Exiting the European Union (Excise)

David Linden Excerpts

Wednesday 3rd February 2021 Commons Chamber

[David Linden (Glasgow East) (SNP)]

The hon. Member for Edinburgh West (Christine Jardine) gave a rather remarkable speech, first suggesting that the SNP was grievance-mongering, only then to agree with the annulment motion we have tabled. While some of us on the SNP Benches have become used to these dreary tirades against the cause of independence and that of the SNP, what we are doing today is trying to protect jobs in constituencies like hers. I also want to correct the record: I am sure that my hon. Friend the Member for Kirkcaldy and Cowdenbeath (Neale Hanvey) inadvertently misled the House when he suggested that Edinburgh airport was the national airport—he might be unaware of Glasgow airport being the best, but that is perhaps a childish point.

I am grateful to my hon. Friend the Member for Paisley and Renfrewshire North (Gavin Newlands) for bringing this annulment motion to the House. The covid-19 pandemic has had a huge impact on all industries and sectors across the UK. However, the tourism and travel industry has been particularly badly hit. The albeit necessary travel restrictions have affected those working for airlines and in airports. Last week I spoke to one of my Baillieston constituents, Sharon Erentz, who works at Glasgow airport. We spoke about how the pandemic will affect air travel for many months—indeed, years—to come, with estimates that holiday makers will be cautious about booking their next holiday abroad for some time.

For many travellers, VAT-free shopping is part of the travel and airport experience. Many people who are travelling arrive at the airport early to buy holiday gifts—perfumes, alcohol and clothes—and it was clear from speaking to Sharon that many customers wait all year round to shop in the airport and take advantage of the tax relief on aspects of the retail.

Additionally, many people travelling for business regularly buy products exclusively in the airport, choosing the VAT prices over many other shops. These are often high-value customers, sometimes spending several thousand pounds at once. One of the things the hon. Member for South Cambridgeshire (Anthony Browne) said that struck me was that somehow this is about tax breaks. For a Government who like to talk about jobs, jobs, jobs, it rather seems that the Minister will overlook the jobs of many constituents such as Sharon, who I represent.

The proposals mean that the products sold in the airport would be the same price as on the high street. Many people have expressed worry over the fact that if there were no VAT-free shopping, many of their usual customers would not buy from the airport shops and stalls anymore. If the airport does not have competitive prices, there is indeed no incentive for holidaymakers to save up to spend that money at the airport. Airline passenger revenue is estimated to plunge by about $314 billion in total—or 55%—from 2019 levels according to the International Air Transport Association. Job losses in the travel industry could reach more than 100 million this year according to analysis by the World Travel and Tourism Council.

My hon. Friend the Member for Paisley and Renfrewshire North has repeatedly questioned the UK Government over the decision to scrap the VAT retail export scheme and the airside extra-statutory concession scheme. He has highlighted that, for Glasgow, the airside concession, which is now to be scrapped, is worth £8.6 million in revenue. It also means that 170 retail jobs will be put at risk at a time when between 1,500 and 2,000 of the 5,000 jobs based at Glasgow airport have either gone or are under threat. Across the UK, it is estimated that the scrapping of both schemes will cause £1.5 billion-worth of losses. When the travel and tourism industry is on its knees, it is completely irresponsible to cut one of the few remaining income streams that offers hope to so many airports.

It is vital that the UK Government are doing all they can to support the sectors most affected by the covid-19 pandemic. With the necessary restrictions, the travel and tourism industry has suffered, and with many people now facing an uncertain future and financial security, the UK Government must act. Ending VAT-free shopping adds further concern for many people, such as my constituent Sharon, who are working at airports and already facing an uncertain future ahead. I very much hope that the annulment motion is successful this evening. I will be voting for it to save those jobs that I am proud to support. Most importantly, I hope that all other Members vote to save those jobs as well.

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[The Exchequer Secretary to the Treasury (Kemi Badenoch)]

Britain’s departure from the European Union brings with it the freedom to reintroduce duty-free sales and make other tax changes that will deliver Brexit benefits to British tourists. Such gains have been enacted by the Travellers’ Allowances and Miscellaneous Provisions (EU Exit) Regulations 2020, which also introduced crucial changes to the VAT and excise rules for passengers following the transition period.

The new rules form a carefully considered package of measures that was introduced following a wide-ranging consultation. The changes take into consideration the Government’s aim of minimising disruption at the border, along with World Trade Organisation commitments that require the Government to align the treatment of passengers travelling to and from the EU and non-EU countries.

The provisions in the SI ensure the smooth flow of passengers entering Great Britain by reducing the need for them to stop at the border to declare goods that they have purchased. My hon. Friend the Member for North Norfolk (Duncan Baker) elaborated on how, from his personal experience, the measure removes bureaucracy. Without the instrument, EU and non-EU passengers would be treated differently, traveller flow at the border would be disrupted and the UK would breach its international obligations under World Trade Organisation law.

The measures I shall outline will have a hugely positive impact on UK travellers for a number of reasons. As my hon. Friend the Member for South Ribble (Katherine Fletcher) said, for the first time in more than two decades, the tens of millions of UK passengers who visit the EU every year—in non-pandemic times—will be able to enjoy duty-free sales. For example, with UK excise duty no longer due, a 1 litre bottle of Scotch could be around £11.50 cheaper.

In addition, we have quadrupled the alcohol allowance for passengers arriving in Great Britain, making it one of the most generous in the world. Under the new rules, passengers will be allowed to bring into Great Britain three crates of beer, two cases of wine and one case of champagne for personal use without having to pay the relevant taxes. This represents an excise duty saving of up to £120. My hon. Friend the Member for Dover (Mrs Elphicke) praised of the significance of such measures to her constituency, which has a port for travel straight to the EU.

I recognise the concerns expressed by the hon. Members for Paisley and Renfrewshire North (Gavin Newlands) and for Gordon (Richard Thomson), along with others, about the ending of the VAT retail export scheme and the removal of tax-free airside sales. Although the latter policy change on tax-free airside sales is not actually part of this instrument, let me explain our thinking behind the decisions.

In simple terms, the maintenance of the VAT RES and tax-free airside sales after the end of the transition period was never an option for the Government. In reality, the choice we faced was between extending the schemes to all EU travellers or removing them both completely, because the World Trade Organisation rules specify that goods bound for different destinations must be treated the same. However, because EU visitors have never benefited from the VAT RES and still spend in UK shops without it, to extend it now would present a large dead-weight loss, and in effect the Government would be subsidising the shopping of EU visitors. I am sure hon. Members would agree that this would be an unwise use of taxpayers’ hard-earned cash.

My hon. Friend the Member for South Cambridgeshire (Anthony Browne) set out clearly and concisely why this was not a fair and efficient use of taxpayers’ money, and I thank him for making such a well-argued case. In addition, data and evidence submitted as part of the Government’s consultation demonstrated that the VAT RES disproportionately benefited London and the south-east of England. In fact, around 90% of sales were made in London and Bicester Village in Oxfordshire. My hon. Friend the Member for Penistone and Stocksbridge (Miriam Cates) made the excellent point that other regions and, in particular, smaller high streets did not appear to gain as much, if at all.

I take the point made by my hon. Friend the Member for Kensington (Felicity Buchan). She and I have had several discussions on this issue and I have also had extensive representations from my hon. Friend the Member for Moray (Douglas Ross). However, they will both know that the Treasury disagrees with their assessments. The Office for Budget Responsibility estimates that the withdrawal of the VAT RES will result in a significant direct Exchequer saving of £1.84 billion in just over five years. In addition, the OBR estimates that the withdrawal of tax-free airside sales will result in a saving of £780 million over the same period.

[David Linden]

With all those forecasts in place, can the Minister tell the House how many jobs—such as that of my constituent, Sharon, whom I represent—will be lost when the Government proceed with this?