SCOTLAND could be banned from setting a cheaper passenger tax rate in a bid to protect North East airports. Demands to allow the country to set its own lower tax on air passengers appear to have been rebuffed by the Treasury amid calls for a regional rate to help the North East.
Scottish First Minister Alex Salmond may not now get the power to set air passenger duty (APD) unlike other areas in mainland Britain, Treasury Minister Chloe Smith signalled.
North East MPs are instead urging the Government to look at a regional APD rate, something the Scottish National Party (SNP) has said it would support for England.
Warnings had been sounded that a lower APD rate in Scotland would unfairly hit North East airports and the economy, with passengers simply travelling over the border.
SNP MP Angus MacNeil said his party would support regional variations in tax.
Ministers have already agreed to cut APD for long-haul flights leaving Northern Ireland because it has a land border with Ireland, which has a much lower rate.
The Northern Ireland assembly is also getting the power to set APD rates for long-haul flights to safeguard transAtlantic flights.
North East MP Phil Wilson, who represents Sedgefield, said: “I have a small airport, Durham Tees Valley airport, in my constituency.
“The problem with air passenger duty relates to regional airports, and I believe that we need a UK solution, rather than a Scottish solution or a Welsh solution. There are specific reasons for the arrangements in Northern Ireland.
“We need a duty that reflects the needs of the regional airports outside the South East of England.”
He added: “Will the minister look into whether there is a way of varying air passenger duty? Perhaps there could be two variations in the duty, and a small congestion charge to encourage the growth of regional airports around the country.”
Economic Secretary to the Treasury Chloe Smith said all taxation was kept under review.
But she added: “My main point about the potential devolution of APD is focused on the wider-ranging impact such a move might have across the whole of the UK economy.
“We should not run the risk of replicating the same problems that Northern Ireland has faced with its land border and lower taxes in the Republic.”
The Government was determined to examine the full range of effects that devolution of APD could have on the UK before any final decision was taken, she said.
Graeme Mason, planning and corporate affairs director at Newcastle International, said APD was acting as a brake and warned that solely giving APD powers to Scotland would give it an unfair advantage over the North East.
“From what the Economic Secretary said during the debate, we think she understands this,” he said. “There is a much better way of reforming APD to address the problem of regional impact.
“Last year we proposed that a higher rate of APD be charged from the biggest, most congested airports, and a lower rate from the uncongested regional airports.
“We are therefore pleased that Mr Wilson called on the Government to consider a variable rate of APD across all regions, not just Scotland and Wales.”
The Journal’s A Tax Too Far campaign has set out warnings about the risk that the current APD system poses to regional airports and economic growth.