| Previous Section | Index | Home Page |
“would allow airlines and tour operators plenty of time to adjust their marketing and pricing strategies to the new structure.”
That was only a few years ago.
By contrast, the current rise was announced on 6 December last year, in the pre-Budget report, for implementation on 1 February this year—not a year’s notice or even six months’ notice, but less than two months’ notice. There was no question this time, then, of allowing airlines, tour operators and especially passengers “plenty of time” to adjust. Indeed, those passengers who had already bought tickets dated after 1 February, and to whom price rises were passed on, were given, as my hon. Friend the Member for Christchurch said, no time to adjust.
The Treasury Committee elegantly described that as the “first element of retrospection” of the rise that the clause seeks to bring into effect. We are therefore bound to ask the Financial Secretary: why the rush? Why did Ministers give a year’s notice of the last significant rise in APD, but less than two months’ notice of this one? I think that we know the answer, to which my hon. Friend the Member for Braintree alluded in relation to the evidence heard by the Treasury Committee. The Chancellor was not, it seems, overcome by an urgent desire to hurry through a reduction in emissions by the means of APD, but simply grabbing the first instrument to hand to help him to pay off the £153 billion that he plans to borrow over the next five years.
There are more questions. For instance, what estimate has the Treasury made of the number of passengers who paid the new rates of APD on tickets dated after 1 February, when many airlines—as the Treasury will have anticipated—pass the cost of the rise to passengers, and what estimate has it made of the cost to those passengers? How much will they pay in total? Can the Minister confirm that the Federation of Tour Operators has issued judicial review proceedings against the Chancellor in relation to the rise, that the Government have acknowledged the service of the claim, that a judge has directed that they must serve their defence by this Friday, and that the court has directed that the case be heard quickly with the intention that judgment may be given by the end of July?
I mentioned a moment ago that the Treasury Committee had described this manoeuvre as the “first element of retrospection”. This takes us to what it described as the “second element of retrospection”. It observed that
“the liability to pay Air Passenger Duty at the new higher rates will effectively be incurred before the House of Commons has authorised the increase”.
The Committee concluded—I consider this an important section of what it said on the subject—
“As a general rule, we consider that, where increases in rates of duties or taxes are proposed in the Pre-Budget Report, those increases should not come into force until after the House of Commons has had an opportunity to come to a formal decision on the proposed increase following the Budget. We draw the attention of the House of Commons to the unusual timing of the implementation of the increases in Air Passenger Duty, for which the Treasury has not cited any relevant precedents.”
That carefully crafted reproof—I do not know why the Financial Secretary is wincing; I am merely reading what the Select Committee had to say—suggests that any precedent cited by the Treasury was not relevant.
The Financial Secretary is on record as citing two specific precedents: the supplementary charge on North sea oil announced in the 2005 pre-Budget report, which was introduced with effect for accounting periods from 1 January 2006, and the increase in fuel duty announced in the 2006 pre-Budget report and implemented from midnight. My recollection is that he cited both those precedents during the debate initiated by my hon. Friend the Member for Christchurch on 27 February. Unfortunately, both those precedents look a little dubious. As the House of Commons Library points out,
“It is arguable that these examples do not provide a precedent that captures all the aspects of the rise in APD rates: for example, the amount of time between the implementation date, and the date the House formally approved the measure (i.e.: that it was a matter of weeks, not days); the nature of the tax change (that it was an increase in tax rates. Not just a tax continuation), and the fact that projected receipts from the change would not have been significantly affected by a delay in the implementation date (either from taxpayers taking account of the announcement, or external factors affecting the yield from the levy).”
In other words—this touches on a point raised earlier by the hon. Member for Falmouth and Camborne (Julia Goldsworthy)—consumers have not usually pre-booked the fuel, or the alcohol or tobacco, that they consume immediately after a budget or pre-Budget report rise in duty on those products. The North sea oil supplementary charge was essentially driven by a strong surge in oil prices, and was implemented immediately to prevent forestalling—the practice of taking advantage of any implementation delay to amend tax planning strategies. As the Library puts it,
“this type of calculation would not be relevant in setting the rates of an airport departure tax”.
Adam Afriyie (Windsor) (Con): The least well-off tend to book their flights much further in advance, because the earlier a booking is made, the better the deals available. On that basis alone, will those people not be disproportionately affected?
7.45 pm
Mr. Goodman: My hon. Friend makes a fair point.
My hon. Friend the Member for Chipping Barnet (Mrs. Villiers), the shadow Chief Secretary, has received a letter from the Financial Secretary citing further precedents. We want to examine those, because the Library note on the other precedents that he cited is extremely interesting.
That brings me directly to the amendments tabled by my hon. Friend the Member for Christchurch—
Mr. Leigh: May I say at this point that my hon. Friend is making such an elegant case against the Government that he has persuaded me to vote for the amendments?
Mr. Goodman:
I was waiting for someone to make that point. I am only surprised that my hon. Friend
needed persuading to vote for them. Evidently I have not entirely mastered his psychology: I must pay more attention in future.
I entirely agree with my hon. Friend the Member for Christchurch that the way in which the APD rise has been implemented has been—as the Library note confirms— legally and procedurally dubious, to say the least. But I doubt that the Financial Secretary will spring to his feet tonight to announce that the Chancellor has accepted the Select Committee’s reproof and to guarantee that his successor will not implement a tax increase in this way in future without consulting the House first.
Mr. Redwood: Given the serious legal proceedings that the Government have had to accept, were they to lose the case presumably it would cost us even more money as taxpayers, because they would have to refund all the money and go to enormous administrative expense to sort out the mess. If the Government gave in on the amendments, they might do all of us a favour by saving us money in the event of defeat in the courts.
Mr. Goodman: My right hon. Friend makes a fair point. A sword of Damocles is hanging over the Government. I do not think that the House of Commons is the right place in which to decide what change is legally in order and what is not, but it may well be that the Government have been as careless about the legal aspects as they appear to have been with the procedure.
Where I part company with my hon. Friend, to an extent, is over his belief that passengers who purchased tickets between 1 February and Budget day, 23 March, and who have consequently had part or all of the Chancellor's APD rise passed on to them by the airlines, are likely to be reimbursed by them if his amendments are passed. This is a crucial point. Part of the debate has been conducted almost on the assumption that APD is paid directly by passengers, but in fact it is paid by the airlines. It is hard to see how the amendment would not simply result in a windfall for the airlines—a windfall of some £100 million, according to our calculations and my hon. Friend.
Mr. Chope: I think my hon. Friend has misunderstood my amendment. It would not give relief only to passengers who had purchased tickets between 1 February and 21 March; it would give relief to all passengers who had purchased tickets for travel between those dates, regardless of when they had purchased them. Some might have purchased them many months earlier.
Mr. Goodman: The key point, though, is that it would give relief to the airlines, because the airlines, not the passengers, pay the duty. One of my reasons for asking the Financial Secretary earlier how much of the increase had been passed on to passengers was the genuine uncertainty that exists on this point. We fear that as a result of the amendment the airlines might simply receive the windfall, say “Thank you very much” to the Treasury, and not pass on the £100 million to the passengers.
My hon. Friend seems to be arguing that the genie can somehow be compressed and put back in the
bottle. We are not convinced that the damage caused to passengers by the companies that chose to pass on the retrospective rise can be addressed by the amendment, but we are certainly not happy to leave the matter there. Although we cannot support my hon. Friend if he insists on pressing his amendment to a vote, we intend to table a new clause at a later stage that will prevent the Chancellor's successor from behaving in the same way in relation to APD. I hope that it will have the support of my hon. Friend as well as that of other Members.
In conclusion, this retrospective rise should not have happened. As my right hon. Friend said, it may be found to be illegal by the courts. However, it is genuinely difficult at this stage to correct the effects on passengers of a change in duty that has already come into effect—to put the genie back into the bottle or, groping for another cliché, to lock the stable door after the horse has bolted. However, as I say, we intend to table a new clause to prevent the Chancellor’s successor from carrying out such a retrospective manoeuvre again.
John Healey: I think that this has been quite a good debate. All the contributions, with the exception of that by the hon. Member for Wycombe (Mr. Goodman), have been clear. His was extraordinarily convoluted. It twisted and turned. I appreciate his position and look forward to any substantive contribution that he may make to the debate on air passenger duty at subsequent stages of the Bill.
Mr. Paul Goodman: The Minister finds me convoluted. May I simply ask him a straightforward question? Does he agree with the Treasury Committee that he has not cited any relevant precedents for this retrospective increase?
John Healey: The hon. Gentleman said himself that he wants to study the letter that I have sent to the hon. Member for Chipping Barnet (Mrs. Villiers), with a whole list of precedents, which I will mention in a moment. Clearly, they are relevant and he wishes to study them. The Treasury Committee did not have access to that information when it came to its conclusions and published its report.
Mr. Goodman: Will the Minister give way?
John Healey: I will, although I want to deal with some of the points that those who have contributed have made to the debate.
Mr. Goodman: Why did not the Treasury Committee have access to the precedents?
John Healey: The information before the Treasury Committee did not include the information that I was able to set out, first, to the Chairman of the Procedure Committee and then to Conservative and Liberal Democrat Front Benchers who lead on the subject.
Mr. Gauke:
I am a member of the Treasury Committee. We hold a number of hearings after a pre-Budget report. There was plenty of opportunity for the Government to cite precedents that we might have
considered to be relevant, but the Government did not take that opportunity. Can the Minister explain why?
John Healey: For the purposes of this debate, there are a number of precedents that I wish to cite. I set them out in some detail to the Chairman of the Procedure Committee, to which I will refer, to Conservative Front Benchers and to the hon. Member for Falmouth and Camborne (Julia Goldsworthy), who speaks for the Liberal Democrats on the matter. What is clear is that aviation currently is responsible for nearly 6 per cent. of the United Kingdom’s carbon dioxide emissions, but that figure is rising and aviation is also responsible for other non-carbon dioxide emissions that contribute to climate change. Very few contest the case that that under-taxed industry should at least cover the climate change costs that it imposes, and very few contest that action is necessary to encourage aviation to reduce the climate change impact.
While the Government continue to push and have led the arguments for aviation to be included in the European Union emissions trading scheme, which we view as the best, most effective and most efficient policy instrument available, it is right to look at what can be done domestically with the policy tools at our disposal at this point. That is what we said in the air transport White Paper in 2003, in the Budgets in 2004, 2005 and 2006 and in the energy review in 2006.
Mr. Chope: If that is so, can the Minister confirm today that, when the European emissions trading scheme comes into place, air passenger duty will be abolished, because that was a pledge that his ministerial colleague was unable to give the European Committee the other day?
The First Deputy Chairman: Order. I wonder whether I could ask the Minister to move on quickly to the amendments currently under discussion. Perhaps the comments made would be more appropriate in the debate on clause stand part.
John Healey: Of course I will, Mrs. Heal. It has been a wide-ranging debate to date. Let me return to the question of the air passenger duty and the proposals of the hon. Member for Christchurch (Mr. Chope).
To be clear, air passenger duty is a tax on airlines, payable by airlines. It is charged per passenger at the point of departure from UK airports, so it is a departures tax. It is not a ticket tax, not a booking tax, not a purchase tax. Again, the tax point is the point of departure by the passenger from the UK airport, not the point of purchase of the flight ticket. That is just as it was in 1994 when the APD was introduced by the previous Government and it is just as it has been for every change since.
Mr. Redwood: Can the Minister tell us how much of the extra duty has been charged directly to the customers who had already bought their tickets, and how many airlines have put surcharges on all subsequent ticket sales?
John Healey: I cannot precisely, because clearly that is a commercial arrangement between the airlines and their passengers, but, for example, Ryanair e-mailed its customers who had pre-booked and direct debited the increase in the air passenger duty from those accounts. BMI and British Airways waived the increase and absorbed the costs. There was a variety of different responses from different commercial operators. The right hon. Gentleman would appreciate that that is properly a commercial matter for those companies in relation to their customers.
Mr. Newmark: Further to what my right hon. Friend the Member for Wokingham (Mr. Redwood) has said, the Minister has just said that the money is to be used to deal with the damage created by CO2. Therefore, I would like to ask him a specific question: how much of the £100 million that is being raised will be used to deal with the damage that CO2 has created?
John Healey: The Chancellor was clear in his pre-Budget statement and I have made the position clear since then in different debates and in Select Committee inquiries. The rise in the air passenger duty will contribute to the increase in spending that we are looking to be able to deploy to some of our priorities, including, specifically, transport and environmental protection. This may interest the hon. Gentleman. He mentions £100 million, but in 2005-06, as the public expenditure statistical analysis confirms, we spent as a Government £8.4 billion on environmental protection. He may have seen yesterday that we published the new PESA outturn estimates. For 2006-07, the spending on environmental protection was £9.7 billion.
Mr. Illsley, I welcome you to the Chair and to this debate. The intention to introduce this legislation to Parliament was announced to Parliament in the pre-Budget report on 6 December and the change has effect for all flights departing after 1 February 2007.
I pay tribute to the hon. Member for Christchurch. As members of the Committee recognise, he has been dogged in his pursuit of the issue. He raised it on a point of order, in an Adjournment debate with me, in a debate on the Budget resolutions, although none of the others from his party who have signed his amendment did so, and of course he has raised the matter today. The decision that we have taken, the move that we have made and the provision in the Bill is not an illegal act, as he asserts. We will mount a strong defence in the case that the Federation of Tour Operators is bringing to the courts. I am confident that our arguments will carry the day.
The hon. Gentleman advanced three arguments. Let me contest each and every one of them. The measure is not retrospective; it is not out of step with established parliamentary procedure; and it is not a measure going through the House without parliamentary scrutiny and debate. I will take those in reverse order.
On the issue of proper debate and scrutiny in Parliament, after the pre-Budget report statement on 6 December, Treasury officials and the Chancellor gave evidence to the Treasury Committee on 12 and 13 December; I gave evidence to the Environmental Audit Committee on 31 January; I gave evidence to the Treasury Committee on 7 February; I wrote to the Chair of the Procedure Committee on 27 March; I
answered an oral question in this Chamber in January and I answered the hon. Gentleman's Adjournment debate in February. Finally, the House had the opportunity to debate the resolution over four days following the Budget, before the taxpayers concerned had to pay out any of the increased sums for which they were liable. At the end of those four days of debate on the Budget resolutions, the House voted on the proposals for APD announced in the pre-Budget report. The vote was carried by 296 to 84—and I must say that the Whip, my right hon. Friend the Member for Rutherglen and Hamilton, West (Mr. McAvoy), would welcome a majority of 212 on several other issues that face us. We are also now having scrutiny and debate as part of our consideration of this Finance Bill. Therefore, the first assertion is not founded.
| Next Section | Index | Home Page |