Air Passenger Duty

Naomi Long Excerpts

Thursday 1st November 2012 Commons Chamber

[Priti Patel]

I thank my hon. Friend for his intervention. As I said earlier, this tax is seen as counter-productive when it comes to inward investors, and we have to tackle that. One business man has written to me saying that the tax is having a major impact on both new business opportunities and maintaining current business. A reduction in it would bolster the aviation industry in the United Kingdom. Another has commented:

“I am a frequent business traveller trying my damndest to provide export business for this country and it grieves me to be paying such a punitive tax to travel on behalf of the country.”

A review of the economic impact of APD would show the true extent of the cost to businesses. In fact, the Government previously looked at the impact of APD on the Northern Irish economy and reduced APD to band A—currently, the standard rate is £26 and the reduced rate is £13—to ensure that Belfast could compete with Dublin’s air travel tax, which is just €3. Just as APD needed to be reformed to help Belfast compete with Dublin, APD should be reduced to help London’s airports compete not just with Amsterdam, Paris, Frankfurt and Madrid, but with many of the Asia-Pacific and other international hubs.

[Naomi Long (Belfast East) (Alliance)]

The hon. Lady is making a compelling case. The Irish Republic has announced that despite the fact that its APD equivalent is only €3, it intends to scrap it, because it believes it is an impediment to growth in the economy.

--- Later in debate ---

[Naomi Long (Belfast East) (Alliance)]

I am pleased to participate in today’s debate. I am a member of the Northern Ireland Affairs Committee, which has spent some considerable time considering this issue, and I am sure that more of my Committee colleagues would have been here today had they not been in Dublin on an official visit. I also congratulate the hon. Member for Witham (Priti Patel) on bringing this matter to the Floor of the House.

I am committed to rebalancing the Northern Ireland economy from its current over-reliance on the public sector, but I believe that that must primarily be achieved by growing the private sector rather than cutting the public sector, and the current APD regime is a significant obstacle to that agenda. APD is a commercial challenge to Northern Ireland business and it conflicts with the positive measures being taken to boost tourism and related employment, and to encourage foreign direct investment. It adds to the cost of indigenous businesses, particularly those seeking to grow their export market. The Committee received evidence of that just last week from a large fish processor in Northern Ireland now exporting to the far east but finding APD a huge burden on business. At best, it adds to cost; at worst, it could jeopardise connectivity between Northern Ireland and other UK and international markets.

Although APD was originally relatively affordable, it has increased significantly, particularly on long-haul flights. The increases have been very steep since 2007—up to 260% for short-haul flights—and between 2008 and 2011, for example, the number of passengers carried by Virgin Atlantic decreased by 7.7%, but the amount of APD paid by its passengers increased by more than 45.5%.

Members will be aware that this is an issue I have raised frequently in the House. I apologise if what I say today has been heard before, but until it is fully acknowledged and acted on, it bears repeating. I concur with a lot of what other hon. and right hon. Members have already said, but I want to focus on the impact on Northern Ireland. Northern Ireland is unique, but it offers an effective demonstration in microcosm of the impact that APD can have more widely in the UK. The last time I raised the issue with Treasury Ministers, I was mildly scolded for not first acknowledging the work that the Treasury had done on APD for direct long-haul flights from Northern Ireland. In an attempt to be more charming and to heal those wounds, I will therefore refer to that first on this occasion.

The United Continental flight was hugely important, as our only long-haul direct route, for a number of reasons. First, of the 600,000 passengers it carried in the last six years or so, 40% were in-bound tourists and business visitors. Furthermore, the route’s success is a demonstration to others of the viability of Northern Ireland as a tourism and business destination for direct long-haul flights, and provides a base on which we can build. APD placed the flight in jeopardy because the rates are so much lower in Dublin, which is less than two hours away. I give credit to the Treasury for responding to lobbying by MPs, the Northern Ireland Assembly and businesses and to the report of the Northern Ireland Affairs Committee inquiry into air passenger duty by reducing APD for long-haul flights from Northern Ireland and indicating recently in the Budget that it would be devolved to the Northern Ireland Assembly.

Having I trust paid due regard to the progress made, I still have to acknowledge that the change does not assist with the unfair burden placed on Northern Ireland by air passenger duty on necessary regional flights or the double duty that is paid, as our access to the UK hubs often requires separate flights owing to the small number of through carriers. UK economic policy remains to focus development on the south-east;, so other regions need to access that market to develop. In addition, the main hub airports in the UK for international travel are based in the south-east. Connectivity to and through the south-east is therefore vital, yet for those of us living on an island off an island it can only be achieved by flying.

The case for a review of APD is strong across the UK. We are island nations and aviation is crucial. However, in Northern Ireland the situation is more acute, as we are the only region with a land border with another EU member. Price-sensitive advantage in the Republic has directly affected Northern Ireland, which is something we need to be conscious of. I have mentioned the Irish Government’s intention to abolish the tax. We should note that, despite the huge economic pressure on them to reduce their deficit, low rates of corporation tax and APD are two things on which the Irish Government refuse to budge because they recognise them as key economic drivers.

APD also has a detrimental effect on tourism in Northern Ireland. Ultimately, if people fly to Dublin, they stay in the Republic of Ireland and spend there. We are lucky in Belfast if we can extract a day trip out of their visit. We need people to come and have bed nights in Northern Ireland. We need them to spend their money in Northern Ireland, which is best achieved by getting people to fly there.

I recognise that APD is lower on regional flights, but it is also paid on both legs of a journey. When combined with passenger landing charges for those on regional flights for which Heathrow or Gatwick is the destination airport, APD significantly increases costs for travellers. There is a disproportionately negative effect on those travelling from Northern Ireland, and there are few practical travel alternatives for us.

I want briefly to reflect on two other key issues: the environmental impact of aviation and the financial impact of change. APD was introduced as a means of taxing aviation to reflect the environment impact. I have no objection to aviation paying its fair share in that regard, but APD has long since parted company with that objective and is now merely a revenue raiser for the Treasury. That may sound dismissive, but it is not intended to be. Raising revenue is hugely important, given the context of the deficit, but the international evidence suggests that taxation on aviation is such a constraint on other revenue that it outweighs its benefits. I am therefore pleased to be able to support the motion today, which seeks a proper review of the situation.

In the few seconds I have left, I would like to reflect on the need for us also to consider the impact on outbound travel—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order.