Part 2 — Devolution of Wales long haul rates of duty

Oral Answers to Questions — Prime Minister – in the House of Commons at 6:13 pm on 9th April 2014.

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2 Chapter 4 of Part 1 of FA 1994 (air passenger duty) is amended as follows.

3 (1) Section 30 (rates of duty) is amended as follows.

(2) After subsection (1) insert—

“(1B) Subsection (1) does not apply to the carriage of a chargeable passenger to which section 30B below (Wales long haul rates of duty) applies.”.

(3) Omit subsections (4DA) to (4DC) (as inserted by paragraph 1 above).

(4) The amendments made by this paragraph have effect in relation to the carriage of passengers beginning on or after the relevant day as defined in section 30B of FA 1994 (as inserted by paragraph 4 below).

4 After section 30A insert—30B Wales long haul rates of duty

“(1) This section applies to the carriage of a chargeable passenger if—

(a) the carriage begins on or after the relevant day;

(b) the only flight, or the first flight, of the passenger’s journey begins at a place in Wales;

(c) the passenger’s journey does not end at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A; and

(d) if the passenger’s journey has more than one flight, the first flight is not followed by a connected flight beginning at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A.

(2) Air passenger duty is chargeable on the carriage of the chargeable passenger at the rate determined as follows.

(3) If the passenger’s journey ends at a place in a territory specified in Part 2 of Schedule 5A—

(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph; and

(b) in any other case, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.

(4) If the passenger’s journey ends at a place in a territory specified in Part 3 of Schedule 5A—

(c) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph; and

(d) in any other case, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.

(5) If the passenger’s journey ends at any other place—

(e) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph; and

(f) in any other case, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.

(6) The rate of £0 may be set for the purposes of any paragraph.

(7) The same rate may be set for the purposes of two or more paragraphs.

(8) Subsections (5) to (7) and (10) to (12) of section 30 apply for the purposes of this section as they apply for the purposes of that section.

(9) “The relevant day” means the day appointed as such by an order.

(10) Section 42(4) and (5) do not apply to an order under subsection (9).

(11) A Bill containing provision authorised by this section may not be passed by the National Assembly for Wales except in pursuance of a recommendation which—

(g) is made by the Minister of Finance; and

(h) is signified to the Assembly by the Minister or on the Minister’s behalf.

(12) “Passed”, in relation to a Bill, means passed at the final stage (at which the Bill can be passed or rejected but not amended).

(13) Duty paid to the Commissioners in respect of the carriage of chargeable passengers to which this section applies must be paid by the Commissioners into the Consolidated Fund of Wales.”.

5 (1) Section 33 (registration of aircraft operators) is amended as follows.

(2) After subsection (2A) insert—

“(2B) If the Commissioners decide to keep a register under section 33B below, an operator of a chargeable aircraft does not become liable to be registered under this section just because the aircraft is used for the carriage of chargeable passengers to which section 30B above applies.”.

(3) In subsection (3)(b) after “applies”, insert “or, if the Commissioners have decided to keep a register under section 33B below, that no chargeable aircraft which he operates will be used for the carriage of chargeable passengers apart from the carriage of chargeable passengers to which section 30B above applies.

(4) In subsection (7) after “section 33A”, insert “or section 33B below”.

6 After section 33A insert—

33B (1) The Commissioners may under this section keep a register of aircraft operators.

(2) If the Commissioners decided to keep a register under this section, the operator of a chargeable aircraft becomes liable to be registered under this section if the aircraft is used for the carriage of chargeable passengers to which section 30B above applies.

(3) A person who has become liable to be registered under this section ceases to be so liable if the Commissioners are satisfied at any time—

(a) that he no longer operates any chargeable aircraft; or

(b) that no chargeable aircraft which he operates will be used for the carriage of chargeable passengers to which section 30B above applies.

(4) A person who is not registered under this section and has not given notice under this subsection shall, if he becomes liable to be registered under this section at any time, give written notice of that fact to the Commissioners not later than the end of the prescribed period beginning with that time.

(5) Notice under subsection (4) above shall be in such form, be given in such manner and contain such information as the Commissioners may direct.”.

7 In section 34 (fiscal representatives) in subsection (5)—

(a) in paragraph (a) after “33A”, insert “or 33B”.

8 After section 41B insert—41C Wales long haul rates of duty: disclosure of information

“(1) An officer of Revenue and Customs may disclose to the Secretary of State, the Treasury or the Department of Finance in Wales any information for purposes connected with the setting of rates under section 30B above, including (in particular) to enable the setting of rates under that section to be taken into account for the purposes of section 118 of the Government of Wales Act 2006 (payments by Secretary of State into Welsh Consolidated Fund).

(2) Information disclosed under subsection (1) above may not be further disclosed without the consent of the Commissioners (which may be general or specific).

(3) In section 19 of the Commissioners for Revenue and Customs Act 2005 (wrongful disclosure) references to section 18(1) of that Act are to be read as including a reference to subsection (2) above.”.

9 In section 44 of CRCA 2005 (payment into Consolidated Fund) after subsection (2)(cb) insert—

(cc) sums required by section 30A(15) of the Finance Act 1994 (air passenger duty: Wales long haul rates of duty) to be paid into the Consolidated Fund of Wales,”.

10 In column 2 of the Table in paragraph 1 of Schedule 41 to FA 2008 (penalties for failure to notify), in the entry relating to air passenger duty, after “33A(4)”, insert “or 33B(4)”.11 The amendments made by this Part of this Schedule have effect in relation to the carriage of passengers beginning on or after 1 April 2014.12 The rate of duty in force under section (30B) shall not be greater than the rate which would be in force if the section had not been enacted.’.

Clauses 72 to 74 stand part.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales)

Diolch yn fawr iawn, Mr Bone. It is an honour to serve under the chairmanship of the best slow left-arm bowler in the Westminster cricket team.

It is with pleasure that I rise to support new clause 2 and new schedule 1, and I will be pushing for a vote at the appropriate time. The UK Government commission on devolution in Wales, headed by Paul Silk, published the first phase of its report in November 2012, which concentrated solely on fiscal powers. Some 18 months later we are still waiting for an essential part of the cross-party Silk commission recommendations to come to fruition: the devolution of responsibility for long-haul air passenger duty. The original cross-party report recommended that responsibility for APD be transferred to Wales at the earliest opportunity and that the Finance Bill was the appropriate vehicle for doing that. The commission had the 2013 Finance Bill in mind, following the precedent set during the 2012 Finance Bill when APD was devolved to Northern Ireland.

It therefore comes as no surprise that I am here yet again attempting to transfer APD to Wales, as was agreed by all the parties in the commission. I will seek to divide the House and to hold other parties to what their representatives on the commission said and, perhaps more importantly, what their representatives in the National Assembly say back in Wales. I would of course be ecstatic if by some divine intervention their masters here in London listened to them for once and voted in favour of the policies they advocate—I do not hold my breath in much hope.

I will go on to speak about the discrepancies between what the Unionist parties say in Wales and how they vote here on devolving APD. First, let me inform the House a little about the background to the UK Government commission’s recommendation to devolve APD as part of a comprehensive package of financial powers and about the stage we are at now. In short, the cross-party Silk commission recommended that powers over stamp duty land tax, the aggregates levy, long-haul APD, landfill tax and business rates be devolved in their entirety. It also advocated a sharing arrangement for income tax, with Wales having the ability to vary each individual income tax band and rate.

After having been made to wait for more than a year by the London Government to grace us with a response to the commission which they themselves set up, we find ourselves already having debated the Second Reading of the Wales Bill in this Chamber. We expect it to be confirmed tomorrow morning that the whole House will return to consider the Committee stage of that Bill after the Easter recess. Yet the Wales Bill has some glaring omissions. It seems like a long time ago now when, last autumn, the Prime Minister and Deputy Prime Minister swept into the Senedd building in Cardiff, to flashing camera lights and an adoring paparazzi, in order to announce new financial powers for Wales. Very few questioned what exactly was being proposed. Only later did it emerge that the Westminster Government were prepared to accept the cross-party commission recommendations only in part and that they would be ignoring some. That is despite the fact that they had representation on the commission in the form of a commissioner representing the Conservative party and a commissioner representing the Liberal Democrats.

In essence, the Government have cherry-picked the commission’s recommendations, even though they were agreed on as a comprehensive package of reforms. It is therefore greatly disappointing that the Westminster Government have decided to ignore the will of the people of Wales, who believe that Wales should have greater power over its own affairs, according to successive polls, not least the ones conducted by the commission while it gathered evidence as part of its reports. Those polls represent some of the most detailed research undertaken on attitudes towards devolution since we first had our own devolved legislature in 1999.

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Education), Shadow PC Spokesperson (International Development), Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Health)

Is all that not doubly disappointing given that our representative on the Silk commission was prepared to compromise in order to get a unanimous report? We gave ground and support to the recommendations of the Silk commission, but the Government are cherry-picking.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales)

My hon. Friend makes a very important point and of course he is right. As I will go on to say, the Silk commission was a huge compromise for Plaid Cymru, yet we find ourselves the only party represented here in Westminster, and the only party represented in the National Assembly in Cardiff, trying to preserve the integrity of the Silk commission. That is a vital point which the people of Wales will realise in good time.

The devolution of air passenger duty was an important element of the package recommended by the Silk commission. It was therefore a slap in the face for Wales when it was omitted from the Wales Bill, which is currently progressing through this House. Both my colleagues and I have spoken several times about that Bill so I will not go into it too much further save to say that my party and I have been dismayed by the attempts of both the Government and the Labour party to put narrow party self interest ahead of the Welsh national interest and to lay down road blocks in terms of the Silk commission.

The Government have sought to water down the financial powers recommended by the commission by constraining them through a lockstep.

Photo of Angus MacNeil Angus MacNeil Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Constitutional Reform), Shadow SNP Spokesperson (Scotland) 6:30 pm, 9th April 2014

I note the hon. Gentleman’s points about the Silk commission and about how the principal parties reneged on it. That also happened in Scotland with the Calman commission, which was set up by the Conservatives, Liberals and the friends of Labour, who then reneged on the Calman proposal to devolve ADP to Scotland.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales)

That is an interesting point. I am sure that the people of Scotland are watching these developments intently, as they will be voting in a referendum on independence in September. The issue is, can they trust anything that the no campaign says in advance of that referendum? I am sure that that will become a growing theme as we approach the closing stages. I wish the hon. Gentleman and his colleagues well in the forthcoming months.

As I was saying, the Government have sought to water down the financial powers recommended by the commission by constraining them through a lockstep, essentially making it impossible to vary income tax in Wales. Meanwhile, the Labour party says that it will block any income tax powers via its Government in Cardiff unless the Barnett formula—the way in which Wales is funded—is reformed. That is despite having 13 years to do so while it was in government.

Labour also now supports the lockstep principle, despite the protestations of the First Minister. There is of course the added twist that the bands can only be moved upwards, which is why I have labelled Labour’s policy “lockstep plus”.

Needless to say, the agreement that was the Silk commission’s recommendations fell far short of what Plaid Cymru was advocating as a party, to which my hon. Friend Hywel Williams alluded earlier. We wanted a more comprehensive list of job-creating and economy-boosting powers including VAT, corporation tax, resource taxes and capital gains tax. However, in the interests of compromise, we settled on the final recommendations.

The Silk commission argued that should corporation tax be devolved to Northern Ireland, Wales should not be left behind. I follow with interest the unanimous support in Northern Ireland, among all parties, pressure groups and interest groups, for the devolution of corporation tax—[Interruption.] Exactly, that is a very interesting point: the Unionists in Northern Ireland want corporation tax and a whole range of job-creating powers for their devolved Government, yet we have unionists representing Welsh constituencies trying to block any move towards further powers for our country.

The Silk commission argued that should corporation tax be devolved to Northern Ireland, Wales should not be left behind. The fiscal powers recommended by Paul Silk and his team in the commission’s report are still desperately needed for the sake of the Welsh economy. The ability to vary some taxes and to borrow for investment would enable us in Wales better to deliver job-creating and economy-boosting measures and policies to help turnaround the continuing bad performance of the economy.

It was also interesting to hear the Secretary of State sing the praises of the lockstep income tax provision of the Wales Bill in a TV interview. He said that it could be used to vary rates and would put Wales at a competitive advantage, but that the devolution of long-haul air passenger duty would put Bristol airport at a competitive disadvantage. That incoherence shows that the cherry-picking of the Silk recommendations falls apart unless they are introduced as a comprehensive and whole package.

Long-haul APD was devolved to Northern Ireland in last year’s Finance Bill, and the Silk commission has recommended the devolution of long-haul APD to Wales. It is clear therefore that today’s debate is the appropriate legislative vehicle to move this issue forward. Although I failed to do so last year, I live in hope that I might succeed today, but given that all the Labour MPs have disappeared home—AWOL again when the interests of Wales are under discussion—I am not holding my breath.

Photo of Nigel Dodds Nigel Dodds Shadow Spokesperson (Justice), Shadow Spokesperson (Foreign and Commonwealth Affairs), DUP Westminster Leader

I have a lot of sympathy for what the hon. Gentleman is putting forward. He has mentioned Northern Ireland in relation to corporation tax and APD. Does he recognise though that one big argument in relation to Northern Ireland is the fact that we have a neighbour to our south, another EU member state, which competes directly with Northern Ireland? We also have a land border, and the corporation tax and APD rates down south are much less than they are in Northern Ireland, so there is a unique case in Northern Ireland—but I am not for one minute setting aside the merits of his case

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales)

As usual, the right hon. Gentleman makes a reasoned argument. Northern Ireland has a land border with the Republic, of course, but we would argue that we have a sea border. I normally find myself making the case for equality with Scotland in this place, but in this instance I am calling for equality with Northern Ireland. What is good enough for Northern Ireland is certainly good enough for Wales.

Just over a year ago, the Labour Welsh Government acquired the national airport of Wales, located just outside Cardiff near Barry in the Vale of Glamorgan. The ability to attract long-haul flights to the airport would significantly improve its competitiveness. It has more than 1.5 million people within its catchment area, and long-haul flights could attract people from even further afield given that that is the only airport in Wales or the west of England with a runway large enough to accommodate transatlantic aircraft. The development of the airport could act as a spur to growth in the south Wales economy, bringing in greater foreign direct investment through better business links, which would in turn bring jobs and growth. Quite frankly, I am amazed that the Labour party has not proposed its own amendment to the Finance Bill and that only goes to show that the First Minister has absolutely no influence over his bosses down here in London or, at least, over Labour MPs based in Wales.

In response to the UK Government’s proposals for the Wales Bill last November, the Labour First Minister said that he was “disappointed” that air passenger duty on long-haul flights would not be devolved. I am not surprised, given that his Government had brought the airport under public ownership only a year earlier. In a lecture at the London School of Economics, the First Minister said:

“Air passenger duty is another tax that should, in my view be devolved. While London struggles with where to build additional airport capacity, we in Wales face a very different problem. Our national airport in Cardiff has not enjoyed the growth in passenger numbers and destinations that we need to help drive economic growth. Devolution of air passenger duty would give us a useful tool to incentivise the growth of Cardiff airport and other smaller facilities, such as Anglesey in north Wales. APD has already been devolved to Northern Ireland for long-haul flights; at a minimum, I believe Wales should have parity.”

The First Minister makes my case for me, but where are his MPs? Where are they? It is just a shame that he could not get his MPs to the Committee to vote when he has the opportunity to do what he keeps preaching to the people of Wales in the Western Mail and on the BBC.

MPs representing Welsh constituencies who fail to vote in favour of devolving air passenger duty do not only ignore the economic needs of Wales, the First Minister of Wales and the overwhelming majority of Welsh public opinion.

Photo of Angus MacNeil Angus MacNeil Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Constitutional Reform), Shadow SNP Spokesperson (Scotland)

I am intrigued by the behaviour of Welsh Labour MPs. Does the hon. Gentleman think that Welsh Labour MPs hold their First Minister, Mr Carwyn Jones, in contempt deliberately or accidentally?

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales)

The key point is that if the First Minister cannot persuade his own MPs and those on his own Front Bench in Westminster to propose policies that he is promising to the people of Wales, why should the people of Wales listen to a single word he says to them in the media? It is a test of his credibility and authority and, based on tonight’s and last year’s evidence, I would argue that the First Minister has no credibility or authority whatsoever.

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Education), Shadow PC Spokesperson (International Development), Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Health)

Does my hon. Friend agree that the First Minister has form on this matter? He will recall that we proposed a new clause to the Water Bill to implement the Labour Administration in Cardiff’s policy on borders and the control of water. Of course, the Labour Benches were entirely empty and, as he has mentioned, Labour failed to vote on that matter, too. Labour is entirely bogus.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales)

Once again, I am grateful for that intervention. That is one in a long list of political issues on which the First Minister and his Cabinet members say one thing in Cardiff while Welsh Labour MPs operate completely differently down here. The proof of the pudding will, of course, be the Westminster Labour party manifesto. We will see what influence the First Minister has over that, but the manner in which he has been completely bullied by the shadow Secretary of State, who now supports a lockstep on income tax powers, seems to show that the balance of power is quite firmly here in London.

Photo of Bob Stewart Bob Stewart Conservative, Beckenham

The hon. Gentleman has referred to Cardiff airport. Is there another airport in Wales to which air passenger duty applies?

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales)

Cardiff is the only international airport. We are talking about APD relief on long-haul flights, and it would apply primarily to Cardiff, but I imagine that the Welsh Government would have ambitions to redevelop other airports in Wales—[Interruption.] If they had the ambition, they would want to improve those airports.

As I was saying, public opinion clearly supports the devolution of the tax to Wales. Only yesterday, the Western Mail published the results of a survey that showed that 78% of respondents supported the devolution of APD. On this, as with so many other issues, the powers that be in Westminster are at odds with what the people of Wales demand. In response to that poll, the Welsh Labour Government said:

“We will continue to put forward the strong case for it”—

APD—

“to be devolved in the hope the UK Government will eventually listen to us and the overwhelming majority of the Welsh public who support this move, as reflected in this poll”.

A day after the poll, we have an opportunity in the Finance Bill to achieve that objective, but where is the Labour party?

I am glad that, since Cardiff airport has been brought into public ownership, new management has driven up passenger numbers by 9%. That is a crucial point—the national airport of Wales is publicly owned. I agree with that, as the airport is an essential part of Welsh national infrastructure, but Labour MPs from Wales are not here to ensure that something that is publicly owned by the people of Wales has the best chance of succeeding in the long term.

The devolution of APD could help to ensure the long-term future of the airport and draw passengers away from congested airports in the south-east of England—something I am sure many MPs and their constituents in and around the south-east of England would welcome. I therefore look forward, perhaps somewhat over-excitedly, to some of those MPs joining us in the Aye Lobby. I am similarly amazed that the Secretary of State for Wales is not pushing for the devolution of APD at the highest level, as it would provide us with the ability to develop the Welsh economy, which should be one of his core objectives.

Alun Cairns is not in his usual place, which is slightly strange, considering that the airport is in his constituency. The livelihood of many of his constituents depends on the vitality of the airport, as well as the aircraft engineering industry that has grown around it, and they will be dismayed to learn that their MP does not support measures that could give the airport a competitive advantage. I should like to make reference in passing to the difficulties that engineering companies operating from the St Athan airbase, which is close to the international airport, face as a result of the management of that airfield by the Ministry of Defence.

The new clause effectively seeks to give Wales an essential tool to support and provide jobs locally in south Wales and the wider Welsh economy. The financial powers recommended by the Commission on Devolution in Wales are needed as soon as possible as a spur to jobs and growth in Wales. The Westminster Government, in the Wales Bill, have cherry-picked the recommendations and omitted the devolution of APD as well as other proposals. The powers included in the Bill may not be implemented until well into the second half of the decade, provided that no more roadblocks are put in place by other parties. Every month that passes without the devolution of those powers, the Welsh economy languishes even longer at the bottom of the economic league table of the nations and regions of the UK, with job and economic prospects diminished, hopes and dreams dashed, and lives stalled.

Plaid Cymru has made jobs and the economy its absolute priority, which is why we have again tabled an amendment on air passenger duty. We want to create a modern and prosperous Wales and, unlike our political opponents, we have little faith in London government of whatever colour achieving that ambition. That is why we want Wales to have the tools to get on with the job without delay. Diolch yn fawr.

Photo of Henry Smith Henry Smith Conservative, Crawley

It is a pleasure to serve under your chairmanship, Mr Bone. I have the privilege and honour of being the Member of Parliament representing Gatwick airport, so aviation is important to my constituents. Aviation is extremely important to the whole of the United Kingdom, as an island trading nation. Many companies located in my constituency are aviation companies, such as Virgin Atlantic, easyJet and TUI Travel, or international companies that have chosen to base themselves close to a major international airport. Therefore, the issue of taxation on aviation concerns not only Wales, Scotland and England, but my constituency in particular.

I would prefer to see us abolishing air passenger duty altogether. We have one of the highest rates of air passenger duty anywhere in the world. I believe that only Chad charges more. Compared with our European competitors, the amount we charge is considerably more. One of our nearby competitors, the Netherlands, used to charge a form of APD but abolished it because of the cost to its economy. Just over a year ago a PricewaterhouseCoopers report concluded that although air passenger duty brings in about £3 billion to the Exchequer, it is estimated to cost the British economy some £16 billion.

I congratulate the Government on their move to reduce the burden of APD, as announced by my right hon. Friend the Chancellor of the Exchequer in his Budget a few weeks ago. It is a great step on the way to reforming and, I hope, one day abolishing this duty. It is a tax that we, as an island trading nation, can ill afford. Reducing bands C and D into band B for flights to capitals more than 4,000 miles from the UK will help many people who want to take well deserved, well earned long-haul holidays. It will also help the diaspora communities, particularly those travelling to the West Indies, India, Pakistan, Australia and New Zealand. Perhaps most importantly for us as an exporting and trading nation, it will help reduce the cost to business of trading with emerging economies such as China.

Photo of David Rutley David Rutley Conservative, Macclesfield

My hon. Friend is making a characteristically powerful speech. I agree that exporters are vitally important. Lord Livingston recently pointed out that mid-sized businesses in particular in the UK are underperforming, as are small businesses, compared to other European businesses. Does my hon. Friend think the changes to APD will help those small and medium-sized enterprises that want to get out and do more exporting?

Photo of Henry Smith Henry Smith Conservative, Crawley

Indeed. The simplification of the upper bands of APD, as announced in the Budget, will help small and medium-sized companies in particular to export. I pay tribute to UK Trade & Investment under this Government, which has been making a fantastic effort to give SMEs the tools to maximise exports. The simplification of APD is of great help to small and medium-sized companies not only in England, but in Wales and Scotland.

My remarks are brief this evening. I congratulate the Government on a Budget that is good for business and good for individuals, with the income tax threshold being raised, corporation tax being lowered, fuel duty being frozen and the simplification of APD. I put in a bid once again for the abolition of APD in the future, but I recognise that it is only this Government who are tackling our economic problems in a fiscally responsible way. Charging APD on a Great Britain-wide basis is the most appropriate approach; I would not support the regionalisation of APD. Let us focus on getting APD ultimately abolished, but welcome the simplification that is good for individuals and for business in this country as a whole.

Photo of Angus MacNeil Angus MacNeil Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Constitutional Reform), Shadow SNP Spokesperson (Scotland)

I rise to speak in support of new clauses 6 and 7, in my name and the names of my Scottish National party colleagues, and I intend to press new clause 7 to a vote.

Unfortunately, air passenger duty has become yet another of the Westminster Government’s damaging interventions in the Scottish economy. It is a tax whose time has passed, if indeed it was ever fitting for Scotland, and it is at best only a demand management tool for Heathrow, needed because of the dithering and prevarication at Westminster about doing anything there. As London lost its advantage in sea-going transport to Rotterdam for reasons of dithering and prevarication, it seems that it is now losing its advantage at Heathrow as well, as the world No. 1 slot goes to Dubai. If Schiphol sorts out a few minor irritants for travellers, it will do to Heathrow what Rotterdam did to the docks.

Since 2007, APD has increased markedly: by between 160% and a staggering 360%. This tax—this demand management tool for Heathrow—is definitely damaging the Scottish economy. I object to it not because Westminster wants to slap it on to flyers owing to its dithering and prevarication—it should be free to tax and spend as it wants, regardless of the stupidity and myopia of its actions—but because of what it is doing to Scotland. The damage is obvious. PricewaterhouseCoopers says that its reduction would increase tax receipts in other areas, especially VAT, and create jobs. In short, Westminster is costing us jobs, certainly jobs in Scotland, through this tax.

Let us have a quick glance at tables that compare APD in the UK with that in some other countries in Europe. According to the Airport Operators Association, the next highest rate on short-haul economy flights is that of Austria, which charges a hefty €8. This sum increases markedly—by 100%—in the UK, which charges €16. On the medium-haul rate, Germany is the leader with €23, but that is trebled, and more, in the UK, where it is €89. On long-haul, Germany, again, leads with €42, but the UK is well out in front with €113—double to treble the rate in other countries. On the maximum-rate charge, France manages to pick up the crown with €47, but steaming out in front, yet again, is the UK with €226. While this demand management tool might be good enough for Heathrow, it is certainly not good for Scotland. It is a gate-keeper tax. I compare it to a high street shop that demands a fee of shoppers before they come into the shop and then wonders why sales have gone down.

There are many ways to approach this, and I think I am going to have to resort to poetry to advance my case. Given the Government’s intransigence, I wonder whether this may be the last untried key to unlocking their obstinacy. I turn to Mary Howitt’s poem of 1829—nearly 200 years ago. It is salient to this issue, because despite its being written before the Wright brothers and the first manned flight, it does make reference to a form of aviation. It is “The Spider and the Fly”:

“‘Will you walk into my parlour?’ said the Spider to the Fly,

‘’Tis the prettiest little parlour that ever you did spy’”.

Scotland, as we know, is one of the prettiest parlours; it is famed for its scenery. Indeed, the website TripAdvisor has named Lewis and Harris, the main island in the north of my constituency, as Europe’s No. 1 island to visit, and fifth in the world overall. Indeed, I would encourage anybody watching this debate or reading it later in Hansard to go to Google Earth and have a look at the scenery. Whether it is the beaches of Harris at Luskentyre, or Uig of the Lewis chessmen fame on the west side, or over at Gress and Tolsta or Port of Ness in the far north, they will see what TripAdvisor is talking about. Anybody visiting will find fine hotels in Tarbert, Harris or Stornoway, Lewis, and many bed and breakfasts, dotted throughout the islands. Stornoway is probably one of the best-connected towns in all of Scotland, with direct daily flights to Scotland’s principal cities of Aberdeen, Inverness, Glasgow and Edinburgh, and sometimes several times daily. There is more. Other islands to the south include North Uist, Benbecula, South Uist, and of course my own native Barra.

But despite our advantages, with standing stones older than Stonehenge and a visitor record going back to the Greeks in 325 BC, the London Government’s attitude is, “Walk into my parlour if you like. We’re not too bothered if you do or you don’t, but if you do we’ll have our highwayman mask on and we’re out to charge you a king’s ransom”—and this is just to reach Scotland in the first place.

That is a pity, because those who do discover the beauty of Scotland and especially its islands—from Islay to Unst in Shetland—find, rather like the fly at the end of Mary Howitt’s poem, that those who go up the winding stair can ne’er come down again. Similarly, those from overseas who discover Scotland are very likely to return. The damage is huge. It is not quite cataclysmic, but it is big. We are not quite in the territory of Lord George Robertson, who killed the word “cataclysmic” stone dead after he took a flight recently to make a speech in the United States of America. I am sure he is well aware of how much APD he paid.

Moving on to more serious voices on this issue than that of Lord George Robertson, a range of industry figures have lined up against this self-defeating tax. Amanda McMillan, the respected managing director of Glasgow airport, has said:

“Aviation plays a critical role in supporting the growth of the UK economy and this role is even more profound in Scotland given the country’s location on the periphery of Europe. Travelling by air is not a luxury but an essential element of business and family life, yet we continue to have the highest levels of taxation in the EU. It was extremely disappointing, therefore, that despite repeated representations to the UK Government the Chancellor in his Autumn statement opted to further increase levels of APD. APD is already proving a significant barrier to attracting new routes and unless there is a fundamental re-think, I have no doubt that Scotland’s domestic and international connectivity will suffer. Thankfully, there is broad cross party support in Scotland for action on APD and we welcome any moves which would address the issue and stimulate further growth.”

I hope to see evidence of that broad cross-party consensus in Scotland when we press the new clause to a vote tonight—or is it similar to the hollow words of Labour in Wales?

Gordon Dewar, chief executive of Edinburgh airport, has said of the White Paper:

“We welcome this policy from the Scottish Government and we would like to see APD not only halved but abolished completely. We’ve had a successful year at Edinburgh Airport but it is clear from our discussions with our airlines that Scotland could be far better connected without the iniquitous yoke of APD. It puts our country and importantly our vital tourism industry at risk. People and airlines will go elsewhere. We reiterate our call for governments to support our economy and abolish this unfair tax.”

The managing director of Aberdeen airport, Carol Benzie, has said:

“What is becoming increasingly clear are the implications of this tax on UK businesses. Put simply APD adds to the burden of running a successful company. 65% of our passengers in Aberdeen are travelling in a professional capacity and ultimately the responsibility for paying APD in each and every one of these cases is being passed back to their employer. Firms in Aberdeen are connected globally with links in emerging and existing markets. These businesses are paying APD twice if they chose to use a hub airport in the UK, and are taking their business elsewhere in increasing numbers to avoid this tax.”

It is self-defeating.

Commenting on the Irish Government’s decision to abolish air travel tax, which came into force on 1 April, Scottish Transport Minister Keith Brown, a former veteran of the Falklands war, said:

“Scrapping Air Travel Tax in Ireland has had an immediate impact and shows what could be achieved in Scotland if we had control over Air Passenger Duty…After the Irish Government outlined its plans to abolish the tax last year, Ryanair stated that it will deliver an additional 1 million passengers to and from Ireland as a direct result of that decision, with 20 new routes into Dublin, Shannon and Cork launching this summer.”

When I spoke about this last year I warned that the UK Government had been ignoring the industry, the people and the Scottish Government for far too long and that it was no wonder that support for independence was growing. We now know that support for independence has grown far more in the past year than I could have imagined. Are the UK Government going to continue with their intransigence? A year on, what do we have? The gap in the polls has closed, tightening to 6% within the margin of error, which is almost a swing, and the head of British Airways, Willie Walsh, and Ryanair’s Michael O’Leary are supportive of Scottish independence because they see the opportunities. I am sure that Members of this place will be supportive of independence after the event, but why do they have to be so slow and so late to the party? Michael O’Leary and Willie Walsh are right on the money, as we will see on 18 September.

The Scottish Government, in their White Paper on the best-planned independence process of any country in the world, aim to reduce APD by 50% within the first term of an independent Parliament, and to abolish it completely when circumstances allow, with a proposal for a straight reduction in bands. Independence is gaining support because of such straightforward, common-sense approaches.

I note that this is a time of improved, or the best-ever, UK-Irish relations, as the Prime Minister has said; relations are at an all-time high. He calls them “Anglo-Irish relations”, but I am of course working my hardest to make sure that those words are indeed accurate after September. Yesterday, the Irish President Michael D. Higgins, a lovely, charismatic and inspirational man, said that people-to-people connections have never been closer between these two islands—no doubt because of their independence.

I must say that I am grateful to a visiting Member of the Dail Eireann, Frank Feighan TD, the Member for Roscommon Leitrim South. He reminded me that not only are the number of routes shooting up in Ireland—the 20 routes that I mentioned—but the ending of APD will increase visitors’ spend. Irish politicians can see clearly, far more clearly than Westminster, that such spend will more than replace what was lost in APD revenue.

It puzzles me that the UK Government are quite comfortable with Ireland, with which we share a sea border, having zero APD—saying that relations are the best ever and are at an all-time high—but are absolutely petrified of Scotland managing to reduce its APD by 50%. That is illogical, incoherent and daft. If the UK Government lost their imperial control mania, they would find themselves living in an island whose aggregate GDP was going up. We would all benefit from that—not just in Scotland, but in England and, I hope, particularly in the north of England, a part of the world for which I have a real soft spot.

I will finish with a PricewaterhouseCoopers study, which says that the UK picture last year suggested that the abolition of APD would yield 0.46% of UK GDP in the first year, and add at least £16 billion to GDP within three years, while creating 60,000 new jobs. The figure for Scotland would be about £667 million. APD raises £2.8 billion to £3 billion in the UK, which is £13 billion less than what could be made. In Scotland, the figure is £234 million.

I say to Treasury Ministers that, given a UK net gain of £13 billion, perhaps the Treasury is thrawn or uninterested in what is happening in Scotland. I appeal to them to get out a calculator and to act in their own self-interest, because if they do, they will see the wisdom of what Ireland, the Netherlands and many other countries have done and the wisdom of what every voice in the industry is saying. Only intransigence and a thrawn, thrawn Westminster attitude has left us in a situation where, year after year, we have to use poetry or any other device to try to get it into the minds of bods at the Treasury that here is something to be listened to and noted for the prosperity of many people, and for those who would fill the 60,000 new jobs.

Photo of David Rutley David Rutley Conservative, Macclesfield 7:00 pm, 9th April 2014

It is a pleasure to serve under your chairmanship, Mr Bone, as we debate the Bill on the Floor of the House. One thing we have learned is that if Scotland made the mistake of voting yes, at least those wanting to leave could do so at a lower cost, given the benefits coming through from the proposal on APD.

Photo of Angus MacNeil Angus MacNeil Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Constitutional Reform), Shadow SNP Spokesperson (Scotland)

In the light of the events of the past few days, does the hon. Gentleman think that Irish independence is a good idea?

Photo of David Rutley David Rutley Conservative, Macclesfield

I have no idea what that matter has to do with APD.

Photo of Angus MacNeil Angus MacNeil Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Constitutional Reform), Shadow SNP Spokesperson (Scotland)

The hon. Gentleman may have heard me say in my speech a few moments ago that the Irish have reduced APD to zero. The President of Ireland has been here on a state visit this week, showing how warm relations are, and we are looking for such warm relations. We are looking to control our APD, and to have very friendly and very warm relations, especially with the people of Macclesfield.

Photo of David Rutley David Rutley Conservative, Macclesfield

I am a regular visitor to Scotland—I normally drive—but I think we should move on to wider issues.

As they stand, the changes to air passenger duty from April 2015 will save business-class, long-haul passengers more than £100. It makes sense to abolish the very high bands of APD. They have caused understandable concerns, with the widespread perception that they were just another example of the unfair tax changes that we inherited from the Labour party. It is right that, as a result of the Government’s decisions, all long-haul flights will carry the same lower band-B tax rate that is paid to travel to the United States, for example. A family of four flying economy to visit relatives or communities in the Caribbean or south Asia will pay £56 less in APD. It is also right and fair that the Government have brought private jets into the scope of APD and that the share of the burden is more easily spread across air passengers.

Government Members believe in tax fairness, and we believe in reducing the burden of tax wherever possible. As my hon. Friend Henry Smith pointed out, however, it must be a fiscally responsible approach, although that seems to have been completely ignored in the comments of some Opposition Members.

By cutting APD, the Chancellor is again helping to support British exporters, not least first-time exporters looking to make their first steps into high-growth export markets, perhaps by attending international trade fairs or visiting prospective clients and customers abroad. Virgin Atlantic says:

“The Government has rightly recognised the damage APD is having on exporters and the travelling public alike.”

There is a real need to encourage more exports and exporters. As I indicated in my earlier intervention, Lord Livingston recently pointed out that

“only 17% of UK mid-sized businesses generate revenues outside of the EU compared to 25% in Germany and 30% in Italy.”

I am delighted that action is being taken across Government to meet that challenge. Our small and medium-sized businesses have the potential to be economic powerhouses for our economy and to create more wealth and more jobs across all regions of the UK, including Wales and Scotland. To realise that potential, we need to rediscover our great trading heritage and embrace the global opportunities for Great British services and manufactured goods. By cutting APD, we are underlining the commitment of the Department for Business, Innovation and Skills, the Foreign Office and UK Trade & Investment to provide support. Those are positive steps.

International aviation links are not merely important for exporting goods and services from the UK to other countries, or to make more sales missions feasible; lower APD will support UK tourism and help to improve our competitive position in the market for inbound tourists, be they leisure tourists or business travellers in the meetings, incentives, conferences and events sector.

According to Kurt Janson, the Tourism Alliance’s policy director, the Bill’s proposed savings

“will be a benefit for attracting visitors from the growth markets of China, India and Brazil as well as the traditional market of New Zealand and Australia.”

Indeed, PricewaterhouseCoopers suggests that the studies it reviewed for its research

“all point to a link between whole economy productivity and airline sector output.”

By encouraging greater connectivity between the UK and the global economy, reductions in APD can add to the mix of supply-side measures introduced by this Government since 2010. APD is another barrier to productive growth that the Government seek to remove.

This Government believe in long-term thinking. Difficult decisions have had to be made to save us from the appalling legacy that we inherited from the previous Government, but we are now seeing the results of that approach. It has become affordable and fiscally responsible to cut APD and other taxes that have been holding back this country’s businesses and people from realising their ambitions. The Government are helping people to realise their ambitions and objectives in life by working progressively to de-risk entrepreneurialism and support the export industry. For that reason, the measures have my full support.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

It is a pleasure to serve under your chairmanship, Mr Bone. It is clear from the contributions and amendments tabled by the hon. Members for Carmarthen East and Dinefwr (Jonathan Edwards) and for Na h-Eileanan an Iar (Mr MacNeil) that APD remains an important issue for many hon. and right hon. Members. Indeed, we have debated APD on the Floor of the House on many occasions, so it is worth briefly reflecting on the coalition Government’s record on APD since they came to power in 2010— a record, as I am sure many hon. Members will agree, of prevarication, indecision and lack of direction.

Before the election, the Conservatives made a commitment to look at a per-plane duty. The report that resulted almost a year later, contrary to the manifesto commitments of the Conservatives and the Liberal Democrats and the coalition agreement, was not taken forward, and for very good reasons. The industry certainly did not support it. Although right hon. and hon. Members on both sides of the Committee will be all too conscious of the need not to take a Liberal Democrat promise at face value, we had certain expectations concerning the coalition agreement.

The Government promised a further review of APD. The consultation covered several areas including private jets, different tax bands, premium economy flights, flights from regional airports and the possible devolution of APD. The consultation paper raised the concern that the existing four-band structure was damaging the UK’s competitiveness and contained several anomalies, such as a higher rate for Caribbean flights than for other destinations in the USA. That was a source of concern for many hon. Members, which, given the announcement in this year’s Budget, the Government seem to have taken on board. The consultation lasted the best part of a year and numerous interested parties took considerable time and effort to respond constructively and in good faith.

What was the result of that long and arduous process, which, including the first consultation, spanned the best part of two years? It was next to nothing. Aside from the extension of APD to cover business flights, we have seen no changes to APD across the UK. That period of time has been described by industry players as

“a sham and a waste of taxpayers’ money.”

There were three full years of promises, yet the Government delivered next to nothing. Three wasted years—a phrase that is synonymous with the coalition Government, whether in respect of APD or, more broadly, the flatlining economy that we have seen for most of the Chancellor’s time in office.

In this year’s Budget, choices were made that, notwithstanding the years of delay and the further year of delay ahead, have been cautiously welcomed by much of the industry. The third coalition U-turn in this area in as many years means that there will be some relief for long-haul flights in the form of lower rates of APD. Let us not forget that APD on all flights of more than 2,000 miles will be uprated by RPI this month. That comes on top of the large increases over the past few years, including the 8% rise that the Chancellor announced in Budget 2012, which was double the rate of inflation.

Budget 2014 saw the announcement or re-announcement—I am not entirely sure which, as Ministers will not give me a straight answer—that the Government will provide funding to aid start-up routes at smaller airports. The regional air connectivity fund, as it will be known, will help new routes from regional airports according to the Red Book, but Ministers do not seem to know which airports or new routes will be eligible or what the fund may be spent on. Although any new support for new air routes is clearly welcome, the proposal seems to bring yet more uncertainty for the aviation industry, the like of which it has already endured for years.

Clearly, that support could be of most value to the constituents of the Members who have tabled the new clauses and the new schedule. Perhaps the Minister will enlighten the Committee and reassure hon. Members about what support their regional airports can expect to receive from the fund.

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Education), Shadow PC Spokesperson (International Development), Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Health)

While the hon. Lady is talking about enlightening the Committee, will she enlighten us as to where her Welsh Labour colleagues are? There is a Welsh Whip lurking at the far end of the Front Bench. Perhaps he will give us a clue.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

We have been very clear on numerous occasions that Labour remains to be convinced of the merits of devolving APD. We do not believe that it is necessarily the correct way forward at this stage.

We acknowledge that the Government have made some notable changes to APD in Northern Ireland. The Chancellor announced in September 2011 that APD rates on long-haul flights using airports in Northern Ireland would be cut because of the threat of competing routes from the Republic of Ireland to the transatlantic route from Belfast to Newark airport in New York, which is critical to the Northern Irish economy. Continental Airlines had been paying APD, unsustainably, at a cost of £3.2 million a year. Following the Finance Act 2012, APD on long-haul flights departing from Northern Ireland was devolved to the Northern Ireland Assembly, which abolished it on 1 January 2013.

I know that right hon. and hon. Members, and anyone who has engaged in this debate over the past few years, will be all too aware of those facts. However, it is important to remind the House of them, so that it can better understand the new clauses and new schedule. Flights in Northern Ireland clearly face specific challenges. As I and other Labour Members have noted before, it is the only part of the UK that shares a land border with another EU member state. George Best Belfast City airport and Belfast International airport compete directly with Dublin in attracting airlines, routes and passengers. The Opposition supported the Government’s move on APD on long-haul flights from Northern Ireland, given its unique international land border and the fact that Northern Ireland largely relies on air transport for its link to the rest of the UK.

Photo of Angus MacNeil Angus MacNeil Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Constitutional Reform), Shadow SNP Spokesperson (Scotland) 7:15 pm, 9th April 2014

Is aviation not about more than competition? It is also about growth. When Governments get their head around that, we will surely see a sea change in their approach to APD. They should focus on growth, not just competition.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

The hon. Gentleman makes an important point, and I entirely agree that the Government should be absolutely focused on economic growth. The debate about APD is part of that discussion, and the regional air connectivity fund must also be part of the conversation. The Government need to provide clarity on those issues in this Finance Bill and in the future.

As I said, Labour remains to be convinced of the merits of devolving air passenger duty. The Calman commission proposed that it be considered, and the Labour Government committed to keep it under review.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales)

The hon. Lady made a telling point in response to my hon. Friend Hywel Williams when she said that the Labour Treasury Front-Bench team remained to be convinced of the position taken by the Labour Government in Wales. As she knows, the Labour Government are in direct intergovernmental negotiations with the UK Government’s Treasury team. If the First Minister and the Welsh Government cannot convince their own party, what credibility can they have in those vital negotiations with the UK Government?

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I have said clearly that the Labour party remains to be convinced of the merits of devolving APD, but let us remember that the Wales Bill that is currently going through Parliament contains a number of devolved tax powers for Wales and is the appropriate place to debate these issues in the round. Labour’s devolution commission in Scotland considered the matter again and argued that devolving APD within the mainland of Great Britain would generate unhelpful tax competition within the UK.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

As I said, the Wales Bill, which is currently going through Parliament, contains a number of devolved tax powers for Wales and is the appropriate place to debate these issues. That is why Labour will abstain on the issue of APD devolution tonight, but we look forward to the Exchequer Secretary providing clarity on the various queries that have been raised today, particularly about the regional air connectivity fund, which is clearly linked to the issues of certainty for investment, growth, which all Members are focused on, and the role that aviation plays in our economy.

Photo of David Gauke David Gauke The Exchequer Secretary

In 2010, the Government inherited an air passenger duty system that needed to be fixed. The changes that the previous Government made in late 2009 caused aggravation to the UK’s overseas friends and frustrated diaspora communities. Clauses 72 to 74 will fix the system by implementing air passenger duty rates for this year and by reform of the rates for next year.

I will address new clause 2 and new schedule 1, tabled by Plaid Cymru Members, and new clauses 6 and 7, tabled by Scottish National party Members. The Plaid Cymru proposal broadly follows the form that was taken to devolve the duty on direct long-haul flights from Northern Ireland, and requests a similar devolution for direct long-haul flights from Wales. The SNP proposals seek the devolution of duty on flights to all destinations.

I remind hon. Members that the devolution of duty for Northern Ireland was in specific response to Northern Ireland’s unique circumstances. It shares a land border with Ireland, leading to a risk of flights relocating from one part of the shared land mass to another. We recognised that risk and acted to ensure that Northern Ireland was not disadvantaged.

The current situation is that airports on the Great Britain mainland face the same APD rates, but the SNP and Plaid Cymru proposals could well lead to the introduction of the same market distortions that our devolution to Northern Ireland sought to prevent, namely the reallocation of flights from one part of the UK to another, leading to distortion in competition, and winners and losers across the UK.

Regional airports are doing well: 2013 was the third consecutive year of passenger growth and our APD banding reform is another confidence boost for the air travel market. Relevant examples include Cardiff airport, which in 2013 saw a 4% increase, equating to around 44,000 extra passengers, with new routes announced to Germany and the Caribbean. In Scotland, there has been 3% growth at Glasgow airport, with almost 206,000 additional passengers. New routes have been announced for this summer to Croatia and Greece. Edinburgh airport has grown 6%, equating to more than 580,000 additional passengers. In the past six months, new routes to Qatar, the USA and Norway have been announced.

Photo of Angus MacNeil Angus MacNeil Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Constitutional Reform), Shadow SNP Spokesperson (Scotland)

Is the Minister happy, or does he agree with industry figures in Scotland, particularly the managing directors of airports, who believe that that growth has been constrained by APD?

Photo of David Gauke David Gauke The Exchequer Secretary

My point to the hon. Gentleman is that the Government must reduce the deficit and APD is a valuable source of revenue. One cannot look at the effects of APD in isolation; one must look at the overall effects on the economy. We have taken measures in the Bill to reduce the burden of APD, but it is worth noting that airports in Scotland and Wales, and regional airports elsewhere in the UK, have been doing well in recent months.

Photo of Guy Opperman Guy Opperman Conservative, Hexham

I wish to praise Newcastle airport, which has welcomed the changes to APD. It is pleased that officials are indicating that the regional air connectivity fund will extend to airports beyond the 3 million passenger mark to those with upwards of 5 million passengers in certain circumstances. Does the Minister agree that that is a further example of the Government assisting regional airports and allowing them to grow as we know they can?

Photo of David Gauke David Gauke The Exchequer Secretary

I am grateful to my hon. Friend because he brings me to my next point. I agree with him. The Government recognise the importance of aviation connectivity for all parts of the UK—for example, domestic flights are not subject to VAT. As he says, we are extending the scope of the regional air connectivity fund to include start-up aid for new routes from regional airports, and increasing funding to £20 million a year. Clearly, exactly how that works is a matter for the Department for Transport, but I welcome the fact that the Government are consulting the regional airports to see whether those that have more than 3 million passengers per year can receive extra support. That includes Newcastle airport, which has 4.4 million passengers. One could also mention East Midlands International, Liverpool John Lennon, Belfast International, Aberdeen, London City and Leeds Bradford, all of which have more than 3 million passengers a year. We are trying to do what we can to ensure that those airports can gain support from the connectivity fund.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

Obviously, we broadly welcome any support for expansion and new routes from regional airports, but would the Minister accept that making an announcement without any details about the type of activity that will be covered by the funding can add uncertainty to the already difficult environment for the industry at present? It is imperative to bring some clarity to the issue as soon as possible. Will he tell us when he will be able to clarify what might qualify for the funding?

Photo of David Gauke David Gauke The Exchequer Secretary

The hon. Lady is being uncharacteristically glass half empty. We have announced an expansion of the connectivity fund. We have said that we are seeking to take that beyond airports that have more than 3 million passengers per annum. As it happens, the Department for Transport is consulting on and developing guidelines for accessing support, and the results will be published in the summer. I am sure that the hon. Lady is as keen as my hon. Friend Guy Opperman to ensure that the best happens for Newcastle airport.

Photo of Guy Opperman Guy Opperman Conservative, Hexham

It is surely a relevant factor that the Budget was only a few weeks ago and the guidance on which we are consulting was published by the European Commission only at the end of February. One could hardly have done it any earlier.

Photo of David Gauke David Gauke The Exchequer Secretary

My hon. Friend is right. As I say, the Department for Transport is developing these guidelines with the intention of publishing in the summer.

Photo of David Gauke David Gauke The Exchequer Secretary

I am sure that the hon. Lady—I think she has Newcastle airport in her constituency or at least nearby—will take this opportunity to welcome what the Government are doing.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

Newcastle international airport is in my constituency[Interruption.] The car park is in another constituency. However, I speak on behalf of all the regional airports. I am not being churlish about the potential funding that has been announced, but I hoped that the Minister would realise the increased commercial uncertainty that can be created by making announcements that lack clarity about what may or may not be included. The Government need to move as fast as possible to create—

Photo of Peter Bone Peter Bone Conservative, Wellingborough

Order. Interventions are getting longer than some of the speeches.

Photo of David Gauke David Gauke The Exchequer Secretary

I am not sure that I can add much, other than to say that if the hon. Lady is concerned about uncertainty she might want to look at some of the anti-business policies pursued by her party.

We also recognise that air services in some of the more remote parts of the UK represent a vital connection to the rest of the country. That is why there is an air passenger duty exemption for flights from the highlands and islands of Scotland.

Photo of Angus MacNeil Angus MacNeil Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Constitutional Reform), Shadow SNP Spokesperson (Scotland)

I am grateful for the exemptions for the highlands and islands of Scotland, but does the Minister think that the devolution of APD to Scotland and Wales would result in an increase in the number of routes, flights, passengers, commerce, tourism and eventually revenue to the public purse? Does he see any advantage to the devolution of APD?

Photo of David Gauke David Gauke The Exchequer Secretary

I wish to avoid running the risk of repeating myself, but I make the point that I made earlier: the devolution of APD within Great Britain would create unfortunate market distortions. As we said in our November 2013 response to the Silk commission, we are not convinced of the case for devolving air passenger duty to Wales, given the potential effects across the country as a whole. In the case of Scotland, the distortive effects across the country as a whole are harder to diagnose, given that it has more major airports with significant route connectivity. Our opinion remains that this requires careful evaluation if we are to be confident of its potential effects, so I ask hon. Members to withdraw their amendments.

Photo of Bob Stewart Bob Stewart Conservative, Beckenham

Is it the Government’s intention to continue the trend of reducing air passenger duty across the country?

Photo of David Gauke David Gauke The Exchequer Secretary

What I would say to my hon. Friend is that we have set out in the Budget and in the Bill significant changes that we think fix the problem we inherited from the previous Government.

My hon. Friend gives me the opportunity to turn to clauses 72 to 74. Ahead of our rates reform, clause 72 fulfils the commitment given in Budget 2013 on the rates of duty for 2014-15. This respects the air travel industry’s point that tickets are often sold a considerable time in advance of travel. The industry needs up to a year’s forward rates certainty to have sufficient time to prepare its accounting systems and set pricing ahead of advance ticket sales. The rates contained in clause 72 have therefore been anticipated by the industry.

Clause 73 rolls back the previous Government’s four-band system. That system saw travellers to China, India, Brazil, the Caribbean and a host of other destinations paying more in tax than travellers going to Hawaii, even though Hawaii is further away. We believe this system to be crazy and unfair. Clause 73 restores sense and fairness by reforming the duty bandings. It introduces a simple to understand two-band system: one band for travel to countries up to 2,000 miles from London, and another for travel to countries further away. This puts a host of countries on to the same rate as the USA and delivers a rates cut for travel to growth markets in Latin America, southern Asia and the far east with effect from 1 April 2015. For example, a family of four visiting relatives in the Caribbean will save £56, and a commercial traveller to China will save at least £14 per trip.

Clause 74 updates the list of countries over 4,000 miles from London to reflect changes in the legal composition of several island states in the Caribbean and the south Atlantic. These states are also set to benefit from rates savings with the reform of APD from 1 April 2015.

In 2011, a number of regional airports offered the view that there ought to be an additional charge of duty at congested airports, or a lower rate at uncongested airports. Their thinking was that it would spread demand for air travel more widely across the country. However, other airports countered that this is not the most appropriate way to address congestion, and many airlines felt that it would distort the market without materially affecting decisions about where services are located.

In October 2012, Her Majesty’s Revenue and Customs published a report that shows that significantly higher prices at congested airports could lead to some passenger redistributions, but it also suggests that the benefits might not be spread widely across the UK. In addition, the report suggests that some regional airports would in fact lose passengers if a difference in price meant traffic and services went to other competing airports. Having carefully considered the idea, we were not convinced that a regional variation of rates would materially help in meeting our objective to rebalance the UK economy. Budget 2013 therefore ruled out varying duty rates by levels of airport congestion. It is of note that the Airports Commission’s December 2013 interim report also concluded that

“an air passenger duty congestion charge is not a promising solution to the capacity problem in London and the South East.”

In more recent times some regional airports have turned their thinking to the idea of a holiday period for new long-haul routes during which duty would not be payable. On this, the Airports Commission’s interim report offers an illuminating view. It says that there are two potential pitfalls. First, if the idea applied to all new routes equally, there would be substantial potential for airlines to game the system by switching existing routes between airports. Secondly, if there were measures to control this behaviour, the idea would run a substantial risk of legal challenge, because it would distort competition in favour of particular routes and not others. The commission felt that it could not recommend the use of air passenger duty holidays. It instead referenced how airport landing charges might be used to incentivise new routes. We see nothing to disagree with in the commission’s analysis.

In Northern Ireland, there is a defined devolution of air passenger duty that responds to Northern Ireland’s unique circumstances. Since 1 January 2013, the Northern Ireland Government have had a devolved power to set rates for direct long-haul flights leaving Northern Ireland. They have used that power to set a zero rate, which means that the highest rate of duty on any direct flight from Northern Ireland is £13. The rates of duty for through-ticketed flights using connections at one or more hub airports remain the same as those applying to the rest of the UK, which means that from 1 April 2015 passenger savings will result from the Budget’s rates reform.

The Republic of Ireland’s recent decision to reduce its air travel tax to zero from 1 April this year is, of course, acknowledged, but I must make clear that I cannot accept calls from Members for the abolition of air passenger duty. Outright abolition is an unfunded request that would leave a £3 billion-plus hole in the public finances. If, as a consequence, the Northern Ireland Government wish to argue their case for further devolution, they must consider the fiscal costs, which would have to borne locally.

I can confirm that in total, the rates reform in clauses 72 to 74 provides a £920 million shot in the arm for travel to growth markets. It simplifies the tax system, and supports the UK’s export drive. The clauses maintain fiscal responsibility within a fiscally neutral Budget, with targeted action to fix the problems left by the last Government. I therefore ask Jonathan Edwards to withdraw his motion, because the proposals in the new clauses and new schedule would inhibit fair opportunity and distort the market.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales) 7:30 pm, 9th April 2014

We have had an informed and very interesting debate. We have also had an incredible revelation, which I hope the Welsh media will pick up tomorrow. Let me make it clear for the benefit of Labour Front Benchers that Carwyn Jones is the Labour First Minister of Wales.

We heard excellent speeches from the hon. Members for Crawley (Henry Smith) and for Macclesfield (David Rutley), a typically passionate speech from my hon. Friend Mr MacNeil, speeches from both Front Benches, and many good interventions.

The people of Wales own—via the Welsh Government—our national airport, which is a key piece of our national infrastructure, and we need to control air passenger duty if we are to maximise the potential of that asset. This is primarily an issue of jobs and growth, but it is also an issue of gross hypocrisy, given that parties operating in a devolved context say one thing in Wales and something completely different here in Westminster. The Labour First Minister of Wales says that this is an economic priority for his Administration, but he cannot persuade his own bosses here in London, or Labour Members of Parliament based in Wales. This is therefore an issue of the First Minister’s credibility and authority. If he cannot convince his own side, why should anyone in Wales take anything that he says seriously, and how can he possibly engage in detailed negotiations with the United Kingdom Government on these very fine and important fiscal matters?

It is necessary for us to divide the Committee so that the people of Wales can see the truth for themselves, and I therefore wish to press new clause 2 to a Division.

Question put, That the clause be read a Second time.

The House divided:

Ayes 9, Noes 254.

Division number 253

See full list of votes (From The Public Whip)

Aye

No

Question accordingly negatived.

Photo of Dawn Primarolo Dawn Primarolo Second Deputy Chairman of Ways and Means

Does Mr MacNeil wish to move new clause 6 formally?

The Second Deputy Chairman:

No? Okay. [Interruption.] It is very generous of Members to assist Mr MacNeil, but he can manage it by himself and I believe that the new clause is not moved.

Clauses 72 to 74 ordered to stand part of the Bill.

The Deputy Speaker resumed the Chair.

Bill (Clauses 1, 5 to 7, 11, 72 to 74 and 112 and schedule 1) reported, without amendment (Standing Order No. 83D(6), and ordered to lie on the Table.