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8 pm
The second argument related to parliamentary precedent. In announcing and putting forward the provisions for the rise in APD, we have used provisions under the Provisional Collection of Taxes Act 1968. We followed established procedure that has been used on a number of occasions by this Government and previous Governments. I confirmed that to the Chairman of the Procedure Committee in March. I understand that that Committee has neither considered nor reported my letter, and I therefore wrote separately to the hon. Members for Chipping Barnet and for Falmouth and Camborne to make many of the same points as were made in the letter.
I wish to quote a couple of passages from that letter. The hon. Member for Twickenham (Dr. Cable) is right that some of the precedents relate to anti-avoidance, but by no means do all of them:
“Others include, for example, the resolution to charge income tax for the 2002-2003 financial year...at the specified rates.”
An older precedent mentioned was the petroleum revenue tax:
“In August 1978, the Government announced a package of changes to the tax, including an increase in the rate to 60 per cent. from 1 January 1979. The measure was not enacted until the post-election 1979 Finance Bill...These precedents are in addition to the one I cited in the House of the North Sea Oil taxation measures”
—the increase in the supplementary charge—
“announced in the 2005 Pre-Budget Report”
and implemented from 1 January 2006. Therefore, it is clear that established parliamentary conventions and procedures are not being broken.
Finally, let me turn to the third argument on retrospection. My hon. Friends the Members for Bishop Auckland (Helen Goodman), for North-West Leicestershire (David Taylor) and for Wolverhampton, South-West (Rob Marris) understood the point to do with this clearly, although a number of other contributors did not. I must say to the right hon. Member for Wokingham (Mr. Redwood) that the arguments are not at all convoluted; they are straightforward. Far from being retrospective, this tax change was pre-announced. The pre-Budget report documents made it clear that the new rates would apply to passengers departing the UK from 1 February. I accept that there is an issue in respect of those passengers who pre-booked before the pre-Budget report of 6 December, but the airlines had almost two
months to deal with that. I say to the hon. Member for Wycombe that they are the liable parties. The airlines are responsible for payment: the airlines choose, and have chosen, whether to levy the APD increase on their passengers or to absorb the costs.
Let me repeat that the distinction is principally to do not with goods and services, but with the point of tax. The point of tax is when a flight takes off, not when it is booked. All previous changes to APD have applied to both flights that were already booked at the time of announcement and to flights booked subsequently. That did not make those changes retrospective. How or whether to pass on the cost of the tax is a commercial matter for airlines. It is a matter to do with their pricing policy, their judgment and the terms and conditions of their ticket sales.
Mr. Leigh: This is a theological argument about dancing on the head of a pin. What about the public? They have no choice. It does not matter whether Ryanair keeps the money or gives it back. The Government can blame it or not. What about the public? What about somebody who has pre-booked his ticket and is now surcharged? Do such people not have any rights?
John Healey: It is not a theological argument. It is a principled argument that is based on legislative and parliamentary precedent. For the hon. Gentleman’s benefit, let me add that because APD is a tax on airlines and not passengers, if a flight that is booked is cancelled or not taken, no APD is liable. Whether an airline then repays to the customer the equivalent sums of the APD that they have already taken is a matter for the airlines, and a question to do with their terms and conditions. I and many other Members have had experience of constituents who have found it difficult to get that APD repaid when they have not taken flights that they have booked and paid for.
Rob Marris: Many airline passengers are aware that the actual price of the service that they are buying is more likely to vary upwards than downwards and that it is more likely to do so the longer the interval between when they book and when they fly, because of fuel surcharges which are commonly added in by many airlines. Therefore, passengers are aware that prices can change.
John Healey: It is also frequently the case that people or organisations make decisions on investments, purchases or pricing without having full knowledge of how the tax position may change.
I wish to emphasise that following the pre-Budget report I and officials at the Treasury and Her Majesty’s Revenue and Customs held many meetings with those affected by the change, including representatives of airlines, travel agents and tour operators. During those discussions, I was able to clarify a couple of points to them, on which I wish to update the House.
The hon. Member for Braintree (Mr. Newmark) raised an issue to do with package travel regulations. Scheduled airlines were generally able to pass on the cost of APD if they wished—although some, of which I have cited two, chose not to do so. We recognise that tour operators, who account for about 15 per cent. of
the flights on which APD is charged, are restricted by the Package Travel Regulations 1992 from passing on increased costs to customers. The European Commission is planning a review of the directive from which the regulations stem. We believe that it should be fundamental and wide-ranging. We expect the EC soon to issue a discussion document setting out options for the review, and my right hon. Friend the Minister for Trade, Investment and Foreign Affairs has today written to the commissioner for consumer affairs underlining the importance that we place on the review of the directive and urging that any review should be wide-ranging and fundamental.
The next point relates to how APD is currently defined in terms of classes of travel; I think that the hon. Member for Christchurch referred to the consultation on this earlier. The aviation and tour operator industries have raised with me concerns about the current structure of APD, which has not changed since it was introduced more than 10 years ago, and in particular in relation to the treatment of seats on business-only flights or seats marked as premium economy. Following initial meetings with the industry, we announced in the Budget that we were open to reviewing the issue, given that the current structure might not send appropriate environmental signals and might cause market distortions. I can confirm today that HMRC has issued a consultation document seeking further information on possible options for change. I have placed a copy of that in the Library and it is also on the website.
In summary, the amendment would cost the Government £140 million—not £100 million, as the hon. Member for Christchurch suggests. The arguments that he mounts that this is a move without parliamentary precedent and without legal basis, that it is retrospective and that it has not been subjected to parliamentary scrutiny and debate are all wrong. I hope that I have been able to demonstrate that. I hope that he will not press his amendment to a Division. If he does, I shall have to ask my hon. Friends to oppose it.
Mr. Chope: I am grateful to the Financial Secretary for his response and for his comments about the package tour regulations, but I do not understand why the Government did not take account of them when they decided to double air passenger duty. Back in 1993, when those regulations were in place, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), the then Chancellor, introduced the concept of air passenger duty in his November autumn statement. He admitted that he did so because, unlike the present Chancellor, he was in need of extra money at the time. He was brave enough to say that, instead of trying to cover up the situation as some sort of environmental good thing.
My right hon. and learned Friend did not implement the tax, however, until 1 November 1994. He delayed implementing it not because he could afford to do so—he needed the money—but because he took the view that it would be inequitable to implement it earlier. My noble Friend Lord Cope of Berkeley, the then Paymaster General, told this House:
“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.]
For that reason, there was a very long lead-in period. The then Government knew about the position of tour operators, which has not changed under subsequent package tour regulations. Why, therefore, did this Government not take the same view this time? That is why they find themselves in the courts, and why the Financial Secretary is desperately exchanging notes with the European Commission before Friday, when he has to hand in to the High Court his submission in answer to the judicial review. I am therefore not convinced by that part of the Government’s argument.
The Treasury must have known about this measure at the time of last year’s pre-Budget report. It must have decided that, irrespective of the situation, it would proceed and impose a tax that will result in tour operators being charged £44 million, which they will not be able to recover from their customers. That is a windfall tax on tour operators—a point that needs to be taken into account when bearing in mind what my hon. Friend the Member for Wycombe (Mr. Goodman) said about the consequences of accepting my amendment.
I was also concerned at the Financial Secretary’s saying that he was playing the situation by the book. He gave a technical, carefully worded response, saying that this duty was not retrospective because under the terms of clause 12, all the taxpayers concerned will not have to pay out any sums incurred before the Budget. He means by that not our constituents—the people who will pay these extra charges in order to travel by air—but the airlines. He implied in that careful use of language that because, technically speaking, the taxpayer in this case is the airline concerned, rather than the customer of that airline, the duty is not retrospective. That is disingenuous beyond belief. Constituents who booked before 6 December holidays and flights taking place after 1 February, and who were charged a surcharge when they got to the airport, have written to me about this issue.
If my amendment were carried, it would alleviate the burden in respect of the period between 1 February and 21 March and would provide extremely welcome relief to many passengers. It would not deal with those passengers who pre-booked their summer holidays, but it would provide relief for all those who booked in advance for their spring or half-term holidays, including most skiing holidays. As a matter of interest, I would probably be able to claim back money in respect of a foreign exchange to France by my son, who went to improve his French. That is not a significant issue; however, many other people would be in the same position if the amendment were carried.
8.15 pm
I thank my hon. Friend the Member for Wycombe for his courtesy; he powerfully reinforced the case that I was making for the amendment. My hon. Friend the Member for Gainsborough (Mr. Leigh) said that he was persuaded by his argument. It was only in the last few moments that my hon. Friend the Member for Wycombe poured cold water on the whole proposition. He suggested that it would somehow be wrong to
enable airlines to enjoy a windfall gain as a result of this tax not being retrospective. Airlines such as Ryanair—I mention that one because it has spent a fortune on full-page advertisements campaigning on behalf of its customers against this awful tax—would not refuse to reimburse its passengers who travelled on flights between 1 February and 21 March; to do so is unthinkable. My hon. Friend the Member for Wycombe has not adduced any evidence to suggest that these commercial organisations would refuse to refund the money. In fairness, he does them an injustice if he thinks that they would behave in that way.
Rob Marris: I can give the hon. Gentleman some evidence, although it is an assumption so far as Ryanair is concerned. Ryanair is the kind of airline that used to charge passengers for using a wheelchair.
Mr. Chope: I know that Labour Members do not like Ryanair, which I think has been voted by its passengers the airline of the year and is one of the fastest growing, most successful airlines. My only regret is that it is not British-owned, but it is providing a very good service for its passengers. I am proud, as the Member of Parliament with Bournemouth international airport in his constituency, that Ryanair is one of its more popular operators. I hope that it will expand its number of routes next year.
Mr. Quentin Davies: In the event that my hon. Friend’s amendment is passed and an airline subsequently refused to reimburse its customers for money that it had extracted from them on the basis that it needed to meet the tax liability imposed retrospectively by the Government, would it not be in a very weak position in the courts, having obtained money under entirely false pretences?
Mr. Chope: My hon. Friend is absolutely right.
The sad thing is that the argument that the airlines might not reimburse the money and might pocket it for themselves and their shareholders is the only argument on which my hon. Friend the Member for Wycombe relies in saying that he does not want the House to support the amendment. I welcome his re-stating our party’s opposition to the principle of retrospection and his saying that we will table a new clause on Report, but actions speak louder than words, and the clearest message that our party could send tonight to our constituents is to vote against this example of retrospective legislation. It is very unfair and, as has been pointed out, it will be particularly damaging to those who booked their flights furthest in advance, who tend to be the weakest members of our society financially. It is time for us to give them some relief from this ghastly Government, so I hope that Members will support me in the Lobby this evening.
Question put, That the amendment be made:—
The Committee divided: Ayes 29, Noes 260.
AYES
Breed, Mr. Colin
Burstow, Mr. Paul
Cable, Dr. Vincent
Campbell, Mr. Gregory
Campbell, rh Sir Menzies
Carmichael, Mr. Alistair
Donaldson, Mr. Jeffrey M.
George, Andrew
Goldsworthy, Julia
Hancock, Mr. Mike
Heath, Mr. David
Horwood, Martin
Howarth, David
Huhne, Chris
Kramer, Susan
Lamb, Norman
Leigh, Mr. Edward
McCrea, Dr. William
Moore, Mr. Michael
Mulholland, Greg
Paisley, rh Rev. Ian
Robinson, Mrs. Iris
Russell, Bob
Sanders, Mr. Adrian
Simpson, David
Taylor, Dr. Richard
Teather, Sarah
Walter, Mr. Robert
Williams, Mr. Roger
Tellers for the Ayes:
Mr. Christopher Chope and
Mr. Quentin Davies
NOES
Abbott, Ms Diane
Ainger, Nick
Ainsworth, rh Mr. Bob
Armstrong, rh Hilary
Atkins, Charlotte
Austin, Mr. Ian
Bailey, Mr. Adrian
Balls, Ed
Barlow, Ms Celia
Barron, rh Mr. Kevin
Battle, rh John
Bayley, Hugh
Benn, rh Hilary
Benton, Mr. Joe
Berry, Roger
Blears, rh Hazel
Blunkett, rh Mr. David
Borrow, Mr. David S.
Brennan, Kevin
Brown, Lyn
Brown, rh Mr. Nicholas
Buck, Ms Karen
Burden, Richard
Burgon, Colin
Burnham, Andy
Butler, Ms Dawn
Byers, rh Mr. Stephen
Byrne, Mr. Liam
Caborn, rh Mr. Richard
Campbell, Mr. Ronnie
Caton, Mr. Martin
Challen, Colin
Chapman, Ben
Chaytor, Mr. David
Clark, Ms Katy
Clark, Paul
Clarke, rh Mr. Charles
Clarke, rh Mr. Tom
Clelland, Mr. David
Coaker, Mr. Vernon
Coffey, Ann
Cohen, Harry
Connarty, Michael
Cook, Frank
Cooper, Rosie
Cooper, Yvette
Corbyn, Jeremy
Cousins, Jim
Creagh, Mary
Cruddas, Jon
Cryer, Mrs. Ann
Cummings, John
Cunningham, Mr. Jim
Cunningham, Tony
Curtis-Thomas, Mrs. Claire
Darling, rh Mr. Alistair
Davies, Mr. Dai
Dean, Mrs. Janet
Dhanda, Mr. Parmjit
Dobbin, Jim
Dobson, rh Frank
Donohoe, Mr. Brian H.
Dowd, Jim
Drew, Mr. David
Dunwoody, Mrs. Gwyneth
Eagle, Angela
Efford, Clive
Ellman, Mrs. Louise
Engel, Natascha
Farrelly, Paul
Field, rh Mr. Frank
Fisher, Mark
Fitzpatrick, Jim
Flint, Caroline
Flynn, Paul
Follett, Barbara
Foster, Mr. Michael (Worcester)
Foster, Michael Jabez (Hastings and Rye)
Francis, Dr. Hywel
Gapes, Mike
Gardiner, Barry
George, rh Mr. Bruce
Gibson, Dr. Ian
Gilroy, Linda
Godsiff, Mr. Roger
Goggins, Paul
Goodman, Helen
Grogan, Mr. John
Gwynne, Andrew
Hall, Mr. Mike
Hall, Patrick
Hamilton, Mr. Fabian
Hanson, rh Mr. David
Harman, rh Ms Harriet
Harris, Mr. Tom
Havard, Mr. Dai
Healey, John
Henderson, Mr. Doug
Hendrick, Mr. Mark
Hepburn, Mr. Stephen
Heppell, Mr. John
Hermon, Lady
Hesford, Stephen
Hewitt, rh Ms Patricia
Heyes, David
Hill, rh Keith
Hillier, Meg
Hodge, rh Margaret
Hodgson, Mrs. Sharon
Hoey, Kate
Hood, Mr. Jimmy
Hopkins, Kelvin
Howarth, rh Mr. George
Howells, Dr. Kim
Hughes, rh Beverley
Humble, Mrs. Joan
Hutton, rh Mr. John
Iddon, Dr. Brian
Ingram, rh Mr. Adam
Jackson, Glenda
James, Mrs. Siân C.
Jenkins, Mr. Brian
Johnson, rh Alan
Johnson, Ms Diana R.
Jones, Mr. Kevan
Jones, Lynne
Jones, Mr. Martyn
Jowell, rh Tessa
Kaufman, rh Sir Gerald
Keeble, Ms Sally
Keeley, Barbara
Keen, Alan
Keen, Ann
Kelly, rh Ruth
Kemp, Mr. Fraser
Khan, Mr. Sadiq
Kidney, Mr. David
Kilfoyle, Mr. Peter
Knight, Jim
Ladyman, Dr. Stephen
Lammy, Mr. David
Laxton, Mr. Bob
Lazarowicz, Mark
Levitt, Tom
Lewis, Mr. Ivan
Linton, Martin
Love, Mr. Andrew
Mackinlay, Andrew
Mahmood, Mr. Khalid
Mallaber, Judy
Mann, John
Marris, Rob
Marsden, Mr. Gordon
Marshall, Mr. David
Marshall-Andrews, Mr. Robert
McAvoy, rh Mr. Thomas
McCabe, Steve
McCafferty, Chris
McCarthy, Kerry
McCarthy-Fry, Sarah
McCartney, rh Mr. Ian
McDonagh, Siobhain
McDonnell, John
McFadden, Mr. Pat
McIsaac, Shona
McKechin, Ann
Meacher, rh Mr. Michael
Meale, Mr. Alan
Merron, Gillian
Michael, rh Alun
Milburn, rh Mr. Alan
Miliband, rh David
Miliband, Edward
Miller, Andrew
Moffat, Anne
Moffatt, Laura
Mole, Chris
Moon, Mrs. Madeleine
Morden, Jessica
Mudie, Mr. George
Mullin, Mr. Chris
Munn, Meg
Murphy, Mr. Denis
Murphy, rh Mr. Paul
Naysmith, Dr. Doug
Norris, Dan
Olner, Mr. Bill
Osborne, Sandra
Owen, Albert
Pearson, Ian
Plaskitt, Mr. James
Pound, Stephen
Prentice, Bridget
Prentice, Mr. Gordon
Prosser, Gwyn
Purchase, Mr. Ken
Raynsford, rh Mr. Nick
Reed, Mr. Andy
Reed, Mr. Jamie
Robertson, John
Robinson, Mr. Geoffrey
Rooney, Mr. Terry
Roy, Mr. Frank
Ruddock, Joan
Russell, Christine
Ryan, Joan
Seabeck, Alison
Shaw, Jonathan
Sheridan, Jim
Simon, Mr. Siôn
Simpson, Alan
Singh, Mr. Marsha
Skinner, Mr. Dennis
Slaughter, Mr. Andy
Smith, rh Mr. Andrew
Smith, Angela E. (Basildon)
Smith, Geraldine
Smith, rh Jacqui
Snelgrove, Anne
Soulsby, Sir Peter
Southworth, Helen
Spellar, rh Mr. John
Starkey, Dr. Phyllis
Stewart, Ian
Strang, rh Dr. Gavin
Stringer, Graham
Stuart, Ms Gisela
Sutcliffe, Mr. Gerry
Taylor, David
Thomas, Mr. Gareth
Thornberry, Emily
Timms, rh Mr. Stephen
Todd, Mr. Mark
Touhig, rh Mr. Don
Trickett, Jon
Truswell, Mr. Paul
Turner, Dr. Desmond
Turner, Mr. Neil
Twigg, Derek
Ussher, Kitty
Vis, Dr. Rudi
Waltho, Lynda
Ward, Claire
Wareing, Mr. Robert N.
Watson, Mr. Tom
Watts, Mr. Dave
Whitehead, Dr. Alan
Wicks, Malcolm
Williams, rh Mr. Alan
Williams, Mrs. Betty
Wills, Mr. Michael
Winnick, Mr. David
Winterton, rh Ms Rosie
Wood, Mike
Woodward, Mr. Shaun
Woolas, Mr. Phil
Wright, Mr. Anthony
Wright, Mr. Iain
Wright, Dr. Tony
Wyatt, Derek
Tellers for the Noes:
Mr. Alan Campbell and
Huw Irranca-Davies
Question accordingly negatived.
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