Meeting of the Parliament 25 April 2017
I am going to make some progress. I will give way later if I have time.
As Bruce Crawford pointed out, the bill does not stipulate the exemptions to the definitions of “chargeable passenger” and “chargeable aircraft”. In other words, it does not identify which category of passenger and aircraft will not be subject to the tax. As the report says, that is unusual in tax legislation, where the scope of taxation is provided for in primary enactments. That is different from the setting of rates and bands, which is normally left to secondary legislation. The equivalent legislation at the UK level is contained in the Finance Act 1994, where the exemptions from APD are set out, and that is reflective of the approach that is taken with other devolved taxes such as land and buildings transaction tax.
As we have heard, the committee agreed by a majority that the Scottish Government should lodge amendments at stage 2 to insert detailed provision for exemptions from the definition of “chargeable passenger” and “chargeable aircraft”. I am pleased that the Scottish Government has indicated that it accepts the point and will lodge stage 2 amendments on that issue.
Much of the evidence that the committee took addressed the Scottish Government’s policy intent to pursue a 50 per cent reduction in air departure tax in order to stimulate economic growth. That point is not covered in the bill, as the setting of rates and bands will be contained in subsequent legislation. It was clear from the evidence that the committee took that there is a lack of an appropriate evidence base for the economic benefits of cutting ADT. Edinburgh Airport Ltd commissioned an economist’s report, which showed economic advantage from the reduction of the tax, but it is fair to say that, beyond that, there is a lack of independent economic assessment.
All those who gave evidence, on whatever side of the argument, agreed that such independent assessment would be welcomed, and the committee’s recommendation was, therefore, that independent economic analysis of the proposed reduction of ADT should be published at the same time as, or ahead of, the Scottish Government’s proposal of its approach to ADT rates and bands. The Scottish Government has accepted that point. The committee had similar views in relation to the environmental impact of cutting ADT, which should be addressed by the Scottish Government, and it has accepted that point, too.
The Scottish Conservatives would support an overall 50 per cent reduction in ADT rates, but our preference would be for the reduction to be targeted at long-haul flights, where we believe the greater economic benefits would derive. The evidence shows that those who travel long haul tend to stay in Scotland longer and have more money to spend. The economic benefit to Scotland would, therefore, be greater if we encouraged the growth of long-haul flights. Moreover, in cutting ADT, there would be the opportunity to attract more long-haul operators to base themselves in Scotland, avoiding the need for passengers to make connecting flights from Scotland to hub airports such as Heathrow and Schiphol. That, in itself, might prove an environmental benefit.
The committee heard evidence that, although reducing ADT on domestic or short-haul flights might well have a negative environmental impact by encouraging more of a shift away from surface travel towards air, the same would not necessarily be true of a reduction in ADT on long-haul flights. In its evidence, Virgin Trains told the committee of its concern that cross-border rail journeys between Scotland and London, in particular, would become less competitive with air travel if domestic ADT were to be reduced, but the company was not opposed to a reduction in long-haul ADT; indeed, it believed that encouraging more visitors to the UK through such a move would be complementary to the expansion of rail travel within the UK.