Air Passenger Duty
To ask the Scottish Government what its response is to the Edinburgh Airport report, “The impact of reducing APD on Scotland’s airports”. (S4T-00965)
The Scottish Government welcomes the report from Edinburgh Airport. We have long called for the devolution of air passenger duty to the Scottish Parliament. A move to devolve APD as soon as possible is backed by leading aviation industry figures in Scotland and will help to unlock the country’s full economic potential and bring more international flights to and from Scotland as well as cutting costs for passengers. We have confirmed that we intend to reduce APD by 50 per cent within the next session of Parliament, with a view to eventually abolishing the tax when public finances allow.
Given the importance of this issue to the Edinburgh and wider Scottish economy, has the Scottish Government received any indication as to why APD could not be devolved sooner, as recommended by Calman and asked for by business leaders and the cross-party group in the Scottish Parliament on aviation?
As Colin Keir knows, the timetable for the devolution of APD is a matter for the United Kingdom Government, and it has given no specific timetable for passing the new Scotland bill. However, we are continuing to press for this to happen as soon as possible. Only when the necessary legislation has been passed by the Westminster Parliament will the Scottish Parliament be able to legislate for a replacement tax that is better suited to the needs of Scotland’s economy.
That said, Scottish ministers have written to the UK Government on several occasions, most recently in January 2015, to call for the devolution of APD through the order-making power that was introduced for such purposes by the Scotland Act 2012. That would be a quicker route for devolving the tax than via the new Scotland bill and would, as Colin Keir has made clear, bring forward the benefits of the change that we propose to make.
Does the cabinet secretary agree that it is wrong that while the UK’s major hub facilities remain in London Scottish passengers are at a financial disadvantage? Will he work with operators and airports to encourage more direct flights to and from Scottish airports?
I am happy to give that undertaking. I also point out that we have been doing just what Mr Keir has suggested, mainly through incentive packages to different airlines and airports for marketing and other benefits, and we have seen substantial success from that at our larger airports. However, he is right to suggest that we could massively increase those benefits not only to airlines and airports but to individuals by having one of the most punitive taxes of its kind in the world first of all reduced and then eliminated.
Does the cabinet secretary share my view that Scotland’s airports would also benefit from the reintroduction of the route development fund, which came to an end in 2007 but which had contributed to a dramatic improvement in Scotland’s direct international air network, with more than 50 new services being introduced? Will he agree to meet me to look at the introduction of a European Commission-compliant scheme funded from the APD budget?
I am of course happy to meet David Stewart on that issue—I have no problem at all with that. However, as I have pointed out in response to Colin Keir, we have already undertaken a number of initiatives that have been designed to maximise the number of direct routes and the number of passengers going to and from our airports. Increasing the number of direct routes also has a beneficial impact on the environment. We have done all that with what we believe to be a European Commission-compliant scheme; if Mr Stewart believes that we could do something else, I am more than happy to meet him to discuss the matter, but I think that he should acknowledge that we have already done a great deal to increase passenger numbers. The airports around Scotland such as Aberdeen, Glasgow and Edinburgh, with which we work very closely, would say the same but, as I have said, I am happy to meet him and discuss the issue further.
The minister will understand that the most vital routes that are run from Scottish airports are those to London and that, as a consequence, any attempt to devolve APD can only ever result in our being able to abolish half of the tax that is paid by Scottish passengers travelling to that destination. Will he undertake to continue to work with the UK Government to seek the tax’s abolition across the board instead of seeking to devolve to Scotland the right to make decisions about our part of it?
We have been asking for this for some time now, but I find it strange that, although the Conservative Party and its unionist colleagues agreed through the Calman commission that the power should be devolved, we are still waiting for that to happen six years on. It is therefore a little bit rich of Alex Johnstone to stand up and say that APD should be abolished. He can make the case to the UK Government, but it appears that it has been listening neither to us nor to him over the past six years.
Underlying Mr Johnstone’s question is, I hope, an acknowledgement that this is one of the most punitive taxes of its type in the world and that it does a huge amount to discourage business from coming to Scotland. According to the estimates that I have, by 2016, more than £210 million will have been foregone every year as a result of the tax, and many other countries such as the Irish Republic have realised how bad this tax is for their wider economy. Alex Johnstone might be willing to support our attempts to get this tax reduced by 50 per cent, which I think is a very positive move, and then ultimately abolished, but, as I have said, the UK Government seems not to have been listening to him just as it has not been listening to us. Perhaps it should start to listen and get on with devolving this tax.
Does the cabinet secretary agree that a 50 per cent cut in APD could mean Glasgow international airport in Paisley receiving a projected 200,000 extra passengers? Is it not also the case that the sooner APD is devolved to Scotland, the sooner our airports, passengers and the economy will see the massive benefits that have been detailed in this report?
I am glad that George Adam has reminded us that Glasgow airport is in Paisley, and he is quite right that the cut would be of massive benefit to the airport. Indeed, it has said the same thing to us, as have the airlines.
Over the past four or five years, I have been at meetings with all the major airports in Scotland and most of the major airlines—airlines that in other situations will sometimes be at each other’s throats in a competitive environment—and it is remarkable that they sit together and say the same thing. There would be the same benefits in Glasgow, in Edinburgh, in Aberdeen and throughout the country, and in particular there would be benefits to individuals who currently have to endure one of the highest taxes of its kind in the world.
Even better for the Scottish economy, we would have an increase in passengers coming to this country, many of whom, we know, have said, “We’re not going to go to the UK. We’re going to go to France.” People from South America and various other parts of the world will go to France, not least because the visa requirements are less onerous, but especially because the airport tax that is applied to them is much lower there. Let us get the tax devolved and let us get that business back.
The economics of the report seem pretty spurious. It is claimed that APD is a barrier to growth, yet we know that aviation levels have continued to grow and, even in the report, projections show that they are expected to continue to grow.
Aside from the economics, there is—astonishingly—not a word in the report about the environmental or social impact of the potential change. Given that the Scottish Government is now committed not to scrapping but instead to replacing APD with a different tax regime, what can the minister tell us about how that new regime will be assessed in terms of not just its economic but its social and environmental impact so that any future decision can be informed by something rather more thorough than this transparent piece of industry spin?
I think that it is true to say that reports other than the one by Edinburgh Airport, which Patrick Harvie mentioned, have also pointed to some of the benefits. I point out to him, as I have done before, that there is a benefit to the environment if, through the reduction and then perhaps elimination of the tax, we ensure that we have more direct flights to Scotland, as that will cut out the more environmentally damaging shorter flights that we need to connect to longer flights around the world.
Patrick Harvie is right to say that, as he has heard in the past from ministerial colleagues such as Paul Wheelhouse, there is likely to be a small net increase in emissions from the reduction in APD, but there will be a positive impact on passengers, businesses, costs and connectivity from our taking that action. In addition, the APD assessment takes no account of other trends in the aviation sector such as the improving fuel efficiency of jet aircraft, which is something that we want to encourage.
There are pluses and minuses in relation to the change. There are pluses for the environment, and there is a huge plus for the economy and for the businesses that comprise our airports. That is why we intend to move forward as soon as we have the power and reduce the tax by half with a view to eliminating it all together.
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