Air Passenger Duty

Debate between Kwasi Kwarteng and Angus Brendan MacNeil

Wednesday 23rd October 2013 Commons Chamber

[Kwasi Kwarteng (Spelthorne) (Con)]

I intervened during the speech made by the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) to ask what the Labour party’s policy on this issue actually was. The hon. Lady made a good speech, but she did not answer my question. She spoke for 17 minutes without providing any clarity on the Labour party’s position, and I remain unsure about the nature of her objections—if they are objections—to this tax.

It is important to review the tax’s history. It was introduced in 1994 by my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), and at that time it was not a green tax. Like most taxes, it was brought in as a revenue-raising exercise and there was no mention whatever of its environmental impact. It was only under the previous Labour Government that the tax mutated into a green tax. It was doubled in 2007, and the banding was introduced in 2008. The right hon. Member for Tottenham (Mr Lammy) and the hon. Member for Hackney North and Stoke Newington (Ms Abbott) have spoken of how their constituents who travel to the Caribbean are particularly affected by the banding, but we did not hear any mention that that banding was introduced by the Labour Government. It seems peculiar that the hon. Member for Newcastle upon Tyne North has not mentioned that Government’s contribution to the development of the tax and nor has she set out the Labour party’s current position on it—that remains perfectly obscure.

We need to consider the deficit. As a free-market Conservative, I do not like taxation, and I yield to no one in my desire and enthusiasm to cut taxes and to stimulate the economy through reducing the burden of taxation to promote growth and enterprise, and to encourage risk-taking and other forms of business enterprise. However, I recognise that we have a deficit, and that deficit completely shapes the nature of our debates on taxation—[Interruption.] I sense an intervention coming on.

[Mr MacNeil]

I was trying to resist the urge to intervene, but the deficit in the UK has been in existence since 2001. The UK has been in a fiscal black hole since then, which was seven years before the economic crisis; it has not been able to pay its way since that time.

[Kwasi Kwarteng]

The hon. Gentleman shows an admirable grasp of our recent economic history; he is absolutely right. From 2001 to today, we have consistently run a deficit. Conservative Members have always been struck by the fact that, although the economy was actually growing during the first six of those years, between 2001 and 2007, the Government of the time saw fit to run a deficit in every one of those years. The present Government inherited a deficit of £160 billion—12% of our gross domestic product—and the fact that it has now been reduced by a third represents a remarkable success. It now stands at somewhere between £110 billion and £115 billion, depending on how the figure is calculated. In the context of deficit reduction, any Government would be reluctant to abolish air passenger duty in a peremptory way, as it brings in more than £3 billion a year. We all recognise that the deficit is a real thing—it is an ongoing annual sum that we have to close—and the £3 billion a year raised by APD makes a real contribution to its reduction.

I fully understand all the supply-side arguments. I understand that, if we were to abolish the tax, we could perhaps reap economic rewards at some future date. However, those who promote reducing or abolishing it must tell us how they would replace that revenue from day one. Where would they find the £3 billion that APD currently brings in? Conservative Members are familiar with general tax-cutting arguments. One could argue for the abolition of most taxes on the basis that that would stimulate growth, and that the money would be recouped in the long run through increased tax revenues. However, we have to face the fact of a real deficit, which is something that Opposition Members never seem to acknowledge in their speeches.

I was entertained by the speech made by the hon. Member for East Antrim (Sammy Wilson), who put forward in a typically trenchant way his views on green taxes, the environment and all the rest of it. I have often heard such arguments in the pub in Staines among my constituents and others, so I am familiar with them, but I shall not touch on green taxes, because what I am concerned about is the deficit.

If we were balancing our books and if we had succeeded a fiscally responsible Government, I would be among the first to say that this APD tax should be abolished. I would absolutely recognise the compelling argument that lowering taxes increases business enterprise. However, because we run a deficit, I feel that the £3 billion coming into the Exchequer is too high an amount simply to discard and forget about.

We need to look at the effects of such taxation on the aviation industry. I think it was my right hon. Friend the Member for Saffron Walden (Sir Alan Haselhurst) who made the point that although APD is quite high, the industry is expanding and more people are flying. From the Government’s point of view, as a revenue collector, the tax is not impeding the growth of the industry, so it would be irresponsible for them to forgo such tax revenue, especially given our record deficit.

Going forward to a time when we are balancing the books under the next Conservative Government, I will be at the forefront of those arguing to abolish APD. Earlier in this Parliament, I wrote and often said that while, in principle, the tax might not be the best thing, there are specific budgetary requirements and conditions of the moment that make APD essential.

We have to consider corporation tax and taxation generally in the round. I congratulate my hon. Friend the Member for Loughborough (Nicky Morgan) on her appointment as Economic Secretary. She cited the fact that our corporation tax rates are extremely competitive. The rate of 20% is among the lowest, if not the lowest, in the OECD. In that context, general taxation on companies and business has been reduced, and we are seeing flickerings of growth—we expect encouraging growth figures at the end of this week. In the round, we can therefore say that the Government’s policy is working. The deficit reduction is happening and growth is beginning to return to Britain. Now is not the time to slacken the deficit reduction plan, so I fully understand why APD is necessary: to further our principal aim of deficit reduction.

The Economy

Debate between Kwasi Kwarteng and Angus Brendan MacNeil

Tuesday 11th December 2012 Commons Chamber

[Kwasi Kwarteng]

Absolutely. The former Prime Minister has said that on a number of occasions. I have been on record as saying that the first Labour Administration between 1997 and 2001 was, I freely admit, a very conservative fiscal Government. As the right hon. Member for Edinburgh South West well knows, during those four years the budget was never in deficit. We ran two years of surpluses and the budget in the other years was balanced. It was only after 2001 that the disaster occurred, that the wheels spun off the car and we suffered under a profligate traditional Labour tax and spend regime. I use the phrase “tax and spend” very gingerly, because the taxation never covered the spending.

That was precisely the reason why the Government ran those deficits—to pay for their projects, to pay for greater spending. They were required to borrow money. I remember that in 2001 one of their favourite columnists, Polly Toynbee, said that Labour would have to tax more in order to spend the money. At least that was an honest position. She was suggesting that Labour should try and balance the budget at a higher level of spending. I and my colleagues might want to balance the budget at a lower rate of spending, but both Polly Toynbee and those on the Government Benches would accept is that it is a road to disaster to borrow yet more money in order to spend on grand projects or whatever utopia the Government want to build in this country. We now have the consequence of this recklessness—of Government Ministers at the time spending more and more money and running 3% deficits.

[Mr MacNeil]

Can the hon. Gentleman tell us for how many years since 2001 the UK has been able to pay its way?

[Kwasi Kwarteng]

I can answer the hon. Gentleman very directly. With reference to our public finances, we have been borrowing money every year—every single year. It is likely that even if we are able to eliminate the structural deficit by 2018, this country will have seen nearly 20 years of continual deficits. This is an appalling legacy that Labour has left the country. Since the end of the second world war, we have never run 20 years of continual deficits, which we will do as a consequence of Labour mismanagement and old-fashioned incompetence.