vulnerable to the pressures exerted by a high rate of APD, as someone going to or from Europe or further afield will often need to make two journeys.

We cannot ignore the wider context of our tourism industry. I have called here for a similar cut in VAT for businesses. Cutting both would mean much for tourism, which is one of Northern Ireland’s principal economic drivers, along with agriculture and fisheries; our manufacturing sector is now smaller. I have no doubt that the measure will involve assessing transport and infrastructure on a north-south basis in the island. That will require a maturity, on the part of all those who have spoken today, in harnessing the power that an all-island economy will release. For too long, our approach has been dominated by physical and psychological borders that do not exist in the mind of most people.

The Government talk a great deal about boosting the private sector in Northern Ireland and rebalancing the economy. One way to do that would be to lower APD on short-haul flights as well as lowering VAT on tourism.