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Mr. Goodman:
I certainly agree that the proposals are pretty chaotic. Again, I note that there is no substantial amendment setting out Liberal Democrat policies in any form. However, I will not carry on down that road. I have made my point, and no one has got to their feet to say that the Institute for Fiscal Studies is wrong. We agree with the Liberals that there should be an assessment, but we do not agree that there should be a delay, because a delay would prevent the aviation tax proposal from coming into effect. For the Liberals,
different considerations apply, and I shall explain why. After the next election, there may be a Conservative majority, a Labour majority—personally, I am rather doubtful about that—or no majority at all in the House, but it is safe to say that there will not be a Liberal Democrat majority. I shall repeat that, in case anyone wants to challenge it: I do not believe that there will be a Liberal Democrat majority in the House.
Unlike the two main parties, the Liberal Democrats are not overburdened with expectations of great responsibility. I presume that if they put their amendment to the vote this evening and it is defeated, they will vote against the clause, just as they voted against the measures in it at the conclusion of the Budget debate. In other words, tonight, they can cheerfully vote against the principle of aviation taxation, although they have no workable alternative to propose, knowing that they will not have to live with the consequences in office. That is not an approach that we can take. Unhappy as we are with air passenger duty as it stands, and with the Chancellor’s handling of it, we simply do not believe that we can responsibly vote not to implement an aviation tax that we were responsible for designing, either by opposing the clause or by supporting the Liberal amendment.
The House has a choice tonight on APD, however flawed the tax may be in principle, and however faulty the Chancellor may be in practice. Members can either vote with the Liberals against the principle of aviation taxation, with no workable alternative anywhere in sight, or they can take the responsible course, and take a principled stand against the short-termism and opportunism that the amendment represents.
Mr. Gummer: I would like to be able to support the content of the Liberal amendment, because the Financial Secretary to the Treasury has been disingenuous in the way in which he has tried to defend the tax that we are discussing. The two arguments that he has used are flawed and damaging to the environment. His first argument was that air passenger duty is an environmental tax—not a very good or effective one, and not one that he would have chosen if there were anything else around, but the only thing that he could scrabble together at the time. That, roughly speaking, is his view of the tax.
The Minister went on to say that it was not a bad tax in retrospective terms, and that he would fight very hard in the courts to make sure that nobody won a case against him. The problem for me is simple. We will need regulation and a shift—not an increase, but a shift—in taxation from taxes on the family and taxes on business to taxes on pollution. However, if the country believes that that is not for the purpose of the environment, but is merely another sleight of hand, another stealth tax in order to gather money for the Treasury, that undermines our ability to take the nation with us in the tough measures that we will have to adopt.
I was disappointed by the Minister’s reply to the last debate, because although it was ruled out of order to talk about the environment, he did so. He mentioned that the tax was environmentally healthy. He also suggested that some minuscule amount of emissions might or might not be saved on some technical
arrangement that the Treasury had gone into. Everybody knows that this is a tax to raise money.
I have a slight disagreement with the hon. Member for Twickenham (Dr. Cable), which I know he will not mind. When my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) introduced the landfill tax, he made it clear that that was an environmental tax. Even though my noble Friend the then Prime Minister allowed me to raise the rules for the defence of the sea because climate change was a real issue—and that was in the early 1980s—back in 1994, the emissions from aircraft were significant only to a very few. There were not many aircraft, the amount of emissions was not very great, and it paled into insignificance when compared with other things. The kind of nonsense that Ryanair peddles now was true then.
Since 1994 Ryanair and others have entered the market, there has been a huge increase in emissions, and those emissions are particularly great in the United Kingdom. If they continue at the present rate, they will use up all the reductions that we can make in the immediate future in other areas of carbon emission. Of course we must be very tough about emissions from aircraft. We know that that is not easy, because many of the people who have taken advantage of cheap flights have found that that hugely improves their quality of life. Any of us trying to deal with the issue knows how difficult it is.
That is why the Minister has done the environmental movement a great disservice by pretending that this ineffective, money-raising tax has anything to do with the environment at all, and why he knows in his heart—that is why he is looking down—that it would have been credible only if he had introduced at the same time a measure resembling the amendment, and said clearly that he needed the money. Honesty is the best policy. Whereas my right hon. and learned Friend the Member for Rushcliffe was honest, I have to say, within the rules of the House, that I do not quite catch that in the present Administration.
Mr. David Heath (Somerton and Frome) (LD): The right hon. Gentleman mentioned the growth in low cost airlines. Is not one of the paradoxes of the whole issue that many of the low cost airlines are flying with relatively new planes fully laden, whereas many of the flag carriers are going round the world with virtually empty planes, causing a great deal more pollution per passenger? That is one of the problems with the Government’s solution, and one of the things that our proposal would catch.
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Mr. Gummer: I agree with the hon. Gentleman. I was not attacking low cost airlines; I was merely saying that because of low cost airlines, there is a lot more flying. This tax is fundamentally a tax on the good airlines which have a proper number of people on their planes, because a full plane costs a lot more in tax than an empty plane.
The idea that it does not matter that the Government are taxing airlines retrospectively, because airlines can pay the tax out of their profits, is the most peculiar piece of logic that I have ever heard. The truth is that
the Government are taxing the airlines, which will either pay the tax themselves or pass it on. The fault is the Government’s, not anybody else’s. My objection is that what the Government are doing with taxation is not helpful when it comes to emissions or green taxation generally.
There are, for example, 39 flights a day to Manchester from London, which is not a sensible way of using our slots, but there are also aeroplanes that can fly across the country and provide a real service to places such as, for example, Cornwall. Because such flights involve turboprops there are fewer emissions, and the flights can be very full. I am not opposed to examining that particular proposal, although it needs to be part of a whole package. We need to talk about slots. I understand that it is often cheaper to have a short-haul slot than a long-haul slot, which cannot be sensible.
There is a whole range of such issues that must be looked at. I have admiration for the Financial Secretary, who is a decent man. I am not making a party political attack, but how has he allied himself with the Treasury, which has not done any of that work, which has not produced a reasonable basis for the tax and which has not bothered? The Treasury has fiddled about with a tax that it knows does not work and pretended that the tax is environmental.
That is why I am interested in the amendment—but I must tell the Liberals that nothing would get me to vote for Liberal taxation proposals. I have got a very long memory, and I remember Liberals who supported tax on domestic fuel until there was a by-election, when they changed the policy overnight in order to win that by-election. The Liberals and taxation are about taxes that people do not think will hurt—the moment that taxes hurt, the Liberals get rid of them. The Liberal party is the party that no one can take seriously on the environment, because the Liberals resile from anything that is difficult. I would vote Labour a dozen times before ever voting Liberal, because at least you know what you are getting. As a constituent of mine said on the doorstep, “The choice in this village is between the Conservatives and the Liberals, and you never know where you are with the Liberals. If God had been a Liberal, we would have had the 10 suggestions.” Homespun humour gets to the heart of the issue, so do not come telling us about your taxation policies, Liberals, because we know what they are—never do the tough thing; always talk the sweet talk.
That is why I think that my hon. Friend the Member for Wycombe (Mr. Goodman) has done the right thing, which is to say that we will vote for this tax because it is a tax to raise money, and tell the Government that we would like two things from them. Either they accept the sense of the Liberal amendment and say that they will produce some properly audited, sensible proposals so we can all see the figures and make an environmental decision in the future—or, if that is not possible, that the Government themselves will say that there needs to be a different way of looking at taxation on aircraft that is much more closely associated with the damage that aircraft do to the environment.
Finally, I am usually able to say such things on the side of the Government with a clear conscience, but I remember that our Prime Minister changed his view even on this matter from the morning to the evening, when he was pressed on the perfectly reasonable question why he felt in the circumstances of today that to take two holidays a year in the Caribbean and none at Chequers was reasonable. Between the morning and the evening, he moved from pooh-poohing aircraft taxation to coming forward with a nicely chiselled but largely irrelevant proposal.
We need to be frank about this measure—it is intended to raise money—but we need also to tell the Government that they have done a serious disservice to the environmental movement by pressing it in this form, and urge them to make up for the damage that they have done.
Rob Marris: I agree with quite a lot of what the hon. Member for Wycombe (Mr. Goodman) said in response to amendment No. 13, which I shall oppose. I do not wish the increase in air passenger duty to be delayed, and I do not think that it is right to put in statute a demand for an “assessment”. We need aviation taxes to raise revenue and to cover the externalities of air travel. We also need additional, not replacement, taxes to change behaviour. If, as I hope, behaviour changes as a result of these taxes, we will have had a positive result in terms of that desired outcome and the Government will not have to worry about revenues from green taxes, in this case on aviation, dropping. The central paradox, if not contradiction, in the Liberal Democrats’ position on green taxes is that they do not really want behaviour to change, because that would mean that tax revenue would drop and they would have an even bigger hole in their budget.
Nevertheless, I have a lot of sympathy with what the hon. Member for Twickenham (Dr. Cable) said about aircraft movements. In 1994, when the tax was first introduced, it had a small aircraft-related element, in that aircraft weighing less than 10 tonnes were exempt. That was to do with flights of small planes from Scottish islands, Cornwall and so on. The Liberal Democrats have a point in saying that when we try to change behaviour we should tax the right thing, which is aircraft movement rather than people. As the hon. Member for Twickenham said—this had not occurred to me and I thank him for raising it—his proposals on taxing aircraft movement rather than passengers would have a differential effect domestically as against internationally, because, as it would be calculated per take off, proportionately speaking it would hit harder domestically. He is right to say that the substitution effect is possible domestically but not for long-distance international flights, although it is possible in the case of other countries in western Europe, where one can take the train, as I do.
I urge my hon. Friend the Financial Secretary to take on board the comments that have been made about the additional green taxes on aviation that I would like in order to change behaviour, particularly domestic behaviour. Let me give an example. We could all cite the difficulties that we have in encouraging the green agenda given the cost of travel in the United Kingdom. One of my nieces, who lives in Sheffield, has just flown
to Thailand. When I asked her whether she was going from Gatwick or Heathrow, she said that she was travelling from Sheffield to Manchester, flying from Manchester to London, and then flying on to Thailand on a different flight. That is not a great green message for the next generation, but she is a young woman of modest means, to say the least, and that was the cheaper option. Additional green taxes might change things in some way in the case of domestic flights.
Julia Goldsworthy: Does the hon. Gentleman not agree that broadening the scope of the consultation would prove useful because the Financial Secretary has already said that he favours a move towards emissions trading for aviation? Would not broadening the scope help the Treasury prepare better for that?
Rob Marris: Yes, I believe that broadening the consultation is a good idea. I imagine that the amendment was tabled before the consultation document was issued, but I do not believe that primary legislation is the place to include broadened consultation or an assessment, especially given that the amendment is framed to delay the increase in air passenger duty as a nakedly, openly revenue-raising measure for the Government, which I support. I do not agree with the amendment but I hope that my hon. Friend the Financial Secretary will consider broadening the consultation on aviation taxes as a revenue-raising measure, and on additional taxes to change behaviour.
John Healey: I congratulate the hon. Member for Twickenham (Dr. Cable) on prompting a wide-ranging debate on a narrow clause. I acknowledge the consistent interest and expertise that the right hon. Member for Suffolk, Coastal (Mr. Gummer) brings to bear on such issues. That also applies to my hon. Friend the Member for Wolverhampton, South-West (Rob Marris).
Let me say to the right hon. Gentleman that, as the hon. Member for Wycombe (Mr. Goodman) acknowledged, I have always been clear about air passenger duty. The Chancellor has also always been clear about it. When he announced the doubling of air passenger duty on 6 December, he said in his pre-Budget statement:
“Currently, aircraft emissions are not part of the EU emissions trading scheme, and nor is aviation fuel taxed. While we continue to work internationally to seek a global agreement on reducing aircraft emissions, each country must take action domestically. From 1 February, we will double air passenger duty. For most journeys—over 75 per cent. of them—duty will rise from £5 to £10, securing extra resources in the coming spending round for our priorities, such as public transport and the environment.”—[ Official Report, 6 December 2006; Vol. 454, c. 310.]
Air passenger duty has an environmental impact but it is not an environmental tax such as landfill tax, which the right hon. Member for Suffolk, Coastal mentioned. That was designed and introduced for the policy purpose of making an environmental impact.
Julia Goldsworthy:
If the proposal has no bearing on the environment, why does today’s written ministerial
statement refer to the “inappropriate environmental signals” that the current rates of air passenger duty convey?
John Healey: The hon. Lady did not listen to me. I shall not give way again unless she listens. I clearly said that air passenger duty has an environmental impact. The consultation that I have confirmed today is about a point that business raised with me and has an environmental impact. For example, it has been put to me that the structure of air passenger duty makes it unsuitable for business-only flights, which may offer 100 business class seats on a plane designed to carry 300 passengers. Clearly, that has an environmental impact.
However, as I explained, air passenger duty is not principally an environmental tax in the same way as the landfill tax, the aggregates levy or the climate change levy, which are designed with an environmental impact specifically in mind.
The problems with amendment No. 13 are not so much technical as legal. International laws, within which we must work, prevent taxing emissions from aviation inasmuch as they are linked to fuel consumption. Courts have successfully struck down taxes on that basis. In a Swedish case involving the Braathens Sverige airline, the European Court of Justice held that a tax that resembled a tax on fuel, such as a tax that related to carbon dioxide emissions, was incompatible with legislation predating the energy products directive. The judgment of the European Court, of course, binds the United Kingdom.
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I have consistently said to Select Committees and to the House that our preferred policy for tackling the impact of aviation on climate change is the European Union emissions trading scheme. That is why we have worked so hard to press the case for, and achieve progress on, the inclusion of aviation in the scheme. I have also made it consistently clear over a number of years that APD is not the most environmentally effective tax for aviation. It is, however, established, available and compatible with international law. I should also add that, unlike some of the proposals suggested by others, it is a simple tax to operate and it imposes a small compliance burden on the industry and on air passengers. APD has a role to play in recognising the environmental costs of air travel, and in ensuring that air passengers understand and acknowledge the environmental costs of their actions.
The rise in APD announced by the Chancellor will have an environmental impact. That is why, before the pre-Budget report, many of the green groups were arguing for an increase in the APD, as it is currently designed and structured. It is also why, after the Chancellor’s pre-Budget report statement, groups including Transport 2000 welcomed the move.
I hope that, having been able to air some of the wider arguments in this short debate, the hon. Member for Twickenham will not seek to press his amendment to a vote. His proposal would delay the increase in air passenger duty, as my hon. Friend the Member for Wolverhampton, South-West pointed out, and that
would be undesirable. I hope that the hon. Gentleman will not press his amendment, but if he does, I shall have to ask hon. Members to resist it.
The Temporary Chairman (Mr. Eric Illsley): Order. Before I call the hon. Member for Twickenham (Dr. Cable) to respond, I inform the Committee that I do not intend to have a clause stand part debate on clause 12, given the length of time that we have spent debating it so far.
Dr. Cable: I should like briefly to respond to some of the points raised in the debate. The hon. Member for Wycombe (Mr. Goodman) is normally quite thoughtful, but he seemed to feel that he had to make some terribly tribal points tonight in order to wriggle out of his desperate embarrassment at agreeing with the Liberal Democrats. We have a proposal but, as far as I am aware, his party does not have anything at all apart from a general commitment to raising revenue from the aviation sector. I think that his points were slightly unworthy of him.
I should also like to correct something for the record. We have submitted a balanced and tax-neutral alternative budget to the Institute for Fiscal Studies. I do not think that the hon. Gentleman’s colleagues got that far. We suggested a series of measures that were environmentally friendly and also fairer and more redistributive. The IFS acknowledged that our sums added up. The hon. Gentleman might not like the policies, but the sums certainly balanced. We acknowledge that, following the introduction of the Budget, which included at least some of the measures that we recommended, such as cutting the basic rate of income tax, we shall have to redo the numbers. We shall do that, and take into account the environmental tax implications.
The hon. Gentleman made a criticism that I did not fully understand. He started by asking why, since we had a workable alternative, we wanted to carry out a study on it. He finished by saying that we did not have a workable alternative, however, so I am not quite sure where his argument was leading. There are two reasons why we suggested that an evaluation was necessary. One is that any sensible party in any Government should do impact assessments even if it thinks that it has got the basic formula right. The present Government have structured that in, but not enough.
Secondly, we are trying to find a mechanism to reach common ground with the Government. We know that they are not in the same position as us, and that they have embarked on a consultation exercise. It would be helpful if they widened that exercise; I do not see a problem with that. In his response, the Minister made what might well have been a valid point about the legal difficulties involved. We have looked at this, and we were persuaded that there would not be a problem, but perhaps there would. That is all the more reason for widening his consultation to try to answer that specific question.
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