Transport Minister seeks industry support for APD move
Writing ahead of the UK Government’s budget later this week, Mr Brown has reaffirmed the Scottish Government’s commitment to cut APD with the powers of independence.
The key transport pledge, outlined in Scotland’s Future, would see Air Passenger Duty reduced by 50 per cent within the first term of an independent Scottish Parliament, with a view to the eventual abolition of the tax when public finances allow.
Mr Brown said:
“Air Passenger Duty in the UK is repeatedly cited by both airports and airlines as one of the biggest obstacles when it comes to securing new direct international services and maintaining existing ones, so I’ve written to the major players in the aviation sector to seek their views on Scotland taking control of APD.
“There is no doubt the current APD regime holds Scotland back when it comes to attracting visitors and business from overseas, as well as making it more difficult for Scottish firms to access international markets, and it is clear the current situation needs to change.
“We don’t need to look far to see the impact having control over APD could have in Scotland. The Irish Government’s plan to get rid of its ‘Airport Travel Tax’ has already resulted in a predicted rise in travellers to and from the country.
“Our case for Scotland taking control of APD has been positive and based on the significant opportunities which this would bring for airlines, Scotland’s airports and passengers, and in terms of the improvements it would facilitate in Scotland’s international connectivity.
“In an independent Scotland, a competitive aviation taxation regime would stimulate direct connections, rather than restrict them. Travellers to and from Scotland could avoid flying via airports in London or on the continent, encouraging business travel and reducing average costs for families on holiday flights.
“Scotland would be able to re-invest the benefits from growth in economic activity that could be expected to flow from a more competitive APD regime in Scotland.
“Our commitment is to reduce APD by 50% in the first term of an independent Scottish Parliament, with a view to the eventual abolition of the tax when public finances allow. This step may be seen as radical, but it’s entirely necessary to deliver the international connectivity which matches the ambition of the Scottish Government, Scotland’s airports and airlines and the needs of passengers.”
In 2009, the Calman Commission recommended Scotland should be given power over APD, but successive UK Governments have failed to take action and it’s clear Scotland is suffering under the current APD regime. In contrast, Westminster has devolved some responsibility for APD to Northern Ireland but Scotland is still locked in to a one-size-fits-all policy. With independence Scotland would be able to re-invest the benefits from growth in economic activity that could be expected to flow from a more competitive APD regime in Scotland.
UK APD is the most expensive tax of its kind in Europe and its impact on Scotland cannot be ignored. A study by York Aviation in October 2012 found that:
- APD rates have increased by around 160% for short haul flights and between 225% and 360% for long haul since 2007.
- The doubling of APD in 2007 had the initial impact of 1.2 million passengers foregone at Scottish airports in 2007, increasing to 1.3 million in 2008. In 2011, this figure increased to 1.7 million and by 2016 it is expected to be at 2.1 million.
- By 2016, £210 million less per annum will be spent in Scotland by inbound visitors than if APD had not risen as it has since 2007.
In addition to the direct losses to the Scottish economy, a report by PricewaterhouseCoopers in 2013 showed that reducing APD would increase other tax receipts, such as VAT.
The Irish Government recently announced its intention to abolish its €3 per departing passenger ‘Airport Travel Tax’ from April 2014. Following the announcement, Ryanair stated that it will deliver an additional 1 million passengers to/from Ireland as a direct result of that decision.