Mr.
Jeremy Browne: I understand the hon. Gentleman’s
point; he is making a well argued case. However, people in my
constituency tell me that it is perverse of supermarkets to fly in food
from the other side of the world out of season, and that local food
should be more widely available instead. Do not all tax regimes have a
potential behavioural effect that disadvantages one form of production
or activity while advantaging another? Is that always a bad
thing?
Mr.
Syms: The hon. Gentleman makes a good point. Imported
fruit from Chile clearly comes in on an aircraft and the effects are
perverse. Our responsibility as politicians, however, is not to
disadvantage UK businesses against their competitors. We all
occasionally go through Charles de Gaulle or Schiphol airport. Our
European competitors want to take business away from Britain, and we
know the jobs that that business generates. We need a sensible airport
policy and we need to nurture our airline industry, which is going
through difficult
times. We
can strip out all the excuses for APD; the basic rationale is money.
That was the rationale of the Conservative Government in 1994, who
needed to raise a lot of money quickly, and it is the rationale of the
current Government. They are trying to raise a lot of money quickly due
to the state of the public finances. I agree with my hon. Friend the
Member for Hammersmith and Fulham, there is a danger that the different
banding and areas will lead people to use European hubs, which will be
a disadvantage, particularly for Heathrow. I hope that the Government
are alive to
that. What
number of passengers is the money that the Government expect to raise
predicated on? Passenger numbers have declined by about 20 per cent.
according to the last figures that I saw, so the measure may not raise
the money that the Government think it will. I am interested to know
how much the Government think that it will
raise.
11.30
am I
would like to put certain concerns on the record. The proposal could
give passengers an incentive to transfer to rival European hubs and put
UK domestic connecting schedules at risk, thereby reducing frequency.
We have heard about the rate of increase for long-haul flights, but do
not forget that airlines invest a lot of
money when they set up a new destination or route and it sometimes takes
a while to get the passenger levels and the business. This measure will
hit airlines, and it may be a disincentive for them to develop new
long-haul routes. The additional distance bands will discourage
high-value long-haul flying from the UK, which could damage the economy
without any environmental benefit, because if passengers go elsewhere
to fly they will still create environmental damage. There are concerns
that the Treasury proposals may be inconsistent with the Stern review
and with the Government’s policy of developing Heathrow. I know
that there are differences across the Committee over that
proposal. I would like
to hear from the Minister about the EU, which will bring in an ETS tax
in 2012. Will this passenger duty cease when the EU has an
environmental tax? If not, our airlines may find that they are subject
to European and domestic taxation, which will be a double disadvantage.
Will the Minister flesh that out? The increase in APD could have the
perverse effect of delaying fleet replacement plans. As I understand
it, British Airways could replace half its fleet over eight years with
the money generated by the tax, so it is not small bucks. It is a lot
of money.
I never speak
for too long having made my point, Mr. Atkinson, so, in
conclusion, I had concerns about the Government’s per-plane
proposals. There may be a better solution, and my hon. Friend the
Member for Fareham will no doubt look at it sensibly when he is a
Minister. The Government’s proposals would not have worked, and
we have come back to per-passenger duty. It is basically about raising
money quickly, and, unfortunately, Governments have to find money
somewhere. It is presumably better to take it from people or businesses
that travel than from those at the lower end of the tax
band. I
am interested in the latest calculations of what the tax would raise.
We need to hear more about what happens when the EU starts an ETS and
how that will interact and dovetail with APD. As we have heard, APD has
been hiked on several occasions. It will be helpful to have a
commitment that it will stay at this level for some time, so that
businesses, which are very important for our economy, can plan for the
future. Will the Government be back for a further bite of the cherry
come next year’s Budget in March or this autumn’s
pre-Budget report? This is a successful industry, which generates
thousands of jobs and is very competitive, so we, as politicians,
should be careful not to kill the golden
goose.
Angela
Eagle: We have had a characteristically thorough debate
about clause 17 and have also looked at schedule 5, which
includes the banding. We have had maths and geography lessons in the
debate today, perhaps even geopolitical lessons about the creation of
new
states. I
will do my best to answer the questions that have been put. As
Opposition Members have said, the Government consulted on proposals to
replace air passenger duty with a per-plane tax. Both Conservative and
Liberal Democrat members tabled amendments to replace APD with a
per-plane tax—their position—but they were not selected
today. We
listened to respondents in our consultation process. As has been said,
we announced in the pre-Budget report 2008 that we would reform the
existing system
and replace the two-destination band structure with a four-band
structure. We had hoped to proceed with the per-plane tax, but we
decided against it for a fair number of reasons. The Government
proposed the per-plane tax in a different economic climate to the
current one, and the decision not to proceed recognised the need to
ensure at least some greater stability in tax policy at a time of
economic uncertainty. It was not thought to be the best time to shift
from one tax to a completely redesigned one, given the uncertainty in
the economy. We were also trying to maintain environmental objectives
by extending the distance banding, and we hope that we have managed to
avoid at least the disruption and costs associated with the transition
to a new tax. Mr.
Hands: Will the Minister give
way?
Angela
Eagle: The hon. Member for Hammersmith and Fulham has not
even let me get going, but I am happy to let him
in.
Mr.
Hands: The Minister really cannot have it that returning
to APD somehow increases certainty in tax policy. It was not just a
consultation, it was a clear statement of intent to move to a per-plane
duty. Having once made the change and now changing back again, there is
no way that anybody could argue that two 180-degree reversals in 18
months is creating stability in the tax
system.
Angela
Eagle: We will not go into 180 degrees and 360 degrees
because that is maths again. All I was trying to say was that we wanted
to avoid the disruption and costs associated with a transition to a new
tax right in the middle of a period of economic uncertainty that did
not exist when the original change was announced. In retaining APD, the
Government recognise that the system could improve the environmental
signals, and hence the change to four bands and the reforms in schedule
5, referred to in clause
17. The
bands will be set at 2,000 mile intervals, and inclusion in each band
will be based on the distance of a country’s capital city from
London. The hon. Member for Hammersmith and Fulham asked a fair number
of questions about some of the detail of that, which I want to deal
with. Firstly, he talked about the methodology in schedule 5, and about
new states that might come into existence. He asked whether they would
end up in the Australasia band. We even got to talking about Scotland
as a potential new state. I will not impinge on any of those highly
controversial potential parallel futures, but I want to assure him
that, as with the current air passenger duty, we have powers in
secondary legislation to react to any changes in states or territories.
The primary legislation gives us a power to vary by statutory
instrument, so the creation of a new country could be absorbed into the
system by use of secondary powers to allocate that country to a
particular band. We do not have the absurdity that he was hinting
at—that everything new ends up in
Australasia. Mr.
Jeremy Browne: I can see the practicalities
of designating the capital city as the relevant consideration. In some
states, however, where the capital city is much smaller than many of
the other cities in that country, is it such a sensible way to make the
calculation?
Angela
Eagle: There is a detailed way of making these
calculations by measuring absolute distances to each destination.
Alternatively, there is a simpler banding structure, where one uses
assumptions. That structure makes the system quicker, easier and less
complicated to administer.
Mr.
Hands: Will the Minister give
way?
Angela
Eagle: I will give way when I have finished this point.
That banding structure simply makes the system easier to administer for
all concerned, including those airlines that have to calculate and pay
the tax. That does not mean to say that anomalies do not arise from a
rough-and-ready rather than an absolute approach. We have gone for the
rough-and-ready approach. I understand the points that are being made
about some of the anomalies with capital cities, particularly
Washington in relation to destinations in other US states and in
Caribbean countries. However, I suppose that a rough-and-ready
calculation is precisely that, and one can always find
anomalies.
Mr.
Hands: I genuinely fail to understand how it can be
simpler to go for this banding structure than for a structure based on
the absolute distances. It is quite clear; these distances do not
change. The distance from London to Boston, for example, or from London
to Honolulu, is not subject to change. Well, I suppose it could be if a
new airport was built, but that is a very obscure example of how it
could change.
I just cannot
understand what is complicated about using the actual distance. It is
what airlines use all the time, for calculating the amount of fuel that
they put in aircraft, or for calculating frequent flier programmes.
Everything is calculated on an actual distance basis and not on a
banding basis. So how can a banding basis be
simpler?
Angela
Eagle: I can reassure the hon. Gentleman that this system
is administratively simpler for those who have to put it into effect,
and calculate and levy the tax on flights. If absolutely every last
mile of distance has to be calculated, that leads to a different
structure for the tax. That would be a different way of doing it and it
would not be rough and ready. I assure him, however, that it would be
more complex in its administration.
Mr.
Field: I can understand the Minister’s view that a
level of certainty is promoted by what the Government are proposing.
However, we are living in an internet world—a Googled
world—where it is not difficult to get hold of this type of
information. It may well have been the case 10 or 15 years ago that it
was difficult to work out exactly how far each and every last far-flung
city in China, Pakistan or India was from London. Now, however, that is
information that literally everybody can get hold of at their
fingertips.
So it is
nonsense now for the Minister to try to defend this system. As I say, I
can see that there is a level of certainty in talking about a single
city in one of the 190 or so states within the United Nations. However,
the reality is that this information—accurate information,
along the lines that my hon. Friend the Member for Hammersmith and
Fulham has explained—is very easy to
obtain. Angela
Eagle: I am not saying that the information is not easy to
obtain. I am saying that it is administratively simpler to use it in
four bands that are approximate; that is the only assertion that I am
making. I am not trying to say that somehow it is impossible for us to
work out how many miles an aeroplane travels from this country to any
destination in the world. Of course, it is a matter of fact that we can
work that information out. However, I am saying that it is
administratively simpler to have four basic bands than to test every
flight, and I hope that Opposition Members will accept that. It would
be a different approach to base the system on actual miles travelled,
and it would make the administration much more complex. It would be
possible to base the system on actual miles travelled if that was the
policy decision that was taken, but it certainly would not be
simple.
On the
definition of “west
of”—
Mr.
Hands: Will the Minister give
way?
Angela
Eagle: I was going to move on to the definition of
“west of the Urals”. It is based on an existing split
that is used by the industry and it follows advice from the industry on
the best way to categorise a country that is, geographically speaking,
as long and thin as Russia is, if I can put it that way.
The draft
legislation that we published before publication of the Finance Bill
contained that split. It was announced in the pre-Budget report and it
was published prior to the Budget statement. The industry is content
with it, and there has been no adverse reaction to it. The system is
one that the industry itself uses at the moment.
[Interruption.] Well, there has been plenty of
time for a worry about the definition of “west of the
Urals” in this context to have surfaced. It has not. Everybody
understands what it means, even if it might be a bit difficult to look
at geographically. Obviously, the hon. Member for Hammersmith and
Fulham has a particular interest in eastern European Russian states and
appears to have visited quite a few of them. I understand that his
geographical assessment of the Urals is accurate, but in this context
“west of the Urals” has a meaning that is broadly
understood by the aviation industry and it has not raised any practical
points that cause us to
worry. 11.45
am
Mr.
Hands: The Minister is being very generous in giving way.
My question is not so much about the Urals here. My question is why
split Russia but not Canada or the US? Russia covers 11 time zones,
Canada six and the US seven. Surely it would be possible to do some
kind of split in those two countries, given that a flight from London
to Honolulu is more than twice the distance of a flight from London to
Boston.
Angela
Eagle: Well, clearly the US is a slightly different issue
as its main land mass is much shorter than Russia’s. If one
includes Honolulu, it gets slightly longer. When we were sorting out
the bands the view was taken that the anomalies, although obvious, did
not justify a split
in the country down the middle in the same way as we have done for the
Russian Federation. If one did it on a line between Boston and Honolulu
the split would be somewhere in the middle of the Ocean. It is not a
land mass in quite the same way if one looks at some of the states
involved. I admit that it is rough and ready. There are anomalies.
Hawaii is a rather obvious example, but it happens to be a state of the
US. If it were not a state of the US it clearly would not be in its
current band in this
system. The
hon. Gentleman also asked whether there is a map that demonstrates the
banding system on a global basis. There is and I am quite happy to give
him a copy. He mentioned Caribbean communities. We are aware of their
circumstances and we are listening to their representations. Clearly,
it mainly involves the anomaly of Hawaii. One can either shift the
bands around and have large numbers of bands to incorporate a whole
range of issues, such as countries that are close to the edge of bands
or countries that are far away, or one can say, “This is the
system and we have to live with it and the way in which it
works.” The
hon. Gentleman also mentioned the issue of transfer passengers and said
he was aware of some kind of action in the courts about APD applying to
them. APD does not apply to transfer passengers, and we are not aware
of any activity in the courts relating to that, coming from America or
elsewhere. If he has some information to impart that we are not aware
of and wants to have a discussion with me outside the Committee, I will
be happy to discuss it, but I admit that I was a puzzled by his comment
on that.
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