HC Deb 20 April 1994 vol 241 cc893-6
Sir John Cope

I beg to move amendment No. 29, in page 28, line 28, leave out from beginning to 'at' in line 29 and insert— 'to make returns in respect of duty—

  1. (i) by reference to such periods as may be prescribed or as may be allowed by the Commissioners, in relation to a particular operator, in accordance with regulations, and
  2. (ii)'.

Madam Speaker

With this, it will be convenient also to discuss Government amendment No. 30.

Sir John Cope

The amendment relates to returns under the air passenger duty, and has two purposes. It removes doubt about the original wording of the Bill, and allows the Commissioners of Customs and Excise to make regulations to require aircraft operators to make returns for accounting periods where no duty is due. There is only a doubt but, nevertheless, it is wise to remove it.

The point about a nil return is that it can be less trouble both to the airline operator—if it happens to have a period in which there is no duty—and to Customs and Excise because it will be saved the trouble of wondering where a return has got to, which it was otherwise expecting. It will save Customs and Excise from having to chase the airline operator, and the airline operator having then to confirm back again. It will be more convenient if nil returns are provided for. There was always the intention to do that but, as I said, there has been some doubt about the original wording of the Bill which the amendment clears up.

The second aim of the amendment is to allow Customs and Excise to have flexibility over the accounting periods for returns in order to help the airline industry. The standard accounting period ends on the last day of each month, and that will be prescribed in the regulations. Undoubtedly, there will be some aircraft operators who run an accounting system that ends on a different day of the month. It would be convenient to allow Customs and Excise to accept a different accounting period of that sort and, indeed, that is what the second part of the amendment does.

Mr. Wallace

We certainly have no intention of opposing the amendment, but we shall make some observations about it. The amendment has been presented to the House on the justification that it will be convenient for aircraft operators, and especially Her Majesty's Customs and Excise.

It is a matter for comment that, while the Government are going out of their way to provide for the convenience of Customs and Excise and airline operators, no concession has been given at any stage for the convenience of those who live in remote island communities and who will be penalised by the measure. I shall not rehearse all the arguments that were made in Committee—they were made in Committee on the Floor of the House and upstairs—and to the Minister.

With regard to the convenience of airline operators, the Minister introduced a new clause to facilitate, as it were, not a guess but a detailed passenger-by-passenger calculation as a means of calculating the rough sum which would be allowed. I know that the hon. Member for Western Isles (Mr. Macdonald) asked whether that might take account of journeys that either begin or end in our island communities.

The Minister is well aware of the importance of the issue to many communities where an airline is an essential service, rather than a form of convenience or a luxury. I therefore hope, even at this late stage, that the Minister is prepared to say something which might give reassurance. He suggested in Committee that the matter might be better dealt with by a subsidy through the Scottish Office than by making further exemptions to the tax which we are now debating. As that subsidy, under the Highlands and Islands Air Services (Scotland) Act 1980, requires the consent of the Treasury, perhaps the right hon. Gentleman will state what level of consent the Treasury is prepared to make in this case.

4 pm

Sir Peter Fry (Wellingborough)

The amendment, and the clause to which it relates, is concerned with the accounting for and payment of the air passenger duty. I find the amendment insufficient and inadequate because it expects the aircraft operators—in other words, the airlines —to enter into the expense of keeping accounts and making returns which most other companies do not have to do.

This part of the Bill imposes upon airlines a duty which they cannot avoid, yet it takes no account whatsoever of the special position of airlines. I understand that the duty is intended entirely to be extra revenue for the Treasury, yet it does not in any way take into account the peculiar position of airlines, particularly with regard to the additional expenses for security which they have at the moment.

I will not go into great detail, you will be delighted to know, Madam Speaker. It is estimated that the six main airports in this country will have to pay about £134 million to improve the searching of hold baggage. If we add to that the necessary research and development, the figure comes to about £200 million a year.

It may be of interest to my right hon. Friend that in 1989, when the Transport Select Committee looked at whether there should be a special duty on airlines, the airline operators asked for a special security tax so that they would be assisted in the essential job of protecting people who fly within and from this country. The Select Committee agreed entirely with the airline operators. The Committee pointed out that previously there had been a tax similar to the one which the Government are now proposing, but it was related purely to security purposes.

At that time, the Department of Transport disagreed. It said, first, that there was no shortage of money to cover the problem of airport security and, secondly, that it would be far too expensive to collect such a charge. That view seems hollow today. We now appear to be expecting airlines to pay for security without any assistance from the new duty at a time when most airlines have been losing money throughout the world. Yet we are expecting them to invest more and more in the means of protecting the travelling public. The objection that it would be impossible or too expensive to collect such a tax has now been totally blown away by the Government's proposals in the Bill.

The Government have lost a great opportunity. They could have brought about a situation whereby part of the tax or duty, or a slight addition to it, could have covered the enormous cost of protecting our citizens and those of other countries who fly to and from the United Kingdom. It is estimated that only £2 would cover that.

I believe that the duty would have been better accepted by the travelling public if they felt that some of the money was going to protect them as they fly around the world. It is a lost opportunity, but I hope that the Government will not close their minds totally to looking at the increased cost of security in airports and on aircraft which fly from here. They should not just regard the duty as another way of squeezing more taxation out of the British public. If they did consider the costs, they would find that the measure would be far more acceptable than it has been until now.

Mr. Andrew Smith

The hon. Member for Wellingborough (Mr. Fry) made some forceful and relevant points, but I fear that he will be disappointed if he expects the Government to do other than simply squeeze every penny that they can out of this measure to make up the massive fiscal deficit—albeit a deficit of £46 billion now, rather than the £50 billion that they forecast—that has resulted directly from their own economic incompetence.

We, too, will pay close attention to what the Government say and do in the future about airline and airport security. We remain very concerned about the impact of the duty on ordinary travellers—especially those travelling to the islands, to whom the hon. Member for Orkney and Shetland (Mr. Wallace) referred. As he acknowledged, my hon. Friends—notably the hon. Member for Western Isles (Mr. Macdonald)—have fought long and hard alongside him for the interests of islanders in this context. The Government's response, however, has been wholly inadequate and insensitive to the needs of, in particular, communities that depend on air services and the lifeline that they provide.

I understand that it is convenient for Customs and Excise for operators to be required to submit nil returns, perhaps year after year; but it is stretching the truth to suggest that it would be convenient for operators as well. The Government keep on about deregulation and the action that they are taking to remove burdens from business, but requiring firms to submit a succession of nil returns does not strike me as winning the battle against unnecessary bureaucracy.

There is some benefit in making accounting periods flexible. It clearly makes sense to ensure the closest possible correspondence between the periods used for firms' own accounting purposes and those that are acceptable for the purposes of Customs and Excise. None the less, this is still a bad tax that has been badly introduced, and we fear that it will have damaging effects, especially in the islands.

Sir John Cope

It is not a question of nil returns year after year, as the hon. Member for Oxford, East (Mr. Smith) suggested. Our amendment is intended to deal only with cases in which there are occasional nil returns from an airline which would normally provide ordinary returns and, indeed, pay the duty.

Mr. Andrew Smith

Is the Paymaster General saying that, after a certain number of nil returns, an operator would no longer be obliged to make returns?

Sir John Cope

If the operator is not liable for the duty, he will fall out of the registration requirements altogether, under clause 33.

Some airlines operate for only part of the year. The amendment would enable Customs and Excise to make a regulation allowing operators which did not expect to pay duty for a number of successive months, on request, to submit a single return covering the period concerned.

The hon. Member for Orkney and Shetland (Mr. Wallace) ingeniously used the amendment to refer to discussions that we have had before about the highlands and islands, and in particular to the question of subsidies, which we have also mentioned before. As he is doubtless aware, my right hon. Friend the Secretary of State for Scotland has announced increased funds for Western Isles council, so that it can increase the subsidy to the airline that operates on the inter-island route within the Western Isles. He would not have been able to do that without Treasury approval. It will mean that prices can be reduced, so that the passenger will pay no more as a result of the air passenger duty. As for the future, I can only say that we shall consider any suggestions that are made.

My hon. Friend the Member for Wellingborough (Mr. Fry) referred to the expenses involved in airport and airline security. I understand his views, but, as my right hon. and learned Friend the Chancellor of the Exchequer made clear in his Budget speech, we are engaged in what is essentially a revenue-raising operation. As he knows, we have always done our best to avoid hypothecation of revenue to particular items of expenditure. While I have some sympathy for what he said, I cannot go along with his suggestion. As has been made clear from the start, it is a revenue-raising duty and that is the basis on which we recommend it.

Mr. Wallace

What the Minister says about the Western Isles covers only internal flights and brings them into line with Orkney and Shetland, where internal flights are already covered by the exemption related to aircraft size. In Committee, the Minister raised the issue of subsidy and returned with that as a possible solution, but that was in the context of flights from the Scottish mainland to the islands. Is the Treasury willing to grant consent to the Secretary of State for Scotland to allow subsidy under the Act to which I have referred for mainland-island flights?

Sir John Cope

I am happy to repeat that we will look at suggestions. However, I will not commit myself or the Government in advance to suggestions that have not, as far as I am aware, yet been put to us—or not to me at any rate.

Amendment agreed to.

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