Scottish Government plan to cut Air Passenger Duty ‘would boost economy’

19 Aug 16

A prominent free market think tank has backed Scottish Government plans to cut and then scrap Air Passenger Duty and urged other parties to unite behind the plan, which is strongly opposed by both environmentalists and airports south of the border.

In a paper published today Reform Scotland says that getting rid of the tax, which will be devolved to Holyrood under the 2016 Scotland Act, would be work the benefit of the Scottish economy as a whole.

“Countries across Europe, including Ireland, Belgium, Holland and Denmark, have scrapped their air passenger tax in recent years. By retaining ours, we are out of step with the rest of the EU,” the group’s chairman, Alan McFarlane, said.

"This is not an ideological issue. It is an obvious and simple economic case. The economic benefits of cutting or scrapping the tax will outweigh the cost of doing so, which will benefit everyone.”

In its 2016 manifesto, the Scottish National Party promised to reduce APD progressively by 50% from April 2018, and to complete the reduction by the end of the present Scottish parliamentary session. It pledged to scrap the tax entirely “when resources allow.”

The policy was opposed by the other political parties at the election, though the Scottish Conservatives have since reversed their stance and most Scottish business bodies are firmly in favour.

A study last year for Edinburgh Airport reckoned that the economic benefits of halving APD would outweigh the lost revenue by a ratio of 1:1.6. The cut, it estimated, would see an extra 0.7 million passengers a year pass through Scottish airports, boost tourism by up to £68m annually, support 800-1,100 new jobs and ultimately swell Scottish GVA by up to £90m.

But the plan has met with resistance from economic authorities south of the border, who fear that airports like Edinburgh and Glasgow, already growing rapidly, would siphon off business from English airports, especially in the North of England.

It is also staunchly opposed by environmentalists, and the Reform Scotland paper met an angry response from the Scottish Greens’ climate change spokesman, Mark Ruskell, who said: “It is a bizarre priority given the state of public finances for the Scottish Government to want to subsidise the airline industry so frequent flyers can leave Scotland more cheaply.

“The costs to the public purse and the environment are too great for an economic benefit which may be marginal at best and at worse could undermine domestic tourism and rail.”

Scottish Labour also remain hostile to the idea. Their transport spokesman, Neil Bibby, said: "With record passenger numbers at Scottish airports it would be the wrong move to offer a huge tax break to airlines who simply don't need it, and kick off a race to the bottom with other parts of the UK.”

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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