Air Passenger Duty

Lord Lee of Trafford Excerpts

Monday 28th January 2013 Lords Chamber

[Lord Lee of Trafford]

My Lords, first, I congratulate the noble Lord, Lord Palmer, on securing this debate. I want to focus my brief remarks on the deleterious effect that APD has on UK tourism. I declare an interest as the chairman of the Association of Leading Visitor Attractions. Tourism is our fifth-largest industry and arguably the number one industry in more parliamentary constituencies than any other single industry. In an Oral Question on 12 November last year, I pointed out that,

“a potential visitor from China must fill in a 30-page visa application form … and find £650 for a family of four in visa fees and air passenger duty. Is it therefore surprising that mainland Europe gets four times as many visitors from China as we do?”.—[Official Report, 12/11/12; col. 1273.]

Thankfully, there has been some improvement on the visa application front, but no give on the APD front.

What is the point of the Government putting an additional £22 million into the GREAT campaign, announced by the Chancellor of the Exchequer in his Autumn Statement, if this is countered by a further rise in APD on long flights and in premium cabins? Since 2007, APD increases have vastly outpaced inflation over the same period, which was 17%. Non-economy visitors in band C from China or India—potentially wealthy spenders—have seen APD increase by no less than 305%. From Australia, it is even worse, with an increase of 360%. In overall terms, the UK levies the highest level of APD of any country in the world. Why is that? Britain’s aviation tax is now so high that the Treasury will collect more than twice as much in passenger taxes in 2012—£2.5 billion—than the total of all other European countries combined, which is £1.2 billion.

Other countries have realised the error of deterring passengers. Belgium, Denmark, the Netherlands and Ireland have all introduced APD charges lower than those now being applied in the UK and subsequently reduced or abandoned them, due to the adverse impact on their inbound tourism. In 2011, the Irish Government acknowledged the negative impact of APD on their economy and removed it to stimulate tourism revenue. Happily, our Government woke up the following year, removing APD from flights from Belfast when it was realised that it made those flights uncompetitive, compared with flights from Dublin.

Of course, we all appreciate that tax revenues must be generated, but why clobber tourism, a great world growth industry? Tourism and hospitality have the near-unique distinction of offering rising job opportunities across the range, from the skilled to the unskilled. It is surely madness to stunt their growth by excessive APD. The Manchester Airports Group tells us that in 2010 AirAsia X dropped plans for a Manchester-Kuala Lumpur service in favour of one from Paris Orly, purely because of the high APD. As the noble Lord, Lord Palmer, said in his opening speech, is it not high time that the Treasury instigated a full economic impact assessment of APD, which has not been done for 19 years?