Finance (No. 2) Bill (Sixth sitting)

Anneliese Dodds Excerpts

Tuesday 16th January 2018 Public Bill Committees

On that basis, I ask the hon. Member for Bootle to withdraw the new clause, and I commend clause 43 to the Committee.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is a pleasure to be speaking with you in the Chair, Mr Owen. I thank the Minister for his clarifying comments. We on the Labour Benches still wish to have the review proposed in new clause 16. The review would, exactly as described by the Minister, examine the impact of the APD changes on the usage of aeroplanes and their emissions.

On one hand, it is helpful that we are shifting towards greater predictability for air operators and consumers around air passenger duty. It seems appropriate that we have the lag so that we can discuss and determine future rates, rather than having short-term change, but we would like a much stronger indication of the direction of Government thinking in relation to the tax.

The Minister offered the same argument for air passenger duty, to a word, as the one we were given in the previous Finance Bill discussion:

“With no tax on aviation fuel or VAT on international and domestic flights, APD ensures that the aviation sector plays its part in contributing towards general taxation, raising £3.1 billion per annum.”––[Official Report, Finance Public Bill Committee, 24 October 2017; c. 111.]

In our discussions in Committee on APD changes in the previous Finance Bill, we went on to talk about the potential environmental impact. I note that at that stage, the Minister said:

“Like all taxes, it will also change behaviour to some degree, and to the extent that it makes flying a little bit more expensive, it could be expected to have the effect of diminishing demand for air travel. The lower rates for economy, which takes up more space on aircraft than first class, assist in ensuring that flights are as full as they can be.”––[Official Report, Finance Public Bill Committee, 24 October 2017; c. 114.]

We would find it very helpful to have a review. I take on board the Minister’s point about regular information about the operation of APD, but what we do not have at the moment, to my knowledge—if I am wrong, the Minister can set me right—is an indication of the relative merits of this approach against potential others.

A number of transport economists and environmentalists have looked at the impact of levying duty on entire planes, rather than on individuals. The thought was that that would somehow lead to more incentives for more efficient use of space. I take on board the differential rates for private jets and small planes as against larger planes, which tend to be fuller during economy use, but it would be helpful to know whether there will be more impetus towards more intensive use of planes that are already in the air but all of whose seats are perhaps not being used. For the Opposition, that would be part of the stronger analysis of the impact of the duty, compared with other approaches. It would be part of the more general review that we feel we need on the overall impact of environmental taxes and reliefs, so that we can be sure that they are targeted as well as they can be for both economic and environmental purposes.

There are a couple of other issues on which we need clarification. We had a debate on the first during proceedings on the previous Finance Bill. My hon. Friend the Member for Luton North (Kelvin Hopkins) and others raised the matter when they talked about the extent of consultation on existing measures. There are higher rates for long haul in the proposals, as in the existing APD regime, but many Britons have no choice but to travel long haul if their family is in the Caribbean, the Indian subcontinent and so on. The Minister at the time made a commitment to write to my hon. Friend on the extent of consultation with groups of people who might be particularly affected. It would be helpful to have on the record the thoughts of the Minister in Committee on that issue, especially because, in many ways, short-haul flights are a lot easier for people to avoid than long-haul ones, because they can adopt other forms of transport instead. Any indications about that would be useful.

It would also be helpful to have an indication of the Government’s thinking about the extent to which they will be able to protect, or otherwise, revenue from APD. Arguably, we are seeing a race to the bottom on the duty. In previous Finance Bill Committees, we have discussed the new system in Scotland—the air departure tax. Clause 43 increases the band B multiplier in Northern Ireland. From the way in which it is written, I assume that that is happening in the absence of the Stormont arrangements coming back into play and giving the Northern Ireland Assembly control, so we are talking about an increase until the Assembly can make a determination.

Generally, however, the direction of travel appears to be downward, and it would be helpful to know the Treasury’s long-term thinking. We have a lot of pressure from airports, particularly those near Scotland, about whether they can protect their business given the potential reductions in the duty in Scotland. My hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) has made that point in the House.

Furthermore, we need consideration of the issue, given the discussion we had in the Chamber only a couple of hours ago, when a Minister—I appreciate that it was not the one in Committee, who is well apprised of all the issues relating to air passenger duty—seemed to indicate that we might change the extent to which we levy duty on incoming flights to the UK, departing from the existing practice under EU rules. That might be a possibility, but it would naturally have an impact on revenues. It would be helpful, again, if the Government indicated how the revenue—the £3.1 billion to which the Minister referred—will be protected.

[Mel Stride]

I need not repeat my earlier remarks about the reviews we already carry out, and I reiterate the point that the new clause, as worded, would implement a review of the possible impact of the taxation we are considering before such taxation had come into effect, which as an exercise is possibly not that valuable. Of course, we always keep all taxes under review. The hon. Lady talked about seeking beneficial behavioural change through mechanisms other than APD, for example. I am happy to receive any representations that she might make in that vein.

The hon. Lady mentioned her colleague, the hon. Member for Luton North, and the impact of APD on passengers who require a long-haul flight to visit relatives. I will certainly get back to her on that when I return to the Treasury. She also mentioned competition between different airports following the devolution of APD. Scotland will in due course bring in its own form of ADT. She also referred to the Northern Ireland situation. It will be for each of those tax jurisdictions to start to take whatever measures they think are appropriate to ensure that their particular airports and passengers are not disadvantaged. I suspect that, as with competing tax rates, the dynamics will probably be for those tax rates to come down, as a result of the competitive effect or the fact that there is a devolved Government. I commend the clause to the Committee.

Question put and agreed to.

Clause 43 accordingly ordered to stand part of the Bill.

Clause 44

VED: rates for light passenger vehicles, light goods vehicles, motorcycles etc

Question proposed, That the clause stand part of the Bill.

[Anneliese Dodds]

The Opposition have received a submission that it is worth asking a question about. It is about the specific case of taxis that are zero-emission capable. As I understand it, they will be exempt from the VED supplement from 1 April 2019, but not until then. There is the complication that taxis are classified as passenger cars because they are built to carry passengers, rather than as commercial vehicles, although in practice they are not really operating as commercial vehicles, which means that at the moment they are subject to the VED standard rates.

As those of us who have done any casework on this will know, taxi drivers need to purchase their car for a long period and there are complicated financing arrangements. In many areas we are keen to promote zero-emission taxis, or taxis that will be capable of transferring to zero or low-emission bases in future. It would be helpful to hear from the Minister whether some further calibration could be done on this measure, so as not to choke off the development of zero-emission capable taxis. I thought the submission was quite interesting in that regard.

[Mel Stride]

I thank the hon. Lady for her question about taxis. We will publish a consultation this spring, which will clarify who will and will not be eligible for the exemption and address the issues she has raised.

Question put and agreed to.

Clause 44 accordingly ordered to stand part of the Bill.

Clause 45

Tobacco products duty: rates

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

The Office for Budget Responsibility expects tobacco clearances to fall, as the long-term trend in the decline in smoking within the population continues. We therefore expect tobacco duty receipts to fall in the longer term. Accordingly, we will review our duty rates at each fiscal event to ensure that it continues to meet our two objectives of protecting public health and raising revenue for our vital public services. I commend the clause to the Committee.

[Anneliese Dodds]

I am grateful to the Minister for that explanation. I understand broadly that we are essentially talking about three changes across the board: the duty rate increase of 2% across all tobacco products, the extra 1% for hand-rolled tobacco, and the minimum excise tax to ensure that there is a minimum tariff for the very cheapest cigarettes.

We are asking for a review and will continue to do so, because it is so necessary. I think that some of the changes are quite positive. The new measures around hand-rolled tobacco are important, given that that form of cigarette has become increasingly popular—more than a third of smokers now use hand-rolled tobacco. Men, rather than women, and people in more deprived socioeconomic groups are particularly likely to smoke hand-rolled cigarettes. We think it is important for action to be taken in that regard.

The MET is also important to ensure that cigarette taxes on their own do not lead to compensatory behaviour, such as switching to a lower price brands. Evidence from countries such as Thailand suggests that when taxes went up, people just compensated by smoking cheaper cigarettes rather than stopping. We are asking for a review because we are concerned about the sufficiency or otherwise of the duty rises reported here for the Government’s overall anti-smoking efforts.

[Alison Thewliss]

On that point about cheaper brands, does the hon. Lady agree that there is also a huge risk that people will turn to illicit tobacco, which is also a tax avoidance matter with people bringing cigarettes into the country?

[Anneliese Dodds]

I am grateful to the hon. Lady for making that germane point. I understand that more research is needed into the extent to which people substitute illicit brands. Of course, that is the nature of the beast, because these products are illicit and therefore difficult to discover. Many of those involved in the trade are involved in other forms of criminality. It is enormously important to deal with that and with the health problems associated with illegal products, which can include lots of chemicals in addition to the tar and other noxious substances present in all cigarettes. I absolutely agree with her.

There is evidence that cigarette taxes are leading to a reduction in smoking, and that the reduction is greater when there are measures in place to prevent the proliferation of very low-cost cigarettes. But there is also evidence that the effectiveness of both is greatly enhanced when coupled with health interventions, not just public awareness campaigns. For example, nicotine replacement therapies have been shown to increase the long-term success of quitting by about 3% to 7%, and if a quit attempt is made by a former smoker with the support of a health professional as part of a structured support programme, they are far more likely to keep that quit in place and not to start smoking again.

Similarly, behavioural support has been shown to increase the likelihood of a smoker quitting long term by a similar figure: between 3% and 7%. I mention that now because current developments are extremely worrying in this regard. A recent report by Cancer Research UK and Action on Smoking and Health shows that cuts to the public health budget nationally have led to dramatic changes in services for smokers. Only 61% of local authorities now offer what the National Institute for Health and Care Excellence suggests for evidence-based intervention to help people stop smoking. I am shocked by that, as I am sure are other members of the Committee. There have been huge cuts to local anti-smoking services, and I understand that at least one local authority now has no budget at all for addressing smoking. In one in nine local authority areas GPs no longer prescribe nicotine patches or similar measures.

Why am I mentioning that now? Let us face an obvious point: tobacco taxes are regressive, because they affect those on lower incomes most. We cannot escape that. If help is available for people to quit, then that regressive impact is in some way compensated for. The evidence is that only about half of the people who smoke actually enjoy it, so huge numbers want to quit. The average smoker in the UK spends £23 a week on cigarettes, and obviously that figure is increasing as a result of these additional duties.

There has been a debate within the international evidence, and this may come up within the Minister’s responsibility when he returns to the issue. Most of the international examination that says that there might not be a regressive impact has suggested that in the long run, low-income smokers will save on their medical costs. But that does not apply in the UK, thank goodness, because we have a national health service that is free at the point of use so everybody is able to use it and there is no such medical saving in that regard.

If those professional services for stopping smoking are not available, particularly to people on low incomes, it will be difficult to avoid the conclusion that this is a regressive tax being imposed without the help that people need to stop smoking. Only about one in twenty people who try to stop unaided manage to stop smoking for six months. People who do stop smoking for some time do have a number of symptoms, as those trying to do it will know. These symptoms are severe, and in many cases they lead to people going back to smoking even if they do not want to do that. It is therefore particularly important that we have help for young people. Labour—

[The Chair]

Order. The health implications are important, but we need to get back to the issue.

[Anneliese Dodds]

Labour said that we would prioritise having a special programme focused on young smokers. The point I am trying to make is that the Minister said this was part of a suite of measures, but he only mentioned public health information campaigns in addition, from what I can remember—I will check Hansard to see whether that is correct. The evidence strongly suggests that if we just increase duty, as we are doing now, without that suite of extra measures, we are not going to see the number of people stopping smoking that we really need. We have also seen cuts in trading services, which potentially is enabling more young people to access cigarettes than should be the case. For all those reasons, we urge the Government to review the effectiveness of this measure on overall smoking cessation rates, and we will continue to push for that review.

[Mel Stride]

The hon. Lady raised the issue of the potential substitution effect in individuals trying to avoid the priced-in tax on cigarettes by purchasing illegal cigarettes, which might increase the amount of illegal trade. I can tell her that tacking illicit tobacco is a key priority for the Government. Since 2000 the UK has adopted a strategic approach, with a wide range of policy and operational responses, in collaboration with other enforcement agencies in the UK and overseas. That effort has achieved a long-term reducing trend in the illicit tobacco market, despite duty rates increasing substantially over the same period. The percentage tax gap for cigarettes was reduced from 22% to 15% and for hand-rolling tobacco from 61% to 28%, so there appears to be some evidence that the substitution effect, or the increase in illicit tobacco coming into the country, is not quite as sensitive to some of the tax rises as one might instinctively imagine.

The hon. Lady asked what other measures the Government are engaged in to try to reduce smoking. As I have said, we are committed to reducing the prevalence of smoking through our tobacco control delivery plan 2017 to 2022, which also provides the framework for robust and ongoing policy evaluation. The plan sets out ambitious objectives to reduce smoking prevalence, including reducing the number of 15-year-olds who regularly smoke from 8% to 3% or less, reducing smoking among adults in England from 15.5% to 12% or less, reducing the inequality gap in smoking prevalence between those in routine and manual occupations and the general population—that touches on her point about the potentially regressive nature of tobacco tax—and reducing the prevalence of smoking in pregnancy from 10.5% to 6% or less.

We will of course continue to keep those measures under constant review. In fact, tobacco and smoking is one of the areas of public policy on which Governments of all colours have placed particular emphasis. There is a huge amount of scrutiny in that area and we will continue in that vein.

Question put and agreed to.

Clause 45 accordingly ordered to stand part of the Bill.

Clause 46

Power to enter premises and inspect goods