Clause 146

Finance Bill – in a Public Bill Committee at 3:45 pm on 12th June 2008.

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Aviation duty

Question proposed, That the clause stand part of the Bill.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party 4:00 pm, 12th June 2008

This clause provides powers for the Government to spend money preparing for the new form of air tax—airline pollution duty. I want to press  the Government on this because it is of great importance to the airline industry and to millions of people up and down the country who use air travel to get around and to go on holiday. Will the Minister clarify whether the Government will be going ahead with an assumption of tax being based on the maximum take-off weight? May I flag up to her one of the industry’s concerns, which is that, although the Government are seeking to use this is a proxy for CO2 emissions by flight, there are factors other than maximum take-off weight that have an impact on emissions? Emissions depend not just on take-off weight, but also on the speed of flight and the design of the plane.

Photo of Mark Todd Mark Todd Labour, South Derbyshire

One of the most material issues is that this brings the dedicated freight sector of aviation into a fiscal framework. I hope that, as the Government construct the details of this review, they give careful thought to the imperative of modernising freight fleets so that they are as energy-efficient and noise-efficient as possible, since many of my constituents, as well as myself, live immediately under freight paths.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

That is an important point and brings me to another key issue, which is uncertainty and the need to have the more detailed proposals that the Government were planning to introduce. Talking to the industry is vital if we are to get a thoughtful but effective new form of air-passenger duty—airline pollution duty—that will work and see CO2 emissions reduced. Perhaps the Minister can tell me whether the Treasury is continuing to meet representatives of the industry because I have been told by some industry participants that they are having difficulty getting access to Ministers in order to outline their concerns, including the issue of freight.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

I refer to my declaration in the Register of Members’ Interests. This is a very strange clause where we are giving powers to spend money on a duty that we know nothing about. It is a bizarre clause and I am really rather unhappy about supporting it.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

Perhaps I can provide some reassurance. A consultation paper was outlined by the Treasury and, following that, some initial proposals were made about a how a new form of airline pollution duty might work. Therefore, I do not have a problem with starting to provide resources so that the Government can bring forward some proper, detailed proposals and the definitive proposal. If it is going to be effective, the industry needs time to prepare. This has not been proceeded with as fast as we would have liked and we would be grateful if the Minister could provide the Committee with the latest timetable for what is going to happen and when.

My final point is on the issue of legality that has been raised in the last couple of weeks by the American embassy. Can the Minister tell the Committee about the Treasury’s feedback on that letter from the embassy, which said that, as far as it was concerned, this was possibly an illegal form of duty? I understand that it should be possible, if it is done with some care, to have a per plane charge. I sense that there is a possibility to get at these issues, but perhaps the Minister will set out the Treasury’s formal responses to concerns raised by the American embassy.

Suffice it to say that we floated this policy in our own consultation paper early last year. Obviously, we support this mutual per plane charge, because it is a much better structure for the tax and will bear down on CO2 emissions from aviation.

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

We are in a rather odd situation, because we have to introduce paving legislation to fulfil a policy commitment, the announcement on which has not yet been fully made. However, I shall attempt to enlighten the Committee as far as I can.

On maximum take-off weight, the only thing that I can say is that it is our lead option for the aircraft measure element of the duty. We have sought an objective, uniform measure or combination of measures of an aircraft and/or an aircraft’s flight. Maximum take-off weight has been a reasonable proxy for emissions en route, but we are still analysing the consultation responses. The hon. Lady rightly said that we need to work shoulder to shoulder with industry to get the measure right. We received more than 160 consultation responses and are considering those at the moment. No decisions have yet been made.

On the timing of the eventual decision, we have said autumn 2008. That is currently our intention. We want to keep working closely with industry and have met representatives, both formally and informally on a number of occasions. We understand that it is important that there should be as much certainty as possible about the structure and rates of tax. We will endeavour to decide as soon as possible.

I am concerned that there may be a view out there that access to Ministers is not as great as some people would like. I shall pass that concern to the Exchequer Secretary.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

I am surprised that autumn 2008 is the time given. The package travel industry has a fixed price that it includes in its brochures, which are already published and it is prepared for autumn 2008. Normally, there is a much greater lead time for the industry. That seems to be a rather short lead time.

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

That is the policy announcement date that we have set.

Coming back to my general point, we want completely to understand the effects on industry as much as possible, which is why we are considering the consultation responses in detail and why we have held a number of different forums and tried other ways of ensuring that we understand the effect on the industry as much as possible. It is always tricky with tax rates, which cannot be pre-announced informally because there would immediately be a huge public relations effect. Within those constraints, Ministers are engaging as much as possible. That is why we have not already  set out the design and detail of the measure. We have been consulting as much as possible.

My hon. Friend the Member for South Derbyshire, with support on his general point from the Opposition, asked specifically about the freight industry. I sympathise with his personal circumstances. It is not the Government’s intention to exclude freight or transfer passengers from the new duty, but we are taking into account the evidence provided.

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

I will, as ever, give way to the hon. Lady.

Photo of Justine Greening Justine Greening Shadow Minister (Treasury), Vice-Chair (Youth), Conservative Party

That is very kind. I am conscious of the time. Will the announcement that will be made in the autumn cover eco-labelling, which some carriers like Flybe are already doing? I understand that when the Transport Committee looked at eco-labelling earlier in the year, it broadly welcomed it. Obviously, it will give passengers better data on the impact of noise and carbon emissions. Just like eco-labelling on fridges, it might help the public to play their part by making an informed choice to spend their consumer pounds with aircraft operators who are doing their best to bear down on the emissions caused by their operations.

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

I agree with the hon. Lady that eco-labelling plays an important part. It has not yet been decided whether the announcement in the autumn will address the specific question of eco-labelling, so I cannot tell her right here, right now, but I do agree with her general point.

Finally, the hon. Lady mentioned the US Government’s response to our consultation. As I said, we are considering all the representations that have been made to us, but we do not think that our proposals are illegal in any way, and that is our response to the American Government. We are committed to our international legal obligations and we will not do anything that we think contravenes them.

Question put and agreed to.

Clause 146 ordered to stand part of the Bill.

The Chairman I congratulate hon. Members on both sides of the Committee on the way in which they have dealt with something like 40 clauses and schedules. That is an excellent effort, and I wish you a good weekend. I shall not be in the Chair next Tuesday morning. My co-Chairman, Mr. Frank Cook, will chair proceedings, but I shall be with you next Tuesday afternoon.

Further consideration adjourned.—[Mr. Blizzard.]

Adjourned accordingly at eleven minutes past Four o’clock till Tuesday 17 June at half-past Ten o’clock.