Finance (No. 2) Bill

Henry Smith Excerpts

Wednesday 9th April 2014 Commons Chamber

[Jonathan Edwards]

Cardiff is the only international airport. We are talking about APD relief on long-haul flights, and it would apply primarily to Cardiff, but I imagine that the Welsh Government would have ambitions to redevelop other airports in Wales—[Interruption.] If they had the ambition, they would want to improve those airports.

As I was saying, public opinion clearly supports the devolution of the tax to Wales. Only yesterday, the Western Mail published the results of a survey that showed that 78% of respondents supported the devolution of APD. On this, as with so many other issues, the powers that be in Westminster are at odds with what the people of Wales demand. In response to that poll, the Welsh Labour Government said:

“We will continue to put forward the strong case for it”—

APD—

“to be devolved in the hope the UK Government will eventually listen to us and the overwhelming majority of the Welsh public who support this move, as reflected in this poll”.

A day after the poll, we have an opportunity in the Finance Bill to achieve that objective, but where is the Labour party?

I am glad that, since Cardiff airport has been brought into public ownership, new management has driven up passenger numbers by 9%. That is a crucial point—the national airport of Wales is publicly owned. I agree with that, as the airport is an essential part of Welsh national infrastructure, but Labour MPs from Wales are not here to ensure that something that is publicly owned by the people of Wales has the best chance of succeeding in the long term.

The devolution of APD could help to ensure the long-term future of the airport and draw passengers away from congested airports in the south-east of England—something I am sure many MPs and their constituents in and around the south-east of England would welcome. I therefore look forward, perhaps somewhat over-excitedly, to some of those MPs joining us in the Aye Lobby. I am similarly amazed that the Secretary of State for Wales is not pushing for the devolution of APD at the highest level, as it would provide us with the ability to develop the Welsh economy, which should be one of his core objectives.

The hon. Member for Vale of Glamorgan (Alun Cairns) is not in his usual place, which is slightly strange, considering that the airport is in his constituency. The livelihood of many of his constituents depends on the vitality of the airport, as well as the aircraft engineering industry that has grown around it, and they will be dismayed to learn that their MP does not support measures that could give the airport a competitive advantage. I should like to make reference in passing to the difficulties that engineering companies operating from the St Athan airbase, which is close to the international airport, face as a result of the management of that airfield by the Ministry of Defence.

The new clause effectively seeks to give Wales an essential tool to support and provide jobs locally in south Wales and the wider Welsh economy. The financial powers recommended by the Commission on Devolution in Wales are needed as soon as possible as a spur to jobs and growth in Wales. The Westminster Government, in the Wales Bill, have cherry-picked the recommendations and omitted the devolution of APD as well as other proposals. The powers included in the Bill may not be implemented until well into the second half of the decade, provided that no more roadblocks are put in place by other parties. Every month that passes without the devolution of those powers, the Welsh economy languishes even longer at the bottom of the economic league table of the nations and regions of the UK, with job and economic prospects diminished, hopes and dreams dashed, and lives stalled.

Plaid Cymru has made jobs and the economy its absolute priority, which is why we have again tabled an amendment on air passenger duty. We want to create a modern and prosperous Wales and, unlike our political opponents, we have little faith in London government of whatever colour achieving that ambition. That is why we want Wales to have the tools to get on with the job without delay. Diolch yn fawr.

[Henry Smith (Crawley) (Con)]

It is a pleasure to serve under your chairmanship, Mr Bone. I have the privilege and honour of being the Member of Parliament representing Gatwick airport, so aviation is important to my constituents. Aviation is extremely important to the whole of the United Kingdom, as an island trading nation. Many companies located in my constituency are aviation companies, such as Virgin Atlantic, easyJet and TUI Travel, or international companies that have chosen to base themselves close to a major international airport. Therefore, the issue of taxation on aviation concerns not only Wales, Scotland and England, but my constituency in particular.

I would prefer to see us abolishing air passenger duty altogether. We have one of the highest rates of air passenger duty anywhere in the world. I believe that only Chad charges more. Compared with our European competitors, the amount we charge is considerably more. One of our nearby competitors, the Netherlands, used to charge a form of APD but abolished it because of the cost to its economy. Just over a year ago a PricewaterhouseCoopers report concluded that although air passenger duty brings in about £3 billion to the Exchequer, it is estimated to cost the British economy some £16 billion.

I congratulate the Government on their move to reduce the burden of APD, as announced by my right hon. Friend the Chancellor of the Exchequer in his Budget a few weeks ago. It is a great step on the way to reforming and, I hope, one day abolishing this duty. It is a tax that we, as an island trading nation, can ill afford. Reducing bands C and D into band B for flights to capitals more than 4,000 miles from the UK will help many people who want to take well deserved, well earned long-haul holidays. It will also help the diaspora communities, particularly those travelling to the West Indies, India, Pakistan, Australia and New Zealand. Perhaps most importantly for us as an exporting and trading nation, it will help reduce the cost to business of trading with emerging economies such as China.

[David Rutley (Macclesfield) (Con)]

My hon. Friend is making a characteristically powerful speech. I agree that exporters are vitally important. Lord Livingston recently pointed out that mid-sized businesses in particular in the UK are underperforming, as are small businesses, compared to other European businesses. Does my hon. Friend think the changes to APD will help those small and medium-sized enterprises that want to get out and do more exporting?

[Henry Smith]

Indeed. The simplification of the upper bands of APD, as announced in the Budget, will help small and medium-sized companies in particular to export. I pay tribute to UK Trade & Investment under this Government, which has been making a fantastic effort to give SMEs the tools to maximise exports. The simplification of APD is of great help to small and medium-sized companies not only in England, but in Wales and Scotland.

My remarks are brief this evening. I congratulate the Government on a Budget that is good for business and good for individuals, with the income tax threshold being raised, corporation tax being lowered, fuel duty being frozen and the simplification of APD. I put in a bid once again for the abolition of APD in the future, but I recognise that it is only this Government who are tackling our economic problems in a fiscally responsible way. Charging APD on a Great Britain-wide basis is the most appropriate approach; I would not support the regionalisation of APD. Let us focus on getting APD ultimately abolished, but welcome the simplification that is good for individuals and for business in this country as a whole.

[Mr MacNeil]

I rise to speak in support of new clauses 6 and 7, in my name and the names of my Scottish National party colleagues, and I intend to press new clause 7 to a vote.

Unfortunately, air passenger duty has become yet another of the Westminster Government’s damaging interventions in the Scottish economy. It is a tax whose time has passed, if indeed it was ever fitting for Scotland, and it is at best only a demand management tool for Heathrow, needed because of the dithering and prevarication at Westminster about doing anything there. As London lost its advantage in sea-going transport to Rotterdam for reasons of dithering and prevarication, it seems that it is now losing its advantage at Heathrow as well, as the world No. 1 slot goes to Dubai. If Schiphol sorts out a few minor irritants for travellers, it will do to Heathrow what Rotterdam did to the docks.

Since 2007, APD has increased markedly: by between 160% and a staggering 360%. This tax—this demand management tool for Heathrow—is definitely damaging the Scottish economy. I object to it not because Westminster wants to slap it on to flyers owing to its dithering and prevarication—it should be free to tax and spend as it wants, regardless of the stupidity and myopia of its actions—but because of what it is doing to Scotland. The damage is obvious. PricewaterhouseCoopers says that its reduction would increase tax receipts in other areas, especially VAT, and create jobs. In short, Westminster is costing us jobs, certainly jobs in Scotland, through this tax.

Let us have a quick glance at tables that compare APD in the UK with that in some other countries in Europe. According to the Airport Operators Association, the next highest rate on short-haul economy flights is that of Austria, which charges a hefty €8. This sum increases markedly—by 100%—in the UK, which charges €16. On the medium-haul rate, Germany is the leader with €23, but that is trebled, and more, in the UK, where it is €89. On long-haul, Germany, again, leads with €42, but the UK is well out in front with €113—double to treble the rate in other countries. On the maximum-rate charge, France manages to pick up the crown with €47, but steaming out in front, yet again, is the UK with €226. While this demand management tool might be good enough for Heathrow, it is certainly not good for Scotland. It is a gate-keeper tax. I compare it to a high street shop that demands a fee of shoppers before they come into the shop and then wonders why sales have gone down.

There are many ways to approach this, and I think I am going to have to resort to poetry to advance my case. Given the Government’s intransigence, I wonder whether this may be the last untried key to unlocking their obstinacy. I turn to Mary Howitt’s poem of 1829—nearly 200 years ago. It is salient to this issue, because despite its being written before the Wright brothers and the first manned flight, it does make reference to a form of aviation. It is “The Spider and the Fly”:

“‘Will you walk into my parlour?’ said the Spider to the Fly,

‘’Tis the prettiest little parlour that ever you did spy’”.

Scotland, as we know, is one of the prettiest parlours; it is famed for its scenery. Indeed, the website TripAdvisor has named Lewis and Harris, the main island in the north of my constituency, as Europe’s No. 1 island to visit, and fifth in the world overall. Indeed, I would encourage anybody watching this debate or reading it later in Hansard to go to Google Earth and have a look at the scenery. Whether it is the beaches of Harris at Luskentyre, or Uig of the Lewis chessmen fame on the west side, or over at Gress and Tolsta or Port of Ness in the far north, they will see what TripAdvisor is talking about. Anybody visiting will find fine hotels in Tarbert, Harris or Stornoway, Lewis, and many bed and breakfasts, dotted throughout the islands. Stornoway is probably one of the best-connected towns in all of Scotland, with direct daily flights to Scotland’s principal cities of Aberdeen, Inverness, Glasgow and Edinburgh, and sometimes several times daily. There is more. Other islands to the south include North Uist, Benbecula, South Uist, and of course my own native Barra.

But despite our advantages, with standing stones older than Stonehenge and a visitor record going back to the Greeks in 325 BC, the London Government’s attitude is, “Walk into my parlour if you like. We’re not too bothered if you do or you don’t, but if you do we’ll have our highwayman mask on and we’re out to charge you a king’s ransom”—and this is just to reach Scotland in the first place.

That is a pity, because those who do discover the beauty of Scotland and especially its islands—from Islay to Unst in Shetland—find, rather like the fly at the end of Mary Howitt’s poem, that those who go up the winding stair can ne’er come down again. Similarly, those from overseas who discover Scotland are very likely to return. The damage is huge. It is not quite cataclysmic, but it is big. We are not quite in the territory of Lord George Robertson, who killed the word “cataclysmic” stone dead after he took a flight recently to make a speech in the United States of America. I am sure he is well aware of how much APD he paid.

Moving on to more serious voices on this issue than that of Lord George Robertson, a range of industry figures have lined up against this self-defeating tax. Amanda McMillan, the respected managing director of Glasgow airport, has said:

“Aviation plays a critical role in supporting the growth of the UK economy and this role is even more profound in Scotland given the country’s location on the periphery of Europe. Travelling by air is not a luxury but an essential element of business and family life, yet we continue to have the highest levels of taxation in the EU. It was extremely disappointing, therefore, that despite repeated representations to the UK Government the Chancellor in his Autumn statement opted to further increase levels of APD. APD is already proving a significant barrier to attracting new routes and unless there is a fundamental re-think, I have no doubt that Scotland’s domestic and international connectivity will suffer. Thankfully, there is broad cross party support in Scotland for action on APD and we welcome any moves which would address the issue and stimulate further growth.”

I hope to see evidence of that broad cross-party consensus in Scotland when we press the new clause to a vote tonight—or is it similar to the hollow words of Labour in Wales?

Gordon Dewar, chief executive of Edinburgh airport, has said of the White Paper:

“We welcome this policy from the Scottish Government and we would like to see APD not only halved but abolished completely. We’ve had a successful year at Edinburgh Airport but it is clear from our discussions with our airlines that Scotland could be far better connected without the iniquitous yoke of APD. It puts our country and importantly our vital tourism industry at risk. People and airlines will go elsewhere. We reiterate our call for governments to support our economy and abolish this unfair tax.”

The managing director of Aberdeen airport, Carol Benzie, has said:

“What is becoming increasingly clear are the implications of this tax on UK businesses. Put simply APD adds to the burden of running a successful company. 65% of our passengers in Aberdeen are travelling in a professional capacity and ultimately the responsibility for paying APD in each and every one of these cases is being passed back to their employer. Firms in Aberdeen are connected globally with links in emerging and existing markets. These businesses are paying APD twice if they chose to use a hub airport in the UK, and are taking their business elsewhere in increasing numbers to avoid this tax.”

It is self-defeating.

Commenting on the Irish Government’s decision to abolish air travel tax, which came into force on 1 April, Scottish Transport Minister Keith Brown, a former veteran of the Falklands war, said:

“Scrapping Air Travel Tax in Ireland has had an immediate impact and shows what could be achieved in Scotland if we had control over Air Passenger Duty…After the Irish Government outlined its plans to abolish the tax last year, Ryanair stated that it will deliver an additional 1 million passengers to and from Ireland as a direct result of that decision, with 20 new routes into Dublin, Shannon and Cork launching this summer.”

When I spoke about this last year I warned that the UK Government had been ignoring the industry, the people and the Scottish Government for far too long and that it was no wonder that support for independence was growing. We now know that support for independence has grown far more in the past year than I could have imagined. Are the UK Government going to continue with their intransigence? A year on, what do we have? The gap in the polls has closed, tightening to 6% within the margin of error, which is almost a swing, and the head of British Airways, Willie Walsh, and Ryanair’s Michael O’Leary are supportive of Scottish independence because they see the opportunities. I am sure that Members of this place will be supportive of independence after the event, but why do they have to be so slow and so late to the party? Michael O’Leary and Willie Walsh are right on the money, as we will see on 18 September.

The Scottish Government, in their White Paper on the best-planned independence process of any country in the world, aim to reduce APD by 50% within the first term of an independent Parliament, and to abolish it completely when circumstances allow, with a proposal for a straight reduction in bands. Independence is gaining support because of such straightforward, common-sense approaches.