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Smith Commission signals 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)

  • James67 says:

    Some lobbying going on to scrap it in advance of legislation and ahead of next summers high season. Would like to see it scrapped UK wide excepting LHR for a while to promote development throughout regions which might otherwise be curtailed if LHR has similar APD regime. However, following substantial improvment in direct regional options it should br withdrawn at LHR too. Good regional development could remove need for a further runway at LHR, or a shorter third runway might suffice.

    • Erico1875 says:

      A lot of positives came from the recent Scotish Independance vote.
      The joint Lib/Lab/Con establishment got a real shake. The “plebs” were not only revolting. but almost left completely.
      Scrapping APD can only help the economies outside of London.

    • Blackberryaddict says:

      Sorry, but why should APD be scrapped everywhere but Heathrow? Why should I pay more tax flying from Heathrow than someone else from MAN? Why give a tax incentive to airports other than Heathrow? Or indeed airlines that fly from other airports?

      • James67 says:

        IMO to give direct flight from regions to many more destinations a chance to flourish. Once that is achieved I would then be in favour of scrapping it at LHR too. Development from regions will always be hampered if they do not get some advantage over LHR. Perhaps, even BA might become British and more competitive again. People will always want to fly to and from LHR, a financial. I believe the benefits of a variable APD would greatly benefit regions without hurting LHR that much. From a passenger perspective…so what, people from regions often had to endure a heathrow transit to get to save on fares or to ger to their destination at all. Si why should London travellers not endure a conbection via MAN or EDI for a while to save a few quid too. Besides, as I statedI don’t think it should be permanent and I don’t think it should apply to other London airports.

        • callum says:

          Well I’m personally sick of people wanting to deliberately hobble London and the South East because the regions haven’t been as successful – it’s jealousy, pure and simple.

          By all means do more to specifically encourage growth in the regions, but helping them by penalising London is grossly unfair. Why should Londoners not have to endure connections? Because they live in a city that can support huge hub airports.

          • James67 says:

            It is not about hobbling London and soth east. It is about creating balance in London and south eat and at same time developing regions. LHR continually at or near capacity so I see no issue in developing LGW, LCY, STN and the regions at expense of LHR. Particularly given the latter is a huge political issue that shows no sign of abating anytime soon.

          • richie says:

            Don’t worry Heathrow be made bigger after the ge.

          • TimS says:

            You already pay additional “taxes” by flying from LHR ( or at least should do) due to higher carrier charges there than at other UK airports.

            The fact that airlines like BA effectively pool and redistribute those charges across all flights from all uk airports means that in reality those flying from the regions effectively subsidise your LHR flights!

      • richie says:

        Exactly. It should be everywhere or nothing. We should not be penalised for living close to the country’s main airport.

      • Lady London says:

        Because London funds the rest of the country, silly!
        🙂

  • Frankie says:

    Hi Raffles. Is the UA Belfast – Newark flight a year round service? Great news if it is..

    • John says:

      I can help with this one. The very busy United (formerly Continental) service is year round, except when it isn’t. Along with one of the Dublin routes, it’s being suspended on 6 January and restarts 12 March.

  • marty says:

    *cough* Wales *cough* 😉 Any powers devolved to Scotland will likely be demanded by Wales as well, in fact as part of the Welsh Commission and submission of its future devolution, powers over APD were explicitly requested, with a view to scrapping it, which would make CWL more attractive to airlines and passengers.(though I accept pretty uselesd for most alliances at the moment!)

  • Payl says:

    Does anyone actually believe that BA would reduce fares from Scotland if APD abolished?
    They will simply find another fee! And remember that BA fees are double the level of ApD. These were introduced to cover fuel price hikes and rose. Now fuel is half what it was an not a penny has come off BA fees.
    We really should stop being so obsessed with APD.

    • Blackberryaddict says:

      We should really stop being so obsessed by fuel charges (except for redemptions). The total price is what you pay. How that is made up doesn’t really matter for the majority of tickets. Do you really think that the price of a ticket will fall if the fuel charge is removed?

      • oyster says:

        Well the fact that redemption tickets (used to be called free tickets remember), cost 800% more than they did 10 years ago is significant. After all, BA don’t give away Avios for free.
        And what about corporate discounts or shareholder discounts? These have also been devalued as the surcharge is excluded from the discounts.

        When Debenhams offer 10% off, it isn’t 10% off only half the original price is it? Why should BA be different ?

  • callum says:

    I think you’re being wildly optimistic. I doubt the Scottish government could actually afford to scrap APD (they’d have to compensate the UK government for it). The best I can see is them scrapping it on direct flights from Scotland like Northern Ireland have.

    I also think it’s pretty unlikely to have a domino effect on the rest of the UK.

    • CV says:

      The stated intention is to start by halving APD, this will cost £75 million. Once thats done then the Holyrood government will then look at scrapping completely (another cost of £75 million). the whole point of it being a devolved matter is that the Westminster government doesn’t then get compensated.

      Additional tourism boost to Scotland estimated at £200 million for the economy.

      • callum says:

        No, the whole point of it being devolved is that the Scottish government gets to decide. If APD from Scotland is worth £150m then the Scottish government budget will be cut by £150m with the transfer of APD raising powers. Any decrease in APD revenue = a decrease in Scottish government revenue (which they’ll of course be hoping is more than made up for in the economic gains from it).

        • CV says:

          Referring back to your comment, and further explain my comment and what are the quoted intentions and expectations (and not my opinion), at no point does the Holyrood government have to ‘compensate the UK government’, this is because it will be a devolved matter. Were Holyrood to cut APD without it being devolved then there would be a case for Westminster requiring compensation from Holyrood.

          • Adam says:

            Strictly, if APD weren’t devolved and Holyrood purported to cut it, the change would be of no legal effect given that it would be outside the competent of the Parliament’s/SG’s powers.

    • Wylie says:

      It must have a massive effect on Newcastle surely and puts the viability of that airport in doubt becoming another Prestwick. Any canny Geordie would gladly travel 90 / 120 minutes to save big bucks. Methinks you don’t grasp the Smith Commission report relating to “Tax Raising powers” – nothing to do with budget / Westminter allowance.

  • Heather says:

    Here up in Yorkshire lots of us already travel to Dublin and Amsterdam to take advantage of cheaper flights both East and West. It’s crazy that I can save over a £1000 by doing so just for a little bit of inconvenience.

    From Yorkshire it will still be easier to get to Dublin/AMS than EDI or Glasgow, but at least it will be another option.

  • Kiran says:

    1. I don’t see the government giving up APD as it is a straight source of revenue. The perceived long-term benefits of increased tourism would fall on deaf ears. What recent government has been interested in long-term benefits to the country?
    2. I would be surprised if BA and other carriers passed on the APD savings to customers.

    Feel free to call me a pessimist.

  • JQ says:

    Scrapping of APD would remove it completely from redemption flights. The price would come down slightly for cash flights – I did some calculations a while back (i.e. on old data) which show that airlines absorb about 30% of the cost of APD while the market bears about 70%

    I haven’t kept up with this stuff, but the way Raffles has worded it – “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” – means very little, as I believe neither party will win the GE!

    • callum says:

      Probably not outright, but I can’t envisage a scenario where one of them isn’t the lead party in a coalition at the very least. And I can’t see many of the smaller parties, bar the Greens, being against a drop in APD.

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