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Resist any levelling down of Air Passenger Duty, AEF tells Treasury

18th September, 2015

The Treasury recently published a paper on options for limiting any impact on UK regional airports of possible cuts to Air Passenger Duty in Scotland. The Scottish Government has indicated its plan to halve and then reduce APD from its airports following devolution of powers over the tax. Airports in the North of England have argued that they could face losses if people were to begin travelling to airports north of the border in order to avoid APD charges (currently £13 on almost 80% of tickets, the HMRC June 2015 APD bulletin indicates).

The paper presented 3 possible options:  Devolving the setting of APD rates to local authorities, setting variable APD rates around England, or providing aid to regional airports within England. Each option, however, would come with significant challenges or disadvantages, the paper suggests, including the need under EU law to reduce Government funding to local authorities if APD were fully devolved to them; additional administrative burdens and increased scope for error and fraud if rates of APD were to be varied around the country; and limitations on the legal right to provide Government aid to airports except in exceptional circumstances.

Our response to the paper notes that:

  • The Scottish Parliament has yet to decide whether to implement its proposed tax cut (which would create a significant hole in their Treasury’s income), and the UK Government should not act prematurely with respect to any compensatory measures.
  • It is any case not clear whether the perceived risk to regional airports in the North of England will materialise, once the cost and inconvenience of passengers travelling to a more distant airport is factored in.
  • APD is an important – if partial – counterbalance to the sector’s exemption from fuel duty or VAT.
  • Any reduction in APD would be likely to lead to some increase in passenger demand, in turn leading to increases in noise, carbon emissions and air pollution that may require additional policy action to correct; the cost and feasibility of this should be considered before a decision is taken on whether to implement any tax changes.
  • There is a strong case in fact for increasing the tax levied on aviation, whether nationally or internationally or both.

AEF comments on Treasury APD paper September 2015