Devolving a key air levy to Scotland would be a “slap in the face for North East business” and throw 1,000 jobs into jeopardy, it is claimed.
Newcastle Airport chief executive David Laws has told of fears for the region’s economy as David Cameron reveals an unprecedented devolution deal for Holyrood may include power over Air Passenger Duty.
It would mean Scotland could slash, or even abolish, the payment and suck passengers to airports north of the border.
Mr Laws today warns the consequences could be devastating, placing 1,000 jobs at risk lost and draining a £400m from the region’s economic output over ten years.
News of the proposal by the Smith Commission comes as a huge blow after months of campaigning by regional figures to ensure a level playing field on APD.
Calls are now ringing out for Chancellor George Osborne to somehow limit the potential damage in his Autumn Statement next week.
Mr Laws said: “We are extremely concerned about these proposals. We have undertaken intensive lobbying, including letters to the Prime Minister, Chancellor and other senior politicians. We have also submitted a full representation to the Smith Commission. This hasn’t been published due to its commercial sensitivity but may be in the future.
“Our submission predicts 1,000 fewer jobs across the North East by 2025, significant impact on passenger numbers, £400M in Gross Value Added (GVA) lost between 2015 and 2025, and additional journey time costs of £265M between 2015 and 2025.”
"We are now seeking a signal from the Chancellor in next week’s Autumn Statement that the Government is going to do something to address any future distortions. The Prime Minister said on 19 September that the devolution settlement had to be fair also to the people of the rest of the UK. We now want him to honour this commitment. The only way to achieve this is for any reductions in Scotland to be matched in the rest of the UK, or for this damaging Duty to be reformed in such a way that distortions are avoided."
Catherine McKinnell, MP for Newcastle North, said Labour would lobby the Coalition ahead of the Autumn Statement.
She said: “It is absolutely critical that the Smith Commission’s proposals for APD do not damage airports like Newcastle and the North East’s economy.
“I’m therefore pushing strongly to ensure that that this principle is upheld in relation to any changes to Air Passenger Duty following devolution.”
NECC Policy and Research Manager, Mark Stephenson, said devolving the levy would thwart the region’s ambition when a recovery is gaining momentum.
He said: “Handing the Scottish parliament powers over APD will be a slap in the face for North East business. Providing a competitive advantage to airports north of the border places our region at a disadvantage at a time when businesses are doing their level best to provide jobs and grow our economy.
“The North East is uniquely exposed to the impacts that such powers will have and it is vital that we are consulted fully before a decision is made. Reaching a fair deal for Scotland as well as in UK regions is crucial, but it makes no sense to rob Peter to pay Paul.”
The Smith Commission, which is setting out how power should be devolved in the UK outlined that Scotland - which almost voted for independence - should also have the power to set income tax rates and bands.
He said: “There are now two clear choices for the Government. They could stick with a centralised system in England, which would disadvantage the North East given the flexibility given to Scotland, or, they could give us the ability vary APD as part of a wider devolutionary settlement for the North East.
“I think, as a matter of principle, the Government should move to devolve powers to a city region at the same speed as Scotland so we are not disadvantaged by more powers to Holyrood.
“We should also have an economic impact test of Scotland’s devolved powers to ensure the North East is not left behind as a result.”