Clause 17
Finance Bill
10:45 am
Greg Hands (Shadow Minister, Treasury; Hammersmith and Fulham, Conservative)
I thank my hon. Friend for that intervention. I will respond to the two specific points that he made. By quoting easyJet, I was not necessarily endorsing its point of view. I was actually answering the point that the Government made earlier; there were a number of interventions and perhaps we lost the thread of the argument a little bit. However, the Government said that their justification for continuing with the status quo on APD was to provide additional support to businesses. I was merely pointing out that a lot of these businesses obviously thought that the opposite was the case.
My hon. Friend is absolutely right, however, on some of the perverse incentives. We have already talked about one of them, which is the possibility of passengers buying two separate tickets to reach a long-haul destination. There is also nothing in this proposal that ends the perverse incentive for airlines to fly empty airliners around. We had thought, and in fact the Government told us, that that was one of the reasons why we wanted to move to a plane tax in the first place. So he is quite right about the perverse incentives that exist.
I will just finish on the airlines with a brief word from the travel agents, who are also important in the current economic environment. The Association of British Travel Agents has also raised concerns about the impact that APD will have on regional passengers who are forced to fly via London and have to pay the tax twice when they travel with two different airlines. Again, that is another perverse incentive and it is significant for the viability of some of our regional airports. If, as the Government say, the industry welcomes their proposals, the industry has done an excellent job in suppressing its enthusiasm for the huge tax rises.
The changes will also have a negative impact on Britain’s competitiveness as a tourist destination if passengers are forced to pay APD on their return journey. I would appreciate clarification on whether APD can be levied on transfer passengers or not. The Royal Aeronautical Society tells me—I have not had a chance to obtain independent verification of this, but I have no reason to disbelieve it—that some US interests are taking their Government to court for charging APD on some transfers, even though the passengers and their luggage stay air side at all times. I believe that other countries are also questioning such an approach. Will the Minister inform us of the latest developments in those important court cases, and what is the Government’s current position on transfer passengers?
The reaction from environmental groups has been mixed. Many welcomed the headline rises, but, like us, decried the abandoned attempt to find a per-plane methodology. Friends of the Earth responded:
“The rises in APD are welcome, but should be seen in the context of the abandoning of per-plane aviation duty.”
Greenpeace stated:
“Plans to tax flights instead of people would have encouraged the industry to fill their planes instead of flying half-empty airliners around the world. Once again the aviation industry has been given a free pass at a time when its contribution to climate change is rising.”
Furthermore, the National Society for Clean Air noted:
“Air Passenger Duty is set to be doubled. However, in light of the significant expansion in UK aviation announced in 2003’s Aviation White Paper these changes are unlikely to have significant impacts on overall emissions from aircraft.”
Charter airlines are another group affected by the measure. The APD tax structure pays no heed to a class called premium economy; it simply lumps it together with business and first class, which is hard to justify to those who simply need a small increase in leg room. We have to understand how premium economy class works on charter flights. Essentially, as I understand it, there is no difference in the seat; premium economy class merely adds a small amount of leg room. The class is particularly popular with families with young children who like to move around on planes, especially on seven-hour charter flights to somewhere like Florida or the Caribbean. It is very difficult to keep children under control or entertained without a little bit of leg room that allows them to move around. Premium economy class seats are therefore very popular with families and, as I understand it, do not cost an awful lot more.
However, those travelling in premium economy class will now have to pay double the APD of the regular economy class passenger. That will be especially true for long-haul charter flights to Florida, for example, when a family of four travels in premium economy class on a charter plane. I am not talking about business passengers flying hurriedly from London to a meeting in New York; I am talking about families on quite reasonable charter package holidays to somewhere like Florida or the Caribbean.