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Budget Resolutions and Economic Situation

It is a pleasure to follow my hon. Friend the Member for Ludlow (Mr. Dunne), who delivered an incisive analysis of what lies behind the Chancellor’s smoke and mirrors. He drew to our attention, if we did not already know it, that the Chancellor is basically once again raising taxes while saying that he is cutting them. My hon. Friend did not go quite as far as my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), who said that the Chancellor was making ““a blatant attempt to mislead the public”” about what he was doing. Those are strong words, but they are highly appropriate in light of what is being done through the Budget, which began unravelling within hours of the Budget statement, and which will be a catalyst through which to discredit the Chancellor when he seeks the position of Prime Minister. In the four hours or so that I have been listening to the debate, my hon. Friend the Member for Ludlow and others have shown that they have great experience and knowledge of the world of business. My hon. Friends the Members for Northampton, South (Mr. Binley), for Beverley and Holderness (Mr. Stuart) and for Ludlow have demonstrated that they can operate in, and make a success of, business, thereby creating employment and generating wealth for our country. Is it any surprise that when the Government started in 1997, they said, ““We’re on the side of small business””? As part of their promise, the Government said that there would be an annual debate on small business on the Floor of the House, but is it surprising that that promise was abandoned long ago? Obviously, the only people who know anything about small business and the operation of the enterprise society are the people on the Conservative Benches, and that has been demonstrated in this debate. The most intellectually stimulating contribution from a Conservative Member this evening was that of my hon. Friend the Member for Gainsborough (Mr. Leigh). He set out his own alternative Budget, which would involve raising the starting rate for paying tax to £15,000 in income. That would take 13.5 million people out of tax. It would also raise the starting point for the 40 per cent. rate to £47,000. That is an aspiration and it should be a policy for the Conservative party. I am delighted that so many members of our Treasury team are on the Front Bench, including the shadow Chancellor. In my remarks I shall concentrate on the issue of air passenger duty. We do ourselves a disservice in the House if we do not show that we are in tune with the concerns of the people out there. There have been full-page advertisements in our popular press over recent weeks expressing concerns about air passenger duty, particularly the increase, which is provided for in resolution 13. The increase will result in an extra £1 billion for the Treasury. What I find particularly offensive is that the increase is retrospective. It goes back to 1 February and therefore breaks new ground with respect to Budget resolutions. That is one of the reasons why I described it as unconstitutional in an Adjournment debate that I was lucky enough to secure. Anyone travelling by air after 1 February has to pay the extra tax, regardless of when the flight was booked. That means that people who booked their flights for the coming spring holiday in, say, October or November, find that when they go to the airport they have to pay an extra sum of money because of the retrospective legislation. Most of the adverse tax consequences are being borne by individuals. I am sure they will find a way of getting their own back against the Chancellor and this ghastly Government when the next election comes. However, there is a significant group of people who do not have that protection. They are the package tour operators. They have taken a financial hit of some £44 million because regulations under the European package holiday regulations prohibit them from passing on the increase to their customers. That is outrageous. Because of the impact on the package holiday industry, when the Conservative Government introduced air passenger duty they gave about one year’s notice of its introduction to deal with those involved in the package holiday business. I am delighted that the package holiday industry is taking the Chancellor to court on the matter, and I wish it well. Air passenger is offensive not just because it is retrospective. It is a good little earner for the Chancellor. He has presented it as a green tax, but we know that it is no such thing. As a result of the change announced on 6 December, there will be savings of about 0.3 million tonnes of carbon per year by 2010-11. Let us compare that with the latest figures that I have for how many million tonnes of CO2 are emitted by China, India and the United States—2,700 million tonnes, and rising by 10 per cent. a year or more. By comparison with that, 0.3 million tonnes by 2010 will hardly change the planet. However, it will provide another £1 billion for the Chancellor’s coffers, and we will do the people who are concerned about the matter a disservice if we allow the Chancellor to present air passenger duty as a green tax. It certainly is not. It is just a revenue raising measure, and an unfair one at that. Fortunately, the demand for aviation is inelastic. That means that however much we charge in taxes on aircraft flights, people will not be deterred from using aircraft. That has become apparent from discussions that have been taking place in the House on the European emissions trading scheme and the proposals to extend that to aircraft. If aircraft carbon were charged at £20 a tonne and average load factors of 70 per cent. prevailed, the result would be increases in the cost of an air journey of between £3 and £25. The growth in aviation by 2020 would be 135 per cent. rather than 142 per cent.: in other words, air travel would be double plus one third. There would be a minimal impact on the large growth in aviation. Why? Because of the inelasticity of this particular economic activity. The number of passenger journeys from United Kingdom airports is set to increase from 228 million in 2005 to 490 million by 2030. I think that that is jolly good news, because it shows that all those people will be able to enjoy an improved quality of life. They will be able to enrich their experience by travelling and seeing the world. That probably applies to their children as well. Other Members, like me, will have children who, over the coming Easter holidays, will fly to the continent to engage in school exchanges and become more familiar with foreign languages. Why should we think it a bad thing for those children to have the enriching experience of travelling abroad by plane? Why should we tax hard-working families in this way? Each year, United Kingdom aviation produces 36 million tonnes of carbon dioxide. At a market price of £10 per tonne, which I think is the current basic market price, aviation would have to contribute £360 million a year to meet its environmental carbon costs. But air passenger duty already yields 1 billion, and the increase proposed in resolution 13 would double that to £2 billion. Far from this being an effort to make the aviation industry pay its environmental costs, the industry will be charged more than five times those costs. The tax burden of air passenger duty is disproportionate, and its impact on the environment is minuscule. Less than 1 per cent. of aviation’s 36 million tonnes of carbon will be saved. I welcome the realisation in my party that this is not a green tax, and I welcome the publication of the discussion document ““Greener Skies: A consultation on the environmental taxation of aviation””. I welcome the assertion that"““The doubling of APD rates… has attracted controversy due to the short notice and retrospective nature of the increase on passengers who had already booked their flights.””"