General Matters
5:35 pm
Stewart Jackson (Peterborough, Conservative)
I am glad to have this opportunity to discuss a vexed issue of tax policy, namely air passenger duty, which has been described succinctly by the TaxPayers Alliance as an unwelcome burden on family holidays, a cost to business and redundant now that the European Union’s emissions trading system is being applied to aviation.
I declare an interest at the outset as the constituency Member of Parliament for Peterborough, which houses the international headquarters of Thomas Cook, so tourism and leisure issues are important to me. This is also a wider issue relating to business competitiveness, the impact on family budgets and household incomes, and the ongoing debate about sustainability, the environment and climate change.
The fair tax on flying campaign has been one of the most successful campaigns in recent parliamentary history. More than 130,000 individuals have written to their MPs in support of early-day motion 174, which calls on
the Government to undertake a comprehensive study of the full economic effects of aviation tax in the United Kingdom, including its impact on employment.
APD was introduced in 1994 at an original rate of £5 per person for short-haul flights and £10 for flights elsewhere. In 2008, the then Government announced that the per-plane duty proposal that they had suggested the previous year would not go ahead and that, instead, APD rates and geographical bands would be restructured. Following the general election, the coalition Government have explored plans to switch to a per-plane duty, as outlined in both the coalition agreement and the 2010 emergency Budget. The overall APD tax take increased significantly from
A typical family of four pays an average of more than £115 in APD each year. A family of four flying in economy class to Florida from the UK would pay £262 in APD, whereas in France the equivalent tax is £38. Compared with seven years ago, APD rates have risen 160% on short-haul flights and up to 360% on long-haul flights, with inflation over that period being about 18%.
The tax has a significant and deleterious effect on the economy. The British Chambers of Commerce found that APD could cost the economy a staggering £10 billion in lost growth and up to 250,000 fewer jobs over the next 20 years. Many European countries, including Belgium, Holland and Denmark, have abandoned their aviation taxes because of the negative effects on their economies. In the longer term, analysis undertaken by Oxera in 2009 shows that the UK economy will forgo £750 million in wealth and 18,000 jobs because of the rises in APD since November 2010, with about half of the extra revenue raised offset by tax revenue losses in the wider economy.
Although it has to be conceded that the research on APD is piecemeal, it does point to significant damage to the economy in the long run. The Government’s figures project 7,000 fewer flights in 2011-12 as a result of the APD increase in 2010. A 2011 report by York Aviation estimated that APD would result in Scotland losing 1.2 million passengers, 148,000 tourists and £77 million in revenue by 2014.
Aviation is vital to the UK economy. It contributes £53.3 billion or 3.8% of GDP. It supports 963,000 UK jobs—352,000 directly in the sector and 344,000 indirectly through the supply chain. A massive amount of economic activity is dependent on the success of tourism, leisure and aviation.