Air Passenger Duty: Regional Airports

Caroline Spelman Excerpts

Tuesday 20th October 2015 Westminster Hall

[Julian Knight]

I thank the hon. Gentleman for his contribution. I am about to turn to those particular points.

[Mrs Caroline Spelman (Meriden) (Con)]

Before my hon. Friend continues, and on the very day that the Chinese President visits our Parliament, may I follow his train of thought about the importance of connectivity with China? My hon. Friend might recall that the President’s predecessor stopped first at Stratford-upon-Avon before coming to London, so the appetite for tourism to the west midlands is real and strong, and greater connectivity through Birmingham would enhance it.

[Julian Knight]

Greater connectivity throughout the United Kingdom—in all the regions and devolved Administrations—would enhance not only tourism, but business and trade. I will come on to those points shortly.

Powers over APD are being considered for Wales, and that might have a knock-on effect for English airports such as Bristol and Liverpool. More seriously for my local airport, Birmingham, the new Manchester devolution deal might see that city gain the power to cut APD for its own airport, which could lure scheduled and package-holiday flights away from Birmingham. Clearly, if we are not to be placed at a disadvantage by rival areas, we need Birmingham airport to be able to compete fairly. However, I do not want my speech or this debate to be exercises in grievances or fiscal wishful thinking.

Despite the best efforts of this Government, we face a difficult fiscal environment. While we are still trying to clamber back from the recession and endemic overspending by Labour, any suggestions should at least be revenue neutral for the medium term.

--- Later in debate ---

[Mrs Caroline Spelman (Meriden) (Con)]

I wish to make a short contribution to this debate, as Birmingham airport is in my constituency and is a very significant employer. It is an intriguing example, as it is an airport that has extended its runway without major public opposition, to the great surprise of the Prime Minister, who asked on a visit, “How did you achieve that?” The straight answer is that for a long time the airport has had a good working relationship with the surrounding community. The surrounding community therefore have quite strong views about air passenger duty, like many hon. Members present, and I share their concern.

A tax should be there to nudge behaviour. The question is, does air passenger duty really do the job it originally set out to do? From hon. Members’ contributions, it is clear that one impact of air passenger duty is the reduction of services and even the closure of some regional airports, with devastating consequences for the regional economic activity that previously focused around them. We are right to encourage the Chancellor to deliver on his pledge in February this year to review the potential options to support regional airports, which I imagine include reducing the impact of air passenger duty. I would like to underline how important that is for Birmingham airport.

I am grateful to my hon. Friend the Member for Solihull (Julian Knight) for securing the debate. As he explained, Birmingham is a significantly underutilised airport. The runway is now the same length as Gatwick’s, yet it takes a third of the passengers that Gatwick takes. I am sure my constituents will be a little alarmed by my hon. Friend’s referring to the 36 million passengers who could theoretically flow through Birmingham airport. That will cause a little consternation at both ends of the flightpath in my constituency. A bit more realistically, with more competitive pricing of this tax or, indeed, its abolition, passenger throughput would increase. The range of airlines locating themselves in Birmingham would increase, which would create jobs.

The significance of this in Birmingham is, as has been touched on, the linking up of transport policy. Mainstream parties of all persuasions have agreed that we should construct a high-speed line from London through Birmingham to Manchester that stops at Birmingham airport. Not many of our country’s airports are located on a main line: Heathrow is not; Gatwick is not on a main north-south line; and Stansted is not. One of Birmingham airport’s unique selling points is its centrality and the fact that people can step off the aircraft on to a mainline railway route at present. Once HS2 is built, the journey from Birmingham international airport to Euston will take 31 minutes. Having taken nearly one hour and 40 minutes to get in from Luton just the other day, I would welcome a 31-minute transfer time from an international airport to London.

Air passenger duty has had unintended consequences, with closures of and reductions in services, but taxes are designed to drive our transport choices. As far as the west midlands is concerned, if one objective is to turn people away from aviation towards alternative forms of transport, the problem is that there is no spare capacity on the railway line, which is why a high-speed line is being constructed. If hon. Members have had the pleasure of driving up and down the M42 recently, they may have noticed the roads are pretty congested.

Indeed, because there is no spare capacity on the railway network, at a time when the west midlands’ manufacturing industries are undergoing a renaissance, their goods are all having to go by road. Our economic recovery can regularly be seen going up and down the M40, as 17 transporter loads of Jaguar Land Rover cars leave the factory and make their way to Southampton. This tax needs to be examined from the viewpoint of whether it is nudging behaviour as it was intended to. If not, and if it is having unintended consequences, there is a strong case for the review to be completed as soon as possible.

This comes at a time when the Government are seriously committed to devolving power. Hon. Members from Scotland have already benefited from significant devolution, and there is more of that to come, but this is a comparatively new development for the regions of England. Variation in air passenger duty would be entirely in step with the logic of returning powers to the regions, so that they can then seriously examine whether such a tax is desirable, whether it would achieve the region’s aims and whether the region still wishes to collect it at the original rate.

Now is absolutely the right time to have this debate. This is significant for our nation’s future transport choices, wherever airports are located. There is a significant underutilisation of some transport assets, as well as a significant overutilisation of others, and air passenger duty does not seem to be doing much to address that problem.

--- Later in debate ---

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

It is a pleasure to serve under your chairmanship, Sir David. I congratulate the hon. Member for Solihull (Julian Knight) on securing this important debate. As the SNP spokesperson on transport, I obviously take a keen interest in this issue.

The hon. Gentleman described the positive impact regional airports can have on the economy—jobs, direct investment and the growth that stimulates further jobs down the line. Members around the Chamber have talked with common purpose about supporting regional airports and those who have to travel from the periphery.

The right hon. Member for Belfast North (Mr Dodds) said that regional airports are being held back by APD, but I would suggest that this goes even further: they are also being held back by a lack of flexibility in policy on route development and route protection. The right hon. Member for Meriden (Mrs Spelman) said that devolving the relevant powers would make a difference, and I think they will when they come on stream for Scotland. That is mainly because Scotland’s regional airports will not get the benefit of High Speed 2. Even if HS2 does come to Scotland, they will not see a difference.

[Mrs Spelman]

For the record, it is right to say that the Scottish Government do want HS2 to reach Scotland. They have given clear evidence to that end.

--- Later in debate ---

[The Financial Secretary to the Treasury (Mr David Gauke)]

Sir David, it is a very great pleasure to serve under your chairmanship this afternoon. I congratulate my hon. Friend the Member for Solihull (Julian Knight) on securing the debate and setting out his case so well. Indeed, I thank all right hon. and hon. Members for their contributions, including my right hon. Friend the Member for Meriden (Mrs Spelman), my hon. Friend the Member for Fylde (Mark Menzies) and the hon. Members for Central Ayrshire (Dr Whitford), for Strangford (Jim Shannon), for South Antrim (Danny Kinahan), for Kilmarnock and Loudoun (Alan Brown), for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) and for Salford and Eccles (Rebecca Long Bailey). I congratulate the hon. Member for Salford and Eccles on her appointment as shadow Exchequer Secretary—I speak as a former shadow Exchequer Secretary—and am delighted to welcome her to the Front Bench.

The Government have a long-term economic plan to rebalance growth across the regions and nations of the United Kingdom, strengthening our economy as a whole. That includes the commitment to a major transfer of power to our great cities, counties and nations so that local people can take more control of the decisions that affect them.

As part of that plan, the Government are delivering the Smith agreement for Scotland and will devolve air passenger duty to the Scottish Parliament. In accordance with the St David’s day package, the Government are also considering the case and options for devolving air passenger duty to Wales. In England, the Government are creating a northern powerhouse by pushing ahead to deliver a package of devolved powers to major northern cities and investing in transport and infrastructure. In the north-east, for example, the Government are in good discussions about the potential to devolve further powers and responsibilities to the regions.

[Mrs Spelman]

I am sure that the Minister would appreciate the sensitivity of this issue for west midlands MPs. If he is not going to mention the fact that the Government are in negotiation with the west midlands local authorities about the creation of a midlands powerhouse, we will be a bit disappointed.

[Mr Gauke]

My right hon. Friend is absolutely right, particularly in the context of a debate secured by my hon. Friend the Member for Solihull, to refer to the progress that we want to make in the west midlands, which is very much a priority area as well. I was going to touch on that. The case for the midlands engine set out today by my hon. Friend and my right hon. Friend the Member for Meriden is important.

I turn to English regional airports; I know they have expressed concerns that air passenger duty devolution will impact negatively on their business. The Government appreciate those concerns. Regional airports play an important role as local employers and enable the transport of people and products nationally and internationally. That improves connectivity, increases trade and helps to create new jobs. Consequently, the Government are undertaking a review of how to support regional airports in respect of such impacts. That is why the Prime Minister stated earlier this year:

“We are not going to accept a situation where there’s unfair tax competition…We will do what’s necessary to make sure that England’s regional airports can succeed.”

--- Later in debate ---

[Mr Gauke]

The hon. Gentleman, who is his party’s Front-Bench spokesman on transport matters, raises an important point, but I question whether APD is the correct way of achieving the objective that he seeks. In the context of APD, there are some challenges, and the gaming of the system is one risk.

Having welcomed the hon. Member for Salford and Eccles, I must point out that her shadow Treasury colleague the hon. Member for Wolverhampton South West (Rob Marris), the shadow Financial Secretary to the Treasury, told the House on 29 June:

“I would increase the rate of APD.”—[Official Report, 29 June 2015; Vol. 597, c. 1275.]

To be fair, that was before he was appointed to the shadow Front-Bench team. I do not know whether that is the Labour party’s position. I will leave that question hanging.

[Mrs Spelman]

The message that we are getting, and it is one that the Treasury often has to give, is that relieving the tax would generate a return for the Treasury through increased economic activity. That is the argument that everybody always uses for tax reduction. None the less, will the Minister be clear with us about the timetable for the review of the options to help regional airports, since it was announced in February?

[Mr Gauke]

My right hon. Friend anticipates the response that I would generally make, as Treasury Ministers are required to do fairly regularly, regarding requests for tax reductions or spending increases. I cannot add to what I have previously said about the review. We will respond in due course. This is a detailed and complex area. One thing that has emerged from the debate is the fact that there are complexities, and that unintended consequences can result from pursuing certain policies, so we wish to consider the evidence carefully. We are in the process of doing so, and we will respond in due course to the points raised in the consultation. A number of options have been set out this afternoon and, although the consultation is closed, we will want to look closely at the contributions to the debate to develop our thinking on the matter.