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Chamber and committees

Meeting date: Tuesday, June 20, 2017

Meeting of the Parliament 20 June 2017

Agenda: Time for Reflection, Business Motions, Oaths, Topical Question Time, Policing 2026, Crofting Commission, Air Departure Tax (Scotland) Bill: Stage 3, Air Departure Tax (Scotland) Bill, Seat Belts on School Transport (Scotland) Bill: Financial Resolution, Decision Time, Scottish Civic Trust (50th Anniversary)


Contents


Air Departure Tax (Scotland) Bill

The Deputy Presiding Officer (Christine Grahame)

The next item of business is a debate on motion S5M-06164, in the name of Derek Mackay, on the Air Departure Tax (Scotland) Bill at stage 3.

16:05  

The Cabinet Secretary for Finance and the Constitution (Derek Mackay)

I am pleased to open this stage 3 debate on the Air Departure Tax (Scotland) Bill. The establishment of air departure tax is another important milestone on the journey to enhance Scotland’s fiscal powers and another example of this Government continuing to move ahead with pace and purpose to ensure that we are ready to begin using Scotland’s new powers once they are devolved to the Scottish Parliament.

I thank the Finance and Constitution Committee and the Delegated Powers and Law Reform Committee for their detailed scrutiny of the bill. Their input has helped to shape the bill that is before the Parliament today, which now includes tax exemptions that were brought forward by the Government at stage 2; it can also be seen in the independent economic assessment that the Government has commissioned to help to inform our secondary legislation plans for tax bands and rate amounts.

I thank those organisations and individuals who contributed to the policy development of ADT, both before and after the bill was introduced to Parliament. As with the other currently devolved taxes, the Scottish Government has taken and will continue to take a consultative and collaborative approach and to engage stakeholders on how ADT should be structured and operated.

The Scottish Government is seeking Parliament’s approval of the bill, which establishes the general structure and operation of ADT—a tax on the carriage of passengers on flights that begin in Scotland. The tax will apply only to the carriage of chargeable passengers on chargeable aircraft and will be payable by the aircraft operator.

With the core foundations of the tax in place, we will bring forward our tax bands and rate amounts proposals in secondary legislation this autumn. The secondary legislation will be subject to the affirmative procedure, which means that it cannot come into effect without Parliament’s approval. That is consistent with the approach taken for the other devolved taxes.

Under terms agreed between the Scottish and United Kingdom Governments in the fiscal framework, air passenger duty will cease to apply in Scotland from 1 April 2018. The block grant will be adjusted downwards and, if the bill is enacted, ADT will replace APD from that date. Revenue Scotland continues to make good progress to be ready to collect and manage ADT from April 2018. Good progress is also being made by the Scottish Fiscal Commission, which will be responsible for producing independent forecasts of receipts from ADT for future Scottish Government budgets. The forecasts will reflect the Scottish Government’s policy for ADT at the time.

Scotland is already an attractive destination for business and inbound tourism but, particularly given the economic threat that Brexit poses, it is important that we continue to be open to key and emerging markets in order to further capitalise on the opportunities that exist. As has been discussed, the Scottish Government’s plans for ADT—a 50 per cent reduction in the overall tax burden by the end of this parliamentary session and the abolition of the tax when resources allow—are a key part of the Government’s economic strategy, in particular to boost trade, investment, influence and networks.

Scotland’s airports are competing on a world stage to secure new routes and capacity. Reducing the tax burden will help to ensure a more level playing field with many other European airports that are competing to secure the same airlines and similar routes.

Patrick Harvie (Glasgow) (Green)

The cabinet secretary is being very clear that, way in advance of having the information or the assessments that he said he wants to commission, he remains committed to the policy of halving and ultimately scrapping this revenue source. What is the Scottish National Party’s view on how the gap should be filled? Should it come from increasing other taxes, which we could do now, or from cutting public services even deeper, which the Government could also propose to do now? Why is he legislating to create a tax that he thinks should not exist?

Derek Mackay

Today is not about tax rates and bands. We will have the discussion about how to use the powers that we are proposing to establish. We have set out a policy, which is based on our view of enhanced connectivity and economic growth and will support the economic drivers of the Scottish economy, in which airports and airlines are central. New routes will enhance business connectivity and tourism as well as providing new jobs.

The Scottish Government agrees with other members that it is important that our plans for ADT are supported by robust evidence and that the impacts are monitored over time. That is why, as I set out at stage 3, we are undertaking a broad range of impact assessments, which will be published by the time Parliament is asked to consider our secondary legislation proposals for tax bands and rate amounts in the autumn.

It is also why the Government lodged an amendment at stage 3, which—now that Parliament has passed it—places statutory duties on ministers to have regard to the projected economic, environmental and social impacts of our plans for tax bands and rate amounts and to keep those under review when the tax bands and rate amounts are in force.

The Government recognises that boosting economic growth by improving air connectivity might lead to an increase in aviation emissions. That should, however, be in the context of Scotland making sustained progress on its statutory emissions reduction targets, which are set across the economy as a whole. We are prepared to work harder in other areas to meet climate targets, and we should also acknowledge that airlines, aircraft manufacturers and engine manufacturers are doing a great deal to reduce emissions through improvements in technology.

Claudia Beamish (South Scotland) (Lab)

Does the cabinet secretary agree that, in view of the fact that transport is now the highest emitter of greenhouse gases, it is extraordinary that that should be the Scottish Government’s position?

Derek Mackay

Our statutory advisers in the UK Committee on Climate Change suggest that even if modelling in a policy proposition around a tax reduction has the outcome of increased emissions, that is still manageable in terms of the climate change agenda. The Scottish Government has a strong track record in meeting our targets and we believe that emissions can be managed by working harder in other areas.

Taken together, the bill’s provisions provide the basis for a tax that is well understood by taxpayers and is efficient to collect and manage. There is general support for the bill among stakeholders and, I hope, among members for the establishment of a tax to replace APD in Scotland. I appreciate that there is still a range of views about the detail of the tax, including rates and bands, and how a tax reduction should be applied to maximise the economic benefit for Scotland.

The Government remains of the view that our approach, whereby the overall burden of the tax is reduced by 50 per cent by the end of the current parliamentary session and the tax is abolished when resources allow, will deliver strong economic benefits for Scotland. I look forward to debating those and other issues this afternoon.

Today, we are not debating the policy; we are debating having the ability to collect the tax in Scotland as a consequence of the negotiations that led to the devolution of the tax to Scotland.

I move,

That the Parliament agrees that the Air Departure Tax (Scotland) Bill be passed.

16:13  

Murdo Fraser (Mid Scotland and Fife) (Con)

I start by welcoming the fact that Parliament is finally going to pass a law, almost 14 months after the Scottish Parliament elections last year. Apart from the Budget (Scotland) Bill, which is a legal necessity, this is the first piece of substantive legislation that will be completed in the current parliamentary session in all that time.

We are at the stage in the bill process at which veterans of stage 3 debates know that there is very little new to say. When a bill has been substantially amended at stage 2 or stage 3, there might be new issues to introduce, but where that does not apply, as in this case, we are effectively rerunning the arguments that we had in committee and during the stage 1 debate, when the bill achieved substantial support across the Parliament.

It is important to reiterate the point that the cabinet secretary just made: that if the bill is not passed, all that will happen is that the Scottish Government will not be able to collect any taxes on air travel. I do not think that any party in this Parliament thinks that that is a sensible outcome. Therefore, I hope that the whole Parliament will vote for the bill at decision time.

Andy Wightman (Lothian) (Green)

If the bill is not passed and the Government is not able to collect any revenue, the outcome will be no different from our passing the bill and eventually setting the rate at zero.

Murdo Fraser

That is an interesting intervention from Mr Wightman. To be fair to the cabinet secretary, I do not think that even he is proposing to collect no revenue at all from ADT starting from next year. He might have an ambition to get there in the end, but I do not think that that is his ambition in the short term, so I think that we can all agree that it is desirable to pass the bill.

The bill will reintroduce the existing UK framework for air passenger duty but gives it a different title—the air departure tax. In other respects and in effect, it is the same as the tax that was there before. That approach was widely welcomed by stakeholders across the board, including the airlines and their management companies, which did not want an entirely new tax structure to be introduced.

Some changes have been made to the bill at stages 2 and 3. At stage 1, my colleague Adam Tomkins raised the question of the scope of the tax, because it is the norm in tax legislation across the UK that the scope of taxation is provided for in primary enactments. That is distinct from the setting of rates and bands, which is normally left to secondary legislation.

As introduced, the bill failed to meet that norm, in that it did not stipulate the exemptions to the definitions of chargeable passengers or aircraft. I was pleased to see that, at stage 2, the Scottish Government amended the bill to cure it of that defect, so it now stipulates the relevant exemptions. The one exception to that relates to the situation in the Highlands and Islands, where I appreciate that there are still unresolved questions around European Union state-aid rules that require clarification.

As amended, the bill is now in tune with not just UK tax legislation but other devolved taxes such as the land and buildings transaction tax. I hope that the precedent has now been established and that all future tax legislation will fully address the question of the scope of taxation when it is originally drafted.

We looked at amendments today on the evidence that is required when setting rates and bands. I am pleased that the recommendations of the Finance and Constitution Committee have been accepted by the Government and are now supported by the Parliament. We will need to see such evidence when the Parliament votes on the detail of the rates and bands.

As we heard from the cabinet secretary, the next stage in the process will be in the autumn, when we will hear from the Scottish Government what its detailed proposals are, the evidence that supports them and the impact that the proposals will have on the environment and on the economy. The hope is that any proposals will be enacted in the next financial year.

Our view, which we have set out on previous occasions, is that we support the ambition of an overall 50 per cent reduction in ADT rates but would prefer to see that targeted at long-haul flights rather than being introduced across the board. There would be two advantages to that approach. First, it is our view that there would be a greater economic benefit from reducing the tax on long-haul flights. The evidence shows that those travelling long haul tend to stay in Scotland longer than those travelling short haul and tend to spend more money while they are here. In addition, if we cut the cost of long haul, there is the opportunity to attract more long-haul operators to base themselves in Scotland, thus reducing the need for Scottish passengers to make connecting flights to hub airports such as Heathrow or Amsterdam.

There is a second advantage to cutting the tax for long haul as opposed to short haul, which is an environmental one. In the evidence sessions, the committee heard from Virgin Trains, among others, a real concern that a reduction in ADT on short-haul flights will encourage a modal shift away from surface travel—such as cross-border rail between Scotland and London—towards the airlines. That would not be helpful in helping us to meet our climate change targets. Interestingly, Virgin Rail is not opposed to a reduction in long-haul ADT. Indeed, it believes that that might encourage more visitors into the UK and complement visitors’ use of the rail network once they are here.

Our preference is for any reduction in ADT to be targeted at long haul. I hope that when the Scottish Government is looking at the evidence base for its proposals, it will consider the relative merits of reducing long haul, reducing short haul and cutting across the board, so that we can weigh all those things in the balance.

I think that I have said all I can say on this particular piece of legislation and I look forward to supporting it at decision time this evening.

16:20  

Neil Bibby (West Scotland) (Lab)

Presiding Officer,

“The power to charge tax on air passengers leaving Scottish airports will be devolved to the Scottish Parliament.”

That is in the Smith commission report and was agreed by all parties—it should not be in any doubt today. Power over what we call air passenger duty is coming to Scotland, but it is a power that we must use responsibly.

As I have said throughout the process, Scottish Labour supports the bill in principle. We believe that the air departure tax should be switched on when air passenger duty is switched off in Scotland next year. However, we will not support the approach to the new tax that the Scottish Government has set out. We will not support a tax reduction for which no compelling case has been made—a tax reduction that is unnecessary and irresponsible. We have argued consistently that a 50 per cent cut to air passenger duty—in effect, that is the SNP’s position—will not make Scotland any greener or any fairer.

Analysis from the Office for National Statistics shows that halving APD would save the top 20 per cent of earners £73, while the poorest would save just £4.50. Indeed, 70 per cent of all flights in the UK are taken by the wealthiest 15 per cent of the population. That is a tax cut for the wealthy, frequent-flying few, not the many who do not fly or who might fly only once a year.

Throughout the debate, the silence from the SNP on the distributional impact of its plans for the new air departure tax rates has been telling, but it must confront the environmental impact of any tax cut, too. I remind the cabinet secretary that his Government is projecting an increase in aviation emissions if air departure tax is cut. As we know, transport is now the largest source of carbon emissions in Scotland. If the Scottish Government does not properly address transport emissions, which must include aviation, it is hard to see how it will meet its obligations under the Climate Change (Scotland) Act 2009, and rail travel, which is a much more environmentally sustainable mode of transport, will lose out in favour of subsidising aviation.

That is the wrong move at the wrong time and there is no economic imperative for it. Barely a month goes by without Scottish airports reporting record growth, with passenger numbers up and new routes opening up to new destinations. Week after week, MSPs lodge motions rightly applauding the growth of airports—and at the same time undermining the Government’s case. Edinburgh airport reported an 11 per cent increase in passenger numbers last year. Glasgow airport reported its busiest May on record last week. Aberdeen airport says that domestic and international passenger numbers are up. With duty-free shopping, no VAT on tickets and no fuel duties for airlines, the aviation industry is already one of the most lightly taxed industries in the world. The economic case for the tax cut simply does not stack up.

I saw that the cabinet secretary was at Glasgow airport this morning. If he is so concerned at the cost of travelling through Scotland’s airports, why has he said nothing about Glasgow airport’s money-making drop-off charge? By his silence on the issue, it appears that Mr Mackay has chosen to side with the aviation industry over his own constituents and the nearly 15,000 people who have signed a petition objecting to the drop-off charge.

The most concerning thing about the Government’s approach to APD is that it represents a completely unnecessary tax break—of up to £189 million a year—for the aviation industry, which will come at the expense of public services and expenditure elsewhere. The SNP cannot, or will not, tell us what it will cut to make up for the revenue that the Government will lose. Will it be the national health service, the bus pass, fire services or the police? Will it be the SNP’s “defining priority” of education? Where is the axe going to fall for that £189 million?

What happens if, having effectively cut or even abolished air passenger duty, the Scottish Government finds out that some other part of the UK has decided to follow? This week, the shadow chancellor, John McDonnell, has written to the Chancellor of the Exchequer, Philip Hammond, asking whether abolishing APD in Northern Ireland will form part of a Tory-Democratic Unionist Party deal. We warned the Government that using air departure tax to cut the rates would trigger a race to the bottom—a race in which public services will lose out and only business interests in the aviation industry can ever win.

The SNP finds itself in the position of siding with big business, the Tories and Arlene Foster and the DUP to make unnecessary and irresponsible tax cuts that are bound to hit already overstretched budgets for public services. Scottish Labour, on the other hand, supports the Air Departure Tax (Scotland) Bill because, unlike the SNP, we actually support an air departure tax. We know that we need to put a legislative framework for the new tax in place now. However, given the level of concern about the Scottish Government’s wider approach to APD, we also believe that the Government must fully assess the economic, environmental and social impact of any changes to tax rates, especially if it persists with tax cuts. The tax reductions that it proposes will have consequences and the Scottish Government should be honest about what those consequences are.

Scottish Labour backs the tax—not the cut—and that is why we will vote for the bill.

The Deputy Presiding Officer (Linda Fabiani)

We now move to the open debate, with speeches of four minutes, please. I call Bruce Crawford.

16:25  

Bruce Crawford (Stirling) (SNP)

I am pleased to speak in this important debate at stage 3 of the Air Departure Tax (Scotland) Bill. I remind colleagues that, at decision time, we are being asked to approve an enabling bill to give the Scottish Government the authority to levy a tax on the carriage of passengers who depart from Scottish airports. Without the bill or something similar, from April 2018, once APD is disapplied in Scotland as a result of the Scotland Act 2012, there will be no legal basis for levying any such tax without appropriate legislation being in place. The bill is categorically not about the Scottish Government’s stated policy intention of delivering a 50 per cent reduction in the overall burden of ADT by the end of the parliamentary session, although I have no doubt that we will hear a fair bit about that, as we already have during the debate.

In its stage 1 report on the bill, the Finance and Constitution Committee supported the introduction of legislation to ensure that a tax on the carriage of air passengers from Scottish airports could be levied. Indeed, by far the majority of respondents to the committee’s call for evidence and those who provided evidence in person supported the principles behind the bill. At the committee meeting on 22 February, when I asked Chris Day of Transform Scotland and Mike Robinson of Stop Climate Chaos whether they supported the introduction of such a bill, both confirmed that they did.

The bill was improved by amendments that were lodged by the Government in response to recommendations made by both the Finance and Constitution Committee and the Delegated Powers and Law Reform Committee, including a recommendation that the Government lodge amendments at stage 2 to make detailed provisions for exemptions from the definitions of “chargeable passengers” and “chargeable aircraft”. The cabinet secretary deserves credit for responding so positively on that matter and on other matters that the committees raised with him.

The Government also lodged an amendment for today’s stage 3 debate in response to concerns that were raised, particularly by Patrick Harvie. That amendment was agreed to unanimously earlier and will ensure that, in preparing draft regulations, ministers must have regard to the projected economic, environmental and social impacts of the proposed tax bands and rate amounts and that they must keep those under review. Those changes may not have gone as far as the Green Party wished to go, but any reasonable person would judge that the Government has come a long way in that regard. I consider that the Government has struck the right balance in responding to legitimate concerns and, as a result, I am strongly of the view that the bill is now fully fit for the purpose that the Government intends for it.

As a side issue, much comment has been made about the Scottish Government’s longer-term policy to deliver a 50 per cent reduction in the overall burden of air departure tax by the end of the parliamentary session.

Andy Wightman

Does Bruce Crawford accept that, given the Government’s stated intention to publish environmental, economic and social assessments, there are circumstances in which that 50 per cent reduction may turn out not to be possible?

Bruce Crawford

I have listened to what the Green Party has said about that at the committee and in the debate. If there was a prize for navel gazing, nitpicking and dancing on the head of a pin—all at once, if that was possible—the Greens would be the first to get that prize—I have absolutely no doubt about that. If the bill did not exist, they would be demanding that we introduce it. It is a quite ridiculous position.

I believe that the most compelling reason to support the Scottish Government’s policy position is the Tory Government’s full-throttle advance towards a hard Brexit cliff edge, which puts Scotland’s economy at risk and threatens many thousands of jobs. Given that, in my constituency of Stirling, the tourism industry supports 5,800 jobs—13 per cent of the total number of jobs—it will come as no surprise to anyone that I regard the position of the Scottish Government as the right one. More than any other time, now is the time to send a signal that Scotland is open for business, and we will do what we can to boost the economy using all the powers that we have at our disposal.

16:30  

Gordon Lindhurst (Lothian) (Con)

Last week, I took part in the debate on opportunities for growth in the Scottish economy. As I said then, the Scottish Government has at its disposal a number of tools to facilitate growth in our economy and it could do more, now and in the future, to build trade and investment relationships with countries around the world, not just in Europe. As we discuss stage 3 of the Air Departure Tax (Scotland) Bill, which will replace the UK-wide air passenger duty, we are dealing with one such economic lever that the Scottish Government could use to foster those deeper relationships.

We have some of the highest taxes on flying in the world, but we have an opportunity to take a different approach and take Scotland on a path to a competitive tax rate that will encourage airlines, businesses and tourists to come to Scotland as well as making it cheaper for our businesses and people to build those deeper relationships with the rest of the world.

The Scottish Conservatives support devolution of the tax to the Scottish Parliament; it is perhaps around the practical application of the legislation—the bands and rates—that we differ from the Government. The Government has made clear its intentions regarding those rates: it wants to cut the tax by 50 per cent initially and scrap it altogether in the longer term. As we have heard, the Scottish Conservatives have consulted widely with stakeholders on how best to use this opportunity and how to target the reduction where it will have the most effect. We have done that in the context of needing to reach out to the world in a post-European Union membership climate. As such, our approach is tailored to differentiate between shorter and longer-haul flights as well as to have a progressive system that encourages reduced rate and standard rate customers to travel.

In practice, the Scottish Conservatives seek to lay out a policy that will incentivise new air links from Scotland to global destinations, giving greater choice of worldwide air travel to those who are less able to afford the higher fares. That includes our small and medium-sized businesses, which have much to offer the world but need the assistance from Government that the policy will provide.

The policy will also ensure that consumers continue to have a choice in how they travel within the UK and Europe, as it will freeze rates for short-haul flights. That will benefit consumers who choose to travel domestically and to the continent by air rather than by other forms of travel, but it will not cause a dramatic shift in consumer behaviour to the detriment of the environment.

I will close by reiterating a point that has been made already. If we do not vote the legislation through today, Scotland will not benefit from the tax that is collected on air travel. Nobody desires that situation. Instead, we can reflect on the opportunities that the devolved policy presents us with while thinking carefully about how we can use the new powers to open up air travel to Scotland.

16:34  

Claudia Beamish (South Scotland) (Lab)

I support the bill, but I will highlight some policy points.

The priority that the Scottish National Party Government is placing on the tax cut is perplexing, and the policy is not progressive. UK passenger data for 2015 shows that 15 per cent of the population take 70 per cent of the flights, and analysis from the Office for National Statistics suggests that a 50 per cent cut in air passenger duty would benefit top earners significantly more than anyone else. The policy is not necessary. Scottish airports are enjoying record passenger numbers, and the number of overseas trips to Scotland was up by 6 per cent in 2016, supporting our thriving tourist industry.

The policy is not clear, either. Once again, the Parliament is expected to scrutinise effectively without having the full picture from the Government. I echo the concerns that were raised by the Chartered Institute of Taxation, which said that, in the absence of such information, it is difficult to say with any certainty what benefits—if any—the change will bring. The Scottish Government should consider that repeated concern seriously.

The policy is also unjustified. Scotland faces a time of financial constraint, and the tax is a valuable source of revenue. APD, which will become air departure tax, was valued at over £270 million in 2015-16. Depriving the public purse of that income seems irrational when coupled with the cuts to public services. Our local services are being squeezed and our communities are suffering for it. Cheaper business class flights will not make Scotland any fairer.

A strategy for airline routes that is based on sustainability and connectivity is important to the growth of Scotland’s economy, but here we are faced with a choice between using the new powers to invest in our economy and introducing a tax cut that will favour the rich and launch a race to the bottom in taxes across the UK. The SNP’s decisions on the matter are revealing.

It is not only a question of social justice, as cutting APD would have implications for climate justice as well. Climate change is one of the biggest issues that every country in the world faces, and it underscores our interdependence. This stage 3 debate has arrived a week after the Scottish Government proudly revealed its success in reducing climate change emissions in the latest tranche of figures and the chamber was filled with warm words and talk of ambition.

The bad news was that the transport sector has now risen to be the heaviest greenhouse gas emitter. Our transport sector, including international aviation and shipping, has dropped its emissions by only 1.1 per cent in 27 years. Between 2014 and 2015, international aviation increased by 9 per cent and, between 1990 and 2015, it rose dramatically by approximately 144 per cent.

Today, the SNP’s talk of climate change ambition could not seem more hollow. In 2015, the UK promised to be a part of the collective action of the Paris agreement. That means that the Government must ensure that every policy in Scotland is stress tested to advance our move to a zero-emission economy. Has the Scottish Government adequately recognised the need to compensate for those additional emissions in our climate change plan? I am not sure.

Given the figures in the greenhouse gas inventory for 2015, it is as clear as day that we need a proper commitment to sustainable travel. Our transport sector—excluding international aviation and shipping—is now more damaging to our climate than it was in 1990. We need a focus on modal shift to improve public transport and infrastructure in order to support more environmentally sustainable modes of transport and to make them an easy choice for passengers. Incentivising people to fly, particularly domestically, is going backwards. It threatens our rail services, which are not afforded the same tax breaks, and it goes against the Scottish Government’s own key objective of bolstering rail services between Scotland and England.

We support a continued exemption for the Highlands and Islands—remote and island areas where air travel can often be the only realistic option—and we hope that the notification to the European Commission is successful. Yet, how can the Scottish Government justify—economically, socially or environmentally—freezing the budgets for bus services and active travel while giving aviation a free pass?

16:39  

Patrick Harvie (Glasgow) (Green)

The debate on the bill is—as it has been throughout the process—characterised by a number of contradictions. The advocates of the Scottish Government’s position look at the rising levels of aviation that our airports continually trumpet and celebrate, yet they say that the tax regime is holding the industry back. They say that cutting the tax in half and then abolishing it will not lead to damaging climate change emissions, but to increased aviation levels. Those things cannot be true. At the heart of the matter is one single contradiction: the Government is legislating to create a tax that the Government thinks ought not to exist. I think that there is good reason to have a specific tax on aviation; the Government does not, yet it is creating one.

In what was an uncharacteristically grumpy contribution—I do hope that his lunch was satisfactory—Bruce Crawford told us that the bill should not be seen as being about the Government’s tax policy. However, to legislate for a tax without having a clear sense from the Government of what the purpose of that tax is—because the Government wants to abolish the tax—is irresponsible. The consequence will be that Parliament will not be in a position to amend the Government’s proposals when it introduces a resolution on rates and bands—on the structure of how the tax will be applied. We will have to take it or leave it, and at that point it will be too late to leave it. In passing a bill that does not constrain ministers, we will essentially be saying that Parliament will accept what they come along with.

Adam Tomkins (Glasgow) (Con)

I would like Patrick Harvie to explain his comment. In what sense will it be too late for Parliament to reject the Government’s proposed rate resolution when it comes to Parliament for a decision? That does not make sense.

Patrick Harvie

We will at some point be forced to agree to a resolution, unless we want the tax to be levied at a zero rate.

There is an alternative to passing the bill. The Government still has ample time to introduce a bill that has a sense of purpose and which imposes clear duties on ministers not just to “have regard to” certain factors, but to act in accordance with meeting the objectives that we have set ourselves on the national performance framework and on climate change. If we pass a bill that includes no such constraints, Parliament will simply have to nod through—even if it must do so on a second go—what the Government proposes. We will have handed too much power to Government, rather than handing power to Parliament.

Let us look at the consequences of the Government’s policy, which it has clearly committed to in advance of having any evidence on the social, economic or environmental impacts. We know from the limited amount of work that the Government has done that its policy will increase aviation emissions. That is a given. At a time when the Paris agreement means that we should be increasing the scale of our ambition on climate change rather than merely meeting the targets that we have already legislated for, that is not acceptable.

We also know that the Government’s policy will have a socially unjust impact. As Neil Bibby mentioned, 70 per cent of all flights are taken by just 15 per cent of people. Most Scots do not fly at all during a given year, so most people will be losers under the policy in that given year. We also know that there is a clear difference between the incomes of those who fly and the incomes of those who do not. In research that we published at the weekend, members can see by income distribution the propensity of people on different levels of income to be frequent fliers. We should not be at all surprised that the wealthiest people are the most frequent fliers and that the poorest people stand to gain the least from the Government’s tax giveaway.

When it comes to economic impacts, the Government has produced nothing to justify its empty assertions. Rather than cut £300 million from aviation taxes, we could use that resource to ensure that people in Scotland have reliable, affordable and decent public transport. That would benefit the economy in a socially just way and it would reduce climate change emissions.

The Greens will oppose the bill, because it is not the bill that we should be passing. We should be passing a bill that has clear and strong constraints on ministers, and which ensures that they act in accordance with the social, economic and environmental objectives that all of us have said we believe in.

16:44  

Liam McArthur (Orkney Islands) (LD)

I thank Bruce Crawford and his colleagues on the Finance and Constitution Committee, as well as all those who gave evidence to the committee, for their work in scrutinising the bill. In response to Patrick Harvie’s comments, I should perhaps declare an interest as the MSP who—with the obvious exception of the jet-lagged Tavish Scott and Alasdair Allan—probably spends more time sitting on aeroplanes every week than any other.

I certainly understand the case that is made for reducing taxes on some air services. For example, as others have mentioned, routes that serve Orkney and other parts of the Highlands and Islands are exempt from APD on outbound journeys, but not for the inbound leg. I have yet to hear a convincing argument for why that is the case, and I hope that that anomaly will be addressed. That is a different proposition from that which is being argued by the Government and the Tory party in the context of the bill—I am talking about lifeline services. In some cases, those services provide the essential link between national health service patients and the specialist treatment on which they rely. Even with the APD exemption and the support of the discount scheme, which was introduced by my colleague Tavish Scott, those services are significantly more costly than those that are offered by the loudest advocates of the bill.

I see no contradiction in continuing to argue for retention, if not expansion, of the APD exemption on lifeline services, while also questioning the economic, environmental and social justification for the tax cut for the airline industry that is being recklessly proposed by the Government.

In the brief time that is available, I will touch on the three justifications for the proposed tax cut. First, on the economic rationale, as others have said, the Finance and Constitution Committee concluded that there simply is not evidence to back up the minister’s claim. The idea of halving, then scrapping, APD or ADT seems to have been plucked out of thin air by the Scottish National Party, with none of the underlying assumptions being challenged or the cost being accurately assessed.

At a time when budgets across the board are under huge pressures, when we hear weekly of crises in education, health, transport and a range of other key public services, we have an SNP Government, with the support of the Tory party, proposing to gift the airline industry a tax cut of up to £150 million a year—a down payment for a tax cut twice that size somewhere down the line. Yet, with continued strong growth in the airline sector, as Neil Bibby rightly highlighted, how is it that SNP ministers have decided that that is the best use of scarce public resources?

If it is hard for the economic case to stand up, the environmental justification is laid out cold. Last week, the Government published figures showing that the transport sector needs to start pulling its weight if we are to meet our medium-term and long-term climate change targets. There has been no progress so far in reducing emissions, and the SNP and Tory plans to slash ADT will not make turning that situation around any easier.

Bruce Crawford

We have heard from Liam McArthur all the reasons why he does not want to cut the tax. Does that mean that, unlike at stage 1, the Liberals will vote for the bill at the end of stage 3? If they do not, their position will be completely contradictory.

Liam McArthur

I do not accept that that is the case at all. As has been pointed out, there is an opportunity to introduce a proper enabling bill that sets the structure in which any future decisions would be taken. To pass a bad bill simply because the Government insists that it needs to be passed is not credible.

The Government seems to take comfort from the fact that only an additional 60,000 tonnes of CO2 will be pumped into our air each year. The notion that that is a mere nothing would be tenable if the UK Committee on Climate Change were advising us to slow the rate of growth in transport emissions. It is not: it is explicitly and strenuously arguing for reductions to be delivered. Taken alongside the Government’s acceptance of the 27 per cent growth in car usage, from where in the transport sector do ministers expect emissions reductions to come?

Socially, too, the proposals fly in the face of what the Government says it wants to achieve. The First Minister talks repeatedly about the need for sustainable economic growth and the case for greater equity, but this tax cut can hardly be described as sustainable or progressive. When budgets and services are being squeezed hard, the Government’s priority appears to be a tax break that will benefit least the people who are least well off.

Last-minute assurances that the economic, environmental and social concerns that I have outlined will be addressed do not cut it. “Have regard to” provisions, in a vacuum, are more loopholes than they are safeguards.

The bill is not supported by evidence; it will give SNP ministers carte blanche and it shows that the Government has the wrong priorities—preferring tax breaks for the airline industry over investment in education and health. On that basis, the Scottish Liberal Democrats will not support the bill.

16:49  

Willie Coffey (Kilmarnock and Irvine Valley) (SNP)

I welcome the chance to speak in the debate and have enjoyed the contributions that have been made by colleagues and witnesses as the bill has progressed through the Finance and Constitution Committee.

Reducing the travel tax on air passengers by 50 per cent over this session of Parliament will help Scotland to compete with other countries on a more level playing field, and it will boost international connectivity and help our national and local economies to grow.

The UK’s air passenger duty is the highest such tax in the world, for almost every category. For short-haul flights it is almost 50 per cent higher than the next-highest such tax that is in place, which is in Greece, and for long-haul flights it is more than double the next-highest such tax, which is in Germany. For years, Scottish air passengers have been paying far in excess of what their counterparts throughout the world have been paying. I welcome the Scottish Government’s plans to address the problem and reduce the tax.

When Ireland abandoned its version of the tax in 2014, passenger numbers grew in Dublin and the Irish regional airports. Jonathan Hinkles, from Loganair, said in evidence to the Finance and Constitution Committee:

“There is clear evidence in Ireland that regional airports benefited from the abolition of the equivalent of APD.”—[Official Report, Finance and Constitution Committee, 1 February 2017; c 52.]

Traffic at Dublin grew by about 40 per cent, but flights to Shannon, Cork and a host of other regional airports brought more people, more tourism and more revenue to the local economies, as the managing director of Dublin airport, Vincent Harrison, has confirmed.

Let me show how disadvantaged Scotland has been by APD policy. Ireland has a million fewer people than Scotland, but 28 million passengers come through Dublin each year—and there have been increases throughout the country. In Scotland, with its greater population, only 21 million people use Edinburgh and Glasgow airports combined. The proposed tax reduction will give both our biggest cities a chance to grow and develop their economies and to compete with similar European cities. As we enter the Brexit negotiations, that is increasingly important.

That brings me neatly to Prestwick airport, in Ayrshire. That fantastic airport has served Scotland since the 1930s and stands to gain from a reduction in tax, just as the Irish regional airports did. Indeed, when Ryanair’s Michael O’Leary was asked at the British-Irish Parliamentary Assembly in Dublin in March 2014 about the prospect of the travel tax being removed in Scotland, he said that he could more than double the number of passengers who come through Prestwick if APD were to be abolished. Last September, he said again that when the tax is scrapped his passenger numbers can go from 5 million to 10 million in two years. As recently as February, Ryanair confirmed that it would bring more aircraft and routes to Scotland, which will create thousands of jobs.

As the cabinet secretary said, the Government recognises that there will be an increase in CO2 emissions and is keen to work harder in other areas in order to meet its targets. We should remember that in Scotland aviation accounts for only about 4 per cent of our total emissions.

Patrick Harvie

Will the member give way?

Willie Coffey

No, thanks.

The additional emissions as a result of the proposed measure were described as “manageable” by the UK Committee on Climate Change.

On jobs, the Edinburgh Airport Ltd study found that if a 50 per cent cut were in place, over five years we could be looking at an extra 3,800 jobs, 900,000 extra passengers and £200 million more for the Scottish economy. That would be of great benefit to Scotland and there would be a huge spin-off for Prestwick airport, where the aerospace industry is well established. That airport’s fog-free status also makes it of strategic importance to Scotland, and it is bidding for spaceport status.

The proposal to reduce and then eliminate the tax presents Scotland with a great economic opportunity—particularly as we will soon know the real cost of Brexit. We also maintain our commitment to manage climate change emissions. I hope that the bill will be passed tonight and that all passengers in Scotland can look forward to a better deal from April next year.

16:53  

Liam Kerr (North East Scotland) (Con)

The bill is a completely logical step. Without it, no tax on air travel would be payable from airports in Scotland from April 2018.

In the early stages of the bill we heard from many interested parties, particularly in the airline industry, who told us that they wanted the mechanisms currently in place in the UK to be replicated as closely as possible, initially. The proposed approach in the bill is not dissimilar to that of the UK; the only substantive difference is the new name of the tax.

In general terms, then, the Scottish Conservatives support the bill. Things get interesting when we consider what the bill does not say. Last May, the SNP said in its manifesto:

“When the power to do so is devolved, we will reduce the overall burden of APD by 50 per cent, with the reduction beginning in April 2018 and delivered in full by the end of the next Parliament.”

The Cabinet Secretary for Finance and the Constitution has made it clear that he believes that cutting air passenger duty will boost growth and the Scottish economy. We think that he is right that a properly targeted reduction in ADT will achieve that, but many in the stage 1 debate struggled to get to that conclusion, and we can see why.

On 1 March, the convener of the Finance and Constitution Committee asked the finance secretary whether the Government had undertaken any economic assessment of the impact of a 50 per cent cut in ADT. The cabinet secretary said that

“we have not commissioned any independent research of our own, but we have certainly looked at all the reports that have been ... provided”.—[Official Report, Finance and Constitution Committee, 1 March 2017; c 5.]

On 25 April, the Scottish Government commenced commissioning an independent economic analysis of its rate reduction plans, to report in the autumn at the point when the Government sets out the tax bands. That is good, but I find it deeply troubling that that is being done only at this very late stage. To my surprise—and no doubt to his consternation—I found myself agreeing with Patrick Harvie in the stage 1 debate, when he said:

“We should make policy on the basis of evidence, not scrounge around to see whether we can work up some evidence after we have adopted a policy.”—[Official Report, 25 April 2017; c 82.]

The lack of such an assessment allows opponents to deploy arguments such as that cutting APD is wrong because such a reduction might benefit the wealthy, and that a reduction in ADT will automatically negatively impact the rail sector and the environment. In response, I would argue that, just because one sector of society might benefit—those it suits others to pejoratively deem the wealthy—it does not inexorably lead to a conclusion that it is a bad thing and should therefore be abandoned automatically. If we accept the argument that those who are wealthier fly, are not those exactly the sort of people we want to attract to Scotland, to invest, to spend, to stimulate local economies and to create growth?

I note that the fundamental premise of what we might call environmental damage arguments accepts that reducing the tax increases the number of flights. Bruce Crawford is right; that is vital economic activity. It means more flights, busier airports, more retail, more support services supplied locally—catering, cleaning, reception facilities, taxis, buses and baggage handlers. It means a greater local economic contribution from more tourists.

As for the modal shift from rail argument, it just does not fly in relation to long haul. [Laughter.] I apologise for that.

The fact is that many in the north-east have little option but to fly if they need to make journeys to London or the midlands. Where the train is an unrealistic alternative, we should encourage flying, and should see Scotland as more than just the central belt.

According to others in this debate, by retaining the tax at full rate, those least able to afford it are being precluded from flying, perhaps on their dream holiday abroad. Those with fewer resources and those businesses with less are forced to use a mode of transport that is not optimal for their requirements, or not go at all. The arguments against the consideration of any form of tax cut simply do not stack up. They appear to be based on the demonisation of one demographic and they fail to embrace the opportunities presented by the bill.

The Deputy Presiding Officer

We move to the closing speeches.

16:58  

James Kelly (Glasgow) (Lab)

As we soar towards the end of the debate, I welcome the opportunity to close on behalf of the Scottish Labour Party and to confirm that we will be supporting the bill at decision time. We do so on the basis that we support the establishment of ADT, so that it can be used positively. However, the establishment of that tax should not be used as the basis for introducing changes that will increase carbon emissions. It should not be used as a basis for taking money out of the Scottish budget, and there needs to be serious and critical analysis of any policy change that benefits flyers who are high earners, while some people in our communities do not have enough to afford the bus fare to the local jobcentre. There are real questions that have to be answered.

It has been quite an interesting debate. On the environmental consequences, we heard two excellent speeches, from Claudia Beamish and Liam McArthur. Claudia Beamish recalled the recent discussion on climate change and said that, whenever it is discussed in the chamber, there are lots of warm words and people are supportive of the measures being taken to reduce carbon emissions. However, the Scottish Government’s own statistics show that, if we reduce APD by 50 per cent, it will potentially result in 50,000 extra tonnes of carbon emissions. There are consequences to the policy that do not sit well with the policy objectives announced in other Scottish Government portfolios.

Neil Bibby raised some interesting questions when he asked who will benefit from the introduction of the tax and the 50 per cent reduction. The top 20 per cent of earners will be £73 a year better off, whereas the bottom 20 per cent will be only £4.50 a year better off. There is a real issue about the fairness of the policy. In a sense, the Government has not been able to tackle this part of the argument. We saw that when Patrick Harvie intervened on Derek Mackay and asked about the consequences for the Scottish budget. Essentially, the Government’s approach seems to be to say, “Let’s just look away now and we’ll deal with it later.”

I find it interesting that it is the Tories, rather than the SNP, that have advanced the arguments for the reduction in APD. Liam Kerr gave the game away in his speech when, in effect, he said, “What’s wrong with helping the wealthy? What’s wrong with cutting APD? If there are wealthy people who benefit, so be it.” That is the logic of the position, and that has to be the challenge for those on the SNP benches who try to portray themselves as the voice of the progressives in Scottish politics.

The reality is that they are going to sign up to a reduction of 50 per cent in APD that will take £189 million out of the Scottish budget. The Tories are quite supportive of that approach, because their position is to say, “Let’s help these wealthy flyers, and that’ll have an overall positive impact on the economy.” Their attitude is that, if that means we have fewer teachers in our schools and fewer nurses in our NHS, so be it. The challenge for the SNP is to say whether they accept that and will sign up to it.

Scottish Labour will support the setting up of the air departure tax, but we will robustly challenge any proposals that will raise carbon emissions, will take money out of the Scottish budget and are not fair and proportionate in their impact on our communities throughout Scotland.

17:03  

Adam Tomkins (Glasgow) (Con)

In my five minutes, I need to say three quick things—why we support the bill; why we supported the Government’s amendments at stage 2 and why they were important; and something about the policy and the fact that, this afternoon, we have heard so many SNP members talk about the importance of cutting taxation in order to grow the economy.

We on the Conservative benches support the bill, first and foremost, because we believe in fiscal devolution for this Parliament. We pushed hard for that in the Smith commission and we strongly supported its view that tax on aviation was one of the taxes that should be devolved in full to this Parliament. The Smith commission said:

“The power to charge tax on air passengers leaving Scottish airports will be devolved to the Scottish Parliament.”

The really important word there is “Parliament”. It said that the power would be devolved to the Scottish Parliament, not to the Scottish Government.

The flaw in the bill as it was introduced earlier in the session—it was a very serious flaw—was that, almost uniquely in British tax legislation, it failed to define in the bill the activity or behaviour that was to be taxed. It is perfectly normal for bands and rates of taxation to be determined by secondary instrument later in the process, but it is very unusual—and it should be absolutely discouraged—for the scope of tax liability itself not to be transparent in the legislation that introduces the tax in the first place.

Bruce Crawford, who is the convener of the Finance and Constitution Committee, mentioned that, but he failed to mention, of course, that he and his SNP colleagues voted against the Finance and Constitution Committee’s recommendation that the bill should be amended at stage 2 to remedy that serious defect. We were nonetheless able to prevail upon the cabinet secretary that we were right and that the convener and his colleagues were wrong, because the SNP does not have a majority on that committee any more.

Andy Wightman

Will Adam Tomkins explain why he did not lodge amendments to that effect at stage 3?

Adam Tomkins

We did not need to, because the bill was amended at stage 2 in the Finance and Constitution Committee by amendments that we supported, so the defects that we identified in the early stages of the process were remedied. That defect was not in the Land and Buildings Transaction Tax (Scotland) Bill or the Landfill Tax (Scotland) Bill, and it is not in the current UK air passenger duty legislation. It is a pity that the SNP sought to introduce such a defective bill into the Parliament and that the defects were supported by all the SNP members of the Finance and Constitution Committee.

It has been a real pleasure to listen to all the SNP members talking about the importance of cutting tax to grow the economy. However, my question for those SNP members is why that argument pertains only to the tax that we are discussing. If cutting APD will help to grow the Scottish economy—I whole-heartedly agree with the cabinet secretary that it would be and that we should get on with it and do it quickly—why does the SNP not also argue that cutting taxation more generally will be good, as doing so will grow the Scottish economy? I know that Labour members will not understand the argument, because they have manifested time and again this afternoon their complete inability to understand taxation. We cannot redistribute wealth within the economy unless we first create wealth in the economy. The argument here is not about redistribution and fairness; it is about creating wealth in the first place.

We propose to remove the air travel tax on flights that are longer than 2,000 miles. That would incentivise airlines to provide new direct links from Scotland to America, China and other global destinations, and that would be important in the Scottish economy with or without Brexit, so that families and businesses do not have to travel via London’s packed airports, Amsterdam or other hub airports in Europe. We hope that the cabinet secretary will make proposals that are based on those policies.

We support an immediate freeze on air passenger duty or air departure tax on short-haul flights to the UK and Europe in order to ensure that passengers can enjoy cheaper fares to destinations that are nearer to home. That is part of our economic strategy ahead of Brexit, which is focused on ensuring that Scotland gets connected to the global economy.

For all the wailing to the contrary from the Greens and others, international evidence supports the existence of a link between air travel demand and departure tax rates. In the Netherlands, for example, a departure tax was introduced in 2008 only to be scrapped two years later following dropping passenger and tourist numbers. Closer to home, the Irish Government abolished its travel tax in April 2014, and annual airport traffic rose the next year by 3.3 million customers.

The gap between Ireland and Scotland on long-haul flights is obvious. In 2015, around 470,000 passengers travelled between the United States and Scotland. In Ireland, that number is more than 2.5 million.

We support the bill and the Government’s underlying policy of cutting the tax not because we think that it is the only tax in Scotland that should be cut in order to grow the economy, but because we believe in the underlying principle of cutting taxation in order to grow the economy. I hope that the cabinet secretary now sees the wisdom of that.

17:09  

Derek Mackay

In my notes, I said that, considering some of the controversy around the policy, the debate has been quite constructive and consensual. Adam Tomkins then contributed and baited pretty much every other party in the chamber, with the exception of the Liberal Democrats.

Sticking with the Tories for just a moment, Liam Kerr made a point about policies being based on evidence, but he did not mention Brexit. Perhaps that is no surprise because, if more evidence was taken into account on that subject, we would all be in a better position. However, Liam Kerr did not say the words, “I agree with Derek Mackay.” The most interesting contribution from Liam Kerr was to say that he agrees with Patrick Harvie on matters relating to the bill. [Interruption.] That seems to surprise many Conservative members who have just come into the chamber.

James Kelly is right that, if we do not pass the bill, we will not collect any of the tax at all, so it is right to create the legislation that gives us a framework to enable us to collect the tax. Of course, we will return to the tax decisions in our consideration of the affirmative order, which will be transparent and done proactively by Parliament.

I have tried to engage on the structure of the tax, and I have responded to what was said in the consultation. I recognise the issue that a number of members, including Liam McArthur, have raised about the Highlands and Islands exemption, which is a significant issue. When I was transport minister, I proposed the increase of the air discount scheme subsidy to 50 per cent, and I am well aware of the issues in the Highlands and Islands relating to aviation as a form of transport and its critical importance to the residents of communities there. I repeat that I am engaging with the UK Government to resolve the matter, and I have a further call planned with the new Chief Secretary to the Treasury, when I will raise that and other matters to progress the issue of a like-for-like exemption for the Highlands and Islands. That is the Scottish Government’s aspiration.

The tax is one of the most expensive of its kind in Europe and the world, so it is right to try to deliver a level playing field in order to sustain what we have in Scotland and establish new routes. We know that the industry and airports are a dynamo of the Scottish economy, and we could do more with the powers that are coming our way. We will do that transparently and in the fashion that I have set out in the debate.

Neil Bibby criticised the airline industry but welcomed airport growth. It is hardly surprising that he welcomed that growth, given the region that he represents, but it is a surprise that he would criticise the airline industry, considering that jobs relating to the industry are so important in that area.

On climate change, the Government has a strong track record of meeting our emissions reduction targets, and we intend to continue to do so. We will take the policy into account in the modelling as we do that.

Patrick Harvie

The cabinet secretary’s position would be more credible if the Government’s climate change plan set out clearly by how much it intends to allow aviation emissions to rise, as a result of the policy or of background levels of growth, and what actions it intends to take to compensate for those increased emissions. When will we hear any shred of detail about what the Government intends to do as a result of the measures that it is taking to increase aviation emissions growth?

Derek Mackay

The Scottish Government has said and has reported that our adviser, the UK Committee on Climate Change, has said that the modelling shows that any increase in aviation emissions is manageable as part of the overall policy. We have acknowledged that it means that we have to work harder in other areas to do that. However, we have a track record of delivery in the area and we will continue with that while delivering on our commitments to boost sustainable economic growth.

The bill is about the fulfilment of devolution and the completion of new fiscal powers. It is about the structure of tax and, taking into account the committee’s recommendations, the exemptions and other matters. Further, in a constructive fashion, I have outlined a commitment to publish analysis and assessment.

Bruce Crawford is right that we want to show that Scotland is open for business. That fits with our economic strategy. It is about internationalisation and supporting business and tourism growth in Scotland in a responsible way.

That is why we will use our fiscal powers in a responsible way, as outlined over the course of the debate. The bill establishes the enabling power and provides for us to come back with an affirmative order to set the tax rates and bands, about which there will be further engagement. I invite the Parliament to pass the Air Departure Tax (Scotland) Bill.