Giving Scotland the power to slash an airport excise duty would distort the regional economy and place thousands of jobs in jeopardy, the Chief Executive of Newcastle International Airport today warns.
Teaming up with airport bosses in Birmingham and Bristol, David Laws makes a direct appeal to party leaders that Air Passenger Duty (APD) not be devolved to Holyrood and the market remains a level playing field.
In the wake of the Scottish Independence Referendum, Prime Minister David Cameron promised more devolution for Scotland, but the airport chiefs are urging caution, just weeks after it was confirmed Newcastle would have a route to New York.
In a joint letter from the three airport bosses, they state: “Continued calls for devolution of APD to both Scotland and Wales risk distorting the UK-wide level playing field on which we currently operate, jeopardising up to £1.2bn in GVA and over 2,500 jobs in the North East and South West of England alone over the next decade according to economic impact assessments carried out by air transport consultants, York Aviation.
“In his comments from Downing Street on the morning after the Scottish Referendum, the Prime Minister stated his wish to see a balanced settlement “fair to people in Scotland and importantly to everyone in England, Wales and Northern Ireland as well”.
“Our research shows that if APD were devolved, this balanced settlement would not be achieved.
“Advocates for devolving APD point to the economic benefits it could deliver, but neglect to mention that these would come largely at the expense of neighbouring regions in England.”
The airport chiefs go on to argue allowing Scotland or Wales to decide on APD, with some politicians north of the border keen to scrap the levy, would mean passengers are more likely to pay less for a ticket and travel by car to an airport.
The letter reads: “The combination of an intensely competitive airport sector and the porous land borders of the UK would result in a significant redistribution of traffic between airports, but with no net benefit to passengers or UK plc.
“The argument that tax competition will lead to reduced APD for all in the long term ignores the damage which would be inflicted on the regional economies of England in the interim.”
Northern Ireland has powers to decide on APD and it is now feared this has set a precedent, but Mr Laws said the Treasury could lose out by fully devolving APD.
The letter adds: “Such a redistribution of passengers across borders in mainland Britain would result in reduced tax revenues to HM Treasury, with the loss having to be made good from other tax revenue sources.
“A substantial reduction in the block grant to the devolved administrations would also be required in order to comply with EU rules – a point recognised by Northern Ireland’s Finance Minister when considering further devolution of APD.
“For these reasons, we urge all parties to recognise the potentially damaging impact on airports in England, and the regional economies they serve, by ruling out the devolution of APD to Scotland and Wales. APD is a tax that should be reformed via UK-wide abolition, reduction or via measures to encourage all regional airports to flourish, not by opening up market distortions between constituent parts of the UK.”