Finance (No. 2) Bill

Brian H. Donohoe Excerpts

Thursday 18th April 2013 Commons Chamber

[Mr MacNeil]

I shall speak to new clause 3 and against clause 183 stand part.

Air passenger duty is fast becoming one of the most damaging interventions by the Westminster Government in the Scottish economy, which over the past 30 years has provided more tax per person per year than across the United Kingdom as a whole. The chairman of VisitScotland, Mike Cantlay, says he is “extremely fearful” of the long-term impact of air passenger duty levies on the long-haul market to Scotland, which have left the country at a competitive disadvantage compared with countries such as Ireland. He added:

“To say to a potential visitor to Scotland from Australia, for example, that before you even book you will be paying hundreds of pounds extra for the sake of coming here, because the UK has a deficit to fund, is not an easy sell. It is lunacy for our industry.”

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

How many journeys would be affected by the new clause?

[Mr MacNeil]

I am sure that the hon. Gentleman knows the answer to that question better than I do. It will affect thousands, if not hundreds of thousands, of journeys. It is estimated that the present arrangements have cost Scotland about 2.1 million visitors since the introduction of air passenger duty a few years ago, and the effect of that on the Scottish economy is mammoth.

[Mr Donohoe]

May I draw the hon. Gentleman’s attention to the wording of new clause 3? Does it not in fact cover only long-haul flights? It does not cover connecting flights through Heathrow or any other airports. How many actual journeys will it therefore cover? I understand that there are only two such long-haul journeys per week to Northern Ireland, for example.

[Mr MacNeil]

The hon. Gentleman will understand that this covers all aspects of journeys feeding into Scotland, and he will know full well that air passenger duty is adversely affecting the Scottish economy. Does he take a contrary view?

[Mr Donohoe]

As the chairman of the all-party parliamentary aviation group, may I remind the hon. Gentleman that we have reported on this matter? The duty has a great effect on everyone in the United Kingdom, not just those in Scotland.

[Mr MacNeil]

I do not dispute that it has a great effect on everyone in the United Kingdom, but Scotland is currently in the United Kingdom and it therefore affects Scotland. I look forward to hearing the hon. Gentleman’s speech. I am sure that the points he raises will be very welcome.

--- Later in debate ---

[Mr MacNeil]

I am sure that the hon. Member for Central Ayrshire will be on his feet presently to confirm his attendance in Inverness.

[Mr Donohoe]

That has nothing to do with this debate. The hon. Gentleman should know that his proposal, which is what we are discussing, does not constitute the devolution of APD. What he is talking about is the equivalent of what happens in Northern Ireland, which affects one flight a day. What I and the all-party aviation group are suggesting is that APD be taken away completely. If he proposed that, I would support him. Is the SNP likely to consider that?

[Mr MacNeil]

I am sure that the hon. Gentleman has investigated the level of APD on flights from London airports to Inverness. Doubtless, he will be flying to the happy band that is the Labour conference this weekend. [Interruption.] As my hon. Friend the Member for Perth and North Perthshire (Pete Wishart) says, he will no doubt do so with enthusiasm.

Not only does APD receive a lot of criticism in Scotland and the UK; it has attracted international derision. Two days ago, at a conference in Trinidad and Tobago, it was not only criticised by Caribbean countries as discriminating against the region, but was described as

“a clear market distortion and barrier”

to tourism worldwide by a senior UN tourism official, Carlos Vogeler, the UN World Tourism Organisation’s regional director for the Americas. He added that APD

“can actually produce a net damage to the economy, particularly in those destinations which are so dependent on air travel, such as the Caribbean”.

Surely, on a social union basis, we should treat other Commonwealth countries, such as the beautiful Bahamas, on a fairer basis. At £332 for a family of four flying economy, its air tax is higher than the £268 in tax when flying to Hawaii.

I will give four reasons why APD should be devolved to Scotland. First, APD is making Scottish airports uncompetitive in their efforts to attract new direct international routes. It is needlessly restricting Scotland’s ability to realise the economic and business benefits that direct air connections bring.

Secondly, APD is designed for the circumstances in the south-east of England, not the rest of the UK. It is, at best, a demand-management tool for Heathrow—a stretched airport that will have no further runways until one is built in a panic in a few years’ time, as Ryanair’s Michael O’Leary predicts. Heathrow needs demand to be limited because it is at capacity and the Chancellor therefore has a coincidental fiscal cash cow. Scottish airports have the capacity for growth and this tax blocks it. Independent control over APD through devolved powers would give Scotland the ability to meet its own needs rather than Heathrow’s. My view of demand management is supported by the chief executive of the Scottish Chambers of Commerce, Liz Cameron, who said:

“Current rates of APD seem more suited to controlling capacity constraints at Heathrow than they do with the needs of regional airports, and devolution of this tax would afford the Scottish Government the opportunity to create an air transport package for Scotland designed to improve our direct international connectivity.”

Thirdly, a Scottish aviation tax regime would incentivise the introduction of new direct international services, which is important for business connectivity and in-bound tourism. We could do that by reducing the rate of duty, or indeed exempting it, in the early years of a new service—the most challenging financial period—until a route is established.

Fourthly, the Treasury said that it is devolving “aspects” of APD in Northern Ireland, making great play of the “unique” commercial challenges it faces—that was perhaps mentioned earlier by the hon. Member for Argyll and Bute. Scotland’s aviation sector also has specific and long-running competitive disadvantages that need to be addressed, and only the devolution of APD will do that. It is unacceptable that the UK Government are still not prepared to commit to the devolution of APD to Scotland, and I warn that such intransigence angers people at first, but when they calm and look rationally at the situation, they see the need for independence, which will be voted for a year next autumn.

According to a report published in October 2012 by York Aviation,

“by 2016 Scotland’s airports will be handling around 2.1 million passengers per annum fewer than they might have been if the APD changes since 2007 had not been implemented.”

It concludes:

“Constraining the growth of Scotland’s airports via APD can ultimately only have a negative impact from this perspective. APD makes it harder for airports to attract new routes or improved levels of service. Over time this will impact on Scotland’s attractiveness as a place to invest and its competitiveness in international markets. This in turn will negatively impact on Scotland’s international economy, including key sectors such as banking and finance, oil and gas, creative industries, technology businesses and advanced manufacturing”.

By establishing the highest passenger tax on flying in the world, the UK Government have finally managed to become the best in the world at something: unfair taxation. They are blocking growth with a gatekeeper tax.

The SNP Government are building a better Scotland. Scottish GDP grew by 0.5% during the fourth quarter of 2012—[Interruption.] The hon. Member for Sedgefield (Phil Wilson), who is from north-east England, might laugh, but I am sure a successful Scotland on his border would benefit north-east England as well. Would he rather have an independent successful Norway on his border or a Scotland that at the moment is in hock to whatever decisions are made by the Tories at Westminster? “Better Together with the Tories” is the Labour mantra.