Finance Bill: Legislative Consent Motion

Executive Committee Business – in the Northern Ireland Assembly at 3:30 pm on 28th May 2012.

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Photo of Sammy Wilson Sammy Wilson Shadow DUP Spokesperson (Treasury) 3:30 pm, 28th May 2012

I beg to move

That this Assembly agrees that the provisions in clause 189 of and schedule 23 to the Finance Bill, as introduced in the House of Commons on 10 May 2012, dealing with the devolution of Northern Ireland long-haul rates of air passenger duty should be considered by the UK Parliament.

Before turning to the detail of the legislative consent motion, I want to touch on a number of issues; namely, the scope of the powers granted to us and the cost of expanding them. Let me be clear from the outset: I have serious concerns about the impact of air passenger duty (APD) for Northern Ireland as one of the more remote regions of the UK. I consider that, as a tax, it no longer meets the basic requirements of being fair to everyone, having a simple structure and not unduly impeding consumers and business. More generally, unlike the rest of the United Kingdom, our access to other regions is not as easy; it is heavily reliant on air transport. We have no rail or car options for wider travel within the UK.

We made our position on the duty clear in our response last June to the Government’s consultation. The Government said that they will return to the rebalancing issue, which is a wider issue that has implications for not only Northern Ireland but potentially Wales and Scotland. We will continue to make our views on APD known. What we are dealing with today is more limited and relates only to the devolution of rates-setting powers for direct long-haul flights.

At the end of 2010 and beginning of 2011, we were faced with significant concerns about the viability of our direct link between Belfast International Airport and New York. That was a direct result of the difference in the rate of APD here and in the Republic. It was very clear that, without urgent action, that route would have been lost to Northern Ireland. It was an urgent matter, because airline schedules were being reviewed in a ruthless way following the takeover of Continental Airlines by United, and timing was crucial. The fact that the Government launched a wider consultation of APD as a whole became a problem for a time. That was launched in the Budget in March and responded to with the autumn statement in November. In the interim, the Government were reluctant to adapt the duty in any way.

The First Minister and deputy First Minister, the Minister of Enterprise, Trade and Investment and I pressed them hard, with the support of Northern Ireland Office Ministers, and I am pleased to say that the Prime Minister and Her Majesty’s Treasury Ministers, particularly the Chancellor — without whose help, it would not have happened — responded positively. Our request was that the Government take whatever action necessary to avoid the loss of that important air link. Our first preference was to find a way to do that within the national air passenger duty framework. Our request indicated that, if the Government could not do that, we wanted the powers devolved so that we could take the necessary action ourselves. We wanted a similar exemption to that which applies for Scotland’s islands, which is on the basis of a very low population density. We cannot begin to match that, but we hoped that an exemption would be made available on some other basis. If that could have been achieved, we would not have needed to devolve the powers and would not have needed the block grant reduction that comes with that.

The Government explored that fully with the European Commission, but no such solution could be found within the state aid rules. The most legally sound long-term solution was to devolve the powers in line with the EU Azores criteria. It was, I believe, the Chancellor who took the decision to reduce the air passenger duty rate for direct long-haul flights from Northern Ireland to the same as that for short-haul flights with effect from last November and to begin the process of devolving the necessary powers to us. I thank him and the Secretary of State for that.

The legislative consent motion before us today is intended to give effect to the first stage of the process prior to an Assembly Bill being brought forward. Before turning to the detail of the legislative consent motion, let me be quite clear: what was under consideration by the Government and on which our consent is being sought is provision to devolve air passenger duty rates-setting for direct long-haul flights only.

Many have argued that that provision should be made to extend devolved powers to band A short-haul flights. Indeed, that issue was raised by the Finance and Personnel Committee, and the Chairman will probably say something about that later. However, put simply, the policy framework to provide for that is simply not in place. The Executive have not agreed such an approach, and at no time have the powers been requested from the Government by the Executive. Indeed, even if we did ask for greater powers, it is not clear that they would have been agreed to. Given the timetable for the Finance Bill 2012, it would be near impossible to do that in that Bill. It is likely that Royal Assent will be granted before Parliament’s summer recess.

While agreeing the policy on short-haul APD rates may be relatively straightforward, gaining consent to the financial implications would not be. While it could be argued that the powers could be granted to use and exercise at a later date, that would be a somewhat unusual approach from a legislative perspective. The devolution of short-haul rates of APD would be an expensive measure. For direct long-haul flights, devolution will cost in the region of £5 million a year with a zero rate.

A similar approach for short-haul flights would be considerably higher, costing in the region of £60 million per annum at present, and, perhaps, rising to £90 million per annum. That is not an inconsiderable sum by any stretch of the imagination. Also, as we contemplate other block adjustments, it is a significant sum that would have to be dealt with.

While phasing may help in the early years, it would not detract from the long-term annual cost. Even halving the rate of duty on short-haul flights would initially cost around £30 million a year. That would have considerable recurring annual consequences for the resources at the Executive’s disposal at a time of already considerable budgetary constraint. Furthermore, to devolve greater powers than are contained in the current Finance Bill may also require an amendment to the Northern Ireland Act 1998, as opposed to being able to deliver the reductions solely through the Finance Bill amendment. The time needed for this would be simply too long for the action that we want to take on direct long-haul flights.

For these reasons, the legislation before Parliament at this time, rightly I believe, deals with the devolution of air passenger duty rate-setting for direct long-haul flights from Northern Ireland. There is a need for restraint and careful consideration for calls for the devolution of wider powers where these have considerable financial consequences for Northern Ireland. That is not to say that the wider concerns have been rejected by the Government or that this is an issue that should not be further considered. Rather, it needs to be considered in the wider context of other regions in the UK and the Government’s response to this more generally.

I will now turn briefly to the detail of the legislation that is currently going through Parliament and which would give effect to the devolution of air passenger duty (APD) rate-setting for direct long-haul flights from Northern Ireland. Members will wish to note that the Assembly currently has no powers in relation to APD, as this is an excepted matter. An Assembly Bill cannot be used to implement the proposal to give the Assembly powers to set the APD rate for direct long-haul flights starting in Northern Ireland. Once the relevant powers are devolved to the Assembly, an Assembly Bill will be required to set the direct long-haul air passenger duty rates for Northern Ireland.

The provisions of the Westminster Finance Bill that deal with Northern Ireland and air passenger duty contain retrospective, current and future aspects. Part 1 of schedule 23 to the Bill gives effect to the cut in air passenger duty for direct long-haul flights departing from Northern Ireland with effect from 1 November 2011. The provision gives legal effect to the rate of duty for direct long-haul flights from Northern Ireland being reduced to £12 for standard class and £24 for any other class for the period from 1 November 2011 to 31 March 2012. This means that the short-haul rate of duty applied where a direct long-haul flight is undertaken from Northern Ireland or, if there is more than one flight involved, the first connection is made in a long-haul destination. Part 2 of the schedule provides for an increase in the rates of APD from 1 April 2012 with the short-haul rate for band A increased from £13 to £26. Provision is also made for those new rates to apply to all direct long-haul flights from Northern Ireland. The Assembly does not have to give consent to these two Parts of the schedule, as no powers are devolved in relation to this.

Part 3 of the schedule devolves the rate-setting for direct long-haul flights to Northern Ireland. This change will apply to flights that take off from Northern Ireland on or before an appointed day. The date is likely to be in late 2012 or 1 April 2013. The date will be appointed following the Finance Bill receiving Royal Assent and the necessary primary legislation being passed in the Assembly. The Programme for Government indicates that the Executive wish to set the rate to zero for direct long-haul flights.

Part 3 of the schedule also makes administrative provision in relation to the setting-up and maintenance of a register of aircraft operators with routes from Northern Ireland.

In addition, it provides for HMRC to disclose information to the Secretary of State, the Treasury and DFP for the purpose of setting the new rates of duty, along with the restrictions on the further disclosure of that information and associated penalties. The legislative consent of the Assembly is required for Part 3 as it gives autonomy over the rates to be set for direct long-haul flights from Northern Ireland.

Part 4 of the schedule provides for the extension of APD to passengers in smaller aircraft and reduces the de minimis weight limit from 10 tons to 5·7 tons. It also extends the exceptions to APD for aircraft used for certain purposes and provides for new rates for certain aircraft. The new rate will apply to those aircraft that have a take-off weight of more than 20 tons and that seat fewer than 19 passengers. Essentially, the provisions extend APD to private jets and set new rates for luxury private jets.

Part 4 also includes changes to reflect the devolution of APD rates for direct long-haul flights from Northern Ireland. For luxury private jets, the legislation provides that the APD rate would be twice that which otherwise applies, and once powers are devolved it will be twice the standard prevailing rate set by the Assembly. Members will wish to note that, although the default rate for luxury private aircraft will be twice the standard prevailing rate, my Department has asked HMRC to provide so that the Assembly could determine different rates for that category of aircraft. If agreed by the Government, an amendment will be tabled at Report Stage, which is scheduled for early July. More generally, the changes in Part 4 will take effect from 1 April 2013.

It is anticipated that the Finance Bill will secure Royal Assent in mid-July. Following that, I will bring a Bill to the Assembly for approval, which will give effect to the second stage of the devolution process: the setting of the direct long-haul rates at zero. I hope that that Bill will be passed before the end of the year, subject to the Assembly’s agreement to the use of accelerated passage.

Before we move into the debate, I want to take the opportunity to thank the Committee for its consideration of the APD rates and the publication of its report on the matter. As always, I welcome the views of the Committee and look forward to its continued assistance as the necessary Bill is brought forward to this place.

In conclusion, having got the support of the Executive Committee, I would welcome the support of Members on this motion.

Photo of Conor Murphy Conor Murphy Sinn Féin 3:45 pm, 28th May 2012

Go raibh maith agat, a LeasCheann Comhairle. On 5 March 2012, the Minister of Finance and Personnel wrote to seek the views of the Finance and Personnel Committee on the provisions of the proposed UK Finance Bill that would devolve direct long-haul rates of air passenger duty to the Assembly. Given that that involves the devolution of tax-setting powers, the Assembly’s consent is required in the form of the legislative consent motion that is before us today.

The Committee was briefed by departmental officials on the implications of the proposed provisions in the Finance Bill on 14 March. The Committee noted that, in addition to DFP, the provisions could be of interest to the Department of Enterprise, Trade and Investment. Therefore, a response was sought from the Committee for Enterprise, Trade and Investment, which confirmed that it supported the proposed legislative consent motion.

To inform its work, the Committee received evidence from a range of stakeholders. On 18 April and 25 April, oral evidence was taken from panels of witnesses that included representatives from Belfast International Airport, George Best Belfast City Airport, ABTA: The Travel Association, the Hotels Federation, the Belfast Visitor and Convention Bureau, the Consumer Council, the Chamber of Commerce and the Federation of Small Businesses. Written submissions were also received from Ballymena Borough Council, Aer Lingus, Flybe and York Aviation. On 2 May, Members received a briefing from the Assembly’s Research and Information Service together with a final oral submission from DFP officials.

Air passenger duty has been criticised as a form of unfair and economically damaging taxation, and Britain is often cited as having the highest APD in the world. The Committee noted that a number of Governments in other European countries have either not implemented aviation duties or have reduced or withdrawn them because of the potential damage to the air transport industry. Members also noted evidence that supports the argument that the British Government should reconsider their policy position and abolish APD, given that it is also damaging to the economy in Britain.

Many of the stakeholders who provided evidence to the Committee emphasised the importance of air travel to business and tourism here. Various statistics were cited, including that the air transport sector contributed a gross value added of around £127million to the regional economy in 2009 and directly supported 704 jobs and an additional 914 jobs in the production line.

The Committee was informed that the anticipated cost of devolving APD on direct long-haul flights, an estimated £5 million per annum, is lower than the direct and indirect revenue that is generated here by the North American route on which the Executive originally campaigned for a reduction in APD and which has been worth in excess of £100 million over seven years.

The Committee recognises that APD is a regressive tax that is particularly disadvantageous to businesses, consumers and the wider economy in the North. This is due to the peripheral location of the region, which results in greater dependence on air travel, and to the proximity to airports in the South, particularly Dublin Airport, which hold a competitive advantage, given that a nominal €3 rate of APD applies. The negative consequences for the North will be exacerbated by the further increases in APD rates levied by the British Government from 1 April 2012. Members, therefore, welcome the proposed devolution of APD rates on direct long-haul flights as an important step towards redressing the disproportionate burden of APD locally.

The Committee agrees that the both the Executive and the Treasury are to be commended for the responsive action that has been taken to safeguard the vital Belfast-New York connection. The Committee has recommended that the Minister of Finance and Personnel, together with the other applicable Ministers, should now develop a co-ordinated action plan in conjunction with all of the key stakeholders to maximise the economic opportunities arising from the devolution of direct long-haul rates of APD. This should include the aim of establishing new direct long-haul flight connections to key business and tourism hubs.

The Finance Bill also includes provisions that extend APD to small business jets, which are currently exempt due to restrictions on weight and size. This will result in most business jet passengers being subject to the same rates of duty as commercial aircraft passengers. Furthermore, luxury private airlines will pay double the higher rate of APD. The Committee research pointed out to DFP that, if the Assembly were to set direct long-haul standard rates of APD to zero, it would create an anomaly where luxury private aircraft flying from the North would be liable for a zero rate of APD. The Department subsequently informed the Committee and the Minister confirmed in his remarks that discussions are ongoing with Revenue and Customs to determine whether the Assembly could be given the power to set the private luxury aircraft APD rate at something other than twice the standard prevailing rate, should the Assembly wish to do so at a future date. This would give the Assembly the power to set a different rate should it so wish. According to the Department, it is hoped that an amendment will be approved at report stage of the Westminster Bill on 2 July 2012 to give effect to this. The Committee would welcome this amendment to the Finance Bill. Indeed, as I said, the Finance Minister confirmed that that is his expectation also.

Although the Committee invited evidence specifically on the detail of the relevant provisions in the Finance Bill, it also received a substantial body of evidence on wider policy issues in respect of APD, including its impact on the regional economy and on provisions that are absent from the Finance Bill but which might have been included. In evidence collected by the Committee, there was general support for the proposal to devolve direct long-haul rates of duty, including optimism that this will open up long-haul route development opportunities for the North. However, many stakeholders argued in favour of fuller devolution of powers than that contained in schedule 23 to the Finance Bill, in particular to cover domestic and short-haul rates, which comprise the vast majority of flights from the region. This was reflected in the comments of the chief executive of Belfast City Airport:

“The moves that have been made to date on air passenger duty have left 98% of that problem untouched.”

Although this issue is wider than the terms of the legislative consent motion before us, it is relevant to the debate in that it concerns provisions that are absent from the Finance Bill but which might have been included.

The Committee concluded that it had been presented with a strong case for reducing or abolishing APD rates on the 98·5% of flights from the North that fall into the domestic and short-haul band A as a measure to improve the region’s connectivity with Britain and other European states, with a view to boosting business and tourism and helping to rebalance the regional economy. While recognising that this will require rigorous cost-benefit analysis, the Committee also concluded that, given the Treasury’s insistence on the devolution of, rather than exemption from, APD and the determination of the British Government to retain APD as a revenue-raising measure, any future reduction in APD on band A flights from the North is likely to be achieved only through the further devolution of powers to also cover band A rates. The Department has advised the Committee that devolving APD rates for all flights from the North and setting a zero rate across all bands could cost the Executive around £60 million per annum. This is a figure that the Treasury has provided as an estimate of the duty that would be applicable from 2010-11. The Minister, however, has quoted a figure of up to £90 million, although DFP officials clarified, as did the Minister today, that that is based on estimated projections up to 2016-17.

I emphasise the Committee’s recommendation that a cost-benefit decision on the devolution of powers over band A rates should take account of the fact that the Executive will only incur a substantive cost if and when the devolved powers are used to reduce the band A rates. The estimated £60 million total cost would only apply if the Executive opted to set a zero rate across all the APD bands. Importantly, the Committee has also recommended that the Executive take an evidence-based approach to reducing rates for particular bands, with the decisions taken on the basis of forecast return on investment.

The Committee has called on the Minister to propose that the Executive commission independent expert research into the business case for reducing or abolishing APD on band A flights departing from the North, which would inform the Executive’s consideration of whether or how wider devolved powers over APD should be exercised. That research should include an assessment of the opportunity costs of non action, rigorous economic modelling and forecasting of options and lessons from other EU states that have reduced or abolished APD, including examples where Governments have attached conditions to APD reductions to ensure resultant benefits for consumers and the wider economy.

As part of that initiative, the Committee recommends that the Executive proceed with making a strategic decision on whether to press the British Government for the devolution of the wider APD powers at the earliest opportunity.

Given the time constraints that now arise, the Committee acknowledges that seeking to include the devolution of band A rates of APD in the provisions of the Finance Bill could risk losing the immediate opportunity for devolving direct, long-haul rates of duty. Therefore, the Committee agreed to support the Minister in seeking the Assembly’s agreement that the provisions in clause 189 of and schedule 23 to the Finance Bill, as introduced in the House of Commons on 10 May 2012, dealing with the devolution of long-haul rates of air passenger duty, should be considered by the Westminster Parliament. I commend the motion to the House.

Photo of Paul Girvan Paul Girvan DUP

I stand to speak in favour of the motion. This motion came about on the back of a crisis situation that occurred due to the potential loss of the Continental flight, which is our only north American route. Therefore, it was important that we moved quickly to get that forward. To get thus far, a lot of lobbying went on. I praise the Minister of Finance and Personnel, the Minister of Enterprise, Trade and Investment and the First Minister and deputy First Minister for the efforts that they put in to ensuring that we could get the opportunity to devolve APD on our long-haul flights.

The case for how much it would cost the Northern Ireland economy has been well made. Let us be honest: if we were willing to take the hit and accept the major cost to the Northern Ireland block grant — the £60 million, £90 million or whatever figure it might be — the Exchequer would not have an issue with saying, “Go ahead. We’ll take that money off you.” We have to be sensible and make a judgement on the benefits.

The north American route is beneficial to the Northern Ireland economy. A lot of the other routes are, necessarily, outgoing and more geared towards people who are leaving Northern Ireland to go elsewhere as tourists and are, therefore, making their spend outside Northern Ireland, whereas the north American route has major business benefits to us, and it is important that we protect that.

In line with going through the process of debating the issue, the Committee has heard extensive evidence from those who are involved in the industry and those who feel that they can benefit from a reduction in APD on our long-haul routes. We can and we will achieve a great benefit by making a decision on that matter with minimal cost. The figure of £5 million has been alluded to in relation to this matter. We can far outweigh that with the benefits that can be levered in from the businesses attracted by that route. However, we can use this as another opportunity to attract additional routes into Northern Ireland and use it as a launch pad to the rest of GB.

We should be attempting to attract other long-haul routes on that basis.

We are unique on the basis that other parts of the United Kingdom do not have to compete with an airport 100 miles down the road that is offering a reduced APD. On the basis of that, we have to ensure that our long-haul flights are competitive. As such, I am in favour of the motion.

I congratulate the Minister for bringing this to the House. It is one of the good news stories. It is this Assembly reacting to what was a crisis situation, where we could have potentially lost one of our major links and would, therefore, have just been putting a nail into the coffin of our connection with North America. We now have the opportunity to attract additional routes for Northern Ireland to benefit from, so I support the motion.

Photo of Leslie Cree Leslie Cree UUP 4:00 pm, 28th May 2012

I am grateful for the opportunity to speak in support of the legislative consent motion on air passenger duty. The Chairman referred to the amount of work undertaken by the Committee and evidence taken from a wide range of sources. I thank the Committee staff for their hard work.

The decision to protect our sole long-haul flight to the US was the right one, and it is right to complete this exercise by approving the motion. During the Committee’s work, however, much was learned that necessitates further discussion and action. Air passenger duty is, as several Members said, a regressive tax, which started out as an environmental tax but is now clearly a finance-raising choice for the Government in Westminster. The tax is harmful to business, consumers and the wider economy in Northern Ireland. Its application actually hinders the development of the economy, which is the Executive’s first priority.

The EU emissions trading system, which was introduced in the UK last January, is a further environmental tax on airlines and is, arguably, a more practical method to tax aviation pollution costs. We do not need both. The fact that the UK imposes higher levels of duty than other parts of Europe is another major concern. Indeed, many countries have abolished APD-type duty.

The rate of duty in the Irish Republic is €3 and may be abolished. Because we have a shared boundary with the Republic, and it is a relatively short distance to Dublin Airport, that is sure to have a significant economic impact on air services in Northern Ireland. We need to address that important issue.

The Scottish Highlands and Islands are exempt from air passenger duty on flights departing from their airports. We are told that that was based on their low population density. We have the same peripherality problem, which is exacerbated by our greater density and the need for access to mainland Britain. Civil Aviation Authority statistics show that, on average, 17% of UK-departing flights are domestic services within the UK. In comparison, 75% of Northern Ireland passenger movements are on UK domestic services, demonstrating a much higher dependence on air travel.

The Consumer Council pointed out that England is to benefit from a £32·2 billion investment in a high-speed rail network that will further reduce dependence on domestic air transport. It will also have wider economic benefits for those regions, but Northern Ireland will not share in those benefits. Indeed, it will be at a greater disadvantage because of its dependence on the air routes. That situation presents a strong case for exempting Northern Ireland from all air passenger duty on flights to and from Northern Ireland.

Tourism is an important part of our economy. The Federation of Small Businesses provided evidence to show that the current structures of APD are damaging to the UK’s tourism industry. That was supported by several other groups. The Belfast Visitor and Convention Bureau pointed out that Germany is the biggest source market in Europe for city breaks, yet we have no direct access to it. Canada is our largest VFR — I think that stands for visiting friends and relations — market after America, and, again, we have no direct access there. As the Member who has just spoken said, I believe that there is scope for cuts to air passenger duty on condition that airlines open up new routes.

The Committee has provided several conclusions and recommendations with the report. I am sure that the Minister will have read those. I recognise that our first objective is to seek the devolution to Northern Ireland of air passenger duty on long-haul flights. I am pleased to support the Minister, and I ask the House to agree the motion.

Photo of Dominic Bradley Dominic Bradley Social Democratic and Labour Party

Go raibh maith agat, a LeasCheann Comhairle. I support the legislative consent motion on the devolution of air passenger duty, which is before the House. The specific measure, which is part of the Finance Bill, will devolve to the Northern Ireland Assembly the power to set the rate of APD to be applied to direct long-haul flights that take off from Northern Ireland. I believe that those flights are designated as bands B, C and D. The measure was spurred by the need to ensure that the transatlantic flight from Belfast International Airport to Newark continued. That route was thought vital in maintaining the links between Northern Ireland and North America, especially in relation to the continued development of business and tourism.

As we have heard, powers over other aspects of APD will be retained by the Treasury. Under the Azores judgement, the devolution of any revenue-raising powers to the Assembly inevitably brings with it a cost to the block grant, which must be borne by the Executive. In this case, it is estimated that the cost is around £5 million, but we must set that against an estimated benefit in the region of £100 million from the United Continental service over seven years. Witnesses told the Committee that three new carriers with similar levels of passenger carriage would create £300 million to £400 million in extra revenue and generate thousands of jobs. So this measure creates potential that is well worth exploiting.

Unfortunately, we have missed the boat, or, should I say, the plane, in relation to the Emirates airline, which was looking at a flight from Belfast to Dubai but chose to fly from Dublin. No doubt, APD was a major consideration in that decision. Hopefully, it is not too late. There is a market out there, and I believe that this measure will help us to exploit that market to the fullest possible advantage.

The further someone is from this island, the more irrelevant the point of entry becomes. If we can encourage people to fly to Belfast, the likelihood is greater that they will stay in this region and that we will get the economic benefit from their stay in many ways. We need to be getting out there and beginning the work of attracting more long-haul flights from more countries.

We can look at the experiences of such continental countries as the Netherlands, Denmark and Belgium. They introduced APD schemes similar to what we have here, only to abandon them or to drastically reduce them, due to the impact that they were having on inbound visitor numbers. So the lesson is clear.

The debate on this motion leads us to an examination of APD on shorter flights — the band A flights — which make up 98·5% of flights from Northern Ireland, compared with 17% in the UK. As other Members have mentioned, that clearly demonstrates our dependence on air travel. It was said earlier that the highlands and islands in Scotland have gained exemption from APD on the grounds of being a peripheral location with low population density. We do not qualify under the revised European rules in that respect, although Mr Cree has mentioned the fact that we still have a strong argument.

We are, of course, in direct competition with Dublin, and that has been mentioned on several occasions today. Dublin Airport is only an hour and a half down the road from both airports. The domestic APD rate here is around £13, compared with €3 in Dublin. Witnesses from the two airports told us that a family of four from Newry, for instance, would pay £100 in taxes to fly from Belfast, compared with €12 to fly from Dublin.

So, it is quite clear where the advantage lies. If you add to that the prediction that rates will eventually double, it is clear that we may be at even greater disadvantage in the future. Although the rate at the moment may not be such to encourage someone to drive to Dublin to fly to Birmingham, for example, that may not be the case in the future if increases happen at the proposed rate. Our main market for connections, by a huge margin, is the UK and Europe. We must remember that our main tourism and business markets are there.

As was said earlier, the cost to the block grant of removing APD on the shorter flights — the band A flights — would be much higher: around £60 million. Nonetheless, we believe that a proper cost-benefit analysis should be carried out to inform a business case on the transfer of these powers. Surely we should try to establish the financial facts rather than simply dismiss the idea out of hand.

If we are to be as competitive as we can be, we need to have every implement in the economic tool chest at our disposal. It should be remembered that the transfer of powers gives us the opportunity to vary APD and that the £60 million per annum total cost would only apply if the Executive set the rate at zero across all bands. There seems to be no definitive position on whether the transfer of these powers would need to be done through a change to the Northern Ireland Act or through a Finance Bill amendment, and we need clarity on that issue too. However, I believe that there is a legislative window towards the end of 2013 when, we hope, corporation tax powers will be transferred.

My party welcomes the measures contained in the legislative consent motion in relation to long-haul flights. We support the motion. We also believe that we should use this change to our fullest possible economic advantage, as outlined at page 21, paragraph 3 of the Committee’s report. We fully support the other key conclusions and recommendations in the Committee’s report. I join other Committee members and the Chair in thanking the Committee staff for the hard work that they have done in the preparation of the report and in assisting the Committee in its work on this issue. I urge Members to support the motion.

Photo of Judith Cochrane Judith Cochrane Alliance

I, too, welcome the opportunity to speak to this legislative consent motion regarding provisions in the Finance Bill for the devolution of air passenger duty rates. I do not wish to simply restate what has already been said by the Members who spoke before me, so I will focus on a few key issues that have arisen during our Committee work.

Among the stakeholders with whom we engaged and met, there was palpable support for proposals to devolve direct long-haul rates of flight duty to Northern Ireland. There was a sustained sense of optimism that that could open up future long-haul route development opportunities in Northern Ireland.

Another issue that was raised was the fact that, due to our unique geographical position, we face stiff competition in aviation provision from our neighbours in the Republic of Ireland. Northern Ireland sits on a platform that is different from that of any other country of the United Kingdom due to its physical separation by sea from the rest of GB and its sharing a land border with another EU member state. With the rate of APD in the South already substantially lower than ours and further proposals to abolish it entirely, there is a very strong case for some form of mitigation of APD for Northern Ireland. That view is shared by the Northern Ireland Affairs Committee in Westminster.

Many representatives were keen to stress the significance of air travel to business and tourism in Northern Ireland. We have already seen an increase in tourism here this year as part of our landmark ni2012 celebrations. More than £300 million was invested in our tourism sector in anticipation of this year. If we wish to be serious about developing our long-term prospects and building on our successes, we must be proactive in adapting our air travel infrastructure to accommodate our goals. Our air travel sector has a proven track record of making sizeable contributions to our economy and employment market. The feeling on the ground is very much that a devolved decision to lower APD rates would undoubtedly attract new business and have an even greater impact on our economy.

The proposed devolution of APD rates for direct long-haul flights signifies a progressive step forward in addressing the uneven strain of APD currently levied on Northern Ireland. Although there remains work to be done by the Minister of Finance and Personnel together with the Executive on developing a co-ordinated action plan to maximise the economic opportunities that may arise from such a change, in real terms, the foundation of any transformation is intrinsically reliant on our support for the measures proposed. It is on those grounds that I support the motion.

Photo of David McIlveen David McIlveen DUP 4:15 pm, 28th May 2012

I also support the legislative consent motion. I do so not so much in a financial capacity, but I do chair the all-party group on tourism, and I thought it worth making a contribution on that basis.

First, we commend the Finance Minister on the work that has gone into this. I know that he worked very hard with his colleagues the First Minister and the Minister of Enterprise, Trade and Investment. I know that a considerable change of mindset from the Secretary of State was required, and that that required a fair bit of negotiation and convincing. We have to pay tribute to the work that the Executive have done. What they have achieved, and, by supporting the motion, what the Assembly will achieve, is the saving of a critical air route between here and New York city in North America. A number of businesses have invested in Northern Ireland very much on the basis of that air route being in place. Therefore, it is to be greatly welcomed that the Assembly is taking clear and concise action to ensure that the route is preserved. Hopefully there will be opportunities for a widening of the network to include other long-haul destinations.

Like corporation tax, this gives us something that we can now sell to airlines. I see that Mr Bradley is no longer in the Chamber, but I would not take as pessimistic a view as he did when he said that we have lost out and that there is very little that we can do about it. The opportunities now are immense. It is only now that we should be trying to speak to airlines such as Etihad Airways and Emirates. We should be making it very clear that Northern Ireland has a unique product to sell and trying to encourage airlines — hopefully with the incentive of a reviewed air passenger duty rate — that this is a place that they should be giving very serious consideration to coming to. It would mean that we could compete much better with Dublin and the routes that it has to offer, and I certainly look forward to that challenge. I think that all Departments will step up to the mark and ensure that we do not miss any opportunities when it comes to competing with our neighbour in the Republic of Ireland.

Another thing worth mentioning is that there is a certain uniqueness in having this in Northern Ireland. To the best of my knowledge, when passengers come into the United Kingdom from a number of destinations outside the European Union, they have to get a visa to do so. However, some indications are being given that, if flights were to come directly into Northern Ireland, a visa would not be required for inward travel in the rest of the UK. If passengers then wanted to go to the Republic of Ireland, they could do so as well. Therefore, there is a convenience issue that we can sell as a result of this matter being devolved to us.

I agree with my colleague Mr Girvan that we have to exercise a degree of caution over how far we take this. I know that the figure of £60 million to £90 million has been floated in relation to the cost if we were to extend this to short-haul routes. As an Assembly, we have to be very careful about the message that we send out, because we have to accept that there are families who are struggling financially at the moment. There have been many debates on the cost of fuel and various essential household items. I do not begrudge people their flights to Ibiza, Majorca or wherever, but if we were effectively to give a carte blanche ruling and extend the air passenger duty rate to short-haul flights, that sort of investment might send out a damaging message in the current financial climate.

So, I think that we have to exercise some caution. This is a good news story, and we have to welcome it. However, we also have to treat it with a degree of caution. Our view is that air passenger duty as a whole is regressive, and, in a utopian financial world, we would like to see it completely dismissed, especially in Northern Ireland. That is because the costliness of travelling by sea, which is our alternative, particularly for getting to the United Kingdom, means that we need air routes much more.

I just wanted to add those few thoughts. I commend the motion to the House, and I hope that every party will unite around it as they did with corporation tax.

Photo of Alban Maginness Alban Maginness Social Democratic and Labour Party

The Committee for Enterprise, Trade and Investment considered papers from the Finance and Personnel Committee on the motion and is convinced that there is an overwhelming case for the transfer of the duty to Stormont.

The Committee was also impressed by the various arguments rehearsed here today, including that that says that we have the highest rate in Europe and that there is heavy reliance on air links to access Britain and other markets for business and tourism travellers, and so on. However, the Committee focused on the need to stimulate foreign direct investment, and the link between here and Newark is, of course, very important. That North American linkage is vital in having a direct long-haul route to attract investors from North America to Northern Ireland. So, on that basis, the Committee was supportive of this move.

The Committee also heard evidence from Almac Ltd informing it that the company expanded its business to the United States, resulting in company representatives travelling back and forth on a weekly basis. That highlights the need to retain a strong link both for foreign direct investment companies that are maintaining a direct linkage with their home base and for indigenous companies that are expanding their business links with particular export markets in the United States and further afield in North America. That, together with the recent visit by the First Minister and deputy First Minister and the Minister for Enterprise, Trade and Investment to Asia, underpins the need to be able to attract flights from those growing markets in Asia if FDI is to be drawn from those regions. Those are important areas for potential future investment.

I deeply regret that we missed out on Emirates. That is, and should be, a sore point for all of us. I think that the duty was a significant factor in the decision to go to Dublin.

I would like to conclude on that note. I congratulate the Minister for his application to this issue and for successfully winning the Treasury’s support. It is a very difficult thing indeed to do, and I do not know how he worked it. Perhaps the extreme situation that we were in worked wonders with the Treasury.

Photo of Sammy Wilson Sammy Wilson Shadow DUP Spokesperson (Treasury)

I am pleased that we had an informed debate and that we had such unanimity around the Chamber on this matter. We did not have the dissenting voice of the Green Party, which was obviously outside enjoying the benefits of global warming.

I was just thinking during this debate what would have been said had we had a discussion on air passenger duty four or five years ago, when I was in another post and was being criticised for holding certain views. Mr Cree mentioned it in his speech; he was the only one to do so. This duty started as an environmental tax, designed to deal with an urgent environmental issue and to stop people travelling in aeroplanes because of the emissions from aeroplanes. The duty was welcomed, not just on the fringes by the Green Party, but even within mainstream parties. Indeed, I remember that, at times in the Assembly, Members spoke about the need to change economic behaviour and the way we behaved and how we had to have those burdens imposed on us.

All these things have serious economic consequences. Members from all parties have recognised this today: air passenger duty was designed and specifically mentioned as a way of cutting down on air miles and the number of air journeys being taken. Ministers at one time boasted that cheap holidays to Spain, France and elsewhere in the world would have to stop if we were going to save the world and that this was a way of doing it. All Members have acknowledged today that it has had a detrimental impact on our economy. Indeed, the United Kingdom is losing out because of the decision not to increase capacity at the hub airport, Heathrow, which is an equally important issue for people from Northern Ireland and one that makes air transport more expensive.

A number of Members have congratulated the Executive on the action that was taken. We grasped at a very early stage the impact that the duty was going to have, especially on the direct-haul flight to North America. That direct long-haul flight had important business consequences, and, indeed, a number of Members have mentioned the importance of direct-haul flights. The Chairman of the Enterprise, Trade and Investment Committee spelt out in his speech the detailed work that the Committee has done. There is absolutely no doubt that direct long-haul flights open up markets, and wherever flights are opened up, trade with that particular region increases dramatically, both in and out, and opens up immense opportunities.

It was identified at an early stage that this duty would have severe impacts on the work that Arlene Foster was doing. She was looking to North America for investment and seeking to grow the current batch of firms operating in Northern Ireland, which appreciated the fact that their managing directors and technicians and whatnot could fly in directly to Northern Ireland. This duty was going to have a severely limiting impact on the investment strategy. No one Minister can take credit for this; let me say that. The First and deputy First Minister, the Enterprise Minister and I all pressed this issue; and there was tireless work by officials in my own Department and in the Department of Enterprise, Trade and Investment.

I have got to say that, when it came close to the time when panic buttons were being pressed all over the place, work was being done by Hugo Swire. I was just reflecting on it before I came to the Chamber. It was a day like this, this time last year. We met Hugo Swire in the middle of the holidays, down at Stormont House. We sat out on the patio and had a nice cup of tea, and we emphasised to him that we needed this message to get through. We told him that we could not emphasise enough the message that had to go to the Treasury. The First Minister has referred to this on a number of occasions. Despite opposition from Treasury officials, who still seemed to think that there was plenty of time on this, the Chancellor himself intervened and took this decision. That was after numerous calls to him emphasising the importance of the issue.

It shows that, sometimes, in these matters you need to have built up a political rapport so that you can get decisions made. People say that the Westminster Government are not responsive to the needs of the regions. I have to say that, at times, it is frustrating, but I can think of a number of occasions when there have been positive responses at Treasury level, and those responses have been for the good of Northern Ireland. This is one such occasion. No individual Minister or Department can take credit for this. A concerted effort was made, and it is a good example of the energy of Ministers in this local Assembly and of officials in Departments and the contacts that they have made actually paying off.

Mr Bradley made the point that, unfortunately, it came too late for the Emirates decision. However, I do not think that is the end of that story. Airlines will always look for opportunities, and Arlene Foster will tirelessly search those out. The north American connection is important, as are connections to other parts of the world, especially where there are growing economies. We probably have to look beyond Europe to the growing economies that are further away and try to get direct long-haul flights to those places so that we can build up a base in areas where there is greater economic potential. Therefore, I am not totally downhearted, but it would have been very beneficial if we had that power available or if we had the decision to reduce the rate before that decision was made by Emirates.

Other Members, including the Committee Chairman, made the point about the wider devolution of air passenger duty, and I know the Committee’s view on the matter. Mr Girvan and Mr McIlveen outlined very well some of the dangers in simply saying that we should devolve air passenger duty totally to Northern Ireland and cut the rate for all flights to zero. First, it is costly; secondly, it cannot be done quickly, and we needed a quick decision on the issue. However, even if we said now that we should build on the current devolution and look for wider devolution, we would have to bear in mind that although it would benefit the pockets of individual families, many flights that we would cut air passenger duty on would not have any direct benefit to the Northern Ireland economy. It would benefit individuals by making it cheaper for them to go on holiday or to fly out to their apartments in other parts of Europe at Easter, summer and Christmas time. However, we would be taking money from public services in Northern Ireland to reduce air passenger duty for economically non-productive flights, and I am not sure that that would be a good use of the resources that are available to us.

As I said, the Executive have taken the position that air passenger duty is a bad tax, but it would be wrong for us to ask for that power to be devolved to us so that we could ameliorate the impact of a bad tax. It is an issue that the United Kingdom Government should be dealing with in the longer run. Having listened to debates on this issue in the House of Commons, I can tell you that there is a growing awareness that this level of taxation for a spurious environmental reason is not finding acceptance with an increasing number of Members in the House of Commons.

In conclusion, as far as the process is concerned now, we will await Royal Assent of the Finance Bill. Then, I will present a Bill to the Assembly to bring the air passenger duty rate down to zero. That should become effective by the end of the year or the beginning of the next financial year. Hopefully, on that basis, we will have yet another weapon in our armoury when it comes to seeking investment into Northern Ireland and increasing flights to Northern Ireland.

I welcome the fact that there has been unanimous support. I thank the members on the two Committees — Enterprise, Trade and Investment and Finance and Personnel — for their work. I look forward to the next stage when the Bill will be brought forward in September, as that will enable us to give effect to the changes that are contained in the Finance Bill at Westminster.

Question put and agreed to.


That this Assembly agrees that the provisions in clause 189 of and schedule 23 to the Finance Bill, as introduced in the House of Commons on 10 May 2012, dealing with the devolution of Northern Ireland long-haul rates of air passenger duty should be considered by the UK Parliament.