The government has rejected a shift in policy on Air Passenger Duty despite MPs having two opportunities to debate the tax in Westminster this week.
An Opposition Day debate scheduled by Northern Ireland’s Democratic Unionist Party yesterday is due to be followed today by a further debate on aviation strategy.
It will be the first test on APD for the new Treasury and Transport teams since the recent government reshuffle.
The DUP had used a Westminster debate to call for the scrapping of the tax, which costs £13 per passenger on domestic flights but its motion was defeated 284 to 13, a majority of 271.
Former Northern Ireland finance minister Sammy Wilson said APD has a disproportionate impact on the province as people there do not have the option of getting a train to other parts of the UK.
He cited the PwC report earlier this year which said that abolishing the tax would have a neutral effect on government finances as it would lead to increased growth.
But replying for the government, economic secretary to the Treasury Nicky Morgan ruled out abolishing APD on the basis it would not be sensible to the UK’s economic recovery.
She said: “With forecast revenues of £2.9 billion in 2013/14, APD makes an essential contribution to the government’s strategy for tackling the current budget deficit and getting debt under control.”
Morgan added: “The Government has frozen APD in real terms since 2010 and since then APD rates have risen by only £1 for the vast majority of flights.
“But considering the fiscal challenges we face today, no responsible government would simply relinquish nearly £3 billion of revenue.”
Morgan said if APD was abolished then an alternative source of revenue would have to be found, which she suggested was a subject people had few suggestions for.
Labour MP Kate Hoey suggested that government ministers might like to travel to Northern Ireland via the Stranraer ferry in order to share the travel experience of people who cannot afford to fly.
Scottish National Party MP Angus Brendan MacNeil warned Westminster not to underestimate the influence APD could have on people voting on whether or not to support an independent Scotland.
“We don’t have taxes designed for Scotland,” he said. “And if ever an issue crystallises that point, it’s APD.
“Scotland is fleeced with APD, a tax that over a four-year period between 2012 and 2016 is estimated to mean that 2.1 million fewer passengers per year will go through Scottish airports.
“APD is a demand passenger tax for Heathrow and other London airports, who for years have craved preferential treatment from successive UK governments.”
British Air Transport Association chief executive Simon Buck said: “It will be interesting to hear what the new shadow transport secretary Mary Creagh has to say on APD, particularly in light of the fact that it’s her Labour colleague, Louise Ellman who has been awarded the debate on Thursday, and whose Transport Select Committee has already recommended a Treasury review of the duty.”
Reform of APD continues to garner widespread support from across the political spectrum, with over 100 MPs now backing calls for a Treasury review of the tax, he added.
“I would encourage all MPs who care about APD to make representations and ensure the government hears the message loud and clear: we need a macro-economic review of APD at the earliest opportunity.”
Writing in the Huffington Post, Buck argued that the UK is bucking the trend of many European neighbours that can see the damaging impact of air passenger tax on economic growth.
“Already Holland, Denmark, Norway and Malta have abolished their version of the tax, with Germany freezing theirs earlier this year after a government review showed it was greatly harming their aviation industry,” said Buck.
“Yet still the Treasury swims against the tide, refusing to acknowledge the wealth of evidence that this week has caused Ireland to become the latest country to abolish its duty.”