House of Commons Hansard Debates for 31 Jan 1994

Mrs. Campbell : The airlines have made it clear in their submission that that deferral is not long enough. They would like implementation to be subject to a further delay to encompass the entire holiday season, because some of their brochures have been printed up until the end of December.

Airlines should be compensated for the cost of collecting the tax on the Government's behalf. Whatever means the airlines choose, the tax will be expensive to collect. It has been suggested that the tax should be levied on the ticket rather than collected at the airport. I thoroughly endorse that argument because of my recent experience in Japan, when I had to queue for some time to pay the airport tax. If the tax is to be collected at airports, it will be necessary to erect a barrier at which people will have to queue. That means that airports will be faced with the

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additional expense of building a barrier and other necessary infrastructure. Barriers will cause congestion and great annoyance, because, as one of my hon. Friends has already mentioned, imagine how someone will feel who has spent his last £10 of English currency on a taxi to the airport only to find that he must find another £10 to pay the airport tax.

I believe that the tax is unnecessarily complicated. It is a niggling sort of tax which will be difficult to administer and collect. I hope that the Government will take my arguments on board. When the Paymaster General replies to the debate, I hope that he will make it clear that he will consider them.

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Mr. George Stevenson (Stoke-on-Trent, South) : I should like to speak in support of amendment No. 3, which is part of the clutch of amendments that we are now discussing. I support the demand for a report to be made on the effects of implementation of the tax which the House could consider before its imposition.

I am sure that all hon. Members, irrespective of their opinion of the airport tax, would agree that we have already had sufficient experience of the Government imposing taxes which were simply not thought through. The Government had to backtrack on the poll tax, for example, at immense cost to the public purse. I know that the House has considered the principle behind the airport tax, but we should think carefully before moving down that same path.

Mr. Hoon : Flight path.

Mr. Stevenson : Yes, indeed. I hope that any problems with the airport tax will not be on the same scale as those caused by the disastrous poll tax.

If hon. Members just took a cursory glance at the valid points made by the travel industry, they would be bound to share some of its concerns. I am sure that they, too, would then call for a full report to be made on the effects of the tax, which could be considered by the House. We could then avoid a repetition of expensive past disasters. Hon. Members should consider the amendments carefully before we embark on a course that could lead to further expense on the public purse and force the Government to backtrack.

I appreciate that the principle behind the tax has already been accepted, but it simply will not work because of its massive impracticalities. The Government have already accepted that the tax is bound to damage the travel industry. They estimate that it might lead to a 2.5 per cent. reduction in business, but I know from people who work in the travel industry that that is a serious

underestimation. Those people believe that the estimate has more to do with the Government's attempt to show the tax in a favourable light than with reality. The Government must consider what that tax burden will do to an industry that is desperately fighting to attract more tourists to our country.

Mr. Forman : Is it not implicit in what the hon. Gentleman is saying that we are discussing estimates of damage to the industry? Nobody knows what it will be, and nobody will know reliably until there is empirical evidence. Is it sensible to have an amendment that says that duty should not be charged until the Government have presented a report on the effects of that duty? Unless the duty is charged, we cannot know the effects.

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Mr. Stevenson : The hon. Gentleman has made my point for me, so I might as well sit down and rest on the laurels of what he has just said. He admits that nobody knows what the effects of the duty will be. The Government are imposing a serious tax which, by the way, they did not mention in their manifesto. Perhaps the hon. Gentleman told his constituents about it when he asked them to vote for him. I should like to see a copy of his election address saying, "I intend to support the imposition of an airport tax". He says, in support of the Government, that the tax will be imposed when the Government have not a clue about its effects. Having sat on these Benches for two years, I am sure that the Government do not know what the heck they are doing. But when Conservative Members say that they accept that, I should have thought that it would lead the hon. Gentleman to the conclusion that he should support the amendment.

Mr. Forman : The hon. Gentleman has wilfully misunderstsood the point that I sought to make. How can he expect the House to take seriously an amendment that says :

"This duty shall not be charged"--

which means levied--

"until the Government has presented a report on its effects"? Clearly, there is a logical inconsistency because we can reliably know the effects only once the duty has been in operation for a year or two.

Mr. Stevenson : I am grateful for the hon. Gentleman's further intervention. If the Government have no idea about the effects of the tax until it has been imposed, how can they assume that the damage to the industry will amount to only 2.5 per cent.? The hon. Gentleman seeks to argue all the way down the yellow brick road on which he has embarked and, the more he intervenes, the more he makes the case for me. If he would like to intervene again, I should be only too happy to allow him to do so.

That the tax will dramatically increase airlines' costs is beyond doubt. However, exactly what those costs will be in pounds and pence is another matter.

Mr. Terry Dicks (Hayes and Harlington) : I apologise for arriving late. The hon. Gentleman hits the nail on the head. For the life of me I cannot understand--neither can the airlines in my constituency at Heathrow- -why the airlines should be responsible for collecting the tax. Abroad, either the airport authority or the Government collect it.

Mr. Stevenson : I share that view. However, that situation is perfectly consistent with the Government's policy of imposing a tax, getting others to collect it, and then blaming them for it. I do not simply make a party political point on that.

If an airline were to say that it could specifically identify the cost of the administration systems that the tax will impose on it, I should be dubious about that. But if the travel industry, and airlines in pariticular, said--as they do--that the tax would impose serious additional costs on them, I would accept that because the ticketing, monitoring and administrative implications of the Government making airlines into unpaid tax collectors are very serious.

I have studied the Bill and done what I can to examine the arguments. I have looked at the research done both by the industry and by the House of Commons Library, but I can find no reference by the Government to the significant costs that will be imposed on airlines as a result of the tax.

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That is another good reason why I hope that we can persuade the Government to take a step back on this. They can maintain the principle if they wish, but they must not go ahead and impose the tax when they do not know its effects, particularly on our airlines. Conservative Members may say, "He would say that, wouldn't he?", but it seems to be sheer common sense. If the Government do not know what effect the tax will have, why step off the cliff edge? Conservative Members may step off the cliff edge if they wish, but taking the airline industry with them would be going too far.

Mr. Dicks : Another nonsense about the tax is the fact that it is imposed only on travellers who go by air. Why is it not imposed on those who go by boat or through the channel tunnel? The airlines feel that it is grossly unfair.

Mr. Stevenson : I am grateful to the hon. Gentleman. I shall come to that point in a moment. The more Conservative Members intervene, the more I recognise that they will be joining us in the Lobby in support of the amendment and I look forward to continuing this exchange there.

Only recently, the President of the Board of Trade said that he was determined to cut a swathe through regulations and burdens on industry. Yet within a few days the same Government returned to the House and said that they intended to impose another burden on industry. This burden is unnecessary, impractical and will prove very damaging.

The industry has described its reaction to the proposal as "resigned pessimism". Is there any wonder? I have discussed the additional serious but unnecessary costs that will be imposed on the airline industry as a result of this tax, but there may be another way of looking at the matter. The airline industry had better establish a system to impose the tax now because it will not be long before the Government impose VAT as well. Some members of the Government may be saying privately--a secret agenda has been mentioned--that if they can get the airlines to put in the systems now it will be nice and easy when they come to impose VAT on them. I understand that the Government intend to embark on "educational visits" to the industry by October 1994. I should be grateful if the Government would explain what they intend to do on those visits. Do they intend to educate the airline and travel industries or--dare I suggest it--to seek a little education themselves? If so, and if they learn about some of the difficulties faced by these industries and about some of the problems that the tax will entail, will the Government be prepared to admit that they have got it wrong in some ways and that they need to examine the problem a little further? Will they compile a report and put the issues to the House in the proper manner?

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I would certainly welcome any comments by the Paymaster General on the purpose of the educational visits. I hope that they will not consist of officials embarking on a propaganda exercise on behalf of the Government. I hope that this will be a two-way process in which the Government confront some of the problems that will result from the tax and that they will be prepared to consider their findings carefully.

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Mr. Peter L. Pike (Burnley) : On these visits, might not the airlines point out to the Government the dangers of overseas airlines moving to use Frankfurt and other airports instead of airports such as Heathrow?

Mr. Stevenson : There is indeed a distinct danger of that. In other parts of Europe the collection of such taxes is the responsibility of Governments, so the administrative burden does not fall on the airlines. Such a move might well be attractive to certain airlines, the more so if this proves to be the thin end of a wedge. Although the tax may be only £5 or £10 today, before we know it the figure may be £15 or £20. I should like a clear commitment from the Minister that the Government have no intention of increasing these taxes once they are imposed. That is the least that we can expect--

Mr. Gallie : Does the hon. Gentleman believe that his Front-Bench spokesman, the hon. Member for Oxford, East (Mr. Smith), would give a commitment that if his party ever came to power it would get rid of such taxes?

Mr. Stevenson : Any Conservative Member who talks about trust on taxation is on very thin ice. I am prepared to debate the principles of taxation with any Conservative Member but I fear that you, Dame Janet, would not allow me to today. In any case, the hon. Gentleman's intervention added not one iota to our debate.

Under the Government's proposals, journeys that start outside the United Kingdom will be generally exempt from the tax, provided that people re- embark on flights departing from United Kingdom airports. In other words, someone who starts a journey in Frankfurt and comes to London but goes on to New York will be all right. Somone embarking on an aircraft from Frankfurt, coming to London, but wanting to go on to the Channel Islands or the highlands and islands will not, however, be exempt--so far as I can tell. Where is the logic in that? Why cannot the Government accept that it is illogical?

The Government will have to explain all this to people in the far reaches of Scotland, in the Channel Islands, in Northern Ireland and in the Isle of Man. It is quite illogical that those making onward journeys to those places should have to pay the tax. The Government may just think, "We've got you!"--a good headline for The Sun, and a vital point about the new tax. It is another anomaly to which the Government appear oblivious.

I know, since I am a regular traveller, that it is still a damned sight easier to go from Frankfurt to New York via London than from Frankfurt to anywhere else in the United Kingdom via London--

Mr. D. N. Campbell-Savours (Workington) : And cheaper.

Mr. Stevenson : Quite. Why are the Government prepared to build in such unworkable and anomalous systems? Why will they not reconsider? The tax will be in danger of losing all credibility because of the anomalies.

We are told that domestic tax will be levied on the first leg of a flight, but not on the return leg, provided that the return leg is from the original airport of destination. That, too, will need explaining. Who is to know whether the return journey is made from the airport of original destination? The complexities are huge. It is no good the Government fobbing off pleas from the industry on the ground that it is just moaning and groaning : there are real problems here, and they will face anyone trying to travel.

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I promised to return to the point made by the hon. Member for Hayes and Harlington (Mr. Dicks), who asked to use the Government's example--why someone who flies via London to somewhere else in the United Kingdom will be subject to the tax while a person coming through the channel tunnel by rail and travelling on to Scotland or Northern Ireland from a London airport will not. That seems to be a serious anomaly, too. What will happen to someone arriving by ferry who wants to come to a London airport and then travel elsewhere? He would have to pay the tax, but someone arriving in London from Frankfurt and travelling on to New York will be exempt.

The Government will never convince me that this tax is justified, practical or required, but they will have to explain it to the people who will have to pay the tax ; or are the Government not bothered about what people think? I note that no one wants to intervene to answer that.

I note, too, that people starting their journeys in the United Kingdom will pay one amount, depending on their final destination. People who will have to pay an airport tax when leaving the continent will face the possibility, depending on where they are going, of paying another airport tax when they arrive in an airport in the United Kingdom. That looks like double taxation. It is no good saying that what people do in other countries is no business of ours. People who have to pay twice will not like it. Paying once is bad enough ; paying twice will make them very angry.

Another problem arises with cancellations. People may pay this additional Tory tax only to find that their airline has cancelled the relevant flight. What will happen then? What will happen if they are transferred to other airlines? The Government information, so far as I can see, does not refer to that. Another airline will be responsible for collecting the tax and will say, "Hang on a second, we want to know through our system that the tax is payable by us. We cannot accept someone saying, It has been paid.'" Does the tax have to be paid again if there is a cancellation and a passenger is transferred to another airline, or will the Government introduce some scheme by which the second airline can be guaranteed that the tax has been paid?

Some hon. Members may think that this is just a bit of fun, but I am asking serious questions. What happens when people are rerouted? We have all had experience of turning up at an airport and being rerouted because of bad weather or goodness knows what. Presumably the tax has already been paid. Will the second airline say, "Hang on a minute, we will not take these people unless they pay their tax again." There is no point in saying, as the hon. Member for Carshalton and Wallington (Mr. Forman) said, that we cannot know the effect of the tax. The British people are entitled to know its effect ; otherwise, they will encounter serious anomalies.

One of our most successful airlines, British Airways, has said--although I do not believe all that it says--that some of its loss-making domestic routes could be pushed over the edge. Have the Government considered that, or do they think that it is just a bit of drum banging by Lord King? After all, he tried to push Virgin over the cliff. Perhaps the tax will do that to some of his own routes. I am coming to the end of my speech. Many hon. Members have said that there are serious practical problems.

Dr. John Marek (Wrexham) : I hope that my hon. Friend will not conclude just yet. He mentioned a great

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many things that are wrong with the tax and says that we should vote against it. Does he agree that there may be a case for levying the tax on airports that have benefited from infrastructure improvements paid for by the Government? For example, Heathrow has benefited from a great deal of concrete paid for out of the public purse. The constituency of the hon. Member for Hayes and Harlington (Mr. Dicks) is half covered by concrete. Should not the users of that airport pay the tax to recompense the public purse for the extra infrastructure? Of course, the highland and islands airports, which are on beaches, would not be subject to the tax.

The Second Deputy Chairman of Ways and Means (Dame Janet Fookes) : Order. This is a long intervention.

Dr. Marek : What does my hon. Friend think of that suggestion?

Mr. Stevenson : That is another issue that the Government have not considered.

This is a tax on success. I am sure that Conservative Members will recognise that phrase because they have used it often enough. The more passengers an airline carries, the more tax it will pay. However, the loss- making but vital routes will be in danger of being pushed into the financial abyss. This is the worst of all possible worlds. Perhaps a better way to impose the tax is to examine investment at airports to see how the public purse has been affected and whether European Community money has been involved. Such airports could be told that as they have benefited it is right for the Government on behalf of the British people to levy the tax in this way. However, I suspect that my hon. Friend's intervention will fall on deaf ears because it makes far too much common sense.

For the Government, this is a simple matter and they do not mind if it taxes success. It is like saying to the airlines, "Do not try to find more passengers because if you do, you will have to pay more tax." That is an interesting concept and I am sure that Conservative Members will wrestle with it before deciding whether to support the tax.

I accept that there are many disagreements on aspects of the tax. That is to be expected, but for the Government to go ahead and impose the tax in the light of serious anomalies and sheer impracticalities, and in the knowledge that it will impose additional burdens on airlines at a time when they are fighting in a market riven with overcapacity, makes no sense.

7.15 pm

I spoke to people in the airlines and in the travel industry and they have told me that there is massive overcapacity. British airlines are fighting tooth and nail for every passenger in one of the world's most viciously competitive markets, and all that the Government can do is impose an unnecessary tax on them.

I have seen many examples of the Government shooting not themselves in the head--they will do that eventually--but shooting the British people and many industries in the head. At a time when the airlines and the travel industry are facing such competition, it is sheer lunacy to impose a tax on them. It defies logic.

Mr. Campbell-Savours : When we were quietly discussing these matters another matter arose. What will

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happen to air miles? A person who wants an air miles ticket approaches the air miles operator, which is some company in Croydon. At what stage will the money be paid?

Mr. Stevenson : I do not want to take up too much time, but if I had sufficient time I could give an endless list of serious objections to the tax. My hon. Friend has mentioned one. I cannot answer his question, but the Minister should answer it. Such schemes were introduced by the airlines because of the vicious competition. To qualify for such a scheme a person has to buy an airline ticket and will pay the tax--depending on the journey --when he buys that ticket. Presumably when he collects the air miles and buys another ticket he will have to pay the tax again.

How do the Government propose to deal with schemes that are designed to attract the maximum number of passengers? Such schemes are presumably in line with the competitive ethos that the Government love to promote. When people go to collect their air miles do they have to pay the tax again? Should not this question be put to the Minister before Conservative Members go into the Lobby in support of the Government? These issues are not flippant ; they are very serious. What we are talking about is double taxation imposed on services designed to attract passengers to British airlines, which are facing severe international competition.

Dr. Marek : I wonder whether my hon. Friend is absolutely right about this matter. I think that air miles, far from being subject to double taxation, are subject to zero taxation. Perhaps this is a matter that the Inland Revenue ought to look into.

Mr. Stevenson : If my hon. Friend is correct, he makes a valid point. Either way, the matter must be addressed. People claiming their entitlement under the various schemes initiated by the airlines have to present their tickets at an airport before they travel. Do they have to pay tax again? If so, surely that is double taxation. You are in enough trouble with single taxation : I expect that when you impose double taxation your already tattered reputation--whatever is left of it--will take another nose -dive.

The Second Deputy Chairman : Order. It is not my reputation that is in tatters.

Mr. Stevenson : If my words implied any such thing, I apologise unreservedly, Dame Janet. I am sure that you will allow me the luxury of making it clear, however, that I do not apologise to one Conservative Member.

This is an important point which must be addressed and I hope that in the summing up speech the anomalies that have been identified will be addressed. The more that is known about them, the more the tax will be under threat, and the clearer it will be that the amendment must be supported. These issues must be considered thoroughly and reported on to the House before this unnecessary, damaging and dangerous tax is imposed on the British people.

Mr. Wilson : I am grateful for the opportunity to make a few points in this debate, which concerns an issue in several aspects of which I have a particular interest.

This is one of the major taxation issues arising from the Budget. It is worth noting, in passing, that, the day after the Budget, it was seized upon by The Sun for its front-page headline as epitomising the whole spirit of the Budget. I

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would not dissent lightly from the populist touch of The Sun in making that selection. Perhaps Conservative Members should take the matter a little more seriously.

The local elections in May will be followed by the European elections in June, and this tax will come into effect in November. In other words, it will begin to operate just about a month after the new Prime Minister has been put in place. The first thing that he will be hit with is the introduction of the take-off tax. As The Sun and many hon. Members have pointed out, this tax will be resented by many. It is symbolic. People will realise that it has no rhyme or reason, that it is not fair or just, that it is simply another means of raising revenue. It is just another way of screwing people, and, for that reason, it will be deeply resented.

The whole Budget could be described as a fiscal Kama Sutra, but this measure will be the subject of very deep unpopularity. The levity with which Conservative Members have treated the matter in this debate will be shown to have been misplaced.

There is another preliminary point that I should like to make. It is the policy of airlines to charge for children from the age of two. As the father of two young children, I regard this as a fairly punitive policy. My little fellow of two and my daughter of five are charged half of what are very substantial air fares. One of the oddities of this tax is that it makes no distinction between adults and children. My hon. Friends and I have been trying to come up with another example of the imposition of a direct tax on two-year-olds.

Mr. Brian Sedgemore (Hackney, South and Shoreditch) : At full rate.

Mr. Wilson : Yes, at full rate.

Have the Government descended so far ? Are they now reduced to charging two -year-olds £5 or £10 for the privilege of accompanying their parents ? Is this the first toddler tax ? If so, do the Government have plans to extend the taxation of two-year-olds ?

Mr. Gallie : The tax on sweeties is probably a direct tax imposed on two-year-olds.

The hon. Gentleman has accused hon. Members of levity in this debate. Does he, like me, regret the fact that no member of the Scottish National party has been present for any of this debate ?

Mr. Wilson : That is a matter between the hon. Gentleman and members of the Scottish National party. No doubt the hon. Gentleman will ensure that his words are noted in the appropriate quarter. I do not accept the hon. Gentleman's parallel. I do not know many two-year-olds who go into a shop and buy their own sweeties. So far as I know, sweeties are not subject to VAT. [Interruption.] Apparently some are. We are back to the fiscal Kama Sutra. What we have here is a quite specific measure to introduce a personal tax that makes no distinction between two-year-olds and adults. This is an oddity which ought to be looked at.

As I indicated at the beginning of my speech, I have several constituency interests in this matter. I am privileged to have in my constituency the base of one of the biggest travel agents in Britain. I refer to the remarkable company of A.T. Mays, which operates from Saltcoats and has branches all over Britain. This is a company of which everyone in my constituency is extremely proud, and it

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provides several hundred jobs. It is axiomatic to say that any tax that hits the tourist industry, including package holidays, and business flights will hit A.T. Mays. This is one very sound reason for my opposition to the duty.

Secondly, many of my constituents are employed by Jetstream at Prestwick. As other hon. Members have said, Jetstream, which forms part of British Aerospace, has set out some very good reasons for objecting to this new tax. I shall come to these in a moment. The most important of my constituency interests, however, is the same as that of every other hon. Member. For many working people a relatively cheap package holiday is no great luxury. It is something that is saved for and looked forward to, and in many cases paying for it involves considerable sacrifice. The gratuitous slapping on such holidays of a tax of £40, which bears no relationship to the value of the product being purchased--the holiday may have cost £199, or even less--is insulting and offensive and is very much to be regretted. This disproportionately high tax, on top of all the other extra taxes that people are being asked to pay this year, will be very unpopular indeed.

I should like to refer briefly to the Jetstream objections. Among hon. Members, it is no secret that Jetstream is going through difficult times, from which we hope very much that it will emerge so that it may continue to provide a very high level of employment in Ayrshire as the major engineering firm in Scotland.

Crucial to that company's success is the ATP airplane that services most of the regional routes in Britain and Scotland. Jetstream supplies both British Airways and Loganair--which recently placed an order for two aircraft. There is no reason why there should not be further orders in future. However, it is a marginal business. Anyone who flies those routes knows that the load cannot produce a large profit. If 5 or 10 per cent. of passengers are lost to those routes, some services will be unable to continue.

7.30 pm

The Government should take account of that strong point. It is not just a question of the travel industry or the social case but one of considerable importance to aircraft manufacturers. If regional services erode as a consequence of the tax and other factors that militate against them, there will be fewer aircraft orders and jobs--a point forcefully made by Jetstream.

Mr. Campbell-Savours : I draw my hon. Friend's attention to a number of conversations that I had withsmall airlines that want to operate between Carlisle and London. For them, Heathrow landing fees are a major preoccupation. That touches on the same principle as my hon. Friend's point.

Mr. Wilson : My hon. Friend is right. Although there are well- established regional routes in Britain--and most highlands and islands services fall in that category--everyone knows that new regional routes are constantly introduced, but fail because the margins are so tight. There will be less continuity of service or development of regional airlines if they have both to meet high landing fees and to suffer the consequences of the new tax. It is not enough to defend imposing a new tax simply because that would be in line with other countries. The absence of such a tax in the United Kingdom has probably been a contributory factor in higher landing fees--a cost

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which airlines already absorb. In future, airlines will continue to pay high landing charges and their passengers will have to meet the new tax. The Jetstream brief states :

"The proposed APD, with the associated implications for fare levels and passenger traffic, will at the very least create uncertainty amongst airlines. In view of this and the substantial capital outlay and risk associated with the acquisition of new aircraft, airlines will be reluctant to commit to new orders until the full economic impact of the APD is known. This will result in the further delay of new aircraft orders and depress aircraft prices as manufacturers compete for scarce orders. Without new orders at profitable pricing levels, the recovery of the aircraft manufacturing industry will not take place and further reduction in manning levels will be inevitable."

I want the Minister to answer that point tonight. This debate concerns not just air fares and the social consequences but jobs in aircraft manufacturing--particularly at Prestwick. That aspect is one to which the Minister should address himself. I hope that the hon. Member for Ayr (Mr. Gallie) will join us in the Lobby tonight--hope, but doubt.

Mr. Jim Cunningham (Coventry, South-East) : We heard today that British Aerospace has to sell Rover. Does not my hon. Friend agree that air passenger duty sends the wrong signal to manufacturers of air frames and aircraft engines? Is not the reason for BAe's sale of Rover the need for resources to develop its manufacturing activities? Has not the new tax been introduced at the wrong time? It also sends the wrong signal to airlines.

Mr. Wilson My hon. Friend is right. Different interpretations can be placed on the implications of today's statement for Jetstream and other parts of British Aerospace. British aircraft manufacturing is a fragile industry which needs encouraging, nurturing and every support from Government-- rather than another kick in the shins. I hope that the case made by Jetstream will be given due attention. It is not the only manufacturer of the sort of aircraft used for regional services but it is certainly the principal one.

Mr. Calum Macdonald (Western Isles) : My hon. Friend said that the imposition of such a tax by other countries does not mean that the United Kingdom must follow. Other countries also subsidise certain services for social reasons--particularly those serving far-flung areas. The Republic of Ireland, for example, subsidises the Dublin to Kerry route, which is of an equivalent distance to that between Stornoway and Inverness, but, after the subsidy, the fare is half that from Stornoway to Inverness.

Mr. Wilson : My hon. Friend makes an extremely valid point. I want to present the islands argument, but I am sure that my hon. Friend will deal with it at considerable length if he catches your eye, Sir David.

Mr. Campbell-Savours : I will give my hon. Friend an example of how marginal is the profitability of certain routes. In six years, three separate airlines have operated between Carlisle and London, where every cost is critically important--and none of them can make a profit from that route.

Mr. Wilson : That is a good point. Such airlines are not looking for a large profit, and they are extremely vulnerable to any influencing factor. However, I will be slightly selfish and emphasise the islands argument,

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because it has distinctive facets. The most important of them is the words used by the Chancellor of the Exchequer in his Budget statement. It is not a matter of semantics. There is no doubt what was meant by the right hon. and learned Gentleman and what he was perceived by all hon. and right hon. Members to mean.

The Chancellor was not perceived to mean that exemption would apply only to some flights within islands, but to mean that he was announcing exemption for most flights involving the Scottish islands. For that, he raised a loud cheer from the Conservative Benches. Conservative Members cheered everything that he said that day, in a somewhat irrational fashion, but the cheer that was raised at that specific statement was due to the perception that the Chancellor was considerate enough to exempt Scottish island flights. That is the truth of the matter.

Good faith is involved as to whether the Government will renege on that undertaking. I am willing to be charitable and to believe that the Chancellor thought that he was doing as I said. It is not really his job to go around checking how many seats there are on the flight from Glasgow to Islay or on inter-island flights between Lerwick and Kirkwall. That is scarcely the job of the Chancellor of the Exchequer. We assumed that he had taken advice and that his perception was that if aircraft with fewer than 20 seats were exempted, most of the flights that hop to and from and between the Scottish islands would be exempted. But that is not the case. In terms of what is now being rigidly applied, the Chancellor gave virtually nothing. If the Government proceed as they intend, the House will have been conned. In fact, the Budget statement exempted barely 26,000 passenger flights a year involving the Scottish islands ; the only exempted flights will be the inter-island flights within Orkney and Shetland, and the little-used service between Wick and Kirkwall. Every flight to every destination on the west coast will be subject to the tax. I shall be very surprised if the Paymaster General can say that that is what the Chancellor thought he was telling the House.

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