Air Passenger Duty

Lord Borrie Excerpts

Tuesday 11th January 2011 Lords Chamber

Asked by

[Lord Borrie]

To ask Her Majesty’s Government what is their assessment of the potential effects on United Kingdom competitiveness of the announcement by the Chancellor of the Exchequer in June 2010 forecasting that air passenger duty revenue would increase from the current rate of £1.9 billion to £3.8 billion per annum by 2015–16.

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

My Lords, the Office for Budget Responsibility’s November forecast estimates air passenger duty revenue at £3.6 billion in 2015-16. The estimate reflects forecast growth in passenger numbers and the November 2010 rate increases as announced by the previous Government. It also assumes that duty rates are uprated by inflation each year—a standard forecasting convention. However, at the Budget, the Government committed to exploring changes to aviation tax and to consult on any major changes. We are considering evidence from stakeholders, including on the impact on UK competitiveness.

[Lord Borrie]

I thank the noble Lord for his answer. However, it does not deal with the great problem that so many countries on the continent of Europe either do not have any duty at all or have a much lower duty than in Britain. Therefore, the competitiveness of our airlines, airports and tourist industry is at a disadvantage. Apropos the last Question and Answer, this is surely one matter on which the Government have a measure of control. It is their duty that has been imposed and is suggested to be higher. I am sure that the Minister will agree with me that the UK tourist industry must be very disappointed with the Answer that has been given, especially when tourists from countries such as India and China—growth economies—are wanted yet are being turned away by this unduly high duty.

[Lord Sassoon]

My Lords, I do not believe that the tourist industry will be either surprised or disappointed because I have merely restated that we are consulting a wide range of stakeholders and listening to views of the tourist organisations, among others. On UK competitiveness, it is important to see the APD in the wider context. For example, we do not levy the APD on transit or transfer passengers. As the noble Lord, Lord Borrie, points out, other countries are introducing similar taxes—Germany introduced a similar tax on 1 January. In the wider context of competitiveness, the Government are reducing corporation tax very significantly from 28 to 24 per cent over four years from April 2011. If we talk about competitiveness, we should look at it in a much wider context.