Rates of air passenger duty from 1 April 2021

Finance Bill – in a Public Bill Committee at 2:00 pm on 16th June 2020.

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

Photo of Kemi Badenoch Kemi Badenoch The Exchequer Secretary

Clause 87 makes changes to ensure that the long-haul rates of air passenger duty for the tax year 2021-22 increase in line with the retail price index. The change will make sure that the aviation sector continues to play its part in contributing towards funding our vital public services.

Aviation plays a crucial role in keeping Britain open for business, and the UK Government are keen to support its long-term success. Indeed, the UK has one of the highest direct connectivity scores in Europe, according to the latest Airports Council International Europe report. The Government appreciate the difficulties that the airline industry currently faces as a result of coronavirus. That is why the Chancellor provided a comprehensive package for all businesses affected by the virus on 20 March. However, as air passenger duty is paid on a per passenger basis, the recent decline in passenger demand will have resulted in a reduction in air passenger duty liabilities for airlines. As the industry returns to health, it is right that the revenue raised from air passenger duty should continue to remain in line.

The clause increases the long-haul reduced rate for economy class nominally by only £2 and the standard rate for all classes above economy by £4—a real-terms freeze. The rounding of air passenger duty raised to the nearest £1 means that short-haul rates will remain frozen in nominal terms for the eighth year in a row, which benefits about 80% of all airline passengers. More broadly, the Government will consult on aviation tax reform. As part of the consultation, we will consider the case for changing the air passenger duty treatment of domestic flights, such as reintroducing the return leg exemption, and for increasing the number of international distance bands.

The changes made by the clause will increase the long-haul APD rates for the tax year 2021-22 by the RPI. Air passenger duty is a fair and efficient tax, where the amount paid corresponds to the distance and class of travel of the passenger and is due only when airlines are flying passengers. The changes ensure that the aviation sector will continue to play its part in contributing towards funding our vital public services. I therefore commend the clause to the Committee.

Photo of Wes Streeting Wes Streeting Shadow Exchequer Secretary (Treasury)

The industry has stated that the proposed changes do not support it and its net zero plans. The news that the airline industry does not like air passenger duty will come as a surprise to no one. As we are debating air passenger duty under clause 87, and as Treasury Ministers declined to come to the House in response to an urgent question from the Chair of the Transport Committee, this is an opportunity for me to raise concerns directly with Treasury Ministers about support for the airline industry in the light of the challenges it faces because of covid-19.

The Minister said that the airline industry has benefited from Government support. In so far as any industry and employer has benefited from the general schemes made available—the job retention scheme, the self-employment income support scheme, the various business grants and loans that are available—that is true. However, back in March, the Chancellor referred to specific support for the aviation industry. It is now June and that support has not yet materialised. In fact, we do not even have any outline of what that support could entail or whether it will materialise at all.

Let us bear in mind that the industry contributes £22 billion a year to the British economy. It supports 230,000 jobs in aviation and throughout the manufacturing supply chain. If we take into account the broader sweep of jobs based around the supply chain, airports and travel, we are probably looking at something closer to 500,000 jobs.

Ministers, whether in the Treasury or the Department for Transport, ought to be embarrassed by the fact that, only a matter of weeks ago, a leading figure in the airline industry told the Transport Committee that the Government have been “asleep at the wheel”. That is not the way that the Treasury should approach a major industry. Of course, the airline industry has a lot to change in order to meet our country’s net zero ambitions, but I am sure we would all agree that we would prefer it if the aviation industry got to that point through research, innovation, sensible application of technology, change of consumer behaviour and a just transition to support the workforce as the industry changes, rather than because airlines go bust and people lose their jobs.

In our proceedings this morning, we referred to the fact that unemployment is already a serious challenge in our country. We see that reflected in the figures today. Unless Ministers take action, things are going to get a hell of a lot worse for an awful lot of people. As I told the poor aviation Minister, who was sent along to answer for Treasury Ministers in the urgent question—with her hands tied behind her back because she had zero latitude to speak for the Treasury—the Department for Transport is neither use nor ornament on this matter.

Only the Treasury can now provide the support that our aviation industry needs. People’s jobs up and down the country are counting on them. It is wholly unacceptable that the Chancellor made a commitment back in March, but has not put his money where his mouth is since. I hope that Ministers might give some semblance of explanation or hope to people in the airline industry and those whose jobs rely on it more broadly that the Government are listening and are going to act in short order.

Photo of Anthony Browne Anthony Browne Conservative, South Cambridgeshire 2:15 pm, 16th June 2020

This is my first ever Bill Committee, but I was under the impression that we were meant to talk about the actual elements of the Bill, rather than wider economic policy or industrial strategies for business. The hon. Member for Ilford North has kindly emphasised all the support the British Government are giving the airline industry, but it is completely irrelevant for discussion now.

Photo of Siobhain McDonagh Siobhain McDonagh Labour, Mitcham and Morden

I would just say to the hon. Gentleman that the decision on what is spoken about and what is not is mine. My general attitude is to encourage participation and comment. I will show the same latitude to both Government and Opposition Members. I call the Minister.

Photo of Kemi Badenoch Kemi Badenoch The Exchequer Secretary

On the issue of a specific support package for the industry, the hon. Member for Ilford North has mentioned the range of measures that we have put in place, and we know that the DFT, the Transport Secretary and the aviation Minister are in close contact with the aviation sector. What the hon. Gentleman does not know is that Treasury Ministers, including myself, have also received lots of representations from the industry—it is not an issue that we are ignoring—but we need to be careful about how we make interventions.

The aviation sector is important to the UK economy. When those companies, as with any other companies that make a material contribution to the economy, find themselves in trouble as a result of coronavirus and have exhausted the measures already available to them, the Transport Secretary and Chancellor are listening to understand the issues, but any intervention needs to represent value for money for the taxpayer.

As we saw in the urgent question earlier today, there are so many people we need to help. We need to be careful about how we spend taxpayers’ money and where it should be directed. At this time, the Chancellor has not made that decision, but we will continue to work closely with the sector, and we are willing to consider the situation of individual firms, rather than working a sector-wide basis, once all the other Government schemes and commercial options have been explored and exhausted. That includes—I am sure this is something Opposition Members agree with—raising capital from existing investors and approaching other investors first.

Question put and agreed to.

Clause 87 accordingly ordered to stand part of the Bill.