APD Cut 'Could Provide £1bn Boost'

9 March 2015, 08:44 | Updated: 9 March 2015, 08:47

Cutting the tax paid by air travellers in half could boost Scotland's economy by £1 billion by 2020 and create almost 4,000 new jobs, a report has suggested.

Research for Edinburgh Airport looked at the impact of cutting air passenger duty (APD) by 50% - something the Scottish Government had planned to do if the country had voted for independence.

With powers over APD now to be devolved to Holyrood following on from the Smith Commission on further devolution, bosses at the airport have called on the Government to set out a timetable for reducing the levy.

Cutting APD in half would result in 700,000 more passengers coming through Scotland's airports in the first year, rising to about 900,000 after five years, the research found.

It said: "Although there is some variation in the extent to which different airports benefit, all the main Scottish airports would receive a boost from the reduction in APD.''

The report also found a 50% reduction "might support around 3,800 additional jobs and £200 million per annum in GVA (gross value added) by 2020''.

It went on to state that over the five-year period to 2020 "reducing APD by 50% would result in total discounted additional GVA of around £1 billion''.

Edinburgh Airport chief executive Gordon Dewar said: "We've long argued that APD is a tax on Scotland's ability to compete with European airports of our size and our economy is footing the bill in lost jobs and lost opportunities.

"It's also damaging the ability for our passengers to travel and to take advantage of the amazing connectivity we have from Edinburgh.''

Passengers flying from Scottish airports could pay an estimated £232 million in APD if the charge is not reduced, though a 50% reduction in the rate would see this fall to about #120 million.

Mr Dewar said: "Our report shows that the economic benefit of a reduction will outweigh any lost tax revenues.

"It's therefore reasonable for passengers, airlines and the tourism industry to have some certainty on when this regressive tax will be reduced, and to know whether it will eventually be scrapped.''

A UK Government spokesman said: "This is a good example of the choices the further devolution of powers is giving the Scottish Parliament.

"The ability to change the levels of air passenger duty will lie entirely with the Scottish Government while also being responsible for the loss or gain of revenue that results.

"That means financial accountability in decision-making in this area in Scotland.

"The UK Government, like Edinburgh Airport, look forward to seeing their detailed plans in due course.''

A Scottish Government spokeswoman said: "We welcome this report that shows the clear benefits of devolving power over Air Passenger Duty (APD) to the Scottish Parliament.

"This is something we have long called for and a move that has widespread support within the aviation and tourism industry. This analysis from Edinburgh Airport only strengthens that argument.

"Devolving APD to Scotland as soon as possible will help to unlock the country's full economic potential, bringing more international flights to and from Scotland as well as cutting costs for passengers.

"In terms of the timetable, only once the necessary legislation has been passed by the UK Parliament will the Scottish Government be able to legislate for a replacement Scottish tax.

"We have confirmed that we intend to reduce APD by 50% within the term of the next parliament with a view to eventual abolition of the tax when public finances allow. No specific timetable has been given by the UK government for passing the legislation, but we continue to argue for this to happen as soon as possible.''

WWF Scotland director Lang Banks said: "This report completely fails to acknowledge that aviation is the fastest growing sector of carbon pollution and threatens to undermine other efforts to curb climate change emissions.

"Despite all their special pleading, the aviation industry still enjoys significant exemption from taxes, including VAT and fuel duty. Even the Scottish Government admits that halving APD would increase carbon emissions by as much as 60,000 tonnes a year.

"The reality is that, if we want to meet our climate targets, any growth in emissions from the aviation sector will have to be offset by deeper cuts elsewhere in Scotland's economy.''