Scottish Government to consult on impact of halving, and then removing, APD
The Scottish government intends to remove Air Passenger Duty (APD) from flights departing from Scottish airports, in the hope of attracting more flights. Scottish ministers hope cutting APD would encourage more direct flights from Scotland and reduce the need for connecting flights via Heathrow and Amsterdam. Air travel is already very under-taxed, paying no VAT and no fuel duty. The Scottish Government says it will halve APD during the Scottish Parliament’s next term, which will run until around 2020. That will mean about £200 million in lost tax to the government, and the Scottish government has to reimburse the UK Treasury. Scottish ministers want APD cut completely “when public finances permit.” There is to be a new policy forum to look into the implications of removing or reducing APD, and a policy consultation this autumn. The forum will include some environmental groups, as well as aviation lobbies. There would be increased CO2 emissions from Scottish aviation if there was a 50% cut in APD, and even more so with no APD. The Scottish government will have to explain “which other sectors of society will pick up the shortfall and at what cost.” More cheap holiday flights for Scottish people is likely to increase the tourism deficit, with more money flowing out than is brought in by in-bound tourists.
Anti-aviation groups to help shape new flying tax
6.8.2015 (The Scotsman)
by Alastair Dalton
GREEN groups will help shape a new Scottish air tax which will replace air passenger duty (APD) when it is devolved, ministers announced today.
Finance secretary John Swinney said environmental organisations would be included in a new policy forum which will hold its first meeting today.
Such bodies have been vehement critics of the polluting nature of aviation, but ministers argue that cutting APD will encourage more direct flights from Scotland and reduce the need for connecting flights to hubs such as Heathrow and Amsterdam.
The Scottish Government has pledged to halve APD during the Scottish Parliament’s next term, which will run until around 2020.
That is expected to cost £200 million in lost tax, which ministers will have to reimburse the UK Treasury.
The move would follow the transfer of powers from Westminster to Holyrood under the Smith Commission proposals.
Ministers have also pledged to abolish the tax – which starts at £13 per passenger for UK flights – “when public finances permit”.
A policy consultation on the changes will be launched this autumn.
Mr Swinney, who will jointly chair the forum with infrastructure secretary Keith Brown, said: “The APD stakeholder forum brings together interested parties – from those in the aviation industry to environmental groups and tax practitioners – to provide expert input into how a replacement tax could work.
“We want to be consultative and collaborative, as we have been with the new fiscal levers already devolved to Scotland.
“The forum, and this autumn’s policy consultation, allow us to take the next step and begin the process of designing and developing a Scottish APD to help deliver our objective of sustainable economic growth.”
The forum will also include the aviation industry and tax experts.
Mike Robinson, who will represent Stop Climate Chaos Scotland and umbrella body Scottish Environment LINK on the forum today, said: “At least we are in the room, even though we will be outnumbered.
“It shows the Scottish Government is willing to consider the bigger picture.”
However, Mr Robinson expressed concerns about the impact of an APD cut on long-distance trains, and questioned how ministers would offset the increase in greenhouse gases he said it would cause.
WWF Scotland director Lang Banks said: “Any conclusions of the Scottish Government and this forum must take into account the impacts on the climate.
“The Scottish Government’s own analysis shows that cutting APD by 50 per cent would increase Scotland’s climate emissions from flying.
“If ministers insist on going ahead with its plans to increase climate emissions from flying, then it will have to explain which other sectors of society will pick up the shortfall and at what cost.”
Friends of the Earth Scotland director Dr Richard Dixon said: “We are supporting the idea of a more sophisticated approach which would penalise frequent flyers so the changes in taxation would not lead to a massive rise in carbon emissions.
“This frequent flyer levy, which we would have been arguing for if we had been able to attend, is supported by a range of campaigning groups.”
Scottish Greens finance and economy spokesman Patrick Harvie backed the levy.
He said: “This would acknowledge the enormous environmental impact of aviation, while recognising that most of the growth in flights isn’t due to people taking an annual family holiday – it’s due to a wealthy jet-set minority, who are coming to treat air travel as casually as hailing a taxi.
“Ending APD would increase climate change emissions by 60,000 tonnes a year.
“If the Scottish Government is remotely serious about its climate change commitments, it needs a replacement tax that will cut pollution without making aviation unaffordable for everyone but the wealthiest.”
But Mr Brown said: “UK APD has been the most expensive tax of its kind in Europe and continues to act as a barrier to Scotland’s ability to secure new direct international services and maintain existing ones.
“Devolution of APD to the Scottish Parliament will provide the opportunity to put in place new arrangements which better support the Scottish Government’s objective to help generate new direct routes and increase inbound tourism.
“Our plan to initially cut APD and then abolish it when public finances permit is a fundamental component to improving Scotland’s international connectivity.”
Edinburgh Airport, where the forum announcement was made, said it was anxious to know when APD would be cut to plan expanding its route network.
Chairman Sir John Elvidge – a former head of the Scottish civil service – said: “Our report earlier in the year showed very clearly that APD is placing a drag on Scotland’s economic growth, costing jobs and millions of pounds in lost revenue.
“We’ve long supported its devolution and are keen to work with the Scottish Government to ensure the process is as smooth and as quick as possible.
“Clarity around the timing of any reduction in APD is vital for route development and we hope that this forum will be able to provide that.”
John Swinney to head air passenger duty stakeholder forum
By Press Association, 6 August 2015 2.42pm.
A new group charged with considering how the air passenger duty (APD) levy could be replaced in Scotland has been set up by ministers.
Deputy First Minister John Swinney and Infrastructure Secretary Keith Brown are to jointly chair the first meeting of the new Scottish APD stakeholder forum this afternoon – hailing it as a new milestone in the reform of the charge.
Meanwhile, the Scottish Government has also revealed it will launch a consultation on a Scottish APD in the autumn.
Powers over APD are to be devolved to Holyrood as part of the new Scotland Bill, which has been brought in at Westminster after the Smith Commission on further powers recommended the change.
The Scottish Government is committed to halving the levy paid by air passengers within the first term of the next parliament, with a view to abolishing it completely when “public finances permit”.
Research for Edinburgh Airport has already suggested that cutting APD in half would result in 700,000 more passengers going through Scotland’s airports in the first year alone.
Mr Swinney said: “Scotland’s airports are busier than ever and the Scottish Government wants to see that success grow further to the benefit of passengers, business, tourism and our wider economy.
“The APD stakeholder forum brings together interested parties – from those in the aviation industry to environmental groups and tax practitioners – to provide expert input into how a replacement tax could work.
“The forum and this autumn’s policy consultation allow us to take the next step and begin the process of designing and developing a Scottish APD to help deliver our objective of sustainable economic growth.”
Mr Swinney made the comments as he and Mr Brown visited Edinburgh Airport, where they met chairman Sir John Elvidge.
Sir John said: “Our report earlier in the year showed very clearly that APD is placing a drag on Scotland’s economic growth, costing jobs and millions of pounds in lost revenue.
“We’ve long supported its devolution and are keen to work with the Scottish Government to ensure that the process is as smooth and as quick as possible.”
Mr Brown said: “Scotland is already an attractive destination for business and inbound tourism, and we want to open up Scotland to key and emerging markets to capitalise on the opportunities that exist.
“Devolution of APD to the Scottish Parliament will provide the opportunity to put in place new arrangements which better support the Scottish Government’s objective to help generate new direct routes and increase inbound tourism.”
Airline chiefs welcomed the plans to first reducing, then scrapping APD.
Sophie Dekkers, easyJet’s UK director, said they had “long-campaigned for the removal of air passenger duty”.
She added: “When APD is halved passengers in Scotland will quickly feel the benefit, with easyJet and other airlines adding more services to existing destinations and launching flights to new destinations from Scotland.”
Paul Simmons, chief commercial officer of flybe, said: “We believe that the abolition of or the reduction of APD in Scotland will have two key impacts, firstly, some international routes which are currently marginal when we assess them and therefore not flown are likely to become viable.
“Secondly, there is likely to be a price reduction for the consumer on domestic flying and the real possibility of additional frequencies.”
Kate Sherry, Ryanair’s deputy director of route development, said: “One need only look to Ireland to see the effect scrapping APD has had, with tourist traffic rising by almost 10% since APD was abolished in April 2014 and the VAT received from the additional tourist spend far exceeding the loss of APD.”
Treasury opens consultation on protecting regional airports from impact of devolving APD
In the Summer 2015 Budget, the Chancellor has announced a short consultation (ends of 8th September) on options for supporting English regional airports from the impacts of Air Passenger Duty (APD) devolution. Sootland may remove APD, and so may Wales. Airports in the north of England are concerned they could lose passengers, to cheaper Scottish flights. The consultation sets out three options for changes to APD. The first is devolving APD within the UK, with powers over APD devolved fully or partially to local authorities within England. The second is varying APD rates within England, so central government would retain powers over APD for the English regions. The rates of UK APD would be varied according to specific criteria, resulting in different rates in different parts of the country. The third is to provide aid to regional airports within England, which have been adversely affected by the devolution of APD. This could be through the Regional Air Connectivity Fund, mainly for the smallest airports and those with up to 3 million passengers per year may be permitted investment aid only in ‘case specific circumstances’. Many airports likely to be affected could be too large to be eligible for aid.
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Levy on frequent leisure flyers proposed to make airport expansion unnecessary – if the tax on flying was fair, no new runway would be needed
Plans for a “frequent flyer” tax to curb demand for leisure flights and make a new runway in south-east England unnecessary have been unveiled by an influential group of transport campaigners, environmentalists and tax experts. These include the Campaign for Better Transport, the New Economics Foundation, the Tax Justice Network, Greenpeace and Friends of the Earth among others. In a letter to the Observer – in order to remove the alleged “need” for a new south east runway – they put forward the concept of allowing each person one tax-free flight per year, but increasing the rate of tax for people who fly frequently. The levy would rise with each successive flight. This would mean that instead of APD (£13 per return flight to Europe) there would be a higher rate of tax for frequent fliers. Their analysis shows that 15% of the UK population take 70% of all the flights, while half of us don’t fly at all in any given year. Rather than a new runway being vital for business, the reality is that it would be used for the better off to take more leisure flights (holidays or visiting friends and family). The proposed levy would mean the number of flights would be cut to a level that would make a new runway unnecessary. The authors of the scheme have also shown that this change to the taxation of air travel would also ensure the UK could comply with its obligations under the Climate Change Act.
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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.
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On the tourism deficit, that is likely to be increased by cutting or removing APD:
The ONS (Office for National Statistics) produces information each month. For example http://www.ons.gov.uk/ons/dcp171778_411258.pdf
and get all the tables for this publication in the data section of this publication .
This table gives all the figures, for each month, for the past few years.
Tourism deficit widens as UK residents spend more on trips abroad
22.5.2015 (Travel Weekly)
Tourism deficit? UK loses £1bn a month as residents splurge their savings on holiday
Britain is losing billions each year from UK residents spending their money abroad on holidays, while overseas visitors to the UK spend less.
Since the beginning of 2013, 129m UK residents have visited an overseas country – spending a total of £76.8bn. This equates to £594 being spent for each UK resident’s visit abroad, according to data released by the Office of National Statistics.
Meanwhile, overseas visitors have spent £46.6bn in the UK since the start of 2013. 73.9m overseas residents have visited the UK in this time period, with £631 being spent per visit.
There are more visitors to the UK – but they are spending less
In the first three months of 2015, 6.9m people visited the UK. This is up from 6.8m in the same period of 2014, and 6.3m in 2013.
The amount of money they spend, however, has fallen. The UK’s 6.9m visitors in 2015 spent less than the 6.3m in 2013.
Some 31 per cent of the people visiting the UK in the first three months of 2015 were on holiday, while 29 per cent were visiting for business purposes, and 32 per cent were visiting family or friends.
This distribution has changed little over the last two years, but the biggest change is in those visiting friends or relatives in the UK – up from 30 per cent in the first three months of 2013 to 32 per cent in 2015.
Brits abroad are mainly on holiday – unlike visitors to the UK
Europe is by far the most popular destination for Brits to go on holiday – with 72 per cent of 2015’s overseas visitors going to the continent.
Over the first three months of 2015, 8.3m UK residents went to Europe. Some 630,000 travelled to North America, while 2.5m travelled elsewhere in the world.
While under a third of people visiting the UK are here for holiday purposes: 55 per cent of Brits visiting other countries were on holiday.
Just 14 per cent of Brits visiting oversea countries were travelling for business, while 28 per cent are visiting family or friends.
Expenditure: who benefits?
In the first three months of 2015, UK residents spent £6.8bn in overseas countries – compared with £3.5bn spent by people visiting the UK.
This is a difference of £3.3bn, a “tourism deficit” which has been expanding over recent years. The gap stood at £2.4bn in the same period for 2013.
British residents have spent more per head abroad than those visiting the UK over the last three months – with the average UK resident spending £590 per visit abroad. This compares with overseas residents spending an average of £515 per visit to the UK.
House of Commons Library publication: Tourism: statistics and policy
“Britain usually runs a large tourism trade deficit because we are far more likely to travel abroad for our holidays than most other countries. Currently, less than 40% of our total holiday spending goes on domestic tourism – roughly a 2:1 trade deficit. And these recent figures are probably rather optimistic; before the effects of a low pound, recession and a volcanic ash cloud had taken their toll, the average for 2006-08 was just 31%. We’re worse than our neighbours too: just 21% of us holiday at home, compared to 28% on average for other European countries. But 29% of us holiday abroad compared to just 16% in the rest of Europe.17 ” Page 17