26 July 2009

Lord Adonis on the UK Air Passenger Duty

The uncorrected transcript of the appearance by Lord Adonis. the UK Secretary for State for Transport, before the House of Commons Transport Committee inquiry into the Future of Aviation (see previous post) on 15 July 2009 is now available. The following is what he said on the subject of the UK Air Passenger Duty (see previous post):

"Q577 Chairman: I would like now to go back to aviation. Could you tell us what is the primary purpose of air passenger duty?

Lord Adonis: The primary purpose is to recover the environmental impacts that aviation makes.

Q578 Chairman: Do you think that aviation does pay for its environmental impacts?

Lord Adonis: We think that with air passenger duty as it currently stands it broadly does so, but of course as the shadow price of carbon changes that judgment will change over time.

Q579 Mr Clelland: Does that mean that that levy is going to be ring-fenced to use for reducing carbon in that area?

Lord Adonis: All levies of this kind, of course, go into the general pot so far as the Treasury is concerned.

Q580 Mr Clelland: The objective of the levy is to deal with the impact of air travel on the environment but the actual levy is not going to be necessarily used for that purpose.

Lord Adonis: The Chairman said what is the primary purpose; I said the primary purpose was to meet the environmental impacts of aviation but it is also a contribution to the wider cost of public services and of course the Treasury would not accept a case for ring-fencing it given the wider role.

Q581 Chairman: Would you be concerned if air passenger duty was seen to threaten the viability of some regional airports?

Lord Adonis: We do not believe that it does so.

Q582 Chairman: Has a case ever been put to you that it does and hoe many representations have you made?

Lord Adonis: We think it is appropriate. I will be quite frank, Chairman, I do not think aviation has a credible future unless it is able to make a bigger contribution to meeting its environmental costs and we therefore stand by decisions we have taken in respect of air passenger duty.

Q583 Graham Stringer: Do I understand the primary purpose of air passenger duty as being to pay the environmental cost for aviation, because when Kenneth Clark introduced it, it was to get over the last recession, it was just a tax?

Lord Adonis: I do not have his explanation to hand but I believe when he introduced it his explanation of the purpose was in terms of the environmental benefits that it would bring about, if aviation met a larger share of the cost of the impacts that it creates on society.

Q584 Graham Stringer: I heard him say the opposite but we can check the record.

Lord Adonis: I am happy to produce the words at the time but it is certainly our view that it is important that the taxation ensures that the aviation industry does meet its environmental costs.

Q585 Graham Stringer: The latest increase will take it well past its environmental costs, will it not?

Lord Adonis: That is not our judgment, our judgment is that it about meets its environmental costs.

Q586 Chairman: The aviation industry is extremely worried about air passenger duty.

Lord Adonis: In my experience all industries are always worried about taxes on them, that is just a given I am afraid in any industry. All industries would dearly love taxation to be reduced on them and of course they quite appropriately make representations to ministers to have those taxes reduced.

Q587 Chairman: Do you see the Government having any role in relation to taxation in the current economic climate?

Lord Adonis: It is not the Government's intention to reduce air passenger duty but future taxation policy of course is not for me, it is for the Chancellor.

Q588 Chairman: What would you be recommending the Chancellor does?

Lord Adonis: That is a matter for the Chancellor; I do not think I can comment on decisions he might take.

Q589 Chairman: You must be making some kind of recommendation.

Lord Adonis: I do believe it is right that aviation should meet its full responsibilities in terms of its environmental impacts.


Q593 Mr Wilshire: You said you did not think air passenger duty would have any harm and it seemed to cover the costs. Does that mean that you consider our continental competitors, who have either frozen their tax or reduced it or abolished it - do you think they are all wrong and we are right?

Lord Adonis: These are decisions that every government has to make for itself. I certainly would not dream of criticising fellow European governments, they have to take these decisions in respect of their own circumstances.

Q594 Mr Wilshire: But they have done what you consider to be wrong for this country?

Lord Adonis: They do not take decisions in respect of Britain, just as I do not take decisions on their behalf.

Q595 Mr Clelland: Is there not a big problem with this because at the moment air passengers can voluntarily pay a carbon offset when they travel. They pay an additional fee and that money specifically goes to reducing carbon emissions. If we put on a new air passenger duty is that not going to encourage passengers not to pay their carbon offset, yet the air passenger duty is not going to go for the purposes of reducing carbon so we are actually going to lose the benefit for the environment.

Lord Adonis: The funding from air passenger duty like all sources of income to the Treasury goes on all of the purposes of government. One of the principal purposes of government, as we have seen today in Ed Miliband's statement, is carbon reduction. In my Department we very recently announced a £250 million fund to incentivise motorists to buy ultra low carbon or electric vehicles.

Q596 Mr Clelland: But how is it going to help if passengers now say "I am not going to pay the voluntary levy because you have put this additional tax on us"; how is it going to help the environment?

Lord Adonis: There are many different sources of funding for carbon reduction. The Government is responsible for the public funding and that public funding goes into a pot, one of the principal objectives of which is carbon reduction so it is perfectly sensible what we do now. The decisions that individuals make on their account thereafter are a matter for them.

Q597 Chairman: Thank you very much for coming.

Lord Adonis: I would be happy to provide any more information that would be helpful for you."

I note in particular Q578 from the Chairman and Q585 from Graham Stringer, Labour MP for Manchester, Blackley, and the replies from Lord Adonis.

The proposed increases in the air passenger duty are the subject of an e-petition on the Number10.govt.uk web site.

1 comment:

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