Scottish and UK governments dispute devolution of APD
Scottish Government announces plans have been complicated by the need for exemptions afforded to the Highlands and Islands to be assessed by the European Commission
Plane - image credit: PA
The Scottish and UK governments have clashed over Air Passenger Duty, after Finance Secretary Derek Mackay claimed attempts to cut the tax would be delayed because his UK counterparts had placed “unacceptable conditions” on the process.
The SNP had originally planned to replace APD with a new Air Departure Tax, set at half the current APD rate, in an attempt to increase flights and generate growth.
But the Scottish Government today announced the plans, which have faced fierce criticism from opposition parties, environmental groups and anti-poverty campaigners, have been complicated by the need for exemptions afforded to the Highlands and Islands to be assessed by the European Commission, under EU State Aid rules.
Speaking in the chamber, Mackay claimed “the obligation was on the UK Government” to ensure the devolved tax would function properly.
He said: “If the UK Government were handing over the tax in a fit state, Parliament would now be considering regulations setting out tax bands and rate amounts. However, that is not the case.”
But a UK Government spokesperson hit back, saying it was “the responsibility of the Scottish Government to ensure that any new tax they design is compliant with state aid rules”.
Meanwhile Patrick Harvie warned the Greens would not support a budget which included a cut to aviation tax.
The statement faced criticism from Scottish Tory MSP Murdo Fraser, who said he was disappointing to hear that the Scottish Government seems to be trying to weasel out of its manifesto commitment to deliver the policy”.
He said: “Many in Scotland’s tourism sector will feel badly let down by the announcement, which a cynic might conclude has more to do with politics and with the Scottish National Party’s desire to pally up with the Greens again to get its budget through Parliament than with any legal technicalities.”
Scottish Labour MSP Neil Bibby accused ministers of “using a convenient opportunity to kick a bad policy into the long grass”.
He said: “Let’s be clear. The SNP’s ADT cut is bad policy. Instead of delaying it, it should be cancelled. The SNP cannot justify a multi-million-pound tax cut for the frequent flying few at a time of real hardship and austerity for the people of this country.”
Mackay told MSPs: “To match the exemption for all Highland and Island flights including connecting flights would require the Scottish Government to forego annual revenues of more than £320m.
“I have suggested that the UK Government agrees to amend the Block Grant Adjustment to enable the Scottish Government to deliver support for the Highlands and Islands in a way that ensures neither the Highlands and Islands or Scotland’s public finances suffer as a result of this apparent defect in Air Passenger Duty.
“I cannot see ADT put into operation with this significant uncertainty hanging over the Highlands and Islands. I therefore urge the UK Government to step up to the plate, to recognise their responsibilities and to support our proposal which would enable ADT to go forward as planned without causing harm to the Highlands and Islands economies.”
But the Treasury rejected the idea the UK Government was responsible for organising how the new tax would operate.
They said: “It is the responsibility of the Scottish Government to ensure that any new tax they design is compliant with state aid rules.
“We are committed to the successful devolution of air passenger duty, and UK Government officials will continue to work with their Scottish Government counterparts as they seek to develop a solution.”
Flights from the Highlands and Islands have been exempt from APD since 2001.
In June parliament voted to replace Air Passenger Duty with a new Air Departure Tax, which is expected to be substantially lower
The bill will see Air Passenger Duty, devolved to Scotland as part of the 2016 Scotland Act, replaced by an Air Departure Tax from April 2018, set at half the current rate
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The Finance Committee session came after Virgin Trains warned that axing APD could see Edinburgh to London rail journeys fall by around a third