Plan to cut APD
FlyBe crisis renews pressure on Scottish government’s air tax
Air taxes back on agenda
The Scottish Government may face renewed pressure to cut aviation taxes after it emerged that Westminster is to consider cutting air passenger duty on all domestic flights as part of a plan to save regional airline Flybe from collapse.
A cut in APD would allow Flybe to defer a £100m tax bill due over three years and would apply to all airlines in order to avoid breaching EU state aid rules.
More immediately, it would give the Devon-based company time to pull together a rescue plan just months after it was acquired by a consortium led by Virgin Atlantic.
The UK government is also anxious to secure more than 2,000 jobs at Flybe and retain valuable transport links.
However, any scrapping or reduction of air passenger duty would have implications for the Scottish aviation industry.
APD is charged on all passenger flights from UK airports, excluding Northern Ireland and the Scottish Highlands and Islands region.
APD will become a devolved power and be known as air departure tax in Scotland. The Scottish government last year reversed a plan to cut it as it did not consider the move to be compatible with its commitment to reduce greenhouse gases.
It had wanted to reduce air departure tax by 50% before eventually abolishing it. But pressure from environmentalists and its commitment to climate change targets forced a rethink and the planned cut was dropped.
Liz Cameron, chief executive of the Scottish Chambers of Commerce, urged the Scottish Government revert to its original plan to scrap APD/ADT to help prevent the collapse of a key mode of transport for Scots and to save jobs.
The Scottish Parliament was given powers to charge tax on passengers leaving Scottish airports under the Scotland Act, which came into force in 2016.
Air departure tax (ADT) was originally due to be introduced in Scotland in 2018, but has been hit by a series of delays.
The government said this was because of legal issues regarding tax exemptions for flights departing Highlands and Islands airports.
Air passenger duty (APD) will continue to be charged on all passenger flights from Scottish airports – apart from those in the Highlands and Islands – until it is replaced by ADT.
The rate of tax varies according to the passenger’s destination and the class of travel, and ranges from £13 for the cheapest class of short-haul flights to more than £500 for some long-haul flights.
APD raises about £300m in Scotland and £3bn across the UK every year.
CBI deputy director general Josh Hardie said: “The CBI is clear that it’s not the role of government to bail out failing companies. But it’s right the government examines what help it can provide, given the importance of regional connectivity to so many people’s jobs and livelihoods.”