§ Mr. Michael Colvin (Bristol, North-West)
I beg to move amendment No. 1, in page 3, line 11, leave out'one half of the rate specified in that subsection in relation to light oil'and insert'3.05p'.The amendment calls for a further reduction in the rate of duty on aviation gasoline—otherwise known as avgas—which is used in piston engines from the present 27½p per gallon, which is about half the rate before the Budget, to 3.05p per gallon, which is the same rate as the duty on aviation turbine fuel, known as avtur, which is used in jet aircraft.
The basis of our argument is simply that all aviation fuels should be taxed at the same rate. As the Minister is aware, this logical move would be of particular help to our general aviation industry. The industry appreciates that the Chancellor of the Exchequer has already recognised the economic pressures on the industry and that he has taken them into account in reaching his welcome decision to reduce the avgas duty rate to half the rate on petrol, or mogas as it is known. I acknowledge that that has been of significant benefit to general aviation, but it still leaves avgas nearly twice as expensive as avtur, with a difference of about £1.08 per gallon including all duties, while in the United States the difference between avgas and avtur is only 15p. As a result, our industry is losing valuable flying training business to the United States for commercial and private pilots.
The Minister will not be displaying his usual infallible common sense if he does not accept that it is not only 792 illogical but unfair for one type of aircraft to use fuel costing 27½p in duty while another aircraft, probably carrying out identical operations, uses fuel costing only 3½p per gallon in duty, simply because a different type of engine is fitted to that aircraft.
On 21 May this year I received a written answer to a question that I had tabled to the Chancellor of the Exchequer askingwhat were the decisive considerations in his determination of the new rate of duty on aviation gasoline.I should like to comment briefly on the points contained in the reply. My hon. Friend the Economic Secretary said:The new rate of duty … was determined after a review which included consideration of the following factors: (a) the uses of aviation gasoline for business and leisure purposes."—[Official Report, 21 May 1982; Vol. 24, c. 211.]There is a common misconception that general aviation is a fun and leisure industry. Ninety per cent. of all general aviation is for business, industrial or commercial purposes. Piston engine aircaft operated by airlines—mainly third level airlines and air taxi businesses—account for 65 per cent. of the total general aviation hours each year, pilot flying training accounts for 20 per cent. and agricultural flying for 5 per cent., which leaves only 10 per cent. to cover everything else, including leisure. It is absurd that airlines operating jet aircraft, 80 per cent. of whose passengers fly for leisure or pleasure, use fuel taxed at only 3.5p per gallon while piston engine aircraft use fuel taxed at a rate almost eight times higher.
My hon. Friend's second point referred to surface vehicles and his fourth point to the relationship between avgas and petrol, otherwise known as mogas. Even if my amendment were accepted, avgas would still be more expensive than mogas and likely to rise in price more quickly.
My hon. Friend's last point about duty evasion and misuse of avgas in motor cars is no more than the old chestnut produced by the Treasury with its super-cautious attitude to the matter. It also shows that the Treasury has failed to understand the problem. Avgas has only a limited distribution. There are 60 outlets at airfields around Britain disciplined by British Petroleum and Shell. Cars will not start to use it instead of petrol. I cannot see impatient motorists queueing up at aircraft dispersal areas for fuel that is much more expensive than the petrol that they can buy in the high street. Even if they did, misuse could easily be policed and stopped.
Last year the duty on avgas raised about £5 million. This year, thanks to the Budget, it will be halved. My amendment would cost the Treasury another £2 million. However, there would be bonuses, because general aviation would be greatly encouraged. That would be consistent with the Government's policy of helping smaller businesses. Regional airports would benefit and there would be a useful spin-off for the manufacturing and trading side of the industry.
I remind my hon. Friend of the support for the proposition of the British civil aviation standing conference that covers almost the entire industry. I congratulate the General Aviation Manufacturers and Trading Association on its campaigning zeal. The more I hear the arguments, the more I convince myself that this amendment is fully justified. I trust that my hon. Friend is equally convinced.
§ Mr. Bruce-Gardyne
I congratulate my hon. Friend the Member for Bristol, North-West (Mr. Colvin) on his 793 self-persuasiveness. I listened to his arguments with sympathy and concern, but I must confess that his persuasiveness towards me was slightly less than his self-persuasiveness. I hope that he will not take it amiss if I say that he was slightly less than generous to my right hon. and learned Friend the Chancellor, who went a long way in the Budget—as far as he believed that he could—to meet the case that was made most effectively by GAMTA. One can also mention the name of my hon. Friend the Member for Woking (Mr. Onslow) who, for reasons that the House will understand, can no longer be involved in such matters.
I do not think that the Government can go the stage further that my hon. Friends seeks in the amendment. I should like to correct one point of fact. My hon. Friend referred to the duty on avtur as 3.05p. I am advised that the actual rate of duty is 3.50p. That is, however, a minor point.
One complication is that the amendment, if accepted by the House, would require the Government to pay back all the differential duty paid by the industry since the Budget. That is not a prospect that we would view with any enthusiasm. My hon. Friend referred to the answer I gave on 21 May, which described the considerations that we have had to take into account in making the change in the duty on aviation gasoline in the Budget.
The main difficulty about the amendment is the risk of what I am advised could be a significant diversion of avgas to use in road vehicles. There are a variety of grades of avgas. The low grade 80/87 octane avgas, now the only avgas produced in the United Kingdom, would be relatively easily diverted to use in motor vehicles. There have been cases, I understand, where this has happened. At present, 80/87 avgas retails typically at about £1.90 a gallon at the point of delivery to an aircraft. A reduction of the duty rate to 3½p per gallon would bring the retail price of such avgas down to £1.54 a gallon or even less. My hon. Friend will appreciate that this is quite a long way below the current price for motor spirit. This would give a definite incentive to divert for road use.
We have taken in this clause powers to increase the control of the utilisation of avgas. Nevertheless, the policing of these controls would be difficult. If the Government accepted a move in the price by reduction in the duty to a point where there would be a strong incentive for diversion of the spirit for use in motor cars, the problems of control would be considerable, especially at a time when we are trying to achieve economies in Customs and Excise manpower.
I understand the arguments that my hon. Friend has advanced. I have to say regretfully that I do not believe that the Government would be justified in taking the risk of what could be a significant diversion and misuse, particularly of the lower grades of avgas, by accepting the amendment. I cannot therefore take that path.
§ Mr. Colvin
With the leave of the House, I should like to inform my hon. Friend that I do not accept all his arguments. They will be studied in great detail by the industry. I shall refrain from forcing a Division at this hour of the morning because I appreciate the difficulties. My hon. Friend has, however, shown that he is beginning to understand the real issues involved. I am satisfied that a 794 marker has been put down, perhaps for next year's Budget. I shall be using every opportunity between now and then to press home the points that I have made.
I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.