Air Passenger Duty and Developing Economies

Lord Morris of Handsworth Excerpts

Wednesday 18th May 2011 Lords Chamber

[Lord Morris of Handsworth]

My Lords, I start by recording my thanks to the noble Baroness for securing this important debate. I too welcome the Chancellor’s announcement that the APD will not be increased this year, as was projected. On the face of it, the Chancellor’s announcement seems to be good news—no increase must be good news. The APD was introduced as a green tax by the Conservative Government in 1994 but has always had a negative impact on the Caribbean. Here I must declare an interest as a frequent flyer to Jamaica, my country of birth.

While the tax has never been good for those with an interest in the Caribbean, the application of the APD discriminatory banding structure has had an adverse impact on Caribbean countries and their economies, and, as I will show, on British businesses as well. We have heard that the APD banding structure is calculated according to the distance between London and the capital city of the country to which you are flying. Whatever the miles and the destinations involved, the fact of the matter is that the calculation from London to the relevant capital city discriminates significantly against the Caribbean. I give an example. The distance from London to Los Angeles is nearly 2,000 miles more than the distance between London and Washington, so a flight to Los Angeles would be in band B—one of the cheaper bands. At the same time, the flight from London to Kingston, the capital of Jamaica—it is in band C, which is much more expensive—is some 800 miles less than that from London to Los Angeles. Common sense would lead one to assume that the APD will be higher travelling to Los Angeles than to Kingston, Jamaica, but the banding structure determines otherwise.

A week ago, the APD was described on the BBC consumer programme “Watchdog” as “barking mad”. The commentator described the policy as something dreamed up during the tea break. As an expert in defending the tea break, I disagree. The way I see it, those responsible for that policy could not run a social event in a brewery. Last September, the Caribbean Tourism Organisation met Ministers and identified some of the negative impacts which the APD has on Caribbean countries and their economies. They pointed out that the Caribbean is more tourism-dependent than any other region of the world. They also said that UK companies in the aviation, tourism and travel industries are being damaged by the APD as bookings to the Caribbean decline. This was confirmed in October last year by Willie Walsh, the then chief executive of BA. He described the duty as having a devastating effect on arrivals to the Caribbean. The chief executive of easyJet informed the “Today” programme this week that 77,000 jobs in the aviation industry are at risk as a result of the APD.

As we consider the impact of the APD on the Caribbean economy, let us not forget the opportunity cost to the UK economy as passengers look for cheaper alternatives. Everyone with an interest must come to the conclusion that the APD is unfair, unclear and economically damaging both to Caribbean economies and to UK interests, and it should go.