Study by York Aviation for Edinburgh airport suggests a 50% + cut in APD in Scotland could “boost Scottish economy by £200m per year”
Air tax cut ‘could boost Scots economy by £1bn’
Slashing the tax paid by air travellers could boost Scotland’s economy by £1bn by 2020 and create almost 4,000 new jobs, a report has suggested.
The figures emerged from research carried out on behalf of Edinburgh Airport.
The report looked at the impact of cutting air passenger duty (APD) by 50%.
Powers over APD are to be devolved to Holyrood following recommendations by the Smith Commission.
However, a specific date has yet to be set as the move requires UK legislation to be passed.
The new research, conducted by consultants York Aviation, suggested a 50% reduction in APD “might support around 3,800 additional jobs and £200m per annum in GVA (gross value added) by 2020”.
It also found that Scottish airports could lose out on nearly one million passengers a year if APD is not cut by at least 50%.
Such a cut, it argued, would result in 700,000 more passengers coming through Scotland’s airports in the first year, rising to about 900,000 after five years.
Edinburgh Airport chief executive Gordon Dewar said: “We’ve long argued that APD is a tax on Scotland’s ability to compete with European airports of our size and our economy is footing the bill in lost jobs and lost opportunities.
“Our report shows that the economic benefit of a reduction will outweigh any lost tax revenues.
“It’s therefore reasonable for passengers, airlines and the tourism industry to have some certainty on when this regressive tax will be reduced, and to know whether it will eventually be scrapped.”
The Scottish government welcomed the report, which it said showed “the clear benefits” of devolving power over APD to Holyrood.
“Devolving APD to Scotland as soon as possible will help to unlock the country’s full economic potential, bringing more international flights to and from Scotland as well as cutting costs for passengers.
“In terms of the timetable, only once the necessary legislation has been passed by the UK Parliament will the Scottish government be able to legislate for a replacement Scottish tax.
“We have confirmed that we intend to reduce APD by 50% within the term of the next parliament with a view to eventual abolition of the tax when public finances allow.
“No specific timetable has been given by the UK government for passing the legislation, but we continue to argue for this to happen as soon as possible.”
A UK government spokesman said: “This is a good example of the choices the further devolution of powers is giving the Scottish Parliament.
“The ability to change the levels of air passenger duty will lie entirely with the Scottish government while also being responsible for the loss or gain of revenue that results.
“That means financial accountability in decision-making in this area in Scotland.
“The UK government, like Edinburgh Airport, look forward to seeing their detailed plans in due course.”
Environmental group WWF Scotland said the report completely failed to acknowledge that aviation was the fastest growing sector of carbon pollution.
Director Lang Banks said: “Despite all their special pleading, the aviation industry still enjoys significant exemption from taxes, including VAT and fuel duty.
“Even the Scottish government admits that halving APD would increase carbon emissions by as much as 60,000 tonnes a year.
“The reality is that, if we want to meet our climate targets, any growth in emissions from the aviation sector will have to be offset by deeper cuts elsewhere in Scotland’s economy.”
Air Passenger Duty facts – from the BBC
Air passenger duty is charged on all passenger flights from UK airports. The rate of tax varies according to where the passenger is going, and the class of travel.
The tax raised £2.9bn in 2013-14, with about £200m coming from Scotland.
APD rates on direct long haul flights from Northern Ireland were devolved to the Northern Ireland Assembly (NIA) in 2012, which then set the rates at £0.
The Republic of Ireland scrapped its equivalent of the tax in 2013, meaning the UK is one of five European countries to levy a tax on passenger departure.
Firm behind report calling for a 50% cut in APD – York Aviation – linked to airlines. Hence bias.
March 17, 2015
The Herald Scotland reports that a report claiming a reduction in Air Passenger Duty (APD) could boost the Scottish economy by £1 billion was based on research by a firm that has worked for major aviation companies. This is York Aviation – which has done numerous reports for the industry over the years, each biased in favour of aviation, with very partial and incomplete analysis. The study is at Edinburgh Airport The impact of reducing APD on Scotland’s airports March 2015 The new report was done for Edinburgh airport, presenting findings useful to their client. Ryanair is another of York Aviation’s clients, which again stands to benefit if the report is taken seriously. Green MSP Alison Johnstone said she was not surprised that an “aviation-friendly consultancy” was involved in a “PR exercise” for big business. The new York Aviation report makes claims, such as how cutting APD by 50% would create 4,000 jobs and boost the economy by £1bn within five years. However, as with all York Aviation reports, it makes no mention whatsoever of downsides – or of money taken out of Scotland by cheaper holiday flights by Scottish people. Links to many other York Aviation reports are given here. A spokeswoman for York Aviation said: “We do relatively little work for airlines.”
Government confirms APD devolution to Scotland
The UK government has published a document, “Scotland in the United Kingdom: An enduring settlement”. It sets out the Smith Commission Agreement on devolving powers to Scotland. This states: “The power to charge tax on air passengers leaving Scottish airports will be devolved to the Scottish Parliament. The Scottish Government will be free to make its own arrangements with regard to the design and collection of any replacement tax, including consideration of the environmental impact. ….if such a tax is introduced by the Scottish Parliament to replace Air Passenger Duty (APD), the Scottish Government will reimburse the UK Government for any costs incurred in ‘switching off’ APD in Scotland. … A fair and equitable share of associated administrative costs will be transferred to the Scottish Government. ….The clause includes provision for appointing the day when APD will be switched off in relation to Scotland.” Abta and the Airport Operators Association (AOA) have responded the plans to devolve APD to Scotland by demanding consistency across the UK. They claim this will affect the competitiveness of regional airports in the north of England.
Air Passenger Duty to be devolved to Scotland, which wants to halve & then scrap it
The Smith Commission, to see how powers including taxation could be devolved to Scotland, says that the Scottish Parliament should be able set income tax rates and bands and Air Passenger Duty should be fully devolved. At present, APD is charged by the Treasury only because air travel is significantly under-taxed, paying no VAT and no fuel duty. There is no logical reason why air travel, which is a luxury product, for discretionary spending, should be exempt from tax. This is particularly the case when the richest sections of society do the most flying, and of the 50% or so who do not fly in any one year, many are less affluent. The Scottish Government wants to halve and then remove APD. For the UK, APD raises about £3 billion per year, and of this about £200 million is raised in Scotland. In theory cutting APD would perhaps increase the number of tourists coming to Scotland. In reality, it is likely that many more Scots travel abroad for their holidays, taking their spending money with them, than foreign tourists flow in. Cutting the tax, and losing the tax revenues from the public finances, may not be wise if it just boosts outward tourism. Airports in the north of England are concerned about losing passengers, who could fly cheaper from Scotland.