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8 Oct 2008 : Column 115WH—continued
3.3 pm
Ian Stewart (Eccles) (Lab): I congratulate my hon. Friend the Member for Manchester, Blackley (Graham Stringer) on securing this important debate. It might appear as though he tried to pour cold water over the Government’s proposals, but he and we want a successful and sustainable ecologically and environmentally progressive system that is administered sensibly and fairly.
The first thing I should point out is that I believe climate change is, in the main, man-made. I believe that radical action is needed to tackle it, and that aviation and shipping should be included in our climate-related reduction targets in the Climate Change Bill. I stand squarely behind that notion so I am not arguing against an aviation tax per se, but I want one that will help us to meet our targets. As the duty is based on maximum take-off weight rather than CO2 or other emissions, the current proposals will mean that planes with identical maximum take-off weights will be charged the same, irrespective of noise or emission levels. So although a newer, heavier plane might produce fewer emissions than an older, lighter model, it will pay more duty because it will have a higher take-off weight.
Concerns have also been expressed that the proposals might lead to a significant increase in fuel-thirsty take-offs and landings. As we have heard, passengers will pay less tax if they avoid long-haul flights from the UK and fly instead from France or Holland. I want a duty that will not impact negatively on the UK’s regions. I accept
earlier comments about Heathrow and other hubs, but I do not want the system to impact negatively on UK regions such as my own—the north-west. I am uneasy about the consequences for my constituents who wish to travel from Manchester or Liverpool airports for their hard-earned annual holidays, and for the economic development prospects of my region. My colleague and good friend the Member for Manchester, Blackley has covered that ground comprehensively. He pointed out that FedEx’s freight service to Memphis, in the USA, which operated four times a week from Manchester, ended in August 2008, and has transferred to Paris. That is real. It is not a projection or conjecture; it has happened. Manchester had expected a second daily FedEx service, and was in discussions with FedEx about a 50,000 sq ft freight facility. It is believed that FedEx was frightened off by the proposed aviation duty—wrongly, in my view. Such organisations should not be frightened off using what is a world-class facility. I support the comments of my hon. Friend and others about the disadvantage for regional airports inherent in the current proposals.
Dr. William McCrea (South Antrim) (DUP): The hon. Gentleman is talking about regional issues. Northern Ireland is only part of the United Kingdom, but shares a land mass with another EU member state, the Republic of Ireland, which is not currently imposing that form of duty on aviation. I am led to believe that it does not intend to impose it. Significant investors will therefore bypass a region of the UK to go to another place that they find more attractive.
Ian Stewart: There is no way that the hon. Gentleman is going to draw me into Irish politics, but I agree with him. That is a clear consequence and it might happen.
Regional airports such as Manchester are already at a disadvantage when it comes to long-haul route development. They have fewer affluent customers to serve and fewer business headquarters to generate business travel. My colleagues have examined the arguments in fine detail, and some have taken the arguments outside the box.
In my final comments, I shall concentrate on another aspect that needs airing: the employees who need to be taken into consideration. We should hear from their representative unions. I am a member of the Unite the Union parliamentary Labour group, having previously been a full-time trade union officer for 20 years, and I am also concerned about the employment impacts of aviation duty.
We have heard much in recent weeks about the need to act globally to deal with the worldwide economic collapse of financial institutions. Equally, we must consider carefully the realities of introducing aviation duty in the UK in a competitive international market. I support the arguments put forward from all the sections gathered today about the international implications of this issue.
I know that Unite the Union is worried that if freight operators are charged, they will change their routes to avoid the tax. Moving freight by road to a European hub airport could lead to job losses. Although those numbers can be debated, it is quite clear that such a move would lead to job losses at UK distribution centres—a legitimate concern for existing employees in the UK—and the loss of capacity to have next-day delivery for documents
and packages, except at a premium price. Although aviation duty would affect only aircraft departing the UK, if long-haul routes are slashed by operators this could affect our facility to import food from developing nations.
Finally, the Government want airports to collect the new tax. Airports have no systems in place to administer aviation duty. Surely given the recent problems in the delivery of tax credit, child support and the education maintenance allowance, we should be wary of imposing new systems for payments. It seems daft to stick airports in that position when there are existing facilities, skills and experience within the airlines themselves.
The Minister has been open to all arguments and has made it clear that she is prepared to consider seriously all sensible suggestions. If we propose anything that the Government regard as sensible, they have said that they will accept it. I would like to compliment the Minister on that openness and to put the same comments to those who have access to the Chancellor.
In conclusion, I want a much more rigorous assessment of the environmental, economic and employment consequences of the proposed aviation duty and I call for other alternatives to be considered. As a north-west MP, I argue strongly that it should be recognised that Manchester airport is the single most significant economic factor in the north-west, and we must not jeopardise that.
3.12 pm
Mr. Robert Syms (Poole) (Con): I welcome today’s debate. Air passenger duty is not a great tax, and it is quite something to invent a scheme that is considerably worse and that will greatly disadvantage our aviation industry which, as we have heard in this debate, is the second largest in the world. It has been a great British success story, but it is a very competitive industry.
As we have seen with developments in Schiphol and at Charles de Gaulle, there are great temptations for carriers to move overseas. The problem with the tax is that it is unilateral and will lead to the export of jobs. We have heard the concerns of hon. Members from Northern Ireland. We have also heard about the problems that may lead to foreign road hauliers bringing in goods on our roads. There is a real problem with the concept of it being a unilateral tax. The Government have not said very much about what will happen when the EU comes up with its new trading system. What will happen then? Will our companies effectively be double taxed?
We have also heard about the disadvantage for long-haul flights. The duty will greatly add to the red tape at airports. The Manchester Airport Group thinks it might have to collect £400 million from airlines, which is more than its total revenue of £300 million. It is concerned about who is liable for the tax because it will have to chase people and may spend a considerable amount of its revenue having to pay the Treasury for money that it cannot get back from third parties. We have already heard from my hon. Friend the Member for Aldershot (Mr. Howarth) about his concern for business aviation. I and my hon. Friend the Member for Christchurch (Mr. Chope) have a first-rate airport in Christchurch—Hurn airport—which does quite a lot of business repairing
aircraft. An aircraft that comes in to be repaired by a local engineering company may end up paying a considerable sum of money even before one screwdriver has been used. There are real concerns about the perverse impact of this particular charge.
Mr. Christopher Chope (Christchurch) (Con): Does my hon. Friend share my concern that this is also sending out a very negative message to the very successful British aviation and aerospace manufacturing industry. In my constituency we have FR Aviation, Meggitt Aerospace, and VT Aerospace. They are major users of the airport and a showcase for British manufacturing, yet this Government proposal seems to pour cold water on this very important part of British manufacturing industry.
Mr. Syms: My hon. Friend makes a very good point. He is a great defender of the economic significance of Bournemouth airport, which offers a real benefit to the people in our part of the world. We have heard about the successful development of regional airports. Such airports are very important to local economies. If the Government proceed with this tax, they will be disadvantaged. The best thing that can be said about the proposal is that it is at its consultation stage. A final decision does not yet have to be made. I hope that this is one occasion when the Government, for good economic and tax reasons, listen. Ultimately, the tax will damage many thousands of jobs, a very successful industry and regional policy. There is concern across the parties and across the country; otherwise there would not be such a range of people in this debate pleading with the Government to listen to the very sensible arguments made by the hon. Member for Manchester, Blackley (Graham Stringer). That is all I want to say. If the Government go ahead with this proposal, it will damage Britain. That would be a very sad day.
3.16 pm
Miss Anne Begg (Aberdeen, South) (Lab): Hopefully, I will not take up too much time because I realise other hon. Members want to speak. I am not going to make the case for or against this particular tax; I will leave that to others. I want to bring up the unintended consequences of the tax, particularly for passengers who are flying from regional airports. I hope that you do not mind, Mr. Caton, if I confine my remarks to Aberdeen. It is not that it is at the end of the universe, although some people think it is—I do not mean that in a negative way. Obviously, because our economy in Aberdeen depends in part on international travel, there are important issues that we must face.
Aberdeen is the energy capital of Europe and many of my constituents make international flights weekly—and sometimes more often—to areas such as Azerbaijan, the middle east, Nigeria and Texas. That is part of our economy. Obviously many of my constituents want to fly abroad.
It has been hinted at by other hon. Members this afternoon that the problem with this tax is that when it is based on aircraft rather than passengers and passenger journeys, there may be a double or even triple effect on passengers flying from a regional airport to a UK hub. Someone from Aberdeen who wishes to fly to Florida to visit Disneyland will either have to fly from Aberdeen
to Heathrow or Gatwick and pay one set of tax, and then fly from Heathrow or Gatwick to Florida and pay the second tax. On the way back from Florida, they do not pay the tax at all, but from Heathrow to Aberdeen they will pay the tax. As I understand it, they will be taxed three times. It is very difficult to work out because there are no figures on how much it will cost. There is potentially a triple cost on passengers. If passengers do not want to pay that extra £300, or whatever it might be for a family of four—it is very difficult to work out the figures—the real incentive begins to develop for them to travel by car to either Edinburgh or Glasgow Prestwick in Scotland to get those international flights. Aberdeen has some international flights, but none outside Europe. It has regular flights to both Schiphol and to Charles de Gaulle. My fear is that if the tax is introduced, there will be real economic incentives for my constituents to use either Charles de Gaulle or Schiphol as their international hub and not Heathrow or Gatwick. A number of holidaymakers use Manchester as the hub in order to transfer on to further international flights.
I should be grateful if the Minister could address that particular issue to show that at least some thought has been given to it, because under air passenger duty, if someone has a through ticket they pay duty not on every individual leg of the flight but just on the through flight. So it is difficult to see how something like that can be introduced when the tax will be on the aircraft and not on the individual passenger journeys. I do not want to say any more, but I hope I have explained the difficulties that my constituents might face: either they will be forced to spend a lot more money going through a British hub, or to use their cars more, which defeats the environmental purpose of the tax; or, they will feel that it is easier for them to use one of the international hubs.
3.20 pm
Mr. Gerald Howarth (Aldershot) (Con): I congratulate the hon. Member for Manchester, Blackley (Graham Stringer) on securing the debate and on making a serious contribution to an important issue. Next Thursday we celebrate the centenary of flight in this country. On 16 October 1908, Samuel Cody became the first man to make a powered flight, flying 1,390 ft from Laffan’s plain in Farnborough in my constituency. For 100 years, aviation has been one of Britain’s most successful industries; let us ensure that we do not knock it now.
I also declare an interest: I am a currently licensed aviator, together with the hon. Members for Edinburgh, South (Nigel Griffiths) and for Montgomeryshire (Lembit Öpik), and my hon. Friend the Member for Welwyn Hatfield (Grant Shapps). We have sought to speak up in this place not so much for the airlines as for general aviation, comprising light aviation, sporting aviation and business aviation, which already contributes £15 million in tax and VAT. We pay and the airlines do not—Mr. Walsh, please make a note.
I have two points to raise. First, general aviation—below 5,700 kg—generally uses Avgas, which is a petrol and on which we pay tax, so we are not affected by the measure. However, the industry is affected, because we are increasingly trying to move to diesel engine development, which is far more fuel-efficient and reduces emissions. It will be hit very badly, because diesel engines use Avtur
Jet A-1, and such development will be seriously affected, meaning bad news for aviation in this country and for the British aviation industry.
My second point, which builds on a point that I made earlier, is about the concerns of the British Business and General Aviation Association, which represents the air taxi business, smaller airports, charter businesses and so on. It is very concerned about the impact of the proposals on its members, who are an increasingly vital part of the economy as major airports become congested. Businesses find it hugely convenient to use airfields in all our constituencies to enable them to get from A to B on the continent and to avoid the hubs, which is good for British business and for the local economy. The association told me:
“Absolutely no detail has been forthcoming from HMT or HMRC”—
Her Majesty’s Treasury and HM Revenue and Customs—
“about the scale of the duty calculation. It would be an absolute disaster if they simply drew a straight line based on MTOW”—
maximum take-off weight. The association continued:
“There has to be some degree of proportionality based on the number of seats to provide a smooth transition from APD to Aviation Duty.”
The market is seriously mobile: these people can up sticks and go somewhere else, which would be very bad news not only for the economy but for the Treasury.
I have discussed the process of collection, which will be much more complicated, and this afternoon I spoke to representatives of Farnborough airport in my constituency about the issue. Why impose another burden on that business? The airport is flourishing, so I hope that the Minister will attend to those concerns and ensure that the business aviation community is told exactly what plans the Government have for the implementation of the tax on a highly successful and enterprising part of the British economy which is vital to British interests. I hope that she will be able to do so in this debate.
In the meantime, I hope that everybody will take note of the events next Thursday. I have been asked by my hon. Friend the Member for Christchurch (Mr. Chope) whether the Vulcan bomber, of which I am a trustee and which I have helped restore to flight, will take part in the flypast. We hope that it will. I shall be in a smaller aeroplane in front of it, and I hope not to get overtaken by it. I hope, too, that the duty will not apply to the Vulcan, because we would just have to raise more funds from charitable sources.
3.24 pm
Mr. Mark Todd (South Derbyshire) (Lab): I shall rush through my speech.
Currently, aviation use is taxed through air passenger duty. A freighter carrying cargo alone bears no levy, but a passenger aircraft carrying belly freight, which many do, is disadvantaged against the dedicated freight carrier, which is clearly anomalous. I therefore support the principle of fiscal measures to equalise burdens between different carriers and payloads.
The second issue, however, is how any tax should be designed, which depends on its purpose, presuming, as one does, that revenue generation is not the only motivation.
The focus should be on the efficient use of aircraft capacity and the carbon impact of the flight itself. The tax should be used as an incentive to modernise carriers’ aircraft fleets. That has a particular bearing on the dedicated freight sector, which tends to use relatively old and less efficient aircraft. The tax should also remove perverse incentives towards particular transport choices. No rational integrator would move its operation without some long-term assurance about any marginal advantage that they would achieve through it. Bearing in mind the pressure that exists on all Governments to comply with carbon reduction targets, how realistic would any such assumptions be?
Sammy Wilson (East Antrim) (DUP): Will the hon. Gentleman give way?
Mr. Todd: It is a bit unfair to do so when someone else is coming up, I am afraid—particularly as I am his MP.
I represent a constituency adjacent to East Midlands airport and live under one of the flight paths. I also participated in an Industry and Parliament Trust attachment to UPS, but I think that Members will interpret that, in this debate, I do not necessarily represent its sentiments. The airport is not always the best neighbour to those who live close to it. It is the largest dedicated freight airport in the UK and the hub for two of the main freight integrators. Its carriers are modernising their fleets rather too slowly, and the duty could, if applied properly, incentivise that process. I conclude by saying yes to a tax, but design it properly, please.
3.27 pm
Mr. Bob Laxton (Derby, North) (Lab): I very much share the views of my hon. Friend the Member for Manchester, Blackley (Graham Stringer). My view is simply that the proposals for consultation are fundamentally flawed, that the new tax will not produce the environmental benefits that are claimed for it, that it is unlikely to provide any additional revenue to the Exchequer and that it will simply damage the UK’s competitiveness and, particularly, its employment.
I stand in the Chamber between two colleagues, my hon. Friends the Members for South Derbyshire (Mr. Todd) and for North-West Leicestershire (David Taylor), who may have slightly different views from me, but all three of us live close to East Midlands airport. Although I live well within the area where one picks up the noise that the airport generates, I believe that it is a very positive facility in the east midlands. It has been a real job-generator; it is a successful airport, with 6 million passengers passing through it; and, by volume, it is probably the largest parcel hub in the UK. The East Midlands Development Agency has stated in its regional economic strategy:
“In the context of international trade and competitiveness, the ongoing function and success of (the airport), particularly as a strategic express freight hub, is important as it is one of the region's key economic assets.”
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