Reducing Air Passenger Duty Will Add £1bn to Scottish Economy

A report commissioned by Edinburgh Airport has outlined the employment and economic benefits of the 50 percent reduction in Air Passenger Duty (APD) in Scotland.

A report commissioned by Edinburgh Airport has outlined the employment and economic benefits of the 50 percent reduction in Air Passenger Duty (APD) in Scotland.

The analysis backs the Scottish Government’s position and shows the impact of reducing APD in Scotland by half and highlights that the reduction of APD could add £1 billion to the Scottish economy by 2020, as well as creating nearly 4,000 jobs.

The assessment builds on previous work undertaken examining the potential effects of reducing APD and this latest research has been undertaken in the light of the findings of the Smith Commission, which included a recommendation that the Scottish Government should have control over Air Passenger Duty on passengers flying from Scotland’s airports.

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Last year, the Smith Commission recommended APD to be devolved to the Scottish Government, though the decision ultimately rests with legislation being passed by the UK government.

The report shows that traffic at Scotland’s airports would rise following the reduction of APD, with an additional 700,000 passengers passing through Scotland’s airports in 2015, rising to almost 800,000 in 2016. The largest increase would be in short haul traffic, which would rise by approximately 4.5 percent by 2020, while long-haul traffic would increase by 3.7 percent compared to figures should the current APD remain.

Edinburgh Airport’s Chief Executive, Gordon Dewar has called on Ministers to act now and provide a timetable for the reduction of APD, to allow airlines and the tourism industry to plan for the change.

"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,” he said.

Inglis Lyon, MD of Scottish regional airport operator HIAL has said that APD is a barrier for business and tourism in Scotland.

"Although flights departing from the Highlands and Islands are exempt from APD, the tax does apply to cross border flights into Inverness, which account for 87% of its passenger traffic, and to arriving and departing flights at Dundee. APD also applies to flights from Aberdeen, Edinburgh and Glasgow into the Highlands and Islands. The impact of this tax is therefore felt right across regional Scotland."

The report commissioned by Edinburgh Airport has found that Scotland will lose out on one million passengers a year if APD is not reduced, and would cost the Scottish economy up to £68 million in lost tourism expenditure every year.

In May this year, APD will no longer apply to under 12s, and the fiscal authority for APD will ultimately be transferred to the Scottish Government, as recommended by the Smith Commission.

Amanda McMillan, managing director of Glasgow Airport, said: “APD is the highest form of aviation tax in the world, artificially depressing demand and dissuading airlines from flying to and from Scotland.  Giving the Scottish Parliament full control over APD will play a major role in strengthening Scotland's connectivity and will help to boost our economy. It is vital that this policy move is progressed as soon as possible to ensure our tourism industry can continue to flourish and Scotland’s economy can thrive.”

APD was first introduced in the UK in 1994, at a rate of £5 for European destinations and £20 elsewhere, but since 2007, the short-haul taxes have risen by 140 percent, while long-haul taxes have increase between 200 and 325 percent.

The UK aviation tax rates are now the highest of any major European country, and raised over £200 million in tax from Scotland alone between 2013 and 2014.

Aberdeen Airport's Managing Director, Carol Benzie said that Scotland needs a thriving airline industry if it is to compete in Europe and attract jobs, tourism and investment.

"APD has been a thorn in the side of our industry for many years now, and ultimately it is our customers and passengers who bear the brunt of it. In a recent submission to the Commission I, alongside my colleagues from Glasgow and Edinburgh airports, made a strong case that the Scottish aviation industry could flourish on a global scale if this tax were to be reduced or ultimately abolished north of the border.

Ultimately we’d like to see the tax abolished across the whole of the UK, but a starting point would be for the Scottish Government to stand by its commitment to reduce and abolish when affordable, which in turn could lead to changes across the wider country. By devolving control of this damaging tax regime we can transform Scottish aviation and tourism in the interests of the economy and all our passengers," she said.


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