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20 Feb 2007 : Column 45WH—continued
There is currently uncertainty about the future housing needs of migrants, as it is difficult to forecast how many will come and how many will stay. There is anecdotal evidence that many are young and travelling without dependants. They are living in private rented accommodation, which is often overcrowded. Such conditions can underpin the speculative buy-to-let market, causing unsustainable price rises in some areas, and prop up poor-quality and poorly managed properties. Public sector agencies must do more to understand better the impact of migrant workers on communities. Effective planning, engagement and communication are essential, especially if migrants settle for longer periods with their families.
The region needs to build more homes, and a better mix of homes, to meet the demands of increased migration as well as changing household size, which is an important driver of the number of homes that are required. As has been pointed out, increasing problems of affordability undermine social cohesion. Local people find it increasingly difficult to enter the housing market near their work, and subsequently are locked out of the nation’s growing prosperity. Consequently, more affordable housing is a priority.
The Government are creating a range of options aimed at tackling the situation. We are already helping thousands of people to get on the housing ladder. For example, 120,000 households are being helped to buy a share of a home and get a first step on that ladder. But home ownership, even on a shared basis, is not the right option for everyone. For some, it is simply unaffordable. For others, renting is a better option because it provides flexibility.
Falling investment under previous Governments created a shortage of social housing in many parts of the country. We have had significant success in reducing homelessness, but there are still too many households living in overcrowded or temporary accommodation. We will increase the supply of new social homes. We are on track for a 50 per cent. increase in new social rented homes in the three years between 2005 and 2008—30,000 homes by 2008. Nearly 3,000 affordable homes are planned for the Yorkshire and the Humber region between 2006 and 2008, including more than 400 in rural areas. We recognise that that will not meet all newly arising need, and we have pledged to make increasing the supply a priority in the 2007 comprehensive spending review.
Local authorities and their partners can do more to deliver more affordable housing, including exploiting capacity through the planning system to meet needs, and making effective use of assets and private sector leverage. Today is important not only because this debate is taking place but because it is the day on which the Government will receive John Hills’ report on the future role of social housing in England. The report provides an objective and comprehensive platform from which we can develop options for future policy within the wider housing reform agenda and debate.
Michael Gove: Will the Minister give way?
Meg Munn: I am afraid that I do not have time.
The report deals with precisely the points that the hon. Member for Leeds, North-West (Greg Mulholland) and my hon. Friend the Member for Leeds, North-East
(Mr. Hamilton) raised about social housing being an area of choice for people, and being important for the general cohesion of areas.
As well as addressing supply and additional affordable housing, we must tackle problems in those areas that are suffering from low or changing demand. That will help to take the pressure off current high-demand areas and help to create attractive towns and cities that will support future economic growth, and the health and quality of life of the whole region.
Places such as Hull and parts of south and west Yorkshire that have been hardest hit by the decline of the region’s traditional industries are benefiting from the Government’s housing market renewal programme. The Yorkshire and Humber regional housing board is also providing wider housing regeneration investment.
My hon. Friend the Member for Hemsworth asked about Yorkshire and the Humber’s share of regional housing pot allocations. I can tell him that in 2007-08 it was comparable with that of adjoining regions, and we have just concluded a consultation exercise on the indicators to be used to inform the next round of investment from 2008-09 through to 2010-11.
The Government are committed to improving access to decent, affordable housing in Yorkshire and the Humber, and to helping to transform towns and cities, which should be places where people want to live, work and invest. As I said, we have provided several policy options, indicated the direction of travel and significantly increased housing resources since 1997, but we cannot work alone. Strong partnerships and good innovative ideas are needed to meet the challenges that the region faces, including developing and building social cohesion.
Air Passenger Tax
12.30 pm
Mr. Christopher Chope (Christchurch) (Con): On 6 December, the Chancellor of the Exchequer announced that he was doubling the rate of air passenger duty, with effect from 1 February 2007, for all flights to and from the United Kingdom irrespective of when those flights had been booked. There has been a lot of fuss about that, with full page advertisements in the press referring to somebody called “Greedy Gordon”. What is all the fuss about? Extra taxes are not a new phenomenon for the Chancellor, and the tax increase is one of many that mean that we are now one of the most highly taxed nations in the world. However, this tax increase is different, because it has not been approved by Parliament. Furthermore, the tax is retrospective from the date of its announcement and it purports to be green when it is not. In this short debate, I hope to address those issues.
The fact is that the tax has been brought in without being approved by Parliament and is therefore a constitutional outrage. It is without precedent. When the Select Committee on the Treasury questioned the Minister, he was unable to refer to any precedent because there is none. After the Committee issued its scathing report last month criticising the Government for not having obtained parliamentary approval, the Minister claimed justification through a precedent in respect of tax on North sea oil. Needless to say, it turns out not to be a true precedent.
If left unchallenged, the APD increase will become a precedent for future taxation without representation. Many years ago, in the American colonies, that was the cry: “No taxation without representation”. We have representation in this country, but the Chancellor of the Exchequer has chosen to bypass Parliament in respect of this tax. In the absence of a written constitution, the Standing Orders and procedures of the House are our constitution and protection against despotism. That the Chancellor of the Exchequer, tipped to be Prime Minister within a few months, can be so cavalier and contemptuous of Parliament is extremely worrying. Indeed, now is the time for him to show some contrition, as the Leader of the House did yesterday when he, too, tried to bypass and upset the procedures of the House in relation to the reform of the House of Lords.
The unconstitutionality of the increase in APD is compounded by its retrospective nature. By 6 December 2006, 4 million holidays had been sold by UK tour operators with departure dates from 1 February 2007 onwards. Of those, 1.3 million were winter holidays and 2.7 million were summer holidays. The Chancellor is charging doubled air passenger duty for each of those 4 million holidays. The Government have increased the cost after the contract has been made between the tour operator and the tour operator’s customer. Almost all that extra cost will have to be paid for by the tour operators—ironically, because of legislation passed by the House against surcharges being passed on to passengers. The total cost for tour operators is likely to be some £44 million.
Tour operators are not the only people to be hit. Millions of individuals with flight-only bookings made
before 6 December for travel from 1 February are finding themselves subject to the extra tax, which is being collected at airports. Hard-working families going on half-term vacations with their children this week are finding themselves in the front line, as victims of retrospective legislation from a high-handed, tax-hungry Government.
So the tax increase is unconstitutional and retrospective. It is also disingenuously being presented as a green tax. All the spin before and at the time of the pre-Budget statement was designed to create the perception that it is a green tax. Even the Minister, whom I welcome to the debate—he is becoming quite a veteran of parliamentary Committees on the subject of green taxes and air passenger duty—said on 9 February 2006, when being questioned by the Select Committee on Environmental Audit, that he did not regard it as a green tax. He said:
“The air passenger duty in many ways is not an entirely satisfactory tax. It was introduced...in the early 1990s. It has never been an environmental tax. It has certain sorts of perverse aspects built into the design. In other words, a more fuel-efficient plane filled with the same number of passengers pays the same rate of air passenger duty as an airline using a much less fuel-efficient plane, and actually a half-empty plane is rather less than a full plane, even though it is more efficient in terms of passengers per air miles travelled. First of all, it is not an environmental tax. Second, it does, however, contribute to the recognition that we have been very clear about, that the aviation industry has to pay the costs, the externalities if you like, that it imposes on society and on the environment. It is a significant contribution to that, but it is not an instrument that is well designed to achieving environmental ends.”
That was what the Minister said in February last year, and I have to say that I agree with every word of that statement.
I agree with the Minister that aviation needs to cover its environmental costs, but it already does. That is the big fallacy that has not been exposed in the Government campaign to increase air passenger duty. Each year, UK aviation produces 36 million tonnes of CO2. Carbon is being traded at less than £10 a tonne—some people say at £7.50 a tonne. The cost of the carbon emitted from UK aircraft is therefore about two fifths of the yield of APD before the latest increase. If one takes the latest increase into account, the yield is only two tenths—one fifth—of the total. In other words, the total air passenger duty is five times as high as it needs to be to ensure that aviation covers its environmental costs.
The fact that only £1 in every £5 of the new rates of APD would be needed to offset total UK air travel carbon emissions for carbon markets raises the issue of what will happen in 2011, when aviation will become part of the European Union’s emissions trading scheme. Most objective commentators view the scheme as a means of providing positive encouragement via an effective market mechanism for companies to invest in more fuel efficient and environmentally friendly technologies to reduce fuel consumption. Is that still the Government’s view? If so, will the Minister confirm that APD will be abolished in 2011, when it can be subsumed into the EU emissions trading scheme?
The evidence that the increase in APD is not a green tax is fortified by the fact that the Chancellor of the Exchequer has given no commitment that the proceeds of APD will be used for environmental purposes. He
would not be able to make such an announcement, of course, without undermining his own purpose, which is to increase his revenues through the tax. That is why the tax was originally introduced by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) back in the mid-1990s. That was avowedly to increase Government revenues, not to help the environment.
In case the Chancellor is thinking about using the extra money—about £1 billion a year—for environmental investment, I suggest that he look closely at the shortfall in current taxpayer funding in aerospace sector research and development that was identified in the national aerospace technology strategy. Targets have been set to achieve a 50 per cent. reduction in carbon emissions, an 80 per cent. reduction in nitrogen emissions and a 50 per cent. reduction in external noise by 2020. However, that sustainable aviation strategy needs investment. The £1 billion a year being raised from APD would make a useful contribution to that investment; it could be directed towards making environmental improvements.
Meanwhile, Sir Richard Branson has undertaken to invest all the profits from his transport companies, estimated at about $3 billion over the next 10 years, in research to develop alternative fuels. He has also launched a major prize to encourage research into the removal of harmful emissions from the atmosphere. Virgin Atlantic is taking active steps to reduce the environmental impact of its activities. APD will not achieve anything for the environment compared with those private-sector, entrepreneurial, market-driven initiatives.
Let us be frank: the increase in air passenger duty is oppressive and retrospective; it is a stealth tax on hard-working families, and the suggestion that it can be justified as being a green tax is utter baloney. I hope that, when Parliament is eventually given the chance to express an opinion on the increase, it will give it the thumbs down.
The way in which the Government have dealt with APD contrasts most unfavourably with the way in which it was dealt with on previous occasions. My right hon. and learned Friend introduced the concept of APD in his autumn statement of November 1993; he found himself in need of extra money, but he did not implement the tax until 1 November 1994. My noble Friend Lord Cope of Berkeley, who was then Paymaster General, accepted that
“It would be unreasonable to expect tour operators to take the theoretical possibility of new taxes into account”—[Official Report, 31 January 1994; Vol. 236, c. 643.]
when they made their no surcharge guarantees.
In March 2000, the Chancellor changed the APD rate to apply to journeys on or after 1 April 2001, thereby giving tour operators and others more than 12 months’ notice. The Treasury explained that the delay would allow airlines and tour operators plenty of time to adjust their marketing and pricing strategies to the new structure. What is different this time? The short answer is that the Chancellor of the Exchequer has decided that he must compensate for the failure of so many of his other policies—not least, the failure to reduce benefit fraud—by raising an extra £1 billion in stealth tax, but not allowing a reasonable time for its implementation. The term “stealth tax” was first
conceived to describe the way in which the present Chancellor behaves, but even then it did not have its present connotation as a tax that has not even been approved by Parliament.
The present increase in APD is out of context with the way in which it has been increased in the past. It is unnecessary, because aviation more than meets its associated environmental costs, and it will cut across the emissions trading scheme for carbon, which all sensible people think is a good way forward. Indeed, the Chancellor said in his pre-Budget statement that he thought it a good way forward, that it would eventually have to be done on a global basis but that, in the meantime, it would be sensible to set up a European Union scheme. That is being done, but it will not work unless the Government give air passengers a sense of fair play. We cannot expect air passengers to engage in voluntary carbon offsetting schemes and we cannot expect airlines to engage in such schemes unless they are treated fairly. The APD increase is not only unconstitutional; it is also very unfair.
12.44 pm
The Financial Secretary to the Treasury (John Healey): I congratulate the hon. Member for Christchurch (Mr. Chope) on securing this debate. He has a long-established interest in transport. He served as a junior Minister in the early 1990s, and for several years a decade later he was a shadow Transport Minister.
The hon. Gentleman asks: what is all the fuss is about? I hope to explain. On the three principle counts on which he indicts the decision of 6 December—first, that it is retrospective; secondly, that it has no environmental benefit; and, thirdly, that it is a constitutional outrage without precedent—he is wrong. I hope to underline precisely the question that he asked—what is all the fuss about?
Before starting to put him right, I have to correct one other fact. It was officials, not Ministers, who were asked by the Treasury Committee about precedents. I appeared before the Committee last month, when I answered questions on air passenger duty. I was able to explain precedents and the parliamentary procedure that we are following in the case of APD, and I shall explain that a little later.
It is certainly the case that the aviation industry is important to the United Kingdom. It directly employs more than 200,000 people, and it carries about a third of all UK exports by value. However, it is clearly right that aviation should pay the external environmental costs that it imposes on society. That was the conclusion reached in the Eddington report, published just before Christmas, and in the Stern review, which was published in October last year.
The hon. Gentleman questions the basis of the environmental cost of aviation. Those calculations, which have been published, were made on an established basis that is widely accepted. In 2003, we calculated and published the external environmental cost of aviation, which we set at £1.4 billion. We made it clear that without a change of policy and practice, it was set to rise to £4.8 billion by 2030. However, I must make it clear to the hon. Gentleman that those
calculations are based on the social cost of carbon, not the traded price of carbon that he cites.
Globally, aviation contributes to the danger of climate change through carbon and other emissions. It is responsible for about 1.6 per cent. of total greenhouse gas emissions. However, the figure is rising; although other sectors are reducing emissions, the demand for air travel continues to increase. In the UK, aviation is responsible for about 5.5 per cent. of our CO2 emissions, but that could rise to as much as 15 per cent. by 2030.
It is an international threat, so we are pressing for international action to tackle it. The UK has been the strongest advocate for the inclusion of aviation in the EU emissions trading scheme, and I am glad that the hon. Gentleman recognises the fact, because it will be the most cost-effective and efficient way to support the aviation sector to play its part in dealing with climate change. We had pressed for its inclusion in 2008, but the legislative proposal from the European Commission, which was published in December last year, welcome and important though it is, means that is unlikely to happen before 2011. We have therefore made it consistently clear that focusing on the EU scheme does not preclude the consideration of other economic instruments.
Air passenger duty is clearly not the best policy. The hon. Gentleman cited at length the evidence that I gave to the Environmental Audit Committee a year ago, and I stand by that; it is entirely consistent with believing, as I said then, that it is not well designed to achieve environmental ends. However, it is available and it has some environmental gains. It certainly has a role to play, especially given the delay in applying other economic instruments.
Before dealing with the three specific points made by the hon. Gentleman, I must be clear about the change announced on 6 December. First, it will help the sector meet its environmental cost. Secondly, it will deliver resources for the coming spending round for the Government’s priorities, including for public transport and the environment. Thirdly, it will deliver savings of about 0.3 million tonnes of carbon per year by the year 2010-11 and will have a wider effect on climate change year on year because of the impact on high-altitude emissions.
In total, we calculate that the environmental gain will be the equivalent of saving about 0.75 million tonnes of carbon every year from 2010. Therefore, despite this tax being a blunt policy instrument, there is an environmental gain. That was the first point contested by the hon. Gentleman. Secondly, he argued that it was a retrospective tax. I will explain how APD works. Despite its name, APD is a tax on the airlines and it is the operators of aircraft who pay it. That has been the case since the right hon. and learned Member for Rushcliffe (Mr. Clarke) introduced the tax in the Finance Act 1994. The duty point is at departure and duty is payable on the basis of when a passenger flies. That makes it simple for airlines and Her Majesty’s Revenue and Customs to administer. When a passenger booked their flight does not make any difference to APD liability, and that has been the case since 1994.
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