Devolution would distort competition between airports like Edinburgh and Newcastle
Devolving Air Passenger Duty to Scotland would create “perverse incentives” and distort cross-border competition between airports like Edinburgh and Newcastle a major report on the UK’s airport capacity has said.
The interim report of the Airports Commission, led by former Financial Services Authority director Howard Davies, has dismissed calls for control of the tax to be handed to the UK’s devolved governments and regions.
APD is charged on all passenger journeys originating or ending at a UK airport, and is passed on to the traveller in the cost of their ticket.
The report’s authors considered proposals for “regional variations in APD”, as well as instituting a congestion-based model for the tax that would encourage airlines to shift operations away from over-crowed London airports.
However, both proposals were rejected. “Devolving APD would do little to incentivise better use of existing capacity at regional airports in England, and could potentially distort competition between proximate airports on either side of a border, such as Bristol and Cardiff, or Newcastle and Edinburgh,” the report states.
“Regional variations in APD could potentially give rise to perverse incentives, for example to not use spare capacity in London and the South East, as currently exists at Stansted and Luton.”
Charging higher levels of APD at busier airports to try and reduce congestion was also dismissed, with the report stating that it would lead to an overall reduction in the number of long-haul routes from the UK.
The SNP government in Edinburgh has repeatedly called for control of APD to be devolved to Holyrood, with ministers arguing that the levy damages Scotland’s tourism
APD has already been devolved in Northern Ireland, where the rate was also cut in November 2011. Similar taxes are charged in other EU countries, but UK rates are considerably higher.
The White Paper on Scottish independence published in November set out plans for APD to eventually be scrapped after a Yes vote in next year’s referendum, with a commitment to a 50 per cent cut in the first parliamentary term after independence.
SNP MSP Colin Keir told Holyrood: “We disagree entirely with this report’s conclusions on Air Passenger Duty, but they are further evidence that the only way Scotland can gain the responsibility we need for APD and other important powers is with a Yes vote next year.”
Keir, whose constituency includes EdinburghAirport, added: “The current system of Air Passenger Duty disadvantages passengers in Scotland and the airports and airlines that serve them – and cutting it will create more direct international flights into Scotland and slash costs for passengers. Westminster’s continued intransigence on this issue shows that this will only happen with the powers of an independent Scotland.”