Plans to devolve Air Passenger Duty (APD) to Scotland could ‘severely disadvantage’ smaller airports in the north of England, a group of influential MPs has warned.
A report by the transport select committee released this week cautioned that if Scotland scrapped APD after receiving powers outlined in the draft Scotland Bill, smaller northern airports could face similar difficulties to those experienced by Northern Ireland’s as a result of Dublin.
The committee states: ‘APD prevents airports in Northern Ireland competing on a level playing field with airports in the Republic of Ireland. This has cost Northern Ireland jobs, growth and connectivity. If APD were scrapped in Scotland, airports in England would be subject to a similar competitive disadvantage.’
It adds that the chancellor’s commitment in the 2014 autumn statement to exempt children from APD was 'a marginal change, which did nothing for business travellers and little for smaller airports’.
MPs reiterated proposals for scrapping APD altogether, citing conclusions from PricewaterhouseCoopers’ report, The Economic Impact of APD, which argued its abolition ‘would more than pay for itself through increased tax revenues from other sources due to the consequent increase in economic activity’.
The committee had previously called on the Government to investigate the potential of scrapping APD but the Treasury rejected the idea stating it would cause a net loss of tax receipts, which would 'require us to increase more distortive and regressive taxes'.
‘APD cannot be amended to support people, businesses and regional economies because of the operation of European competition law, while proposals to devolve it to the regions would serve only to spread a patchwork of market distortions across the UK,’ the committee also warned.
Committee chair Louise Ellman commented: ‘We heard about how airports in Northern Ireland have been affected by APD, where passengers choose to fly from Dublin because aviation taxes are lower. Northern England could experience a similar competitive disadvantage if APD is devolved to Scotland.’
The MPs also called on the Department for Transport (DfT) to consider ringfencing various flight slots for regional connectivity services if there was an expansion of airport capacity in the south east.
The airports commission is due to report back after the election and is considering a shortlist of three expansion plans, two for Heathrow and one for Stansted.
‘The whole country should share the economic benefits of expanded airport capacity. But that will only happen if new capacity includes new domestic flights to airports outside London. The DfT needs to take a proactive approach and ensure that the regions are connected,’ Ms Ellman said.