Mr.
Hands: That point was raised with me by the Royal
Aeronautical Society, which I will refer to the Minister. That is
probably the easiest way to resolve the
issue.
Angela
Eagle: I look forward with interest to any correspondence
I might get from the Royal Aeronautical Society as a result of that
exchange.
We
have discussed the shift from per-plane taxes back to APD. During that
process we listened carefully to the responses to our announcements in
PBR 2008. We were particularly struck by the difficulties of developing
a per-plane tax, not least because of its effect on freight and the
great practical difficulties in trying to incorporate freight into the
system. Although I am not allowed to look at the papers of previous
Administrations, I suspect that that was why freight was not included
in earlier stages when the tax was originally developed. It is
difficult to include freight.
The hon.
Member for Poole made an interesting contribution, particularly with
regard to per-plane taxes and the difficulties they would have caused
for the airports near or in his constituency. We were particularly
worried about the regional impact when we had a closer look at that
following representations from the freight industry and airlines,
particularly regional airlines, and not only in the south of the
country, but in other areas where we were worried about the potential
effect on employment. It is difficult to develop a policy for an
industry that is relatively untaxed, as we know, because of the Chicago
convention and the way in which the
airline industry has developed, and actually it is very mobile by
definition. Therefore, there always has to be a balance between trying
to have a tax system that is legal—because of the issues
relating to the Chicago convention, to which the hon. Member for
Hammersmith and Fulham was absolutely right to refer—and trying
to have one that does not cause perverse incentives or have the
unintended effect of driving business
offshore. Mr.
Syms: Clearly, the best environmental approach is to
develop many of the regional airports, and of course freight is
important, as I mentioned earlier. If someone who lives in Bristol uses
Bristol airport and someone who lives in Bournemouth uses Bournemouth
airport, they will not have to drive on the M25 and clog up the roads
at Heathrow or Gatwick, and that is a rather good thing. It still is
the case that more pollution is generated by road traffic around
Heathrow than by the aircraft. One has to have a balanced approach to
that, and there is actually a good argument for developing regional
airports sensibly, because they have great environmental
benefits.
Angela
Eagle: Obviously, I agree that we should definitely look
at the development of regional airports as a powerful economic driver
in the regions, not only because of local employment and other issues,
but because we need to remember that air travel is currently relatively
untaxed. That relates not only to emissions, but to noise pollution and
other kinds of disruption that merit tax. We must try to get the
balance right. The hon. Member for Poole has used the right word:
balance, which it is important to consider when developing tax policy
in those areas.
Obviously,
the European Commission’s decision finally to include aviation
in the EU emissions trading scheme from 2012 was welcome. That deals,
partially at least, with some of the issues of pollution on a
supranational basis, as the only way those issues can be resolved
sensibly is by international agreement that allows tax to be levied
appropriately without causing some of the perverse incentives that all
Members have mentioned in their
contributions.
Mr.
Syms: Clearly, we have APD, which generates a lot of
money. Then there is the emissions trading system across Europe, of
which there will be a cost. There is a danger that our airlines,
vis-Ã -vis the US and some of the other non-European airlines,
may be disadvantaged. Is that something that the Treasury is looking at
and modelling? One cannot pretend that we are just going to carry on as
we were when there is a new pan-European trading tax
system.
Angela
Eagle: Yes, and we will watch that as it develops. It does
not come in until 2012. Some 15 per cent. of auction rights, the rest
of the trading permits, will be given away at least up until 2020. So
we do not have 100 per cent. auctioning, which will limit
the amount of money that can be raised by having a limit on emissions
at EU level, but it is progress. I anticipate that further progress
will be made internationally as well with other, similar trading
systems. It is impossible to know, from here in 2009, exactly and
precisely how that will develop, but it is certainly an issue that HM
Treasury keeps a very close eye on. It will obviously have an effect on
future taxation policy and has to be taken into account.
The hon.
Member for Taunton, apart from making me feel rather old—I am
not going to tell anyone when I was born, much less talk about the sort
of mathematics I studied for my O-level and whether it involved great
circles or any other such
calculations—
Mr.
Field: I rise, being gallant, to point out that, like the
Minister, when I started school we did have 240 pence in the
pound.
Angela
Eagle: The hon. Gentleman has obviously looked up when I
was born. I remember decimalisation—as I am sure the hon. Member
for Taunton does not. I suspect that that is his privilege and my
burden, rather than the other way
round. It
is clearly true that taxes have to come from somewhere. I thank him for
making that observation; it is very wise. As Exchequer Secretary, it is
one that I wish larger numbers of people would admit to when they come
to see me. It is clear that we should try to tax bads rather than
goods, but we should also remember that part of the use of APD is
clearly in raising revenue, as well as attaching an environmental cost
to
flight.
Mr.
Hands: I am still struggling. I will go back a little bit,
as I thought the hon. Lady was going to explore that in more detail. I
am struggling with her rejections of a move to a per-plane basis. I
think her conclusion was that it would be too difficult with freight.
Nevertheless, the point I raised was that we can still introduce a
per-plane basis for commercial passenger aircraft. Freight does not
necessarily need to be touched. Has she has explored that?
On another
point, the hon. Lady seems to be saying that the EU ETS, and pulling
aviation into it, has somehow prevented a need to look at a per-plane
basis. I am not sure whether I understood that correctly. Will she also
tell us something about the relevance of the ETS to the consideration
of whether we go to a per-plane or per-passenger
basis?
Angela
Eagle: The relevance of the EU ETS is as a background to
that. Aviation, being international, has been untaxed, not only because
of the Chicago convention, but because it is quite difficult to levy a
tax nationally on something that is international and can move very
quickly. Therefore, the answer is to have a series of international
agreements to levy taxation on, for example, fuel and a range of
things, ideally going into the future. The EU ETS, and
aviation’s inclusion in it, is the first example of a
supranational structure that will enable us to put at least some of the
cost and the environmental cost of their industry’s carbon
emissions on to aviation operators. That is its relevance to our debate
today.
Mr.
Hands: My first point was that, if there is a problem with
freight, which the hon. Lady has talked about, it does not prevent
introducing a per-plane system for commercial passenger aircraft on a
stand-alone
basis. 12
noon
Angela
Eagle: Given the economic situation that developed between
PBR 2008 and 2009, the timing was not correct for the disruption that
would be caused by
moving to a completely new tax in that area. We were worried about some
of the issues with hubbing, too. The hon. Gentleman has talked about
how preserving an air passenger duty would cause some difficulties with
hubbing, particularly on long-haul flights, but a per-plane tax would
make the situation more difficult. Overall, it is best to stick with
the existing system and to implement the reforms in clause
17.
Mr.
Syms: To answer my hon. Friend’s intervention, a
lot of freight is carried in the hold in passenger aircraft—once
the bags have been balanced up, the freight is put in—so if
aircraft that only carry freight were to be excluded while aircraft
that carry passengers were to be taxed, some freight would be taxed and
some freight would not. There would therefore be a perverse incentive
between, on the one hand, British Airways carrying medical equipment
and other bits and pieces across the Atlantic and, on the other hand, a
National Express-type aircraft that is dedicated purely to freight or
purely to parcels. It is therefore difficult to
differentiate.
Angela
Eagle: The hon. Gentleman is correct; passenger planes
carry freight, so if we excluded freight-only aircraft, they would have
a tax advantage over other forms of freight-carrying. Such
complications and practical difficulties were certainly highlighted by
the consultation. It is possible either to dismiss that
consultation’s findings and plough on regardless, or look at
them and think about the changed economic circumstances, and we have
decided that, in the current circumstances, to cause disruption by
moving to a completely new basis for the tax might not be the right
thing to
do. I
appreciate that the hon. Member for Hammersmith and Fulham might have
decided differently, but in politics it is never easy to make an
announcement and then say that now is perhaps not the best time to
implement it, because one gets jibes about 180° turns and
U-turns. The consultation process was genuine and we modelled a range
of other potential ways of levying the per-plane tax. We looked at some
of the complications, not least that which the hon. Member for Poole
has mentioned on exempting freight; it is not easy to exempt freight in
the current circumstances. Our decision is reflected in clause 17 and
schedule
5. Question
put, That the clause stand part of the
Bill. The
Committee divided: Ayes 16, Noes
8.
Division
No.
2] Question
accordingly agreed to.
Clause 17
ordered to stand part of the
Bill. Schedule
5 agreed
to.
Clause
18Standard
rate of landfill
tax Question
proposed, That the clause stand part of the
Bill.
Mr.
Hands: The clause relates to landfill tax. We do not
propose to divide on it, but we need to examine a little the
substantial increases in landfill tax. On 1 April 2009 the rate
increased from £40 to £48 a tonne. I understand that that
will be followed by four further £8 increases, which
is a doubling of landfill tax in five years. Looking broadly at the
change in landfill tax, there are clearly benefits and
costs. The
benefit of such a steep doubling of the tax will be that more recycling
treatments will be economically viable for many more types of waste,
not merely municipal. The landfill tax was introduced on 1 October
1996—that is what threw me off earlier into wrongly saying that
air passenger duty was introduced in 1996—and since 1997, the
proportion of waste sent to landfill has declined by 32 per cent.,
according to the Government’s consultation document issued at
the same time as this year’s Budget. That decline has not all
been due to landfill tax, but at least a significant part of the
progress in reducing the amount of waste that we send to landfill has
been partly driven by the tax
treatment. Turning
to costs, however, first there is potentially a big increase in costs
for some of our engineering and manufacturing companies at a time when
they are generally struggling, and we might drive away some of those
businesses when we need to be boosting British manufacturing. The other
drawback is a likely increase in fly-tipping. We need to ask the
Minister whether any of the new revenues from the doubling of landfill
tax will be given to the local authorities that will have to deal with
the consequences of the increase in the tax and the likely increase in
fly-tipping. Those same local authorities will themselves have to pay a
greatly increased rate of landfill duty. The question must be whether
the net effect will simply be larger council tax bills, on top of the
already more than doubling of council tax under this
Government. There
would be an increased incentive for the development of alternative
forms of disposal, but alternatives take time to come on stream and are
not cheap. They remain welcome, however, and we recognise that a robust
and predictable landfill tax regime is a prerequisite for the viability
and coming on stream in the coming years of some of those alternative
waste treatment techniques. Some of the developments appear to hold a
great deal of promise, particularly those that would produce usable
biomass from general waste. However, it would help if the Minister
indicated the Government’s view of the pace required to keep
such developments in the pipeline while avoiding placing too great a
strain on those disposing of waste. In other words, is the 20 per cent.
or £8 per annum increase for the next five years a reasonable
and sustainable rate for the waste disposal
industry?
The
consultation document that the Government produced at the same time as
the Budget bears the title, “Modernising Landfill Tax
Legislation” but is mostly about countering the effects of the
Waste Recycling Group court case last year, in which the Court of
Appeal ruled against Her Majesty’s Revenue and Customs and
placed a significant amount of waste outside the scope of the tax. The
Government admit in the impact assessment that the present legislative
approach “will
make landfill tax legislation as a whole more complex and less
coherent.” Broadly
speaking, it seems sensible to restore the scope of landfill tax to
what was originally intended, while simplifying the structure. We need
to examine the proposals further before reaching a judgment on the
particular remedy suggested. It will provide welcome context if the
Minister explains how much revenue she believes has been lost since the
ruling in 2008 and whether landfill operators are altering their
procedures to take advantage of the loopholes
opened. Some
of the Government’s suggestions may dramatically increase the
tax on waste that currently qualifies for the lower rate. The
document’s lead option for that category would restrict the
lower rate to waste that is classified as “inert” under
the EU landfill directive. It is not clear whether the Government
regard that change as a requirement of the directive or regard
harmonisation with the criteria in the directive and other parts of the
European framework as desirable in itself. The Government’s
references to falling behind recent developments in
“thinking” rather suggest the latter—that it is in
keeping with the framework rather than a positive requirement of the
directive.
It is not
clear what the precise implications of the change will be; perhaps the
Minister could set out the Treasury’s view. Up to £160
million of additional revenue is identified in the impact assessment,
but the fact that the consultation explicitly asks the industry the
questions:
“Are
you aware of any other wastes which would cease to be lower rated under
the
proposal?” and “Are
you aware of any wastes which would be brought into the lower rate of
tax under the
proposal?” suggests
that the Treasury and HMRC are not completely certain of the effects of
their lead option. It would be unfortunate if a consultation that began
with the fallout from one court case ended up triggering many others.
The consultation even asks
for “information
on the extent to which the wastes listed in paragraph 3.8
are still produced in the
UK”, which
surely ought to be known already, since the reason given for listing
them is that they are currently taxed at the lower rate. It is rather
odd if the Government are taxing wastes that they are not even sure
still exist. Perhaps I have interpreted their question uncharitably and
it means “produced as a product” not, as it says,
“produced as a waste”. Some reassurance on that and the
other points I have raised would be
helpful.
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