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.