The next item of business is a debate on motion S4M-10185, in the name of Keith Brown, on air passenger duty. We have a wee bit of time in hand, so we will be slightly generous if members take interventions.
14:43
I welcome the opportunity to come to the chamber to restate the strong case that we have set out for control of air passenger duty coming to Scotland.
As members will be aware, our proposals for APD enjoy widespread support, including from Scotland’s airports and a growing number of airlines. Our case for Scotland having control of APD is based on the facts. Scotland has a decent return from its European network, but we continue to play catch-up in relation to longer-haul international connectivity. Our strategic approach is to work with our airports to entice more direct international services, but also to improve connectivity to hub airports where we have to do that.
There have been some notable successes recently. Edinburgh’s new routes to Chicago and Doha are prime examples of the results of airports and the Government working together to secure success, but those successes have happened despite the current application of APD. Scotland’s airports are absolutely clear and unanimous that APD is a barrier to further success.
I believe that what Scotland has to offer places it in the tourism heavyweight bracket, but it is clear that APD is having a severe impact on the ability of our tourism industry to punch at its proper weight. The rationale is straightforward: more direct international flights make it easier to attract more tourism to our country and increase our share of that vital market.
A stark illustration of the effect of the burden of air passenger duty is that, together with other burdens such as VAT, the United Kingdom as a whole, despite the excellence of our cultural offerings, is rated by the World Economic Forum as the 139th least competitive tourism country from a list of 140. The country occupying 140th place is Chad. Our tourism industry is geared for success and has unmatched natural and human resources to work with but, when a family of four travelling to Scotland from North America are presented with an excess of £276 on their air fare, other parts of Europe can start to become a better alternative.
Changes were announced in the last UK budget, which I will touch on shortly, but research work that was conducted in 2012 estimated that increases in APD rates between 2007 and 2011 could result in a loss of 2.1 million passengers to Scotland’s main airports every year by 2016. The same report concluded that, in the five-year period from 2007, rates for short-haul flights had increased by around 160 per cent and for long-haul flights by up to 360 per cent. In 2014, the figures now stand at 160 per cent and 385 per cent respectively. There can be no justification for that rise. Furthermore, a separate piece of independent economic modelling that was carried out in 2013 concluded that abolishing APD could provide the UK with a short-run increase in gross domestic product of almost half of 1 per cent, rising investment and employment and a permanent boost in GDP into the medium term.
It is worth thinking about the effects of APD in increasing carbon emissions. Many people now fly to Dubai via Dublin because flying directly from Scotland costs more as a result of APD. Some people are adding an environmentally damaging short-haul flight, which means that APD is working against our climate change targets.
For some time, APD has been at the top end of the most expensive aviation duties in Europe, with significant annual rises bucking the European trend. Indeed, there appears to be a growing realisation among our European neighbours of the negative economic impact that air passenger taxes can have. For example, the Irish Government abolished its €3 airport travel tax in April. It is also worth saying that the APD in the UK is the most expensive tax of its kind in the world. We could compare the effects of that change in Ireland with the reduced offering at some Scottish airports.
We should not forget the importance to the economy of our airports in their own right and the vital importance of their success. They are major employers in their areas, directly and through contractors. For example, Glasgow airport employs more than 400 staff directly, while contractors and service providers boost the indirect figure to 4,500. We therefore need to recognise that successful airports are catalysts for economic development, and we should do everything that we can to support that ambition.
There are some misgivings on Opposition benches, but our strong desire for Scotland to have control of APD is not based on the idea of power for the sake of power—it is based on a problem that we have identified, that is widely observed in the industry and which was recognised by the Calman commission in June 2009. The UK Government has had ample opportunity to deal with the issue, but it has chosen not to do so. The Calman commission suggested that, if air passenger duty was devolved, it should also be devolved to Northern Ireland. It has now been devolved to Northern Ireland, but no adequate explanation has as yet been given for why it has not been devolved to Scotland.
For some time, it has been apparent that UK Government aviation policy has been Heathrow-centric. Heathrow’s captive market makes it easier to charge APD at whatever rate suits the Exchequer. I have long argued that regional airports do not have that luxury and have drastically different capacity and demand issues. It is therefore just common sense to acknowledge that a one-size-fits-all policy will not work. The UK Government appears to have only partly seen the merits of that argument, in relation to Northern Ireland.
The recent changes in the UK budget betray the UK Government’s singular focus. The reduction from four bands to two represents a tangible and immediate benefit for existing and soon-to-be-introduced long-haul services. With that in mind, it would be no surprise to see the current direction of travel continue, whereby Heathrow looks to optimise its restricted capacity by encouraging more long-haul services at the expense of regional ones. When APD is charged on both sectors of a domestic service, the disincentive to airlines is clear. The continuing squeeze on our Heathrow connections and the barrier to enhanced international connectivity that APD has provided comprise something of a double whammy to passengers.
The UK budget changes could, in theory, add more potential to our future discussions with the Chinese and other long-haul markets, but they have little impact in the present. Our airports do not have direct scheduled services that fall into the upper two bands for which the rates are being reduced. The managing director of one of our larger airports told me recently that the changes affect around 4 per cent of his business. The impact at Heathrow and Gatwick will be much more significant, of course.
Recognising the need for quick but considered action, our commitments for APD in “Scotland’s Future: Your Guide to an Independent Scotland” deal with the short-term and the future. We are committed to a 50 per cent reduction in the first term of an independent Scottish Parliament with full abolition when public finances allow. The proposal is Scotland focused and does not have to reconcile unintended consequences at Heathrow and other large UK airports—something that continues to be an insurmountable challenge for the UK Government.
Those proposals are recognised as radical but absolutely necessary for the position in which we find ourselves. The industry shares that view. Scotland’s airports have been supportive of APD control coming to Scotland for some time. Indeed, one of the airlines, Flybe, called today to say that it wished us all the best in the debate and hoped for widespread support among the Opposition parties.
The Scottish Chambers of Commerce and other business organisations agree. Willie Walsh, the chief executive of British Airways’s parent group, suggests that APD would be dealt with more progressively in an independent Scotland, and the UK Government would be well advised to listen to that.
I also note Ruth Davidson’s previous position that APD should be abolished and the Liberal Democrats’ position on federalism. We have the grounds for some consensus in Parliament, but the picture is quite confused. I understand that despite the fact that no action has been taken on the recommendation of the Calman commission—which the Conservatives supported—Ruth Davidson felt it necessary to restate her support for the devolution of APD, although that has since been contradicted by a report in The Guardian today. She has also mentioned that she sought the abolition of APD from David Cameron, who refused point blank.
When a vital change that even the Conservatives agree should happen is dismissed out of hand by the UK Prime Minister, it is a perfect example of why we must have independence in Scotland. Perhaps later in the debate we will get some more certainty about the Conservative position.
On the Liberal Democrats, we had a statement from the Secretary of State for Scotland saying that devolution of APD would happen but, lo and behold, it has not happened. Perhaps we can get some clarity from the Liberal Democrats on that and on how they reconcile their refusal to move on the devolution of APD with their position on federalism.
The minister asks for clarity. Perhaps we could have some clarity from him. Yesterday, we learned that the Scottish National Party proposes to increase benefit for carers by £58 million. Given that that was not included in the page of costings in the white paper, will he tell me whether that policy comes before or after APD in the queue for money?
A request from me for clarity from the Liberal Democrats evokes a response asking for clarity about a childcare policy. Perhaps Alison McInnes could use her own time to answer the question that I asked rather than avoiding it in the way that she did.
The Labour Party position changed dramatically between April 2013 and March 2014. Originally, Labour proposed to support the devolution of APD, but that has changed in its latest devolution proposals. I do not know what the rationale for that is, but perhaps we can have some clarity on that in the debate.
Those who are not in favour of control of APD coming to Scotland are swimming against the tide. We have laid out the reasons why it is important that Scotland should have control over the tax. The York Aviation study and other studies have estimated the costs to Scotland at around £200 million per year at 2014 levels.
We know that people in South America and North America consider APD. I have been given the example of flights from Mexico. Entire planeloads of people decide to go to Paris or other European capitals rather than come to the UK and Scotland and they cite two reasons: APD and visa controls. That involves real cost because, had those people come to Scotland, they would have spent money in our shops, hotels and restaurants to the benefit of our people. That is no longer happening.
The York Aviation study mentioned a loss of £2 billion to the UK. That is a huge figure and a huge loss. We can boost jobs and the economy and cut back on some of the expensive connecting flights that we currently have to have by having more direct flights. For that reason, I am happy to move the motion.
I move,
That the Parliament notes with concern the continuing prevarication of the UK Government in devolving control of air passenger duty (APD) despite the clear recommendation of the Calman Commission on Scottish Devolution in 2009, evidence of the damaging impact of the significant increases in APD since 2007 and the growing campaign for control for it to be devolved; further notes the APD changes that were announced in the 2014 UK Budget, which, from April 2015, will amend the existing four-band system and, as a consequence, reduce duty paid on journeys of more than 4,000 miles; further notes that, based on the international destinations currently served from Scotland’s airports, this will be of minimal immediate value to Scotland; believes that improving Scotland’s international air connectivity and the ability of its aviation sector to properly compete with global competitors is a matter that needs to be urgently addressed; considers that this would be assisted by control of APD being devolved, and believes that, in the event of a Yes vote in the independence referendum, the UK Government should devolve this as a matter of priority in order to enable the Scottish Government to progress the proposals contained in Scotland’s Future: Your Guide to an Independent Scotland to reduce APD by 50% in the first term of an independent Scottish Parliament and to seek to abolish it when public finances allow.
I call Mark Griffin to speak to and move amendment S4M-010185.2. Mr Griffin, you have a generous nine minutes.
14:55
Another day, another debate on independence. Once again, we are talking about powers and process when we could be talking about reducing poverty and inequality. It is another debate whose end result will be Scottish National Party MSPs voting one way, us voting another way, and not a thing changing in Scotland in terms of transport connectivity.
We have thought long and hard about air passenger duty and we are still unconvinced about removing it. We discussed it through the Calman commission and we have introduced it for debate in our devolution commission and, although we feel that air passenger duty is in need of reform, we believe that a 50 per cent reduction, followed by total removal, would not be sensible without further consideration of the economic and environmental impact.
Can Mark Griffin say why it was a point of principle for the Calman commission to agree that APD should be devolved? I understand that he might quibble with the proportion by which it is cut, but how has the principle that APD should be devolved to Scotland changed from the conclusions that Labour reached as a result of the Calman commission?
The point of principle is that we need to take into account economic assessments and environmental assessments. I will deal with that in my speech but, from first principles, we need to make those judgments and take those assessments into account before we decide where the tax is best administered. We are not closing the door to devolution to Scotland; we simply think that more consideration is required before such a decision is taken. The Scottish Government seems somehow surprised by that, but we do not think that we can remove what is an environmental levy without considering those impacts thoroughly.
Will the member give way?
No, sorry.
It is no surprise that the SNP wants that power over tax, since the Government is an all-centralising force in Edinburgh and never misses an opportunity to demand more powers. However, we have to look more deeply at what the Government wants that power for. When we look at those reasons, we see an SNP-Tory alliance. Those two parties propose devolution of air passenger duty, resulting in tax competition across the UK, with the benefits going to big airlines and the costs being borne by the public purse and the environment. The debate is a mirror image of the one on corporation tax, which sees the Scottish Government pursuing a low-tax economy while claiming that it is a progressive force.
What are the views of Mr Griffin and the Labour Party on the York Aviation report, which showed the devastating effect that APD has on Scottish airports, and the PricewaterhouseCoopers report, which went into some detail on the economic advantages of scrapping APD across the UK?
The Government has failed to have any assessment of the policy before introducing it. With regard to the papers that the member mentioned, I agree that there would be an increase in passengers coming to the UK, but the member has to appreciate that there would also be an increase in passengers leaving the UK, which would mean that home-based tourism revenue would be affected as well. That is surely the case.
Will the member give way?
What is progressive about a tax cut to big business of £135 million through the reduction of air passenger duty, on top of the £385 million that would be given to big business through a cut in corporation tax that would set the level 3 per cent lower than even George Osborne is proposing? That is a tax break to big business of more than half a billion pounds on day 1 of Scottish independence, and there is no answer from the Scottish Government on where the axe will fall on public spending.
Will the member give way?
Let us look at the detail of the proposal. The Scottish Government has said that the costs of reducing APD could be offset by increased VAT receipts as a result of increased tourism. Of course, that revenue would go to the UK Treasury, and that seems to be the reason why the Scottish Government is not introducing its childcare policy, but we can leave that inconsistency for another day.
It has been indicated that a 50 per cent reduction in air passenger duty would increase passenger numbers by 3 per cent. A 3 per cent increase in inward passengers would generate additional income and tax revenue in Scotland, but would that be enough to offset the £135 million pounds in lost revenue? As I have said, if we were predicting a 3 per cent increase in visitors, surely logic dictates that we should expect a 3 per cent increase in Scots flying out. How much would it cost the Scottish economy and the public purse if more Scots were to go on foreign holidays rather than stay and visit UK destinations?
I have yet to see any detailed figures produced by the Scottish Government on the likely impact of the policy other than what we know for certain: the public purse would be £135 million pounds worse off. Will the minister say today, in the interests of transparency and ahead of the referendum, which public services would be cut or who would pay higher taxes to fund the policy? Would it be teachers, nurses or the police? Would it be local government or come from care of the elderly services? The Scottish Government can have no credibility on the issue when it has no costings and it is not willing to say where spending will be reduced or taxes increased.
Will the member take an intervention?
The member has made it clear that he is not taking an intervention, Mr Brodie.
That is not to say that we are opposed to the reform of air passenger duty. However, during any such considerations, the full implications of any reform should be known.
It must also be remembered that air passenger duty was introduced as an environmental levy. The white paper makes a clear commitment to decarbonisation. How are the two policies consistent? The white paper states:
“We will be able to align transport policy with energy policy to achieve Scotland’s ambitious decarbonisation targets.”
Section 33 of the Climate Change (Scotland) Act 2009 commits the Scottish Government to reduce carbon emissions by 46 per cent on 1990 levels by 2020, with a further reduction of 80 per cent on 1990 levels by 2050. The Scottish Parliament unanimously backed that target. The act also requires the Scottish Government to hit annual emissions reduction targets and report back to Parliament. Both of the targets have been missed, making the subsequent targets more difficult to hit.
The Scottish Government has also been criticised by Opposition parties and a number of environmental organisations for having too many proposals and not enough policies in its annual report on proposals and policies. Those criticisms include basing long-term goals on vague assertions, such as the availability of new technology in the future.
There is striking similarity between this debate and that report because the Government can offer only the same vague assertions that everything will be okay. There are no costings to consider, no figures on how the environmental impact and carbon reduction targets would be offset, and no proposals for any reform of air passenger duty to reduce the carbon emissions from air travel.
The debate should essentially be about transport connectivity but instead it is about transport connectivity—as with everything else—in an independent Scotland. I have said that nothing will change after today; we will simply carry on as we were. That would not be the case if the Government were serious about transport connectivity.
We could have been debating the actions and options that the Scottish Government is taking right now to make Scotland a more connected and attractive place to come and visit for business or leisure. The Government could be well on the way to delivering a rail link to Glasgow airport, boosting one of our most important city regions, but here we are again talking about powers and process and a continuation of the Government’s independence agenda of tax cuts for big business.
I move amendment S4M-10185.1, leave out from “with concern” to end and insert:
“that reducing air passenger duty by 50% would take £135 million out of Scotland’s budget in addition to the £385 million that the Scottish Government’s proposed cuts to corporation tax would cost; further notes that these reductions in revenue would have to be fully funded by tax rises or cuts to vital public services; calls on the Scottish Government to confirm immediately what tax rises or public service cuts it would introduce in an independent Scotland, so that the people of Scotland can make an informed decision on 18 September 2014, and further calls on the Scottish Government to hold a serious debate on transport connectivity.”
15:04
I start from a position of enormous advantage in the debate, because I was brought up to believe that all tax is evil. My experience of a career in politics has tempered that only slightly; I now believe that tax may be a necessary evil, but it is evil, nonetheless.
Occasionally, a tax comes along that causes everybody to round on it and attack it because of the damage that it is doing. Air passenger duty is exactly that kind of tax. It is therefore no surprise that we find ourselves debating APD once again, having debated it on 20 November 2012.
To be perfectly honest, not a great deal has changed in the interim. One of the things that has not changed is the fact that the SNP is still desperately quoting the York Aviation report. The only difference is that the report has, a year and a half down the line, been demonstrated to be out of date and unworthy of our concern.
Nevertheless, I will go into some more detail on the report. It claimed that by 2016 increases in rates of air passenger duty could result in 2.1 million passengers being lost to Scotland and that £210 million less would be spent in Scotland per year by inbound visitors. It also suggested that the initial doubling of APD in 2007 had had the effect of reducing the number of passengers by 1.2 million across the country. It predicted that the knock-on effect of APD would be that the Scottish economy would lose
“inward investment, trade and competitiveness.”
However, the figures that have been produced since show that, in 2013, Glasgow airport handled 7.4 million passengers. That figure is up from 7.2 million in 2009 and bucks the trend that was predicted in the York Aviation report. Edinburgh airport had 9.2 million passengers, which was up from 9 million in 2009. The figures appear to indicate that there is a growth trend. That trend is at its greatest at Aberdeen airport, which handled 3.5 million passengers in 2013, compared with only 3 million in 2009. It therefore appears that, even given the recession that we have gone through, the predictions in the York Aviation report have not materialised.
Nevertheless, I found myself agreeing with a great deal of what the minister said in his opening speech about the economic impact of taxation.
Given that Mr Johnstone is a fine, dyed-in-the-wool Tory, does he not agree—based on his own political judgment in the past and so on—that the change of ownership at Edinburgh airport and competition might have helped to improve the figures?
There we go. There is an example of a positive contribution being made from outside Scotland.
Let us now look at what we are saying about the tax, what it was meant to do and the effect that it is having. Of course, we all know that it was initially proposed as a green tax. It was meant to tax people who were travelling by air and who were, as a result, polluting, but it is now simply considered to be a revenue-raising measure. Nevertheless, we should never make the mistake of believing that taxing people out of the air is likely to have a positive effect on the environment because—as we all know—not only have passenger numbers increased in recent years, but predictions that airlines would not invest in new cleaner aircraft have turned out to be wrong. The result is that the emissions from our aircraft—especially when they are measured per passenger—are dropping very quickly as fleets are renewed and efficiency is improved.
A key aspect of that is that larger aircraft will tend to use hubs. As a result, we in Scotland will rely—as we always have—on feeder services to the major hubs, and cannot hope to bring all those services directly into Scotland. The consequence is that we must concern ourselves not only with the air passenger duty that is being paid in Scotland, but with that which is being paid in London.
So, as I stand here, I am willing to hold out the olive branch and say “Yes—the Calman commission said that air passenger duty should be devolved.” Yesterday, the Conservative Party published the Strathclyde commission report, which sets out what we are prepared to do in the event of a no vote. It is a detailed document that goes into—at great length—the generous proposals for devolution that we will have, in that event. The SNP is getting most excited about one small part of it—the part that said that we would like to see the devolution of APD. However, the SNP misses the point that even if APD were devolved and we were to abolish it all—not just the 50 per cent that the SNP has committed to during the lifetime of the first Parliament of an independent Scotland—the only way that we could properly rid Scotland of APD would be to abolish it on a United Kingdom basis, so that Scottish passengers would not have to pay it at the London end as well as the Scottish end.
Why is it okay to give Northern Ireland powers to reduce APD, but not Scotland?
The irony of Chic Brodie’s position is that he takes the place of the unionist: the man who looks from the centre and believes that everything should be equal in all directions. I take the position of the politician who believes in devolution: I believe in different solutions for different countries. That is why I—as a true devolutionist who believes in decision making right here in Scotland—am prepared to propose that we, as two political parties, with so much that separates us, reach out and link hands, and go forward together for the benefit of Scotland and its air passengers, in order to secure, in the long term, a sound commitment that the burden of this evil tax will ultimately be removed so that we do not have to suffer it any longer.
Gosh!
I move amendment S4M-10185.1, to leave out from “with concern” to end and insert:
“the recent changes announced by the Chancellor of the Exchequer, which simplify air passenger duty (APD), reduce the charge on flights to countries over 4,000 miles from the UK and cut tax for millions of passengers to and from many emerging markets; notes the findings of the Commission on the Future Governance of Scotland, which was chaired by Lord Strathclyde, regarding the devolution of APD in Scotland, and calls on the Scottish Government to find a viable alternative to the air route development fund.”
You have six minutes, or thereby, Mr Harvie.
15:12
How do I follow that? I can only reflect that I must have been raised with a fundamentally different understanding of the word “evil” from Alex Johnstone. I was raised to understand that the decisions that we make collectively to provide the public services that we all depend on, the investment that we make in the future, and—I hope—our struggle towards a more sustainable economy, are profoundly to the good. Nothing could be further from the truth than to call that kind of approach “evil”.
Given that starting point, I have a great deal of sympathy for Mark Griffin’s arguments not just about whether cutting APD would be a good or bad change in aviation and transport connectivity terms, but about how it would be paid for. Labour and the Greens have reached agreement on the Government’s approach to corporation tax, and the same argument applies to APD; if the Government wishes to cut a tax, it must say whether that revenue will be replaced by revenue from other taxation or be cut from the budget.
This is the question that I wanted to ask Mr Griffin. The Netherlands got rid of APD because although it was raising €250 million, the country was losing €750 million in tourism and VAT. Why would we have to replace the tax?
If we stop raising a tax, less income will come to the public budget, so cuts will be have to made somewhere.
To answer the question of whether cutting, or even abolishing, air passenger duty is a good idea, we have to begin with an acknowledgement that the aviation industry already enjoys massive tax breaks, compared with other transport modes. Since the “Convention on International Civil Aviation” in 1947—there have been many European Union directives and EU-US trade deals since then—the aviation industry has paid no fuel duty, while every other transport mode pays some tax on its fuel.
Will Patrick Harvie take a very brief intervention?
No, I need to move on. I have taken one already.
Aviation is covered by VAT, but it is zero-rated in this country. Consumers pay no VAT on tickets, airline fuel is zero-rated, and no VAT is due on the purchase of new aircraft, aircraft servicing, air traffic control, baggage handling, aircraft meals and many other aspects of the industry.
Can we figure out the value of the massive tax breaks to the industry? The assessment of the UK Government, with which I do not agree on many things, is that if the UK was to charge fuel duty and VAT on tickets, it could result in revenues of around £10 billion. That estimate is from 2008.
I am not suggesting that it is something that one country can do unilaterally, or that the changes would be effective if one country were to embark on them unilaterally. However, we need to begin with acknowledgement of the scale of the tax break that the industry enjoys.
Is taxation through air passenger duty too much of a burden to bear and is it holding the industry back? I do not think so. I have had a look at recent increases. In 2013, Aberdeen airport apparently had the busiest year in its history, and beat its record high from before the economic downturn by having 3.48 million people pass through. Glasgow airport has enjoyed its busiest year since 2008 after 7.4 million people passed through its doors in 2013, which was a 2.9 per cent increase. Edinburgh airport, which has been mentioned already, was used by 9.8 million people or thereabouts in 2013. That was an increase of 6.3 per cent, which beat the global average increase in the aviation industry, most of which is happening in rapidly developing countries. The industry remains very expansionist.
The airline industry is also very profitable. Just a few days ago, the published forecast global profit is in excess of £10 billion. European airlines made £240 million profit in 2012, £300 million in 2013, and the amount is projected to rise to £1.7 billion in 2014.
It is fascinating to hear those figures, but could Patrick Harvie express them in terms of percentage profit?
What we can see from European airlines is clearly a large percentage increase from £240 million to £300 million and then to £1.67 billion in 2014. The industry is clearly still expanding and is highly profitable, and it enjoys massive tax breaks. That is my starting point, and I find it hard to take a different view.
What would be a fair contribution through taxation for the industry? For me, it must be related to the social and environmental impacts of the industry on noise and traffic on the ground, as well as the impacts of carbon dioxide, which are higher, given levels of emissions at altitude. In its briefing to members, ABTA says:
“ABTA accepts that aviation should pay its proper environmental cost”
but it quite laughably goes on to say that it
“believes that cost is more than reflected in the current APD levels. This is particularly true with the introduction of the Emissions Trading Scheme (ETS)”,
which only covers 25 per cent of aviation emissions in Europe.
This is an industry that makes a far lower contribution through tax than other transport modes, and which has a far higher impact on climate change because of its emissions. Keith Brown’s argument that short-haul flights are more environmentally damaging is exactly the spurious rationale that was given for the air route development fund, which saw continual increases in long-haul as well as short-haul flights.
The assumption that underlies the industry’s argument and the Government’s position is that aviation can just keep growing while the rest of society aims for dramatic carbon dioxide cuts. I do not think that the industry can be given a free ride for much longer.
I move, as an amendment to motion S4M-10185 in the name of Keith Brown, to leave out from first “notes” to end, and insert:
“considers that the aviation industry does not pay its fair share of tax; notes that European airlines expect to make profits of over £1.5 billion in 2014 but will pay no tax at all on aviation fuel and benefit from significant VAT reductions in the UK; considers that the cost of air passenger duty is a small fraction of these tax breaks enjoyed by the industry, and believes that the aviation industry is a highly profitable industry that is failing to pay for the pollution that it creates and should be taxed in line with its environmental impact.”
We move to the open debate. Speeches should be up to seven minutes, please.
15:19
APD illustrates much that is wrong with the Westminster Government—not just the current Government, but the institution itself. There is a good Scots word to describe it: thrawn. The case for reducing or abolishing air passenger duty has long since been made. It is a proverbial “no-brainer”. That is not my word, but the word of Mike Cantlay of VisitScotland. There is no case at all to be made for a tax that acts against the public interest while depriving the Exchequer of revenue.
It has long since been shown that reducing APD will more than pay for itself through increased tourism and associated visitor spend, through increased VAT and an increased take from the whole basket of taxes, and through job creation and reduced welfare costs. As if that is not enough, reducing APD will pay for itself by increasing our competitiveness and increasing business, and by increasing our global connectedness and associated trade.
Scotland, unlike the rest of the UK, is increasingly an exporting economy. We export our oil and gas and our oil and gas expertise. Our oil and gas supply chain earns more money internationally than it does in the North Sea.
Mike MacKenzie is making the case that reducing or abolishing APD would have a beneficial impact on the rest of the economy. All the oilmen would be flying all over the world; that would be great. However, it would clearly have a cost to the Scottish budget. Cannot the member understand that reducing a tax means that the money must be found somewhere else in the Scottish Government’s budget—even if, as he says, there is a benefit in the wider economy?
I am surprised that Mr Harvie does not properly understand the nature of taxation. Sometimes we give away with one hand to collect much more in the other, from the whole basket of taxes. Virtually every tax in the basket will deliver an increased take.
That is Laffer curve nonsense.
If I may continue, Mr Harvie.
We also export food and drink. Exports in the sector have increased by 55 per cent since 2007 and are worth £5.4 billion. The target is to achieve exports of more than £7 billion by 2016.
In pursuing our exporting success, we contribute greatly to the UK balance of trade. Of course, the UK Government does not like to talk about that, because without Scotland’s exports the UK will face balance of trade difficulties; without Scotland’s exports, the UK trade deficit would double. That is one reason why UK politicians, despite their posturing, will be pleased to enter a currency union with Scotland after independence.
Successful participation in the global economy requires travel. In the modern world, that means air travel. Quite simply, there is no other way to do it. Tourism brings in more than £4 billion a year to the Scottish economy, a significant proportion of which comes via air travel. It makes no sense to throttle our trade with the rest of the world, to stifle our tourism potential and to limit our economic potential by imposing air passenger duty.
No doubt that is why the Calman Commission on Scottish Devolution and, as I understand it, the Tories’ Strathclyde commission, recommended that APD be devolved to Scotland. No doubt that is why the Liberal Democrats’ home rule report, “Federalism: the best future for Scotland”, which was published in October, recommended devolution of APD.
As usual, the UK Government is too slow, too dumb and too deaf to listen to the compelling case that has been repeatedly made for devolving the tax.
Mike MacKenzie said that abolishing the tax is a no-brainer and he said that we would make up every penny and more in other taxes, so why does he not favour immediate abolition upon independence?
I am very glad that Gavin Brown asked that question because, of course, we cannot just pull on that lever and suddenly get a tax windfall the same day. It takes time. [Interruption.] It takes time. That is why, sensibly, the Scottish Government has pledged to reduce the tax to 50 per cent immediately on independence. Thereafter, as taxes from other parts of the basket of taxes roll in—pour in—to Scotland, ultimately we will abolish the tax completely. I am sure that Mr Brown agrees with me that that makes good economic sense.
Of course, it is for those reasons that the aviation industry, all those who depend on it and, increasingly, people across Scotland, are indicating their support for independence.
15:26
It has been guesstimated that by 2016, if nothing is done to tackle APD, this damaging measure will have cost the Scottish tourism industry and our economy some £210 million per annum over a four-year period by virtue of lost inbound tourist spend. We do not have to look far in seeking tangible evidence of the positive impact that reducing such taxation can have. Ireland has just scrapped its equivalent of APD and expects 1 million more visitors to come annually as a result.
On the back of the move, Ryanair has opened up 21 new routes in and out of Dublin, Shannon and Knock, which is not only advantageous for visitors but affords the Irish themselves greater scope for travel, not to mention opening up potential new business opportunities. And there is the rub for Scotland: we are not competing on a level playing field, or one even remotely resembling that, with one of our closest tourism rivals—rivals with whom we are going head to head in the areas of golf and heritage tourism, particularly in the United States market. Of course, independent Ireland already had an advantage over us, having reduced its VAT rate on tourism—as 25 other European nations have done—a little over two and a half years ago.
The latest move makes it even harder for our industry to take Ireland on. Right now, we are trying to participate in a competitive marketplace with one hand tied behind our back. Despite the Scottish Government’s pleas, the UK Government has steadfastly refused to look at the VAT issue, decisions on which, as with APD, can be taken only by Westminster.
The Irish national tourism agency, Fáilte Ireland, commissioned a report on the impact in the first two years of the reduction in VAT from 13.5 to 9 per cent; I mention that partly to answer Patrick Harvie’s point about the budgetary impact. The report showed that tourist numbers in Ireland were up; that 10,000 jobs had been created across the industry; and that the tax take from those in employment and from tourist spend in the economy more than made up for the income that the Irish treasury surrendered through the cut.
Will the member give way?
I want to develop my point. Approximately €95 million in total came from additional income tax, social welfare savings and tourism spend, as against a drop of €88 million in the country’s VAT receipts. Ireland’s reduction proved to be a winning move, and so will its abolition of APD, even though duty there was already pitched at a far lower level than it is in the UK.
As any of us who fly will know, the cost of taking to the skies to and from the UK is grossly inflated by APD. The hit is bad enough on short-haul flights, but for long-haul flights it really is punitive. Although the Westminster Government plans to tinker with APD in 2015 by pegging the charge for all flights exceeding 2,000 miles at £284 for a family of four, the negative impact on the Scottish economy and on our airports of continuing to levy APD at such levels could go beyond the obvious.
Even factoring in the cost of a connecting return flight over the Irish Sea, it is much cheaper to fly from Dublin to some destinations that Edinburgh serves than it is to fly direct from Scotland’s capital. I will give three examples involving three different carriers, flying to Philadelphia, New York and Paris in July this year. In the case of Philadelphia, there is a saving of £184 to be made; for New York, the saving is £404 per flight; and for Paris, it is £30 per flight, despite the fact that Edinburgh is closer than Dublin to Paris.
Unless the issue is tackled, either by having APD devolved or by securing control of it through independence—which is the more desirable option by far—we could be facing a bleak time of it, with Scottish holidaymakers snubbing direct flights from this country in favour of cheaper alternatives to be had elsewhere. I do not want Scotland to operate as some sort of regional hub, linking people into London or Dublin; I want Scotland to develop more in the way of comparably affordable direct flights and to properly exploit its potential as a first-choice tourism destination.
Ryanair’s Michael O’Leary has predicted that the full abolition of APD would double the number of visitors to Scotland over five to 10 years. I accept that we are not talking about full abolition, but even a 50 per cent reduction, moving towards removal of the tax when the public finances allow, would allow much of that potential to be realised.
The Westminster Government might be planning to abolish two bands of APD for journeys in excess of—
The member’s proposal for the partial abolition of APD would take £135 million out of the Scottish budget. What areas of the budget would he cut to replace the shortfall?
I thank the member for teeing that up. Labour’s amendment claims that a 50 per cent cut in APD would remove £135 million from an independent Scottish Government’s budget. What about the positive, and countering, impact that such a move would have? The PricewaterhouseCoopers report from last year suggested that if APD were abolished across the UK as a whole, that would generate the equivalent of 0.46 per cent of UK GDP in a year, rising to at least £16 billion within three years, leading to the creation of 60,000 jobs. I am no economist, but I think that that suggests that tackling APD would be a pretty good thing, especially if it were married to considering VAT in the tourism sector, too.
Who knows? People from the north of England might just start to travel to an independent Scotland to catch flights from here, rather than the present situation, which is quite the reverse. If an independent Scotland were to reduce and, ultimately, scrap APD, as the UK remained on its present path, the boost to our airline sector and our economy could be significant.
Scotland-based travellers would surely support our airports instead of heading south in pursuit of a saving, and some travellers from over the border might be tempted north by cheaper fares.
We need action on the issue, and it needs to go beyond simply devolving APD. Scotland needs control of the measure, as it does over every other power associated with a fully independent country.
15:32
We have heard from the minister, as well as from Mike MacKenzie and Graeme Dey, about the economic factors behind air passenger duty, but I wish to take this opportunity to concentrate on the environmental aspects of the debate, as well as on the role of air travel in general transport connectivity.
My Labour colleague Mark Griffin has already argued that the benefits of devolving air passenger duty at this stage still need to be assessed. I do not intend to go into those arguments again.
The SNP plans are to abolish the duty “when public finances allow”—whenever that may be. Frankly, that seems somewhat simplistic and rather disingenuous. We do not currently have any information on the carrying out of detailed research into the economic and environmental consequences, which we need to understand the full picture of what the Scottish Government is saying about both the proposed 50 per cent reduction and what would happen later.
As I have already highlighted in many debates, as have other members across the chamber, the Parliament voted to pass the Climate Change (Scotland) Bill in 2009, committing us to reducing carbon emissions by 46 per cent by 2020, I think, and by 80 per cent by 2050. As the Scottish Government has been made all too aware by stakeholders outside the Parliament—and as my colleague Mark Griffin highlighted—that is no easy task, as members from all parties across the Parliament acknowledge. Our targets are the most ambitious in the world and are difficult to achieve, but the long-term benefits of cutting greenhouse gas emissions were recognised by all parties, which led to the present Government—and those that will follow in the future—committing to taking the issue of climate change very seriously and developing policies accordingly.
Will the member take an intervention?
No, I will not take an intervention, sorry; I am developing what I want to say.
It is the pathways that matter, and they are complex and difficult for us all. As such, I am struggling to understand how cutting APD, which encourages more air travel, is compatible with reducing greenhouse gas emissions. I am sure that the minister does not need me to point out that air travel produces one of the highest levels of emissions of any global sector, so why is the Scottish Government aiming to cut the tax?
The member has concentrated on environmental issues, but I think that she would acknowledge that, since 2007, there has been a 12 per cent reduction in transport emissions in Scotland. She will also be aware that we intend to spend £1.3 billion on environmental measures between 2013 and 2016. Is it the position of the Labour Party that, on principle, it does not support the devolution of APD to Scotland? That is not clear from what has been said so far.
The minister has asked a number of questions. We are looking at that possibility. My colleague Mark Griffin has already highlighted that there are economic and environmental issues that need to be assessed before we take a final decision. That has been made clear.
Has the Scottish Government assessed what increase in air travel there is likely to be as a result of a cut in APD? Has it considered the increase in carbon emissions that would be created and how that would be offset? As Patrick Harvie highlighted, the aviation industry receives major tax breaks. In its white paper, the SNP announced its intention
“to align transport policy with energy policy to achieve Scotland’s ambitious decarbonisation targets.”
That is a commendable goal, to be sure, but it surely sits uncomfortably with the SNP’s stated aim of using the revenues from oil—part of the fossil fuel mix—to provide much of the economic support for a potentially independent Scotland and with the proposed cut in APD.
Will the member take an intervention?
I will not, as I am just moving on to a new point.
We should surely be encouraging people to fly less—whenever that is possible, I stress—instead of creating another needless incentive to contribute to greenhouse gas emissions. I am afraid that the Scottish Government’s position is somewhat hypocritical. That has been a running pattern: it is forever making grand pronouncements on environmental issues while pursing policies that contradict its intentions, whether in relation to North Sea oil and energy or the marine environment. In my view, there is a danger that the word “sustainable” will be lost from the Scottish Government’s policy of sustainable economic growth.
In any case, the focus on air passenger duty is something of a red herring; instead of concentrating on one aspect of the transport sector in isolation, we should be considering transport connectivity as a whole. Last week, we heard about the new Caledonian sleeper franchise and how it will greatly improve rail connections to London. The opportunities to further develop rail travel to mainland Europe should also be considered.
Of course no one is saying that all air travel should be discouraged. Most non-domestic journeys, especially intercontinental ones, require air travel, but the proliferation of intercity flights in the UK could be tackled by making the case for more rail travel. That said, no one has yet acknowledged the importance of the exemption from APD for the Western Isles, to some parts of which it would not be realistic to travel using means other than air travel.
I hope that members agree that it is fair and sensible to consider connectivity in the round. Sometimes, it can take just as long to get to major cities in the UK from Edinburgh by flying as it does going by rail. I know from having googled the cost of many train journeys and having found that they are not necessarily affordable for people that cost is one of the main reasons why people choose to fly.
We need to think laterally. Is the Scottish Government working with VisitScotland to encourage families to consider holidaying in Scotland instead of flying abroad? I must put my hands up and admit that, occasionally, I fly abroad. Instead of looking at APD in isolation, as we are doing in today’s debate, we need to look at all these issues in the round.
The SNP has made the bold assertion that it will abolish APD when the public finances allow. Has that policy been properly weighed up against the economic and environmental impact, or is it yet another example of the SNP holding in front of people and businesses something that it says would happen after independence—we will never know—without having it properly costed?
15:39
Few things bind those within and outside the aviation industry together more than their hatred of APD. The campaign called a fair tax on flying is an alliance of over 30 airlines, airports, tour operators and destination and travel trade associations who are all calling on the UK Government to make UK aviation tax fairer. When we add to that group people of the same mind about APD, such as those in chambers of commerce—for example, Edinburgh Chamber of Commerce—we see that the opinion that there is something wrong with APD is shared widely.
APD was introduced in 1994, I believe on the back of being an environmental tax, but it is certainly not that now; it is just a tax—nobody claims that it is even close to being an environmental tax. It started off at just £5 for short air journeys and £10 for going elsewhere. Now, of course, the UK has an APD rate that a World Economic Forum report of last year stated was the world’s highest.
We have seen over the past couple of years the publication of the PWC report—incidentally, it was written by people who used to work in the UK Treasury—and the York Aviation report that was commissioned by Scottish airports. As Mr Johnstone pointed out, Scottish airports have had some pretty good figures, which are in spite of APD and come from a demand for more direct flights. Investment in the airports is due to the hard work of the people who run them, who are looking for route development. We have had success in Scottish airports from that, but we could do even better. As the MSP whose constituency includes Edinburgh airport, I believe that it is a driver for the economy. Everyone in the business sector accepts that. We need to encourage the airport, because we need jobs and to get the economy moving, and we can do that through the aviation industry.
Given what we have heard so far from a number of people, we can see the economic difficulties that those in the aviation industry are faced with. I have explained that in terms of Edinburgh airport. Indeed, as the minister pointed out, Saad Hammad, the chief executive of Flybe, has commented:
“Across the aviation industry, scrapping Air Passenger Duty would not only incentivise airlines to provide new routes and enhance travel for Scotland’s passengers, it would also significantly boost business and the economy. Scottish business people and consumers have had to count the cost of paying this tax twice when travelling domestically to an English airport — a disproportionate financial penalty which must not be allowed to continue.”
That shows that it is not just us who criticise APD. I know that operators in the Airport Operators Association, which is UK wide, and particularly those in the north of England, in Newcastle and Manchester for example, are all saying the same thing about APD, which is what makes the comments that some members of the Labour Party have made today even more worrying. I am sure that they will be sending shivers down the backs of those in the aviation industry, because it is looking for support. That simple fact is evidenced by the comments of many people in the industry.
As has been said, Scottish business people and consumers generally have had to count the cost of paying the APD tax twice. The crux of the matter is that we in Scotland have a geographical and airport hub problem that means that we end up paying APD twice.
APD is nothing more than Westminster’s demand for a tax; as I have said, it is not a green tax. It is a constant source of amazement that so far the Chancellor of the Exchequer has failed to respond to the pleas of business leaders such as Richard Branson of Virgin Atlantic, Willie Walsh of British Airways, Carolyn McCall of easyJet, Saad Hammad of Flybe and Michael O’Leary of Ryanair to stop trying to make their businesses uncompetitive in an incredibly difficult market.
And uncompetitive they are. Competition is not just between carriers and airports but between nations. As the minister mentioned, a family of four from here going on holiday to Florida would pay £276 in APD, whereas an equivalent family in Germany flying to the same destination would pay £154. As Graeme Dey pointed out, the Republic of Ireland has scrapped the APD tax. Scotland was promised by the Calman commission that APD would be devolved to it. APD got devolved to Northern Ireland in an attempt to make it more competitive with Dublin. What difference is there between Belfast versus Dublin and Belfast versus Glasgow? We are talking airplanes here.
APD has put Scotland at a competitive disadvantage, but Westminster demands to hold on to it and it appears that the Labour Party, having seen a bit of merit in the devolution of powers, is no longer terribly happy—
Just thinking through Mr Keir’s example, I ask him how making it cheaper for families to go to Florida would help the Scottish economy.
I would have thought that the complete infrastructure of business is relevant, including travel, ticketing, services that are provided and the amount of money that people may well spend with their families as they are waiting on a flight. Basic stuff like that is part of the business. People make money from those things, and taxation comes out of that.
The Tories now appear to be mildly supportive of APD but, as the minister pointed out, the article in The Guardian seems to suggest that the leadership in the Treasury in London is completely against it, so I am sorry if I take what was said in the launch the other day with a pinch of salt. I do not believe that there has been much in the way of expectation that any of the better together parties will provide relief for travellers in the event of a no vote.
APD just does not work. It hurts the travelling public, it hurts businesses and it hurts Scotland more than any other part of the UK.
I ask you to draw to a close, please.
Unlike some people who have a lot of money, ordinary people save for months to take their family on the holiday that they want to take, and they are penalised because of APD. Why on earth should they be taxed for that? Just to travel through London, we end up paying double.
APD is also a barrier when it comes to airports vying for new routes.
Will you draw to a close, please?
Not just Scotland, but the south-east of England pays the penalty for APD through the quantity of direct flights won by those here in Scotland. The sooner we get the power and have APD under our full control in a full independent nation, the better.
15:47
If any one matter or any one tax illustrates and confirms that the Westminster coalition inhabits—and its predecessors inhabited—the economic madhouse, APD is it. In 1993, the then Tory chancellor Ken Clarke said:
“I need to raise revenue, but to do so in a way which does least damage to the economy.”
He went on:
“I propose to levy a small duty”—
I stress the word “small”—
“on all air passengers from United Kingdom airports. This will be set at £5 for departures to anywhere in the United Kingdom ... and £10 for departures to other destinations.”
Now, it is £340 for a family of four to visit Australia. He went on:
“There will be exemptions for transfer passengers and ... most flights between the Scottish islands will not bear tax.”—[Official Report, House of Commons, 30 November 1993; Vol 233, c 933-4.]
When the new duty was announced, the Tory Government argued that it was most unlikely to have a big impact on sales of flights. In a written answer, the then Paymaster General—and he was a general—Sir John Cope stated:
“Overall, the tax is expected to reduce demand for air travel by around 2½ per cent.”—[Official Report, House of Commons, 19 January 1994; Vol 235, c 641W.]
It brings to mind Burns:
“Hey Johnie Cope are ye wauking yet,
Or are ye sleeping I would wit.”
One thing is for sure. We have been sleepwalking into an unmitigated disaster for an important element of our economy, our jobs, our tourism and our vibrant air industries, as the tax has grown over the past 20 years of Westminster management. Never mind the Tobin tax on financial transactions; here we have the Topsy tax. The Calman commission was right to say that we should have had powers over APD and the UK Government is and was wrong.
The member mentioned the Calman commission. Will he remind me of the extent of the SNP’s engagement with that?
I say to Mr Johnstone with all good will that Aristophanes said that a man may learn wisdom even from a foe. The rationale is that Scotland would have made it clear that it was looking for full independence and not a halfway house.
The situation affects not just Scotland but the UK Exchequer. Patrick Harvie was right to talk about the effect on climate change aspirations. None of the conversations that have emanated from the Chancellor of the Exchequer or the Treasury has meaningfully considered fuel efficiency or the need to move to modern aircraft. The same duty rates apply to very old aircraft.
There is a clear lack of a long-term strategy, which I believe will mean that Heathrow is almost paralysed, as Gatwick and Stansted will be at peak times. Airports elsewhere can and would fight for international direct routes to mitigate that. I say with meaning that that would be much better than losing London as a significant international hub. However, the law of diminishing returns has never been a shining feature of the UK Treasury’s economic management.
No one diminishes the taxing time for our airports. I welcome the recent decision about Prestwick, but I want all Scotland’s airports to flourish, as they can under their professional management, in what I believe will be a growing economy. Passenger departure taxes such as APD erode the economy and airlines’ profitability, which affects jobs in airlines and airports, not to mention the enjoyment of customers who like to go to Florida—I say that to Gavin Brown.
Such taxes have applied across Europe, but the Netherlands, Denmark and now Ireland have abolished them. I wanted to make the point to Mr Griffin—there might have been confusion when I raised it with Patrick Harvie—that the Netherlands canned APD after one year because the €250 million that it brought into the economy was losing the Netherlands more than €700 million in tourism and VAT income. Tourism there is prospering again.
Some European countries still levy air passenger duty, but none has had the 165 per cent increase that we have seen and felt in the UK since 2007. Nowhere does that resonate more than in Scotland. I know that the Opposition parties will rail at what I say, because many of their members have developed the unique skill of proposing nothing and opposing everything, but if they want an illustration of how Scotland’s economy could benefit from independence, APD provides the perfect canvas.
Scotland’s major airport managers and the associated airline managers—the professionals who are involved in the industries—unanimously agree that we should set off on a journey to reduce and eliminate the Topsy tax. To improve our exports in knowledge transfer, trade, competitiveness and tourism—that is an export activity—and to ride with the punches of global competition, we need more direct and international connectivity, which is vital for business. By the way, that also indirectly helps the rest of the UK’s economy. London and the south-east could choke if we do not do something about limited air transport capacity.
Will the member take an intervention?
I am sorry—I am in my last minute.
With the Presiding Officer’s agreement, I will not dwell on the likely negative impact on Scottish expenditure and jobs if Boris’s fantasy becomes a reality—it really is fantasy island.
In the significant area of international tourism and business, as in many other areas, Scotland is increasingly diverging from London and the rest of the UK. For the economy, and with jobs at the heart of our approach, we need at least to be able to develop a competitive advantage where we can. We would rather do that than whinge about the situation. The independent ability to reduce and eliminate this iniquitous tax would allow us to share the investment and the motivation to create the jobs that we all want.
I am afraid that you must close.
I am just finishing.
What I described will come about only with the sovereignty of independence. It will then be up to others outside to meet the economic challenge that we will introduce, which I suspect will be in their economic interests, too.
I believe that members were advised that they could have up to seven minutes for their speeches. That is all that is available for members.
15:55
From listening to this debate, I am not sure that the Scottish Government’s arguments have progressed much beyond those in the debate back in November 2012. I wonder whether there is a wee bit of motivation to try to embarrass members of other parties—possibly even people who admitted at that time that there was a case for the devolution of APD, such as me. I will certainly not deny what I said at that time, but there are issues that need to be counterbalanced with that.
I will illustrate with a local example some of the problems and the difficulty that there could be with having two different regimes in the United Kingdom.
Will the member give way?
No. I would like to illustrate some of the problems with my local example. I am sure that, if Kevin Stewart was speaking, he would have a local example that he wished to use.
For my constituents, airports in the north of England are as accessible as those in the central belt of Scotland, and they are probably more widely used. In fact, passengers can take a train directly into Manchester airport from Lockerbie or from Dumfries, Annan or Gretna by changing at Carlisle. There has been a long-cherished wish in the Solway basin to have Carlisle airport opened to passenger flights. Unfortunately, that aspiration was disappointed in March this year, when an application for the development of Carlisle airport was overturned in the High Court after a challenge from a local farmer. Nevertheless, the Stobart Group still hopes to bring forward another application, which it hopes will result in daily passenger flights to Dublin and London. Obviously, if that aspiration is eventually realised—I accept that it has been discussed for many years without there being much significant progress—it could really open up additional tourism potential for Dumfries and Galloway.
If it is unfair that passengers who go to and from Scottish airports may have to pay air passenger duty twice if there are no direct flights from those airports—I made that point in the debate back in November 2012—it is equally unfair that passengers who travel to and from airports in the northern parts of England, which could include some of my constituents who cross the border to do that, should have to pay twice. There could be the opposite situation in which people travel from the north of England to Scottish airports. Why should any of us have to pay twice because there is no direct flight from our own airport? Indeed, airports in the north of England and their passengers could be disadvantaged not only with respect to London but with respect to Scotland and Wales under the devolution of APD. The situation is therefore complex.
Our amendment back in November 2012 urged the UK Government to take action to resolve that anomaly, as it disadvantages passengers from airports in Scotland, Wales and the north of England. I am not sure whether that is being addressed by some of the reforms that the UK Government has proposed. Perhaps a Conservative member could enlighten us on whether there are any intentions to resolve that anomaly. Devolving APD at this stage could result in tax competition, as we have heard from Mark Griffin and other members, rather than resolve the wider issues around the way in which the tax operates. The great thing about devolution is that it can be reviewed and refined in the light of experience; indeed, that is happening. Unfortunately, if we decide on independence, there is no way back if we do not happen to like it.
When the tax was introduced in 1994, climate change was far further down the agenda as a priority. As Claudia Beamish pointed out, the Scottish Parliament passed the Climate Change (Scotland) Act 2009, which committed us to a 42 per cent reduction in emissions by 2020, which is only six years from now, and an 80 per cent reduction by 2050. It is important that that act included our share of emissions from international aviation and shipping. That was quite bold, and we recognised that as part of the ground-breaking legislation that we passed. The Scottish Government has missed its annual reduction targets for two years in succession, so we have a problem. We set ourselves targets and did not reach them.
I do not know that APD as it stands is the best way of controlling aircraft emissions, but I do not endorse any approach that is simply about reducing the tax and eventually removing APD altogether without replacing it with some other form of taxation on aviation emissions. Perhaps taxing passengers is not the best way; perhaps there are ways in which taxation could be aimed at companies that use aircraft or fuels that are more polluting. There might be ways in which we could refine the approach, but I do not think that it is correct to take away the tax altogether.
In fact, I recall that, in the debate to which I referred, Stewart Stevenson gave some interesting examples of possible ways to tackle aviation emissions, which related to different types of fuel and so on. Consideration needs to be given to how APD could be reformed, which is what Labour colleagues in Westminster have been urging the UK Government to do.
The Scottish Government says in the motion that it would
“reduce APD by 50% in the first term of an independent Scottish Parliament”.
I am slightly puzzled as to why it wants APD to be devolved only if there is a yes vote in September, whereas previously it wanted APD to be devolved, full stop. That aside, as we have heard, the Government proposal to cut APD by 50 per cent would remove £135 million from the Scottish budget, but we have no indication of where the money would come from. I expect that, as with the proposed £385 million cut to corporation tax, the Scottish Government answer will be that the money would come from economic growth—in fact, we have already heard that.
There is still a problem, however. Gavin Brown got one of the SNP members—I cannot remember which one—to admit the problem, which is that, even in the unlikely event that the Scottish Government’s highly optimistic assertions are correct and there is economic growth, it will not happen instantaneously, but the cuts to the budget will bite as soon as they are implemented. From the start, £135 million would be removed from the budget in order to make it cheaper for Scottish residents to fly off on holiday. We all like a cheap holiday—I do as much as anybody else—so that would be popular, but is it really the best use of £135 million?
If there is £135 million kicking around with nothing to be done with it, might it not be better to use it to invest in our public transport system, which gets people to and from work every day and contributes to economic growth? Alternatively, perhaps it could be used to reinstate some of the rail projects that the Scottish Government has either abandoned or delayed. Those would also contribute to economic growth, and would do it in a sustainable manner.
Please draw to a conclusion.
Right—thank you.
Unfortunately, the Scottish Government, having included aviation emissions in the Climate Change (Scotland) Act 2009, now seems to be retreating rather quickly from action to tackle those emissions. APD might not be the best way to do that but, if the Scottish Government gets rid of APD, will it bring in an alternative green tax to tackle aviation emissions?
16:02
I find the debate somewhat bizarre because, not so long ago, members from across the chamber seemed to be supportive of the devolution of air passenger duty. In fact, about 18 months ago, I attended an event that was hosted by Tory MSP Jamie McGrigor at which cross-party support was expressed for the tourism industry’s call for the demise of air passenger duty. We heard that some folks no longer come to Scotland for trips because of APD.
We have heard from the Calman commission, the Strathclyde commission and the Lib Dems’ Campbell commission that APD should be devolved, and Labour’s interim report on devolution said that there is a case for APD to be devolved. However, today, we hear from all fronts that they no longer believe that that is the case. I say to the people out there that they should be extremely sceptical of what the unionist parties say on any given thing, because they will inevitably turn that around and say, “No, we don’t believe that that should be the case.” People should be very sceptical indeed.
Dr Murray has just said that she does not want two different regimes in the United Kingdom, but the reality is that we already have two different regimes, because Northern Ireland has had APD devolved. What is the difference between the north of Ireland and Scotland in that regard?
Let me get back to what people out there actually think. As a north-east of Scotland representative, I get lots of moans and groans about the fact that there are not enough routes from the area and about the costs of flying from there to other parts of the world.
Nick Barton, who was the interim managing director of Aberdeen International Airport for a while, said:
“Numerous studies have spelled out the impact that it is having and we have even seen rival airline bosses standing shoulder to shoulder, united against APD.
At the same time we are working within an industry which is, by its very nature, exceptionally mobile, and airlines looking to serve new markets will ultimately choose other European countries at the expense of Scotland.”
We have seen that happen.
Is that not a classic example of how the SNP would rather stand isolated and impotent than work together across the Parliament to achieve our long-term objective?
It is not about isolation at all; it is about creating new international routes so that we can connect with our partners throughout the globe. The isolationism comes from the folks who feel that we have no option but to keep APD powers at Westminster. That creates isolationism; I want internationalism.
Let us move on to the current managing director of Aberdeen International Airport, Carol Benzie, who said:
“What is becoming increasingly clear are the implications of this tax on UK businesses. Put simply APD adds to the burden of running a successful company. 65% of our passengers in Aberdeen are travelling in a professional capacity and ultimately the responsibility for paying APD in each and every one of these cases is being passed back to their employer.
Firms in Aberdeen are connected globally with links in emerging and existing markets. These businesses are paying APD twice if they chose to use a hub airport in the UK, and are taking their business elsewhere in increasing numbers to avoid this tax.
Ultimately APD which we are told is helping get Britain back to growth is actually doing more harm than good.”
We should listen to those folks who are involved in the business day to day. Beyond that, we should listen, as I do regularly, to the folks who travel from Aberdeen to all parts of the globe, whose competitiveness is being damaged by APD. As Carol Benzie rightly says, many folk choose to use hub airports elsewhere. They travel to Charles de Gaulle airport, Schiphol and various other places. They will soon travel to Northern Ireland, I am sure, now that APD will be going from there.
I want there to be fewer short-haul flights to hub airports and many more direct routes from Scotland—from Aberdeen, Glasgow, Edinburgh and Prestwick—to all parts of the globe. That is much more environmentally friendly than having short-haul flights.
If that is the consequence that Kevin Stewart anticipates flowing from the policy of halving then scrapping air passenger duty, why does the Scottish Government’s own assessment of the carbon impact show that emissions would rise as a result of the policy?
We all know that short-haul flights have the greatest impact on the environment.
Some folk have pooh-poohed the York Aviation report today. That is a wrong thing to do. That report says that APD is seen as
“a pseudo environmental tax despite the fact that rates take no account of the actual environmental impact of a flight and future plans have never sought to reflect aviation’s entry in to the EU ETS in 2012. The new Coalition Government appears to view APD more simply as a revenue raising instrument.”
I agree that that is what it is doing. We should have the powers and could do much better with them.
16:09
I last spoke on APD in November 2012, as many other members also did. There has been an awful lot of talking about it and it is perhaps time that we should think about what Benjamin Franklin once said:
“Well done is better than well said.”
It is now time to move from talking about things to actually doing things.
The debate has been quite interesting. I suspect that I could make quite significant common cause with Elaine Murray and perhaps one or two others. However, I want to talk about two things: the economics of the issue and the environmental benefits that might come from a different approach.
I will run through some figures. I have done the calculations on the back of an envelope, so I do not pretend that this is anything like the final word on the subject.
An average vacationer coming on a short haul vacation to Scotland will spend 3.6 nights here. If they spend the average amount of money on a hotel—£120 per night—they will contribute £72 in VAT. Let us treat that as new tax from someone who would not otherwise be coming. They will probably get a taxi to the centre of Edinburgh from the airport and another taxi back out to the airport, because the kind of tourist—[Interruption.] Yes, they might get the bus or the tram. I am in favour of trams. They are on the wrong route, but that is an issue for another day.
The money that they spend on the taxi journeys will contribute another £4 in fuel duty and VAT.
They will have three restaurant meals. At, let us say, £25 a time, that represents a further £15 in tax. We are now up to £91 in tax and we have not yet taken account of the money that they will undoubtedly spend in our shops. When I do my little calculation—capable of being criticised, but based on principles that cannot be argued with—that comes to a tax take, for a new passenger on an average short visit, of something of the order of £150 to £200. The APD is around £20 and, of course, the idea is that removing that £20 charge from everybody who comes attracts new people.
I do not think that there has been enough economic analysis of that subject in the debate so far, and I think that we should consider it further. I do not think that we have reached the end of the story on economics but there is a clear indication that, if you get new people here, you get new tax take. We have to ensure that we get enough new people—
Will the member give way?
I will not, for time reasons and because, as I said, my argument is not complete and comprehensive. I will let the member address his point in his closing remarks.
I think that Patrick Harvie said that all airlines pay no VAT. That is not quite true. In Scotland, the routes from Oban to Coll, Colonsay and Islay, from Kirkwall to the outlying islands and from Tingwall to the islands in Shetland all pay VAT on their fuel, because they burn aviation gasoline rather than aviation turbine fuel. I admit that that is a small proportion of what goes on. To be honest, it does not seem to make very much difference one way or the other. There is certainly a case for considering the way in which we tax airline operating companies.
Of course, the essential thing is that APD is a regressive tax. We charge people the duty and deny ourselves more.
Let us talk about environmental issues. In the previous debate on this subject, I talked about a few such issues. It is fine to talk about the need to have powers over APD, but what we actually need are the powers over the whole picture. If APD is the answer, it is a very silly question indeed.
This would be a crude way of doing it but we could say that turbo prop aircraft will pay less APD per passenger, because they are less polluting, as they burn less fuel per mile and they fly lower, which means that the radiative forcing effect is reduced. If someone is down at the bottom, in an unpressurised aircraft flying little flights around Scotland, their radiative forcing is halved again, and their fuel cost goes down to a third.
We could adopt the Norwegian model. In Norway, many commuter flights are flown in aircraft such as the Cessna Caravan, which is a single-engined turbo prop aircraft—a type of aircraft that, by the way, has a better safety record than multi-engined aircraft. The American Federal Aviation Administration has all the numbers on that. Almost uniquely, the UK will not allow such an operation for our scheduled services in instrument conditions. That would have an environmental as well as an economic benefit; it would also make some routes—from Skye to Glasgow, for example—more economically viable.
APD is part of that; we can do things with it. As I said in my 2012 speech, we could have differential APD for airlines that towed their aircraft adjacent to the runaway because, on average, that prevents five tonnes of fuel burn in a 757. Five tonnes of fuel is burned just to get a plane from the stand out to the take-off point: tow them out and save 5 tonnes. APD should be used to encourage airlines to do that: because they need to invest in tow trucks, we give them something in return.
It’s not just about gaining APD; it is about having all the policy levers that surround APD. That is a huge difficulty in how the devolution settlement has been constructed and operates. I am not saying that anyone set out to do that deliberately. They did not; rather, they set out with a good and honest heart to construct a settlement, but it does not work. Little bits have been devolved piecemeal, instead of whole policy areas being devolved to allow a proper co-ordinated approach to all the issues in an area.
Let us get APD devolved, because we could use it more imaginatively and for economic and environmental benefit. However, if we also had all the surrounding powers, we could do so much more. It is in that spirit that I say that, whatever the outcome in September, let us get APD. Even in the event of a yes vote, we will still be under Westminster until 2016, and there is time to get the benefits more quickly. A yes vote would, however, guarantee that we would have those powers sooner rather than later, and forever.
16:16
Most of the debate has been devoted to colleagues denouncing the evils of APD. Mr Johnstone even began his speech by denouncing all taxes as evil. I am happy to disagree on that point, but I am also happy to accept that air passenger duty is a mess and undoubtedly needs to be reformed. However, I am no longer convinced that simply devolving the policy is necessarily the solution.
Part of the problem is that APD was introduced as an environmental levy and as a green tax but it is clear that, as Mr Johnstone, Mr Keir and one or two other members mentioned, APD is simply another tax that is providing revenue. That is a fair assessment and why APD needs to be reformed. After all, aviation’s impact on climate change is central to the debate. Transport is the second largest source of carbon emissions and aviation is the most polluting form of transport, as Mr Harvie mentioned in detail. Mr Keith Brown tried to make a fist of the argument that somehow reducing tax and making aircraft travel cheaper would be a green measure, because there would be more direct flights and people would not need to travel via Dublin or Schiphol airports. That argument does not have a great deal of credibility.
Many members have referred to the anomalies in how the tax operates, such as the fact that APD has never applied in the Highlands and Islands and the impact of the changes in Northern Ireland and the Republic of Ireland. Those anomalies argue against the devolution of this tax as the solution, because that would simply result in a race to the bottom. That would amount to the end of air passenger duty but would leave us with no answer to the problem of how we tax air travel in order to compensate for the environmental and climate damage that it does. The problem is not only national but international, so we need to address solutions nationally and internationally, not in smaller and smaller ways.
Will the member take an intervention?
Yes.
Can I have Mike MacKenzie’s microphone turned on, please?
I am afraid that I forgot to put in my card, Presiding Officer.
Can I get some extra time because of the delay, Presiding Officer?
I am afraid that there is no extra time. I ask Mr MacKenzie to be quick.
Will Iain Gray acknowledge the great reduction in emissions and the greater fuel efficiency in aviation over the past 30 years?
I hope that that is the case. I also hope that the member will acknowledge that the Scottish Government has repeatedly missed its own emissions targets, so it must address how it will reduce the impact of aviation, as well as everything else.
The one thing that we can be sure about, if we cut air passenger duty in half, is the impact on the public finances: £135 million would have to be replaced in order to pay for public services. The argument that that change is cost neutral or even that it will bring in more money makes no sense—if that is so, why does the white paper say that the second 50 per cent can be abolished only when public finances allow? If there is no impact on public finances, we should get rid of it all at once. The Government does not believe that there is no impact, and neither do we.
Will the member give way?
No. I am sorry—not after that.
If the concern is that there should be more direct flights from Scotland, it is a concern that we could take more seriously if the Scottish Government had found a replacement for the most successful route development fund anywhere in these islands, which brought in 41 new direct flights and which the Government simply abolished. Flights for Mr Stewart’s constituents, from Aberdeen to Stavanger, and flights to Stockholm and Dubai, were all delivered by the RDF. If we were really concerned about business connectivity at our airports, we would not have a Government that cancelled the Glasgow and Edinburgh airport rail links. I say to Mr Keir that the Edinburgh airport rail link could have made the airport in his constituency that he quite properly supports one of the best connected airports anywhere in the world. Indeed, Elaine Murray’s constituents might have been able to get a train to an airport in Edinburgh instead of having to go to Manchester or Newcastle, as they do at the moment.
All this is just another proxy for the independence debate. As with childcare, pensions and, as we have seen this week, carers, all this is just another reason to claim that after a yes vote everything would be more and cheaper, and that Scotland would not have to face difficult decisions or the great challenges of our age, be that demographic change or the change in climate. None of that is credible.
Throughout the debate, many have quoted support from industry. For the aviation industry, though, independence is just a proxy for the APD debate. Of course it wants a reduction in taxation. Willie Walsh has made it clear, however, that even if those changes were to happen to APD, he would not plan to introduce more long-haul flights in Scotland. He is absolutely clear on that. As for Mr O’Leary—I met him years ago when I was a minister; I got on perfectly well with him, which was difficult because he spent the whole meeting dressed as Bob the Builder, for a reason that escapes me—he said this about climate change in Scotland:
“If global warming meant temperatures rose by one or two degrees, France would become a desert, which would be no bad thing. The Scots would grow wine and make buffalo mozzarella.”
When it comes to the future of aviation, we need to have a serious debate about Scotland but it should not be a proxy for something else. Perhaps, after September, we can return some seriousness to the debate.
16:23
I take this debate extremely seriously because Glasgow international airport is a major employer for my constituency. The airport is not fully in my constituency; it is also in Derek Mackay’s, and I have been told by the minister to make that painfully obvious to everyone here. The airport is a key employer in our area. It is the gateway to Scotland for many tourists and business people. From a previous life, I know exactly what it is like to try to get from one end of these islands to the other using aviation. Given Scotland’s geography, aviation is more important to us than it is to other parts of these islands.
Glasgow airport has 30 airlines, 100 destinations and, as has already been mentioned, 7.4 million passengers a year. Glasgow airport generates £200 million for our economy and it is still the principal airport for long haul. It is also extremely involved in our local community in Renfrewshire. There is the flightpath fund, which covers Renfrewshire, East and West Dunbartonshire and Glasgow. The three key areas that the fund considers are employment, environment and education, ensuring that many groups benefit. It is a valuable part of the community that I represent. In spite of the damaging impact of APD on the Scottish economy, the airport contributes to that community.
It has already been said that a reduction in APD would save Scotland £200 million per year, which is £200 million that we could put back into our economy. That would give us the opportunity to discuss what we were doing about connectivity throughout the world, instead of having to pay APD twice, in effect, by going to one of the hub airports.
Some of my colleagues have mentioned some of the problems down in Heathrow and the turmoil that Heathrow has got itself into with its proposed expansion plans. Chic Brodie mentioned the problems we have with the mayor of London, who has a fantasy idea about having an airport somewhere in the middle of London. We have to look at how we can get connectivity for our businesses throughout Scotland.
As he mentions connectivity and airports, does George Adam now support the establishment of a rail link to Glasgow airport?
I say to the Labour Party: let it go. Let it go and let us move on. Glasgow airport is working with the Scottish Government on other ideas regarding interconnection between Glasgow and the surrounding area. It is time for the Labour Party to move on. Its history on capital spend projects is not very good. The trams, which just started operating, were one of its babies—[Interruption.]
Order, please.
Did the Labour Party want GARL to get to the same stage as the trams? Even this building went massively over budget under Labour, so I will not get told about capital spend by anybody from the Labour Party.
Will the member give way?
Not at the moment, thank you.
Look at some of the companies that are involved in Scotland and are backing this. Some of my colleagues mentioned Edinburgh airport, the chief executive of which, Gordon Dewar, said:
“This tax has now hit its tipping point where the damage that it is doing to Scotland far outweighs the benefits.”
Amanda McMillan, managing director of Glasgow airport, said:
“On the question of devolution of APD, Glasgow Airport has always been supportive of this proposal given the Scottish government’s more progressive approach to aviation and its greater appreciation of the role the industry plays”.
Even Liz Cameron of the Scottish Chambers of Commerce said:
“Current rates of APD seem more suited to controlling capacity constraints at Heathrow than they do with the needs of regional airports, and devolution of this tax would afford the Scottish Government the opportunity to create an air transport package for Scotland designed to improve our direct international connectivity.”
One of my colleagues mentioned Flybe, which is a regional airline that has a unique aviation model and covers all our regions and areas. Its chief executive officer said:
“We welcome today’s debate as an important step towards rectifying this taxation which places us, as a UK regional airline, at a competitive disadvantage and continues to damage Scotland’s aspirations for economic growth ... New destinations going hand-in-hand with considerably more passengers can only mean one thing—growth”.
Is that not the most important thing: growth and investment in our economy? A lot of members do not seem to understand that.
How would the devolution of this tax help passengers from Scotland arriving at London to connect with other flights? Surely George Adam understands that the abolition of this tax on a UK basis would be far more beneficial to Scottish passengers than simply devolving it and abolishing it here.
Mr Johnstone misunderstands my arguments about connectivity and direct flights, which actually make Scotland part of the world.
Alex Johnstone made a road to Damascus speech on APD. The Calman commission said that APD should be devolved. Lord Strathclyde’s commission said that APD should be devolved. Here we go: promises, promises from the Tories. Why do they not just stick it in the Queen’s speech? In fact, why does Alex Johnstone not take a flight down, pay the APD, and ask one of his colleagues to stick it in the Queen’s speech?
I ask Mr Johnstone to put his money where his mouth is so that we can have the argument and the Conservatives could do something apart from pandering and trying to be relevant in the independence debate. Along with the many other things that the Scottish Government has promoted, APD is another reason why we need independence, and I believe that if we get that opportunity, we can connect Scotland to the rest of the world and change the lives of people in Scotland.
16:30
Most of the arguments that we have heard about the tax side of the debate, just as with the Scottish Government’s approach to corporation tax, seem to boil down to little more than Laffer curve mythology—the notion of taking a theoretical graph and extrapolating from it an argument that cutting pretty much any tax is justified in any circumstances. It is cover for an ideological position that I reject.
I do not think that that notion is true but, even if it was, the argument that Elaine Murray made at one point in her speech is very clear. Even if cutting taxes increased revenue, there would be a delay effect and the Scottish Government’s budget would take a hit in the short term. There are those who might want to extend that argument and abolish a whole host of other taxes, no doubt to Mr Johnstone’s joy. However, I hope that we can challenge the notion that doing so would increase tax revenues.
We have heard several arguments about the notion of incentivising long-haul connections to replace short-haul connections and about how that would have some benefit. We heard that from Mr Adam, who seems to be the latest in a list of members who have not noticed that we can actually get to London by train. The same notion was also used by the Labour-Lib Dem coalition to justify the air route development fund and it simply does not stand up to scrutiny. Even if additional long-haul flights are put in place, it simply frees up slots at airports where the connections would have happened, those slots are quickly filled up by other long-haul flights, and the increase in emissions continues. That is what happened under the air route development fund—there were continual increases in emissions—and it would happen under the proposed scenario.
Some members have talked about fuel efficiency in aviation as something that can reduce the emissions from the industry. It is true that only fuel efficiency can hold back the increase in emissions that comes from increased aviation, but it cannot stop it altogether.
Will the member take an intervention?
No, thank you.
We saw what happened with the fuel efficiency of cars, which increased dramatically during the 20th century: the increase in use of those cars meant that overall fuel consumption and therefore overall pollution went up as well. That is what is happening with aviation—and I quote the International Air Transport Association, which says:
“fuel efficiency gains have partially decoupled CO2 emissions from expanding air transport services”.
It talks about a 1.9 per cent improvement in fuel efficiency and projects a further 1.7 per cent increase in fuel efficiency in 2014. That is set against a 5.2 per cent increase in air transport itself, so there is still an increase in emissions of 722 million tonnes of greenhouse gases before factoring in the radiative forcing effect.
Is the member aware that the solar-powered aircraft Solar Impulse 2 had its maiden flight yesterday? Along with electric cars, those technologies will ultimately solve—
I like the drawing board as well, and I will be interested to see when that aircraft or any other zero-carbon aviation mode of transport comes into commercial operation. However, we are limited by what is available at the moment and what the industry is doing today around the world.
Those increases in fuel efficiency will be limited by two things: what is practically achievable; and what is profitable for the industry. No public policy can change the former, and the lack of fuel duty reduces the incentive for the industry to invest in more efficient practices and reduce emissions that way.
Claudia Beamish was one of many members who talked about the CO2 impact. I started asking the Scottish Government questions about the CO2 impact of its policy as soon as the policy was announced, which must be more than two years ago. After the First Minister gave a commitment that the policy’s impact on carbon emissions would be assessed, there was a delay of 18 months before we got any kind of answer to my continual questions, while the climate change and transport ministers vacillated about who would answer the question.
Two months ago—at last—Paul Wheelhouse confirmed that the SNP’s air passenger duty policy would increase emissions. I thought that that was the final word, but today it seems that the transport minister is rowing back from that position. That is simply not credible. It begins to sound as though the SNP is just making it up as it goes along. If we are to take the policy or any replacement for air passenger duty seriously, we need to assess the impact before the Scottish Government makes its decision.
We heard from members that the policy is supported by the aviation industry. My jaw was on the floor at that point—it really was. A profit-driven private sector business does not want to pay tax—wow!
Mr Adam advanced the argument that the damage that is done by air passenger duty outweighs its benefits. No. If we continue to allow the industry to expand and not pay its environmental costs, it is the industry that will cause damage that is greater than the benefits that it brings.
Believe it or not, Presiding Officer, I am not arguing that we should dig up the runways to plant cabbages—I am really not. What I am saying is that the industry should pay its share and is not currently doing so. I am saying that if we are serious about climate change we cannot allow the industry to grow for ever, and that our real priority should be good-quality, reliable, affordable alternatives.
16:36
This has been an interesting debate, in which we have heard a range of views, from Alex Johnstone’s description of tax as a necessary evil, to Labour’s argument that the economic benefit must be balanced against the impact on the public finances, the Greens’ opposition to any reduction in APD on a point of principle—primarily an environmental principle—and the arguments from SNP members, who are so enthusiastic about abolishing APD that they say that it must be gone by some unspecified point after 2020. Abolition is such a no-brainer and we will get so much more in taxation afterwards that APD must be gone by then, say SNP members.
That was classic SNP hyperbole. It was a classic attempt to turn the debate into yet another debate about the referendum. Once again, the Scottish Government has complained loudly and bitterly about the powers that it does not have, as it does day in, day out, and week in, week out, while refusing to do anything with the powers that it has.
Let us consider the taxation powers that the Scottish Government has, such as powers over land and buildings transaction tax, which is coming into force, or, more broadly, business rates for the tourism industry. The Government has done nothing with business rates for the tourism industry and is refusing point blank to say what it will do with LBTT. If it wanted to be credible on the matter, it would demonstrate its credibility by using the powers that it has to take action.
Does Mr Brown agree that what he said perfectly illustrates the inadequacy of partial devolution? The art of taxation is to achieve good public outcomes by giving away with one hand and recouping with the other. That is the whole point, and that is what limited devolution’s offering of a wee bit more tax powers here and there does not allow us to do.
What I said demonstrates the inadequacy of the current Scottish Government’s approach. I will come back to the point about recouping tax with the other hand, because a classic example of SNP spin in that regard was handed to me just a couple of minutes ago.
First, on airlines, the Scottish Government has the power to introduce an air route development fund. Such a policy was introduced by the previous Executive in 2002 and was successful. Patrick Harvie mentioned the policy: he did not like it but he said clearly that it was successful in the context of short-haul and long-haul flights for Scotland.
It was fair enough to scrap the policy, at least temporarily, in 2007. The result of the EU ruling made it difficult for it to continue in its existing form. However, seven years later, had the Scottish Government had the political will, it could have found an EU-compliant successor to the air route development fund.
What work has been done on it by the Scottish Government? Perhaps the transport minister will tell us. What papers has the Government published about the investigation into how it might be done? Let us hear from the Government later on that point and let us see what work is currently being done in relation to what the Government could do with an air route development fund, because there is definitely scope to do something.
I now come to the point that I want to make in response to Mr MacKenzie. Every SNP member today, including the minister, said that abolition is a no-brainer because we would recoup far more VAT than the money that we get from APD. They say that they are not making it up: they have reports from PWC and from York Aviation—[Interruption.]
Order.
All the reports said that we would recoup more money from VAT. Mr Stevenson—admittedly saying that it was a back of an envelope calculation—pointed out that we would get more money from hotels and restaurants through VAT. That is very interesting, because I have in my hand an article from Travel GBI, the number 1 magazine for domestic travel tourism and business use across the UK. Are we going to collect more VAT? No, because the tourism minister is promising a tax cut on VAT for all of the tourism and hospitality industry. The magazine article states:
“Scotland tourism minister Fergus Ewing has confirmed that an independent Scotland could reduce VAT on tourism”.
He has suggested that we should cut VAT on the hospitality industry from 20 to 5 per cent. [Interruption.]
Order.
MSP Graeme Dey—no wonder he is sitting at the back of the chamber today—is quoted in the article as saying:
“the VAT rate on tourism in Scotland and the refusal of the UK Government to cut it is just one of many examples of why Scotland’s interests would be best served by being an independent country.”
Let me just ask this question—
Chic Brodie rose—
The member is just finishing.
By how much would tourism need to increase in order to recoup all the VAT and all the money from APD that the SNP says that it is going to cut within the first few years of independence? Iain Gray said that this was a proxy for the independence debate; it has been exactly that and the SNP has been found out—it is making promises that do not stack up at all. It is about time the Scottish people saw the SNP in its true light.
16:43
It has been a very interesting afternoon. It started off with Mr Johnstone spelling out the evils of taxation. I did not realise that Mr Johnstone was so influential—we then had many Reaganite speeches against taxation from the SNP back benchers. It is quite clear that this is the afternoon for the right wingers on the SNP benches. [Interruption.] No wonder Christina McKelvie looks embarrassed.
Order, please.
Three central themes have come out of the debate: the impact on the Scottish budget; the attitude of the Government to climate change; and its central view on transport policy.
On the Scottish budget, Iain Gray and Patrick Harvie are absolutely correct: if the Government is going to propose a 50 per cent cut in APD, which will take £135 million out of the Scottish budget, it needs to explain to people where it will make cuts. Does it mean that we will have fewer classroom assistants? Does it mean that we will have fewer nurses? The Government needs to be up front and honest with people about these things.
Chic Brodie rose—
Let me develop this point. If Alex Neil says at the weekend that he wants to get rid of 15-minute care visits, how can that be done if one of the first acts of an SNP Government in an independent Scotland is to cut corporation tax and APD by 50 per cent, taking £500 million out of the budget? It is time that we had some honesty.
The whole issue of climate change has been a very interesting aspect of the debate. Claudia Beamish made a substantive contribution regarding the action needed to tackle greenhouse gas emissions. It is interesting that, with the exception of a brief interlude from Stewart Stevenson, the SNP back benchers have completely ignored the climate change issue in the debate. It was almost a case of “Shut your eyes and it will go away; we don’t need to talk about that.”
I wonder whether Mr Kelly is being unfair: we heard from Mike MacKenzie that there is a one-seater solar plane that is going to solve the problem. [Laughter.]
Order.
Yes. To be fair to Mr MacKenzie, I think he said that it was still at the drawing board. Mr Harvie should not misrepresent his position. It has not quite taken off yet.
Mike MacKenzie rose—
Members: Oh!
Order, please.
As regards the attitude to climate change, I was in the chamber when the Climate Change (Scotland) Bill was passed. Everybody in the Parliament agreed to it, and we all sat and clapped away. There were a lot of happy clappers on the SNP benches, but they cannot clap away like that and say that they want a 46 per cent reduction in carbon emissions by 2020—
It was 42 per cent.
—if they also want a 50 per cent reduction in APD. Those two policy objectives do not sit together. What should really have happened in the debate was for the SNP Government to bring in Paul Wheelhouse, who should have wound up the debate and answered how the policy of a 50 per cent reduction in APD squares with trying to reduce carbon emissions. It is sheer hypocrisy.
My third theme concerns the wider issues around transport policy and how it affects airports. A number of members have spoken about the importance of connectivity, which the Government should perhaps have been concentrating on this afternoon. The Commonwealth games are coming up shortly, and people will be arriving at Glasgow airport, where there is no rail link to take them to the Commonwealth games venues.
It is interesting to consider the growth in the number of car parks around Glasgow airport. People are driving in their cars to the airport and are therefore increasing carbon emissions. If there were proper connectivity and better public transport links in place, people would not need to go to the airport car parks, and that would reduce emissions.
I wonder whether the member recalls that the study into GARL showed that it would take 15 cars off the M8 in the peak travel hour. The money should be invested in ways that are actually effective in getting cars off the road, perhaps even improving the bus services until other options can be made available.
Mr Kelly, you have one minute left.
It is a pity that the SNP Government chose to pour £30 million of public money from GARL down the drain, instead of investing in a link that could have had a real benefit to Glasgow.
To progress the debate, we need proper evidence on the environmental and economic impacts, which would allow us to take an informed position not only on whether APD is correct but also on the level of APD.
As many members have said, the debate that we are having on APD is a proxy for the independence debate. The SNP starts off with uncosted promises—which, in this case, take the form of cuts to APD that it cannot square with the reductions in carbon emissions that it hopes to achieve—and ends up with an all-things-to-all-men policy that completely lacks coherence. We need a proper, grown-up discussion about transport policy and APD. SNP members need to stop kidding themselves.
You must close.
I hope that, post-September 18—whatever the result of the referendum—we can discuss the issues properly so that we can support transport policy and Scotland’s airports properly.
16:50
As James Kelly said, this has been a relatively interesting debate in which some good speeches have been made. Those by Mike MacKenzie and Graeme Dey, in particular, were very effective.
Claudia Beamish concentrated on environmental benefits and expressed a desire to improve the prospects of rail travel vis-à-vis air travel. I agree with her on that. The question that we must ask is why the Labour Party has still not committed to bringing high-speed rail to Scotland. That is the biggest single development that would result in modal shift from air to rail, and the Labour Party still does not support it. To be fair, I say that neither do the Conservatives or the Liberal Democrats support it, despite their manifesto commitments to bringing high-speed rail to Scotland.
I agree with many of the points that Claudia Beamish and Elaine Murray made. Elaine Murray suggested that we could incentivise use of better fuels or penalise use of more damaging fuels but, as I think she said, such issues must be dealt with at international level, which is how they are dealt with at the moment. That was a perfectly reasonable point to make.
I do not agree with the sneering approach that some members took to the new technology in the solar aeroplane that Mike MacKenzie mentioned. Such developments take time: I certainly hope that that one succeeds.
There has been a remarkable degree of displacement activity on the part of the unionist parties—they have done anything but give straight answers on the positions that they now hold. Even after listening to what Alex Johnstone said, I still do not understand whether the Tories support devolution of APD. He started off by saying that the tax is “evil” but went on to say that perhaps it is “a necessary evil”. He failed to say whether he supports its devolution. What was really interesting was the attack that he made on the aviation industry—not least when he laughed along with Patrick Harvie while he made his attack—and the York Aviation report. Essentially, his point was that, given the growth in use of airports, the industry is doing all right anyway, so it can live with the tax. That undermines what Ruth Davidson said yesterday, when she talked about devolving APD. The Tories are all over the place on the issue.
Gavin Brown’s speech was even more interesting. At one point—in an intervention on a back bencher—he seemed to be arguing for immediate abolition of APD. Incredibly, he asked what the benefit would be of reducing APD for Scottish holidaymakers who want to go to Florida. We are talking about the party that supports Hayek, Friedman and Keith Joseph, yet Gavin Brown is arguing that the most punitive tax in the world be imposed on Scottish taxpayers. How does he square that with advocating a low-tax economy?
Gavin Brown said that reducing APD would have no benefit for the Scottish economy or the people of Scotland. He might want to think about that for a bit longer, because it would have obvious benefits. It would benefit the airports, which would increase their business through increased custom. Airlines and individuals would benefit, too. It is a relatively basic part of tax theory that it is possible to increase economic activity by reducing taxes. Mr Brown argues that people who want to go to Florida should face the heaviest possible tax. I remind Parliament that, prior to 2007, a family would have paid £80 in APD to go on holiday to Florida, whereas in the summer of 2014, they will have to pay £276 for the same trip. The people of Scotland will be interested to know that Gavin Brown supports that whole-heartedly.
I turn to some points that Patrick Harvie made. He mentioned that the proposed reduction of APD would be of great benefit to the airline industry. We cannot deny that the airline industry would benefit, but he has never acknowledged that APD is paid by passengers. I have not had his experience of globetrotting on long-haul flights, to which he has confessed previously. [Interruption.] He did that in the most recent debate. I am sure that he must realise that it is individuals who pay APD and not the airline industry.
One of the questions that I put earlier was about whether the Government is consistent in its assessment of the carbon impact of its policy. Just two months ago we finally got confirmation from Paul Wheelhouse, the Minister for Environment and Climate Change, that the Government’s policy will increase emissions, but the transport minister seemed to imply today the precise opposite. Which minister should I believe?
I answered the question earlier. Patrick Harvie might not have been listening, at that point. I mentioned that we would have £1.3 billion to support delivery of measures to reduce greenhouse gas emissions and that we have reduced transport emissions in Scotland since 2007 by 1.7 million tonnes, which is about 12 per cent. I have also said, as has Paul Wheelhouse, that we will conduct a study of our policy once we have introduced the 50 per cent cut in APD. If we get the opportunity to reduce APD, then of course we will have to study the effects of that. That is a responsible position.
I really struggle to work out what the Labour Party’s position is on APD. We had an idea of it from Iain Gray, who described APD at some length as a bad tax that is riddled with inconsistencies and anomalies and is no longer an environmental tax. However, his solution is to leave it to the people who invented the tax to deal with it. I think that we can make a better job of dealing with it in Scotland.
We have had the same inconsistency from the Conservatives, who said yes to the Calman proposal on APD, but then nothing happened for five years. Ruth Davidson has apparently said yes to devolving APD, but has no intention of doing anything about it very quickly. As George Adam rightly said, there is no reason why a proposal to devolve APD cannot be contained in the Queen’s speech tomorrow. If the Conservatives really believe—I am sceptical about this—that APD should be devolved, it can be announced tomorrow. Whether by train or by plane, the Conservatives here can get on to their people in Westminster to ensure that that happens.
The simple fact is that the Conservatives, the Liberal Democrats and the Labour Party agreed with the Calman proposal to devolve APD. What has changed since then? What has made the big difference? Why has it not happened? Why the inertia on the part of the unionist parties? I admit that different people were involved at the time of Calman: Wendy Alexander, Annabel Goldie and either Tavish Scott or Nicol Stephen. However, why has nothing happened in relation to devolution of APD? The demand out there for it has been ignored.
Will the minister give way?
I will just finish this point.
The airline industry is demanding the abolition of APD, but there is also a real concern about APD among people who have seen the cost of their air travel go through the roof because of a tax that everyone acknowledges has nothing to do with the environment and is all about revenue raising.
What work has the transport minister personally done in the past couple of years on the air route development fund, which is a power that he currently has?
I could go through the meetings that we have had with airports and airlines, and the documents that we have produced in trying to speak to people about that. However, to try to wish away the fact that the air route development fund was abolished—
You have done nothing.
Does Gavin Brown not believe that we have had those meetings? Is that his point? The simple fact is that he knows that Europe said that it was no longer possible to use the air route development fund. Trying to ignore that just leaves him without any credibility on the points that he is trying to put forward.
The Liberal Democrats are so weak in their position on APD that they tried to turn the debate into one about childcare benefit, which was unbelievable. They then disappeared for the entire debate—there were no Liberal Democrats here. That shows the weakness of the unionist parties on the issue.
Hear, hear.
The idea that criticism of APD comes from just the airline industry and not from individuals is completely wrongheaded. We know from talking to people that they know that they are paying extra because of APD, and that it is the highest tax of its kind in the world.
It is a fairly straightforward issue to resolve. If the other parties believe that APD should be devolved—that has been their position at various points, although it has changed—they can very quickly resolve that by just getting on to their colleagues down in Westminster. Michael Moore has been quoted as supporting devolution of APD, people in the Labour Party have been quoted as supporting it and so have people in the Conservatives. They should just get on to their colleagues in Westminster, because they can sort the problem tomorrow. That would be a real example of how the union can work—as they believe—for the people of Scotland, so they should get on the phone and get it sorted out today.
Despite all that the other parties have said on APD, they have done nothing, and people do not believe them. In the same way, they invented figures that they announced last week in order to try to impress on people that the start-up costs of an independent Scotland would be £2.7 billion. It was then found out that they had magnified the actual figures by 12 times, and were totally discredited by the words of Professor Dunleavy. They are also failing to serve the people of Scotland.
This is a fairly straightforward issue, because the other parties said that they supported the abolition of APD. It should be abolished, and that is perfectly deliverable: get on the phone and get it changed.
That concludes the debate on air passenger duty. Before we move on to decision time, I remind members that, in relation to the debate, if the amendment in the name of Mark Griffin is agreed to, the amendment in the name of Alex Johnstone will fall. [Interruption.]
I ask whoever has the mobile phone on to switch it off, please. We can tell who it is because they have gone red in the face.
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