Finance Bill

Thank you for calling me to speak, Mrs. Heal, and I appreciate the ongoing guidance that I have received from you. I have four brief points to make on amendment No. 3 and the deferral of the air passenger duty increase. I use the term ““increase”” advisedly because, in respect of economy fares, the Chancellor has merely undone his own handiwork. First, I want to make it clear that air passenger duty has nothing whatever to do with forestalling. I do not want to get too bogged down in procedural intricacies and precedents, but the precedent laid down by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) when he originally introduced air passenger duty was to give the industry several months in which to adapt to the duty and to any subsequent rises. As I understand it, however—perhaps my hon. Friend the Member for Christchurch (Mr. Chope) will correct me if I am wrong—amendment No. 3 seeks partly to preserve that precedent which, until the Chancellor scrapped it, helped to prevent a good deal of unnecessary confusion to airlines, tour operators and passengers alike. My second point is that air passenger duty is not at risk of forestalling precisely because it does not really help to effect behavioural change. APD was introduced on a clear pretext: to raise revenue from an under-taxed industry. The reason for the curious timing of the APD increase that appeared in the pre-Budget report was equally clear: it was to raise £100 million of additional revenue. That was certainly the view of Robert Chote of the Institute for Fiscal Studies when he gave evidence to the Treasury Committee. He said:"““The fact that the Chancellor is in a tight position I think is clear...from the fact that he did not offset the rise in green taxation with a cut in other taxation, as he might have found appealing given the political debate””." Martin Weale, also giving evidence, told me personally that APD"““is very much at the level where it is just an additional tax rather than really going at changing behaviour.””" Likewise, the Institute of Chartered Accountants was of the opinion that APD did not demonstrably change behaviour. It took another three and a half months for the Treasury to concoct an explanation. When Mark Neale from the Treasury gave evidence on the Budget, he suddenly told me that"““the APD change came in quickly because there were pressing environmental reasons for bringing that change in quickly.””" I will not try to guess what those pressing environmental reasons were, but it remains my opinion that there were pressing economic reasons to grab the £100 million on offer from seven extra weeks of increased yield. What we need from the Chancellor now and in the future is a much clearer differentiation between taxation to change behaviour and taxation simply to raise revenue. My third point concerns the anomaly that tour operators have faced regarding their ability to pass on the cost of increases to their customers, to which the hon. Member for Falmouth and Camborne (Julia Goldsworthy) referred earlier. I know that the matter is, embarrassingly, sub judice, and that the Financial Secretary gave some reassurance in February that he would have the Department of Trade and Industry consider reviewing the guidelines.