Finance Debate - Air Passenger Duty
Brooks Newmark questions the reasons behind the date of implementation of the rise in air passenger duty.
Mr. Brooks Newmark (Braintree) (Con): Thank you for calling me to speak, Mrs. Heal, and I appreciate the ongoing guidance that I have received from you. I have four brief points to make on amendment No. 3 and the deferral of the air passenger duty increase. I use the term "increase" advisedly because, in respect of economy fares, the Chancellor has merely undone his own handiwork.
First, I want to make it clear that air passenger duty has nothing whatever to do with forestalling. I do not want to get too bogged down in procedural intricacies and precedents, but the precedent laid down by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) when he originally introduced air passenger duty was to give the industry several months in which to adapt to the duty and to any subsequent rises. As I understand it, however-perhaps my hon. Friend the Member for Christchurch (Mr. Chope) will correct me if I am wrong-amendment No. 3 seeks partly to preserve that precedent which, until the Chancellor scrapped it, helped to prevent a good deal of unnecessary confusion to airlines, tour operators and passengers alike.
My second point is that air passenger duty is not at risk of forestalling precisely because it does not really help to effect behavioural change. APD was introduced on a clear pretext: to raise revenue from an under-taxed industry. The reason for the curious timing of the APD increase that appeared in the pre-Budget report was equally clear: it was to raise £100 million of additional revenue. That was certainly the view of Robert Chote of the Institute for Fiscal Studies when he gave evidence to the Treasury Committee. He said:
"The fact that the Chancellor is in a tight position I think is clear...from the fact that he did not offset the rise in green taxation with a cut in other taxation, as he might have found appealing given the political debate".
Martin Weale, also giving evidence, told me personally that APD
"is very much at the level where it is just an additional tax rather than really going at changing behaviour."
Likewise, the Institute of Chartered Accountants was of the opinion that APD did not demonstrably change behaviour.
It took another three and a half months for the Treasury to concoct an explanation. When Mark Neale from the Treasury gave evidence on the Budget, he suddenly told me that
"the APD change came in quickly because there were pressing environmental reasons for bringing that change in quickly."
I will not try to guess what those pressing environmental reasons were, but it remains my opinion that there were pressing economic reasons to grab the £100 million on offer from seven extra weeks of increased yield. What we need from the Chancellor now and in the future is a much clearer differentiation between taxation to change behaviour and taxation simply to raise revenue.
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My third point concerns the anomaly that tour operators have faced regarding their ability to pass on the cost of increases to their customers, to which the hon. Member for Falmouth and Camborne (Julia Goldsworthy) referred earlier. I know that the matter is, embarrassingly, sub judice, and that the Financial Secretary gave some reassurance in February that he would have the Department of Trade and Industry consider reviewing the guidelines.
Mr. Chope: Has my hon. Friend seen that a consultation paper has been published today in relation to reviewing the guidelines? Having looked at that consultation paper, however, any expectations that he had that the problem would be solved will be dashed.
Mr. Newmark: My hon. Friend beats me to my peroration, which, sadly, I will now have to leave aside.
I want to address, however, the damage that has been done to the reputation of environmental taxation by this debacle. The Treasury claimed that APD would save 1.1 million tonnes of CO2 annually, but it is left to the Environmental Audit Committee to remind us that that is a cut in projected growth, not a cut in absolute terms.
John Healey: The Treasury has at no stage said that the APD change will lead to a saving of 1.1 million tonnes of carbon each year. Its direct impact will be to save 0.3 million tonnes of carbon a year, as I and the Treasury have consistently made clear. Given the savings on other greenhouse gas-causing emissions, which are not CO2, its overall impact will be to save about 750,000 tonnes of carbon a year by 2010. I hope that that helps that hon. Gentleman, and does not damage his case too much.
Mr. Newmark: No, it does not damage the case. I appreciate the clarification, but it does not detract from my point that APD is effectively a blunt instrument to deal with the amount of CO2 being chucked out into the air.
Mr. John Gummer (Suffolk, Coastal) (Con): Does my hon. Friend agree that were the proposal a green tax, no more would be paid for a full aeroplane than for an empty aeroplane? It is a simple fact-
The First Deputy Chairman: Order. I am afraid that that intervention is not relevant to the debate.
Mr. Newmark: I appreciate that guidance, Mrs. Heal, but I do concur with my right hon. Friend.
There is a legal challenge against APD on the grounds that it is not a proper environmental tax, with the result that the entire industry is feeling less inclined to be co-operative with the Government. There is a growing sense among the general public that APD-
The First Deputy Chairman: Order. May I remind the hon. Gentleman of the amendment under discussion, which is not about environmental taxation? His remarks might be more suited to the clause stand part debate.
Mr. Newmark: Again, I appreciate your guidance, Mrs. Heal, but my remarks were a precursor to my final point.
Lastly, there seems to be no intention that APD revenue, especially the extra £100 million stealthily-or perhaps not so stealthily-taken from airline passengers should be hypothecated to investment in the environment, such as building more flood defences.
Mr. Edward Leigh (Gainsborough) (Con): To be entirely in order, the debate should be about the implementation date. The Minister has made an intervention, however, giving an estimate of the amount of carbon emissions that would be saved. Will my hon. Friend tell us what proportion of worldwide carbon emissions from aviation will be saved by varying the implementation date? I suspect that it would be infinitesimal.
The First Deputy Chairman: Order. May I point out to the hon. Gentleman that the decision as to what is in order is entirely a matter for the Chair?
Mr. Newmark: Thank you, Mrs. Heal.
As I was saying, the £100 million retrospective tax would be most beneficial if it could be hypothecated to building such things as more flood defences, which would be most welcome in my constituency, especially in the north end at Three Fields, in the south near the village of Coggeshall, and particularly in my own village of Bradwell.
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OTHER CONTRIBUTIONS TO THE SAME DEBATE
Mr. Newmark: Further to what my right hon. Friend the Member for Wokingham (Mr. Redwood) has said, the Minister has just said that the money is to be used to deal with the damage created by CO2. Therefore, I would like to ask him a specific question: how much of the £100 million that is being raised will be used to deal with the damage that CO2 has created?
John Healey: The Chancellor was clear in his pre-Budget statement and I have made the position clear since then in different debates and in Select Committee inquiries. The rise in the air passenger duty will contribute to the increase in spending that we are looking to be able to deploy to some of our priorities, including, specifically, transport and environmental protection. This may interest the hon. Gentleman. He mentions £100 million, but in 2005-06, as the public expenditure statistical analysis confirms, we spent as a Government £8.4 billion on environmental protection. He may have seen yesterday that we published the new PESA outturn estimates. For 2006-07, the spending on environmental protection was £9.7 billion.