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Has the Smith Commission signalled the end of Air Passenger Duty in both England and Scotland?

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The Smith Commission reported this week on, amongst other things, the devolution of tax powers for Scotland.  You can read a full report on the BBC here.  What is key about the Smith Commission is both Labour and the Conservatives have agreed to support its recommendations, whichever party wins the May 2015 election.

As well as suggesting that the Scottish Parliament should set income tax rates and bands, it also suggested that Air Passenger Duty rates should be fully devolved.

This was not a surprise as Northern Ireland already has the power to set its own APD rates on direct long-haul flights – albeit that there is only one long-haul flight from Northern Ireland!  It does not apply if you pick up a connecting long-haul flight in London.

The soundings so far from the SNP are that they will scrap APD if given the power to do so.  They believe that the increase in revenue from additional tourism and business investment will easily outweigh the loss of APD.

From 1st April 2015, a family of four travelling over 2,000 miles will be paying £284 in APD for four economy tickets and £568 for four business class tickets.

This is a great result if you live in Scotland.  Even if you live nearer Heathrow, you may feel that flying to Edinburgh and coming back to Heathrow on the same plane 30 minutes later before getting onto your long-haul flight was worth it.  For anyone living in England but within easy driving distance of Edinburgh or Glasgow it would be a no-brainer.

A domino reaction may then kick in.  Manchester and Birmingham will start to argue that they are losing out because airlines and passengers are moving to Scottish airports.  It is hard, for example, to see the new United service to New York from Newcastle surviving.  And how does British Airways deal with the fact that its flights will be up to £142 per person cheaper when you start your trip in Scotland?

Change will not be quick in coming, unfortunately.  The Smith Commission proposals will be bundled together in piece of legislation and there are far more contentious issues than APD which will need to be agreed and included.  This may be the beginning of the end though.

Comments (41)

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  • Alan says:

    Interesting to see in Australia they have plans to consider increasing it, which isn’t going down well! (although I did have a chuckle at them saying how high their current rates are, they clearly haven’t heard of our UK rates!)

    • Will says:

      Scotland would likely scrap it due to politics as much as economics.

      You would certainly see busier Scottish airports, and you’d possible see a Scottish “ferry” airline taking people down to England.

      They’d then hope that every passenger realised why they were being inconvenienced and think “this england place is a real stupid set up”

      And I think it would work. APD is a stupid concept unless all countries universally adopt it at the same level. It also hurts the poor much harder than the rich which again in sure Scotland would make very clear.

      You’d see adverts “your family will save £500 from Scotland – the people’s country”

      • richie says:

        ‘ Hurts the poor more than the rich’ I gather you must be using that phrase loosely. I would argue that someone who is ‘poor’ could not afford to take a family of four on a long haul holiday.

        • Chris says:

          It’s a relative construct. I don’t think Will is suggesting people down at the foodbank are planning their next longhaul. It is accurate though, a regular family (ie the poor in this analogy) are much harder hit than the banker from the south east

    • Lady London says:

      Well yes the Australian government can charge what it likes, since the only way to get from Australia to another country is to swim, other than flying!

  • Wylie says:

    APD should be abolished UK wide for the economic reasons stated and advantages which could be derived. Whilst there will be advantages travelling with direct carriers from Scotland – Qatar, Emirates, United, American……..many of us use our Avios for long haul. Given that British Airways – “London Airways ” requires a “connecting flight” in the London area- not a direct flight – I assume avoidance of APD from that point will not materialise and the only way too achieve this would be an APD free flight from EDI / GLA and hop on Aer Lingus from Dublin.

    • paul says:

      I use ex EU fares all the time and its not to avoid the APD. Indeed I know of no one who starts a journey outside of the UK simply to avoid APD, it simply is not high enough to make financial sense. Ni I use ex EU fares simply because they are up to 75% cheaper often than the same seat from LHR. If you abolish APD it would not stop me going to the EU to start a journey.
      I still maintain that APD is not the problem everyone makes it out to be.

  • James67 says:

    Points about BA failing to pass on full benefits of cut in APD are very likely correct. I have frequently checked fares ex DUB and difference is minimal when compared to fares ex GLA or EDI despite lack of tax ex DUB. Regardinf intention of Scottish Government, I’d be very surprized if an SNP government didn’t scrap it given previous comments from Alex Salmond. What I think all of us want is the same: more competition, more choice, lower fares and more direct flights UK wide. A cut or abolition in APD in short term I believe will benefit whole UK in long term; the effect could be both greater and more rapid were LHR to be disadvantaged at the same time but will ultimately not matter. LHR and by extension B A were never penalised in any way for their market dominance; why should they escape when other companies like BT did not.

  • steve says:

    Are there Figures available that can show how many flights departing/arriving in the UK are for tourism/business?

    • TimS says:

      No, because some/many flights are mixed.

      For many, LHR-JFK will be business but for some it would be tourism for example.

      As airlines don’t generally require details of the reason for your travel it is almost impossible to quantify.

      If someone uses a flight to commute to and from a second home would that be business or tourism? And what if they were commuting from their second/weekend home to return to work? Same airport pairing, same traveller, different reason for travel.

  • John says:

    I agree with previous posts that BA etc flights are unlikely to be cheaper from Scotland if APD is removed. However the Scottish Govt owns Prestwick Airport. 4 million people live within a 2 hour drive of that airport including the northwest of England. Attracting airlines there to fly long haul would make sense as though APD revenue would not fall, VAT etc would plus income from hotels et that would spring up. It’s not like they need to build a new airport. I live in Aberdeen and though I would love long haul flights from there commercially would make more sense to have a Scottish hub airport – Prestwick would make more commercial sense as it is pretty empty just now and has good road and rail,links; it could be the Scottish version of Dublin airport and poach business from England. If developed with no APD cost it could compete with Heathrow. Plus I think most trans Atlantic flight go that way anyway departing uk airspace in sw scotland. I know the budget airlines have been on about doing trans Atlantic flights this could be the opportunity. At the moment I have to endure The big London airports to get to anywhere I wish to visit.

    • Londonbus says:

      Prestwick is a turkey. It is like Shannon – it only exists because of older technology and the need for a diversionary airfield. BAA sold it quite soon after privatisation. I appreciate it has ok ish road and rail links. However, to get an airport to act as a hus you need a substantial o/d market locally (that’s where the money is). Prestwick doesn’t fall into this category.

      I suspect the Scottish Government will lose a lot of money on it.

  • Clive J says:

    Having a lower APD in the regional airports over LHR would certainly allow those areas to develop commercially. Then once they have London house prices, transport costs and are paying £5 a pint we can put the old equality debate aside 😉

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