31st May, 2016
AEF has responded to a consultation on the Scottish Government’s plans to reduce and replace Air Passenger Duty (APD), challenging the potential economic benefits and highlighting the environmental impacts.
APD is being devolved to the Scottish Government under the Scotland Act 2016. The SNP has committed to halving and eventually abolishing APD, as referenced in the Programme for Government 2015-16 and Draft Budget 2016-17. Towards the end of the last Scottish Parliament, the SNP Government acted on this commitment by consulting on its proposal to replace APD, reduce it by half and abolish it “when resources allow”.
However, the likelihood of these changes occurring was hampered by the recent Scottish elections when the SNP failed to win an overall majority. This leaves the Government relying on votes from other parties to pass new legislation and all other parties had manifesto commitments opposed to reducing or abolishing APD.
AEF believes that in the absence of other measures, APD goes some way towards making up the shortfall for an undertaxed industry, with zero VAT or fuel duty being charged on an airline ticket. This is a major anomaly according to the World Bank and International Monetary Fund, and particularly important considering that the vast majority of flights are for leisure purposes.
The consultation focused on two areas: its proposals for a replacement levy to APD and a scoping study of the environmental impact assessment of the proposed changes that would need to be undertaken. Download AEF’s responses below.
How likely are the economic benefits?
The premise of the SNP’s commitment to reducing and abolishing APD is that it would improve connectivity and generate economic growth. AEF’s response argues, however, that there are no guarantees that either of those aims would materialise. Our response cites evidence from a report commissioned by the Northern Ireland Department of Enterprise, Trade and Investment which concluded reductions to APD would primarily benefit outbound holidaymakers, and we refer to a CE Delft report which questioned the evidence base for the direction of causation between airport activity and economic growth. The Scottish Government should independently assess whether reducing APD will contributing to its economic objectives.
What about the environmental costs?
While APD is not explicitly designed for environmental purposes, if cutting the tax increases aviation demand this will come with environmental costs, as we highlight in our response. For example, under the Scottish Government’s proposals, halving APD would increase aviation emissions by 34-60 KtCO2e per year according to an initial assessment by Transport Scotland, the national transport agency for Scotland. They predict that reducing APD on departures from Scotland is likely to lead to an increase in demand for short haul leisure seats in particular. If predictions that some passengers would switch from northern England airports materialise, this would further increase passenger demand and associated emissions. This conflicts with the SNP’s commitments to increase the Scottish Government’s ambition on climate change.
Our response to the Scottish Government outlines the case for taking domestic as well as international action for addressing emissions from aviation, noting that under the Climate Change Scotland Act all sectors are expected to be contributing to a ‘high ambition pathway’, with no slack available for any sector to increase its emissions. It also highlights the need for aviation policies to contribute to reducing the health burden of aircraft noise, in line with WHO recommendations, and meeting legal limits on air quality – issues that could be exacerbated by an APD cut designed to increase air traffic. All aviation policies should contribute to national and international environmental goals.
AEF response to Scottish Government consultation on APD May 2016. The consultation document is available here.
AEF response to Scottish Government APD SEA consultation May 2016. The consultation document ‘A Scottish replacement to APD: Strategic Environmental Assessment Screening and Scoping Report’ can be downloaded here.
Image credit: Alex Hunter via Flickr