Finance Bill

Indeed, and the tax being proposed at that time was not an environmental tax at all, but a revenue measure. However, the Financial Secretary was right to say that we now confront a different kind of world, where there is a legitimate and powerful concern about the environment, and particularly about global warming. As he rightly said, carbon emissions from the aviation industry are substantial and growing very rapidly. The question is whether the air passenger duty is a reasonable proxy for an environmental tax. Can the environment be taxed in a better way? There is a strong argument that the air passenger duty is a very clumsy way to tax the environment. That point was made in a brief interjection by the right hon. Member for Suffolk, Coastal (Mr. Gummer), who was ruled out of order but whose point was nevertheless correct. The current duty penalises airlines that use their aircraft efficiently. The same aircraft travelling full pays twice as much duty as one travelling half empty, so there is no incentive to be efficient. Moreover, the duty is inequitable because it bears particularly heavily on low-cost airlines and their passengers. That is compounded by the fact that this country has a very inefficient system for allocating slots for landing and take off. They are allocated free, and are grandfathered. No consideration of efficiency is involved, so airlines are under no pressure to use their aircraft efficiently in terms of passenger use. Very often, slots are acquired and retained so that competitors are kept out of the business but, were they auctioned in a more economically rational way, there is no doubt that aircraft would be used more efficiently. The combination of inefficient allocation of airport slots and the existing taxation system is pretty rough and ready, and an ineffective environmental measure. However, no doubt the Minister’s figures are right and he is working on Treasury assumptions about the elasticity of demand. Doubling the tax will no doubt have a rough and ready impact on carbon emissions. The question is whether it could be done significantly better. This morning, the Treasury issued a ministerial statement. When I started to read it my heart jumped because the first sentence said that ““air passenger duty””, as defined,"““could send inappropriate environmental signals and cause market distortions””." At last, I thought, the Treasury has got the point and it will look at different options. However, it turned out that what was produced in a long and complicated consultation paper has nothing much at all to do with the environment; it would produce simply a more equitable sharing of the burden of air passenger duty between different categories of passenger. The Government have spotted that there are such things as airlines with only one travel class and their passengers may qualify for the lowest rate of duty. The Government are concerned about the anomalies and have produced a complicated consultation paper to deal with them. I have not yet had a chance to study it, but it does not seem at first sight—the Minister may correct me—to have much to do with environmentalism.