Air Passenger Duty

Gavin Shuker Excerpts

Thursday 20th October 2011 Commons Chamber

[Gavin Shuker (Luton South) (Lab/Co-op)]

I congratulate the hon. Gentleman on securing this debate not once, but twice, not least because it gives me the opportunity to welcome the Economic Secretary to the Treasury to her new role—a well-deserved promotion. Does the hon. Gentleman agree that part of the problem with this issue, with which I am very sympathetic, is the fact that there is a gap between the Treasury and the Department for Transport in that the Treasury leads but the Department for Transport is required to produce plans for airports and aviation?

[Henry Smith]

I am grateful for that intervention. The holy grail of government is joined-up government, with all Departments and the Treasury working together. My right hon. Friend the Minister for the Cabinet Office and Paymaster General is doing a great job in trying to achieve that.

The World Economic Forum’s international tourism competitiveness report ranked the UK 134th out of 138 nations for air taxes, and we are beaten only in the amount we charge by the west African countries of Senegal, Ivory Coast, Mali and Chad. The chief executive of British Airways said:

“Aviation in the UK is the most undervalued and overtaxed industry in Britain. We want to play our full part in assisting Britain’s economic recovery, but we are held back by levels of tax on flying which are higher than anywhere else in the world”.

and added that the increases would cost BA an extra £100 million and put more pressure on ticket prices. At the recent launch of a new Air Asia X route from Kuala Lumpar to London Gatwick, its chief executive stated that it is commercially more difficult to operate from the UK than from France. He pointed out that 10% to 12% of its passengers flying from Paris to Kuala Lumpar are British nationals. That gives a sense of the shift that passengers are already starting to make.

--- Later in debate ---

[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.

[Gavin Shuker]

Will the Minister give way?

[Miss Smith]

Briefly, as I must conclude.

[Gavin Shuker]

I want to make just a small observation. Before the election, the Conservatives campaigned on moving to a per-plane duty. Given the complexity that the Minister mentioned, can she shed some light on why they said that they would do so?

[Miss Smith]

The glory of coming into government is that one realises that all sorts of things are worse than one imagined, and that is a case in point. As I have said, the legality and feasibility of that approach have been clarified quite extensively.

I will touch briefly on the question of the devolution of APD. As hon. Members will know, the Chancellor announced that from 1 November 2011 the rate of APD for direct, long-haul passengers departing from Northern Ireland will be cut to the short-haul rate, which I hope we all agree is good for constituents in Belfast East and elsewhere in Northern Ireland. That measure was in response to the unique challenge facing Northern Ireland and is designed to ensure that local airports remain competitive. However, in order to provide a permanent solution to the issue, the Government have launched a process for the devolution of APD to the Northern Ireland Assembly. We are working in close consultation with the Executive to take that forward. I would also like to offer my thanks, and those of my predecessor, to members of the Northern Ireland Affairs Committee for the diligent and helpful input they provided on the issue.

Let me also say a few words about APD and the regions, which hon. Members may be interested in. We received around 500 responses to the APD consultation, many of which related specifically to the question of regional APD rates. It is certainly fair to say that there is no consensus on the matter. Some regional airports have asked us to consider lower APD rates for the regions, but several airlines and hon. Members have asked us to consider the opposite. I note the views of my hon. Friend the Member for Crawley in this regard. On that question, and on the broader reform of APD, the Government aim to publish a full response to the consultation later this autumn. We will of course take into account the views expressed in this debate.

There is one other issue that has been raised which I must address quickly: the environmental impact of aviation. We must recognise the scale of the challenge that confronts us. Since 1990, CO₂ emissions from UK aviation have more than doubled. In 2010 they accounted for around 6% of total UK CO₂ emissions. As other sectors decarbonise over the coming decades, aviation emissions are likely to make up an increasingly large proportion of total UK emissions. The Government’s approach to this problem is a pragmatic one. The international nature of aviation requires an international response, which is why we support the inclusion of aviation in the EU emissions trading system from 2012. At the same time, the Department for Transport, in true joined-up fashion, is considering the best way to tackle local environmental impacts as part of its aviation policy review.

I know that some have called for the abolition of APD once aviation enters the ETS, but I must point out, as others have done, that APD is fundamentally a revenue-raising duty and currently raises around £2.5 billion a year. The forecast revenues that will result from aviation joining the ETS are only around £0.1 billion a year, reflecting the fact that under the relevant EU directive most of the allowances for the system will be given to airlines for free. In looking forward, however, the Government will assess the revenue requirements from aviation taxes, including those from the ETS, in the round.

In conclusion, I hope that we can continue to have constructive debates in a way that helps deliver a tax system for air transport that is fair and sustainable for the long term and puts us on a positive footing in the world. I thank my hon. Friend the Member for Crawley again for bringing this matter to the attention of the House.

Question put and agreed to.