AIR PASSENGER DUTY (APD)

  In the Travelmole submission, it is claimed that as a result of reforms to air passenger duty, a family of four will be able to save up to £292 from November 2010 on a long-haul journey if it flies via a European airport. This claim assumes that passengers travelling via a European airport on a long-haul flight will automatically be subject to the lower, Band A rate of APD.

  APD is calculated on the passenger's final destination. Therefore the APD liability of a journey from the UK to a long-haul destination will be the same whether the journey is made via a single, direct flight from the UK, or using connected flights (eg via mainland Europe). HMRC has an established set of criteria to govern whether the second or subsequent flight on a journey may be treated as connected.

  "Disconnecting" a flight to hub elsewhere is often quoted as a means to reduce APD liability. However, there are a number of practical as well as financial consequences. A passenger with two unconnected tickets for travel will need to "land" themselves at the first destination airport, and then check back in for the second flight, and will be subject to any taxes or charges due for that country. Also, both airlines will incur handling charges for processing the passenger, which are likely to be passed on.

  In addition, a passenger taking a connected flight enters into a contract for travel to their final destination. This protects the passenger against unforeseen delays or cancellations on any part of that journey, as it is the airline's responsibility to ensure that they reach their final destination. In some cases this may mean rebooking a passenger on an alternative flight or providing or paying for accommodation until a flight is available. Unconnected flights do not carry the same protection, and an airline's responsibility will cease once the passenger has reached the destination specified on the ticket.

SOCIAL HOUSING—FORMULA RENT GUIDELINE INCREASES

  The Government formally announced a Review of Council Housing Finance in March 2008. The purpose of the review is to develop a sustainable, long-term system for financing council housing, one that is consistent with wider housing policy, including the establishment of a regulator of social housing. One of the workstreams of the Review is looking at social rent policy and what should be done once rent convergence has been achieved. The Review is expected to report to Ministers in Spring 2009. A formal consultation will follow the review.

  The Housing Green Paper, published in April 2000, proposed a rent restructuring regime underpinned by a single national formula based on relative property values (30%) and local earnings levels (70%) to guide landlords in setting rents in the social housing sector. Current rent policy is guided by the principles originally set out in the Green Paper. These included:

—  that social rents should remain affordable in the long term;

—  that social rents should be fairer and less confusing for tenants;

—  that there should be a closer link between rents and the qualities which tenants value in properties; and

—  that unjustifiable differences between the rents set by local authorities and by registered social landlords should be removed.

  Rent restructuring continues towards a target date for convergence with formula rent of 2012.

  CLG issued the draft Housing Revenue Account Subsidy Determination consultation document in October this year.[27] The determination proposes to fix guideline rent increases for the next two years in order to protect tenants from both high and variable increases in inflation, while continuing to deliver the rent convergence policy.

  The determination sets out that average guideline rent increases for each local authority are to be based on an average of 6.2% in 2009-10 and 6.1% in 2010-11. A cap on actual rent rises above 7% has been proposed to keep rents at affordable levels.

ENERGY COMPANY SOCIAL ASSISTANCE AND PRICING DIFFERENTIALS

Social and discounted tariffs

  Budget 2008 announced that the Government wanted to see energy suppliers increase their spending on social assistance to £150 million a year. Following subsequent discussions with John Hutton (then Secretary of State for Business, Enterprise and Regulatory Reform) the six largest energy supply companies (Centrica, EDF Energy, EoN, Npower, Scottish & Southern Energy, Scottish Power) agreed to increase their collective spend to £100 million in 2008-09, £125 million in 2009-10 and £150 million in 2010-11.

  Ofgem published guidance in July on the types of initiatives that energy suppliers can include towards this commitment. Ofgem will continue to monitor supplier activity, and will report on an annual basis. It will shortly be publishing analysis covering the period to end March 2008.

  Following the agreement, suppliers provided data which showed that around 600,000 customer accounts were going to benefit from a social or discounted tariff this winter. Indications are now that over 700,000 customer accounts are now receiving a reduced or social tariff, around twice the 370,000 customer accounts on such a tariff last year.

Differential pricing

  As noted in the PBR, Ofgem recently carried out a detailed study of the retail markets for electricity and gas, which concluded that many customers have benefited from lower prices and better service. However, it also noted that certain groups of consumers have not benefited fully from the market and are disproportionately affected by practices such as unjustifiable differential pricing.

  Ofgem has calculated that since its probe began, more than £300 million has been taken off the premiums paid by customers including pre payment meter users. The companies have also indicated further reductions that should reach at least £200 million for more than four million households who are off the gas grid and others who the probe identified as missing out on the best deals.

  However Ofgem has also indicated that it is not satisfied with the overall pace of delivery and announced on 16 December further proposals to deal with the issues it has identified. It will be consulting in January on proposals to change the suppliers' licences to ban unfair prices and ensure consumer interests are more fully protected.

WHITE CIDER

  Alcohol duty is charged according to strength, volume and category of alcohol. Cider is taxed by volume in bands of the same strength. Most ciders including white cider fall into the same category and will be charged at the same rate of duty.

  The alcohol duty increases announced at Budget 2008 and in the Pre-Budget Report apply to all alcohol products including all ciders. The primary purpose of alcohol duty is to raise revenue to fund the Government's spending priorities, and we do not see alcohol duty as a prime tool for tackling problems associated with harmful drinking.

  White cider receives a great deal of attention from commentators. However, it is not possible to effectively target that part of the industry without affecting more mainstream products and niche/craft ciders made by small producers.

December 2008