Air Passenger Duty

Andy Slaughter Excerpts

Thursday 20th October 2011 Commons Chamber

[Mr Andy Slaughter (Hammersmith) (Lab)]

This is the second time I have come to listen to what the hon. Gentleman has to say and I had hoped that his speech would be somewhat non-partisan. I remind him and the Minister that the Conservative party said in its manifesto that it would move to a per-plane duty and would not keep the current banding system, which is seen to be wholly unfair. I hope that both the hon. Gentleman and the Minister will address what will be done to remove the unfair anomalies in the system.

[Henry Smith]

I thank the hon. Gentleman for his intervention. He is absolutely right that a per-plane duty was discussed and I understand that there were some legal problems with it. It is important that we as a country should finally get right the future of aviation taxation in the round, not only for the sake of hard-working families who want to enjoy a holiday now and again but, most importantly, for our economy.

Quite apart from what we think in this place about the future of APD, let me quote what a few others have said. Southern rail has added its concerns about a future increase in APD by saying:

“Any tax regime that has the potential to impact negatively on Gatwick Airport’s growth plans also has the potential to impact on Southern’s growth plans. We work closely with the airport and in recent months we have seen growth in airport passenger numbers and growth in its public transport market share. We would not want this momentum to be lost or hampered as this will impact on the medium term growth aspirations of our business”.

The airport has said:

“Gatwick is a family airport. Our passengers pay £400 million in APD every year, which goes straight into the Treasury’s coffers. It is difficult to understand why hardworking families, whose household bills are rising every month, should pay so much extra just to go on holiday. For many of them, it’s a luxury they save all year to afford.”

The Gatwick Diamond Business Association, which represents all the economy and not just the aviation sector in the sub-region, has said:

“The tax regime is having a negative impact on the UK’s ability to connect with emerging markets.”

In his speech in Manchester just a couple of weeks ago, my right hon. Friend the Prime Minister pointed out how one of the keys to UK economic growth is the need to connect better with the growing markets in Asia and South America. The Gatwick Diamond Business Association went on to say:

“Increasing tourism from the Far East is important too and in total the hospitality sector is the fifth largest in the UK. This could grow by 10% over the next five years alone…provided they are given the ability to derive their fair share of the forecasted growth in global travel.”

Another local firm in the Gatwick diamond area, CGGVeritas, has taken about 1,500 flights to meet its global customers in the past year and estimates that it has paid up to £50,000 of its budget just on the APD portion of those air tickets.

Virgin Atlantic, headquartered in my constituency, takes the view that aviation has a critical role to play in UK tourism and the wider economic recovery through encouraging visitors to these shores ahead of the Olympic and Paralympic games, but this economic potential is being stifled by ever increasing levels of air passenger duty, which are already the highest in Europe.

--- Later in debate ---

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I congratulate my hon. Friend the Member for Crawley (Henry Smith) on securing this debate and thank him for his response to the air passenger duty consultation earlier this year.

I will address the content of my hon. Friend’s speech and some of the specific points raised by hon. Members in a moment. First, let me say as the new Minister responsible for APD that not only did it fall on my desk with a thump in my first week, but the main challenge is to get the policy right for the long-term benefit of passengers, the industry, the economy and those who have responded to the consultation. I very much agree with my hon. Friend about the importance of the aviation sector. That goes without saying for all of us here in the debate. It employs substantial numbers of people—my hon. Friend’s constituents and others—directly or indirectly in the UK and is among the most productive sectors of the economy. I recognise that aviation is also an enabler and a catalyst for many businesses in the UK. The hon. Members for Belfast East (Naomi Long) and for Luton South (Gavin Shuker) pointed out the vital need for joined-up government so that we can get taxation and regulation functioning sensibly together and contributing to growth in the economy.

Let us be very clear: we all want UK aviation, and sectors such as the travel industry that rely on aviation, to succeed. That was the starting point for the APD consultation launched at Budget. It is why my predecessor, my hon. Friend the Member for Putney (Justine Greening), spent a lot of time over the past year talking and listening to airports, airlines and various organisations, including those overseas, to understand their concerns, and I hope to do the same. I note that she will be spending more time on transport issues than she might have anticipated only a few days ago. It is because we understand the pressures facing consumers, as my hon. Friend the Member for Crawley has outlined very capably, that the Chancellor froze APD in the Budget in March.

Despite that, some people have called for a cut in APD. We must be frank about the situation in which we find ourselves, as my hon. Friend has said. When we came to office last year, we inherited a fiscal deficit of historic proportions, and action has been necessary to try to steady the ship, if you will forgive another transport pun, Mr Deputy Speaker. If we are to put the economy back on the path to sustainable growth, it is imperative that we tackle the deficit and that we take contributions from all parts of society. Unfortunately, I cannot promise the House that APD will be cut in the near future. I know that many hon. Members are concerned about other aspects of APD, including the changes that the previous Government made to the structure of APD in 2009. My hon. Friend has referred to some of those changes and their impact on our Commonwealth partners.

Many stakeholders have complained about the previous Government’s changes to the banding structure of APD. Some have pointed to the anomalies created by that structure, including my hon. Friend, and we have received a number of representations from those who feel that flights to Caribbean destinations are unfairly penalised. Following in my predecessor’s footsteps, I will hold a series of meetings with stakeholders on that subject.

[Mr Slaughter]

I congratulate the Minister on her appointment, although she has been handed a bit of a poisoned chalice.

My constituents who travel regularly to the Caribbean are concerned about the anomaly. Before the election, the hon. Member for Putney (Justine Greening), who was then shadow Economic Secretary, often posed in photographs with Ministers from the Caribbean and gave assurances about those anomalies. We understand that many other assurances will not be kept, including on the move to per-plane duty. Will the Minister at least give us the comfort that the Caribbean anomaly, if I can put it that way, will be addressed, whatever the Government propose?

[Miss Smith]

I can certainly give the hon. Gentleman an assurance that I shall carry on meeting representatives from the Caribbean and, indeed, from Australia and New Zealand very shortly, to discuss those concerns. I am afraid, however, for reasons I shall come on to, that it is rather difficult at this precise moment to give him further assurances, because the Government are due to respond to the consultation. I shall shortly deal with the detail of that, and with his points about per-plane duty.

The good news is that the consultation enabled Ministers to go into all those issues in more detail. The hon. Gentleman will know that in the Budget, the Chancellor announced that, for the first time, as my hon. Friend the Member for Crawley described, APD would be extended to passengers flying aboard business jets, which is another important feature that we have made clear. That addresses a clear unfairness in the system, and the consultation invited views on how that should be addressed.

I cannot promise the hon. Member for Hammersmith (Mr Slaughter) or anyone else that we will meet everyone’s wishes, but we will try to deliver an APD system that is fairer, simpler and more efficient, and the Chancellor will set out those details in due course. On the hon. Gentleman’s point about per-plane duty, to make the position clear, the UK’s international obligations in that area include air service agreements with more than 150 countries, including the 1944 Chicago convention. We will not introduce per-plane duty at present because of concerns about legality and feasibility. We will, however, work with international partners to continue building consensus.