Scotland Bill

Debate between Kevan Jones and Alex Salmond

Monday 29th June 2015 Commons Chamber

[Mr Kevan Jones]

It is a pleasure to serve under your chairmanship, Mr Crausby.

I do not oppose the devolution of APD to the Scottish Parliament, but as my hon. Friend the Member for Blackley and Broughton (Graham Stringer) said, it will have a dramatic effect on regional airports within the UK. The hon. Member for Dundee East (Stewart Hosie) mentioned the attractions of Edinburgh to north-east businesses that want international flights, but I have to say that they would sooner fly directly from Newcastle. As for the notion that people would fly to Edinburgh and then get on a train to travel south to our region, that would not be an alternative to flying directly to the north-east via Newcastle. Newcastle airport has been a success story for the north-east.

We hear much from this Government about rebalancing the economy. The north-east has taken the brunt when it comes to the loss of public sector jobs and it also has the highest levels of unemployment in the UK. There have also been knock-on effects from the Government’s decisions deliberately to divert funds from poorer regions such as the north-east to the Tory heartlands.

We have heard the Government’s rhetoric about growing the private sector. Newcastle airport has, I think, been a great example. A few years ago, I had the privilege of being a director of the airport, which is a great partnership between the local authorities in the region and the private sector. In 2012, the airport added value of some £640 million to the north-east economy, and under its master plan by 2030 it will generate some £1.3 billion for the north-east economy. It is currently sustaining 7,800 jobs, rising to over 10,000 by 2030.

The team at Newcastle airport now provides direct flights to Dubai and to New York, and those international flights will be put at risk if the Scottish Government go ahead with their plans. I understand that this is a devolved matter, and I understand the reasons why the Scottish Government want to reduce APD. Clearly, as my hon. Friend the Member for Blackley and Broughton said, the tax was brought in for environmental reasons that now make little sense when it comes to growing the country’s economy.

[Alex Salmond (Gordon) (SNP)]

I could be reading the amendment paper wrongly, but am I wrong to interpret the hon. Gentleman’s amendment 36, which has not been called for debate, as designed to delete the clause that would devolve air passenger duty? Several times, the hon. Gentleman said that he was not opposed to the devolution of APD, but I thought his amendment was supposed to delete the provisions that made APD a devolved matter.

[Mr Jones]

The reason for that is that I was advised to do so to get my probing amendment on the amendment paper. There is no intention to delete the provisions, and the amendment has not been selected. I would have thought that the right hon. Gentleman’s experience in the House would make him au fait with the procedures for ensuring that Members can get a subject debated.

The Scottish Government’s proposals on APD do not make economic sense. Reducing and abolishing APD will clearly grow airport traffic into airports in Scotland as well as grow jobs, yet that will be to the detriment of airports such as Newcastle’s.

--- Later in debate ---

[Mr Jones]

On this very rare occasion, I agree with the hon. Gentleman. I would abolish APD altogether; it is a tax that, as the Scottish Government have recognised, stifles economic development. A PwC report says that the number of overseas visitors would grow by 7% if we abolished it altogether and that more money would come in from other taxes.

Scotland, for her own, sensible reasons, could halve and then abolish APD, leaving Newcastle at a great disadvantage. That would cost jobs; it has been anticipated that up to 1,000 jobs could be lost by 2025 if the situation remained the same, along with £400 million gross value to the economy of the north-east. One of the poorest regions in the UK cannot afford to be at such a disadvantage.

As my hon. Friend the Member for Blackley and Broughton (Graham Stringer) said, there seems to be a bit of confusion over the Government’s approach. He read out the Chancellor’s comment at the Treasury Committee sitting. The Chancellor seemed to be sanguine, giving the impression that if Scotland reduced its APD, airports such as Newcastle could happily soak up a 10% loss in traffic. I am sorry, but I have been a director of the airport and I know the management team well—I know how hard they have to work to attract every single flight and new route to Newcastle. A clear 10% loss would not be acceptable. My hon. Friend mentioned another point. The Chancellor also said that his personal view was that tax competition should be allowable. If that means putting the north-east at a disadvantage, the Government have to address that.

There has been some confusion. During the general election, the Prime Minister was asked by a local newspaper about unfair competition affecting Newcastle airport and—we should not forget the other airport in the north-east —Durham Tees Valley airport. He was questioned about reducing rates of APD for north-east airports to match the reduction in Scotland, as the Labour party in the region had been arguing. He said that that could be a positive suggestion.

What we need now is clear action. We have a new Minister for the northern powerhouse, the Under-Secretary of State for Communities and Local Government, the hon. Member for Stockton South (James Wharton). I understand that his constituency includes Durham Tees Valley, so whether he can persuade the Treasury to do something about the effect of the clause on the north-east economy will be an interesting test of his power. We hear a lot about the northern powerhouse. Those of us in the north-east think that it ends in Manchester.

It is important that the effect of the clause is addressed. If it is not, this unfair tax will not only cost jobs in one of the poorest regions of the UK, but stifle one of the few economic drivers in the north-east in Newcastle airport, which can grow not only business, but competition. As I said in an earlier intervention, Newcastle airport is important not only for passengers, but for cargo revenues. It enables companies in the north-east to export around the world. The direct flight to Dubai has meant that a lot of local businesses have been able to export products there directly and to grow.

I am interested to know the Government’s approach to this issue. If the clause is passed, we cannot have a lag that leaves regions such as the north-east being hit by the tax competition which the Chancellor seems to think is acceptable, but which the Prime Minister clearly wants to do something about. The ball is firmly in the Government’s court to ensure that this anomaly is put right.

[Alex Salmond]

I am grateful to the hon. Members for Blackley and Broughton (Graham Stringer) and for North Durham (Mr Jones) for the way that they have spoken about this issue. I am unconvinced by the argument that they had to table an amendment to delete the devolution of air passenger duty in order to make speeches. Speeches could be made on clause stand part. None the less, whatever the flow of logic, I am delighted that they have confirmed that they support the devolution of APD. I will be very supportive, in return, of some of the arguments that they have made.

As I have been through this issue in one guise or another over the past few years, I thought that it might be useful to remind the Committee of a little bit of history. The devolution of APD was proposed by the Calman commission. For Members who were not in the House at that time or who are not fully up on these matters, the Calman commission was the response of the Unionist parties to the SNP’s breakthrough in the 2007 election. We are still debating the devolution of APD because it disappeared from the legislative programme arising from Calman that was enacted in the last Parliament. It was proposed again by the Smith commission, which was the response of the Unionist parties, through the vow, to try to deflect the yes campaign in the final days of last year’s referendum.

Both those events, incidentally, have been overtaken by the fact that 56 Members of Parliament now adorn these Benches for the Scottish National party. No doubt, at some occasion in the not too distant future, we will be back debating the Government’s response to that latest political development. Surely history tells us—the hon. Member for Blackley and Broughton referred to this—that it would have been far better to have been more extensive and generous with devolution in the first place, and that we should not repeat the mistakes that the Government and the Unionist parties made in the past.

I had a meeting with Howard Davies a few years back when he was asked to chair the Airports Commission. I will be generous and say that it was set up to address the under-capacity and congestion at airports in the south-east of England—or perhaps it was to bash Boris’s proposal for an island airport. The point was to reconcile between Heathrow and Gatwick. We can be absolutely certain about two things in respect of the proposals that will come from the Howard Davies commission. First, we can be certain that, whatever the final adjudication, it will be some considerable time before either Heathrow or Gatwick emerges as the winner from the process. Secondly, we can be certain that, whatever emerges from the process, considerable amounts of public money, running into many billions of pounds, will be devoted, by one means or another, to expanding the capacity of those airports, which are severely congested at the moment.

The reason I mention this is that when I had my meeting, as First Minister, with Mr Davies—it might be Sir Howard Davies now, for all I know—[Interruption.] I am told that he is soon to be ennobled—other people have more information on these things than I do. Anyway, when I had my meeting with Sir Howard, I said, “Given that, whatever happens, your proposals will take some time to be enacted, would it not be a grand idea for you to propose, in the meantime, measures to relieve some of the congestion in the south of England airports? Perhaps reducing air passenger duty in Scotland, Northern Ireland and the north of England and, pro tem at least, diverting some of the business from those airports would relieve some of the extraordinary pressure on them.”

--- Later in debate ---

[Mr Kevan Jones]

Does the right hon. Gentleman agree that Scotland and the north-east, for instance, are losing business not just to London but to parts of mainland Europe? At Schiphol, for instance, air passenger duty has been abolished.

[Alex Salmond]

I do agree with that, but I also think that we must consider the motivation for the introduction of what appears to be a remarkably foolish tax. Any Chancellor looking at Heathrow, for example, would see a fully congested airport and an air passenger duty with an effective collection rate of 100%, whereas any Chancellor looking at the north of England, Northern Ireland or Scotland would see airports with substantial capacity where a reduction in APD could increase business, and, given increased revenues from VAT and other taxation, would see the magic formula for a Laffer curve emerging. I was going to turn to the hon. Member for North East Somerset (Mr Rees-Mogg) at that point, but when I mentioned the Laffer curve, he was busy having a conversation, just when he could have reached a peak of excitement.I think that it would be possible to achieve that Laffer curve, reducing the tax and increasing the revenue, and it seems that my view is shared on both sides of the Committee.