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Air Departure Tax (Scotland) Bill

Overview

This Bill proposes for a tax to be charged on the carriage of passengers on flights that begin at an airport in Scotland, to be called air departure tax (ADT). 

This tax will be paid by the aircraft operator and will be collected and managed by Revenues Scotland. 

There will be some exemptions:

  • Flight and cabin crew working during the flight
  • Rotary aircraft such as helicopters
  • Aircraft not fuelled by kerosene 
  • Aircraft with a maximum take-off weight under 5.7 tonnes

You can find out more in the Explanatory Notes document that explains the Bill.

Why the Bill was created

As part of the Scotland Act 2016, responsibility for taxing passenger air travel is devolved. Air Departure Tax (ADT) replaced Air Passenger Duty (APD) for flights beginning in Scotland.

APD still applies in the rest of the UK to aircraft operators that are currently liable. 

You can find out more in the Policy Memorandum document that explains the Bill.

The Scottish Parliament can make decisions about many things like:

  • agriculture and fisheries
  • education and training
  • environment
  • health and social services
  • housing
  • justice and policing
  • local government
  • sport and the arts
  • tourism and economic development
  • many aspects of transport
  • some aspects of tax and social security

These are 'devolved matters'.

Laws that are decided by the Scottish Parliament come from:

Becomes an Act

This Bill passed by a vote of 108 for and 11 against or abstentions. It became an Act on 15 July 2017.

Introduced

The Scottish Government sends the Bill and related documents to the Parliament.

Air Departure Tax (Scotland) Bill as introduced

Related information from the Scottish Government on the Bill

Scottish Parliament research on the Bill 

Financial Resolution

The Presiding Officer has decided under Rule 9.12 of Standing Orders that a financial resolution is required for this Bill.

Stage 1 - General principles

Committees examine the Bill. Then MSPs vote on whether it should continue to Stage 2.

Have your say

The deadline for sharing your views on this Bill has passed. Read the views that were given.

Committees involved in this Bill

Who examined the Bill

Each Bill is examined by a 'lead committee'. This is the committee that has the subject of the Bill in its remit.

It looks at everything to do with the Bill.

Other committees may look at certain parts of the Bill if it covers subjects they deal with.

Who spoke to the lead committee about the Bill

Video Thumbnail Preview PNG

First meeting transcript

The Convener

Item 4 is to begin our consideration of the Air Departure Tax (Scotland) Bill at stage 1 by taking evidence from the Scottish Government’s bill team. I welcome the Scottish Government officials James McLellan, who is the bill team leader and the head of devolved taxes, Mike Stewart, who is the bill manager, and John St Clair, who is the lead solicitor for the bill and senior principal legal officer.

Members will have received copies of the bill and its supporting documents, along with the Scottish Parliament information centre briefing. Before we question the Government officials, I ask Mr McLellan to make an opening statement.

James McLellan (Scottish Government)

Thank you for the opportunity to make a short opening statement on the Air Departure Tax (Scotland) Bill. The devolution of air passenger duty formed one of the recommendations of the Smith commission report, which was published on 27 November 2014. Paragraph 86 of the report recommended that

“the power to charge tax on air passengers leaving Scottish airports will be devolved to the Scottish Parliament”.

The proposal and others in the Smith commission report were taken forward in the Scotland Act 2016, which received royal assent on 23 March last year. Following the commencement of section 17 of the 2016 act, the Scottish Parliament now has the power to legislate for a tax that will replace APD in Scotland.

In the programme for government, the Scottish Government announced that a bill for the replacement of APD would be introduced in the first year of this parliamentary session. It also reaffirmed the Scottish Government’s commitment to delivering a 50 per cent reduction in the overall burden of ADT by the end of the session and abolishing the tax when resources allow.

As the committee is aware, on 14 March last year, we published a policy consultation. It generated a range of views and we received 160 responses. We are grateful to all who contributed their time and input to the process and we have worked carefully to refine our legislative proposals, reflecting on the responses that we received.

In addition to the public consultation, the Scottish Government has established a stakeholder forum, which is chaired by the Cabinet Secretary for Finance and the Constitution, to provide expert input into the development of our policy and legislative proposals for ADT.

The Air Departure Tax (Scotland) Bill was introduced on 19 December 2016. It makes provisions for air departure tax, which is a tax to be charged on the carriage of chargeable passengers on chargeable aircraft by air from airports in Scotland. The tax is to be payable by aircraft operators. Under terms that have been agreed by the Scottish Government and the UK Government in the fiscal framework, APD will cease to apply in Scotland from April 2018 and, if the bill is enacted, ADT will replace it from that date.

The bill comprises 42 sections, five parts and three schedules, which establish ADT and set out the key concepts underlying the tax, including the identification of “chargeable passengers” and “chargeable aircraft”. The bill sets out the tax rate structure and rules that determine which flights are to be treated as “connected” for ADT purposes. It provides for administrative matters relating to the payment, collection and management of the tax, and it makes further provisions, including in relation to subordinate legislation.

Details on exemptions, tax bands and tax rate amounts are not included in the bill and will be delivered at a later date. Sections 8 and 10 make provision for the Scottish Government to set exemptions, tax bands and tax rate amounts through subordinate legislation. The approach to tax bands and tax rates is consistent with the approach that has been adopted in relation to other devolved taxes in Scotland.

Revenue Scotland, which is Scotland’s tax authority for devolved taxes, will be responsible for the collection and management of ADT, as it has been since 1 April 2015 for land and buildings transaction tax and the Scottish landfill tax.

The financial memorandum accompanying the bill sets out the estimated costs to the Scottish Administration. It gives details of the impact on the Scottish budget and costs for Revenue Scotland and the Scottish Fiscal Commission in administering and forecasting the tax. It also demonstrates that the Scottish Government is committed to providing sufficient and appropriate resources to support the new tax powers.

The Scottish Government is currently undertaking a strategic environmental assessment. The key remaining step of the SEA process is to publicly consult for 12 weeks on our tax rate amount proposals, and that will be accompanied by an environmental report that outlines the results of the environmental assessments. We will provide further details on the timing of that in due course.

We look forward to considering and reflecting on the evidence that the committee will gather at stage 1 of the bill process and to discussing our legislative proposals with you this morning.

The Convener

Thank you for that comprehensive overview from the Government officials’ perspective.

I note that the Government has consulted on the proposals to replace air passenger duty and has published an analysis of the consultation responses. Will you summarise the main points that were made in the responses and explain how the consultation helped to shape the bill?

Mike Stewart (Scottish Government)

We received a substantially greater number of responses to the public consultation than we did with the consultations on the two previously devolved taxes. We were very grateful for the views that were expressed in the consultation.

A key finding was that, although the policy consultation paper was predominantly focused on the structure of the tax and how it would be collected and managed by Revenue Scotland, the majority of views that were expressed were on the Scottish Government’s wider proposals on the tax rate amounts and in particular the proposals to reduce by 50 per cent the overall burden by the end of the current parliamentary session and to abolish it when resources allow. That drove a large number of responses to particular questions. As well as those views, which were predominantly driven by members of the public, a large number of organisations opposed the proposals.

Among those who responded to the consultation questions on the tax structure, the overwhelming consensus was to retain—generally at the high level—the same structure and administration arrangements as for UK APD. That was driven not just by airlines and the aviation and travel sectors but by other organisations, even those that might have objected to the proposal to reduce the tax. A minority of respondents gave suggestions on how the tax might be collected slightly differently, but the key message that we took from the responses was the need to look closely at how the UK manages the tax.

In addition to the consultation, we engaged extensively with our stakeholder forum, which James McLellan mentioned. We established the forum on 6 August 2015. So far, it has met five times, and we will continue to engage with it as part of our overall stakeholder engagement approach. The forum’s strong consensus was to model the structure and administration of the tax on the UK’s approach.

I will go into the specifics of how the consultation responses informed views. That overwhelming consensus has largely driven the policy discussions and analysis, which have led to the content of the bill. Part 1 of the bill is entirely consistent with the powers that have been devolved. Part 2 defines the terms “chargeable passenger” and “chargeable aircraft”, and the definitions used are exactly the same as those used for UK APD.

On the exemptions, which I am sure we will come on to later, we are considering our overall approach in the round, and we will also be looking at further technical and legal details. However, there was largely consensus on those exemptions, too.

The tax bands are not in the bill. We propose to bring forward detail on that aspect at a later date. The strong consensus on the issue was to stick with the two-band UK APD approach. In essence, band A is short-haul flights—all flights within Europe and to most of northern Africa all the way up to and including Libya but not Egypt—and band B is any other type of flight. We are still reflecting on the banding structure, because that is a crucial part of the tax rate amount decisions that we are analysing. Further detail on tax rate amounts will be brought forward at a later date.

On the administration of the tax, the Revenue Scotland and Tax Powers Act 2014 provides the general framework for the collection and management of devolved taxes in Scotland. The starting point on how ADT would be collected and managed was to reflect on the views expressed in the consultation responses, our wider engagement with stakeholders and our discussions with HMRC and other bodies. We then looked at what legislative changes would be required in order to introduce those.

Part 4 and schedule 2 contain further legislative provisions that are considered necessary for ADT and that were not covered in the Revenue Scotland and Tax Powers Act 2014. The bill has concepts of registering for the tax in advance and paying tax at the same time as making a tax return.

We have taken parts of the collection and the management of the tax that are specific to UK air passenger duty, such as the concept of tax representatives and having revenue protection measures in place for handling agents. Taking into account the difficulties that some aircraft operators, particularly smaller airlines, experience with their accounting systems, the bill allows operators to apply to Revenue Scotland to use special accounting schemes. The views that were expressed in the consultation were almost overwhelmingly in support of all of those arrangements.

I hope that that answers your question.

10:15  



The Convener

That was a very comprehensive answer. You explained that, in some areas, the policy and the direction of the bill follow the provisions for air passenger duty. Are there any particular areas in which we are doing things differently for air departure tax compared with the legislation for air passenger duty?

Mike Stewart

There is really only a small handful of differences in the detail of the bill. The overriding point is that, although the provisions in the bill look slightly different from the equivalent UK APD provisions, which are largely in the Finance Act 1994, the actual effect is broadly the same.

The first key difference relates to the tax return. In fact, most of the key differences relate to the administration of the tax. We have two methods of making a tax return—a quarterly tax return and an occasional return. The provision on occasional returns, which is broadly the same as the provision in the UK tax, is for aircraft operators that only operate infrequent flights or at particular times of the year. For them, making a quarterly tax return is not the most efficient method of complying with their liabilities under the tax. Under APD, the standard return is monthly, but we went for quarterly returns. That is one of the key differences.

Another key difference is on tax representatives. Those are essentially separate contracting bodies with which the aircraft operator enters into a contract to provide particular services. The UK APD has a requirement that any aircraft operator that does not have a business establishment or other fixed establishment in the UK is required to have a tax representative. We considered that in the course of developing the bill and, in order to ensure that we are fully compliant with European Union law, we have changed that geographical requirement to apply to any aircraft operator that does not have a business establishment or other fixed establishment within the European Economic Area. That is one small difference. Other than that, there are not too many differences—those are the key ones.

The Convener

Murdo Fraser has a supplementary on that.

Murdo Fraser

It is a follow-up to that question from the convener. Mr Stewart, you pointed out some fairly minor technical differences. Is it fair to say that, in effect, you are just replicating the existing UK system in Scotland, albeit that you are giving it a different name? You are calling it air departure tax instead of air passenger duty, but in effect it is the same tax.

Mike Stewart

If you are comparing the effect of the provisions of the bill and the structure of the tax that is in place at the moment, you are correct that, if the bill is passed and put into effect, the practical effect on the ground and the collection of the tax will be broadly the same.

In relation to the collection and management of the tax and how Revenue Scotland makes its decisions on compliance with the tax and a risk-based approach, that is a matter for Revenue Scotland and its approach may well be different from the way in which HMRC collects and manages the tax. The driving factor was not to assume automatically from point zero that the structure of the tax would be copied across. We allowed people to bring forward alternative proposals through the consultation paper. Some people did that in minor ways, but there was an overwhelming consensus from the stakeholders and the consultation responses, and that played a large part in the decisions that we arrived at on the bill.

The Convener

In the early part of the evidence session we are trying to concentrate on the specifics of the bill. After that, we can get into wider issues. Adam Tomkins has a specific question on the bill itself.

Adam Tomkins (Glasgow) (Con)

Yes, convener—thank you.

Am I right in understanding that tax bands, tax rate amounts and tax exemptions are not covered in the bill?

Mike Stewart

Yes, that is correct.

Adam Tomkins

Am I right in understanding that, with regard to APD, exemptions, tax bands and tax rate amounts are currently provided for in primary legislation?

Mike Stewart

Yes, that is correct.

Adam Tomkins

And am I right in understanding that, in the LBTT legislation of 2013, exemptions with regard to LBTT were laid out in primary legislation?

Mike Stewart

That is correct, yes.

Adam Tomkins

So why is ADT being treated differently? Why are those matters not in the bill but being left to ministers?

Mike Stewart

That is a fair point. Clearly, there was an overwhelming consensus among the stakeholders and in the responses to the consultation that we should retain the current exemptions. With regard to the exemptions, we have provided a power in section 8 of the bill that allows regulations to be brought forward through subordinate legislation. We are considering our overall approach to exemptions in the round. There are some further technical and legal matters that need to be worked through. I cannot comment more specifically on those, but we certainly recognise—

Adam Tomkins

Sorry, but am I to understand from your answer that the reason why those matters do not appear in the bill is because you are not ready?

Mike Stewart

No, it is not that we are not ready. We know our general approach; it is just that we consider that it would be best to—

Adam Tomkins

If I am wrong that you are not ready, what is the reason for the matters of bands, rates and exemptions not appearing in the bill?

James McLellan

As Mike Stewart set out, we want to take the opportunity of the bill process to further consider our overall approach to exemptions. In terms of—

Adam Tomkins

But hang on—

The Convener

Adam, let Mr McLellan complete his answer.

Adam Tomkins

Sorry.

James McLellan

Just to reassure you, we will come forward with further details in due course and certainly well in advance of ADT coming into effect in April 2018.

Adam Tomkins

I am not reassured, and the reason for that is that the Smith commission agreement says:

“The power to charge tax on air passengers leaving Scottish airports will be devolved to the Scottish Parliament.”

It does not say that the power will be devolved to the Scottish ministers; it says that it will be devolved to the Scottish Parliament. So I ask again: why is the structure of the ADT legislation manifestly different from the structure of the primary legislation for the current United Kingdom tax and manifestly different from the structure of the LBTT legislation, for which exemptions were set out in the bill rather than left to the subsequent delegated authority of ministers?

James McLellan

The comparison with the UK process is interesting, and we can look at that. The UK has an annual finance bill, which provides a regular process to amend primary legislation, but we do not have that in Scotland. That is a key difference between the approach that we took to the ADT bill and the existing UK legislation.

Just to reiterate, we are still looking at exemptions, and we will provide further details in due course, and certainly well in advance of the bill coming into effect.

Adam Tomkins

That addresses the difference between the bill and current UK APD legislation, but it does not address the difference between the bill and the Scottish Parliament’s LBTT legislation. Why should exemptions appear in the LBTT primary legislation, which was enacted by this Parliament, and not in the ADT bill?

James McLellan

That is because of the range of responses that we had in the consultation process. Mike Stewart mentioned that the range was far more significant than with the other fully devolved taxes. There are a range of views and we are considering them.

Obviously, there is the option to introduce the exemptions through secondary legislation, but that could also be done via amendments to the bill at stage 2 or 3.

Adam Tomkins

Does the course of action that the Scottish Government currently anticipates involve lodging Government amendments to its own bill?

James McLellan

We are still considering our options on that. I would not describe it as our stated intent at the moment—it is too early in the bill process to say.

Adam Tomkins

As things stand, it is more likely that those matters will be dealt with by subordinate legislation than by amendments to the bill.

James McLellan

We are still considering the options for exemptions.

The Convener

We will get the minister before us at the end of this stage, which will be a chance for us to come back and reheat these arguments.

Adam Tomkins

I think that I might.

The Convener

I suspect that you will.

I have a supplementary question. What consultation process will you carry out on these matters before any regulations or other statutory instruments are introduced in Parliament?

Mike Stewart

With regard to tax rate amounts, we are currently in the middle of a strategic environmental assessment process that the Scottish Government is required by law to carry out because the effects of the 50 per cent reduction in the overall burden of the tax are considered likely to have an environmental impact. Before any legislation containing the tax rate amounts, at least, is laid before Parliament, we will be required to publicly consult on those plans over a 12-week period. That remaining step still needs to occur. There will be a further opportunity for people to comment in a public consultation on the tax rate amount proposals.

The current thinking is that the tax bands are inextricably linked with the tax rate amount proposals. We set out in the bill the concept of a standard rate that applies typically to economy-class flights, a premium rate that applies typically to first-class and business-class flights and a special category rate. There was overwhelming consensus on the tax rates but a bit more of a difference of opinion on the tax bands, which are much more interrelated with the tax rate amount proposals.

We are currently considering what is the best approach on the tax rate amounts, and there will be a further public opportunity to comment on those proposals before legislation can be laid before the Parliament on the tax rate amount proposals.

Murdo Fraser

On the question of tax bands, just so that we are clear, is it the Government’s current intention to replicate the existing system by having a band A and a band B?

Mike Stewart

I would not be able to provide too much detail on that at this point. Perhaps that is something to ask the cabinet secretary when he appears before the committee. The overwhelming consensus among the stakeholders is that we should have that two-band structure, because it provides a simple and effective measure and will minimise any disruption for airlines. A driving focus of our decisions will be how efficient and convenient the tax structure is and how it enables us to deliver our policy objectives on the tax rate amount proposals.

Murdo Fraser

I have one more question on tax bands. Did the Government look at whether it would be possible to have a different band for domestic flights within the UK, or was there a legal impediment to doing that?

Mike Stewart

That idea was proposed in the consultation responses. Virgin Trains, for example, is particularly interested in that idea, because it is concerned about the impact on the rail sector if there was a reduction in the amount of air departure tax that is charged on flights within the UK, especially where those flights provide competition. That is one of the options that we are looking at, but I cannot say anything more about it at this point.

Murdo Fraser

You are not aware of a legal impediment to it, though.

Mike Stewart

It is one of the options that we are examining at the moment.

The Convener

Willie Coffey has a question specifically on the policy memorandum to the bill.

Willie Coffey (Kilmarnock and Irvine Valley) (SNP)

It is on the issue that has just been raised. In your opening remarks, you talked about why the tax bands, rates and exemptions are not included in the bill at this stage. You seemed to say that that is consistent with some of the other measures that are being introduced, and you mentioned landfill tax. Can you clarify why we are dealing with those things separately and not including them in the bill at this stage?

10:30  



James McLellan

The point that I made in my opening statement was that our approach to rates and bands—setting them out through subordinate legislation—is consistent with the approach that we have taken on the fully devolved taxes. The rationale around that is partly to ensure that there is consistency, but another relevant point—to pick up on the exchange about the differences between the Scottish and UK approaches—is that the UK has an annual finance bill and we do not, which gives us more flexibility. Making changes to rates and bands through subordinate legislation will enable us to reflect operational issues and other feedback that we get once the tax goes live.

Willie Coffey

That is the advantage, as you see it, of doing it in this way in Scotland.

James McLellan

Yes.

Willie Coffey

When will we see the detail emerging? We are just short of a year away from bringing in the new provisions. When will we be able to see and scrutinise the detail?

James McLellan

We will bring forward details of that shortly. As I set out in the earlier exchange, it will be done either through subordinate legislation after the bill is passed—we hope that the bill will be passed before the summer recess, so we would look to bring forward subordinate legislation in the autumn—or via amendments to the bill at stages 2 or 3.

Willie Coffey

Convener, is there time for me to ask one more question?

The Convener

Yes, if it is specifically about the bill. We will then move on to the financial memorandum issues.

Willie Coffey

It is specifically about the bill. In the light of the conversation that we have just had, I wonder why the detail of the connected flight rules has been kept in the bill rather than that being left for discussion, consultation and review as things develop in Scotland. It seems to involve the same provisions.

Mike Stewart

The connected flight rules are in schedule 1 to the bill. Again, the wording of the legislation is slightly different, but the effect is the same. The connected flight rules are linked to section 9 with regard to determining for the purposes of tax the final destination of a person’s journey.

Someone may take a flight from Edinburgh down to Heathrow and connect to another destination—perhaps a long-haul destination that is not offered by a Scottish airport. Under air departure tax, assuming that the flights are connected, the final destination will be the long-haul destination and not just Heathrow, so air departure tax will be charged on that further-away point rather than just on the shorter point. However, the effect is the same.

The Convener

Patrick Harvie has a supplementary on the specifics of the bill.

Patrick Harvie (Glasgow) (Green)

It is on the provisions that allow ministers to set bands and rates by regulations. The analysis of the consultation responses shows a very strong degree of concern about the environmental impact of the changes. That is barely mentioned in the policy memorandum, but the analysis of responses says that it was by far the most commonly expressed concern. Did the Government actively consider introducing to section 10 elements that ministers would have to consider before reaching a view, or before proposing regulations? Was that actively ruled out, or was it simply not considered?

James McLellan

Sorry, are you asking about consideration of the environmental impacts before—

Patrick Harvie

I have seen many pieces of legislation that require ministers to give consideration to certain factors before exercising functions such as making secondary legislation or ministerial orders. Was that actively considered and ruled out, or has it simply not been thought about?

James McLellan

We are very much alive to the environmental effects and we are explicitly considering that as part of the development and the consideration of our approach to rates and bands.

Patrick Harvie

I appreciate that that is happening at policy level. You told us that the strategic environmental assessment is being conducted but, given what was said a few minutes ago, we are being asked to pass the bill before we get a chance to see the assessment.

I am asking whether, in the development of the bill, any consideration was given to introducing criteria into section 10 that ministers would have to consider before they proposed rates and bands?

Mike Stewart

No.

Patrick Harvie

Thank you, that is very clear.

The Convener

We will move on to financial memorandum issues.

James Kelly

Mr McLellan, in your opening statement, you said that the financial memorandum gave an explanation of the impact on the Scottish budget. Bearing in mind that the policy objective of the introduction of ADT is, as the policy memorandum describes it, a

“50% reduction in the overall tax burden”

by the end of this parliamentary session. I do not see any acknowledgement or assessment in the financial memorandum of the fact that that will obviously mean a reduction in the Scottish budget. Can you give us an explanation?

James McLellan

In the financial memorandum, we have included the currently available OBR forecasts of what would be raised through APD in Scotland. That gives us the OBR’s assessment of how much would be raised if the current policy was continued and if it matched policies in the rest of the UK. As has been discussed, decisions on what the banding structure would look like, on how we would distribute the 50 per cent cut across that structure and on the phasing of the cut have not been finalised, so it is not possible at the moment for us to estimate the potential impact on the Scottish budget. That is certainly one of the things that are being considered as part of our approach, so we are looking at the affordability of the 50 per cent cut for the Scottish budget, as well as looking at wider stakeholder views and the available economic evidence to support that.

James Kelly

You must acknowledge that paragraph 10 of the policy memorandum states that the Scottish Government objective is a 50 per cent reduction in ADT by the end of the parliamentary session. Table 2 in the financial memorandum shows, as you pinpointed in your answer, the OBR forecast that revenues in 2021-22 would be £378 million if we continued in the current vein, yet that is clearly not the objective of the legislation, so it is not true to spell out that the revenues gained in 2021-22 would be £378 million. If there was a 50 per cent reduction, it could logically be argued that the revenues would be reduced to £189 million and, if there was a reduction, that would impact on the public finances. Do you not think that the financial memorandum should have given some explanation of that?

James McLellan

The figures that we have set out in the financial memorandum have been derived from what we were able to put in the bill. The decisions on how we distribute the tax and the cut, and on when it is phased in, will determine what the revenue impact will be.

On the mechanics of how it will work, there will be a deduction to the Scottish block grant from April 2018 and we have set out the approach for how that will happen. In effect, it will be based on an estimate of the APD tax raised in Scotland in 2017, and that will be reconciled once we have outturn. There will be a deduction to the Scottish block grant in 2018 based on that number.

How much revenue comes in will depend on where we get to with the policy for reducing the tax and with its phasing through the bill process. There may well be a difference between the amount that is taken off and the amount coming in, depending on where we get to with decisions on the tax rates and bands.

James Kelly

But you accept that the Scottish budget will reduce following the introduction of the proposed legislation.

James McLellan

If we reduce the tax by 50 per cent, depending on when the change comes in, the revenue coming in from that tax will be less than the amount that is taken off the block grant. The adjustment to the block grant will be indexed to UK Government policy. The future size of that will depend on UK Government policy.

The Convener

I need a bit of clarity here. The proposed legislation will not itself decide the rates and bands. Therefore, the amount of reduction in the Scottish budget will not be decided by the bill; it will be decided later by what is proposed on rates and bands in a statutory instrument.

James McLellan

Yes, that is right. Ultimately, the revenue impact will be determined by the rates and bands.

James Kelly

Yes, but the policy objective, as outlined in paragraph 10 of the policy memorandum, is

“a 50% reduction in the overall tax burden”.

The Government clearly has an objective of reducing the tax. Is that the case?

John St Clair (Scottish Government)

Perhaps I could intervene. My colleague is purposely being strict in his language. He is not moving on from the effect on the revenue coming in from the APD replacement to the total effect that the measures might have on the Scottish budget, because there are all sorts of variables. For example, if a reduction in the proposed tax led to an increase in economic activity, that could impact on other tax receipts. We are steering clear of answering that question directly, but we are not trying to avoid it.

The Convener

That is something that the minister will have to be prepared for when he comes before us. He should be able to provide an answer to James Kelly’s pretty reasonable question.

James Kelly

I will conclude my questions, but my position is that it is a glaring omission in the financial memorandum that there is no assessment or acknowledgement of the on-going impact on the Scottish budget.

Patrick Harvie

I will follow up on that point. There is clearly a question about the direct impact on the Scottish budget from the revenue that would be raised under the Scottish Government’s policy intention as it stands, rather than under the letter of the bill.

There is also a question about the potential indirect consequences for the Scottish budget. A great deal of the written submissions that we have received from private sector organisations that clearly have an interest in this policy area are trying to persuade us that there will be an increase in other forms of revenue through economic activity that is generated through the Government’s policy. As far as I can see, the financial memorandum makes no attempt to go into that. Is the Government conducting, or has it conducted, any assessment of what it predicts to be the revenues specifically coming to the Scottish Government, as opposed to revenues going to the UK Government, as a result of the indirect effects of the policy being put into practice?

James McLellan

We are certainly analysing the potential economic effects of our stated policy objective as part of the decision making. That covers a number of strands. One of them considers recent studies that have been published. There have been studies by PWC, York Aviation and Edinburgh Airport, from which I believe you are taking evidence later today. We are looking at the existing evidence that is available. We are also studying international comparisons that could be helpful. We are looking at countries such as the Netherlands and Ireland that have taken a similar approach by either cutting or abolishing such a tax to see what that can tell us about the revenue effects. We are also undertaking our own internal assessment of the potential effects.

10:45  



Patrick Harvie

I appreciate that. You say, “We are studying,” and, “We are analysing.” Has that work has been completed or is it still on-going? Is a policy intention already being signalled prior to the completion of that work and before we know what the effect will be?

James McLellan

Based on the existing available evidence, the Scottish Government has set out its policy aims, which are covered in the policy memorandum. We are continuing to model the effects before taking a final decision on the rates and bands.

Patrick Harvie

So the results and methodology of that work will be published before a proposal on rates and bands is put forward.

James McLellan

We would certainly look to bring forward that analysis, either as part of the strategic environmental assessment or to support the subordinate legislation on rates and bands.

The Convener

We turn to wider financial issues. Ivan McKee has a question.

Ivan McKee (Glasgow Provan) (SNP)

To my mind, the stated aim of the reduction in APD is to generate economic activity. However, the 50 per cent reduction is configured across the board, and it need not apply to all classes and types of travel. I want to drill down to get a wee bit more detail on that. First, I want to find out whether the structure of the bill is able to support an approach of tackling the issue in different ways; I will give you some examples to consider. Secondly, I want to follow up on what analysis you may or may not have done on the economic impacts.

Looking at the type of air traffic that generates economic activity, we might want to encourage inbound tourism rather than outbound tourism, which could have a negative economic effect because people who might otherwise holiday here would be encouraged to holiday elsewhere.

On the business side, we may want to target certain markets to bring in foreign businesspeople to work here and to encourage links with Scotland through direct flights. We might decide to prefer some markets over others, and we might end up with a situation in which we want to reduce tax on long-haul flights but not on shorter flights, for the reasons that I have just mentioned.

In the domestic-versus-international sphere, we might not want to encourage domestic flights where there is an overground or train alternative—we will be hearing from Virgin Trains in the next session today—whereas we might want to encourage direct flights from Scottish airports to international destinations.

A whole range of policy scenarios could come into play. Rather than using a blunt instrument that does not give us the desired economic benefit, we may want to focus on targeting specific types of passengers and specific markets, and on discriminating—if that is the right word in this context—between inbound and outbound passengers.

Does the structure of the bill as it is drafted allow us the flexibility to do that, or will we simply end up with a blunt instrument such as the UK has at present? Have you done any economic analysis on different types of segmentation in the market with respect to different passengers and different destinations?

James McLellan

I can say a bit on that, and Mike Stewart may want to add some detail on the bill itself.

As you said, there is a range of issues. As far as our stated economic goals are concerned, we believe that the power over APD will provide us with the ability to put new arrangements in place that better support our strategic objective of generating sustainable growth by improving international connectivity to Scottish airports; helping to generate new direct routes; sustaining existing ones; and, importantly, increasing inbound tourism.

Ivan McKee talked about analytical issues such as inbound tourism versus outbound tourism. Ensuring that the structure of the rates and bands minimises leakages from the economy through outbound tourism is certainly something that we are considering. We want to ensure that whatever is introduced maximises the opportunities.

The other debate that Ivan McKee raised was about long haul versus short haul. Again, that is something that we are looking at. I suppose that there are the strict economic impacts, but there are also wider impacts for rail and how that feeds into it. The short answer is that we are considering all those issues as part of our economic assessment. We would look to design the rates and bands of the tax in a way that effectively maximises the benefits based on the picture that we have pulled together, which is as comprehensive—

Ivan McKee

The question is whether the structure, as proposed, allows the flexibility to cope with all those variations.

James McLellan

It will do. I do not know whether Mike Stewart wants to say anything additional on the specifics of the bill.

Mike Stewart

If you are talking about the fundamental parts of the ultimate legislation, both primary and secondary, those are bits of detail that are still to be set out. I would view those as being most focused on the tax bands and the tax rate amounts. On the structure of the bill, the core concept of the tax is that we have to pay due regard to the scope of the powers that have been devolved to the Scottish Parliament.

Ivan McKee

Sure.

Mike Stewart

We have tax rates set out there. That is the only part of the core structure of the tax in terms of the interrelationship between the tax rate amounts that is in the bill. The greatest opportunities for delivering those and considering those types of areas will be covered in legislation that is still to be put forward.

Ivan McKee

So the bill would allow for that. You might end up with 10 or 20 bands, depending on where you want to target. You might have different rates for different types of passengers, or different rates depending on whether someone comes here from elsewhere and then goes home again, or vice versa. You might have a different rate depending on how long they spend here. Is there flexibility to do all that within the structure that is proposed?

Mike Stewart

On the types of issues that you mentioned latterly, such as how much people spend and so on, we would have to pay due regard to the legal constraints but also try to keep the tax simple.

James McLellan

One of the guidelines on the devolved taxes is that we should keep to the principles of Adam Smith. One of the generally acknowledged features of the UK tax is its simplicity. It is one of the most cost-effective taxes in terms of its collection and management. We would have to have regard to the impact of any policies that were reflected in the structure of the tax before going to those types of areas, and consider the impact that there would be on airlines and, overall, how the aviation and tourism sectors work.

Ivan McKee

Sure. Airlines have very complicated software that does all that stuff anyway, so it is an industry that is not unused to very complicated charging structures.

My final point is that I look forward to you producing analysis on that and following up on what Patrick Harvie asked about earlier. The segmentation of the different market aspects is something that you will analyse in due course—is that correct? Will you cover the economic impacts?

James McLellan

Yes. That is one of the many factors that we are including as part of our economic analysis. We will bring further details on that to the committee in due course.

Ivan McKee

Thank you.

Neil Bibby (West Scotland) (Lab)

My question is on the economic impact. The policy memorandum was published at the end of last year. Paragraph 7, which is on strategic objectives, says that the Scottish Government believes

“the tax to be an increasing burden on airports, airlines and passengers which holds back air route development.”

However, at the start of this year, Glasgow airport reported a record 9.4 million passengers in 2016, and Edinburgh recorded 12.4 million passengers in 2016—up 11 per cent on the number for 2015.

I appreciate that there is a debate to be had about the rate at which the tax will be set, but why does the Scottish Government believe that it is necessary to change the tax rate if passenger numbers are already increasing? What other factors and policies to support aviation growth have been considered? For example, if it is concerned about increasing tourism, has the Scottish Government analysed the effect of a fall in the pound in attracting investment? Does it consider that there may be an increase in passenger numbers and tourism without a change to the APD rate?

James McLellan

There is an upwards trend in air passenger numbers not just for Glasgow and Edinburgh airports but globally. The trend reflects the return to economic growth and the increase in available airline capacity.

On the current rates, APD is one of the highest taxes of its kind in the world. If you look at aviation tax across the world, you see that the UK is second only to Chad. The competitiveness of the tax rate is something that we are concerned about and are looking at.

We believe that cutting the tax burden helps to ensure a more level playing field with the many other European airports that often compete to secure airlines and routes. Doing so enables us to develop new routes and sustain the existing ones.

Neil Bibby

We have touched on the principles of taxation and on Adam Smith’s principles of proportionality and the ability to pay. Following Ivan McKee’s question about the impact on groups, has the Scottish Government done an analysis of airline passengers in Scotland? Do airline passengers tend to be the poorest in society or the most well-off? What impact will the tax have on those groups?

James McLellan

The impact on specific groups is another thing that we will factor into our analysis. We will consider a range of things.

Ultimately, the effect will depend on the decision around rates and bands.

Maree Todd (Highlands and Islands) (SNP)

I will ask about the impact on climate change. The United Kingdom Committee on Climate Change advised that any increase in emissions from reducing taxation with ADT is likely to be manageable. Its assessment is that the increase in emissions will be about 4 per cent and that we will be able to offset that by making other changes in the transport sector. Do you agree with that conclusion? Did the people who put forward opinions in response to your consultation agree with it?

James McLellan

We recognise that the policy will have environmental impacts. You are right to say that the Committee on Climate Change advised that the increase in emissions should be manageable. We have said that we will work harder in other areas to mitigate the effects of the increase and that the environmental impacts are being carefully considered through the strategic environmental assessment process.

Maree Todd

Four per cent does not seem to be a huge difference. Is there any debate about that figure?

James McLellan

Not that I am aware of.

11:00  



Maree Todd

As a representative of the Highlands and Islands, I am particularly interested in hearing what people had to say about exemptions. Currently, Highlands and Islands airports are exempt from APD. Is such an exemption likely to continue?

James McLellan

In the consultation responses there was overwhelming support for keeping a similar tax structure and similar exemptions. As I said in response to earlier questions, at this stage we cannot say more about specific exemptions, but we have committed to come forward with further details shortly.

Maree Todd

What is the timescale? You said something about the bill going through in September, I think, and the detail being available subsequent to that. Is that correct?

James McLellan

We hope to get the bill passed before the summer recess—that is certainly what we are planning to do. Issues that must be brought forward through subordinate legislation will be dealt with after that, in autumn—in September or October.

Maree Todd

Is it likely that tax will need to be charged on ticket sales that have already been made? Tickets go on sale about 340 days before travel. Is that correct?

James McLellan

On those specific tickets, that is correct. The other thing to add is that through the other routes that we have—we mentioned the stakeholder forum, which draws on a range of stakeholders, including industry stakeholders—we are trying to give the airlines as much certainty as possible ahead of final decisions on rates and bands.

The Convener

Adam Tomkins wants to follow up on that issue.

Adam Tomkins

I want to ensure that I understood James McLellan’s answer to Maree Todd correctly. You are talking about retrospective taxation by secondary legislation. What legal advice has the Government sought or taken to ensure that proceeding in that manner will not be vulnerable to judicial review in the Court of Session?

James McLellan

I apologise if my answer caused confusion. I was not talking about retrospective changes to taxation; I was picking up on the specific point about the timing of the details of tax rates, bands and exemptions.

Adam Tomkins

Perhaps I misunderstood, in which case I apologise. However, if you are talking about applying a tax in autumn to a ticket sale that preceded the point of tax liability, is not that retrospective taxation?

James McLellan

The tax will come in from 1 April 2018, and from that point we will have full details of the tax rates and bands.

Adam Tomkins

When you say that the tax will come in in April 2018, do you mean that that is when the bill will take effect, or that the instruments of secondary legislation that establish the bands and rates will take effect from then? I am not sure that I understand the chronology of all this.

James McLellan

Yes—everything. Our ambition is to have the bill passed by summer recess, and to deal with additional points that were not covered, on things such as exemptions, rates and bands, through secondary legislation well in advance of the tax coming in from April 2018.

Patrick Harvie

I want to follow up the climate change questions, because I do not think that we needed to throw quite such a soft ball.

The UK Committee on Climate Change, which of course has a formal role in advising the Scottish Government on climate change under the Climate Change (Scotland) Act 2009, has clearly recommended that by 2050 aviation emissions need to be limited to 2005 levels. That allows for some degree of demand increase, but not unlimited demand increase. The UK Government nominally accepts that advice; whether we think that its actions are consistent with achieving that outcome is another matter. Does the Scottish Government, in framing its aviation tax, take the view that aviation emissions by 2050 need to be limited to 2005 levels, or does it have no policy on that?

James McLellan

We will need to write to you with further details on the specifics of our commitment to overall aviation emissions and how that feeds into our climate change plan.

Patrick Harvie

So the bill’s development has not been informed by any policy context for what you expect aviation emissions to be in the future. There has been no consideration of the policy intentions in that respect.

James McLellan

There has been, in terms of the overall effects. That is set out in our approach to the strategic environmental assessment. An update to that will be produced as part of the 12-week consultation. In that, we will set out our assessment of what we think the effects will be in that regard.

Patrick Harvie

So that work is still on-going. In framing the bill and the policy intentions in relation to the replacement tax, the Scottish Government has not yet formed a view on whether it will comply with the UK Committee on Climate Change’s recommendation that aviation emissions by 2050 should not exceed 2005 levels. Is that correct?

James McLellan

Again, until the full analysis is done of the effects, we cannot comment. On the specifics of the target—

Patrick Harvie

Forgive me—I will be more robust with the minister, but I think that even an official is able to comment on whether the Government has a view on that question.

James McLellan

We would be happy to write to you on the specifics of the target. The assessment of the environmental impacts that we have done to date has been published, but I am afraid that I do not know the details of how that interacts with the wider UK target. As I said, we would be happy to write to you.

The Convener

When you write to us, will you also make sure that you tell us how you will go through the exercise of considering the rates and so on, and what the process will be for introducing the secondary legislation? The issue is not just the primary legislation; it is also the secondary legislation that will follow. It would be up to members to propose different rates. They could suggest rates that would go up, which would have one kind of environmental impact, or they could suggest rates that would stay the same, which would have a different environmental impact. We are considering the principles of the proposed legislation. However, I think that Patrick Harvie asked some fair questions.

That leaves Liam Kerr to deal with information technology matters.

Liam Kerr

I have a couple of quick wrap-up questions.

First, I want to follow up on something that Neil Bibby asked about. I understand from James McLellan’s answer that no particular analysis has been done of the socioeconomic profile of people who fly. Can we extrapolate from that that no analysis has been done on who is flying, where to and why with regard to business travel, or on what can be expensed in terms of passenger duty? Is it correct to say that such analysis has not yet been done?

James McLellan

That is a core part of the analysis that we are undertaking. We are trying to pick up the inbound/outbound dynamic and the categories of people who take flights—in other words, whether they do so for leisure or business. We are looking at that.

Liam Kerr

I note in the financial memorandum an estimate of £120,000 to set up the IT to make the system work. Given the costs involved and the difficulties experienced in the setting up of various other IT projects, how accurate is that estimate of £120,000? It feels rather low.

James McLellan

The estimate that is provided in the financial memorandum for the Revenue Scotland IT cost is Revenue Scotland’s best estimate of the resources that will be needed to deliver ADT. It is the cost of developing a new ADT module that will be added to the existing Revenue Scotland tax collection system—it is not something completely new. The costs were based on a robust business case, which was compliant with Treasury green book methodology and approved by the Revenue Scotland board. The costs were thoroughly scrutinised.

Liam Kerr

I have a final, quick thought. We have received various representations—indeed, Ivan McKee suggested this—that the way to stimulate economic activity, growth and the economy in this instance is by reducing tax. I presume that the converse is true and that if we increased tax, that would potentially stifle the economy, growth and jobs. Do you accept that analysis? How will that issue ultimately inform the thinking about bands and policy?

James McLellan

Our broad position is that APD is one of the highest taxes of its kind in the world. As we have set out before, we believe that cutting the tax will give Scotland’s airports a competitive advantage over other airports that are trying to attract new routes. That is the overall rationale behind the policy.

The Convener

I thank the witnesses for coming along this morning.

I suspend the meeting to allow a changeover of witnesses.

11:12 Meeting suspended.  



11:16 On resuming—  



The Convener

Colleagues, our next piece of business is to continue our consideration of the Air Departure Tax (Scotland) Bill at stage 1. We are joined by our second panel of witnesses: Tim Alderslade is chief executive of Airlines UK; Jonathan Hinkles is managing director of Loganair Ltd; Gordon Dewar is chief executive officer of Edinburgh Airport Ltd; and David Horne is managing director for the east coast route at Virgin Trains.

Members have received copies of the submissions from our witnesses, so we will go straight to questions. If I asked all the witnesses to make an opening statement, we might not finish our business today.

You will be aware that the bill does not specify the proposed rate of taxation to replace the existing United Kingdom air passenger duty. The Parliament will consider that further down the line. However, some of you have experience of the administrative arrangements that govern the current system. Can you suggest any ways in which the new devolved Scottish system’s administrative arrangements could improve on those of the current system? What changes would you like and why? Whoever wants to kick off should feel free to do so.

Tim Alderslade (Airlines UK)

Airlines UK has been clear that we want the new arrangements to be as similar as possible to the UK Government arrangements. That is vital for our members, so we were pleased that the Scottish Government’s consultation documents stipulated that the arrangements, including those for the bands, capital cities and exemptions, would be as similar as possible to those of the UK. Our members want the arrangements to be as simple as possible and as close as possible to the UK’s arrangements.

Gordon Dewar (Edinburgh Airport)

As members know, the administration is much more of an issue for the airlines. It is obvious that we are talking about one of the most efficient tax collection methods—indeed, I think that it is the most efficient. Currently, two people in total manage the system for the whole UK. That simplicity has huge benefits, including benefits for the consumer. It is clear to the consumer what the tax is and what they are paying for.

There is potentially an argument for variation in levels, although we want to keep the bands and the administration similar. It is clear that that is for secondary legislation. We are probably more interested in the policy’s impact through economic benefits.

Jonathan Hinkles (Loganair Ltd)

Similarly, we think that keeping the tax collection structure and the back-of-house administration that goes into collecting the tax as close as possible to the arrangements in the rest of the UK would be helpful. Clearly, we have views on the levels of APD, which we will perhaps come to later. However, the administrative burden from the structure and collection of the tax is a big factor in an airline’s life. We want the arrangements to be along the lines of what already exists.

The Convener

Is the collection process as outlined in the bill satisfactory and robust, or would you like changes to it?

Jonathan Hinkles

We have no fundamental issue with what is proposed in the bill. We are content with suggestions that were made and all that we have heard in meetings that the Scottish Government has held to consult airlines in preparation for the bill.

Tim Alderslade

Likewise, the quarterly online collection is more than adequate for our members—we have no problem with that at all. Currently, we have a monthly paper process, so the proposed arrangement is an improvement and we are happy with it.

The Convener

Does David Horne have any views from the trains perspective?

David Horne (Virgin Trains)

I have no views on the administrative issues that the airlines face.

The Convener

One of the key concepts that underlie the proposed tax involves having the definitions of chargeable passengers and chargeable aircraft follow the structure of APD. What is your view of the definitions that are used? Do you wish to see any changes in the definitions that are in the bill in order to improve the tax’s operation? That question is probably directed to Tim Alderslade and Jonathan Hinkles in particular.

Tim Alderslade

We are happy to have in place the same arrangements on chargeable passengers and chargeable aircraft as those that currently exist in the UK, and we do not want any changes. We are happy with what we have seen.

Jonathan Hinkles

The definition of chargeable aircraft protects the exemption for small aircraft of below 5.7 tonnes in take-off weight, which operate many of the lifeline air services. That is fundamental to us. Another element that is important to us is retaining the existing exemptions for connected passengers and passengers who travel on routes that are operated under a public service obligation with the Scottish Government or with local councils, depending on the administering body for the PSO.

We are broadly comfortable with the proposals. It is essential to maintain the existing exemptions in the definitions of chargeable passengers and chargeable aircraft.

The Convener

I will try to bring in some of the members who did not get a chance to ask questions earlier. To enable that to happen, we need to ask a more general question first. Ivan McKee will do that.

Ivan McKee

I ask for your comments on the points that I made earlier. The main point of the tax reduction is to generate economic activity. However, there is a differentiation to be made, because encouraging some types of travel would reduce economic activity in Scotland, and the positive economic impact that might be encouraged has quite a range.

In the Edinburgh Airport analysis, two scenarios were based on the type of passengers who might be encouraged to travel. That is a passive approach—you merely said that one thing might happen or the other thing might happen—but I come at the issue from the angle of thinking about what we want to happen and how we can make it happen. Notwithstanding the comments that have been made about keeping things as simple as possible, do you have any comments about the type of travel that we might want to encourage for the good of the whole economy and not just to get more people buying your duty-free goods?

Gordon Dewar

There are two fundamental impacts of reduction, whatever form it takes. A reduction in the price of travel in some shape or form makes travel more accessible to people—as a meaningful change, that has more impact on people who are on low incomes.

The bigger driver for the wider economy is encouraging further connectivity, which involves new routes and new airlines coming in. It is clear that different routes will have different impacts. It is fair to say that long-haul routes—particularly those that bring in visitors—are seen as attractive propositions. Equally, the whole of Europe is fertile ground for inbound tourism for Scotland. That volume would have a bigger impact, even though the rate of growth in long-haul flights might be higher if the reduction was significant.

Even though offering more choice to Scottish residents will undoubtedly allow them to go to different places, it will probably not generate a huge amount of extra outbound trips, because people are largely constrained by affordability and time rather than choice. However, if we make Scotland accessible and affordable for inbound visitors—direct services are the best way of doing that—we will see a large increase in their number. We see that every time that happens. In fact, every single long-haul route and most of the short-haul international routes that have arrived at Edinburgh over the past four years have seen a majority of inbound passengers over outbound passengers.

Ivan McKee

Are there international comparisons? Denmark and Norway, for example, have 20-odd million passengers going through their main airports in Copenhagen and Oslo alone, never mind all their other airports. Although those countries are of a similar size to Scotland, they are a step above where we are in the number of travellers that go through them. In that scenario, would significantly more outbound travel come through?

Gordon Dewar

Do you mean outbound travel from Scotland?

Ivan McKee

No—I mean travel into those countries. I do not know whether you have analysed that. That is where we want to get to—we want to get to the level where 20-odd million passengers are going through Edinburgh, as in Copenhagen.

Gordon Dewar

Absolutely. As far as the 20 million is concerned, Copenhagen airport operates in a slightly different way. Denmark has a home-based hub operator, so a lot of the passengers in Copenhagen—as in Heathrow—are through passengers who make little difference to the local economy. It is therefore not necessarily a great comparator.

If the duty is reduced significantly—if it is halved, for example—we will see a significant interest from airlines in bringing in new routes. Carolyn McCall of easyJet has already said on the record that she would increase the number of passengers in Scotland by 30 per cent on the back of such a reduction. Michael O’Leary has been robust about his intentions to increase passenger numbers.

If we make a reduction quickly and clearly, we will probably get an overresponse, because the airlines will want to demonstrate the impact. I say an overresponse because we should not forget that, even if we halved the amount across the board, we would still have the most expensive air passenger duty anywhere in the world, other than Chad. All that we would do is reduce our discrepancy and our disadvantage; we would not get ahead of the curve in any shape or form.

There was a question earlier about whether we should be worried when there is already success. I remind members that we got back to the 2008 level of passenger numbers only last year. Although Edinburgh is in the lucky position of having a strong economy that is growing well, which we are doing well out of, we would not say the same about Aberdeen, Prestwick and many other airports.

Tim Alderslade

It is important to say that last year, we had 251 million passengers across the UK. It is great that Edinburgh and Glasgow airports are doing well, but that is not unique across the UK. With the exception of one or two airports—Liverpool and Durham Tees Valley, for example—most airports in the UK are experiencing strong passenger numbers. However, as Gordon Dewar said, that is only getting back to where we were in 2008, before the economic crisis.

It is also important to say that in Edinburgh, Glasgow and Aberdeen, we can still use existing runway infrastructure to have significant growth. I rebut the earlier point that, because we are doing well in Scotland and across the UK, we need a cap on passenger numbers. That is absolutely not the case. When we have spare capacity in existing infrastructure, we should be doing everything that we can to get more routes in and more connectivity.

The Convener

Does Jonathan Hinkles want to respond?

Jonathan Hinkles

On economic activity, we believe that there is a strong opportunity to make a difference in the Highlands and Islands by reciprocating the current exemption for flights from the Highlands and Islands so that passengers who depart from Glasgow, Edinburgh and Aberdeen on flights to the Highlands and Islands are lifted out of APD, as it is today, and ADT, as it will be in the future. That would give the fastest return on investment of the Scottish Government’s funding, which would in cash terms be well below £2 million a year—that is the tax that is currently collected from those customers.

We make that proposal because about a quarter of the passengers who travel on those routes are funded directly by a public service such as the national health service, which funds patients who are travelling, or councils. About a quarter of the tax income from customers who fly from mainland airports to the Highlands and Islands is already funded by the Government. On the basis of not wishing to perpetuate a money merry-go-round, it would make sense to reciprocate the exemption.

Growing the traffic that travels into Highlands and Islands airports would also allow us to generate more income for Highlands and Islands Airports Ltd—HIAL—through the charges that it levies on airlines such as Loganair, which would reduce the subsidy that it has to take from the Government. There is a fairly direct case for that before we get into the strong economic impacts from encouraging tourism and encouraging business in the Highlands and Islands.

We carry about half a million passengers a year on routes that are exclusively in Scotland. All bar one of those routes crosses a body of water, so trains are not a substitute in the market that we serve. From an environmental perspective, travelling between Glasgow and Stornoway, for example, by car and ferry generates in sum—depending on how that is done and the number of passengers travelling—more emissions than a direct air journey.

There is a strong case economically—it includes the indirect economic benefits to the Highlands and Islands—and environmentally for reciprocating the exemption. An early step that we would like to be taken under the Scottish Government’s powers to levy the air departure tax would be to lift out of ADT the routes from Glasgow, Edinburgh and Aberdeen that depart to the Highlands and Islands.

11:30  



The Convener

Maree Todd will ask you questions on rural areas, and David Horne should not worry, because we will get to trains, too. However, first we have a couple of supplementaries.

Ash Denham

I am an Edinburgh MSP. We know that Edinburgh airport is Scotland’s busiest airport and is a big employer in the area. I direct my question to Mr Dewar. A number of studies have been carried out, including one by Edinburgh Airport, on what the economic impact of reducing the tax would be. Will you share with us some of your findings, particularly on the wider economic impact on Edinburgh and the surrounding area, and on the monetary value—the gross value added?

Gordon Dewar

Our model is based on halving the tax, on the basis of the Government’s statement that it wants to reduce the tax take. Of course, the position would vary if there were different bands and rates. We think that the value across Scotland of the reduction would be 10,000 extra jobs—they would largely be in the tourism industry, with other jobs for those directly involved in the aviation sector from new routes and new airlines, for example—and about £300 million in gross value added.

Even more interesting is that there would quickly be a positive revenue take. There might be a modest lag as things took time to bed in and we got the expected growth but, if we had a clear statement and policy, airlines would be quick to respond.

The benefits that we would get from additional passengers, albeit that they would be paying lower APD, would bridge some of the gap. We would also get other revenue and income streams, with new taxes from employment, for example. One of the biggest wins would be a reduction in the payment of unemployment benefits as people got back into employment and were able to live independently as a result. All that is before we get into all the indirect economic value of the wider spend of, for example, tourists in the Highlands and Islands.

Across the piece, reducing the tax would be one of the best investments that we are likely to see, because we would get not only an economic return but a cash return into the Government’s coffers.

Ash Denham

You heard us talk in the earlier session about the tax being one of the most expensive in Europe and possibly beyond. How does the Scottish Government’s intended direction fit in with the wider context? What are other countries doing on APD?

Gordon Dewar

With the exception of Norway, which has recently announced an increase in the tax—I think that it is about to find out the folly of doing that—every country has gone in the opposite direction, and most have abolished the tax. The only benchmark is with Chad—that is interesting, as I have never compared Scotland to Chad before—because it is the only country that we are on a par with.

Every country in Europe is down at the €2 or €3 tax level, so we are an outlier. That is counterintuitive, given that we are at the north-west periphery of an island, we are incredibly dependent on inbound tourism and tourism is the largest employer in the country. The logic seems to be perverse. In effect, we could reverse or at least address the situation by halving the tax. We need to remember that, even if we did that, we would still have the most expensive tax in Europe. Halving the tax would be a pretty logical policy to pursue.

Tim Alderslade

We reported on the issue last year. If Scotland were to push ahead with a 50 per cent reduction, that would improve its short-haul flights standing by 38 places on the rest of the UK and, for long-haul flights, it would rank the ninth highest in the world, which would leave England and Wales at the top of the league table for cost. Although Scotland would still be one of the most uncompetitive nations in the world for short and long-haul flights, it would move down the league tables. That is quite a useful analysis of where Scotland would sit compared with where it sits currently.

I hasten to add that I do not think that we should compare ourselves to Chad when it comes to air ticket taxes and charges.

Ash Denham

I have one more question, which is on trains. A lot of business travellers fly from Edinburgh to London, and the train network is concerned about the impact that reducing the tax might have. Does David Horne see that as a factor?

David Horne

We said in our written submission that an APD reduction will have clear benefits in generating better international connectivity. We all want to improve trade and attract more tourists to Scotland, which will bring economic benefits.

On domestic routes, our analysis is that, if APD is reduced on domestic routes as is being discussed, that will result in a switch of modes from rail to air. We are concerned about that. Rail has had a great success story over the past few years, with more services coming to Scotland and investment in improving services. Further investment that will benefit Scotland’s and Edinburgh’s connectivity is either under way or being developed. We need to protect that, because it is as important as the international connectivity that Scotland seeks.

The Convener

I am going to go deeper into the rail issues later—I know that Murdo Fraser has a question on that. First, there are supplementaries on the previous point.

Neil Bibby

Just for the record, I did not say that there should be a cap on passenger numbers. I asked a legitimate and reasonable question about why it is necessary to cut APD when passenger numbers are increasing. I hear what has been said about passenger numbers getting back to 2008 levels, but we had a global financial crash in 2008 and obviously there were wider economic reasons for that.

Why have passenger numbers at Edinburgh and Glasgow increased over the past couple of years? Irrespective of whether or not there is a cut to APD, do you expect passenger numbers to increase again over the next year?

Gordon Dewar

We have to come at that from the wider market view. The European aviation market is growing at about 5 per cent per annum. If an airport’s growth is at 5 per cent per annum, it is in line with the marketplace. That is a result of a fairly benign position where the UK economy has been doing reasonably well overall, comparatively speaking, and oil prices are low so fuel prices for airlines are reasonable and manageable. We are in an upswing in terms of the general economics.

We should take comfort only from above 5 per cent growth; otherwise, we are just marking time with the wider economy. That is one of the reasons why we are getting back to 2008 levels—it is a market correction. We are seeing quite a significant move from Prestwick to Glasgow—that is not market growth overall; it is just market transfer.

Edinburgh has done well because our economy has done exceedingly well when compared with the rest of the UK. I would also like to think that we have done something right in the way we engage with airlines and point out the benefits that they can have. We are out there competing with hundreds of airports around the world, trying to make the case why airlines should make very risky and large investments in Edinburgh and Scotland rather than somewhere else. We have got good at that, and we have moved out of shared ownership with Glasgow—the gloves are off and we are prepared to fight our corner to get our fair market share within Scotland.

All that is true, but I do not want to overencourage the idea that we are doing marvellously and that it will all continue. That is not the case. The economy is driving most of it; there is a modest upside in some of the things that we are doing, but we will have to work really hard. My competition is not with Prestwick or Glasgow or Aberdeen. In the case of easyJet and Ryanair, I am competing every day against Copenhagen, Barcelona, Rome and all our other European competitors. That is the market that we should be looking at, and we are massively against the wind; physically we are further away, so airlines have to burn more fuel and use more staff time to get here, and our tax is the highest in Europe by a long way.

Neil Bibby

You recorded an 11 per cent increase in passenger numbers in 2016. I press you again: do you expect passenger numbers to increase over the next year—in 2017?

Gordon Dewar

They will grow in 2017, but do not expect them to grow by that much. The aviation market is highly leveraged against general economic growth, and there are also some local conditions. If the economy is growing at 2 per cent, aviation will grow at 4 or 5 per cent. The converse is true. From 2008 to 2010, most airports were seeing double-digit declines. It is not as if growth just lands in our lap; we have to work hard at it.

Of course, in a constraining or flat market, airlines work even harder to find the margin elsewhere. To put this in context, APD, or departure tax, is £13, but my average top charge to an airline is under £10. I am out there competing and offering discounts to airlines in order to entice them away from Copenhagen, for example, but before I even start, I cannot get close to matching APD. Even if I made it free, we would still be more expensive than most other European airports because of the departure tax.

Tim Alderslade

It is also worth putting on the record that, according to the International Air Transport Association, the average profit per passenger for airlines is $7, while UK APD is £13. That puts it into context. Over the past 10 years, our members have spent upwards of $50 billion buying 470 new aircraft, with 400 more on order. Some are replacing existing aircraft, while others are new aircraft that airlines are trying to get into new destinations in order to set up new routes and get greater connectivity. They will go where they can get the biggest bang for their buck. Although easyJet is a UK carrier, it has bases all over Europe. If you are only making several pounds or several dollars per passenger, if you have to, you will go to Copenhagen or elsewhere in Europe, where you will make a bigger profit.

The Convener

I believe that Patrick Harvie wants to raise some economic issues, too.

Patrick Harvie

Good morning. Gordon Dewar has talked about some of the economic analysis that was included in his written submission, and I want to look at that. You have talked about the potential for additional revenues to be generated for the public purse; I think that you mentioned Government coffers, but it was not clear which Government you meant. In your submission, you cite value added tax, only a proportion of which is to be assigned to the Scottish Government; corporation tax, which is not being devolved at all; and savings from the welfare or social security bill, which, again, is not devolved. You also do not seem to have included any analysis of the proportion of people working in the aviation industry who are presently claimants. Finally, you mention employment taxes, using an Oxford Economics study from 2013-14, at which point the personal allowance was significantly lower than it is now and lower again than it is intended to be by the end of this parliamentary session.

Is it not clear that not only is there no indication in your analysis of the proportion of the purported additional revenues that will come to the Scottish budget but you are relying on research and studies that are woefully out of date and cannot be considered as a reliable forecast of the revenues that might come through the devolved taxes?

Gordon Dewar

I welcome the request I heard made earlier when I was sitting in the public gallery for the Government to carry out a full and frank analysis of the issue.

Patrick Harvie

I would welcome that, too.

Gordon Dewar

Such an analysis has been missing for some time now. I am using 2013-14 data because I have been arguing this case for seven or eight years now. We are a long way from where we started.

If the Government did that analysis, it would be fantastic, because if we were to commission it, the accusation would be, “They would say that, wouldn’t they?” That would be unhelpful. After all, we would commission it only because no one else would. The company in question—Oxford Economics—is very reputable and it was independent as far as its findings were concerned, but the right answer would be for the Government to undertake a full analysis of the revenue and economic benefits of this move.

Patrick Harvie

I hold my hands up and say that I have probably said, “They would say that, wouldn’t they?” myself from time to time.

However, just to boil this down, I note that your written submission, which still cites the Oxford Economics research, talks about generating

“£900 million in revenues from Income Tax and £1.3 billion in Revenues from National Insurance”.

National insurance is not devolved, either. There is a substantial gap between £9,440, which is what the personal allowance was when that research was carried out, and the £12,500 that the Scottish Government intends the threshold to be by the end of the current parliamentary session. People would now need to be earning significantly above £12,500 in order to generate any meaningful income from the income tax on theoretically generated employment. After all, we are talking about the tourism and hospitality sector, which is pretty notorious for poverty wages.

11:45  



Gordon Dewar

I would not agree with the last part of your comment.

Patrick Harvie

You might if you were on the minimum wage.

Gordon Dewar

I am closely associated with VisitScotland and the Scottish Tourism Alliance and I understand the economics of tourism. The sector is a very successful employer and has lots of opportunity for growth—

Patrick Harvie

But you would agree with the basic point that employment generated would have to involve wages significantly above £12,500 in order to generate any income tax revenue—

Gordon Dewar

I would agree with the point that analysis should be done by those who understand these things.

Jonathan Hinkles

Across the Highlands and Islands network, the average salary at Loganair is almost double the level that Patrick Harvie is talking about. When it comes to job creation in our organisation, salaries will be above that level.

Patrick Harvie

I am perfectly prepared to take your word for it. We are mostly talking about induced employment in the wider economy, though—hotels, tourism, nightlife and the rest.

Jonathan Hinkles

I understand.

The Convener

Before I bring in Maree Todd, can I clear up this Chad matter? In FIFA rankings, Scotland is 67th and Chad is 151st. I understand how that is arrived at, but who came up with the analysis that says that Chad has the highest air passenger tax in the world and the UK the second highest?

Tim Alderslade

It was in a World Economic Forum study. The WEF does a study every two years on tourism, air taxes and airport charges. We were 136th out of 137 countries. Chad was below us but did not submit any figures, so it is conceivable that we were last.

The Convener

Wow. I am really glad that I asked.

Gordon Dewar

The reason why we are so ineffective in terms of pricing in airports is all down to Heathrow.

The Convener

We will get the clerks to source that study for members, because it has been mentioned a few times.

Maree Todd

I would agree with the concerns expressed by the panel. To characterise the tourism industry as an entirely low-wage economy would be doing it a disservice. It is a vital industry in the part of the country that I represent.

Jonathan Hinkles said that the fares of 25 per cent of passengers to and from Highlands and Islands airports are directly paid by Government bodies, councils or the NHS. I do not need much convincing that those are lifeline flights. Will you give me some more detail about that? Does it include staff going on training, for example, or participating in networking opportunities? I used to work for the NHS and I regularly had to fly simply to maintain my ability to do my job.

Jonathan Hinkles

Yes, it includes those categories. We take the data of customers booking with us and can clearly identify those travelling under our NHS patient travel arrangements. That is around 50,000 passengers a year out of the half a million that we carry in Scotland. The customer provides us with information when they book, such as an email address. We can ascertain where the customer works from the email address of the person who has booked the flight for them, which might be registered to the NHS, the police or councils. That is how we came up with those figures.

Maree Todd

That might be an underestimate, because I used to book flights using a personal email address.

Jonathan Hinkles

It may be, yes.

Maree Todd

Some of the submissions received in the consultation discussed whether all flights from the Highlands and Islands should be categorised as lifeline flights. There was a question about whether flights from Inverness airport to sun and ski destinations should be included. Do any of you have any information about what proportion of flights from Highland and Islands airports that might account for?

Jonathan Hinkles

We believe that it is relatively small. If we look at Highlands and Islands Airports Ltd’s total throughput of its route network—which is around 1.1 million passengers a year, including Inverness—Loganair accounts for more than half of HIAL’s business. If we take into account the Inverness to London air services, which are growing significantly, and the Inverness to Manchester and Dublin flights that we provide, the remaining number of services, from Inverness to sun and ski destinations, is relatively small.

Of course, Inverness airport is trying to encourage that number to grow, and we support that, because it brings down the overall cost-sharing burden of running those airport facilities. From memory, I think that Inverness had six flights this year to Majorca, versus probably about six a day at the height of the season at Gordon Dewar’s airport—something of that nature. It is a miniscule part of the wider picture for the Highlands and Islands network.

Maree Todd

I also want to ask about alternative modes of transport. You said that all routes but one go over a body of water. Is the one route that does not go over a body of water the Wick to Edinburgh route?

Jonathan Hinkles

It is indeed the Wick to Edinburgh route, which might as well be a journey over a body of water given the surface transport alternatives. That is why that route still flies.

Maree Todd

The alternatives are an eight-hour train journey or a six-hour car journey.

Jonathan Hinkles

Indeed.

We have direct competition, in terms of ferry services, and we see a direct interaction between ferries and air travel. For example, the introduction of the road equivalent tariff to the Islay ferry market in 2012 has had a direct impact on the Glasgow to Islay air service. Passengers leaving Glasgow pay APD but ferry fares have been brought down through the introduction of RET.

Against that background, we believe that there are strong benefits in reciprocating in the new tax the exemption that currently applies to flights from the Highlands and Islands—essentially through the form of aid of a social character—to flights to the Highlands and Islands that depart from Glasgow, Edinburgh and Aberdeen.

Maree Todd

Did I understand correctly that you had done some climate change impact comparisons? For example, did you compare the flight from Glasgow to Islay with single-occupancy-car and ferry journeys?

Jonathan Hinkles

We have done outline work. I will not profess that we have had a bevy of consultants working away in the background on that. We have looked at CalMac Ferries’ average emission figures and the figures from the longer northern isles ferry routes, which Serco NorthLink Ferries operates from Aberdeen and Scrabster. In essence, the longer the ferry journey, the worse the emissions, and ferries tend to depart from the closest point from which they can sail, which normally implies that there is a long car journey to get to the ferry in the vast majority of areas where we are in competition.

The Convener

Liam Kerr had some questions on that.

Liam Kerr

There are some quite big claims in the evidence that Virgin Trains submitted, such as the claim that

“33% of the southbound rail market would switch to air”

if APD were to be abolished. On what evidence are you basing that? From what studies have you drawn those conclusions, and how robust are they?

David Horne

The conclusions are based on conventional transport modelling, using the information that we have available to us at the moment. Clearly there is a range of outcomes.

All the research that has been discussed in evidence today needs some proper scrutiny, as was mentioned earlier. However, we believe that the research that we have undertaken is robust. We know that rail competes strongly with the aviation market and we know that the initiatives that we have launched in the past year have been successful in attracting customers from airlines to rail, as well as in having boosted Scotland’s connectivity.

We know that the market is competitive, which is why we are extremely concerned that a reduction in the tax that is paid by air passengers will result, on domestic routes, in a switch from rail to air, which will fundamentally undermine the case for further investment in the rail routes between London and Scotland.

Liam Kerr

Have you robust evidence that suggests that your customers are making an active choice to take the train because they do not want to pay a £13 charge, and that if that charge was only £7 they would choose to do something different?

David Horne

We have evidence that customers compare the prices of the modes that they can choose as well as factors such as journey times and connectivity. They consider whether they want to fly to Heathrow and then make the journey into the city centre, for example, or get directly to the city centre. They consider a number of things, and we absolutely know that price is one factor. That is why—

Liam Kerr

Yes—but I am asking about the 50 per cent reduction in the tax.

David Horne

It is clear that in transport modelling the prices of alternative modes are aggregated prices: the whole price that a passenger would pay for an air fare, including taxes, would be compared with the rail fare. In our analysis, we have applied the proposed reduction in the tax element, and the results that we have shared reflect that effect.

Liam Kerr

Right. I think that you are saying that your conclusion is that, if the airlines were suddenly able to display a £7 reduction in their fares, that would cannibalise 33 per cent of your rail market.

David Horne

Our research says that that would be the case on south-bound rail.

Liam Kerr

What do the airlines say about that?

Gordon Dewar

I will not speak for the airlines; I will speak for Edinburgh Airport. As a former public transport modeller and rail operator, I have never seen elasticities in impacts of anything like that scale. I do not recognise where the numbers come from or how they are plausible. However, I am very happy to be in a competitive market, and I will stand on the customer service and the choices that we offer. It is a bit galling when a heavily subsidised industry asks for its competitors to be taxed in order for it to be competitive.

David Horne

For the avoidance of doubt, our services between London and Scotland are not subsidised. This year, we paid £280 million in premium to the Government. I think that per passenger that equates to slightly more than airlines pay under band A for aviation passengers.

Gordon Dewar

That does not, however, take account of Network Rail—

The Convener

I have enough debates between politicians to control. A few members want to ask supplementary questions, so the witnesses will get another chance. Another three folk want to contribute on trains. Murdo Fraser has the first question.

Murdo Fraser

Thank you, convener.

The Convener

I am sorry, Liam—have you finished?

Liam Kerr

No. I was on a roll, convener.

The Convener

My sincere apologies. On you go.

Liam Kerr

I want to ask Mr Dewar about the figures. In your submission, you say that a reduction in APD could mean an extra 18 million passengers being flown from Scotland. In your analysis, where would those passengers come from and where would they go to?

Gordon Dewar

The additional passengers would largely be driven by a bit of economic uplift. The cost reduction would generate some outbound Scotland-based travel, but that would be very modest.

If we consider what is happening in a growing market, we see that we are pretty flat on domestic travel, for example, but that growth in international travel is up 20 per cent. Some of that travel is outbound, but the vast majority is inbound because we are making it easy for people to come to Scotland for the first time through the attraction of the new routes. That is driven not by a £6.50 or a £37.50 reduction in fare prices—although that will contribute—but by the fact that more routes can start because it has become economically and financially viable for airlines to start them.

Liam Kerr

Your submission makes a number of suggestions about the positive economic impact of the change. Logically, you would have gone on to say that there would be a potential negative impact on the train service, the supply chain to the trains and the jobs that are associated with those. Has that analysis been done?

Gordon Dewar

There are definitely different impacts in different segments of the market. It is natural to say that in a well-established, mature and competed-for market—in this case, the domestic rail market—the opportunity for economic growth from that market is lessened. However, if long-haul air travel markets are opened up where there has previously been no really attractive proposition to come to Scotland, we will see massive increases there. Europe sits fairly in the middle, but it is, of course, critical because it has such a massive pool of existing and future travel. Long-haul travel can grow at very high percentages, but it will never be a huge part of total travel.

The real win involves going to places from which people genuinely cannot currently get easy or affordable access to Scotland. When we do that, we see people responding in huge numbers. When we have a route change from an indirect connection—via London, Amsterdam, Paris or wherever—to a direct one, we typically see a threefold or fourfold increase in the number of people making that trip, which is pretty heroic, in the first place. We know that that is strong, and that is the average.

12:00  



Take easyJet’s Hamburg route as an example. Obviously, Hamburg is not far in terms of distance and, therefore, travel time, but it was really inconvenient to get to because people had to go via one of the hubs. When that route opened up, travel between the Hamburg area and Scotland increased tenfold—80 per cent of that travel was Germans coming to Scotland.

Liam Kerr

Is there an argument for disaggregating the conversation? At the moment, it seems that we are talking about reducing APD or changing it across the board when, in effect, what we should be doing is talking about international air travel and having regard to alternative travel structures. For example, do we need to be thinking in a more sophisticated way about what we can do to stimulate the more northerly airports, which are in areas where there are fewer alternatives? Rather than talk about a blanket reduction in APD, do we need to start talking about Edinburgh airport perhaps taking a hit while Aberdeen airport gets 0 per cent APD?

Gordon Dewar

I could start at the legal end of that discussion and tell you that you would not be able to achieve that under the existing legislation.

Murdo Fraser

We are changing the law.

Gordon Dewar

We should let the economy speak. What we are seeing is that Scotland, which is being led by Edinburgh Airport at the moment because the company is competing effectively and are putting out pricing offers to airlines—there is nothing to stop our competitors doing that, and they do so aggressively. There is a winning agenda, which we should back. The winning agenda is not that of Edinburgh Airport; it is the Scottish economy, the Scottish tourism sector and the education sector—which is the largest driver of passengers to Edinburgh these days, and involves exporting people as well as people coming in. We have a hugely strong market, so we should create the economic conditions that will allow it to flourish.

Too much tampering leads to complexity, which starts to undermine the value of what is being done and leads people to start playing with things over which they do not have as much control as they would like—I include myself in that. You have to acknowledge that the market will speak: we should not be playing a game involving what is up the A9 or across the M8. We are trying to get into a competitive environment with Europe and the rest of the world. That is the reality. This is not about how we manage what is within Scotland; it is about how we make people want to come to Scotland in the first place.

If you were to make Inverness airport tax free—oh! It is already! The impact of that has not been that all the airlines are piling into Inverness at the expense of Edinburgh. What has happened is that people who fly from Edinburgh pay the £13 tax because airlines fly from there to Copenhagen.

Tim Alderslade

On that point, under current EU law—which applies as long as we remain a member of the EU—it would be illegal under EU state-aid rules to reduce APD for one airport but not for another that is within something like 60 miles of it. The Government has considered the issue across the UK in response to this debate, and has uncovered a number of challenging legal issues, which is why, so far, it has shied away from taking action.

The Convener

I want to turn back to trains. Tim Alderslade wanted earlier to make a point about trains: the next question will let us get back to the subject.

Murdo Fraser

I want to go back to David Horne and follow up some of the earlier questioning about trains.

I would have thought that it was self-evident that something that affects the cost competitiveness of trains versus airlines is bound to depress the number of journeys that are taken by train. I would be interested to hear more specific evidence about the claims that you are making about reductions.

The Scottish Government’s policy intent is a 50 per cent reduction in APD, but it has not specified whether that is an across-the-board reduction, how that might be split into band A and band B and so on, or, indeed, whether the bands will be retained or some new banding introduced.

From the point of view of Virgin Trains, if the reduction in APD were to be targeted at long-haul routes, which has been proposed, and domestic flights were left with APD at current levels, would that satisfy your concerns?

David Horne

In simple terms, yes it would. Our concerns relate entirely to the domestic routes, where we compete strongly with air. We welcome Scotland’s continued international outlook. We all want Scotland to thrive: we benefit from a strong Scotland in our core market. Scotland is important to our business; if it can attract more international flights through the policy, that will be good for Scotland and we would support it. Our concern is that reducing APD on domestic routes will simply achieve modal switch, which would be damaging for environmental policy objectives, and for economic objectives because of the loss of connectivity that would result in the medium to long term.

Murdo Fraser

Okay. If I understand you correctly, you are saying that a reduction in APD for long-haul flights would be complementary to provision of rail travel and could, therefore, have an economic benefit by bringing more people to Scotland who might then use rail services while they are in the UK.

David Horne

Absolutely.

Tim Alderslade

There is a slight issue on short-haul flights. At the moment, we are comparing like with like because we are comparing journeys from Edinburgh or Glasgow down to London. Most of the services for our short-haul domestic carriers like FlyBe are routes such as Exeter to Aberdeen, Exeter to Newcastle or Norwich to Aberdeen. It is very unlikely that someone will get a train to run those services. I completely buy the argument that David Horne makes about the straight journey from Edinburgh to London, but if we want to promote domestic connectivity from Scotland to secondary regions and cities within the rest of the UK, reducing the tax on short-haul flights by 50 per cent will have an impact on that.

Reducing APD on short-haul flights would not have any impact on interlining through London. We are talking about going from A to B—Edinburgh or Glasgow to London. Someone who is interlining through Heathrow to go to the States is unlikely to go into Euston station and get another train through to Heathrow; they will go via Heathrow to interline out of the airport.

That is my argument on trains and planes.

Murdo Fraser

I get that, but connecting flights to an international flight would be exempt.

Tim Alderslade

From which airport?

Murdo Fraser

All airports. If I flew from Aberdeen or Edinburgh to San Francisco—

Tim Alderslade

If you were going from Edinburgh to New York, for example, and you were interlining—

The Convener

Let Murdo Fraser finish his point.

Murdo Fraser

As I understand the legislation, a passenger pays APD on their point of destination. Therefore, if I flew to San Francisco from Edinburgh and the policy was to scrap APD for long-haul flights only, I would not pay it, regardless of whether I went via Heathrow or somewhere else.

Tim Alderslade

If the policy was to scrap APD, that would be correct. Currently, you would pay APD at the long-haul rate.

Murdo Fraser

I have a question for Mr Horne. There is a headline in a Scottish newspaper today that says:

“Richard Branson on collision course”

with the Scottish Government over APD—I might be paraphrasing slightly—which, I think, refers to the evidence from Virgin Trains to the committee. However, I assume that Virgin Atlantic Airways, which is a member of Mr Alderslade’s organisation, will take a different view. Perhaps he can confirm that. Do we know what Mr Branson thinks or is he in two minds on the issue?

David Horne

I will give a bit of background for the committee. Virgin Trains East Coast is a joint venture between Virgin Group and Stagecoach Group and is 90 per cent owned by Stagecoach. The views that we are expressing are our views as a company. Both our shareholders clearly have wider interests, but in the meeting and in the submissions we have made, we have been putting forward our views and the analysis that we have undertaken as a company.

Tim Alderslade

It will come as no surprise to you to learn that Airlines UK represents both short-haul and long-haul carriers, so I will not get into a discussion around the bandings or the Virgin Group. As we have said, we want the 50 per cent reduction across both bands. I will leave it there, before I get into trouble.

Willie Coffey

As an Ayrshire MSP, I am interested in the potential beneficial effect of the policy on Prestwick airport. I was fortunate to be at a meeting in Dublin the day before the Irish Government abolished its air passenger tax, and Michael O’Leary was present at the same meeting. The following day, he announced a series of major investments in Dublin and so on and so forth. Gordon Dewar rightly said that the winning agenda for Scotland is tourism. As a west of Scotland MSP, I am interested in the potential benefits for Prestwick as a regional airport. Is there any evidence from elsewhere in Europe that regional airports in particular countries and jurisdictions get a spin-off benefit from policies such as this?

Gordon Dewar

The straightforward answer is that every airport that sees a reduction in tax has improved chances for growth—that is probably the best way in which I can put it. It probably would not help if I gave you my view on the possibility of Prestwick achieving that, but tax can be a massive drag. We are generously provided for by good airports in the central belt of Scotland and well provided for in the Highlands and Islands. There is an opportunity to harness that asset base and the enthusiasm and capability of the management teams around Scotland, if we just take the handcuffs off.

Willie Coffey

Some of the displacement that has occurred is from Prestwick to Glasgow, particularly with regard to the Dublin Ryanair flights from Prestwick. Michael O’Leary promised that if a measure on APD was introduced he could double the passenger numbers at Prestwick from 1 million to about 2.5 million. He made that clear commitment on the record. If that policy was applied to Prestwick, it would surely have a huge and beneficial impact on the Ayrshire economy.

Jonathan Hinkles

There is clear evidence in Ireland that regional airports benefited from the abolition of the equivalent of APD. The traffic levels at Dublin airport have grown by 40 per cent over the past three years, but it is clear that there are now additional links into Cork, Shannon and a wide range of points. However, at the same time, Derry airport, because it is still subject to UK air passenger duty, is losing its sole remaining air service to London, and the Government is having to step in. The model of what has happened in Ireland and the impact on the immediate periphery would be a good benchmark for further scrutiny into the likely effects of the Scottish proposals.

Gordon Dewar

In Northern Ireland, Belfast International retained its United Airlines New York service only because APD was abolished for it. That was the difference between keeping the route and it being cancelled.

Neil Bibby

I want to go back to the issue of encouraging air travel within the UK at the expense of rail travel. I looked yesterday at the possibility of travelling in a couple of weeks’ time from Edinburgh to London. I found that I could get a Ryanair flight from Edinburgh to Stansted and that, even including travelling from Edinburgh city centre to Edinburgh airport and a train journey from Stansted airport to London city centre, the cost came in at £63. On the same day, a Virgin train between Edinburgh and London would cost £115 return.

I appreciate that Virgin Trains East Coast has special offers, such as £20 returns in sales, but whenever I have looked at the options for travelling between Edinburgh or Glasgow and London, it frequently seems cheaper to get a flight than to take the train. Why is that the case? Why is rail travel between Scotland and the rest of the UK so expensive? Is that not something that needs to be looked at in general, irrespective of our position on APD? If we want to increase the number of people who travel by rail for such journeys, we must make it more affordable for people to go from Glasgow or Edinburgh to London.

12:15  



David Horne

We agree that it is important that rail travel between Scotland and London is affordable, and that is what we have been seeking to achieve over the past two years, since we have been operating the east coast route. Last year, we expanded our services so that there is now a half-hourly service between Edinburgh and London—Ryanair does not run a half-hourly service to Stansted—which enables us to offer many more thousands of cheaper tickets on the route each week. We are addressing affordability, which is clearly important to our market.

We are also seeking to offer a different proposition from airlines. We are trying to take people between city centres in order to cut out the journeys to and from airports, and we are conscious of people’s experience of getting through airport security these days. Our focus is on providing a high-quality, frequent service that allows people to work on board. We also provide free wi-fi and entertainment systems between Scotland and London. We are attracting people through the customer experience as well as through price, although I agree with you that price is important.

The Convener

I do not want to get into a debate about the merits of rail and air travel or who is giving the best deals, as that is not really what the bill is about. Did you want to pursue that point, Neil?

Neil Bibby

I just wanted to explore the reasons why rail travel is currently more expensive than air travel on a lot of occasions.

The Convener

Okay. Patrick Harvie has a question on the same area, but time is marching on and I need to get the public finances issue that James Kelly wants to raise on the agenda.

Patrick Harvie

We have not touched on climate change yet, either.

The Convener

I know that climate change is still to be commented on. I assume that you will pick up on some of that now.

Patrick Harvie

I can deal with climate change now if you like, convener. First, I will follow up one issue in your written submission, Mr Horne, because I want to understand clearly the implications of what you are saying. You say that, as a business, you have no objection to increased international aviation coming to Scotland, but you are concerned about the environmental impacts of a modal shift away from rail to domestic flights. We are half on the same page, as I am concerned about the environmental impacts of both. Is your analysis of the modal shift that you are predicting predicated only on the Scottish Government reducing APD—or the equivalent tax—on domestic aviation? If the UK responded in kind, by having a similar tax cut south of the border for domestic aviation in the other direction, would that increase the modal shift that you are predicting?

David Horne

We will confirm this to you separately if I am wrong, but my understanding is that our analysis is based purely on changes that the Scottish Government would make.

Going back to an earlier point about our analysis, the reduction of 33 per cent in the southbound rail market is our assessment of the impact of the abolition of ADT on flights from Edinburgh to London, rather than a 50 per cent reduction in ADT on those flights.

We have not assumed anything about how the UK Government may respond.

Patrick Harvie

Is it reasonable to assume that, if the UK Government were to respond by implementing the same kind of cut in APD for domestic travel, that would have a similar impact on the attractiveness of rail in general for those domestic journeys and on the value of the franchise were it put out to tender again?

David Horne

It would clearly have a further impact, which would need to be assessed.

Patrick Harvie

Thank you.

Do you want me to go on to climate change, convener?

The Convener

I know that David Horne is pressed for time. Are you okay to stay, David? I think that, originally, you had to be away by midday.

David Horne

I am happy to stay.

The Convener

I was going to bring James Kelly in. Are you content that we move on to climate change, James?

James Kelly

That is fine.

The Convener

Okay. We will move on to climate change.

Patrick Harvie

As far as I can see, the most recent commitment from the aviation industry was given in 2009 and was a commitment, given in international negotiations, to halve CO2 emissions—I assume that that means its overall climate change impact—by 2050.

Can the aviation industry representatives tell me whether that is still the commitment of the industry, and whether this approach to a new tax is compatible with Scottish aviation achieving that goal?

Tim Alderslade

Aviation is signed up to global targets of carbon-neutral growth from 2020 and a 50 per cent reduction in CO2 emissions, based on 2005 levels, by 2050. I can give you the assurance that that is still the commitment. It is a voluntary commitment from the industry.

Patrick Harvie

Thank you, that is very clear. Can you explain how the increase in aviation levels that you are aiming to see as a result of the Scottish Government’s ADT policy is compatible with halving emissions from aviation by 2050?

Tim Alderslade

The industry, working through the sustainable aviation strategy, has forecast that demand will go up by around 50 per cent by 2050. We can comply with our climate change commitments and still meet that additional increase in passenger numbers through a variety of mechanisms. The increase in Scottish flights will be relatively small compared to the increase that we will see both in the UK and globally, but, through a variety of mechanisms, we can see an increase in passenger numbers while reducing our emissions and hitting our global target.

Patrick Harvie

So there should not be any objection to locking in the requirement for ministers to achieve that impact on aviation emissions when they set the rates and bands of this tax.

Tim Alderslade

That is not something that I have given great thought to. All that I can say is that, as a global industry, those are the commitments that we have made. We have made them now for a number of years, and we are on target to hit them. By 2050 we would like to see a reduction of 50 per cent on 2005 emission levels. As a result of the measures that we are taking, we are now starting to see emissions come down.

Gordon Dewar

Can I come back on that?

The Convener

I think that Mr Hinkles is next.

Jonathan Hinkles

The primary method through which those objectives will be achieved is the adoption within the industry of new technology, in particular improved engine technology, which will bring down fuel burn.

My other point, particularly in respect of our business within the Highlands and Islands, is that operating with a lower cost base will allow us to increase the number of passengers. That will probably initially be done by operating larger aircraft that will generate the growth in passengers but produce lower emissions per passenger carried, as a result of the economies of scale achieved by operating larger aircraft.

There is no contradiction between reducing or abolishing ADT and continuing to see reductions in emissions. Airlines operate in a hugely cut-throat industry and they will continue to adopt new technology because they have to remain competitive.

The one thing that we cannot guarantee with any certainty is the price of aviation fuel. Airlines will always make every effort to minimise their aviation fuel burn and run their businesses as efficiently as possible. That is consistent with minimising the emissions that we generate by burning that fuel.

Patrick Harvie

I do not want to get into a technical discussion about the achievability of that—it would take a very long time and we might not agree by the end of it anyway. However, you say that the confidence exists that the industry can not just increase efficiency but halve emissions, compared with the baseline. Surely we would therefore have no problem at all in placing a legal requirement on ministers to achieve that impact when they set the rates and bands of this tax.

Jonathan Hinkles

First, there is a global impact around the question.

Another question is, if the target is not achieved, what mechanism will you use to recover the ADT that has not been collected from customers over that period of time? Although I understand the rationale behind it, I am struggling to see how what you propose could be put into practice. If, over the course of 10 or 15 years, passengers have been charged either no ADT or a reduced level of ADT and at the end of that time the industry has not met its target, how could you realistically go to each and every customer retrospectively, sending a captain’s hat for a whip-round to collect the tax that was not collected? I cannot understand how that would work.

Patrick Harvie

I have not suggested retrospective taxation. I am suggesting a requirement on ministers to ensure that the rates and balance of tax that they propose are compatible with the objective that the industry seems confident that it is on track to achieve.

Tim Alderslade

The targets are global because aviation is an international industry. We cannot look at those targets in a Scotland-specific way. The Committee on Climate Change has been quite clear that action to tackle climate change needs to be taken globally or regionally. To take a purely Scottish perspective would be quite a blunt approach.

Patrick Harvie

Globally means everyone, rather than by someone else.

The Convener

Gordon Dewar is also keen to come in, Patrick.

Gordon Dewar

I observe that although this is utterly crucial for us, we should not get carried away by the impact that it will have on the global aviation industry. It is a market-share play. EasyJet and Ryanair have fleet orders and they will not order more aircraft because Scotland has reduced APD. We will take the same aircraft away from other European countries. It is a market-share play, simply by getting us down towards the levels of tax that other countries charge—which is largely nothing. In effect, there will be no net impact on emissions as a result of the change, although, of course, there will be some marginal additional travel.

One of the other benefits of direct services, which will result from this, is that they avoid the very inefficient hubbing through other airports.

Patrick Harvie

I want you to clarify that point. Are you saying that there will no net emissions impact from the Scottish Government’s policy of halving and then abolishing ADT?

Gordon Dewar

I am saying that, in global terms, the impact will be extremely small. The Committee on Climate Change said that the impact of the abolition of APD would be 0.1 per cent. That is utterly manageable. The vast majority of what would happen as a result of that change is that aircraft that would have been assigned to Spain, Italy or Germany will be assigned to Scotland. There is no net impact on what that aircraft emits.

Patrick Harvie

As we are yet to hear the environmental impact assessment from the Government it seems that everyone is unclear whether the impact is small or non-existent. Let us wait and see.

Tim Alderslade

Our members have invested in—

The Convener

I am sorry to interrupt, but Patrick Harvie was making a statement rather than asking a question. We will not get anywhere if we start making statements back and forward. Let us move on to public finances.

James Kelly

I will try to boil this down to one question. In a previous evidence session we heard about the potential impact on public finances. The objective is a 50 per cent reduction in ADT by 2021. The financial memorandum shows that the OBR forecast for the Scottish element of APD revenue—if there were no change—would be £378 million in 2020-21. A 50 per cent reduction could therefore mean a reduction in the Scottish budget of up to £200 million.

In those circumstances, the budget is about choices and priorities. Given everything else that is going on, if the budget is reducing, would it be right for a council not to be able to pay a living wage to a care worker employed in a care home, so that a couple on a joint income of £60,000 would be able to enjoy a reduction in the price of their airline tickets?

Jonathan Hinkles

The strongest answer that I can give to that is to refer to the point that I made about the economic effects in Ireland, where the change has been made and proven. Ireland is an economy with a strong tourism base, exactly the same as Scotland. There is economic evidence to draw on before taking such a decision; it will not just be a leap of faith into the deep end of the swimming pool. I would encourage benchmarking against the wider economic impact in Ireland of taking the same action that it is proposed to take in Scotland. That will take the guesswork and uncertainty out of the equation, particularly for the committee and the ministers who will ultimately take the decision.

Gordon Dewar

I echo that. As I said earlier, it would be helpful to get a baseline model from independent sources that people can trust. If you look at the whole of the UK, the evidence on economic growth is unchallengeably positive. The revenue to the state—the combination of the Scottish state and the UK—is also positive. I am not even going to step into the discussion about how you reconcile that between the Scottish and UK Governments because as a UK and Scottish resident, that is wooden dollars—although I know that is not the reality for the way in which the Government is run in Scotland.

The proposal is one of the best investments you will ever see. It is not a tax cut or giveaway, but is a huge investment. If you listen to the tourism industry, which is entirely neutral on aviation per se, it is saying that if you want to hit the 2020 tourism target—tourism is one of the biggest economic engines for Scotland—the most important single thing that can be done is to follow through on the stated policy of halving APD.

12:30  



James Kelly

Even if that means that care workers working in care homes are not able to be paid the living wage?

Gordon Dewar

I do not believe that it does mean that. We are calling for someone to look at the data and see what the implications are. Within the UK, it will undoubtedly be regenerative and I would hope that even the Scottish dimension would be very close to that. However, I am not a tax expert and I cannot do the modelling for the civil service. Even if there is a lag in the overall benefit for Scotland, the wider economic benefits of having more people in employment, better standards of living and everything else that goes with that says that cutting APD is one of the best investments that you face.

The Convener

I understand where James Kelly is coming from, but to be fair, that is a policy question for the minister to answer.

Tim Alderslade

In the interests of transparency for all of us on both sides of the argument, it would be beneficial for the Scottish Government to invest a small amount of money in an economic study.

The Convener

We have reached the end of today’s evidence. I thank everyone who has come to give us evidence as part of our consideration of the Air Departure Tax (Scotland) Bill. I expect I shall be paying much more attention to the comparisons between Scotland and Chad in the future.

12:31 Meeting continued in private until 12:31.  



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Second meeting transcript

The Convener

The next item is evidence on the Air Departure Tax (Scotland) Bill at stage 1. I warmly welcome to the meeting Stephen Leckie, the chair of the Scottish Tourism Alliance; Gareth Williams, the head of policy at the Scottish Council for Development and Industry; and Garry Clark, head of policy and research at Scottish Chambers of Commerce. Members will have received copies of the written submissions from all three witnesses, so we will go straight to questions.

I will begin with a general question. The three submissions speak of the potential economic benefits for Scotland should the air departure tax be reduced. How have those anticipated benefits been quantified, and what assessment has been made of them in the context of the impact of other external factors, such as the current weakness of sterling? Who wants to take that on first?

Garry Clark (Scottish Chambers of Commerce)

We have long been supporters of the devolution and reduction of air passenger duty, which is to become the air departure tax in Scotland. Our support for that dates back to before the 2014 Smith commission. Throughout that time, we have encouraged both the UK Government and the Scottish Government to take a stand on air passenger duty and aviation taxes in general because, historically, the UK has been one of the highest-taxed countries in the world when it comes to air travel. We believe that APD is a tax on connectivity, and we do not believe that the nation should tax activities that it seeks to promote.

We have called for a fairer, lower tax on air travel. A number of studies on the issue have been undertaken over the years. For example, a couple of studies by York Aviation and one, at a UK level, by PricewaterhouseCoopers a few years ago suggested that there would be a net economic benefit from reducing or eliminating air passenger duty. That has been the consistent view of such reports over a period of time, and we have no reason to doubt them. We have no evidence to contribute in terms of the veracity of the reports, other than to say that they are consistent in their view and that they were published by a number of sources over the years. I think that, as the legislation goes forward, we would all welcome additional scrutiny of the Government’s plans for reductions in APD, or ADT in Scotland. I presume that any economic impact assessment would contain some analysis of the expected effects of the tax and its reduction.

Gareth Williams (Scottish Council for Development and Industry)

I agree with much of what Garry Clark has just said. We would point to the experience of countries—Ireland, the Netherlands and Germany, for example—that had similar taxes and compare the effects that those taxes had on connectivity, on the behaviour of people flying from those countries and on their tourism industries with what happened once the taxes were either reduced or taken away.

I underline the point that the current tax is uncompetitive in international terms. We cannot see the sense in that, given our geographical position and the needs of the economy in relation to internationalisation. Having taken into account the international experience and the reports that Garry Clark highlighted, we support both the bill and the reduction in APD.

Stephen Leckie (Scottish Tourism Alliance)

I can add a real-life example that is covered in the submissions. The Republic of Ireland abolished its air travel tax in 2014, resulting in a 7 per cent growth in passenger numbers and 21 new Ryanair routes. Abolishing such taxes makes a direct difference, and the industry will be able to move quickly if air departure tax is abolished.

The Convener

Liam Kerr has some questions on the quality of the assessments that have already been made.

Liam Kerr

First I have a question on the point that has just been made.

As Mr Leckie just said, and as Mr Clark mentioned in his written submission, the Republic of Ireland has had a 7 per cent growth in passenger numbers and 21 new routes. What is the evidence around that, and does that evidence show a concrete correlation between removing the tax and those positive outcomes?

Garry Clark

We have not done any specific analysis of that. However, in addition to the new routes that were established following the elimination of the tax in the Republic of Ireland, increased capacity on services was announced, and frequency of services increased, too. There seems to be a cause and effect there, although as an organisation we have not done any analysis of that.

Liam Kerr

Is that not a little concerning? One assumes a correlation, but surely showing an actual cause and effect ought to be the next stage: removing tax means increasing routes and the number of flights.

Gareth Williams

The reaction from the aviation industry to the changes in tax that were made was pretty much instantaneous. You can draw a strong correlation from that. There have also been strong commitments from some of Scotland’s largest airlines on how they would respond to a reduction in tax in Scotland. Those are on public record, and we can expect those airlines to be held to them.

Liam Kerr

I will come back to that.

Was the Irish experience limited to international routes, or did the response to the change—the 7 per cent growth in passenger numbers and the 21 new routes—affect the national picture and the international picture?

Gareth Williams

My understanding is that it applied to international and domestic routes, and that it was not just limited to Dublin. The figures were spread across a range of Irish airports, and all parts of Ireland benefited from that connectivity.

Liam Kerr

I just wonder whether that data will prove to be productive. We will be asked at some point to make a decision based on something that seems to show cause and effect but perhaps does not.

Mr Williams, you said that you have commitments. This is an interesting point. Has Ryanair, for example, said, “If you abolish passenger duty or cut it by 50 per cent, this”—whatever “this” might be—“is what we will do”? Do you have that in writing? Is there an absolute guarantee in your mind that that would happen if changes were to be made?

Gareth Williams

The verbal and written commitments that have been made to the Scottish Government have been reiterated to us directly—by easyJet, for example, and I know from the Scottish Tourism Alliance’s evidence that it has had a similar commitment from easyJet. From what we have heard, Ryanair is equally committed to increasing capacity.

10:45  



Liam Kerr

Do those commitments apply to a 50 per cent reduction or to a 100 per cent reduction? Are there any caveats to those commitments?

Gareth Williams

I would need to go back and look at exactly what was said.

Stephen Leckie

A blanket commitment would be too broad brush. I think that the companies would want to know what was proposed for the international, domestic and European markets, whether the reductions were for 50 or 100 per cent, the timescales within which reductions would take place and when any reductions would be announced. It is not as simple as getting a commitment in writing from those guys saying that they are going to create new routes. We know that they would create new routes; the question is how much they would do and when they would do it, and that would all depend on when the bill is passed, when they are told about the proposals and what the implications might be for the three different sectors.

The Convener

Does Patrick Harvie have a supplementary question on that?

Patrick Harvie

I want to get into the economic impact analysis generally, but I was particularly keen to follow up the points about Ireland.

The Convener

Okay.

Patrick Harvie

I ask Garry Clark to unpack for me how exactly he subtracted the background level of aviation growth from what happened in Ireland in order to identify the impact of the tax changes.

Garry Clark

I am not sure that we have undertaken those calculations. We would welcome any analysis of the impact in other nations of any reduction in aviation taxation.

Patrick Harvie

So you do not know what the impact of the tax changes was.

Garry Clark

I am not aware of any study that measured one against the other. However, after the tax was cut, there was a measurable response.

Patrick Harvie

Hang on. If you are saying that there was a measurable response, that suggests that you know what the impact of the tax changes was, as opposed to the normal background growth in aviation, which we have also seen in Scotland.

Garry Clark

Let me clarify. There was a response, which is something that can be measured. However, I would not necessarily say that you can attribute all of that to the cut in tax.

Patrick Harvie

It is not necessarily a response to the tax changes.

Garry Clark

No.

Patrick Harvie

We probably should not call it that then.

Garry Clark

We would certainly welcome analysis.

Patrick Harvie

What does it say about the situation that Ireland is now considering reintroducing aviation taxation? I have here a recent article from The Irish Times, in which the finance minister, Michael Noonan, raises the prospect of reintroducing the tax,

“claiming the aviation industry is under-taxed.”

He says that restoring the tax would be a

“useful tool for raising revenue and paying for externalities associated with air tax such as emissions, noise pollution, etc”.

Gareth Williams

I am not aware of that comment.

To go back to the point about the response, there was a Government study that estimated that aviation tax in the Netherlands had cost the Dutch economy €1.3 billion. Given that that study was produced by the Government, we can presume that it was strongly evidence based. That study led to the abolition of the tax, and I am not aware that the Dutch are planning to reintroduce it.

Patrick Harvie

Are you no longer relying on the Irish example that was cited earlier?

Gareth Williams

We are relying on a range of different examples, including Ireland, the Netherlands and Germany.

Patrick Harvie

You are including Ireland, and I am asking what it says about the proposition that, in the Irish experience, abolishing taxes is an overwhelmingly positive thing given that the Irish are considering reversing that?

Garry Clark

It is also important to recognise that the previous tax rate in Ireland was somewhere in the region of €3 across the board, rather than the well over £100 that it is for some categories of travel from the UK. That would need to be factored into any calculations.

Patrick Harvie

It remains the case that the Irish finance minister now regards aviation tax as a

“useful tool for raising revenue and paying for externalities”.

Those are things that we would be unable to do if we pursued the advice that you are giving us.

Gareth Williams

The proposal is for a 50 per cent cut over this session of Parliament. We would want to see that reduction made as quickly as possible. As Garry Clark articulated, even if the Irish were to reintroduce taxes, the rates would still be lower.

Patrick Harvie

Are we able to get into the wider economic impact now, convener?

The Convener

I will come back to that. I promised Ash Denham that she could come in.

Patrick Harvie

That is fine.

Ash Denham (Edinburgh Eastern) (SNP)

Edinburgh airport is Scotland’s largest airport. I am interested in getting more visitors into Edinburgh to visit attractions, to stay in hotels and to eat in restaurants in the city—and to visit Scotland more widely as well, of course.

You will be aware that we took evidence on the bill last week. It seemed to come across strongly in that evidence that the airports in Scotland, and perhaps Edinburgh airport in particular, are competing against other airports—Copenhagen was mentioned quite a lot—for new routes. If we can get new routes into Scotland, we will obviously increase passenger and visitor numbers. Do we have any analysis of the types of visitor we might expect to come and which types of visitor might be key drivers of the economic impact?

Stephen Leckie

Other than anecdotal chat about who we know arrives at Edinburgh airport, for example, we do not have a breakdown of domestic, European or international visitors. We know that Europeans want to come and visit Scotland; we also know that they recognise that Scotland is an expensive place to come to, like for like, given the value of the euro and so on. A reduction in air departure tax would help that position. Of course, we have the second-highest rate of VAT in Europe, so a reduction in VAT would help, too. I will use Ireland as an example again. Ireland reduced VAT from 13.5 to 9 per cent, which has made a difference to Irish tourism operators. Indeed, we have spoken to them about that.

On the international front, having more international visitors and business tourism at the Edinburgh International Conference Centre, the Scottish Exhibition and Conference Centre and the SSE Hydro arena—three of the biggest event-managed places in Scotland—would also make a big difference. However, we should not discount the massive market from London to Edinburgh and Scotland, which pours money into our economy up here. People can get to London easily, but that does not apply to Bristol, for example. The easiest way to get to Bristol is by air, so if aviation tax was reduced domestically, that would help to persuade business folk from Bristol, for example, to travel up to Edinburgh and Scotland.

Gareth Williams

In addition to the tourism impact, the statistics show that the largest percentage of long-haul traffic that comes through Edinburgh on business is from the education sector. That traffic includes researchers, staff, students and people going to and coming back from conferences. If we want to develop a knowledge economy, we must take account of the strong correlation between connectivity and the knowledge economy globally. We are competing with other countries and other airports for such business, so we should not disadvantage ourselves by having some of the highest tax rates.

Garry Clark

I agree with that. In recent years, we have seen healthy growth at Glasgow and Edinburgh airports—less so at Aberdeen airport, given the current circumstances. Both Glasgow and Edinburgh airports have told us that they might have grown services even more if the taxation burden on air travel had been lower. They would certainly underline their capacity to win new routes and to get more people to come to Scotland and to spend money here.

We also need to ensure that, as we look to increase our international trade, we are able to access more destinations across the globe in order to sell our goods and services on a wider scale. In a changing world environment, that is more important than ever.

Ash Denham

Will any of you take a view on which category of traveller—long haul, European or business—a tax reduction would impact the most?

Stephen Leckie

We think that the biggest immediate economic impact will be on European travel. As for long haul, the China market is coming our way, in time. Are we ready for the Chinese market today? No, we are not. On the domestic market, it is about not just London but Bristol and other peripheral airports. Europe will take the biggest immediate hit.

Gareth Williams

I agree. There are still gaps in connectivity between Scotland and Europe. Given Brexit, we want to maintain links and take advantage of opportunities. The priorities in relation to long haul are China, obviously, and west coast United States, particularly in the context of the tech sector. Could we also develop links with South America in due course?

As Garry Clark said, domestic routes remain important. Traffic has declined by 25 per cent at Aberdeen over the past couple of years, and the airport does not have long-haul routes, so if we want to maintain connectivity for the north-east—particularly for the oil and gas services supply chain and the international exports that it generates for the economy—we need to ensure that there is no further loss of services.

Garry Clark

We agree. There are broad opportunities to expand Scotland’s connectivity. Long haul is important, but some airlines that serve European and domestic destinations, including Ryanair and easyJet, have suggested that they might be able to offer additional services if there were a cut in aviation taxes. If we are to take advantage of that opportunity, we will need a cut that is fairly broad in scope.

Ash Denham

Thank you.

Adam Tomkins (Glasgow) (Con)

Mr Williams, in response to Ash Denham’s question about Edinburgh airport, you mentioned the education sector and in your written submission you said:

“Education is the single biggest reason for long haul travel via Edinburgh Airport.”

I understand the links between aviation taxation and innovation, internationalisation and connectivity. However, in your written evidence you went further and said that there is also a link with productivity. You said that

“The OECD’s work on ‘The Future of Productivity’ has highlighted the importance of participation in and integration into”

something that you called “global value chains”, and you then cited education and Edinburgh airport in that context. Can you help me to understand a little better how you perceive the relationship specifically between aviation taxation and productivity?

Gareth Williams

Innovation and internationalisation are key drivers of productivity; they are inputs into national productivity.

On global value chains, businesses are increasingly disaggregated around the world and there is a strong need for connectivity between different parts of the value chain. Figures that came out last week showed, for example, the strength of professional services in Scotland as an international export. Such services form part of the value chain for many international businesses. That is what I had in mind in relation to productivity.

Adam Tomkins

Thank you.

The Convener

Ash Denham asked about Edinburgh airport, and I know that Willie Coffey has a specific interest in Ayrshire, so I will bring him in before I widen out the discussion.

Willie Coffey

I was interested in Patrick Harvie’s point about what Michael Noonan, the Irish finance minister, said. It was Michael Noonan who abolished the levy years ago, so I will be really interested if he is changing his mind. Frankly, I do not think that he will do—

Patrick Harvie

I think that he has done.

Willie Coffey

Last week, witnesses told the committee that there is evidence from Ireland that the regional airports benefited from the abolition of the tax. My interest is in Ayrshire and in particular in Prestwick airport.

We heard last week from Mr Hinkles that traffic levels at Dublin grew by 40 per cent and that there were clear additional benefits to regional airports such as the one in Cork. Do you have a sense of how regional airports in Scotland might benefit from the tax being reduced by 50 per cent and, ultimately, I hope, abolished altogether in Scotland?

11:00  



Stephen Leckie

The tourism industry involves 20,000-odd businesses throughout Scotland and represents something like 10 per cent of the economy. There is a huge capacity for growth in the sector. The tourism strategy 2020 was led and developed by the industry in 2012 and we have had a mid-term review of it. A new insight that came out of the 2012 production concerned connectivity and transport and the ease with which we can pour visitors and customers into Scotland, not just in the principal airports but the length and breadth of Scotland, in the Highlands and Islands, the north and the south.

Your point is well made. It is fundamental to the success of all the industries that are attached to the local airports. We know how keen Skye is to have some sort of airport of its own reinstated. We know how well the airports elsewhere work. As I said, the issue is that Scotland is seen as expensive to get to and to get around. If we can reduce the air departure tax, it will make a difference to that perception and, therefore, the money will be spent elsewhere.

Garry Clark

It is important to stress that regional airports are sensitive to price changes and anything that would affect the viability of services to them. In the earlier part of the previous decade, there was quite a bit of expansion in regional airports as a result of the air route development fund. Prestwick was a significant beneficiary, as was Dundee airport. It is important to recognise that there is a sensitivity around the cost of travel, from which regional airports may be able to benefit under the bill.

Willie Coffey

Mr Williams, do you have any comments?

Gareth Williams

I have nothing to add.

Willie Coffey

How do we get a handle on the figures for the likely impact? Do we just wait until it happens and examine what happened or is there any way that we could extrapolate from the Irish experience and assume that the beneficial effects for regional airports in Ireland will be reflected in Scotland? Should we be doing that work now and, if so, who should do it?

Gareth Williams

We said last year in our response to the consultation that we would welcome some analysis that builds on what York Aviation, PWC and Edinburgh Airport have produced. We also said that, if that analysis was felt to be necessary for the Parliament to understand the issues and the potential benefits, the Scottish Government should lead and commission it as soon as possible. That is still our position.

The Convener

I understand that Liam Kerr has a question specifically about Aberdeen airport.

Liam Kerr

It is to an extent.

The Convener

Is it or is it not?

Liam Kerr

It is, and it is about air passenger duty.

The Convener

Other people want to raise the wider issues but, if it is about Aberdeen, on you go.

Liam Kerr

Thank you, convener.

Mr Williams, you just mentioned Aberdeen airport and, in your written submission, you talked about how it has been affected by the economic slowdown. All the witnesses have referred to the fact that passenger numbers dropped. I have a JCDecaux report that says that passengers who fly through Aberdeen airport are affluent, 40 per cent of them work in the oil and gas industry and 53 per cent of them travel on business. Would a cut of 50 per cent to the duty—let us call it £7, give or take a little—impact on Aberdeen airport, at least in relation to the domestic market?

The Convener

Will you let everyone else know what JCDecaux is? Certainly, I am unaware of that organisation.

Liam Kerr

It is a report that profiles the various airports, as I understand it. The chaps on the panel will probably tell you better than I can.

Gareth Williams

Aberdeen airport has been clear that a number of routes are vulnerable to being removed because of the slowdown in traffic and that the proposed reduction would be one way of taking action to try to prevent that from happening.

Liam Kerr

I accept the argument about the international market but, on the local market, does it follow that a £7 reduction in duty for passengers who apparently will predominantly be expensing it will drive passenger numbers back up?

Gareth Williams

I understand what you are saying about the profile of passengers, but that does not apply to everyone. I have forgotten the figure that you cited but, when we look at the market as a whole, there will be a significant number of people to whom that does not apply. The policy also sends a signal to the aviation industry about Scotland being a good place to base aircraft and to fly services from, and that positive signal will influence marginal decisions.

Stephen Leckie

On the specific example of passenger number increases at Aberdeen airport, the bigger word that I would like to use is “stimulation”. It is not just about the £7 reduction per passenger going to Aberdeen and how relevant that is if they are expensing it; it is about persuading the airlines to pour a lot of new routes into Scotland—for example, for a family of four or six who are travelling to Scotland or a business that is paying fares to get folk here for a conference. It is about providing stimulation to persuade the airlines to provide more routes to pour more visitors into Scotland.

The Convener

We will widen out the debate to the wider economic issues.

Ivan McKee

I thank the panel for coming. There are a couple of things that I want to touch on. The committee papers refer to an analysis by Edinburgh Airport. Are you familiar with that? Have you looked at the key data in it? Specifically, there are numbers for the economic impact of an extra 1 million passengers—I assume that that is based on growth in gross domestic product—and the jobs that would be created. Are you familiar with those numbers from an economic development point of view? Do they look right to you? Have you done any analysis of those numbers?

Garry Clark

Edinburgh Airport produced those numbers as an update on work that was carried out by York Aviation, which I think has done two or three reports over a number of years on the impacts of APD cuts in Scotland. A wider PWC study at UK level in 2015 or thereabouts indicated long-term gains for the Exchequer from the elimination of APD in the UK. We would say that there has been a consistent pattern of evidence of the economic impact.

Ivan McKee

You are comfortable with where the airport has got those numbers from. Could you tell me where those numbers have come from?

Garry Clark

I did not undertake the report.

Ivan McKee

You have not looked into how it did the calculations.

Garry Clark

I have not looked at the methodology; I have looked at the context of the reports.

Ivan McKee

You are just taking the headline figures and saying that they are okay.

Gareth Williams

The figures have been verified by Biggar Economics. They have been independently—

Ivan McKee

But you have not done any number crunching to say whether they look right or wrong, in the ball park or whatever.

Gareth Williams

From our perspective, they accord with the figures in other reports and international experience. We are not resourced to undertake that kind of work ourselves, but we have consistently asked others, such as the Scottish Government, to look at it.

Ivan McKee

Taking another angle, you guys are getting a free hit when you come here. We are asking, “Do you want a tax cut?” and you are saying, “Yes, please.” Let me make the question a wee bit harder. I understand that there are a lot of segments in the market, such as inbound tourism, outbound tourism, business, long haul, domestic, short haul and European. Assuming that we are going for a 50 per cent reduction and given that the stated objective is to generate economic activity, if you had that money to spend, would you go for an across-the-board 50 per cent reduction, would you target a 100 per cent reduction in certain areas and have no change in other areas or would you want a combination of those in order to generate the biggest increase in economic activity? Where would you target the 50 per cent reduction if you had that money to spend?

Garry Clark

We have consistently said on behalf of the members in our network that the point of a reduction in APD would be to send out a clear signal about Scotland being open for business and to increase Scotland’s connectivity and the number of air services with the rest of the world. We want a reduction to be implemented in as simple a way as possible and to have the maximum impact, and we said in our submission that a straight 50 per cent cut in APD across the board is probably the best way of doing that. That said, we are mindful of issues that have been raised regarding, for example, cross-border connectivity between Glasgow and Edinburgh and London. That is certainly a valid concern, although it is less of a concern in relation to Aberdeen airport, for example. However, the system should be as simple as possible and it should send a clear and strong message about Scotland’s direction of travel.

Ivan McKee

Just to drill into that a bit more, it is clear, I think, that outbound tourism can potentially have a negative effect on the economy because people are spending their tourist money elsewhere rather than in Scotland. That is at one end of the scale, and there could be other areas at the other end of the scale. You are saying that the most important thing is to send a clear signal rather than to understand the specific economic impact of cutting the tax for different categories of travellers.

Garry Clark

I am not saying that we should not try to understand the economics. As the bill goes forward and measures are introduced to undertake the commitment that the Government has made, that needs to be backed by evidence. We would be as keen to see such evidence as we would be to see that for any other tax change that the Government chose to implement.

Ivan McKee

Do the other panel members have views on where they would like the benefit to fall?

Gareth Williams

Our interest is connectivity, which requires a mix of outbound and inbound journeys and is what airlines will look at, but it is hard to separate those out. Any work in that area would have to take into account how difficult it would be to administer the kind of differentiations that you described, particularly if the objective is eventually to abolish the tax.

As to our priorities, we think that simplicity is important. As I have said previously, the internationalisation of the economy is one of our highest priorities, and routes to Europe and beyond are a top priority. However, we would not want to ignore the fact that domestic connectivity is still important and that it is not all about connectivity with London, as there are lots of other important routes. We have to bear in mind the particular issues for the north of Scotland.

Stephen Leckie

If we were to stipulate the answer that we think that we would get from the airlines that pour visitors into Scotland, it would be that the reduction has to be across all three areas. That would make the biggest impact and send out the message that we want Scotland to increase its visitor numbers. It is then for the industry to figure out a way in which to look after them. We might talk about the expense of going to Europe, for example, but the value of the euro for Britain at the moment means that it is more expensive to go to Europe, which is good for us in Scotland. The way in which to capitalise on that is to react right now with the air departure tax.

Murdo Fraser

Good morning, gentlemen. I want to raise two issues, the first of which follows on neatly from Ivan McKee’s questions and is about the balance between inbound and outbound journeys. One of the arguments that you will hear from people who are against reducing APD is that, if we make flights out of Scotland easier, we will just encourage more Scots to go overseas on holiday rather than taking holidays at home. Do you have any sense of what the balance is between inbound and outbound travel? How do you think reducing APD would encourage a net increase in holidays in Scotland?

11:15  



Gareth Williams

We would point to the opportunity that exists in the billions of people out there who could come to Scotland compared with the size of the Scottish market. In Scotland, we have a strong presence of people from all parts of the world. I am sure that Stephen Leckie can talk more about particular opportunities, but we look at the number of international students and note that countries such as New Zealand are specifically targeting as one of their highest priorities the tourism opportunities that come from the presence of international students in their country. We intrinsically have the opportunity to bring in many more people than can go out on outbound flights.

Garry Clark

Stephen Leckie is the expert on tourism but, before he comes in, I would like to widen the question out slightly. I understand where Murdo Fraser is coming from on a net balance of tourists coming in and out of the country and what impact a reduction in air departure tax might have on that. However, it is equally important that we get businesspeople, including those from small and medium-sized enterprises, out of the country in order to forge alliances and enable trading in markets that we are targeting around the globe. It is difficult to put a boundary between a tourist leaving the country to spend money abroad and a businessperson leaving the country to generate more wealth for our country. We certainly encourage further growth in connectivity, and reducing ADT is a means of doing that, but for us it is as much about businesspeople going out there and forging those alliances as it is about tourists.

Stephen Leckie

The airlines are going to chase routes that they believe to be profitable, and that works in our favour as they pull more visitors into Scotland. It is up to us in tourism to figure out the best ways to look after those visitors and maximise the revenue growth from them. It is as simple as that.

Murdo Fraser

I will address my second question to Mr Leckie first. I want to put the debate into a wider context, if I can. We know about some of the pressures on tourism. I do not know whether you were here earlier when the Cabinet Secretary for Finance and the Constitution was here, but one issue that came up was the rates revaluation, which is affecting the tourism and hospitality sector quite severely. If the policy of reducing air departure tax proceeds, what impact will it have in balancing out some of the other concerns in the industry about the cost pressures that are coming through?

Stephen Leckie

The convener warned me before we started that this is about air departure tax and not about—

The Convener

Murdo Fraser’s question is a fair one in the context of air departure tax.

Stephen Leckie

Right. I do not think that the industry has ever faced such an extreme challenge as it faces today with the significant rises in business rates, energy costs and food and drink costs. Some tourism businesses are telling me that they have a 20 per cent uplift in food and drink costs alone. We also need to consider the impacts of the living wage and the apprenticeship levy. The industry has never faced such tough times in terms of costs.

Revenue growth is our big challenge. In 2012, the “Tourism Scotland 2020” strategy reckoned on putting £1 billion of revenue on to tourism in Scotland. This time last year, we were looking at being £300 million short of that. The chief executive of Edinburgh Airport indicated that, if a decision was made to reduce air departure tax by 50 per cent, it would soak that up by 2020.

The massive uplift in costs for the industry might mean that some tourism businesses close because they just cannot afford to keep their doors open—it is as blunt and simple as that. Part of the potential rescue package might be that, if we pour more visitors into Scotland, we can increase our yield and our revenue, as that might be enough to save and rescue some businesses.

I hope that I have not gone away from the point, convener.

The Convener

Not at all. It is entirely in context. Does anyone else have a question? Patrick Harvie, is yours a supplementary question to that one?

Patrick Harvie

It is not a supplementary to that specific question, but it is on the economic impact.

The Convener

I need to bring Maree Todd in—we need to create a fair balance here, because she did not have a lot of time to contribute in the previous session either.

Maree Todd

Thank you, convener.

The Convener

You were going to talk about issues to do with the Highlands and Islands but also bring in rail issues.

Maree Todd

Yes. I represent the Highlands and Islands, which is an area with pretty poor connectivity. Connectivity is the key to life in the Highlands and Islands. People living on islands have a lack of alternatives to flights. The same can be said of some of the mainland airports, such as Wick. Last week, we talked about the alternative to flying between Edinburgh and Wick as being an eight-hour train journey, which is not an attractive proposition for any businessperson or tourist. I want to ask about that.

Tourism undoubtedly contributes a huge amount to the Highlands and Islands economy—proportionally more so than in the rest of the country—and we have a very vibrant sector. It also sustains some fairly fragile parts of Scotland. How might the tax reduction make a difference to that?

Garry Clark

To kick off on that point, APD is a tax that is not currently levied on departures from the Highlands and Islands, as I am sure you are well aware, but it is charged when people come from other airports to the Highlands and Islands. Certainly, any moves to reduce the cost burden of travelling to the Highlands and Islands have to be positive. For example, over the past few months, we have seen some of the costs being reduced for flights from Heathrow airport and the reintroduction of the Inverness to Heathrow service, which colleagues at Inverness Chamber of Commerce tell me is a very well-used service and one of the most popular services there; it has been a cost reduction that has helped to bring that about. If we can reduce the costs of connectivity within the UK, and of accessing the Highlands and Islands, that has to be positive.

Gareth Williams

I absolutely agree. Aviation and connectivity are essential for the Highlands and Islands. They are very important to the life sciences sector, for example, in addition to tourism, food and drink and lots of other sectors. As a minimum, we want to see the current position for the Highlands and Islands preserved with ADT.

There are some concerns about the relative position between the Highlands and Islands and the rest of Scotland changing, which might make it more attractive for people from the Highlands to fly from other airports in Scotland. That is an issue that we think has to be considered. I saw the evidence that Loganair gave last week, including its thoughts on how services could be further improved. I have not had the opportunity to discuss that with Loganair, but I thought that it made some interesting points.

Stephen Leckie

There are two aspects to Maree Todd’s very well-made point: the Highlands and the islands. In the Highlands, where we run three hotels on the west coast—in Glencoe and Ballachulish and on the west Highland way—there is huge latent and unprecedented demand for hotel accommodation for groups and tours, leisure operators, couples and families. However, it is easy to get there—it is a nice drive to Glencoe from Edinburgh or Glasgow.

You would not say the same if you were asked to drive to Shetland, Orkney or Stornoway. You could not do it. If you were to take the ferry, it would take you a day to get to Shetland. Therefore the only option is to fly there, as I was privileged to do last year—and what a wonderful experience it is to fly to those areas.

In the Scottish Tourism Alliance, we are very conscious of those areas in the Highlands and Islands that are away out further and beyond, and their impact on the economy. They are very much part of Scotland and we are proud to say that. Skye is a much easier place to get to—with the Skye bridge, you can drive there. We would like to be able to fly to Skye as well.

Maree Todd

I would undoubtedly like us to be able to fly to Skye as well.

I want to ask you about the number that you quoted at the end of your report. You said that the UK is currently ranked at 140 out of 141 in the world for holiday costs. As I represent an area for which tourism is an important part of the economy, that statistic concerns me. Could you give me a little bit more detail on how that statistic was arrived at? Does it take into account aspects other than taxation, such as currency exchange, and which country is 141st?

Stephen Leckie

VAT is the biggest indicator in that particular bit of research. I have looked up the country that sits in last place, but I cannot remember what it is. I think that it was a country that we might not ordinarily recognise.

The Convener

I will come back at the end to wider economic questions and to Scottish budget issues. Now is a good chance for Neil Bibby to talk about rail.

Neil Bibby

Yes, I have a question on that and I will come back in on the budget later.

We have heard that passenger numbers are increasing and we discussed last week how rail travel between Edinburgh and London—or between Glasgow and London—is often more expensive than air travel. We know that train travel is less damaging to the environment than air travel—obviously you do not represent the airlines or the airports—so should we not make rail travel in the UK more affordable with our domestic travel policies?

Stephen Leckie

If you book rail travel in advance online, it is amazingly cheap, but if you were to phone today to book a train ticket for tomorrow from Edinburgh to London, it would be expensive. It is about educating folk who wish to use that form of transport that it is cheap online and in advance.

Neil Bibby

I cited an example last week of booking for a couple of weeks’ time and finding that it was far more expensive to travel by rail than by air, so it is not just about educating people. I appreciate that there are deals from time to time, but rail travel is consistently more expensive. Do you think that rail travel is affordable?

Stephen Leckie

Yes, I absolutely do. If we take some specific examples, anything with a time and a space in this industry should be yield managed. The yield is maximised by charging the most when the demand is greatest, so it might have been the case, in the particular moment that you picked your sample flight to London—if it was London—that there was high demand for that flight so there was a high price, and that the rail option was cheaper.

Neil Bibby

Are there any other comments on that?

Garry Clark

There is an issue of comparability. As a result of the lack of competition for flights between Glasgow and Heathrow, for example, if you book at the last minute, it can be very difficult to get a seat or it can be fairly expensive, because of demand.

We recognise that there is a potential issue over APD and that there might be an impact on modal competition between rail and air for cross-border travel, which needs to be looked at. It is less of an issue for the Invernesses, the Fort Williams and the Aberdeens than it is for Glasgow and Edinburgh. Equally, as Stephen Leckie mentioned, it is perhaps less of an issue for services to the likes of Bristol and other regional airports than it is for services to London. There is an issue because, when the east coast franchise was awarded, the effect of a reduction in APD for domestic services was probably not a material consideration.

Gareth Williams

For us, it is about connectivity, so we want good air links and good rail links. There is competition for city centre to city centre travel but, if you are flying internationally from Scotland via Heathrow, rail is not a particularly attractive option. For domestic connectivity, there are lots of issues to unpack, but we agree that that needs to be thought about further as part of the general mix of improvements that we would like to see. There have been journey time reductions on rail that have made rail more attractive, but if rail is really going to become dominant from central Scotland to London, we need to push those journey times down further in addition to considering price issues and so on.

11:30  



The Convener

James Kelly is next. We will try to wrap up the economic impact and the impact on the budget in one bit.

James Kelly

Looking at the financial memorandum, I note that the impact of a 50 per cent cut could be a reduction of up to £200 million in the Scottish budget. Is that a fair sacrifice to make in order to introduce the changes that have been proposed in the bill?

Garry Clark

We think that Government taxation policy in general should be aimed at growing the Scottish economy. If we are serious about funding public services in the long term, we ought to be pursuing tax policies that will grow our economy and ensure a better return for the taxpayer.

I mentioned the PWC report earlier. It suggested that, certainly at a UK level—it considered the UK situation only—the elimination of APD could ultimately result in a net benefit to the Exchequer as a result of the impacts on other elements of tax. Any decisions on tax need to be taken in the context of the priority of growing the Scottish economy.

Gareth Williams

We have a similar perspective on that. We have had a couple of years with quite weak growth in the Scottish economy. If we are going to be able to afford the public services that we all want in years to come, particularly with the new fiscal framework, we must have higher rates of growth, and internationalisation of the economy is key to that.

The export stats that came out recently showed reasonable progress, but they also indicated that the value of exports from SMEs has declined, in contrast with those of larger businesses. There is evidence that fewer SMEs have been engaged in exporting recently. We have to make it attractive to SMEs to start to explore markets and to make connections if we are going to have a diverse, resilient economy that will generate wealth for the country.

Garry Clark

Gareth Williams has mentioned export figures. One of the stories that those figures tell is that the most significant growth in Scottish exports over the past 15 years has been to markets outside the UK and the European Union. Those have grown by about 83 per cent. Enabling connectivity to those markets will help that opportunity to grow even further.

Stephen Leckie

The issue is about the stimulation factor and persuading airlines and visitors—including those on business tourism, those travelling for education purposes and folk coming here for both big and small events—to come not just to the main airports but to the regional airports. It is about persuading them that Scotland is a great place to come and visit—and it costs a bit less.

The ostensible figure of a £200 million drop in tax income will largely be offset. In fact, as I understand it from all the papers and the other stuff that has been written before, it will be more than compensated for over the next few years.

James Kelly

There remains a real question as to whether the Scottish budget will in fact be compensated to the tune of £200 million.

The Finance and Constitution Committee and MSPs in general will have to decide how best to allocate the moneys in the budget for supporting transport. I was interested in Mr Leckie’s comment that rail travel is “amazingly cheap”. Does he think that it is fair, for example, that the cost of a monthly ticket for an 18-year-old student doubles from £30 to £60 when they turn 19? That is for travel between Cambuslang and Glasgow Central—a distance of 4 miles—using a monthly ticket. Do you think that that is right? Would it be right for a couple on a joint income of £60,000 to enjoy reductions in their air fares, while people struggle to pay for their daily train journeys?

Stephen Leckie

I do not work in that sector. I thought that I was being asked about a comparison between the cost of air travel to London and the cost of rail travel to London, rather than a comparison with a trip from Cambuslang to Glasgow.

James Kelly

If we are talking about a 50 per cent reduction in air tax, do you think that it is right that people at the top of the income brackets, for example a couple with a joint income of £60,000, should enjoy reductions in the cost of their air travel, whereas someone on the living wage, for example, will not see any reduction in the cost of their train travel?

Stephen Leckie

That feels like an awfully leading question and one that is closed. It is not a question that I am comfortable answering. That is not why I am here today.

James Kelly

It is one of the issues that we will have to decide on in relation to the implications of the bill.

Patrick Harvie

I am a little sorry that there was not much appetite to explore that issue. I hope that the witnesses would agree that if we are to approve a course of action, we should have a good degree of confidence in the economic impact as well as the social and environmental impacts, compared with other courses of action that we might choose to pursue with the same resource. That comparison was a fair one to make.

There seems to be some confusion around the economic impact. We heard in a previous evidence session from Edinburgh Airport about the work that it was citing. There seems to be some variance between the Edinburgh Airport position and the figures from, for example, the Scottish Tourism Alliance. Edinburgh Airport claims that, at the top end, the job creation figures by 2021 would be 9,484, whereas the STA claims 10,609. What Edinburgh Airport claims about employment tax—by which I assume it means income tax—would be at most £2.3 million by 2021, whereas the STA claims that it will be £12.7 million. Finally, Edinburgh Airport says that, at most, the saving in social security benefits paid would be £52.2 million, whereas the STA says that they would be £106.1 million. Why is there such confusion around the figures?

Stephen Leckie

I would need to look into all those figures to understand exactly. For the first figure, the difference seems so little that I suggest that it is splitting hairs. The difference between the second and third figures might be to do with the comparison between the overnight stays and day visitors, for example. I cannot be certain without looking over the figures and understanding where they came from.

Patrick Harvie

Regarding the second figure on employment tax, I assume that you know where the STA’s figure of £12.7 million came from. Do you have any greater confidence than Edinburgh Airport did on that figure being based on up-to-date information on changes in taxation, for example, given that the personal allowance has increased since 2013—that is when Edinburgh Airport’s figures date from—which will clearly reduce the income tax paid by any additional employment that is generated? Are your figures up to date?

Stephen Leckie

As far as I am concerned, they are up to date.

Patrick Harvie

Are you saying that they are based on the income tax that would be generated, given the current personal allowance limits that have just been changed?

Stephen Leckie

No. I cannot answer that question.

Patrick Harvie

So you do not know whether they are up to date.

Stephen Leckie

No. I cannot answer the question that you are asking.

Patrick Harvie

Okay. Let us turn to the analysis of savings to the social security system that you have presented. You have chosen to use a website called entitledto.co.uk to calculate the benefit saving per job created and you have given us a figure of £10,000. Is that figure per year or during the lifetime of the employment?

Stephen Leckie

Can you direct me to the page that you are looking at?

Patrick Harvie

It is at the end of your written submission. The first bullet point on the final text page says:

“In our analysis this would result in a net BENEFIT to the government purse.”

The page after that includes the figures that you have given us. Towards the bottom right-hand corner, it says

“Benefit savings per Job Created - £10,000”

and it cites entitledto.co.uk as a source.

Stephen Leckie

I am really sorry, but I cannot answer that. It feels like you are trying to trip me up, so I will need to go away and look at that.

Patrick Harvie

No—I am just trying to understand the information that you have given us. Do you know, for example, whether that includes devolved benefits such as the council tax benefit or only reserved benefits?

The Convener

The numbers were submitted by the STA and the questions are fair, but obviously Stephen Leckie cannot answer them today. Therefore, it would be fair for him to reflect on them and for us to ask the STA to write to the committee with a response.

Patrick Harvie

It would be helpful to understand why the STA chose to use the figures that it has given rather than, for example, information from HMRC, the Department for Work and Pensions or the Office for National Statistics, which would be more accurate.

Can any of the witnesses tell us what percentage of the fiscal benefit would come to the Scottish Government as opposed to the UK Government? They talk about additional tax being paid or savings through the social security system. Obviously, the Scottish Government will take the hit from reduced revenue from the aviation tax.

Gareth Williams

I cannot tell you the percentages. We look at the benefits for the economy as a whole and for public finances as a whole. That includes Scotland and the UK.

Patrick Harvie

But we do not know the extent of the benefits.

Gareth Williams

No.

Patrick Harvie

Okay. Perhaps we could make a comparison with countries that are introducing or reintroducing aviation taxes, such as Sweden and Norway. Both Sweden and Norway have concluded that there will be a net benefit to the public purse from the introduction of aviation taxes. A recent assessment of the German Parliament concluded that there was a net gain of €800 million from Germany’s aviation tax. That was based on looking at both the revenues and the economic impact.

The Convener

Are you gentlemen aware of those studies?

Gareth Williams

No.

Garry Clark

Not specifically.

Patrick Harvie

It seems to me that we do not have any certainty about the economic impact, job creation, the fiscal impact on the public purse or, indeed, the extent to which tax changes have generated changes in aviation levels in other countries. Should we not have competent answers to such questions before we approve a course of action?

Garry Clark

Any economic analysis of those issues would be hugely helpful, but our organisations are not necessarily the ones that would undertake that analysis. It is still fair to point out—we mentioned this in our submission—that, even with a 50 per cent discount, we would still have the fourth-highest level of domestic and short-haul air taxes in Europe and the second-highest level of long-haul taxes. England and Wales are at the top.

Patrick Harvie

Aviation is growing despite that.

Garry Clark

The more it grows, the more connected we will be.

The Convener

Patrick, I understand why you are asking those questions, which are now on the record. However, we have heard from witnesses a number of times that the in-depth analysis that is required is a job for somebody else—specifically the Scottish Government—to do.

Patrick Harvie

I have asked about information that is in the witnesses’ written submissions.

The Convener

I know that you have.

Patrick Harvie

I also have a question about the environmental impact, if it would be appropriate to move on to that now.

The Convener

We had better move on to it now or it will not be covered at all. On you go.

Patrick Harvie

I have not been convinced that the Scottish Government or anybody else is giving us a clear indication of what the environmental impact of the policy will be, either. The Scottish Government does not appear to have made a decision yet on whether it supports stabilising aviation industry emissions or reducing them over time—that is what the global aviation industry figure is doing. Do any of the witnesses have a view on how important a factor a reduction in aviation emissions is in Parliament’s decision on the bill?

The Convener

Do the witnesses think that that is a question for them or for other organisations?

11:45  



Gareth Williams

The bill and the rates are addressed separately. We support the bill in enabling the tax to be introduced in Scotland. As far as the rates are concerned, we have commented on the economic aspects, and Transport Scotland and others have done some work on the environmental issues. If there is a feeling that the rates must be looked at again, we would be perfectly content for that to happen.

Patrick Harvie

Scottish Chambers of Commerce’s submission says that the fact that

“The efficiency of modern aircraft is ... improving rapidly”

should be seen as an opportunity to reduce emissions. Are you confident about that statement?

Garry Clark

We looked at work that the Committee on Climate Change undertook, which suggested that, during a period of passenger growth in UK aviation, emissions had largely fallen.

Patrick Harvie

The International Civil Aviation Organization takes the view that the industry is some 12 years behind its own targets for reducing emissions through efficiency. If we were to conclude that that was a more reliable assessment of the state of play, would we not be well advised to call for a pause on a policy that might lead to significant increases in aviation, based on the projected increase in passenger numbers?

Garry Clark

I do not think that we are in a position to choose one analysis over another.

Patrick Harvie

Sure—I am not asking you to—but if we were to conclude that the ICAO was correct, would it not be appropriate to pause the policy and to figure out how we can get a reduction in aviation emissions rather than to allow an increase?

Gareth Williams

The UK Government has made it clear that it does not regard APD as an environmental tax. Indeed, there is evidence that the way in which it has been applied leads to behaviour that increases emissions. The fact that people fly less directly to avoid paying APD has a negative impact on emissions.

The aviation sector has made strong progress and given strong commitments on reducing emissions in the future. If we take into account the fact that the Parliament will look at the rates on a regular basis and has some statutory commitments to meet on climate change, there seems to be plenty of opportunity to monitor progress.

Patrick Harvie

I think that the comment that APD, if it is seen as an environmental tax, is an ineffective tax is probably a fair judgment—you seem to be suggesting that the way in which it operates increases emissions. However, that is very much at odds with the Scottish Government’s analysis, which shows that the impact of its policy will be to increase emissions.

Gareth Williams

The Scottish Government has looked at the totality. My point was that, on particular routes, APD can have a negative impact because it encourages people to fly less directly—for example, by going via Dublin or Amsterdam.

Patrick Harvie

Do you accept the Scottish Government’s view that its proposal will increase emissions? Is that just something that we should live with?

Gareth Williams

I have no reason to doubt that view. I note that the increase is very modest and, as I suggested in our submission, there are other ways in which reductions in the emissions associated with aviation could be achieved—the provision of public transport links to airports is an example.

The Convener

I think that you have had a fair kick at the ball, Patrick.

I was listening to the discussion, so I do not know whether anyone else indicated that they would like to ask a final question. Neil Bibby has one. This will be the last question, unless there is a supplementary.

Neil Bibby

This week, the former Edinburgh MSP and minister Kenny MacAskill said that it was

“hard to see a credible argument”

for the proposed reduction in APD, which would only enrich airlines and airport operators. I think that he has a fair point, particularly when passenger numbers are increasing.

I want to follow up on James Kelly’s point about budget priorities. We know that if there is a 50 per cent cut in APD, there will be a loss of at least £120 million in Government revenues. Do your organisations have a view on what services should be cut? The cabinet secretary often asks Opposition parties for views on what services should be cut when we propose particular policies, and I am sure that we will ask him the same question in relation to this proposal. I understand the economic growth argument that you make for reducing the tax, but a decision will have to be made about where that £120 million cut should be made. Should that money come from the national health service or education?

The Convener

I understand why you asked that, but I do not think that it is a fair question to ask the panel.

Neil Bibby

I think that it is a fair question to ask.

The Convener

Well, I do not, because our witnesses are not here to make a judgment across the whole portfolio. It is a fair question for a Government minister.

Neil Bibby

Surely we ask organisations where money should be saved and where it should be spent. I think that it is legitimate to ask that, but if you do not think so, that is fine.

The Convener

If any of the witnesses feel that the question is a legitimate one that they would like to answer, please feel free to do so.

Gareth Williams

I understand the fiscal position for the Parliament. I respectfully suggest that the question that needs to be asked is about the situation in five to 10 years’ time. I go back to the point that was made about people on the living wage. We must ask ourselves how we are going to get a stronger Scottish economy and generate more wealth that can be shared fairly. To do that, we must have stronger international links, grow our tourism sector and increase our exports. I understand the short-term challenges, but I think that on such issues—as with everything—we must take a long-term perspective.

The Convener

I thank the witnesses for coming along to give evidence.

Meeting closed at 11:51.  



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Third meeting transcript

The Convener (Bruce Crawford)

Good morning, colleagues, and welcome to the seventh meeting in 2017 of the Finance and Constitution Committee. We have received apologies from James Kelly.

The first item on the agenda is continuation of our stage 1 consideration of the Air Departure Tax (Scotland) Bill. We will take evidence from Revenue Scotland, from which I welcome Elaine Lorimer, the chief executive, and Neil Ferguson, the head of strategy and change. I invite Elaine to make a short statement, if she wishes to do so.

Elaine Lorimer (Revenue Scotland)

Yes—if I may, convener. Good morning and thank you for inviting us to the meeting. Neil Ferguson, who is sitting next to me, is the programme manager for the implementation at Revenue Scotland of the air departure tax. We hope that, together, we can provide some insight into and assurance about the work that Revenue Scotland is undertaking to ensure a smooth transition to the introduction of air departure tax. As the committee is aware, our role is not policy formulation; that is for the Scottish Government. Therefore, our interest is primarily in part 4 of the bill.

Revenue Scotland has been operating since 2015 and is the tax authority in Scotland with responsibility for collection and management of the wholly devolved taxes. Air departure tax is the third tax for which we will assume responsibility—the others being land and buildings transaction tax, including the additional dwelling supplement, and the Scottish landfill tax. The approach that Revenue Scotland takes to its work is grounded in the four principles of taxation that were set out by Adam Smith: certainty, efficiency, convenience and taxes being proportionate to the ability to pay. In addition, we have taken a digital-first approach, using technology to best effect. Those principles will underpin our approach to the implementation of air departure tax.

Our electronic system for registration and making returns has proved to be secure, reliable and robust. It handles about 115,000 tax returns annually, with 99.97 per cent reliability. It has the capacity to accommodate air departure tax; our plan is to design a new module that will be added to the existing system. When we considered the options for administering the new tax, that option represented the best value for money and was, by offering stability and security, the most sensible option from a risk perspective. It was clear, too, from our early engagement with aircraft operators, that there was strong support for an online system—particularly given that the United Kingdom system was paper based until January.

In our first two years of operation, we have established a strong reputation for working collaboratively with taxpayers, their agents and representative bodies, as well as with other key institutional bodies on the Scottish tax scene, including the Scottish Fiscal Commission and the Scottish Government. We are grateful for the continued support from, and sharing of information by, Her Majesty’s Revenue and Customs and colleagues in the Scottish Government and Transport Scotland, which is helping us to prepare for air departure tax. Each of those bodies has a seat on the programme board that we have established to oversee our work.

Air departure tax opens up a new range of taxpayers to our organisation, with many tax operators being global businesses that are not domiciled in this jurisdiction. Although that may present challenges, we will be mindful of it as we develop our implementation programme, and we will build on our external engagement with taxpayers through face-to-face meetings and using digital technology to reach them as best we can; for example, our advice and review group, which involves a number of aircraft operators, will meet in London this week.

The new tax will also bring different challenges for our compliance work, especially when enforcement becomes necessary, but we have time to plan for those things. We know from our other work that engagement with taxpayers and their representatives is the key to successful development of our systems, processes and guidance. Once again, we will look to the aircraft operators to test our systems with and to assist in production of our guidance.

It is relatively early days in our programme of work to bring the new tax into effect, so we will be happy to update the committee at any point as that work progresses.

The Convener

The committee has heard evidence that the proposed administrative arrangements for the collection of ADT are similar to the current arrangements for collection of UK air passenger duty. What main differences would you highlight? What improvements can you make to the system through the way that you are going to go about collecting ADT?

Elaine Lorimer

As I see it, there are two key differences between the administrative arrangements, although Neil Ferguson will no doubt add some more.

The first is that we will be moving from requiring operators to produce a monthly tax return to requiring them to produce a quarterly tax return. On the face of it, that will be administratively more convenient for the airline operators. In the work that we have done with them so far, they have given us information that supports that.

The second key difference is that we will be moving to our online tax system for the aircraft operators to use to register with us and to submit their tax returns. HMRC has just—in January this year—introduced its digital system, which is obviously very new. If I had been sitting here in November, I would say that our move would be a fundamental change, but HMRC has moved to a digital system, so that is less new for aircraft operators.

I do not know whether Neil Ferguson wants to add anything.

Neil Ferguson (Revenue Scotland)

There are one or two other minor things. Obviously Revenue Scotland, rather than HMRC, will collect the tax, so that is a change for aircraft operators, in terms of whom they will deal with. We will, under section 13 of the bill, be required to keep a register of “taxable persons”. We will also introduce the opportunity to pay by credit card or debit card, which is not currently available under UK APD arrangements. We have not done it before, but we think that it will be helpful—in particular, for occasional operators. Those are some other key differences.

The Convener

On page 3 of your submission you outline a number of processes that you handle in respect of LBTT and SLFT returns. Is an estimate available—it may be in the financial memorandum or the policy memorandum, so forgive me if I have missed it—of the number of transactions and returns that you will deal with, on top of what you already do as an organisation?

Elaine Lorimer

Neil Ferguson will be able to provide some detail for you. We expect, I think, to deal with 150 aircraft operators that we call legacy airlines—the main airlines. We also expect a much smaller number of occasional operators. Set against the 115,000 tax returns that we receive, which is the combined number of landfill tax and land and building transaction tax returns, it will be a much smaller amount; it will be slightly greater than the number of landfill tax returns but much smaller than the number of LBTT returns.

The Convener

It is helpful to get an overall perspective.

We have a range of questions on software issues—the change from paper to computers—reporting issues, timing issues and complexity. Willie Coffey will kick off.

Willie Coffey (Kilmarnock and Irvine Valley) (SNP)

My interest in the software stems from a long career in software design and development. I am quite keen to understand a wee bit more about where we are in relation to specification and design of the software. I note from the financial memorandum that provision for it is about £120,000, which some members feel is a wee bit on the modest side. Where are we in development of the software? How soon do you need detail of the actual operational arrangements for the tax, so that you can build that into the software?

Elaine Lorimer

The starting point is to remind the committee that we have an existing system which has a lot of the fundamental elements, including the main platform for management of the tax, the means by which we expect operators to register and its being web enabled. All that functionality already sits in the system. When we implemented the additional dwelling supplement, we went through a similar process, in which we had to make amendments to our existing system. That went through very smoothly. We are, in essence, going to develop bespoke areas purely for the air departure tax. In many ways they will be not that different from what we have for the returns that we receive from landfill operators. The system is very similar.

That might explain the background. On where we are with specifying what we need, we are in the early stages. We have an established relationship with the supplier—it is our current supplier—so we do not need to go through a procurement process because there is provision within the existing contract to enable the new module to be developed. That means that we do not face timescales such as are associated with procurement.

As far as specifics are concerned, we have started our process-mapping work—we have a business analyst working with us who is working through that. We will be working with the developer over the summer with a view to having a system that we can test in late autumn. Neil Ferguson might want to add detail on that.

When it comes to how much notice of changes we need, part of the beauty of the system that we have is that it gives us quite a lot of flexibility. If bands or rates change, that will not cause us a huge amount of difficulty from a design point of view. What would create more difficulty for us—we are not anticipating this—would be alteration of the fundamental framework on which the tax is based. We are operating on the basis of assumptions about what is in the policy memorandum and what the Government’s publicly stated intentions are for the broad framework of the tax.

Neil Ferguson

I will say a little bit more. As Elaine Lorimer said, the business requirements are being dealt with at the moment. We are holding a workshop with the aircraft operators tomorrow to go through some of that. We will look at screenshots of how the system might look and get some user feedback on development of the system so far. Ultimately, we want to prepare the functional specification for the information technology system through the course of March and April. That would lead, in around May, to a work order request to start building the system. We want to take the collaborative approach that we have taken in the past with the previously devolved taxes; we want to involve aircraft operators, as users of the system, to do some user testing and we want their feedback on it.

The cost appears to be low because, as Elaine Lorimer said, we are not building the platform; we are, rather, adding something to an existing platform that already deals with user accounts, security measures and so on. We are not building a system from scratch or creating a completely bespoke system, which is why the cost appears to be lower than it might otherwise have been. What we are doing takes some of the risk out of the process, as well.

Elaine Lorimer

I am sorry—I would like to make one other point. I mentioned our experience of introducing the additional dwelling supplement. That experience means that we have a good benchmark for how much the introduction of ADT will cost. It is fair to say that we have also built a reasonable contingency into the £120,000. As things stand, we do not expect to require all that funding.

Willie Coffey

The convener asked about transaction numbers. I think that the number of transactions that you will be entitled to take tax from is likely to be significantly higher in ADT than it is in land and buildings transaction tax, for example. Is the number of individual tax payments likely to be much higher?

Elaine Lorimer

No. We expect the numbers to be much lower than is the case with LBTT, because the taxpayers will be the aircraft operators. Aircraft operators will be responsible for submitting ADT returns and will be obliged to collect the data on passenger numbers, to break the data down into the relevant bands, to apply the rates and to make the tax returns. We will get from the operators an aggregate return; we will have the powers to drill into that and to seek background data to test operators’ compliance with the legislation. We are talking about a small number of returns compared with LBTT.

Willie Coffey

Are you confident that you will be able to implement the tax within the budget that you have highlighted?

Elaine Lorimer

Yes.

Neil Ferguson

We expect fewer than 500 returns per quarter on ADT, whereas on LBTT we get around 10,000 per month. ADT is of a different scale altogether from LBTT; in that respect, as Elaine Lorimer said, it is much more akin to the Scottish landfill tax. We are applying quite a lot of the learning from over the years with the Scottish landfill tax to how we are going to deliver ADT, because the two taxes are similar in scope and complexity.

10:15  



Ivan McKee (Glasgow Provan) (SNP)

I want to drill a bit further down into the readiness of the system, the way that you have designed it and what it can and cannot cope with. I am coming from an overview that the purpose of the policy is to stimulate economic growth. It may be that when we look at it from a policy perspective we will reach the conclusion that there may need to be more bands, or differentiation between types of passengers, times of the week or times of the year. Depending on how the policy discussion goes, many variables could allow the policy to focus on specifics to stimulate growth for specific businesses in certain areas. For example, we might distinguish between outbound and inbound tourism. If the policy goes in more complex directions, at what point will the system that you have designed start to become unfit for purpose?

Elaine Lorimer

The advice that I have from my team that is working on APD is not that that would not matter, but that as long as the fundamental structure of rates and bands exists, we can accommodate a number of rates on a number of bands. A more sophisticated system, such as the one that Mr McKee described, potentially places a bigger burden on the aircraft operator, because what we would receive would be the aggregate return against all the different categories. We can design a tax return that has the required fields, but the obligation would be on the aircraft operator to amend its systems and processes in order to provide us with that information.

Ivan McKee

Okay: it would be the aircraft operators rather than Revenue Scotland that would have the most difficulty, in that case.

Elaine Lorimer

I think so.

Neil Ferguson

I would expect that to be the case. As Elaine Lorimer said, we can design the tax return. The key thing is that at the moment the tax is per passenger, on the basis of tax bands. We did the same with the first two devolved taxes. Our system has to be flexible enough to accommodate changes of rates and bands, and the addition and removal of bands. We can handle all that, but it would be difficult if the entire structure of the tax were changed and if we did not have a per passenger tax on the basis of tax bands, as is set out in the policy memorandum. Our current assumption is that that is the way in which the tax will be structured and framed.

Ivan McKee

Could there be something that relates to the type of passenger, for example?

Neil Ferguson

Yes. It depends on the variables; we can build in variables but, as Elaine Lorimer said, the more variables you add to the mix, the more complicated it will become for the airlines. It might be that the airlines would need more time to deal with that complexity. Ultimately, the airlines will be filling in a tax return that is an online form.

Ivan McKee

That is clear. Earlier, you made a hint about auditability. At the end of the day you get something from the airline that says, “We owe you £1 million”, but what is the process for you to drill into an airline’s passenger numbers and records and so on, and how often do you expect to do that to ensure that you are getting the correct information in returns?

Elaine Lorimer

Part of role of the Revenue Scotland team that will be responsible for management of the tax will be to carry out what we call compliance work. We will, over the next year, design our strategy for compliance with the tax. As with the other taxes, we will have power under the legislation to open inquiries, to require the taxpayer to provide us with information and to drill into that information—for example, by visiting the taxpayer at their premises. We will have powers to get to the information that we need.

We will also be able to access other information that is not held by the taxpayer, to check against. We can work with the Civil Aviation Authority, for example, to examine passenger numbers and flows, and match that information with the data that come from aircraft operators. We will also have information-sharing agreements and memorandums of understanding with HMRC, as we do for the other taxes, which will enable us to access data that HMRC has so that as part of our compliance work we can check it against what the aircraft operators submit in their returns.

In a sense, the approach that we will take for the air departure tax will be pretty similar to the approach that we take for other taxes.

Ivan McKee

That is great. Thank you.

The Convener

Mr Kerr, are there areas that you want to cover?

Liam Kerr (North East Scotland) (Con)

No, it is fine—they have been covered.

The Convener

Maree Todd has questions about timing.

Maree Todd (Highlands and Islands) (SNP)

I have a slight concern about timetabling, although it might just be me who is unable to understand it. The airlines tell us that the tax bands and rates need to be published or made public about a year and a half before the tax is introduced so that they can charge it. Will that be an issue? Will it add complexity to the system if that information is not made public until a short time before the changes are introduced?

Elaine Lorimer

I suspect that the airlines and aircraft operators have made that point to the committee because they are thinking about it from the perspective of planning their business and what they will charge passengers. However, the situation does not really impact on us, because we will require the operators to provide us with tax returns for the first quarter of business starting from 1 April next year through to July. The first tax return that they will have to send to us will be in summer next year, and it will only cover flights that they have operated and have departed from Scotland since 1 April.

As I understand it, HMRC has in the past made changes to the existing UK tax by, for example, introducing exemptions after airline operators had already charged the tax because they had taken prior bookings. We understand from HMRC that the airlines have all been very co-operative in working with the bookings that they had already taken and reimbursing. Also, not all the airlines pass on the tax directly to the passenger. The airlines’ issue with timing is to do with their ability to plan their business.

Maree Todd

To pass the tax on.

Elaine Lorimer

Well, to plan their business.

Patrick Harvie (Glasgow) (Green)

I want to follow up on the questions about implementation. I am still a wee bit unclear about how much flexibility Revenue Scotland would be able to cope with without there being an impact on the implementation of the tax if, for example, Parliament chose to take the bill in a different direction, or it chose a different structure for the tax, or it chose to change the requirements in relation to fiscal representatives or disagreed with the Government on the question of monthly versus quarterly returns. How much change is tolerable without there being an impact on implementation? Are there particular changes that Parliament might consider that you think would be problematic?

Elaine Lorimer

There is a lot in that question.

Patrick Harvie

Sorry.

Elaine Lorimer

It depends on what the changes are. To take your example of Parliament deciding to move from quarterly to monthly returns, we would be able to accommodate that. It would depend on what the changes would be around fiscal representatives, but I cannot think off the top of my head of changes that would affect our ability to implement for 1 April.

The fundamental issue that might cause an issue for us is if the underlying structure of the tax changed and it moved away from being based on passenger numbers with rates and bands. Again, we would need to look at the detail of what Parliament wanted to change and we would be able to provide advice to the Scottish Government and Parliament about the impact on Revenue Scotland.

Ultimately, we need the ability to get a tax return in with the data that enables us to check that the right amount of tax has been paid. As we have said, if there are fundamental changes to the tax structure, that might give us IT issues—it would depend on the changes—but the greater impact would be on the aircraft operators and airlines, because they are obliged to hold and to provide the data in such way that allows us to check whether it is correct.

Patrick Harvie

I also want to ask about the European Economic Area. I think that there are three references to the EEA in your written submission, which are mostly about the appointment of fiscal representatives. I was unclear whether the implication was that, if we find ourselves outside the European Economic Area, there would be problematic consequences.

Elaine Lorimer

We wanted to bring to the committee’s attention that having fiscal representatives in the European Economic Area would be a change from the current UK system. The Parliament is obliged to respect European law in legislation that it passes. HMRC obliges aircraft operators to have a fiscal representative in the UK. Under the bill, we will have to be ready to deal with fiscal representatives who are located anywhere in the European Economic Area. You could imagine that, from a compliance or a debt recovery perspective, that could give us more complexities than if we dealt with fiscal representatives based in the United Kingdom.

Patrick Harvie

The potential problems that you flagged up in your submission are to do with language, communication and what have you.

Elaine Lorimer

Or enforcement.

Patrick Harvie

Yes. Would our position outside the European Economic Area—if that comes about—exacerbate the potential problems of enforcement, collection or any other aspect of how the system is supposed to work?

Elaine Lorimer

I would need to take legal advice on what the impact would be. It depends on what happens with Brexit, but, in the event that we are outside the European Union, it may well be that changes could be made to the legislation to give us the opportunity to insist on aircraft operators having a fiscal representative based in the UK or Scotland, rather than anywhere in the European Economic Area. That is both a legal and a policy question.

Patrick Harvie

Do you happen to know what the relevant situation is in other countries in Europe in the broadest sense—that is, those outside the European Union? Do they require domestic representatives for such arrangements or are they able to operate for this purpose in the EEA as a larger area?

Elaine Lorimer

I do not know the answer to that.

Neil Ferguson

I am not sure about that, either.

Elaine Lorimer

We can find out.

The Convener

It might be useful if you could follow up on that and let us have a note, because we have the minister coming next week and we can ask him similar questions.

I think that Liam Kerr has a question in this area, too.

Liam Kerr

Yes—thank you, convener. It is on a matter that Ms Lorimer mentioned. I appreciate that this is not entirely your area, but you said that not all the airlines pass on the tax to their passengers. Will you elaborate on that? A number of previous witnesses have said that, if the tax is cut, that cuts the cost to the consumer, so there will be a modal shift. However, that might not happen if the airlines do not pass on the tax through the fares that they charge.

Elaine Lorimer

My understanding is that aircraft operators are not under any obligation to pass on the tax. It would be a business decision to pass on the tax, if that is what they choose to do. That is as much—

Liam Kerr

Do you have any oversight on what proportion of airlines currently pass on the tax?

Elaine Lorimer

I am sorry, but I have no information on that.

The Convener

I have had a thought about Patrick Harvie’s question on fiscal representatives. The bill states that the representatives must be based in the EEA but, in your response, will you consider whether it needs to be a bit more flexible to take account of our being outside the European Union and the EEA, should that happen in the longer term? A reflection on that would be helpful.

10:30  



Patrick Harvie

Or if we are still in it and our nearest neighbour is still outside it.

The Convener

Indeed. There are lots of potentials. All that I am looking for is general flexibility in the legislation.

Elaine Lorimer

We will see what we can do on that. It is obviously a legal point. It is also perhaps a policy point, so the Scottish Government would need to have a view, but we will see what we can do. The way that the bill is currently drafted is because of the way that the law currently stands.

The Convener

I understand that.

Neil Ferguson

I will add one minor point. At the moment, the fiscal representatives for UK APD have to be based in the UK. There is no obligation, but any aircraft operator outside the European economic area that has no presence in the UK might choose to use, for the purposes of air departure tax, the fiscal representative in the UK that it uses for UK APD. In that case, we would still be dealing with someone who is based in the UK. There is no obligation on operators to do so, but there is the possibility that they might. That would make things a bit easier.

The Convener

I do not want to take this too far, but we could have a situation where the legislation here requires representatives to be based in Scotland, which would deal with everything and give us maximum flexibility. I will leave you guys to come back and tell me that, if you want to.

Ash Denham (Edinburgh Eastern) (SNP)

As Ms Lorimer mentioned in response to an earlier question, UK APD works on monthly returns, but Revenue Scotland wants to move to ADT being based on monthly data with quarterly returns. I do not know whether you have seen the comments of the Chartered Institute of Taxation, but it said that Revenue Scotland’s arguments on that issue

“did not appear ... to be entirely valid.”

It also had concerns that, because landfill tax is based on a quarterly return cycle, having the same cycle for ADT could create a workload pinchpoint, if all the returns come in at once. Will you comment on that?

Elaine Lorimer

I will answer the second bit of your question first. We will staff the organisation so that the management and administration of the air departure tax returns, when they come in, will be dealt with by a separate team from the landfill tax team. As we have been developing as an organisation, we recognise that we absolutely have to be expert in the individual taxes, and therefore we have different teams specialising in the different taxes. From that very basic perspective, there should not be a problem at all with workflow management. We have already talked about the system’s capacity—there should not be a pinchpoint in that, and there should not be a pinchpoint in our staffing.

We think that the move from monthly to quarterly returns will actually benefit the airlines because, although they will still have to keep the data, they will have to go through the process of compiling a tax return only quarterly, which means fewer occasions in the year. We shared our thinking on that with the airlines early on in our engagement with them, and they are supportive of it as a concept, because it is less administrative hassle for them.

I hope that that answers your questions. From our perspective, that is the model that we have for landfill tax and it works. So far, the airlines have told us that it is a good and positive move for them as well. They will still have to keep the monthly data, but they will not have to go through the administrative process of collating all the data and submitting it in a monthly tax return.

Ash Denham

My second question is about the register. Is there any conflict between Revenue Scotland’s duties on taxpayer confidentiality and the register? Will it be a list of operators or of passengers?

Elaine Lorimer

As you know, we have an obligation to have a register. For landfill tax, we have a register of landfill operators. We are mindful of our obligations under the Revenue Scotland and Tax Powers Act 2014 to protect taxpayer information. Therefore, we would absolutely not wish to be put in a situation, or indeed to put any aircraft operator in a situation, where we were breaching those obligations.

Our current thinking—we have not finalised it yet—is that we will move to a similar model to what we have for landfill tax, so the name of the aircraft operator will be on the register. It most certainly will not be the individual passengers. It is the aircraft operator who is the taxpayer, and it is the aircraft operator that we are interested in.

Ash Denham

Thanks.

The Convener

Neil Bibby has some questions in this area as well.

Neil Bibby (West Scotland) (Lab)

I understand what you are saying about it being less hassle for the airlines to do quarterly instead of monthly returns, but is there not an argument that it is better for the public purse to have regular monthly, as opposed to quarterly, income?

Elaine Lorimer

That is a question for the Scottish Government.

Neil Bibby

Fair enough.

Elaine Lorimer

It is the Scottish Government’s bill, so obviously it will have thought through what is in it.

Neil Bibby

Okay—I will ask the Government that question.

Adam Tomkins (Glasgow) (Con)

I have a couple of quick questions about staffing, estate and operating costs. What is the current staff of Revenue Scotland?

Elaine Lorimer

We have around 55 staff at the moment, and that will go up to about 60.

Adam Tomkins

Are you going up to 60 only because of the devolution of APD?

Elaine Lorimer

Yes. You will see in the financial memorandum that we have sought to cover additional staff costs to enable us first to do the work on building up a programme this year so that we can introduce the tax. Then there will be on-going costs in relation to putting together a small team of professionals to manage the tax for us.

Adam Tomkins

Do you need estate provision to house the additional staff?

Elaine Lorimer

No. Actually, just last weekend, we moved to a different layout within our existing footprint in Victoria Quay, which means that we can operate much more flexibly in the office. We have sufficient space in the office to accommodate new staff.

Adam Tomkins

How much do you think the annual operational costs of Revenue Scotland will go up by?

Elaine Lorimer

It is in the order of £500,000 a year—

Adam Tomkins

Is that additional?

Elaine Lorimer

Yes—that is additional, going forward.

Adam Tomkins

Thank you.

The Convener

I thank the witnesses for coming and for their evidence. It was a helpful session that has told us that you are as well prepared as you can be in the circumstances of dealing with new taxation.

I suspend the meeting to change over witnesses.

10:37 Meeting suspended.  



10:41 On resuming—  



The Convener

We will continue our consideration of the Air Departure Tax (Scotland) Bill at stage 1. We are joined by Mike Robinson, a board member of Stop Climate Chaos, and Chris Day, a policy adviser for Transform Scotland. I warmly welcome you to the evidence session, and I thank Transform Scotland for providing us with some evidence beforehand. Maree Todd has the first question for you.

Maree Todd

As I am sure that you are aware, I represent the Highlands and Islands, so I want to focus initially on the lifeline nature of flights from the Highlands and Islands. A number of people have made representations that we should not only maintain the tax reduction for flights out of the Highlands and Islands but consider abolishing the tax for flights into the Highlands and Islands. What are your thoughts on that?

Chris Day (Transform Scotland)

Our view, as you will see from our evidence, is that there is a case for treating the islands, in particular, differently because of the argument that there is no alternative for some types of journeys to and from the islands. I am not quite sure what the distinction is between travelling in and out, in the sense that people are charged APD or ADT on one leg of the journey, but a consistent theme throughout our evidence is that where there is clearly no alternative, there is a case for a different regime.

I do not want to get into an argument about the definition of “lifeline”, because one person’s luxury is another person’s lifeline, so it is quite a difficult issue. The Scottish Government would have to be careful to ensure that if traffic is generated on air services to and from the Highlands and Islands, ferry services are not undermined, for reasons that I suspect are fairly obvious. I will go into them if you wish, but I probably do not need to say more than that.

10:45  



Mike Robinson (Stop Climate Chaos)

I do not think that anyone is questioning the position with regard to lifeline services, other than in relation to the issue of connecting flights—it is not just about coming back to the main cities in Scotland; you can fly all the way to New York without paying APD if you book the ticket in the right place, which does not make sense to anybody. We have no issue with lifeline services per se, but the position around connectivity seems a little wrong.

Maree Todd

Chris Day referred in particular to island services. Do you have a different view with regard to those mainland airports that might be—

Chris Day

The question concerns connectivity. It depends how far into the Highlands you are going.

Maree Todd

I am thinking about, for example, Wick airport, where the alternative to flying is an eight-hour overland trip to Edinburgh.

Chris Day

I suppose that our argument would be that we would like the Scottish Government to invest in the railway network to reduce journey times between Wick and the central belt.

From our point of view, the issue is not a major one, but that is simply because the scale of travel that is involved is not major. Our prime concern involves the larger flows between the main airports and Inverness and Aberdeen airports, rather than the routes that are typically catered for by small aircraft, many of which, in any case, are exempt under the current proposals because they are under a certain weight.

Maree Todd

You note that the overall number of flights from the Highlands and Islands is not high. Others who have given evidence previously have said that the number of flights from Scotland does not make a particularly large contribution to the number of flights that are made in the world. They have said that issue of increased flights to and from Scotland should be viewed in that worldwide context, because the flights are not extra flights; they are simply flights that are going to Scotland rather than to some international destination. Do you have a response to that?

Chris Day

To put it politely, I would say that that seems as if Scotland would be asking to be exempted from its obligations to the wider world. Sometimes, people make the argument that Scotland should not bother with action on climate change, given the scale of carbon emissions from China or the United States. This is perhaps Mike Robinson’s area of expertise, but it seems to me that the nature of the climate change emergency is such that that is not really a moral or sustainable argument. We are a well-developed and relatively wealthy country. It is not acceptable to say to other countries that, because they are a bigger problem than we are, we are going to make only a small contribution. We are actually in a position in which we have a much greater opportunity to make a difference than other countries in the world, in terms of leading on climate change, simply because of the relative wealth that we have compared to other countries—I was going to say the Maldives, but that is not a good example, and I sure that you will be able to think of better ones.

Mike Robinson

I tend to concur with that. I think that the argument that Maree Todd put forward is spurious, for a number of reasons. Further, it is not helpful in the context of Scotland, because we have a set of targets and ambitions around climate change, and we should not exempt one industry from the responsibility to deliver them. That is a fundamental point. The rest of society is aiming for an 80 per cent reduction in carbon emissions by 2050, but this one industry is doubling its carbon impact at the moment and is expected to do so again by that date. It has to play a role. Why is it being treated differently from every other industry? Apart from anything else, that seems to be anti-competitive.

Your question about flights into, as opposed to out of, the Highlands and Islands is interesting. It is perhaps not necessarily a purely environmental one, but there seems to be some disagreement about the entire purpose of the reduction in APD.

I have sat on the Scottish Government air passenger duty stakeholder forum since its inception. The policy of reducing APD began as a way of increasing business connectivity—that was very much its primary purpose. If it is an economic stimulus, that is, arguably, a slightly different thing, because more people in this country fly abroad than fly here. We should recognise that incentivising people to come here might help our economy and that incentivising people to fly out helps another economy. Maybe we need to think about that. That is just as true for the Highlands and Islands as it is for Scotland as a whole.

We have to be a little bit careful. We are trying to deliver against Scottish commitments on the climate, and we should not see reducing APD as a separate issue.

Maree Todd

My final point has been put very loudly and clearly by the many people whom we have seen. The United Kingdom is an island nation on the western periphery of Europe, and the Highlands and Islands, which I represent, is very dependent on tourism. We need people to come here. Scotland is ranked about 140 out of 141 in respect of holiday costs for the world, and the particular tax that we are discussing is the second highest in the world. People who give evidence to us do not say that we can afford to do more, but that we should level the playing field so that we compete evenly rather than gain a competitive advantage. What is your response to that?

Mike Robinson

I have several views, one of which is that it is debatable how long any competitive advantage that we might gain would last. I am interested to know how we will ensure that airlines hold to any commitments that they might make for any real length of time. We are trying to get that benefit, but will they just up sticks and move on as soon as the advantage diminishes? We need to bear in mind that there are issues to do with the longevity of the measure.

Chris Day

It is useful to bear in mind the costs of APD and ADT to the inbound traveller. The typical figure is £13, which is not an awful lot in the context of a holiday for four. The argument might well be that, if the intention is to give a £180 million break that is designed to bring down costs, it might as well be given directly to the tourism industry to reduce its costs on site rather than doing things indirectly by giving a third party a reduction in costs. I suspect that in people’s travel decisions in the next year we will see that any change that results from a change in air departure tax will be swamped by changes that result from the decline in the value of the pound. That is critical in people’s decisions about where they go on holiday.

Mike Robinson

Even the Civil Aviation Authority has reported that a huge number of factors affect the cost of a holiday. There are far more factors than just the cost of the flight. Most of our tourists do not come by plane, of course; most come by land. Therefore, what has been proposed does not cater to most of our tourists anyway. APD is a fairly minimal part of the overall cost of flying. Even the CAA has said that the cost of fuel and many other factors, including security and the state of the economy, have a far greater impact than tweaking APD.

The Convener

I want to follow through on that. If we follow the logic that the impact of the change in the value of the pound will be so significant—I am not saying that it will not be—you are really saying that, in that circumstance, what the level of taxation is does not really matter.

Chris Day

To take a logical alternative, if a tax of £1,000 were imposed, that might well matter, but the level of the tax now is insignificant in the context of the other costs of a holiday. That is borne out by all the evidence that is included in the reports that have been produced for the Scottish Government in relation to Edinburgh airport, for example. I believe that, certainly for the business sector—I am trying to avoid using transport jargon, but the report talks about “elasticity” and I can never remember whether demand is elastic or inelastic—the cost of the tax is a fairly small part of the decision whether to travel. That is buried in the Edinburgh airport report and in Transport Scotland’s “Estimate of the Impact on Emissions of a Reduction in APD in Scotland”, which is cited in footnote 3 of the Transform Scotland submission.

Liam Kerr

Mr Day, when you talked about ferry services, you seemed to imply that, if we drove traffic to air services from ferry services, that would obviously be a bad thing. Forgive me, but I do not know why that is obvious. Would you mind elaborating?

Chris Day

Ultimately, it would undermine the viability of the ferry services, which may incur further cost to the Scottish Government. I am a central belt resident whose knowledge of the Highlands and Islands is limited, but I assume that it is important for the Highlands and Islands that ferry services continue to be available at a level that meets the area’s needs. If the ferries are not carrying passengers because everybody is travelling by air, the question is eventually going to arise.

Liam Kerr

I find that quite interesting. I understand that you are both here with an environmental hat on and that you are concerned about the environment. I would have thought that you would have approached the issue by considering which is the least environmentally damaging mode of transport.

Chris Day

Yes.

Liam Kerr

Have you done any analysis from that perspective in considering whether you would prefer to drive a modal shift from ferries to air travel?

Chris Day

Generally speaking, sea travel produces fewer emissions and consumes less energy per passenger kilometre than air travel does.

Liam Kerr

Do you have any modelling that says that? I live up in the north-east of Scotland, and if I want to go up to the northern isles I might choose to drive to Thurso to get the ferry from there. Therefore, there would be a huge extra environmental burden—if I can put it that way—if I made that choice over air travel.

Mike Robinson

There are a lot of statistics on this out there. I do not have any to hand, but there are lots of statistics on passenger kilometre consumption of carbon and they vary enormously because there are so many factors involved. It depends on how many people are in the car, what the capacity of the aeroplane is, how many passengers there are and other such issues. Therefore, it is difficult to get into absolute detail. I am sure that you could come up with an example that would make ferry travel look worse than air travel. However, that does not change the fundamental principle that, as a general rule, flying is more expensive, in per passenger kilometre terms, than any other form of transport.

One issue that has come up in the forum is that of short-haul flights being worse than long-haul flights because take-off accounts for much more of the energy consumption. Per passenger kilometre, a short-haul flight is the worst option of all. Having said that, the Climate Change (Scotland) Act 2009 recognises that aviation has a much higher impact because of where the emissions take place, and the act contains a multiplier—albeit that it is currently set at 1, which is somewhat farcical. There is a recognition that aviation involves an added factor beyond its fuel consumption.

11:00  



Chris Day

If you have to drive to a ferry terminal, you might well also have to drive to an airport.

Liam Kerr

Yes, I would accept that. However, I do not want to develop that argument, because, if I may say so, that analysis is quite facile.

My next question is for Mr Day, simply because I have his submission in front of me. With regard to taking it at face value that people are choosing rail over air because they have a difficulty with the £7 APD charge, what modelling has been done to show that removing or reducing APD will be so detrimental to cross-border rail travel?

Chris Day

I am aware of evidence that you have received from Virgin Trains, which indicates a very significant impact on its London to Edinburgh figures. Of course, we are not just talking about Virgin Trains; I think that a total of four different operators provide Anglo-Scottish services, although two of those franchises are operated by one company.

Other than that, I would not quote any specific modelling. You can look at general trends that show that where a low-cost air operation has come into effect it has had an impact on equivalent rail journeys—and vice versa.

Mike Robinson

I believe that there is a study that shows that when APD was introduced there was a 3 per cent uplift in train usage in those areas where that alternative existed. I do not think that there is any evidence, or that any modelling has been done, of the impact of what would happen the other way round, but it is clear that the rail companies are concerned and very obviously view such a move as anti-competitive.

Liam Kerr

I just think that we need that level of detail and that someone needs to be doing that exercise. For example, I understand that Virgin CrossCountry is about to cut a number of services from Aberdeen to Penzance because people are simply not making that choice. That has nothing to do with air passenger duty or ADT and everything to do with the mode by which they want to make the journey. It seems to me that someone needs to provide that data if we are to make a decision.

Mike Robinson

I totally agree. Throughout this entire process, there has been a lack of supportive data in a number of areas, and we would very strongly ask for baselining to be carried out right now on a whole number of factors. There has been talk of this 50 per cent cut being followed by another 50 per cent cut if economic circumstances allow, but I do not think that talk is enough; the cut should happen only if all sorts of evidence is gathered on all sorts of factors to prove that the measure has actually had the impact that it set out to have. I am not convinced by the policy’s economic or environmental case, and there is a clear need for better baseline information if any decision is to be made.

Liam Kerr

Yes.

I move on to my final question. I have to apologise to Mr Day again; it is just that I have his submission before me, and it interests me. I am going to take a very north-east view about something that you alluded to earlier. Your submission says:

“A further tax reduction for aviation would encourage passengers to travel by plane”,

which

“would undermine the ... case for High Speed 2”

coming up

“to Scotland”.

Effectively, you are asking the people in the north-east, who, realistically speaking, have no other means of getting to the south-east if, for business reasons, they have to get there very quickly—

Patrick Harvie

I have seen trains in the north-east—I am sure that I have.

The Convener

Patrick, let us not have these comments. You will get your chance in a minute.

Liam Kerr

Why should people in the north-east effectively subsidise a fast rail link to England from the central belt and still be expected to pay ADT for journeys that they pretty much have to take by air?

Chris Day

My understanding of the Scottish Government’s intentions in respect of HS2 is that it will seek to negotiate an arrangement with the Government at Westminster to protect slots at airports in the south-east. The regional transport partnerships in the north-east have said that they are quite content with the concept of Anglo-Scottish services on HS2 as a general benefit to Scotland, but—to pick up on the point that you make—the quid pro quo is that the Government must ensure that slots are maintained at airports in the south-east for journeys from Aberdeen and Inverness in particular.

Patrick Harvie

I assure Mr Kerr that he would need to be rolling coal for the road element of his journey to be more damaging than the air element.

I want to move on to how the bill fits into the wider policy context. Even the critics of the bill and the Government’s policy are not arguing against mixed modal provision to the islands—I do not think that anyone is proposing to argue that. Do you think that the Scottish Government has a policy on aviation emission levels, how much they should be allowed to grow by or how much they should be limited by? I cannot find one anywhere. Are you aware of a policy statement on that?

Mike Robinson

I have never seen anything like that.

I respond to part of the earlier question, too, by saying that the tax was not set out to be an environmental tax. It was introduced because organisations such as the International Monetary Fund and the World Bank said that the industry was undertaxed. However, you would like to think that it has ended up with the potential to be an environmental tax, because it might have inhibited the growth of the demand for aviation. In fact, aviation has not been diminished but is at record levels, as you will have been told by Glasgow and Edinburgh airports in particular, so the tax as it is currently set out is not inhibiting demand.

Patrick Harvie

Yes, the airports certainly say that they are having a whale of a time and are growing massively. The one thing that the Government’s climate action plan says about aviation is that

“We might expect to see a 15 per cent improvement in the efficiency of new aircraft by 2035”.

Even if we assume that the entire aircraft fleet is made up of super-efficient new aircraft, which is an ambitious assumption, would it be fair to say that if, between now and 2035, we return to the level of growth in aviation that we have seen over recent decades, we will still be more than doubling the emissions from aviation?

Mike Robinson

The forecast that I have seen from the Civil Aviation Authority suggests that it would double again—we have already doubled emissions since 1990 and it would be doubled again by 2050. Yes, the demand is clearly expected to grow substantially.

Patrick Harvie

In your experience on the group that was working with the Scottish Government on the policy, was anyone seriously questioning the idea that halving APD or the equivalent tax would lead to the level of emission increase that the Scottish Government has predicted?

Mike Robinson

The forum is primarily made up of airlines and travel bodies, so clearly there is an interest in seeing a cut take place. As you might expect, your point has not been a specific topic in the forum. However, there is no question about the impact of aviation on climate emissions. The Tyndall centre for climate change research reported that aviation will account for the entire emissions budget of the UK by 2050 if we allow it to continue to grow at the current rate. It is clearly not sustainable and I do not think that anyone is questioning that.

Patrick Harvie

Given that those issues are not acknowledged either in the Scottish Government’s climate change action plan that was published in January or in the specific transport sector paper that accompanied it, which has one mention of the word “plane” and no analysis of the environmental impact of aviation, what changes to the bill are you looking for that would require the Scottish Government to consider them properly in the setting of rates and bands? The policy seems to have been decided before the strategic environmental assessment, which is the opposite of what the law is supposed to require.

Mike Robinson

Not surprisingly, we support the devolution of the measure, but we do not want to see a cut in APD. We think that APD should be held at its current level. There is some debate about the different types of taxes that could be introduced and there has certainly been debate in the forum about having frequent flyer taxes and other such measures. However, those are incredibly complex, difficult to administer and very expensive to enforce so the fact that you pay every time you fly is about as equitable as it gets.

Fundamentally, we do not view what is proposed as being environmentally equitable, because one industry is not being asked to do what every other industry is being asked to do. That is probably true economically and in tax terms, too. The fact that the multiplier is set at 1 in the 2009 act gives a fairly good indication of how we are treating aviation in comparison with every other industry.

Patrick Harvie

I am trying to get at specific changes that could make the bill better. Parliament must pass this bill or another bill, because there is no provision for the collection of APD once it is devolved. There must be some legislation on the matter. What can we do with the bill that would lock in requirements on the Government to report on the level of emissions that it thinks it necessary to achieve or to make an undertaking on the additional measures that the rest of the economy would have to take to pull the extra weight that aviation is refusing to pull?

Mike Robinson

For me, the only easy answer is that the bill should be more evidence based. As I have already said, the bill needs to have a much sounder evidence base as regards its economic and, in particular, its environmental impacts. That should form the basis for any decision making; for me, it should be a trigger for a decision being allowed or not allowed.

Patrick Harvie

Do you have anything to add, Mr Day?

Chris Day

As it stands, the bill seems to be a piece of enabling legislation. What is important is the nature of the tax and the bands that are applied to it. In our submission, we make the point that it is not quite clear how those will be subject to parliamentary scrutiny, which seems a bit odd.

Patrick Harvie

Thank you.

The Convener

For the sake of absolute clarity, do you support the bill’s general principles, which provide the legal basis for collection of the tax?

Chris Day

We are entirely content with the devolution of APD to Scotland.

The Convener

The question that I asked was whether you support the general principles of the bill.

Chris Day

Yes.

The Convener

Mr Robinson, can you give us an answer on that, too?

Mike Robinson

My position is the same.

The Convener

I just wanted to get that on the record, so that we know where we are on the bill itself.

Murdo Fraser (Mid Scotland and Fife) (Con)

Good morning. We understand from what you have said so far that you are not keen on any cut in air passenger duty, because of your concerns about emissions from aviation.

Mr Day, your submission contains a lot about the impacts on surface travel and your concern about modal shift away from rail, which reflects the evidence that we took a few weeks ago from Virgin Trains. Given that you do not favour any cut in APD, if there were to be a cut, would you prefer it to be targeted at domestic and short-haul flights or at long-haul flights? Do you have any view on where that balance should be struck?

Chris Day

At this stage, we have been highlighting problems with the proposals that have been set out by the Government so far. The Government’s objective appears to be to reduce the tax burden by 50 per cent. I understand that that has generally been interpreted as meaning that there will be a 50 per cent cut in the rate of APD across the board. There might be a number of different tunes that could be played on that.

As I said in an earlier answer about the islands, we are particularly concerned about the cutting of APD on routes on which there is an alternative means of transport that is sustainable. It seems bizarre to provide a tax break to a less sustainable form of transport.

Murdo Fraser

Therefore, if the Government was determined to press ahead with cutting air passenger duty by 50 per cent in the generality, would you view it as being better for the environment for that cut not to apply to domestic and short-haul flights and, therefore, to be weighted towards long-haul flights?

Chris Day

As Mike Robinson will undoubtedly say, long-haul flights are particularly emissions heavy. In the first stage, we would focus on ensuring that there are alternatives, but—

Murdo Fraser

That is a qualified yes to my question.

Chris Day

As your preface also said, we do not want to see a cut at all.

Murdo Fraser

I understand that. Mr Robinson, do you have anything that you want to add?

11:15  



Mike Robinson

Short haul is worse per passenger kilometre than long haul, but long haul accounts for the bulk of the emissions because of the distances travelled. Ultimately, to go back to the purpose of the bill, if it is about business connectivity, it is a very clumsy tool for bringing that about.

Murdo Fraser

Thank you.

Willie Coffey

At our previous meeting, we heard evidence that the economic spin-off for regional airports was significant in Ireland, where the tax was abolished some years ago. As a member of the Scottish Parliament for Ayrshire, I am interested in doing what I can to support and promote Prestwick airport to encourage tourists to come to Scotland. Is it your view that it will have no noticeable impact on the economy of Ayrshire if we reduce the tax by 50 per cent? Do you expect that we will see the number of passengers coming into that airport rising significantly?

Chris Day

I am not sure that we could assume that any benefit would accrue to Prestwick airport as opposed to Glasgow. It is difficult to identify impacts on specific airports—particularly where there are a number of airports in close proximity, such as Prestwick and Glasgow.

Our fundamental view is that the economic growth of Scotland—or anywhere else—is led primarily by factors other than connectivity. What tends to happen with the growth, or otherwise, of air travel is that it follows economic growth; it does not lead it. In fact, since we submitted our evidence, I have produced a graph, which I will be happy to circulate to the committee later, that indicates that, when APD was introduced and doubled, there was practically no change to the trends in air travel at Heathrow and Edinburgh. The point is that it is not significant.

To pick up the Irish example—and I am aware that other evidence about that has been given to you at various times—it is quoted that the APD rate at Belfast international was reduced to 0 per cent in 2011 because Continental Airlines, as it then was, threatened to withdraw its Newark to Belfast service, which was regarded as being particularly important. That service no longer operates. Continental was taken over by United Airlines, which withdrew the route because, even with the 0 per cent APD rate, passenger numbers had gone down the tubes.

I have looked at figures for the three major airports in Ireland, which are Cork, Shannon and Dublin. As members will recall, the economy of Ireland was particularly badly affected during the latter part of the last decade. What we saw clearly was passenger numbers dropping throughout that period, then beginning to level off and then returning to a form of stability. They had been on a slight upward trend before Ireland abolished APD. Evidently, Cork and Shannon are still struggling along, but Dublin seems to follow quite a different trend—in fact, it is different from most of the European airports as well, where we tended to see a rise up until about 2009 or 2010, then a big drop and then a gradual rise. That applied across Europe. I do not know whether it has some kind of interaction with Cork and Shannon, but Dublin seems to follow a different trajectory. It is noticeable that the upturn in flights at Dublin was in hand before Ireland abolished APD. That might not answer Mr Coffey’s question.

Mike Robinson

Mr Coffey’s question is hard to answer. For his sake, I hope that Prestwick maybe gets a bit more business, but the question that he should be asking is to the airlines, to find out what commitment they have to support Prestwick in light of an APD cut. To be honest, we are talking about a marginal reduction in the price of tickets across the whole of Scotland, so it is very difficult to isolate a particular airport and say that it will help it as opposed to another.

Willie Coffey

I remember the chief executive of Ryanair, Michael O’Leary, saying clearly that, if APD went altogether, he could double the number of passengers coming through Prestwick. That would be double the number of people who needed to eat, sleep in hotels and hire cars, which would surely have a positive impact on the Ayrshire economy.

Mike Robinson

I would like to think that it would, but I would again say that, according to the CAA and the Office for National Statistics, the evidence is that far more people fly out rather than in. Therefore the measure might well bring tourists to the area but, equally, it might take twice as many locals away.

Chris Day

A lot of the airlines are very mobile, and they will introduce flights for one season and then drop them. Therefore, I would be a wee bit sceptical about statements that are made about long-term investment in any local economy by an airline.

Ivan McKee

I thank the witnesses for coming. There has been a lot of discussion of the environmental impact, but I would like to focus on the economic impact. What is your view on how the economic case stacks up? You have made some comments on that already. The point of any reduction in the tax would be, as has been stated, to generate economic activity and business connectivity, which you have talked about. There are a number of ways to do that. You had questions earlier from Murdo Fraser about how the tax is best applied. Scotland needs to grow its economy, and the measure is seen as a way of doing that. Do you have or are you aware of any evidence or any numbers that show that cutting the tax will not generate the return that has been proposed? If not, do you think that there would be value in doing that analysis?

On segmentation, we have talked about outbound and inbound tourism, business connectivity and long and short-haul flights. From a purely business point of view, leaving aside the environmental aspects that you have talked about, do you see differential impacts as a result of that segmentation?

Mike Robinson

I will try to answer that as best as I can. On whether we believe the economic case, the short version of the answer is absolutely not for a moment.

Ivan McKee

My question was whether you have data to support that assertion.

Mike Robinson

Some of the data to support that are the wider statistics on the impact on passenger numbers. On business connectivity, there are reports on the price insensitivity of business travel. Because businesspeople tend to need to be somewhere, they pay what is going, and they are much less price sensitive than other travellers. Therefore, although the measure is meant to be to do with business connectivity, for that reason alone it is highly debatable whether it will have any great impact, whereas it will probably have much more of an impact on people who are just going on holiday, which was never really the intention.

Chris Day

We do not have the evidence. We are a fairly small organisation. We have tried to look at the contradictory evidence that has been supplied by those who have been arguing the case for a reduction, and we have challenged that. In my previous answer, I touched on the point that it is difficult to see at Scotland-wide level the evidence that, if we make the reduction, Scotland’s economy will benefit. On a simplistic level, the UK economy is growing at about 2 per cent, which is more than economies in the rest of Europe, yet we are told that this is the only country in Europe that charges APD. What is that about? I have a graph that indicates that air travel follows the economy.

Another striking thing about the data that has been supplied by the industry and the Scottish Government is that it assumes that, if we bring people into Scotland by one mode of transport, that is a free gain. They do not seem to consider that there are other parts of the economy relating to transport that might disbenefit. Claims are made about the number of jobs that would be generated at airports, but no questions are asked about the number of jobs that might be lost relating to long-distance coaches or the railway.

Ivan McKee

I appreciate all the points that you make, but I am asking whether we have evidence, and I think that I have got the answer. At the moment, the only analysis that we have seen is the one by Edinburgh Airport, which I think originally came from Biggar Economics.

Chris Day

Yes. As Mike Robinson says, there is a strong case for further independent evidence gathering—it has to be independent—to fill in some of the gaps in the evidence.

Ivan McKee

Yes, because clearly the result will depend on the assumptions that are made, and you are making lots of assumptions. It would obviously help everybody’s analysis to be able to see, based on assumptions that you make and can support, what the impact would be if we did certain things—maybe some effects would not be as large and some would be bigger. As far as you are aware, there is nothing on that and nobody is doing it at the moment.

Chris Day

There might be, but I am not aware of it.

Mike Robinson

We are not aware of that. The tax is a clumsy tool and therefore differentiation in the way that it is applied would probably be helpful.

The Convener

I thank our witnesses very much for coming. I now close the meeting.

Meeting closed at 11:26.  



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Fourth meeting transcript

The Convener (Bruce Crawford)

Good morning, colleagues, and welcome to the eighth meeting in 2017 of the Finance and Constitution Committee. As usual, I ask members to set their mobile phones, tablets and so on to a mode that will not interfere with the committee’s processes.

The first item on our agenda is evidence taking on the Air Departure Tax (Scotland) Bill at stage 1. The committee will have the opportunity to put questions on the bill to the cabinet secretary and his officials. I welcome Derek Mackay, the Cabinet Secretary for Finance and the Constitution, and I welcome back the Scottish Government officials James McLellan, head of devolved taxes, John St Clair, senior principal legal officer, and Mike Stewart, bill manager.

I invite Mr Mackay to make an opening statement.

The Cabinet Secretary for Finance and the Constitution (Derek Mackay)

Thank you for the opportunity to make an opening statement on the Air Departure Tax (Scotland) Bill. The devolution of air passenger duty was recommended by the Smith commission, and following the passage of the Scotland Act 2016, the Scottish Parliament has the power to legislate for a tax that will replace APD in Scotland.

In the programme for government, the Scottish Government announced that a bill would be introduced to establish a tax to replace APD in Scotland. It also reaffirmed its commitment to delivering a 50 per cent reduction in the overall burden of the tax by the end of the current session of Parliament, and to abolishing it when resources allow.

The Scottish Government has taken a consultative approach to engaging with stakeholders on a replacement for APD. Last year, we published a policy consultation, which generated a range of views. After reflecting on the responses that we received, we worked carefully to refine our legislative proposals. In addition, we established a stakeholder forum, which I chair, to provide expert input into the development of our policy and our legislative proposals for ADT.

I have read the responses that the committee has received in response to its call for evidence at stage 1, and I thank all those who have contributed to what has been a thoughtful and thorough discussion of the issues. The committee has taken evidence from a range of stakeholders, and the Government will reflect carefully on all the points that have been raised.

As the committee is aware, the bill was introduced on 19 December 2016. Under the terms that were agreed between the Scottish and United Kingdom Governments in the fiscal framework, APD will cease to apply in Scotland from 1 April 2018. If the bill is enacted, ADT will replace it from that date. The bill establishes the general structure and operation of ADT and includes the power for the Scottish ministers to set tax exemptions, tax rate amounts and tax bands through secondary legislation.

The Scottish Government hopes that the bill will be passed in advance of the summer recess, subject to its receiving parliamentary approval. Once the core foundations of the tax are in place, we will put forward tax rate amounts and tax bands in secondary legislation in the autumn. The fact that that secondary legislation will be subject to the affirmative procedure means that Parliament will have the opportunity to scrutinise our proposals at a later date; it will not be possible for them to come into effect without Parliament’s approval.

The approach of setting tax bands and tax rate amounts in subordinate legislation is consistent with the approach that has been adopted in relation to other devolved taxes in Scotland. The Scottish Government is considering all exemptions from ADT in the round, together with options on tax bands and tax rate amounts.

I have listened to the environmental concerns that have been raised by some respondents. The Scottish Government is committed to undertaking a full strategic environmental assessment. As an example of good practice, openness and transparency, the screening and scoping report was made available for full public comment.

The SEA process will continue to develop as the policy proposals themselves are further developed and, as part of the next phase of that process, an environmental report setting out the findings will be published and made available for comment alongside the policy proposals.

More widely, the recently published “Draft Climate Change Plan: The draft third report on policies and proposals 2017-2032” sets out how the Scottish Government proposes to meet the statutory emissions reduction targets under the Climate Change (Scotland) Act 2009. Those targets, which have been set at levels recommended by the United Kingdom Committee on Climate Change, cover all emissions across the Scottish economy, including domestic and international aviation.

Revenue Scotland, Scotland’s tax authority for devolved taxes, will be responsible for collecting and managing ADT in the same way as it has been responsible for land and buildings transaction tax and Scottish landfill tax since 1 April 2015. The Scottish Fiscal Commission will assume responsibility for developing a model for ADT and, once the policy position has been set out, will produce independent forecasts of revenues to inform the Scottish Government’s 2018-19 draft budget.

I look forward to answering the committee’s questions, convener.

The Convener

Thank you, cabinet secretary. Some of my colleagues will get into the specific details of the bill, but I think it only fair to open with a question about the evidence with regard to the Government’s policy. In evidence to the committee, the airline industry and environmental groups had a lot of comments to make about the lack of an evidence base, particularly on economic and environmental issues, for the Scottish Government’s stated aim of a 50 per cent reduction in the level of ADT in the current parliamentary session.

I heard what you said in your opening remarks, cabinet secretary, and I note in your letter of 24 February the reference to the impact of the 50 per cent reduction on emissions. Nevertheless, how do you respond to the wide-ranging criticism about the current lack of evidence?

Derek Mackay

Are you talking about evidence specifically on environmental concerns, convener?

The Convener

I am talking about the environmental and economic assessments.

Derek Mackay

Okay. There are a number of reports out there and a great deal of evidence, and you can draw your own conclusions on what each piece of evidence might mean. However, I want to home in on one particular aspect: this tax is one of the highest of its kind in the world—and certainly the highest in Europe—and it is self-evidently the case that there is an issue in that respect.

Indeed, our agencies have informed us, as a result of their engagement with airlines and airports, that that is a key consideration for airlines when they think about where to establish new routes, and it is therefore a consideration with regard to attracting economic growth. It is, as I said, a key consideration for airlines in deciding which destinations to go to, and from that evidence, that information and that experience, the tax seems to be a barrier to Scotland developing new routes. Some Scottish airports, such as Edinburgh and Glasgow, have had some success, while others, such as Aberdeen, are not in as strong a position and have not enjoyed the same growth. The experience of the airports is that APD has had and is having an impact on attracting and sustaining routes.

As I said, a number of reports on the matter have been published, and there is something of a consensus around and a consistency of views on the economic benefits of a 50 per cent reduction. Going beyond the question of what a policy change will look like, I note that two operators—easyJet and Ryanair—have identified how they would allocate routes in future and have said that they would increase capacity if the tax were cut by 50 per cent.

I suppose that those are the different pieces of evidence that I draw from—what has been published, what operators and airports are telling us about their experience, what would assist our economic case and what would improve our international connectivity—in recognition of the rate of this tax across Europe and more widely. Furthermore, the World Economic Forum has identified air links as an important driver of global competitiveness.

On the environmental side, obviously more work has to be done on the specifics of the policy. What we have at this stage is enabling legislation to allow us to collect the tax; more detail will come with the tax rates and bands, and more information about the impact of the proposal will come from the required strategic environmental assessment, which must consider those matters and publish the evidence on what, specifically, the policy looks like with regard to the rates and bands.

In the context of the Government’s ambitious environmental policies, it is recognised that the policy could lead to an increase in emissions and that we will have to work harder in other areas. To put the emissions into context, as I understand it, an increase of 3 per cent in aviation emissions would be a 0.1 per cent increase in total Scottish emissions. However, based on the evidence that there is an environmental impact, there is a recognition that that is an increase and there must therefore be efforts in other areas. There can be environmental studies into the generic policy, but more detail will follow from the setting of the rates and bands. That will give more clarity on the environmental impact and the economic output.

The Convener

I understand that we are dealing with the principle of whether there should be a tax, but can you give us an understanding of what the timescales might be? I will come back to the economic stuff, but can you give us any detail of the timescales for the strategic environmental assessment? When might that be forthcoming? Obviously, if and when the statutory instrument emerges, that will be a key point for members to determine whether the evidence exists to examine that.

Derek Mackay

That is right, convener. We have to have the information from the SEA as we set the tax policy. I ask Mike Stewart to cover the timescales in the build-up to that determination.

Mike Stewart (Scottish Government)

The remaining step of the SEA process is to publish an environmental report as well as a set of proposals from the Government on the tax banding and tax rate amounts. There will be a 12-week period for public consultation, which is a statutory part of the SEA process. That consultation process must be concluded and a reasonable amount of time must be allowed after that before the secondary legislation for the tax bands and tax rate amounts can be laid before Parliament. As the cabinet secretary said, the Government plans to set out the tax bands and tax rate amounts in secondary legislation, which will follow enactment of the bill. We will probably lay that secondary legislation some time in the autumn. I cannot give exact timings but, working back from that on the basis of a 12-week process, the SEA consultation will most likely begin before the summer recess.

The Convener

So it would be at least 12 weeks before the statutory instrument is brought before Parliament.

Mike Stewart

Yes, plus the reasonable amount of time that has to be allowed after the conclusion of the consultation, to enable the Government to take on board any feedback that comes in. With most consultations, most of the responses tend to come in right at the end of the consultation period.

The Convener

I will deal with the economic impact assessment now. Committee members are aware that a number of pieces of work have been done by the airports or airline operators on their view of the issue. However, has the Government undertaken any economic assessment of the impact of the 50 per cent reduction in the tax?

Derek Mackay

Our officials have certainly looked at all the reports and considered them. To the best of my knowledge, we have not commissioned any independent research of our own, but we have certainly looked at all the reports that have been published and provided, and we have also looked at the experience in Ireland.

The Convener

Will you commit today to carrying out an independent assessment of the economic case?

Derek Mackay

If the committee wishes me to look at that, I will certainly consider it—absolutely. I again make the point that the bill is enabling legislation, to allow us to collect the tax. Obviously, a key stage is when we decide at what levels to set the tax. The consideration of that will probably tell us much more about the environmental and economic impact. If the committee, as one of its recommendations, wishes me to consider that, I will do so.

The Convener

It is highly likely that we will recommend that, although obviously we will not consider our report for a couple of weeks yet.

That is a helpful beginning. I think that Ivan McKee wants to raise issues about the economic impact.

10:15  



Ivan McKee (Glasgow Provan) (SNP)

Yes, I wanted to drill further into that. It might be difficult to go further, because you do not have an independent economic assessment at this stage, but I wanted to go into a bit more detail. I am starting from the position that one of the aims of the 50 per cent reduction is to generate more economic activity, as it was believed that that would bring more money into public sector finances as a consequence.

We have seen some analysis by Biggar Economics about Edinburgh airport, and I would like to go a step further and look at the range of routes and different types of passengers, because some of those have a much higher impact on potential economic growth than others. Inbound tourism is clearly preferable to outbound tourism, medium-haul and long-haul travel might bring different economic benefits, depending on the routes, and business passengers bring a greater economic benefit than tourism does. Have you looked at segmentation and at which segments give the most economic benefit, so that you can tailor the tax to enable and encourage growth, or are you just taking a blanket view and making the change in the hope that it stimulates economic activity across the board?

Derek Mackay

We want to refine the policy at the next stage, when we set rates and bands, to help us to achieve the Government’s economic strategy, which will have to adapt to circumstances such as the changed European outlook and our connectivity and business and tourism opportunities, which have changed as well. The convener asked whether the Government has commissioned its own independent survey, and the answer is that we have not done so but we have looked at all the other pieces of work that are in the public domain, who commissioned them, what they were for and the summary of each report. All that can be fed in, once we have the power and the ability to collect the tax, so that we can arrive at a decision on the rates and bands.

There are environmental issues to be considered as well as economic opportunities, but the Government’s economic message is about Scotland being open for business, supporting tourism and wanting strong connectivity, and many members around this table understand how airports can be drivers of the economy. Our message on connectivity is that it strengthens our position on Europe, and all those things will feature in the next stage of considering what gives us economic benefit and what the Government’s spending plans will be. How the tax ties in with all that is a matter for future consideration, and we will look at how any reduction in the tax should be applied and distributed, but I am not prejudicing that this morning. We are talking about the foundations of the legislation that will enable us to collect the tax, but we are not putting our proposal into the public domain, because that has yet to be determined.

Ivan McKee

That is clear. You will look at the data, you will consider segmentation and which segments of the market might generate the most economic stimulus, and there will be further consideration at a future stage.

Derek Mackay

Of course.

James Kelly (Glasgow) (Lab)

It is disappointing that the Government is introducing a major piece of legislation without having conducted its own research and assessment. I note the minister’s comments that he will await the committee’s recommendation, but I would like to ask about a specific point. In preparing to introduce the bill, had you given any consideration to the impact of Brexit?

Derek Mackay

That is certainly a consideration as to how we would apply the reduction or set rates and bands, and your point is helpful as it shows that putting everything in primary legislation would not necessarily be the appropriate thing to do, because the world is changing, routes and operations are changing, and politics and budgetary considerations are also changing. As with other taxes, we have to be flexible and adept, because the international connection issues would naturally feature in our policy going forward.

James Kelly

Does that mean that you are reconsidering your policy intent to reduce the tax by 50 per cent?

Derek Mackay

The policy intent is to reduce the tax by 50 per cent and then abolish it when resources allow. That 50 per cent reduction is intended to be over the parliamentary session, so the policy intent has not changed. How that reduction is distributed is still to be determined.

James Kelly

You say that the bill is enabling legislation, but you are setting out a clear policy intent. It will have a substantial impact, so it is important that there is robust research to back that up.

The Parliament debated Brexit yesterday, and the Economy, Jobs and Fair Work Committee’s report on that raised a concern that the impact of Brexit would have an adverse effect on poor and elderly households. Is it a consideration that reducing the tax would benefit families that are able to afford flights but adversely affect poor and elderly households, as the Economy, Jobs and Fair Work Committee underlined?

Derek Mackay

The wider point is the one that you make on the Government’s wider spending plans. I do not dismiss that, but the issue of Brexit raises a point about international connectivity. Post the Brexit vote, we want to ensure that it is clear that Scotland has a desire to remain connected to the world. Connectivity is also important for economic and business growth. Business organisations also support that position.

You are right that there is a public expenditure point, but the other points are international connectivity, engagement with Europe and the decisions that are to be taken on the tax rates and how tax is distributed within the financial envelope. All those matters have to be considered when we consider the tax rates and bands. I am not avoiding the questions on policy intent but that is not what I am asking you to determine.

Murdo Fraser (Mid Scotland and Fife) (Con)

The evidence that we have had for and against a reduction has been poor. When you introduce the statutory instruments, it would be useful for them to be backed up with a proper economic analysis. I reinforce the points that have been made about how helpful the committee would find that if it were possible for that to be done.

My main question concerns timing. I understand that your policy commitment is a 50 per cent reduction by the end of the parliamentary session. Will you say anything more today about when you intend to introduce that reduction?

Derek Mackay

No, because that would be premature. We have to establish the legislation, as that allows us to collect the tax. After that, there is further discussion to be had on what a reduction will look like and how it will fit with our economic plan and connectivity ambitions and with environmental considerations. All of that should be taken together. There is evidence from the impact of Ireland’s abolition of the tax, but we should be able to consider all the evidence—everything that currently exists, everything that we are trying to achieve as a country and our economic strategy.

It is fair to say that we have to return to Parliament with the evidence on the reduction, what we would be trying to achieve with our preferred approach and whether it makes economic and environmental sense. We have a broad policy intent. Having established the ability to raise the tax, we will return to Parliament with how that policy intent is refined into the tax proposition that is to be considered. The more information that is produced to support that case, the better. I get that point and I commit to doing that.

Murdo Fraser

I want to be clear on timing. Are you saying that you plan to introduce the instruments in the autumn and that, at that point, you will produce all the evidence to go along with them?

Derek Mackay

That is correct but, as has been set out, in advance of that, we will publish the SEA, which will speak specifically to the tax options.

The Convener

We have another couple of questions on wider economic and environmental issues, and then we will go to Patrick Harvie on the specifics of the policy and links to the bill. I believe that Neil Bibby has a wider question about the economic policy, and Maree Todd has a question on wider environmental issues.

Neil Bibby (West Scotland) (Lab)

I want to follow up on James Kelly’s question about the impact on people in Scotland of the proposed cut. Cabinet secretary, in addition to looking at your economic impact case, will you look at the impact on the poorer sections of society versus that on the most well off? Will you look at the impact that your policy will have on those different groups of people in Scotland?

Derek Mackay

Obviously, it is right that any financial decision that the Government makes takes into account those kinds of consideration. However, it would not just be a matter of what is raised by way of the tax, because we must also reflect on the economic benefits that would come from growth, whether that is new routes, sustaining existing routes or supporting our airports. Mr Bibby’s regional area includes Glasgow airport, which is also in my constituency area, so I should declare an interest in that regard.

Supporting our airports has wider benefits through the employment that that brings. There are many aspects to the policy, but determining a tax and a potential tax reduction has to be considered in the context of the Government’s overall spending plans.

Neil Bibby

You referred to the research that you have looked at. The Office for National Statistics has suggested that, if APD was cut in half, that would save the top 20 per cent of earners £73 but it would save the poorest just £4.50. The Civil Aviation Authority previously identified that the mean income of those who fly from Glasgow, Aberdeen, Edinburgh and Inverness is over £40,000 a year. Are you aware of those reports? Is that information part of your reflections on the research that is available?

Derek Mackay

Yes, I have looked through a number of the reports. However, I repeat that I do not think that we can view the policy in only that way. I know that we are going beyond the bill to the issue of setting the tax and looking at what the rate could be and where the reduction could be distributed, but I think that we have to look more widely at all the potential economic benefits of the policy. If the policy will generate wider economic growth, we must consider who will benefit from that. For example, there is a spectrum of employment opportunities at an airport, and not all airports are in the strong positions that Edinburgh and Glasgow are in. It is a fair comment that we must look at everything in the round while making a determination on the rates.

Neil Bibby

You said that you have looked at the experience in the Republic of Ireland. As part of your research, have you also looked at the impact on money going to the public purse in Ireland?

Derek Mackay

It is funny that you should mention that, because when I came into my post I had a flurry of meetings with other finance ministers, including the Chancellor of the Exchequer, and I had the pleasure of meeting Paschal Donohoe, an Irish finance minister who is more focused on public expenditure. I asked him about the airport tax decision in Ireland, as I was interested in it. He said that he absolutely believed that it was the right thing to do economically and that it has supported the Irish economy. That was the view of the Irish expenditure and finance minister, but the evidence supports that view and shows that the policy delivered more economic activity, which the Irish believe helped to fuel their economy.

The figures show that, since Ireland abolished its air passenger tax in 2014, Dublin airport has achieved the highest rate of passenger growth of any major airport in Europe, with passenger numbers increasing by 15.4 per cent in 2015 and a year-on-year increase of 13.4 per cent in the first half of 2016. I am sure that the Irish would argue that that led to further economic benefits and tax receipts that helped to fuel the economy.

Neil Bibby

It would be helpful to have more information on that.

Derek Mackay

Okay.

Maree Todd (Highlands and Islands) (SNP)

As you know, cabinet secretary, I represent the Highlands and Islands. Environmentalists have made a reasonable case that supporting rail alternatives to air travel would be more environmentally friendly, but my part of the country does not really have rail alternatives. Some evidence was put forward to suggest that other alternatives might not be environmentally friendly—for example, a sole person driving a large car and getting a ferry is probably less environmentally friendly than someone taking a flight. Can you give us your thoughts on that? I know that, again, we are talking about the detail.

10:30  



Derek Mackay

As a former transport minister, I am very pro rail; it has a lot of benefits in terms of the environmental impact. Domestically, we are moving increasingly towards electrification. There are subsidy issues with rail, but I am absolutely pro rail. However, as finance minister, I cannot view the world only through the prism of the central belt, and your point about the Highlands and Islands is very well made: not everyone has access to the central belt stations to get to London.

I will make two points. First, taking a national perspective, air travel gives a level of connectivity that would not otherwise exist. That is significant. Secondly, it is not convenient for everyone to travel from certain parts of the country to other parts of the UK by rail, and aviation offers different destinations and routes in comparison with rail.

I do not think that there is a battle between rail and aviation, because each presents different opportunities for different parts of the country. I repeat that we must not view the issues solely through the prism of the central belt.

The Convener

Does Liam Kerr have a supplementary to that?

Liam Kerr (North East Scotland) (Con)

Yes—it is a matter arising from that response. Cabinet secretary, you rightly say that not all airports are in a similar situation to that of Edinburgh and Glasgow, and that you do not want to view things through the prism of the central belt. When you do your robust evidence gathering, will you investigate the possibility of differentiated schemes for different areas and different airports, depending on your preferred outcomes and on local needs?

Derek Mackay

You make a fair point about considering local needs, but the best way to achieve that is to design a national policy that serves local needs. It may be difficult to establish a national tax policy that can be segmented in that way, but the key point is whether we will understand the needs of every part of the country in designing a policy, and the answer to that is yes. There are different ways to do that, but our policy must ultimately be compliant and consistent as well as practical for operators to administer.

We will do that by designing the right national policy, rather than try to have different policies for different parts of the country. That would be another way to do it, but it might not be legally compliant.

Patrick Harvie (Glasgow) (Green)

Good morning, cabinet secretary. I think that the idea is that, now that everyone has the plates spinning, my job is to make you drop one or two of them. I will start with one of your first comments. You said that there is a range of reports and research on the economic evidence. Can you tell us which ones you rely on?

Derek Mackay

I certainly rely on the advice from officials, and I have looked at all the reports to produce a consensus. There is a range of reports, and I would not pick and choose between them and say that one is more credible than the others. They all inform the Government’s position. I do not think that it would be right for me to set out a hierarchy or prioritise them.

Patrick Harvie

So there is not an economic projection—on, for example, the number of jobs that would be created either in the aviation industry or through induced employment in the wider economy—that you consider to be reliable.

Derek Mackay

There seems to be a consensus around a few of the reports that converge on some of the benefits. The PricewaterhouseCoopers, York Aviation and Edinburgh Airport reports seem to be consistent in some respects in their outputs, but I would not pick any one individual report, having looked at a review of them all.

Patrick Harvie

So the Scottish Government does not have a view on what level of employment or economic activity would be generated by its current policy.

Derek Mackay

Each report has looked at the policy and arrived at what it thinks the economic benefits are. To be absolutely accurate, one of the determinants will be what operators do based on Government policy, and what they commit to by way of capacity, additional routes or sustaining routes—whatever that happens to be.

Patrick Harvie

And you do not know what will happen.

Derek Mackay

The operators now say that they cannot give absolute certainty as to what they will do until they know what the tax rates will be. The consensus is that any tax reduction—the airlines of course want the biggest reduction possible—will lead to more routes, more connections and more capacity and, therefore, more jobs and more economic growth.

The extent to which that boils down to absolute numbers will depend on what the Government proposes by way of a tax reduction and how and when that is distributed.

Patrick Harvie

Therefore, you accept the claim about increased numbers of routes without question, even though in Northern Ireland, for example, after the abolition of its aviation tax, some routes have simply shut down. The tax rate does not change the viability of the route itself.

Derek Mackay

It would change the viability of some routes, because of behaviour.

Patrick Harvie

Which routes?

Derek Mackay

Which ones in the future in Scotland? I do not know which ones, because it is hard to assess right now.

From the perspective of the airlines and airports, some routes are doing very well and some will change—some were announced last week, I think. Some routes will be successful and some will not.

The advice is that, in trying to secure new routes to Scotland, we are not competitive because we have one of the highest taxes of its kind in the world, and that is a consideration for operators when they look at where to locate new routes. Some airports have been quite successful of late and others not so; some routes are successful, others not so. In establishing new routes, the first thing that an operator will look at is the tax take. Therefore, it is a consideration in all of those examples.

It is hard to be formulaic on the outcome of a tax policy without having set it. Of course that factor should be fully considered when we determine the distribution of any reduction and how the tax is applied.

Patrick Harvie

Therefore, you still fall back on the advice from the industry, which would like to pay less tax.

Derek Mackay

Well—

Patrick Harvie

Let us look at the tourism deficit. We know that tourism results in some people coming to Scotland and spending money, but that it results in more money being spent by Scots who travel overseas for holidays elsewhere and spend a larger amount of money. There is a deficit. Will your policy see that deficit go up or down?

Derek Mackay

There is obviously an economic return on people coming back, when the routes are established.

Patrick Harvie

The point is that establishing a new route, or a greater flow of traffic on an existing route, will see money go in both directions. At the moment, we have a tourism deficit. Will that deficit go up or will it be reduced as a result of your tax changes?

Derek Mackay

It is hard to say, because I have not proposed what the tax changes will be.

Patrick Harvie

You have stated that the overall policy is a 50 per cent reduction in the tax take over the course of this parliamentary session.

Derek Mackay

You asked about what the impact will be on routes. In answer to that, I say that there will be more passengers, more capacity and more routes. Surely Patrick Harvie, as an internationalist, would welcome more international connections opening up to the world, so that there is engagement and ability to travel. We believe that the policy will generate more economic growth for Scotland.

Patrick Harvie

You believe that, but you are still not citing any evidence to demonstrate it.

Derek Mackay

You are asking me to cite evidence on what routes will change as a consequence of the tax policy that I have not set out.

Patrick Harvie

Okay. Let us look at the fiscal impact—the impact on the public purse. We have heard evidence—

The Convener

I am sorry to interrupt but, before we go there, I know that one of Ash Denham’s questions is on the issue of routes. We will complete that and then come back to Patrick Harvie’s fiscal question. Both Ash and Willie Coffey have questions on routes, so we will exhaust that and then come back to fiscal impacts.

Ash Denham (Edinburgh Eastern) (SNP)

New routes are key to economic impact. A friend of mine who travels regularly for business often finds it difficult to find a flight to the European destination that they are going to, which means that they have to take two flights and go via Heathrow. That is not great from an environmental perspective, and it is not particularly good from a business perspective.

Indeed, an Ernst & Young report that came out last year on foreign direct investment said that regional connectivity was an important factor when businesses made investment decisions. I want to get to the bottom of whether that is the main thrust or objective of the Government’s policy. Instead of competing with, for example, Newcastle airport, are we actually trying to compete with Stockholm or Copenhagen for new routes?

Derek Mackay

That is a key point. First of all, there has to be a benefit. I am not trying to prejudice things with regard to where any reduction might be distributed, but there is clear economic benefit in getting access to hub airports, because that unlocks so many other opportunities and destinations. We are focusing on the opportunities for not only direct flights but flights to hub airports and all the connections that they bring.

There is a view that the policy is just about competing with other UK airports, but that is not the case. It is about competing with airports such as Dublin, Stockholm, Lisbon and Barcelona and ensuring that we are able to attract airlines to provide routes to Scotland. The competition is, as you have suggested, much wider than the UK.

Ash Denham

Ryanair recently announced that, as a result of this policy, it was considering bringing 15 new routes to Scotland. What expectations can we have about whether the decisions on those routes will be long term?

Derek Mackay

The issue with some air operators in Europe is that they can be quite adept and flexible, therefore the more competitive we are, the better placed we are to attract such operators and their European access. Some short-haul European routes are easier to change than others that might have a longer decision-making and implementation period and which therefore have sustainability. The Government wants new routes to be sustained, and part of the policy approach is to try to retain what we have.

Ash Denham

Finally, if the objective is to increase the positive economic impact on Scotland, how will we judge whether the policy has been successful?

Derek Mackay

That can be judged through the Government’s economic strategy. However, as far as international connectedness is concerned, the evidence of success will be more routes, more passengers, more destinations reached through Scotland’s airports and more economic growth, as well as sustaining what we already have.

The Convener

On that specific point, evidence that we have received from the Chartered Institute of Taxation suggests that there should be some form of monitoring to assess whether the bill’s intended outcomes actually deliver the objectives in the policy memorandum. Will the Government consider that point?

Derek Mackay

Yes, I think that it would be helpful to consider an evaluation of the economic outputs that the fiscal policy has achieved. There will, of course, also be the environmental assessment, but I am open to that kind of evaluation of tax policy and intervention.

The Convener

That is something that we can reflect on when we come to write the committee report.

Willie Coffey (Kilmarnock and Irvine Valley) (SNP)

Cabinet secretary, I want to briefly fly you down to Prestwick. At previous committee meetings, we have heard evidence of the positive impact of this kind of policy on regional airports in Ireland; indeed, a moment ago you mentioned the strong increase in passenger numbers in Dublin. At a meeting of the British-Irish Parliamentary Assembly that I attended in 2014, Ryanair’s chief executive, Michael O’Leary, said quite clearly that he could double passenger numbers through Prestwick if the tax were removed completely—and that was only in relation to the London and Belfast routes. Given what we have already said, if you are asked to conduct any kind of analysis for the committee, can you ensure that there is some kind of regional impact assessment of airports such as Prestwick so that we can see what might be the positive benefits for them?

Derek Mackay

I respect the member’s interest in Prestwick, but I have to point out that we are trying to support the sustainability of the overall sector. I come back to Liam Kerr’s point about the impact with regard to local circumstances. Those are all matters that we would consider in arriving at a decision on tax policy. I am well aware of Ryanair’s operation at Prestwick and the comments that it has made in the press about what it would do if APD were reduced.

10:45  



Willie Coffey

Is there any more hard data from Ireland about the impact on the regional airports? The issue has been mentioned several times, although we have not had that particular evidence presented or sent to us. Is there any hard data to give us an indication of what has happened in the regional economies in Ireland as a result of the tax going?

Derek Mackay

I will see what further information we can provide to the committee.

Willie Coffey

Thanks very much.

The Convener

Patrick Harvie will take us back to the fiscal stuff. I should also say that a number of members still want to get in.

Patrick Harvie

Cabinet secretary, several of the reports that you have cited claim that there will be a benefit to the public purse through increased taxation in other areas, as reducing this tax generates other forms of economic activity that contribute to the tax take. First, do you agree with that analysis? Secondly, have you achieved an answer to the question that the representatives of Edinburgh Airport, for example, were not able to answer when it was put to them by the committee about the proportion of induced taxation that will be paid to the Scottish Government in devolved taxes and the proportion that will be paid to the UK Government in reserved taxes?

Derek Mackay

No, I do not have an answer to that question, Mr Harvie, but it is a fair one. What I will do is tell you why it is not a reason for our not doing anything. When the Scottish Government makes an intervention in an area to support the economy, it does not always get the tax receipt from that, but that does not mean that we should not make the right decision to grow our economy. I do not have the analysis of what would go to the Chancellor of the Exchequer and what would come to the Scottish Government. As I have said, the consensus is that the policy will deliver greater economic growth, but I do not have such a breakdown.

Patrick Harvie

So you do not know whether, if the Government’s policy objective is met and you see the kind of economic activity that you would like to see generated, that will put the public finances in the Scottish Government in a stronger or weaker position.

Derek Mackay

As Mr Harvie will be aware, the nature of the block grant adjustment is such that we will know specifically what the return will be from the policy on air departure tax once it is being raised. However, it is hard for me to determine the share of other taxes that we will benefit from. If the policy improves employment, there will be an increase in income tax, and we will also have assignment of VAT in due course. However, it would be hard to break all that down, and my giving a figure now would pre-empt my setting of the tax rates, which would more adequately inform such an analysis.

Patrick Harvie

I was going to ask about income tax. The three studies that you have cited as having some reliability attempted to put figures on, for example, the income tax being generated, but they seemed to be based on out-of-date income tax rates, bands and personal allowances. Has the Scottish Government attempted to update that work, given how much above the personal allowance the induced employment generated in the hospitality sector might be?

Derek Mackay

Not specifically. I make the point again that that would pre-empt what the tax rates might be.

Patrick Harvie

To me, that reinforces the notion that you are asking us to pass a bill that places no requirements or constraints on ministers regarding the issues that they must consider in proposing rates and bands.

Derek Mackay

I do not agree. I have told the committee that I think that there should be economic and environmental consideration in advance, as we put our tax position across. What I am asking the Parliament to consider right now is the ability to raise the tax.

Patrick Harvie

Would you be open to placing those requirements on the face of the bill?

Derek Mackay

I have given a commitment with regard to the information that the Government could provide. The SEA is a requirement that we are duty bound to deliver in any event.

Patrick Harvie

I would prefer that to be conducted before a policy such as a 50 per cent cut in APD was adopted, and I would prefer that we looked at that social, economic and environmental analysis before deciding what the policy should be instead of deciding on a policy and then looking for evidence to support it.

Derek Mackay

We are getting into the realms not just of what the Government is proposing but of what political parties have proposed in their manifestos and why we have reached the decisions that we have reached. As I have said, there is evidence that what is proposed will support economic growth, but the situation is dynamic because of international events, public expenditure and the dynamics of Parliament. A range of things come into play. I am accurately outlining the steps that we will take before I put a tax proposition to members. You are asking me specifically about the evidence that should rightly be considered before we take those steps, and I am being as open as possible about how that is presented to Parliament, through committee, in a due process.

Patrick Harvie

However, you have already decided on a policy—and it is a 50 per cent reduction in APD over the current session of Parliament.

Derek Mackay

Because this Government believes—

The Convener

You have made the point, Patrick.

Patrick Harvie

Okay. On the environmental aspects, I note that, following our first evidence-taking session, we received a letter from one of your officials, the deputy director of the fiscal responsibility division, telling us that

“the Scottish Government has made use of an energy modelling system ... to assess how effort”

on carbon reduction

“is best shared across sectors of the economy.”

Is there a view in the Scottish Government about what share of that effort should fall to the aviation sector?

Derek Mackay

In terms of environmental effort?

Patrick Harvie

In terms of carbon reduction, yes.

Derek Mackay

We have set out a climate change plan. We recognise the potential for increased emissions as a consequence of the policy, so we will have to work harder in other areas. We will produce the SEA on our policy proposition—

Patrick Harvie

I am sorry, but I asked quite a specific question. The statement is that the energy modelling system assesses

“how effort is best shared across sectors of the economy.”

I am asking whether the Scottish Government has a view about what share of that effort should fall to the aviation sector. In effect, the UK Committee on Climate Change thinks that aviation emissions should be capped at 2005 levels by 2050, while the aviation industry says that it can halve emissions from that 2005 baseline by 2050. Whether we regard its efforts in that regard as credible, that is what it says it can do. Does the Scottish Government have a policy on what aviation emissions can be, or how much they can be allowed to grow?

Derek Mackay

As Mr Harvie knows, I have responsibility for fiscal policy. I am happy to engage with the Cabinet Secretary for Environment, Climate Change and Land Reform and report back on the wider environmental view on that, but I am sighted on statistics—

Patrick Harvie

Surely you have done that before reaching this point with the bill.

Derek Mackay

As I have said, the environment secretary has lead responsibility for environmental matters. You are asking more deeply—

Patrick Harvie

What did they say?

Derek Mackay

That is what I am saying. I will return to you with Roseanna Cunningham’s position on the apportionment of climate change emission contributions.

Patrick Harvie

So you have not asked.

Derek Mackay

Mr Harvie, I was able to outline our position. If you want me to go through the position on the environment in more detail, I can do that—

Patrick Harvie

I am doing my best to give you a chance to do so.

Derek Mackay

If you wish me to continue, I covered this in my statement earlier, saying that we recognise—

The Convener

I have had enough of the two of you going back and forth on this, so I am going to stop that particular conversation at this point. Is there anything else that you want to ask the cabinet secretary, Patrick?

Patrick Harvie

Yes. The same letter says that the Scottish Government is

“prepared to work harder in other areas”

based on the increased aviation emissions. Can you tell us what preparation there has been in that respect?

Derek Mackay

As Mr Harvie knows, we have taken our climate change plan to Parliament and we have a number of proposals and recommendations on what we will do to reduce emissions across transport, housing and agriculture and through energy efficiency and decarbonisation of the transport system. There is a range of policies by which we will meet our statutory targets on the environment.

However, we recognise that, even with some of the progress that has been made in aviation around fuel efficiency and technology, that will take us only so far. If there is growth in the sector and there are more emissions, that increase has to be within an area that is tolerable to the Scottish Government. Increased emissions as a consequence of the policy might amount to about 3 per cent of aviation emissions—which is 0.1 per cent of total Scottish emissions—and the Committee on Climate Change, which has looked at the matter, has advised that any increase in emissions from the reduction in APD is likely to be manageable.

We have published the draft climate change plan, which sets out how the Government proposes to meet its statutory emissions reduction targets under the Climate Change (Scotland) Act 2009, and, as I have said, a range of actions in other portfolios and sectors is contributing to our environmental case. We will also look at the strategic environmental assessment to see what else can be done, and ultimately we will arrive at our decisions on tax rates.

Patrick Harvie

Neither that answer nor the draft climate change action plan tells us what actions are going to be necessary in other sectors to pull the weight that aviation is not being required to pull because it is being given a free ride on climate change.

Derek Mackay

But it gives the overall targets on climate change and what we are doing in other sectors to meet those statutory targets.

Patrick Harvie

So you do not worry at all that following the example of Ireland, which you have used as a comparison with regard to the economic benefit that it feels that it has had, will leave us in the same position as that country. It has less ambitious climate change targets, but the most recent report that I could find shows that it is failing to meet them.

Derek Mackay

No, I do not believe that our climate change targets would be undermined.

Patrick Harvie

What is the basis for that belief?

Derek Mackay

Well, I think—

The Convener

Come on, Patrick. You have had a fair crack of the whip in this area.

Patrick Harvie

But there is nothing here.

The Convener

It is becoming a ding-dong exchange again, and it is not really getting us anywhere. We will move on to Adam Tomkins on the issue of exemptions.

Adam Tomkins (Glasgow) (Con)

Cabinet secretary, you might be relieved to know that I do not want to ask you about the economic impact or the environmental assessment of the tax. I want to ask you about something in the bill—or, rather, about something that is not in the bill. If I have understood it correctly, tax bands, tax rate amounts and tax exemptions are not legislated for in the bill. Is that correct?

Derek Mackay

Yes.

Adam Tomkins

Why have you made the judgment not to legislate in the bill for tax exemptions given that tax exemptions are included in the current APD legislation and in the LBTT legislation that the Parliament passed in the previous session?

Derek Mackay

That is a good question. The reason for our decision is that we want consistent flexibility and the ability to adapt, as it is the Government’s intention to match the current exemptions for passengers and ministers have previously agreed to retain under ADT all the current UK APD exemptions. However, as Mr Tomkins will be well aware, there is a difference between Scottish legislation and what might be done at Westminster, which has a finance bill every year. That practice is, of course, worthy of consideration by the Scottish Parliament, and the budget review group might conclude that we should do that. However, because we do not have that legislative route every year through which to change elements of finance policy—or legislative policy—it is more appropriate that we use secondary legislation to make such changes. That is not fundamental to the operation of the bill or the tax, but the Parliament might want to have the flexibility to change tax rates and exemptions.

We can take a view on whether it was right that, in the past, exemptions were included in primary legislation, but I think that it is far more appropriate to have an enabling power that allows ministers and the Parliament to consider matters, because that allows us to respond far more flexibly to changing circumstances. If the UK Government did something by way of exemptions and we felt that it was important to replicate that in Scotland, the Government and the Parliament should have the ability to do that without returning to primary legislation and all the stages that are required for that. The use of secondary legislation would still allow maximum parliamentary scrutiny.

It is true that rates and bands feature more in LBTT and landfill tax, which are devolved to Scotland. However, I think that exemptions should be dealt with through secondary legislation for reasons of flexibility and the ability to adapt.

Adam Tomkins

Are you going to take the exemptions out of the LBTT primary legislation and put them in regulations so that you can have more flexibility?

Derek Mackay

I am not proposing to do that.

Adam Tomkins

I am struggling to understand what the difference is. Why does having the exemptions in the primary legislation for LBTT give you enough flexibility but putting exemptions in the bill that is before us not give you enough flexibility? I do not understand.

Derek Mackay

It is a matter of fact that putting exemptions in primary legislation does not give us the same flexibility, but I am not suggesting that we should revisit the primary legislation on LBTT or the landfill tax. Particularly for LBTT, the exemptions seem to be pretty static. Exemptions for passengers under the air departure tax might also be fairly static. For example, an exemption for children who are aged under 16 on the date of travel in economy class is not likely to change. However, other exemptions might be subject to change. If the UK Government considers that there should be a change in exemptions, it can make that change through a finance bill in the House of Commons, but I do not have that option.

11:00  



Adam Tomkins

It might be helpful if you could give us a table of all of the changes to passenger and aircraft exemptions that have occurred at United Kingdom level since the introduction of the tax, so that we could see how frequently the flexibility is required in practice. I do not know what the data on that would show.

There is a twofold concern. First, effective parliamentary scrutiny is important, irrespective of the kind of legislation that we are talking about. We all know that the most effective parliamentary scrutiny comes with primary legislation and that all forms of secondary legislation have secondary levels of parliamentary scrutiny. Secondly, there is a point about legal certainty and the rule of law. I accept that the situation is fast moving, particularly with regard to the changing needs of Scottish connectivity, Brexit and all of that. Nevertheless, even fast-moving areas of Government regulation have to be subject to the rule of law, and the way in which we subject Government discretion to the rule of law is by having as much as possible in primary legislation, not by having as much as possible in the hands of ministers. Do you accept all of that?

Derek Mackay

I think that some of what you say is deliberately provocative, but I accept that the Parliament should scrutinise those functions. I would not describe statutory instruments—whether they are subject to affirmative or negative procedure—as a means by which ministers can escape their duty to attend to Parliament or make a case. I attend committees for the purposes of full scrutiny of statutory instruments, and the committees and the chamber can decide what to do with them. I am not asking for an executive order; I am asking for statutory instruments to give us the ability to change. If I was talking about an executive order, we might be having a completely different debate and Mr Tomkins’s point might be stronger.

Adam Tomkins

I am not accusing you of replicating the style of administration of President Trump—

Derek Mackay

I am glad to hear it. That might be one of the plates that Mr Harvie was trying to encourage me to drop.

Adam Tomkins

I am trying to understand the extent to which it is necessary for you and your ministerial colleagues to have the flexibility to change not the bands and the rates but the very shape of the tax. Exemptions are qualitatively different from the bands and the rates. Bands and rates are about how much is liable; exemptions are about who is liable to pay and in respect of what. That is a substantial and qualitative difference. My view is that we have not heard enough about why it is necessary to put those exemptions into secondary legislation rather than keep them in the primary legislation when that has not happened with UK legislation on air passenger duty and when it did not happen with this Parliament’s legislation on LBTT.

Derek Mackay

I will happily provide a comparison. There are two key reasons for what we are doing. In order to remain competitive, we must have the ability to change through due process, using a statutory instrument, if we choose to do so. You say that a different approach is being taken on air passenger duty. That is because the UK Government has the ability to make—I decided not to say “has the luxury of making”—amendments through a finance bill that has its own process at Westminster, which is a process that I do not have here. That is the first reason, and I will happily provide more detail on that.

The second point concerns consideration of tax rates in the round. There might be a better way of delivering some of the exemptions in that way. It is about having the ability to produce not only good primary legislation but good legislation in general that delivers outcomes. There might be a better way of doing things, which the committee can explore.

The Convener

Liam Kerr has a supplementary question.

Liam Kerr

It is just a small one that arises from Ash Denham’s earlier question.

Cabinet secretary, you are making a direct link between a reduction in the tax and an increase in the number of flights by operators such as easyJet and Ryanair. What modelling are you doing of that? What evidence do you have of the impact of, say, the UK Government introducing a 50 per cent reduction after you have done so? Would that ruin the scheme or negate any positive impact?

Derek Mackay

One of the drivers for our proposal—the policy intent—is a desire to make Scotland more competitive and to give us an advantage. Currently, APD is one of the highest taxes of its kind in the world. It is certainly the highest in Europe. We want to put Scotland in a stronger economic position and improve our international connectivity, and the airlines and airports support the approach.

We will have to revisit our decisions on what we do with the air departure tax from year to year on the basis of a number of factors such as public spending plans, economic opportunities and the evaluation of what the policy is achieving, and decisions will be taken in the light of what other airports and airlines face. We will have to analyse all of that before we set out to Parliament our proposition on the tax rates, and we will then keep that under review. The UK chancellor could change the position on APD every year, and Scotland could look to respond or not, as the case may be.

The Convener

Let me see whether I have got this right. Cabinet secretary, I thought that you told us earlier that this is not really about the competition between Newcastle and Edinburgh, for instance, but is more about Stockholm, Lisbon and Barcelona. If that is the competition that we are talking about, what the chancellor did at the UK Treasury would have less impact on our decisions here. Have I got that wrong?

Derek Mackay

The magic words “block grant adjustment” are often spoken in this committee, and whatever we do is relative to what the UK Government does in arriving at the outcome of our figures through the block grant adjustment. Liam Kerr’s point was specifically about what we would do to respond to the chancellor’s position, which will inform our position, and you rightly make the point that this is about competition not only with other UK airports but with international airports, about securing routes to and from Scotland and about sustaining what we have. Nevertheless, we must not forget that this is all relative to the block grant adjustment.

The Convener

I cannot remember whether Neil Bibby still has an outstanding question on passenger issues.

Neil Bibby

I have a brief question, convener. When the cabinet secretary answered Ash Denham’s question about what the measure of success would be, he talked about more passengers, flights and operators, but one extra passenger is “more” and one extra flight is “more”. Can you be more specific about what the measure of success will be?

Derek Mackay

I do not know whether the committee wants me to break things down to the absolute numbers of passengers and flights that will be sustained.

Neil Bibby

Just give us the rough figures.

Derek Mackay

I have described the measure of success as the contribution of generally more. However, as I have said repeatedly, I think that we will be better informed once we have set out the tax rates that will flow from the Government’s economic strategy, which will allow the operators greater certainty about how they can respond. Two operators, in particular, have outlined what the approach will mean in terms of their increasing their presence in Scotland by way of routes and capacity. Once we have outlined our tax proposition, that should inform how the airlines can respond by way of growth.

The Convener

I think that you can take it as read, cabinet secretary, from what you have heard around the table, that the committee will ask you to have an independent economic assessment carried out, because many of the questions are germane to that work being carried out. I am making an assumption, but I do not think that you should wait for our report—I see heads nodding around the table. Rather, you should assume that that request will be in the report. That will begin to answer some of the questions that have been asked around the table.

Derek Mackay

That is executive democracy.

The Convener

That was me applying my executive order. I must watch my haircut in the future.

That concludes this evidence-taking session on ADT. I suspend the meeting to allow a changeover of witnesses.

11:09 Meeting suspended.  



11:11 On resuming—  



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1 February 2017

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8 February 2017

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22 February 2017

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1 March 2017

Financial Resolution

The Presiding Officer has decided under Rule 9.12 of Standing Orders that a financial resolution is required for this Bill.

Finance and Constitution Committee Committee's Stage 1 report 

What is secondary legislation?

Secondary legislation is sometimes called 'subordinate' or 'delegated' legislation. It can be used to:

  • bring a section or sections of a law that’s already been passed, into force
  • give details of how a law will be applied
  • make changes to the law without a new Act having to be passed

An Act is a Bill that’s been approved by Parliament and given Royal Assent (formally approved).

Delegated Powers and Law Reform committee

This committee looks at the powers of this Bill to allow the Scottish Government or others to create 'secondary legislation' or regulations.

It met to discuss the Bill in public on:

31 January 2017

Read the Stage 1 report by the Delegated Powers and Law Reform committee published on 1 March 2017.

Debate on the Bill

A debate for MSPs to discuss what the Bill aims to do and how it'll do it.

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Stage 1 debate on the Bill transcript

The Deputy Presiding Officer (Linda Fabiani)

The next item of business is a debate on motion S5M-05283, in the name of Derek Mackay, on the Air Departure Tax (Scotland) Bill at stage 1.

16:27  



The Cabinet Secretary for Finance and the Constitution (Derek Mackay)

I am delighted to open the stage 1 debate on the Air Departure Tax (Scotland) Bill. The devolution of powers over air passenger duty to the Scottish Parliament was recommended by the Smith commission in November 2014. Following the passage of the Scotland Act 2016, the Scottish Parliament now has the power to legislate for air departure tax, which will replace APD in Scotland. In the programme for government, the Scottish Government announced that a bill would be introduced to establish a tax to replace APD in Scotland. To deliver on that commitment, the Air Departure Tax (Scotland) Bill was subsequently introduced on 19 December 2016.

Under terms agreed between the Scottish and UK Governments in the fiscal framework, APD will cease to apply in Scotland from 1 April 2018, the block grant will be adjusted downwards and, if the bill is enacted, ADT will replace APD from that date.

Separately, the Scottish Fiscal Commission will assume responsibility for producing independent forecasts of receipts from ADT for future Scottish Government budgets. Those forecasts will reflect the Scottish Government’s policy for ADT at that time.

The bill establishes the general structure and operation of ADT, which is a tax to be charged on the carriage of passengers on flights that begin in Scotland. The tax will apply only for the carriage of chargeable passengers on chargeable aircraft, and will be payable by the aircraft operator.

Revenue Scotland, Scotland’s tax authority for devolved taxes, will be responsible for collecting and managing ADT, which it has done efficiently and effectively since 1 April 2015 for Scotland’s other devolved taxes, which are the land and buildings transaction tax and the Scottish landfill tax. The bill as introduced also includes powers for Scottish ministers to set tax exemptions, tax rate amounts and tax bands through secondary legislation. I will say more on exemptions later. Setting tax bands and tax rate amounts in subordinate legislation is consistent with the approach adopted in relation to other devolved taxes.

The Scottish Government is seeking parliamentary approval for the bill in advance of the summer recess. With the core foundations of the tax in place, we will then set tax rates and tax bands through secondary legislation in the autumn. The secondary legislation will be subject to the affirmative procedure, which means that Parliament will have the opportunity to scrutinise tax bands and tax rate amount proposals at a later date. Those cannot come into effect without Parliament’s approval. In future years, tax bands and tax rate amounts—

James Kelly (Glasgow) (Lab)

Will the cabinet secretary take an intervention?

Derek Mackay

Of course, but after I make my point.

In future years, tax bands and tax rate amounts will be set as part of the budget process, which is consistent with existing practice for other devolved taxes.

James Kelly

At what point in the process will the cabinet secretary outline the cuts that will have to be made to the Scottish budget to take account of the up to £189 million less that will be in the budget as a result of the introduction of a policy of reducing ADT by 50 per cent?

Derek Mackay

I am coming to the policy intention and I will engage with the wider community, Parliament, political parties and the sector to understand and outline our position. However, it is clear that the Government has had a long-standing commitment to delivering a 50 per cent reduction in the overall burden of ADT by the end of the current parliamentary session, and to abolishing the tax when resources allow. That is a long-standing position to support our economy.

Patrick Harvie (Glasgow) (Green)

This is the central contradiction in the bill. The minister is now saying that he is going to conduct discussions with all the parties and economic analysis. Surely the Government should have done that before deciding what its tax policy is going to be. What on earth is the rationale for deciding on a tax policy before having a clue what its impact is going to be?

Derek Mackay

The Scottish Government has been clear. We support that position, and we have looked at the evidence. I have been asked to expand on the independent evidence and I have said to the committee that I am willing to do that.

The plans are a key part of the Scottish Government’s economic strategy, in particular in boosting trade, investment, influence and networks, which are especially important given the economic threat posed by Brexit. Scotland’s airports are competing on the world stage to secure new routes and capacity. Reducing the tax burden helps to ensure that there is a more level playing field with the many other European airports that are competing to secure the same airlines and similar routes. New routes will enhance business connectivity and tourism.

Today, we are proposing the foundations of the tax. I will return to tax rates and bands in due course, as is the case with other devolved taxes.

As is also the case with other devolved taxes, the Scottish Government has taken and will continue to take a consultative and collaborative approach to engaging stakeholders on how ADT should be structured and operated. We published a policy consultation last year that generated a range of views. Since then, we have worked carefully to refine our legislative proposals, reflecting on the responses that we received. In addition, in August 2015 we established a stakeholder forum, which I chair, to provide input into the development of our policy on and legislative proposals for ADT.

Revenue Scotland is also taking a collaborative approach to stakeholder engagement and is actively working with aircraft operators and others on matters relating to the collection and management of ADT, such as information and communications technology and guidance.

The Scottish Government has also listened to the responses that the Finance and Constitution Committee received during its consideration of the bill at stage 1, and I thank that committee and the Delegated Powers and Law Reform Committee for their detailed scrutiny of the bill and for the conclusions and recommendations in their stage 1 reports.

The Scottish Government welcomes the Finance and Constitution Committee’s support for the general principles of the bill. Last Friday, I responded to all the issues raised in the recommendations in the committee’s report. I will highlight some of the key aspects of that response. The Scottish Government agrees with the committee and stakeholders that it is important that our plans for ADT are supported by robust evidence and that the impacts are monitored over time. The Scottish Government has therefore commenced the commissioning of an independent economic assessment of the Government’s plans for a 50 per cent reduction in the overall ADT burden by the end of the current parliamentary session.

Neil Findlay (Lothian) (Lab)

Will the minister take an intervention?

Derek Mackay

I will maybe take a further intervention after I have made some more progress.

The assessment will report in the autumn, no later than when the Government sets out its secondary legislation plans for tax rate amounts and bands. In addition to that analysis, a robust monitoring and evaluation framework will be put in place for assessing the economic impacts of ADT in the future.

The Scottish Government has listened to the environmental concerns about our plans that some respondents have raised and is already committed to undertaking a full strategic environmental assessment of our ADT reduction plans. The screening and scoping report, which is an example of good practice, openness and transparency, was made available last year for full public comment.

The next main step of the SEA process is to publicly consult on the Scottish Government’s plan for an overall 50 per cent ADT reduction along with an accompanying environmental report, which will outline the findings of the assessment of the plan against a wide range of environmental topics, such as climate factors, air quality and biodiversity.

As well as the SEA, the Scottish Government is currently undertaking quantitative assessments of the likely greenhouse gas emission and noise impacts of our overall 50 per cent reduction plan. The noise assessment will be published in the autumn, no later than when the Government sets out its secondary legislation plans for the ADT tax rate amounts and bands that will apply from 1 April 2018.

Mike Rumbles (North East Scotland) (LD)

So far, the finance minister has not mentioned the fact that Transport Scotland has concluded that what has been proposed will mean 60,000 tonnes of carbon dioxide emissions going into the atmosphere every year. Is not that a rather important point that he seems to have omitted so far?

Derek Mackay

In giving further detailed evidence to the Finance and Constitution Committee and others, the Government has made it clear that we will need to work harder in other areas of the environment and in transport, recognising the policy’s impact on emissions, in aiming to achieve our very ambitious climate change targets.

Supporting information will be published for the SEA consultation on the Scottish Government’s approach.

I turn to exemptions and the Highlands and Islands issue, which is very important to many people.

Although there is a case for considering exemptions alongside tax bands and tax rate amounts—an exemption being a zero rate, in effect—the Scottish Government has listened carefully to stakeholders, the Finance and Constitution Committee and the Delegated Powers and Law Reform Committee, and we will lodge amendments at stage 2 that provide for passenger and aircraft exemptions.

I bring to members’ attention an important policy and legal matter concerning the introduction of an ADT exemption for passengers who fly from Highlands and Islands airports. A similar exemption has applied under APD since 2001. The Scottish Government strongly supports retaining a like-for-like exemption under ADT, and is interested in suggestions that have been made during stage 1 for enhancing the exemption. As ADT is a new tax devolved under the Scotland Act 2016, the Scottish Parliament is legislating for the first time on the matter. After careful consideration, the Scottish Government’s view is that such an exemption has to be notified to and assessed by the European Commission under state-aid rules before it is implemented in compliance with European Union law. The Scottish Government will work closely with the UK Government to resolve that matter. As the EU member state, the UK is responsible for notifying the exemption to the European Commission. I have spoken to the Secretary of State for Scotland and the Treasury about the matter, and I am exploring alternative solutions. I will, of course, ensure that Parliament and stakeholders are kept regularly updated on the issue.

In conclusion, taken together, the provisions in the bill provide the basis for a tax that is well understood by taxpayers and is simple and efficient to collect and manage. The secondary legislation powers in the bill, which are, in most circumstances, subject to the affirmative procedure, provide sufficient legislative flexibility to make future changes to the tax in order to support key Government policies or reflect changing market conditions, or to make changes in light of Revenue Scotland’s operational experience of collecting and managing the tax.

There is general support from stakeholders and support in the chamber for the principles of the bill and the establishment of a tax to replace APD in Scotland. I appreciate that, underneath that support, there is a range of views on whether the tax should be reduced and, indeed, how that tax reduction should be applied to maximise the economic benefit for Scotland.

The Government remains of the view that our approach of reducing the overall burden of the tax by 50 per cent by the end of the current session and then abolishing the tax when resources allow will deliver strong economic benefits for Scotland. I look forward to debating those and other issues this afternoon.

I move,

That the Parliament agrees to the general principles of the Air Departure Tax (Scotland) Bill.

The Deputy Presiding Officer

I call Bruce Crawford to speak on behalf of the Finance and Constitution Committee.

16:40  



Bruce Crawford (Stirling) (SNP)

It is my pleasure to speak as the convener of the Finance and Constitution Committee. I put on record my thanks to my fellow committee members for the constructive manner in which they went about their deliberations on the Air Departure Tax (Scotland) Bill. I also pay tribute to the professionalism of the clerking team in assisting us with our scrutiny of the legislation and thank all of the stakeholders for their contributions.

The Air Departure Tax (Scotland) Bill marks another important step, a milestone or even—dare I say it—a new departure in the implementation of the Scotland Act 2016. In scrutinising the bill, the Finance and Constitution Committee recognised that it is essentially an enabling bill. That is, the bill provides the means to tax passengers departing from Scottish airports when the UK’s air passenger duty is disapplied in Scotland with effect from April 2018. Without this bill, passengers leaving from Scottish airports would be able to fly untaxed.

I know that some members will think that that is a good idea while others will not. Whatever views there are, the committee supports the legislation enabling such a tax to be levied in Scotland.

Patrick Harvie

I am sure that the committee convener would recognise that it would be a more accurate description of the situation to say “if no such bill were passed”. We do not have to pass this bill. If this bill were to fall, the Government would be forced to come back with a better one.

Bruce Crawford

I cannot deny that logic—there is no point having a fight about something that no one would disagree with.

The committee made a wide range of recommendations in its stage 1 report. I will not have time to address all of them in my speech, but I want to comment on three specific issues that emerged during the committee’s scrutiny of the bill and areas where the committee considered that improvements could be made. The issues are: the evidence base for the proposed 50 per cent reduction in ADT during the current parliamentary session; how outcomes will be monitored; and how the exemptions to ADT will be dealt with.

Although it is not part of the bill, the committee considered the Scottish Government’s stated policy intention to reduce ADT by 50 per cent and ultimately to abolish ADT when resources allow. It is fair to say that, during our deliberations, the lack of the required level of evidence regarding the economic impact of the proposed 50 per cent reduction was a recurring theme. As a result, the committee recommended that the Scottish Government commission an independent economic impact analysis of the proposed reduction in ADT. I welcome the fact that the cabinet secretary’s response to the committee confirms that the Scottish Government has commenced the commissioning of such an independent economic analysis.

To date, the Scottish Government has not set out the tax rates and bands for ADT that it intends to apply. The committee recommended that, as well as publishing the proposed tax rates and bands, the Scottish Government should publish the forecast of the impact of the proposed 50 per cent reduction on the Scottish budget to 2021-22. I therefore welcome the Scottish Government’s response that it will provide a forecast of the economic impact on the Scottish budget at the same time as it sets out its secondary legislation plans for the ADT tax rates and bands that will apply from April 2018.

In a similar vein, the Scottish Government is required to publish a strategic environmental assessment alongside the tax rates and bands. We considered that the Scottish Government should publish an analysis of the likely increase in carbon emissions arising from the proposed 50 per cent reduction as part of the strategic environmental assessment. Again, therefore, I welcome the cabinet secretary’s announcement that a quantitative assessment of the greenhouse gas emissions will be published alongside the environmental report, as part of the strategic environmental assessment.

The committee heard a wide range of evidence from witnesses on examples from countries where taxation on air travel has been reduced or abolished. The committee welcomes the cabinet secretary’s previous commitment to provide further information on the experience of the Republic of Ireland and in particular the regional impacts within Ireland of the decision to abolish aviation tax.

An issue that relates to the economic impact of the proposed 50 per cent reduction in ADT is how the socioeconomic and environmental outcomes would be monitored. It is fair to say that there was a range of views on the committee on the outcomes that might result from the proposed reduction. However, the committee was unanimous in recommending that the socioeconomic and environmental outcomes in relation to ADT should be regularly evaluated and reported on to the Parliament every second year.

In evidence to the committee, the cabinet secretary indicated that the Scottish Government also thinks that it would be helpful to consider an evaluation of the outcomes that arise from a reduction in ADT. The committee recommended that the Government lodge amendments at stage 2 to place a duty on the Scottish ministers to that effect. I note that the Scottish Government does not intend to lodge such amendments, but I welcome the fact that the independent economic impact analysis will include consideration of the best way to design a robust monitoring and evaluation framework to assess the socioeconomic and environmental impacts of ADT.

Finally, on the absence from the bill of detail on the exemptions to ADT that the Scottish Government intends to apply, the Scottish Government has indicated that it intends to deal with the issue via secondary legislation. There was a range of views in the committee about the most appropriate legislative route through which to address the issue. The committee recommended—albeit by division—that the Scottish Government bring forward at stage 2 the detail of the exemptions that it intends to apply. I therefore welcome the cabinet secretary’s commitment that the Scottish Government will lodge amendments at stage 2 that detail the exemptions to the definitions of “chargeable passenger” and “chargeable aircraft” that the Scottish Government intends to apply.

I understand that it will not be possible to bring forward an amendment that relates to passengers who fly from all Highlands and Islands airports, as such an approach would require to be notified to and assessed by the EU under state-aid rules.

I put on record the committee’s appreciation of the constructive engagement that we have had with the cabinet secretary and his officials in supporting our scrutiny of the bill. I welcome the commitments that the cabinet secretary made in his opening speech and in his letter of 21 April in response to the committee’s report.

The committee supports the general principles of the bill.

16:48  



Murdo Fraser (Mid Scotland and Fife) (Con)

I echo the Finance and Constitution Committee convener’s thanks to everyone who gave evidence to the committee and to the committee clerks and the Scottish Parliament information centre for all their assistance in the preparation of the stage 1 report. As we heard, the deliberations of the committee were, with a few notable exceptions, largely consensual.

As the convener pointed out, the background to the bill is the devolution of air passenger duty to Scotland as part of the package of devolution that is being put through by the current UK Conservative Government in response to the Smith commission report. That allows the Scottish Parliament to decide to take a different route in relation to the taxation of air travel, should it choose to do so.

The bill that is before us will simply create a mechanism for the collection of a tax. Were it not to be implemented, no tax on air travel from airports in Scotland would be payable from next year. It therefore makes sense to legislate to put in place a framework for the continued collection of a duty from air passengers.

The bill largely reflects the existing framework that is in place at UK level for air passenger duty.

Patrick Harvie

On the face of it, I do not disagree with the basic description that Mr Fraser has given. However, can he recall any other situation in which a Government has proposed legislation to create a tax that that Government basically thinks ought not to exist?

Murdo Fraser

I appreciate that Mr Harvie will be unhappy this afternoon, as the proposals combine two things that he likes least in the world: aviation and tax cuts. It must be horrendous for poor Mr Harvie to have to consider them together in one bill this afternoon.

The Scottish Government has not had much experience of dealing with taxation and, frankly, nothing would surprise me about the Scottish Government’s approach to taxation. However, we will learn more in due course.

Let me return to what I was saying before I was interrupted. The evidence that we heard from all interested parties, particularly the airline industry, which is responsible for the collection of the tax, is that they do not want a completely different framework established for Scotland; they want the mechanisms that are currently in place to be replicated as closely as possible. In taking evidence, the committee detected no appetite for creating a wholly new tax on a different basis from the existing air passenger duty.

Indeed, the only substantial difference seems to be that the tax has been given a different name. It is being called air departure tax rather than air passenger duty. Cynics might suggest that it is simply an exercise in changing the name for the sake of it rather than a reflection of any different approach having been taken in practical terms.

In general terms, the Scottish Conservatives are supportive of the bill and will be happy to vote for the general principles at decision time tonight. However, we raised one principal concern at stage 1, and it was raised by my colleague Adam Tomkins on a number of occasions when we took evidence, as is reflected in the stage 1 report.

Neil Findlay

Will Mr Fraser take an intervention?

Murdo Fraser

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.

The Deputy Presiding Officer

Come to a close, please.

Murdo Fraser

Therefore, I believe that, for economic and environmental reasons, a cut in long-haul ADT as opposed to a cut across the board would make sense, but we accept the need for a stronger evidence base, and we look forward to the Scottish Government bringing forward that evidence when it sets out its case for rates and bands in due course.

16:55  



Neil Bibby (West Scotland) (Lab)

Every party that is represented in the Parliament is a signatory to the Smith agreement. As all the previous speakers have said, a commitment was given as part of that agreement to devolve to this Parliament power over taxing the carriage of passengers from Scottish airports. That commitment, which was supported by all parties, should be honoured, and it is for that reason that Scottish Labour will vote to allow the Air Departure Tax (Scotland) Bill to progress beyond stage 1.

As has been said, the bill is an enabling bill that is supported in principle by the Finance and Constitution Committee. It is required if we as a Parliament are to give the Scottish Government the authority to switch on a new air departure tax when air passenger duty is switched off in Scotland next year. For us, endorsing the bill at stage 1 means endorsing the principle that the Scottish Government should levy its own air departure tax, in line with the conclusions of the Smith commission. It does not in any way mean endorsing the Scottish Government’s approach to what the rates and bands of ADT should be. Scottish Labour objects to the Scottish National Party’s plans to cut air passenger duty in half and then phase out the tax entirely, and we will vote against cuts to ADT rates when the time comes.

We support the bill because we believe that there should be an air departure tax, but we oppose a tax cut for the aviation industry because it is the wrong priority at the wrong time. Across Scotland, our schools and local services are facing hundreds of millions of pounds of cuts. At a time when we should be protecting the services that people rely on and finding new ways to invest in our communities, it is absurd that a tax cut for the aviation industry should be the SNP Government’s priority, and it is unacceptable that the Scottish Government cannot tell us what the impact of its proposals to cut the tax will be on the budget.

Since 2011, this Government has cut £1.5 billion from schools and local services, with £117 million of those cuts falling in Renfrewshire, which the finance secretary and I represent. Across Scotland, SNP cuts threaten schools, care services, road repairs and more. There are public sector workers who cannot afford to make ends meet and there are many local services that our councils cannot afford to sustain, yet the SNP tells us that it can afford to make a business-class flight cheaper.

It is estimated that the value of the tax break could be as high as £189 million. As James Kelly said, the key question for the finance secretary to answer is what will be cut to pay for it. The axe will have to fall somewhere. Will it fall on schools or on hospitals? Will it take the form of cuts to bus passes for the elderly? It is time for the SNP to be honest about its plans. Alternatively, are we just set to see £189 million of unspecified cuts over the next few years?

A 50 per cent cut in APD will not make Scotland any fairer. Analysis from the Office for National Statistics indicates that halving APD would save the top 20 per cent of earners £73 a year while saving the poorest an average of only £4.50 a year. Those on higher incomes fly more often, so they will benefit the most from any cut.

A 50 per cent cut in, or the complete phasing out of, ADT will not make Scotland any greener, either. The Scottish Government accepts that it could lead to a 3 per cent increase in aviation emissions, which could have a severe negative effect on our climate. The leaders of every party that is represented here today signed up to the climate change agreement, which committed us to building a low-carbon transport system for Scotland. Incentivising air travel at the expense of cross-border rail will contribute nothing to the fight against climate change.

As has been said, the Finance and Constitution Committee has recommended that the Scottish Government publish an analysis of the likely increase in carbon emissions arising from the proposed tax break. The committee also recommended that amendments be lodged at stage 2 to place a duty on ministers to report every second year on the socioeconomic and environmental outcomes from the air departure tax. However, we should go further and ensure that stronger safeguards are written into the bill at stage 2.

The Scottish Government has not presented us with a convincing case that a tax cut will make Scottish aviation any more competitive. The Government decided on its policy before considering the facts and is only now commissioning research to back up its claims. However, we know now that changing the tax regime will not, in itself, boost connectivity or improve our infrastructure.

There was some discussion in the Finance and Constitution Committee about the Irish experience of abolishing APD, which is interesting. The growth in passenger numbers that is often attributed to the tax cut in Ireland actually coincided with growth in passenger numbers across Europe, including in Scotland, so it is not at all clear that the tax cut was a stimulus for growth. As Chris Day from Transform Scotland pointed out,

“It is noticeable that the upturn in flights at Dublin was in hand before Ireland abolished APD.”—[Official Report, Finance and Constitution Committee, 22 February 2017; c 25.]

Here in Scotland, Edinburgh airport recorded an 11 per cent increase in passengers in 2016 despite the existing APD regime being in place. We regularly see motions from MSPs across the Parliament welcoming new routes and record passenger numbers at their local airports, celebrating the success of the Scottish airports but, at the same time, undermining the minister’s case that an ADT cut is a necessity.

There is no evidence that the Scottish Government’s chosen approach to air departure tax will make Scotland fairer, greener or more economically resilient. Next to no evidence has been produced in support of the Scottish Government’s case. The Finance and Constitution Committee says unequivocally in its stage 1 report:

“there was considerable consensus across all spectrums of opinion that the evidence base underpinning the proposed reduction required development ... the proposed reduction in ADT currently lacks an adequate evidence base.”

The Scottish Government says that it intends to listen and consult before it sets ADT rates and bands later this year, but we already know from the existing Scottish Government consultation that there is widespread opposition to the proposed tax cuts. If, following a consultation, Mr Mackay finds yet again that there is opposition to an ADT cut, will he abandon his plans for an airline tax giveaway? We would welcome an answer to that question.

The Deputy Presiding Officer

You must close now, Mr Bibby.

Neil Bibby

Will the finance secretary listen to the majority? It is not often that the SNP does that.

We will support the introduction of an air departure tax today, but we will not support the proposals to cut that tax, which the Scottish Government has been unable to justify for months.

The Deputy Presiding Officer

You must finish, Mr Bibby.

Neil Bibby

Let us use the Parliament’s powers to create a fair, proportionate and stable air departure tax regime.

The Deputy Presiding Officer

We move on to the open debate. We have no time in hand, so I ask for some self-discipline from speakers, please.

17:03  



Maree Todd (Highlands and Islands) (SNP)

As of next year, the Scottish Parliament will set the rates for a new Scottish air departure tax. That presents the Government with an opportunity to design a tax around the needs of the Scottish economy and to boost international connectivity and help to generate sustainable growth. Our current level of air passenger duty, as the UK tax is known, makes it one of the highest taxes of its kind in the world, and by far the highest of its kind in Europe. Our Government stood on a manifesto commitment to reduce the tax, which will put Scottish airports on a more even footing with many other European airports that hope to secure the same airlines and routes as our local airports.

I welcome the Scottish Government’s commitment to helping our airports to secure new international connections. I hope that we will be successful in securing new links with Europe, new long-haul routes and good connections to world hubs. That will show that Scotland is open and ready to do business on an international stage.

Many submissions to the Finance and Constitution Committee claimed that an ADT reduction would lead to increases in routes, capacity and passengers. Several airlines, such as easyJet and Ryanair, have confirmed that, as they are already making commitments to increase their presence in Scotland if such a reduction is implemented. That offers the prospect of a significant boost to our economy that will help businesses, create jobs and boost tourism. All of that should be welcomed.

In my region, and particularly in the islands, air travel is not a luxury but a necessity for businesses and communities. It is often the simplest and most practical way for people to get to where they need to be. For many folk in the islands, air travel is essential for both their professional and private lives. Many people who fly to and from the islands and other parts of Scotland do so out of necessity rather than choice. It was said in evidence to the committee that one in four passengers who travel on routes from Glasgow, Edinburgh and Aberdeen to the Highlands and Islands are funded directly by a public service such as a council or the national health service, which funds patients and staff who need to travel. When I worked for the NHS, I regularly had to fly from Inverness simply to be able to do my job. Choosing to fly to attend an education session in London represented the difference between one day off work and three.

Loganair alone carries about 500,000 passengers a year on routes that are exclusively in Scotland, and all bar one of those routes cross a body of water. On many routes, trains will not be a viable travel option, and all other alternatives to flying will often be significantly more time consuming and impractical. Even from an environmental perspective, particularly on those routes where trains are not an option—for example, between Edinburgh and Lerwick—to travel by car and ferry could generate more emissions than a direct air journey.

It is clearly important for the local economy that the current exemption under APD for flights departing from the Highlands and Islands is continued under the new tax. The exemption ensures that there is no added expense for that essential travel, so I am really pleased to see that the Scottish Government supports it in principle and hopes to implement it as long as it complies with state-aid law, as any exemption of that sort rightly should.

There is an obvious concern that a reduction in air departure tax will lead to an increase in aviation emissions due to the additional routes and flights operating in Scotland. I welcome the prospect of additional investment and economic activity as a result of a reduction. However, as someone who is committed to addressing climate change, I would be concerned by any suggestion of a significant increase in emissions. I am comforted by the fact that the Committee on Climate Change has found that any increase in emissions as a result of the change is likely to be manageable.

The Government’s consultation paper on ADT estimated that a 50 per cent reduction in the tax would lead to a maximum increase in aviation emissions of around 3 per cent, which would be an increase of only 0.1 per cent of total Scottish emissions.

Patrick Harvie

I do not dispute the figures, but all of us, including all industries, have a responsibility to make a serious contribution to reducing emissions. Is there any other industry that the member would like to give a free pass to?

Maree Todd

The short answer is no. I do not think that the policy is giving a free pass to the air industry. On the benefits, we have to look at the policy and at dealing with emissions in the round.

It is important to recognise that the increase would not be significant enough to affect the Government’s intention to reduce overall transport emissions by a third between 2014 and 2030. I welcome that ambition and I am glad that a reduction in air departure tax would not affect that target.

The Government has given both the environmental impact of the policy and its financial implications thorough consideration thus far, and it has given assurances that it will continue to do so as the policy moves forward. As the tax is newly devolved, this will be the first time that the Parliament has been able to make changes to this area of taxation, and it is vital that we consider any potential changes from all relevant angles before they are implemented.

17:09  



Liam Kerr (North East Scotland) (Con)

When travelling down on Sunday I was wondering what I could say about the Air Departure Tax (Scotland) Bill at stage 1. I thought—as is often the problem when following Murdo Fraser—“What more is there to say?”

The bill will introduce an air departure tax at the same time as the current APD tax is switched off, and it simply creates a mechanism for the collection of a tax. Do the Scottish Conservatives support the general principles of the bill at stage 1? Yes. However, there is more to say about what the bill does not say.

Last May, the Scottish National Party manifesto said of air passenger duty:

“When the power to do so is devolved, we will reduce the overall burden of APD by 50 per cent, with the reduction beginning in April 2018 and delivered in full by the end of the next Parliament.”

The finance secretary is on record as believing that cutting air passenger duty will boost growth and, when announcing the policy, Derek Mackay said that the proposed 50 per cent cut is

“a fundamental component of our efforts to boost Scotland’s economy through ... generating sustainable growth.”

The other week, I said in the debate on Scotland’s economy that we need a road map—a plan—to revitalise the Scottish economy. It is always dangerous to assume anything in politics, but I and the rest of the Finance and Constitution Committee members were pretty hopeful that the Government, and the SNP when setting its manifesto, must have had sufficient evidence to make such a bold assertion about the policy’s impact.

However, when the finance secretary appeared before the committee on 1 March and the convener asked whether the Government had

“undertaken any economic assessment of the impact of the 50 per cent reduction in the tax”,

the finance secretary’s answer was instructive. He said:

“To the best of my knowledge, we have not commissioned any independent research of our own, but we have certainly looked at all the reports that have been ... provided, and we have also looked at the experience in Ireland.”—[Official Report, Finance and Constitution Committee, 1 March 2017; c 5.]

The committee received a letter dated 21 April in which the Scottish Government stated that it had

“commenced the commissioning of an independent economic analysis of the ... 50% reduction”

plans, which would

“report in the autumn”

when

“the Government sets out ... the tax bands.”

That is good, but it is not good enough. In its totality, the bill is a major piece of legislation. There could be a major change to the airline industry, airports, the economy, the environment and the macroeconomic UK picture. Derek Mackay is probably right that a properly targeted reduction in the tax will boost Scotland’s economy. However, it is deeply troubling that the Scottish Government has to date done no assessment and commissioned no independent economic analysis of the plan’s economic or environmental impact. It is also troubling that the Scottish Government has based its plans on the reports that have been provided to it while extrapolating principally from a country whose situation is in many respects completely different from the Scottish situation.

Andy Wightman (Lothian) (Green)

The member says that the Scottish Government has done no economic analysis of its plans. What economic analysis has he done of his own plans?

Liam Kerr

Andy Wightman makes my point for me. We asked the Government to bring forward its plans, given that it made a manifesto commitment. We have looked at the extensive evidence that was provided to the committee, but we are not putting forward a policy.

I will address something else. As Maree Todd pointed out, there is an air passenger duty exemption for passengers who fly from Highlands and Islands airports. Derek Mackay talked of the Scottish Government’s strong support, as a principle, for retaining a like-for-like exemption and said that it wants to extend that. He has concluded that removing APD from air passenger transport in the Highlands and Islands is a good way to support the area economically.

David Horne from Virgin Trains warned the Finance and Constitution Committee of his concerns about modal shift should we start to do things with air passenger duty. The Scottish Government needs to be careful of modal shift in the central belt but, when the train is an unrealistic alternative or not the right means of transport for a local economy—such as in the north-east or the Highlands, as Maree Todd said—we ought to encourage flying, as people are trying to do in the Highlands and Islands.

The fact is that many of my constituents in the north-east have little option but to fly if they need to make journeys to London or the midlands. Aberdeen airport has suffered badly through the oil downturn, and passenger numbers are recovering only now following two years of month-on-month decline. When I asked in the Finance and Constitution Committee for an exemption to be considered for Aberdeen airport in the same way as for the Highlands, Mr Mackay told us that that would not happen and would not be considered. His view was that the best way to achieve the strategic objectives of boosting air connectivity and generating sustainable economic growth will be to apply ADT equally to all areas and airports and that a differentiated approach would be likely to increase complexity, administration requirements and compliance difficulties.

Those propositions clearly do not marry, and I find it deeply concerning that the Government will, for reasons of expediency and apparent ease, dismiss without investigation one proposition, while pursuing a differentiated policy that is fraught with complexity and EU red tape simply because that is the way it has always been and the assumption is that that is the way it should stay.

As I said at the outset, the Scottish Conservatives back the bill, and there is a clear reason why: there is not really much of substance in it to oppose. What is much more interesting—of course, I use that as a euphemism for “concerning”—is what is not included, and that is what has been assumed or decided without independent investigation.

17:15  



Willie Coffey (Kilmarnock and Irvine Valley) (SNP)

I am pleased to speak in support of the Government’s proposals to reduce and then eliminate air passenger duty, which is the tax that the UK Government imposes on people every time they fly. The UK imposes the highest air passenger tax anywhere in Europe—more than three times the rate that France applies and about double what Germany and Italy charge their citizens.

Since the tax was introduced in 1993 by the then Tory Government, the tax rate for long-haul trips in the lowest class of travel has increased by a spectacular 630 per cent. The tax raises approximately £3 billion a year. When Scotland reduces the tax, from as early as April next year, that will place us in a much more competitive position, and the rate for our version of the tax will be much lower than the rate in England and Wales.

Patrick Harvie

Will the member give way?

James Kelly

Will the member give way?

Willie Coffey

I ask the members to give me a wee minute to develop my point, if they do not mind.

England and Wales will remain the most expensive countries for band B economy flights, while Scotland will drop to ninth in that category. The boost that cutting the tax—initially by 50 per cent—could bring to Scotland is significant. It will help us to achieve a more level playing field with airports in other European countries, and the shift to Scotland of many flights will have a significant economic impact.

I am happy to take an intervention from James Kelly.

James Kelly

Willie Coffey outlines all the money that will be saved in tax, but £189 million a year will be taken from the Scottish Government budget. Which areas will be cut in order to find additional revenue?

Willie Coffey

I thank James Kelly for raising that point. Labour seems to forget, or completely overlook, the economic impact that eliminating the tax will have.

I will speak about Prestwick airport in a moment. I hope that Labour and Mr Kelly support the investment in growth and jobs that that airport could bring to the Ayrshire economy. If they do not, that may explain to Mr Kelly why Labour has no MPs or MSPs in that county or in that part of Scotland.

EasyJet has said that it will increase capacity in Scotland to accommodate an extra 1.5 million passengers, and Ryanair has said that it will add a further 1 million passengers, on top of its 17 new routes, when the 50 per cent cut takes place.

The impact of abolishing air travel tax in Ireland has been significant, and not just for the city of Dublin. Since that tax was abolished in 2014, Dublin has experienced the highest rate of passenger growth in Europe, with year-on-year rises of approximately 15 per cent. As a direct response to the abolition of the travel tax in Ireland, Ryanair introduced 25 new routes and guaranteed an extra 1.2 million passengers each year. Dublin airport handles about 28 million passengers per year, which can be compared with Edinburgh airport at around 12 million and Glasgow airport at 9 million. Regional airports in Ireland have benefited, too, with an increase in the frequency of flights that serve Cork, Shannon and Donegal.

Dublin airport’s managing director said that

“The growth in passenger numbers”

has had

“a significant impact on the Irish economy”,

with higher visitor numbers and increased trade and investment coming in. According to Airlines UK, when the Netherlands abolished its aviation tax in 2010, it experienced an increase of 20 million in the number of passengers departing from Dutch airports.

The Edinburgh airport study suggested that, by 2020, the policy will have created nearly 4,000 new jobs and brought about £200 million extra to the Scottish economy. However, it is not just Edinburgh and Glasgow that will benefit from the cut in the tax. Prestwick in Ayrshire stands to benefit from the tax reduction, as the Irish regional airports have.

In 2014, I attended a meeting of the British-Irish Parliamentary Assembly at which Ryanair’s Michael O’Leary said that, if Scotland abolished what he described as a “mindlessly stupid policy”, he could double passenger numbers at Prestwick alone. Only a few weeks ago, Ryanair said that the scrapping of the tax will enable it to base more aircraft in Scotland, add more routes and create thousands of additional jobs. That is a huge opportunity for Prestwick and the wider Scottish economy.

Prestwick contributes about £60 million a year to the Scottish economy and it is well placed—as members will know—to become the front runner in the selection of a site for the UK’s first spaceport, because of its existing facilities infrastructure and the meteorological conditions. It would therefore be welcome if all parties in Ayrshire got behind Prestwick airport and distanced themselves from the comment of an Ayrshire Tory councillor that the airport should shut.

In its examination of the Government’s proposals, 10 of our 11 members of the Finance and Constitution Committee supported the bill’s general principles, while asking the Scottish Government to provide more analysis of the policy’s economic and environmental impacts. I am pleased to note that the economic assessment that all members sought will be carried out and published no later than the autumn of this year, as the cabinet secretary said in his opening speech.

I expect that other colleagues will want to focus on emissions a bit more closely, but we heard that the policy could give rise to an increase of 3 per cent in greenhouse gas emissions. That would represent about 0.1 per cent of total Scottish emissions and was described as “manageable” by the UK Committee on Climate Change.

The economic opportunities that the policy brings to Scotland and to Prestwick airport in particular are immense. The Irish experience is that, for every additional million passengers achieved, they have managed to create an extra 1,000 jobs. That would be a fantastic boost for Scotland and for Prestwick and I am delighted to back the Scottish Government’s proposals to reduce and then get rid of this travel tax.

17:21  



Neil Findlay (Lothian) (Lab)

There are many competing priorities for any Government. There are so many areas of our society that need the urgent attention of Government and this Parliament. The public services that civilise our society are under huge pressure, with many at breaking point. Whether it is the school system that educates our children, the care service that looks after our elderly and vulnerable citizens, or the police who keep our streets safe, they are all under pressure like never before.

Those areas should be the priority of this Government and this Parliament, but clearly they are not. The First Minister says that her priority is education and closing the education attainment gap, yet she is cutting the budgets of councils and colleges year on year on year. This Government has overseen the loss of 130,000 college places and cuts to lecturing staff and has failed to implement national pay bargaining; we are going to see strike action. That has all been driven by more than £200 million in budget cuts to our colleges. Where is the bill or legislation to address those issues?

What about our local services? Since 2010, £1.8 billion has been cut from council budgets. That is a 16 per cent cut to our local communities, our social services, our schools and our environment. There has been no legislation—no bill—to address those issues.

Maree Todd

Will the member give way?

Neil Findlay

Certainly, if the member wants to explain that.

Maree Todd

Does the member welcome the commitments that have already been made by commercial airlines to bring more business to Scotland as a result of the policy?

Neil Findlay

If Maree Todd listens, I will move on to that point in a minute. However, my point is that all the issues that I have raised are down to the political choices that have been made—

The Deputy Presiding Officer

Excuse me, Mr Findlay—could you move on to address the motion that is under discussion, please?

Neil Findlay

I am just coming to that, Presiding Officer.

Those issues are all down to the political choices that have been made by this Government. I would have expected bills to address those issues, but what bills have been introduced? There has been a bill on independence—surprise, surprise. Then there is the bill on air passenger duty—yes, there is a plan to set up a system and bureaucracy to administer it, but behind that there is a plan to cut the duty and then to eradicate it completely. That is the plan.

Our public services are crying out for investment, cuts are crippling services and jobs are being lost by the tens of thousands. What is the action of this Government? Is it to take a progressive position, raising money from those who can afford it to pay for services to help those in need? Is it to address the crisis in those public services? No. It is to rip another £200 million to £300 million of scarce revenue from those services while handing a £73 a year tax cut—at the minimum—to the wealthiest people and a £4.50 a year tax cut to the least wealthy.

On which planet is that progressive or fair? I will give way to the finance secretary if he wants to tell us how the policy that he is promoting is progressive. There you go—he is glued to his chair. The finance secretary cannot answer that, because he knows that the policy is not—

Derek Mackay

Will the member give way?

Neil Findlay

Oh—here is Merlin to tell us how it is progressive.

Derek Mackay

It says a lot that Mr Findlay has to invite me by making some sort of insult. Does Neil Findlay not care for the employees of, for example, Edinburgh airport, who are trying to make an economic success of it? It is part of our connectivity and economic success story, ensuring that we continue to grow our economy in a way that is good for everyone, not least those who happen to be employees of airports and airlines.

Neil Findlay

Mr Mackay defeated his own argument, because Edinburgh airport is hugely successful without the cut in APD. However, he did not champion the public services that are crying out for the investment that is going to disappear. There was no mention of that—he still has to tell us where the cuts will land.

On which planet is the 50,000 or 60,000—whatever it is—extra tonnes of greenhouse gases that will be pumped into the atmosphere consistent with the Government’s stated environmental policies? Again, it appears that some magic trick will be done, in which we can have all those increased flights and yet there will be no impact on the environment. Thirteen per cent of greenhouse gases come from travel, and the Government’s analysis shows that the effect of the cut in APD will be to increase air travel and the associated emissions by more than 50,000 tonnes.

The minister cannot explain how the policy is progressive, and he most certainly cannot explain how it is good for the environment. APD was introduced because the aviation industry was heavily undertaxed, not being subject to VAT, and yet this Government wants to give more tax giveaways to the industry. I am firmly of the belief that the Government is completely in the grip of the aviation sector.

There is no evidence that a cut in APD is beneficial to the economy—indeed, some people have suggested that there may be a loss of income from domestic tourism—and there is no evidence to support the cut. This is a Government that claims that it implements evidence-based policy—

The Deputy Presiding Officer

You must come to a close, Mr Findlay.

Neil Findlay

—and yet the finance secretary is throwing away £230 million on a wing and a prayer. Is it any surprise that Murdo Fraser and the Tories support the policy? On a day when they want to rip tax credits from rape victims—

The Deputy Presiding Officer

You must come to a close.

Neil Findlay

—they want to give a big tax cut to the aviation industry. Shame on you.

The Deputy Presiding Officer

I remind members that they should always speak through the chair and not to each other.

17:28  



Patrick Harvie (Glasgow) (Green)

I echo the thanks of Bruce Crawford to our committee colleagues, the clerking team and support staff, and the witnesses during our stage 1 inquiry.

I did not expect to like this bill. I imagine that the cabinet secretary did not really expect me to like it, either. A few things have surprised me during the process. One surprise was the additional delicious irony of debating the bill at stage 1 just before a debate on earth hour, in which everyone will pat themselves on the back about the lovely little symbolic gestures that we are making. Over the past month, I have even seen press releases from airline companies, saying how great they are because they switched off the lights in their corporate headquarters for an hour, for the planet. They are good, are they not? No—they are hypocrites, and so is anyone else who takes that stance.

I was also surprised, in a way, that the bill is so close to being one that I could support. The reason for that is the confusion at the heart of the Government’s policy intention. Normally, when we see a Government bill, we see a policy memorandum that sets out the objective and purpose of the legislation. However, the only purposes that are given in the strategic objectives, in paragraph 8 and onwards in the policy memorandum, would be served by not passing the bill and by having no tax on aviation at all. If the strategic objectives that the Government has set are what it really cares about, it would not pass this bill—it would not even propose it.

This is a tax that is being legislated for by a Government that thinks that that tax ought not to exist. It is, therefore, understandable that we are looking at a bill that is bereft of meaning, intent and purpose. I think that there is good purpose in taxing aviation differently from other forms of economic activity, because it has disproportionate impacts on the environment and in terms of social inequality. We need to mitigate and manage those impacts in a way that is consistent with economic objectives, and tax is an important way of achieving that. A bill that was clear that that is the purpose of an aviation tax would be different from the one that we are looking at; perhaps it would not be radically different, but it would not give a free hand to ministers simply to say, “We’ll come back to you and let you know what the rates and bands are going to be and then you, as Parliament, will nod them through.” We will not have the ability to amend those proposals when they come forward. We will either nod them through or we will be told that we are giving the aviation industry an even bigger free gift by way of not taxing it at all.

A bill that I could support would constrain ministers somewhat to at least consider the factors that are important. Let us look at the economic factors. The Government and its back benchers—including some who are in the chamber today—have said that there will clearly be a really positive economic boost for Scotland from this. Evidence? Evidence we have seen none.

I think that Liam Kerr recognised in his speech the fact that the cabinet secretary has acknowledged that, to the best of his knowledge, the Government has conducted no economic analysis of its own. He referred to some pre-existing reports, which are based on outdated information about the labour market, unreliable information from the Government about the fiscal impacts of the policy and reports that simply cannot be depended upon as evidence, some of which came into the public domain after the SNP had adopted its policy, not before. We should make policy on the basis of evidence, not scrounge around to see whether we can work up some evidence after we have adopted a policy. The economic impacts are entirely unclear, and the Government should be undertaking that analysis prior to adopting a tax policy.

The environmental impacts have been spoken about, and I think that Maree Todd was the first to talk about the limited nature of the increase—apparently there will be only a small increase in our aviation emissions as a result of the Government’s policy. However, as far back as 2009, the UK Committee on Climate Change said not that we need to limit the increases but that we need to restrict aviation emissions and that, by 2050, they need to be reduced to 1990 levels. We need reductions in emissions, not modest increases. I note that representatives of the industry who gave evidence to the committee said not only that they could achieve that reduction back to 1990 levels but that they could achieve a 50 per cent reduction by 2050 relative to 2005 levels, which is an even more ambitious goal. I do not for a moment suggest that the industry is doing what is needed in order to achieve that, but, if it thinks that it can do that, we should lock it into that goal and we should say to the minister that he has to ensure that the tax rates are compatible with achieving that.

On social justice, the figures that the Scottish Greens have published today show that, of the more than £89 million that would be saved by UK leisure passengers, £33 million would go to the richest 10 per cent of households; £60 million would go to the richest 30 per cent of households; and just £8 million would go to the poorest 10 per cent of households.

All those issues—economic, environmental, fiscal and social—should be hardwired into the bill. The Greens will lodge amendments to do that. If those amendments are agreed to, we could support the bill at stage 3; if they are not, we will oppose it. Tonight, we will abstain, on the basis that the bill is fixable, and we will make every effort to persuade the Government that it needs to be fixed.

The Deputy Presiding Officer

I give notice to closing speakers that I will have to shave some time off them. I call Mike Rumbles, to be followed by Kate Forbes.

17:34  



Mike Rumbles (North East Scotland) (LD)

On 7 October last year, the First Minister said that the Scottish Government is committed to acting on climate change and

“limiting global temperature increases to ... below 1.5 degrees”.

The SNP website—I have been reading it—says:

“We hope the example can embolden the international community”.

On her recent self-publicity tour of the United States, Nicola Sturgeon added:

“We are not complacent about climate change and there is still much to achieve.”

She has not been listening to her SNP MSPs during the debate.

Analysis by Transport Scotland has concluded that a cut in air passenger duty of 50 per cent, which is what the SNP intends to do, will lead to an increase in emissions of carbon dioxide of up to 60,000 tonnes a year. That figure has hardly been mentioned in this debate. Where are all our environmentalists? Are not we all meant to be environmentalists now?

What is the Government’s response to that analysis? The SNP reaction is to say that it can offset that huge increase in emissions by making other changes in the transport sector. Really? That may be the Government’s aim, but I would not put too much faith in the transport minister being able to deliver that offset. That is especially so after he said to the Environment, Climate Change and Land Reform Committee that he simply accepts Transport Scotland’s other prediction of an increase in car use in Scotland by 27 per cent within the next 13 years and failed to come up with any real ideas on how to combat that. If you have an idea that you can mention to the transport minister, I am sure that he will be delighted to hear it—I would like to hear it, too.

The Deputy Presiding Officer

Through the chair, Mr Rumbles.

Maree Todd

In the interests of accuracy, I would like to challenge the words “huge increase”. It is only a 0.1 per cent increase in total emissions.

Mike Rumbles

There we have it. The SNP believes that an increase of 60,000 tonnes of carbon dioxide is minor. I am glad to see that the transport minister is back in his seat. I am afraid that, as with so many policy areas, any reading of the situation shows that the SNP Government has no interest in doing what is right, only in doing what is politically expedient to its cause.

Air travel is the highest emitter of carbon dioxide per passenger kilometre. It is the only sector where emissions have risen significantly during the past two decades, and the SNP wants to add to that increase by cutting tax on air travel. Rather than apologising for their ministerial colleagues, SNP members should be asking them how pumping an extra 60,000 tonnes of carbon into Scotland’s environment and losing at least £125 million of revenue each year will help the Scottish Government to build a sustainable legacy for our children.

Scotland’s aviation sector is in good health and flourishing, with passenger numbers growing by 5 million in the past five years. On a personal level, I am delighted with that—my son is an airline pilot in Scotland, so it is great news. I know a little bit about the aviation industry. There is no good reason to give aviation a free pass. We need everyone to meet their carbon reduction responsibilities and pay their fair share.

As MSPs, we get many approaches from lobbyists giving us their views, and this debate is no different. I was particularly taken by the response from the Church of Scotland, whose comments I read with great care:

“The Church of Scotland is disappointed by the proposals on three grounds.

1. We believe they are inconsistent with Scottish Government commitments to reduce Scotland’s greenhouse gas emissions.

2. They promote inequality: those on high incomes fly most and will benefit most; while those living in poverty fly least and will benefit least, if at all.

3. They put pressure on the UK government to follow suit”.

Not only are the proposals simply the wrong thing to do to tackle climate change, but they leave a hole of at least £125 million a year in the public finances—a hole that needs to be filled. The Scottish Government will either have to raise those taxes another way—and where will that burden fall?—or it will have to reduce expenditure and cut budgets. If it does the latter, where will those budget cuts fall?

Those who say that the bill is simply an enabling bill—I have heard that, too—should look at part 3, where there is a whole section on tax rates without any mention of what those tax rates should be. Where is the policy memorandum? It does not exist. Section 10(3) simply says:

“Regulations under this section ... may modify this Act.”

In layman’s terms, if we pass the bill, Scottish ministers may change what they like in it. This is a terrible bill, which gives far too much power to ministers and not enough power to this Parliament. It deserves to be thrown out. I am with the Church of Scotland on this one. The Liberal Democrats will vote against the bill at decision time.

17:40  



Kate Forbes (Skye, Lochaber and Badenoch) (SNP)

I state that I am the parliamentary liaison officer to the Cabinet Secretary for Finance and the Constitution.

The Government’s motion asks Parliament to agree to the general principles of the Air Departure Tax (Scotland) Bill; the detail will come later. I generally support the devolution of air passenger duty and will set out why I believe that the Scottish Government should take advantage of that to bring the tax into line with international competitors, for the benefit of residents and small businesses in my constituency and across Scotland.

The Highlands and Islands have benefited enormously from air travel exemptions and would benefit even more from a Scotland-wide reduction. In the Highlands and Islands, the challenges of connectivity are exacerbated, yet our economy is dependent on movement: of goods and their import and export; of people and tourists; and of entrepreneurs scoping out and developing business opportunities. Air travel is a necessary part of free movement, which is why I have welcomed more flights into and out of Inverness and why I strongly support reopening the air strip in Skye for commercial flights. Better connectivity goes right to the heart of population retention, job creation and growth and resilience in the economy.

It stands to reason that, as a small island country of 5 million people, domestic and international travel and movement are critical. If we are ambitious for economic growth, which I am, we need new connections, more connections and attractive connections between Scotland and destinations around the world. That is more challenging when air passenger duty in the UK is one of the highest taxes of its kind in the world and by far the highest in Europe.

The international opportunities for businesses and jobs in my constituency are clear. An example of that is found in the food and drink industry. There was a huge increase in the value of food and drink exports last year, as food exports alone grew by 22 per cent to £1.5 billion. Fish and seafood, much of it caught by fishermen on the west coast of the Highlands, recorded the largest overall increase—a whopping £156 million.

Andy Wightman

Does Kate Forbes accept that prawns and whisky will never pay air departure tax? Does she further agree that the simplest way of reaching the Government’s goal of eliminating the tax would be not to waste our time here by passing a bill and just to let it fall?

Kate Forbes

In the Highlands and Islands, we need the opportunity to create jobs in order to retain our young people and our families. We need the increase in income that will be generated by those jobs. Any growth in businesses and anything that allows entrepreneurs to take advantage of new opportunities will contribute directly to retaining our population, which is one of my priorities.

Scotland’s food and drink industry is not done yet. Sourcing much of its fine fare in the Highlands, it is Scotland’s fastest growing major sector, with ambitions to grow further. What is really important is that it is not just the big businesses that are benefiting but the small and medium-sized businesses. To capitalise on that, we need to internationalise more. In doubling food exports since 2007, we have seen a transformation in growing markets such as Asia. The chief executive of Scotland Food and Drink has said that the game changer for food and drink over those years

“has been developing a national brand for Scottish produce in export markets, with industry and government working hand in hand to invest in overseas trade experts and activity ... this success story has much further to go.”

We know that smaller towns in rural Scotland are the most entrepreneurial in Scotland. In places such as Ullapool and Newtonmore, which topped the list, 17 per cent of the population are self-employed. Many of those small businesses are based on tourism or food and drink, which depend on travel and movement. Both sectors are doing well. Overseas visitor expenditure rose 23 per cent between 2005 and 2014.

How do those entrepreneurs and small businesses grow and develop? They do so by building relationships, ideally face to face, with partners, investors and customers. I appreciate that the Scottish Government is doing more to facilitate that. This month, the First Minister opened Scotland house in London as a platform for making connections and growing businesses. There is a wealth of opportunities in London, in Europe and beyond for Scottish business. That is the connection between Mallaig, Carbost, the Black Isle and overseas.

However, it does not matter how many opportunities are out there if we do not have good travel links, and that is why reducing air departure tax will make an enormous difference for travel to and from all Scottish airports and have a direct and positive impact on families in the Highlands.

17:46  



Rachael Hamilton (South Scotland) (Con)

It has taken almost a year, but finally we have before us a bill at stage 1 to debate in Parliament. Finally, the powers that be have decided that focusing on issues other than a re-run of the same debate about Brexit is worthy of parliamentary time.

This is a debate about air departure tax and, as the chamber has heard, the Scottish Conservatives are supportive of the bill at this stage. The air departure tax will replace the current UK air passenger duty and will come into effect in 2018, if the bill is passed.

The Scottish Conservatives welcome Derek Mackay’s commitment to making amendments at stage 2 that will make detailed provision for exemptions from the definitions of “chargeable passenger” and “chargeable aircraft”. Exemptions are not present in the bill—the bill does not even say which category of aircraft will not be subject to the tax. Also, as the Finance and Constitution Committee has highlighted, evidence on social, financial and environmental impacts is needed before MSPs are asked to set the bands and rates.

The approach that was taken to the introduction of the bill, which took almost a year, was described as “odd” by Transform Scotland, because, without the full facts on the nature of tax and the bands that will apply under the bill, it is difficult to scrutinise.

The Scottish Conservatives want to see a more ambitious approach to our skies. Murdo Fraser has announced our proposal to remove the air travel tax on flights that are longer than 2,000 miles. That will incentivise airlines to provide new direct links from Scotland to America, China and other global destinations so that families and businesses do not have to travel via London’s packed airports. That is good for Scotland. It will promote Scotland as a visitor destination and as a business destination. Making Scotland easy to access makes it an easier place in which to do business and get out and see our sights.

That is all is part of our plan to get Scotland connected to the global economy. To put it into perspective, on the UK’s competitiveness in the current situation, “The Travel & Tourism Competitiveness Report 2015” by the World Economic Forum lists the UK as 137th out of 140 countries in terms of ticket tax and airport charge competitiveness. It is possible for Parliament to open Scotland’s doors wide, reap the awards and see millions more passengers come to Scotland.

The Scottish Conservatives will support the bill at stage 1. However, at stage 2 we hope to see amendments that make detailed provision for exemptions from the definitions of “chargeable passenger” and “chargeable aircraft”. We want to see the removal of the air travel tax on flights that are longer than 2,000 miles and an immediate freeze on APD for short-haul flights to the UK and Europe.

What I and, I am sure, members of other parties want to see is a bill come to this Parliament that can be fully scrutinised, with the full information available to do that. It has taken almost a year for the first bill to come before us and, despite that amount of time, we still do not have something that can be scrutinised appropriately. To quote Transform Scotland, that is slightly “odd”.

17:49  



Ivan McKee (Glasgow Provan) (SNP)

The transfer of air passenger taxes to the Scottish Parliament, as part of the latest round of devolution, gives Scotland the opportunity to design and implement a tax system that will support our specific economic development needs.

The UK-wide air passenger duty will cease to apply in Scotland from next April, so the bill is necessary simply to put in place a replacement tax. The bill, as presented, will provide only the structure for that tax; the Government will propose the details of bands and rates later this year, and they will be subject to parliamentary approval. However, the Government has stated its policy objective to reduce the burden of ADT by 50 per cent. Therefore, although rates and bands are not detailed in the bill, the Finance and Constitution Committee took evidence on the shape and structure of the proposed 50 per cent reduction and the consequent economic and environmental impacts.

Scotland is an international, outward-looking nation, and our links to our European neighbours and countries further afield are critical to us. That is especially so in the context of the UK Government’s headlong rush towards a hard Brexit, which threatens those links. Scotland’s place in the world depends on our international connectivity. Direct international flights are a key part of that connectivity, and steps to increase that connectivity should be encouraged to boost business, including inbound tourism, further develop cultural links, and encourage free movement. It is therefore important that the policy focuses on the primary objective of enhancing economic growth. I am glad to see that the Government recognises that imperative. As the committee’s report states:

“The Scottish Government will design and structure ADT in a way that boosts Scotland’s air connectivity and economic competitiveness, encouraging the establishment of new routes which will enhance business connectivity and tourism.”

The committee has highlighted the need for robust economic data that will address the economic impact of any rates and bands that the Government will propose. That is critical to understanding the most effective way to use the tax lever to drive economic growth.

Patrick Harvie

If Ivan McKee is right that analysis of the economic data is the effective way to decide how to use the devolved tax, why does he think that the Government has decided its policy of making a 50 per cent cut and then scrapping the tax so long before that data is available to it?

Ivan McKee

There is nothing unusual about having a policy. Did the Greens do a full economic analysis of their additional rate tax proposal? I believe that they proposed a 60 per cent rate. In any analysis, that would reduce the tax take. Did the Greens have an economic analysis of that?

There is an intent to reduce the ADT by 50 per cent. As the committee said, robust economic analysis is essential to understanding the shape of the reduction and how that would look. The ultimate objective must be to recover, from increased air activity and from economic growth, more tax than is lost through the cut.

We need to recognise, of course, that any data can be only an estimated projection of what the economic outturn will be. Indeed, anyone who has watched the committee’s investigations into the results of changes to LBTT will understand the challenges in assessing the economic impact of policy changes that have already taken place, never mind those that have not yet been implemented. Like the assessment of our old friend the counterfactual, unpicking policy impacts from wider economic trends is not always easy. Nevertheless, a thorough economic assessment in advance of changes to ADT policy, together with on-going assessments of impacts, is required to give substance to the policy. I therefore welcome the cabinet secretary’s commitment to return to Parliament with evidence on the economic and environmental impacts of the approach to ADT prior to making specific proposals on rates and bands. The committee also recommended that

“the economic and environmental outcomes arising from ADT”

should be evaluated and reported on to Parliament every second year.

The most effective use of reductions in air departure tax as a mechanism to drive economic growth will come through understanding that a one-size-fits-all policy is too blunt an instrument to maximise that objective. Although the committee heard that simplicity of implementation and operation of the tax is a factor in the design of a future ADT system, it is important not to lose sight of the primary objective and to deliver a reduction in the tax that recognises that reductions for some types of flights might deliver significantly more economic benefits than others—in other words, there should be a differential approach.

The committee heard about lifeline flights to communities in the Highlands and Islands where alternative transport solutions are limited. The need to support those communities is well understood, and measures to ensure that those flights are free of ADT should be a priority. However, flights from the central belt to London and other large English cities compete with rail routes with frequent and fast services, and there is an argument that ADT reductions in that context would do little to support the primary objective of maximising economic growth. Measures that encourage direct flights to European cities and beyond, on the other hand, can deliver significant benefits to our economy, particularly if they are targeted at locations where the scope for business and inbound tourism is greatest.

The UK has one of the highest rates of air passenger taxes in the world. That may make sense to maximise revenue from London airports, where demand outstrips supply, but in this area of UK Government policy, as in many others, what works for London and the south-east is not always the best policy for Scotland, and we need to derive a policy for ADT that makes the most sense in the Scottish economic context.

I look forward to receiving the Government’s economic analysis of its proposed rates and bands. I look forward to crunching the numbers and working through them in committee with the cabinet secretary and his officials, and I look forward to Scotland implementing an ADT policy that supports economic development and international links.

The Presiding Officer (Ken Macintosh)

We move to closing speeches. I call James Kelly to wind up for the Labour Party.

17:55  



James Kelly (Glasgow) (Lab)

I start by reiterating the comments of other colleagues thanking the Finance and Constitution Committee clerks and SPICe for their excellent work in backing up the narrative that was produced in the stage 1 report.

The Labour Party’s position in this debate is that we support the general principles of the bill, as Neil Bibby outlined in his opening speech. The air departure tax is a logical conclusion of the Smith commission’s recommendation to devolve APD. We support the tax because it gives an additional lever to raise money from those who can afford air travel, to contribute towards the Scottish budget. We also support it from the point of view of seeking to reduce carbon emissions, so there is a logic in having the tax in place.

However, the Scottish Government’s reason for introducing the bill is to reduce the tax by 50 per cent and ultimately to abolish it. It has to be said that the evidence for supporting the policy that has been proposed in the bill by the cabinet secretary, Derek Mackay, is wholly inadequate. The policy memorandum clearly sets the objective to reduce the effect of ADT by 50 per cent by the end of this session of Parliament. As the financial memorandum states, by 2021-22, that would have the effect of reducing revenue to the Scottish Government by £189 million. We have not seen any analysis of how that money, which would be lost from the Scottish budget, would be replaced. Willie Coffey spoke about the economic benefits of the policy, but we have not seen anything from the Government to back that up.

When the Smith commission recommended the devolution of the tax, it also said that environmental impact studies should set out when it was going to be used, but that has not been done. As Patrick Harvie pointed out, the submissions that have provided some analysis, mainly from the airport operators, are not up to date, because they were all done before Brexit and take no cognisance of the impact of Brexit.

Derek Mackay has outlined his intention to complete stage 3 before the summer recess, and he has made it clear that any analysis would be done later than that, when the secondary legislation kicks in, so we will be asked to agree the bill before the summer and to agree the basis of the policy memorandum without any proper analysis or submission from the Government. That leaves us in a position in which, as Neil Findlay correctly pointed out, we must question the fairness of the policy. As the ONS outlined, the top 20 per cent of earners will be £73 better off, whereas the bottom 20 per cent of earners will be only £4.50 better off. That is not a progressive policy, and is wholly unfair.

We should look at other impacts on people who travel in Scotland. For example, a student who turns 19 no longer has access to the young Scot rail card and must pay full fare for their season ticket and incur substantial travel costs. Maree Todd said that air travel is a necessity for people in the Highlands and Islands, but for an apprentice who stays in Cambuslang and has to travel to their place of employment, where they earn less than the national living wage, travel is also essential if they are to complete their apprenticeship successfully. If the person must travel by bus from Cambuslang to East Kilbride, they will incur substantial costs which will bite heavily into their wages. We need to ask how such people will be served by the current priorities.

We also need to consider how the proposed approach lines up with the policy of seeking to reduce carbon emissions, as other members said. I have heard minister after minister, not just in this chamber but at receptions and media events, declare proudly that the Scottish Parliament passed world-leading climate change legislation. That is absolutely correct, but the logic of the air departure tax policy is that air travel will increase, which will increase carbon emissions. It seems to me that a reduction in air departure tax is not consistent with the Scottish Government’s policy approach.

Kate Forbes

Will the member take an intervention?

James Kelly

I am sorry. I am running out of time.

The Government’s policy approach is incoherent and it has submitted inadequate evidence to back up its policy. It is time for the Government to think again; it must bring forward more substantive evidence before we get to stage 3.

18:01  



Dean Lockhart (Mid Scotland and Fife) (Con)

This is a welcome, if somewhat rare, opportunity to discuss a bill in the Parliament.

We have heard a range of views on how the Parliament can use its powers in respect of air passenger duty, or air departure tax, as it will be known. Although each party has different views on the future of ADT, the debate has centred around three main issues: concern about the lack of detail in the bill, with questions asked about when and how we will get that detail; the objectives of the proposals and what the Government is trying to achieve; and the next steps that will be required to take the bill forward, in particular the level of parliamentary scrutiny of any secondary legislation.

Liam Kerr, James Kelly and others highlighted the lack of detail in the bill at stage 1 in a number of important areas. The bill fails to set out the basis of liability for the proposed new tax, which is a fundamental issue in any tax legislation. It also fails to identify which category of passengers or aircraft will be exempt from the tax. There are no details of the tax bands and rates that will apply, and there has been no independent assessment of the economic, financial and environmental impact. As Rachael Hamilton said, that lack of detail led the Delegated Powers and Law Reform Committee to express

“disappointment that the legislation has been introduced in the absence of full development of the Scottish Government’s policy”.

Given all that, we urge the finance secretary to undertake a full analysis of not just the policy’s economic and environmental impacts but how it will work in practice, thereby avoiding a repeat of what happened with the disastrous introduction of land and buildings transaction tax, the methodology for which was described today, in a study that the Government itself commissioned, as “ill-suited”.

On the objectives of the bill, we support the overall direction of the policy to reduce air departure tax. However, if we are to proceed with a reduction, our preferred approach would be a targeted reduction for long-haul flights, with the aim of increasing Scotland’s global connectivity with major economic hubs in the United States, China, India and south-east Asia.

Our approach differs from the less targeted proposals of Mr Mackay, who is advocating a blanket 50 per cent cut to ADT, including for short-haul flights. The Finance and Constitution Committee heard evidence that cutting ADT for short-haul flights would not necessarily deliver economic benefits. According to the Scottish Association for Public Transport, cutting ADT for short-haul flights would merely lead to growth in domestic flights at the expense of rail travel.

Given all that, we welcome the Government’s agreement to undertake a full and independent economic, financial and environmental analysis of its plans, and we urge that analysis to look at the following issues. It should look at the benefits of cutting ADT on long-haul flights compared to the benefits of cutting it on short-haul flights. It should also look at how the policy can increase tourism from around the world. Scotland welcomes fewer than 50,000 tourists a year from China, compared to the more than 1 million Chinese tourists who visit London alone. The average long-haul tourist spend in Scotland is over £650 per visit, which is significantly higher than the level of air departure tax per passenger that would be forgone. Therefore, an increase in tourism would be a welcome boost to the economy, but the analysis must show a link between reducing ADT and increasing tourism. As Kate Forbes highlighted, we need to look at how we can capitalise on having more direct long-haul flights to increase our exports to the rest of the world, which have increased by 75 per cent over the past 10 years. Finally, we need to look at how we can minimise the environmental impact of the proposals.

Other parties have expressed their outright opposition to any cuts to ADT. Labour’s view, as summarised by Neil Bibby and others, is that it is a tax on those who can afford to fly, and that cuts would come at the expense of public spending. However, that is looking at the wrong end of the equation. We are suggesting that, if it is targeted properly, a reduction in ADT will boost Scotland’s global connectivity and, if implemented properly, should result in a boost to the economy, more people being encouraged to do business in and with Scotland, more visitors to Scotland and more investment in Scotland.

Neil Bibby

The SNP’s proposed airline tax break will cost £189 million. If the member supports the SNP’s proposal, will he tell us where the cuts will fall? The SNP has not told us where those cuts of £189 million are going to fall. What would the Tories cut to fund the policy?

Dean Lockhart

Last year alone, tourism was worth almost £2 billion to the Scottish economy. If we were to increase tourism by 5 or 10 per cent, that would result in a much-needed boost to the Scottish economy.

Patrick Harvie

Will the member give way on that point?

Dean Lockhart

No, I need to make progress.

We are not looking at cutting spending; we are looking at growing the economy and growing the Scottish Government’s budget in years to come.

We have heard from others about legitimate concerns surrounding the environmental impact of any reduction in ADT. We agree that, to address those concerns, a strict environmental impact analysis will be required. We look forward to debating that when it is published by the Government.

I will conclude by highlighting to Mr Mackay the next steps that are required to take the legislation forward. The Government must produce supporting evidence of the economic, social, financial and environmental impacts of the proposal. We need that evidence to be made available before we debate the tax rates and bands or ADT in the future. We also suggest that, before any reduction in ADT is made final, the Government should work to reach agreement with the airlines that they will commit to expanding their routes in response to any cut in ADT, as has happened in other countries. Finally, we need an assurance from Mr Mackay that he will listen to the Parliament, the Finance and Constitution Committee and the independent analysis before implementing the proposals, thereby avoiding a repeat of the disastrous implementation of land and buildings transaction tax.

The Presiding Officer

I call Derek Mackay to wind up the debate.

18:08  



Derek Mackay

How long have I got, Presiding Officer?

Members: Two minutes. [Laughter.]

The Presiding Officer

You have until 20 past 6.

Derek Mackay

Thank you, Presiding Officer. I heard the Opposition’s demand for more time to continue the debate for enthusiasts who are listening at home.

It has been a consensual debate. I really mean that. Many suggestions that I will reflect on have been made from around the chamber. I hope that the Finance and Constitution Committee’s response shows that I have engaged with the committee, listened to cross-party points of view and responded positively to a number of recommendations in good time for the stage 1 debate. I do not want to lose any of the consensus that exists in support of the bill.

Nevertheless, it was interesting to hear Dean Lockhart lecture me about air departure tax and APD, because the Conservatives are converts to the principle of a reduction in that tax. But, hey—I will not be churlish about that. I welcome the Conservatives’ change of position.

I turn to things that I thought that I would never hear other members say. It does not necessarily surprise me that Mike Rumbles remains opposed to the bill, although I will reflect on the fact that a request for an extension of tax cuts for airlines has been made by his islands colleagues, who want to extend the air discount scheme—of which I have experience, as a former Minister for Transport and Islands—to businesses and others. Indeed, as transport minister, I increased that scheme, so I understand the request.

I welcome the Labour Party’s position, but I will not take it as read that support for the general principles of the bill represents support for our policy proposition on tax rates and bands, or other matters. I agree with James Kelly and Neil Bibby—those are not words that I say often—that the bill is enabling legislation that provides a framework to allow the tax to be collected when the UK Government switches off air passenger duty in April next year.

Neil Bibby

One of the key questions that the cabinet secretary has been asked by all the Labour members who have taken part in the debate is where the £189 million of cuts that will be needed to fund the cut in ADT—in the event that he gets his tax break through—will be made.

Derek Mackay

The Government has set out its policy intention to introduce a tax reduction to stimulate economic growth, to improve connectivity, to support tourism, to sustain the routes that we already have and to secure new routes to Scotland, which can be achieved by Scotland being on a level playing field and having advantage in some areas. I will, of course, work with other parties as the bill works its way through Parliament: I must engage with other parties in order to find compromise to ensure that the proposition on tax rates and bands is approved by Parliament.

Patrick Harvie

Will the cabinet secretary give way on that point?

Derek Mackay

I want to make some progress, because I have a number of important points to make. It would be wrong to say that the bill will transfer power to ministers because, ultimately, Parliament will have to approve the tax rates, bands and exemptions that will apply in Scotland. That is why I have reflected on a number of points and will lodge amendments to the bill at stage 2 to address them: I refer to points that have been made on, for example, monitoring and evaluation to assess the impacts of the policy, on exemptions and on independent economic analysis.

The Government is not alone in believing that a tax reduction would stimulate economic growth—the Scottish Chambers of Commerce and the Confederation of British Industry Scotland share that belief. The point to make is that the bill is about the principles and the framework to enable the tax to be collected. Other matters—not least, exemptions—will be determined in committee through use of affirmative procedure. I know how important the exemption is for the Highlands and Islands, which is why I am working with the UK Government to ensure that we have continuity of like-for-like exemption for the area, and that that exemption is compliant.

I think that the fact that the Government is embarking on independent economic analysis should be welcomed. It is true that we are taking forward our policy aspirations on the basis of evidence that we have seen from elsewhere, but a valid point was made about there being a degree of cynicism about some evidence, given who paid for it. The point of our independent analysis is that we arrive at an evidence-based decision by taking a methodical approach and looking at modelling. Having commissioned that analysis, we know that we will be in a good place to make the right decisions on ADT in Scotland, in keeping with our policy intention, as we approach the switch-off of APD next April.

I have listened to what the other political parties have said about their positions. The bill is about successful transfer of a power; it is about devolution and delivering on the deal that was achieved. That is why I think that the Liberals would be wrong to oppose the bill, at this stage. We must embark on the decision making in a timely fashion in order to deliver efficiency, certainty and clarity on the tax rates and exemptions in the future.

Patrick Harvie surprised me most, when he said that he believes that the bill could be made better and that it is “fixable”, given the Greens’ opposition to the policy intent. The Greens would like the tax to be collected in Scotland, which is one of the reasons why I think that the principles are worthy of support. There will be further engagement on the tax rates and bands.

Patrick Harvie

I have set out some principles that I think should be behind the bill in order to ensure that ministers give due consideration to social, economic, fiscal and environmental factors in setting their tax policy. Is there any reason why the cabinet secretary would be anxious or uncomfortable about having to give due consideration to those factors before he comes back to Parliament on the bill? What would be the objection to amendments that would put principle into the bill?

Derek Mackay

I have been able to outline to the Finance and Constitution Committee a positive response to a number of suggestions that were made by the committee, one of which was about on-going analysis and monitoring of the impacts of our policy. Of course we will take a close look at the impacts of the decisions that we make as a Government and as a Parliament. We have been balancing issues of affordability, economic growth and environmental impact, and we will also be informed by further environmental analysis, including the strategic environmental assessment that will inform decisions about air departure tax.

We must look at the issue in a balanced fashion and continue to engage with the other political parties, recognising that the tax represents a transfer of power that we want to be successful. We also want to use the tax in a way that will stimulate the economy and support connectivity—in particular, in the light of the economic challenges that are coming from the Brexit situation. We want to use the tax in a way that will support the economy, while we also address the environmental concerns that have legitimately been raised, and look at the wider transport envelope. A number of members focused on environmental concerns. The Government is, of course, delivering on its environmental targets, and we will set out further actions through our climate change efforts. The Scottish Government’s record on delivering ambitious climate change targets is strong.

Mike Rumbles

Will the cabinet secretary give way on that point?

Derek Mackay

I am almost ready to conclude, but I thank Mike Rumbles for his offer to intervene further to oppose the bill, which seems to have consensual support from across the chamber.

There will be further engagement by the Government at stages 2 and 3 on how to take the bill forward. I listened closely to what the Conservatives and others had to say around sharing further evidence and analysis in good time to inform decisions about rates and bands, and to address exemptions in the way that I outlined.

A number of members said that the bill is the first that Parliament has considered in this session, but that is not the case. It might be a surprise to some members, but we approved the Budget (Scotland) Bill, which went through its various stages to become law as the Budget (Scotland) Act 2017, and which is delivering hundreds of millions of pounds of extra investment in the public services of Scotland.

Following this consensual debate, I look forward to engaging with all members to progress the Air Departure Tax (Scotland) Bill to ensure that we deliver the tax competently, clearly and in keeping with Adam Smith’s principles. We want also to ensure that the tax follows the success of the previously devolved land and buildings transaction tax and landfill tax, and that it supports the economy and delivers on the policy objectives that have been outlined.

I invite Parliament to approve the general principles of the Air Departure Tax (Scotland) Bill.

Financial resolution

A financial resolution is needed for Bills that may have a large impact on the 'public purse'.

MSPs must agree to this for the bill to proceed.

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Financial resolution transcript

The Presiding Officer (Ken Macintosh)

The next item of business is consideration of motion S5M-04995, in the name of Derek Mackay, on the financial resolution for the Air Departure Tax (Scotland) Bill.

Patrick Harvie (Glasgow) (Green)

On a point of order, Presiding Officer. I apologise for giving you only very late notice of my intention to raise this point of order about the financial resolution.

Rule 9.12.3 of standing orders requires that a financial resolution be passed in respect of certain bills before the bill can progress past stage 1. I do not think that we are in breach of that rule in any way, but I ask the Presiding Officer to reflect on it. The rule states that a financial resolution is required

“Where a Bill contains provisions ... which charge expenditure on the Scottish Consolidated Fund, or ... the likely effect of which would be to ... increase significantly expenditure charged on that Fund ... give rise to significant expenditure payable out of that Fund for a new purpose; or ... for an existing purpose”.

However, we are debating today a bill whose principal financial impacts will be through taxation revenue, not increased charges on the consolidated fund. The existing rule is, indeed, triggered in respect of the bill, but the financial memorandum that the Government has provided addresses only additional expenditure aspects, and the Government is not required to produce a financial memorandum that goes into the taxation revenue impacts of the financial impacts of the bill. Will you consider whether that rule in our standing orders is still adequate, now that we are in the era in which we legislate on bills such as the Air Departure Tax (Scotland) Bill, whose principal financial impacts are on tax revenue?

The Presiding Officer

I thank Patrick Harvie for giving me some—albeit that it was very little—advance notice of the point of order. In this particular case, there were other considerations about the bill that I had to take into account, which triggered the need for a financial resolution. In this case, we will be able to go ahead this evening.

However, Mr Harvie raises a very interesting point about the wording of the relevant standing order, which I will take under consideration.

Patrick Harvie

Thank you.

The Presiding Officer

Having said that, I ask the Cabinet Secretary for Finance and the Constitution to move motion S5M-04995, on the financial resolution for the Air Departure Tax (Scotland) Bill.

Motion moved,

That the Parliament, for the purposes of any Act of the Scottish Parliament resulting from the Air Departure Tax (Scotland) Bill, agrees to—

(a) any expenditure of a kind referred to in Rule 9.12.3(b) of the Parliament’s Standing Orders arising in consequence of the Act, and

(b) any charge or payment in relation to which Rule 9.12.4 of the Standing Orders applies arising in consequence of the Act.—[Derek Mackay]

Vote at Stage 1

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Vote at Stage 1 transcript

The Presiding Officer (Ken Macintosh)

There are seven questions to be put as a result of today’s business. I remind members that, if the amendment in the name of Ruth Davidson is agreed to, the other amendments will fall.

The first question is, that amendment S5M-05282.4, in the name of Ruth Davidson, which seeks to amend motion S5M-05282, in the name of Nicola Sturgeon, on child tax credit cuts, be agreed to. Are we agreed?

Members: No.

The Presiding Officer

There will be a division.

For

Whittle, Brian (South Scotland) (Con)
Wells, Annie (Glasgow) (Con)
Tomkins, Adam (Glasgow) (Con)
Thomson, Ross (North East Scotland) (Con)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Smith, Liz (Mid Scotland and Fife) (Con)
Simpson, Graham (Central Scotland) (Con)
Scott, John (Ayr) (Con)
Ross, Douglas (Highlands and Islands) (Con)
Mundell, Oliver (Dumfriesshire) (Con)
Mountain, Edward (Highlands and Islands) (Con)
Mitchell, Margaret (Central Scotland) (Con)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Lindhurst, Gordon (Lothian) (Con)
Lamont, John (Ettrick, Roxburgh and Berwickshire) (Con)
Kerr, Liam (North East Scotland) (Con)
Harris, Alison (Central Scotland) (Con)
Hamilton, Rachael (South Scotland) (Con)
Greene, Jamie (West Scotland) (Con)
Golden, Maurice (West Scotland) (Con)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Davidson, Ruth (Edinburgh Central) (Con)
Corry, Maurice (West Scotland) (Con)
Chapman, Peter (North East Scotland) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Carlaw, Jackson (Eastwood) (Con)
Cameron, Donald (Highlands and Islands) (Con)
Burnett, Alexander (Aberdeenshire West) (Con)
Briggs, Miles (Lothian) (Con)
Bowman, Bill (North East Scotland) (Con)
Balfour, Jeremy (Lothian) (Con)

Against

Yousaf, Humza (Glasgow Pollok) (SNP)
Wightman, Andy (Lothian) (Green)
White, Sandra (Glasgow Kelvin) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Torrance, David (Kirkcaldy) (SNP)
Todd, Maree (Highlands and Islands) (SNP)
Swinney, John (Perthshire North) (SNP)
Sturgeon, Nicola (Glasgow Southside) (SNP)
Stewart, Kevin (Aberdeen Central) (SNP)
Stewart, David (Highlands and Islands) (Lab)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Smyth, Colin (South Scotland) (Lab)
Smith, Elaine (Central Scotland) (Lab)
Scott, Tavish (Shetland Islands) (LD)
Sarwar, Anas (Glasgow) (Lab)
Russell, Michael (Argyll and Bute) (SNP)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Rumbles, Mike (North East Scotland) (LD)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Robison, Shona (Dundee City East) (SNP)
Paterson, Gil (Clydebank and Milngavie) (SNP)
Neil, Alex (Airdrie and Shotts) (SNP)
McNeill, Pauline (Glasgow) (Lab)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
McDonald, Mark (Aberdeen Donside) (SNP)
McArthur, Liam (Orkney Islands) (LD)
McAlpine, Joan (South Scotland) (SNP)
Matheson, Michael (Falkirk West) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Martin, Gillian (Aberdeenshire East) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Macdonald, Lewis (North East Scotland) (Lab)
MacDonald, Angus (Falkirk East) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
Lochhead, Richard (Moray) (SNP)
Leonard, Richard (Central Scotland) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Lamont, Johann (Glasgow) (Lab)
Kidd, Bill (Glasgow Anniesland) (SNP)
Kelly, James (Glasgow) (Lab)
Johnstone, Alison (Lothian) (Green)
Johnson, Daniel (Edinburgh Southern) (Lab)
Hyslop, Fiona (Linlithgow) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Haughey, Clare (Rutherglen) (SNP)
Harvie, Patrick (Glasgow) (Green)
Harper, Emma (South Scotland) (SNP)
Greer, Ross (West Scotland) (Green)
Gray, Iain (East Lothian) (Lab)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
Gilruth, Jenny (Mid Fife and Glenrothes) (SNP)
Gibson, Kenneth (Cunninghame North) (SNP)
Freeman, Jeane (Carrick, Cumnock and Doon Valley) (SNP)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
FitzPatrick, Joe (Dundee City West) (SNP)
Finnie, John (Highlands and Islands) (Green)
Findlay, Neil (Lothian) (Lab)
Fee, Mary (West Scotland) (Lab)
Fabiani, Linda (East Kilbride) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Ewing, Annabelle (Cowdenbeath) (SNP)
Evans, Mairi (Angus North and Mearns) (SNP)
Dugdale, Kezia (Lothian) (Lab)
Dornan, James (Glasgow Cathcart) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dey, Graeme (Angus South) (SNP)
Denham, Ash (Edinburgh Eastern) (SNP)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Crawford, Bruce (Stirling) (SNP)
Constance, Angela (Almond Valley) (SNP)
Cole-Hamilton, Alex (Edinburgh Western) (LD)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Campbell, Aileen (Clydesdale) (SNP)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Bibby, Neil (West Scotland) (Lab)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Beamish, Claudia (South Scotland) (Lab)
Baker, Claire (Mid Scotland and Fife) (Lab)
Arthur, Tom (Renfrewshire South) (SNP)
Allan, Dr Alasdair (Na h-Eileanan an Iar) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Adam, George (Paisley) (SNP)

The Presiding Officer

The result of the division is: For 31, Against 91, Abstentions 0.

Amendment disagreed to.

The Presiding Officer

The next question is, that amendment S5M-05282.1, in the name of Kezia Dugdale, which seeks to amend the motion in the name of the First Minister, be agreed to. Are we agreed?

Members: No.

The Presiding Officer

There will be a division.

For

Yousaf, Humza (Glasgow Pollok) (SNP)
Wightman, Andy (Lothian) (Green)
White, Sandra (Glasgow Kelvin) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Torrance, David (Kirkcaldy) (SNP)
Todd, Maree (Highlands and Islands) (SNP)
Swinney, John (Perthshire North) (SNP)
Sturgeon, Nicola (Glasgow Southside) (SNP)
Stewart, Kevin (Aberdeen Central) (SNP)
Stewart, David (Highlands and Islands) (Lab)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Smyth, Colin (South Scotland) (Lab)
Smith, Elaine (Central Scotland) (Lab)
Scott, Tavish (Shetland Islands) (LD)
Sarwar, Anas (Glasgow) (Lab)
Russell, Michael (Argyll and Bute) (SNP)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Rumbles, Mike (North East Scotland) (LD)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Robison, Shona (Dundee City East) (SNP)
Paterson, Gil (Clydebank and Milngavie) (SNP)
Neil, Alex (Airdrie and Shotts) (SNP)
McNeill, Pauline (Glasgow) (Lab)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
McDonald, Mark (Aberdeen Donside) (SNP)
McArthur, Liam (Orkney Islands) (LD)
McAlpine, Joan (South Scotland) (SNP)
Matheson, Michael (Falkirk West) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Martin, Gillian (Aberdeenshire East) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Macdonald, Lewis (North East Scotland) (Lab)
MacDonald, Angus (Falkirk East) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
Lochhead, Richard (Moray) (SNP)
Leonard, Richard (Central Scotland) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Lamont, Johann (Glasgow) (Lab)
Kidd, Bill (Glasgow Anniesland) (SNP)
Kelly, James (Glasgow) (Lab)
Johnstone, Alison (Lothian) (Green)
Johnson, Daniel (Edinburgh Southern) (Lab)
Hyslop, Fiona (Linlithgow) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Haughey, Clare (Rutherglen) (SNP)
Harvie, Patrick (Glasgow) (Green)
Harper, Emma (South Scotland) (SNP)
Greer, Ross (West Scotland) (Green)
Gray, Iain (East Lothian) (Lab)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
Gilruth, Jenny (Mid Fife and Glenrothes) (SNP)
Gibson, Kenneth (Cunninghame North) (SNP)
Freeman, Jeane (Carrick, Cumnock and Doon Valley) (SNP)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
FitzPatrick, Joe (Dundee City West) (SNP)
Finnie, John (Highlands and Islands) (Green)
Findlay, Neil (Lothian) (Lab)
Fee, Mary (West Scotland) (Lab)
Fabiani, Linda (East Kilbride) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Ewing, Annabelle (Cowdenbeath) (SNP)
Evans, Mairi (Angus North and Mearns) (SNP)
Dugdale, Kezia (Lothian) (Lab)
Dornan, James (Glasgow Cathcart) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dey, Graeme (Angus South) (SNP)
Denham, Ash (Edinburgh Eastern) (SNP)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Crawford, Bruce (Stirling) (SNP)
Constance, Angela (Almond Valley) (SNP)
Cole-Hamilton, Alex (Edinburgh Western) (LD)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Campbell, Aileen (Clydesdale) (SNP)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Bibby, Neil (West Scotland) (Lab)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Beamish, Claudia (South Scotland) (Lab)
Baker, Claire (Mid Scotland and Fife) (Lab)
Arthur, Tom (Renfrewshire South) (SNP)
Allan, Dr Alasdair (Na h-Eileanan an Iar) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Adam, George (Paisley) (SNP)

Against

Whittle, Brian (South Scotland) (Con)
Wells, Annie (Glasgow) (Con)
Tomkins, Adam (Glasgow) (Con)
Thomson, Ross (North East Scotland) (Con)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Smith, Liz (Mid Scotland and Fife) (Con)
Simpson, Graham (Central Scotland) (Con)
Scott, John (Ayr) (Con)
Ross, Douglas (Highlands and Islands) (Con)
Mundell, Oliver (Dumfriesshire) (Con)
Mountain, Edward (Highlands and Islands) (Con)
Mitchell, Margaret (Central Scotland) (Con)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Lindhurst, Gordon (Lothian) (Con)
Lamont, John (Ettrick, Roxburgh and Berwickshire) (Con)
Kerr, Liam (North East Scotland) (Con)
Harris, Alison (Central Scotland) (Con)
Hamilton, Rachael (South Scotland) (Con)
Greene, Jamie (West Scotland) (Con)
Golden, Maurice (West Scotland) (Con)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Davidson, Ruth (Edinburgh Central) (Con)
Corry, Maurice (West Scotland) (Con)
Chapman, Peter (North East Scotland) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Carlaw, Jackson (Eastwood) (Con)
Cameron, Donald (Highlands and Islands) (Con)
Burnett, Alexander (Aberdeenshire West) (Con)
Briggs, Miles (Lothian) (Con)
Bowman, Bill (North East Scotland) (Con)
Balfour, Jeremy (Lothian) (Con)

The Presiding Officer

The result of the division is: For 91, Against 31, Abstentions 0.

Amendment agreed to.

The Presiding Officer

The next question is, that amendment S5M-05282.2, in the name of Alison Johnstone, which seeks to amend the motion in the name of the First Minister, as amended, be agreed to. Are we agreed?

Members: No.

The Presiding Officer

There will be a division.

For

Yousaf, Humza (Glasgow Pollok) (SNP)
Wightman, Andy (Lothian) (Green)
White, Sandra (Glasgow Kelvin) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Torrance, David (Kirkcaldy) (SNP)
Todd, Maree (Highlands and Islands) (SNP)
Swinney, John (Perthshire North) (SNP)
Sturgeon, Nicola (Glasgow Southside) (SNP)
Stewart, Kevin (Aberdeen Central) (SNP)
Stewart, David (Highlands and Islands) (Lab)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Smyth, Colin (South Scotland) (Lab)
Smith, Elaine (Central Scotland) (Lab)
Scott, Tavish (Shetland Islands) (LD)
Sarwar, Anas (Glasgow) (Lab)
Russell, Michael (Argyll and Bute) (SNP)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Rumbles, Mike (North East Scotland) (LD)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Robison, Shona (Dundee City East) (SNP)
Paterson, Gil (Clydebank and Milngavie) (SNP)
Neil, Alex (Airdrie and Shotts) (SNP)
McNeill, Pauline (Glasgow) (Lab)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
McDonald, Mark (Aberdeen Donside) (SNP)
McArthur, Liam (Orkney Islands) (LD)
McAlpine, Joan (South Scotland) (SNP)
Matheson, Michael (Falkirk West) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Martin, Gillian (Aberdeenshire East) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Macdonald, Lewis (North East Scotland) (Lab)
MacDonald, Angus (Falkirk East) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
Lochhead, Richard (Moray) (SNP)
Leonard, Richard (Central Scotland) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Lamont, Johann (Glasgow) (Lab)
Kidd, Bill (Glasgow Anniesland) (SNP)
Kelly, James (Glasgow) (Lab)
Johnstone, Alison (Lothian) (Green)
Johnson, Daniel (Edinburgh Southern) (Lab)
Hyslop, Fiona (Linlithgow) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Haughey, Clare (Rutherglen) (SNP)
Harvie, Patrick (Glasgow) (Green)
Harper, Emma (South Scotland) (SNP)
Greer, Ross (West Scotland) (Green)
Gray, Iain (East Lothian) (Lab)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
Gilruth, Jenny (Mid Fife and Glenrothes) (SNP)
Gibson, Kenneth (Cunninghame North) (SNP)
Freeman, Jeane (Carrick, Cumnock and Doon Valley) (SNP)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
FitzPatrick, Joe (Dundee City West) (SNP)
Finnie, John (Highlands and Islands) (Green)
Findlay, Neil (Lothian) (Lab)
Fee, Mary (West Scotland) (Lab)
Fabiani, Linda (East Kilbride) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Ewing, Annabelle (Cowdenbeath) (SNP)
Evans, Mairi (Angus North and Mearns) (SNP)
Dugdale, Kezia (Lothian) (Lab)
Dornan, James (Glasgow Cathcart) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dey, Graeme (Angus South) (SNP)
Denham, Ash (Edinburgh Eastern) (SNP)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Crawford, Bruce (Stirling) (SNP)
Constance, Angela (Almond Valley) (SNP)
Cole-Hamilton, Alex (Edinburgh Western) (LD)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Campbell, Aileen (Clydesdale) (SNP)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Bibby, Neil (West Scotland) (Lab)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Beamish, Claudia (South Scotland) (Lab)
Baker, Claire (Mid Scotland and Fife) (Lab)
Arthur, Tom (Renfrewshire South) (SNP)
Allan, Dr Alasdair (Na h-Eileanan an Iar) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Adam, George (Paisley) (SNP)

Against

Whittle, Brian (South Scotland) (Con)
Wells, Annie (Glasgow) (Con)
Tomkins, Adam (Glasgow) (Con)
Thomson, Ross (North East Scotland) (Con)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Smith, Liz (Mid Scotland and Fife) (Con)
Simpson, Graham (Central Scotland) (Con)
Scott, John (Ayr) (Con)
Ross, Douglas (Highlands and Islands) (Con)
Mundell, Oliver (Dumfriesshire) (Con)
Mountain, Edward (Highlands and Islands) (Con)
Mitchell, Margaret (Central Scotland) (Con)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Lindhurst, Gordon (Lothian) (Con)
Lamont, John (Ettrick, Roxburgh and Berwickshire) (Con)
Kerr, Liam (North East Scotland) (Con)
Harris, Alison (Central Scotland) (Con)
Hamilton, Rachael (South Scotland) (Con)
Greene, Jamie (West Scotland) (Con)
Golden, Maurice (West Scotland) (Con)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Davidson, Ruth (Edinburgh Central) (Con)
Corry, Maurice (West Scotland) (Con)
Chapman, Peter (North East Scotland) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Carlaw, Jackson (Eastwood) (Con)
Cameron, Donald (Highlands and Islands) (Con)
Burnett, Alexander (Aberdeenshire West) (Con)
Briggs, Miles (Lothian) (Con)
Bowman, Bill (North East Scotland) (Con)
Balfour, Jeremy (Lothian) (Con)

The Presiding Officer

The result of the division is: For 91, Against 31, Abstentions 0.

Amendment agreed to.

The Presiding Officer

The next question is, that motion S5M-05282, in the name of Nicola Sturgeon, on child tax credit cuts, as amended, be agreed to. Are we agreed?

Members: No.

The Presiding Officer

There will be a division.

For

Yousaf, Humza (Glasgow Pollok) (SNP)
Wightman, Andy (Lothian) (Green)
White, Sandra (Glasgow Kelvin) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Torrance, David (Kirkcaldy) (SNP)
Todd, Maree (Highlands and Islands) (SNP)
Swinney, John (Perthshire North) (SNP)
Sturgeon, Nicola (Glasgow Southside) (SNP)
Stewart, Kevin (Aberdeen Central) (SNP)
Stewart, David (Highlands and Islands) (Lab)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Smyth, Colin (South Scotland) (Lab)
Smith, Elaine (Central Scotland) (Lab)
Scott, Tavish (Shetland Islands) (LD)
Sarwar, Anas (Glasgow) (Lab)
Russell, Michael (Argyll and Bute) (SNP)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Rumbles, Mike (North East Scotland) (LD)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Robison, Shona (Dundee City East) (SNP)
Paterson, Gil (Clydebank and Milngavie) (SNP)
Neil, Alex (Airdrie and Shotts) (SNP)
McNeill, Pauline (Glasgow) (Lab)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
McDonald, Mark (Aberdeen Donside) (SNP)
McArthur, Liam (Orkney Islands) (LD)
McAlpine, Joan (South Scotland) (SNP)
Matheson, Michael (Falkirk West) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Martin, Gillian (Aberdeenshire East) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Macdonald, Lewis (North East Scotland) (Lab)
MacDonald, Angus (Falkirk East) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
Lochhead, Richard (Moray) (SNP)
Leonard, Richard (Central Scotland) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Lamont, Johann (Glasgow) (Lab)
Kidd, Bill (Glasgow Anniesland) (SNP)
Kelly, James (Glasgow) (Lab)
Johnstone, Alison (Lothian) (Green)
Johnson, Daniel (Edinburgh Southern) (Lab)
Hyslop, Fiona (Linlithgow) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Haughey, Clare (Rutherglen) (SNP)
Harvie, Patrick (Glasgow) (Green)
Harper, Emma (South Scotland) (SNP)
Greer, Ross (West Scotland) (Green)
Gray, Iain (East Lothian) (Lab)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
Gilruth, Jenny (Mid Fife and Glenrothes) (SNP)
Gibson, Kenneth (Cunninghame North) (SNP)
Freeman, Jeane (Carrick, Cumnock and Doon Valley) (SNP)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
FitzPatrick, Joe (Dundee City West) (SNP)
Finnie, John (Highlands and Islands) (Green)
Findlay, Neil (Lothian) (Lab)
Fee, Mary (West Scotland) (Lab)
Fabiani, Linda (East Kilbride) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Ewing, Annabelle (Cowdenbeath) (SNP)
Evans, Mairi (Angus North and Mearns) (SNP)
Dugdale, Kezia (Lothian) (Lab)
Dornan, James (Glasgow Cathcart) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dey, Graeme (Angus South) (SNP)
Denham, Ash (Edinburgh Eastern) (SNP)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Crawford, Bruce (Stirling) (SNP)
Constance, Angela (Almond Valley) (SNP)
Cole-Hamilton, Alex (Edinburgh Western) (LD)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Campbell, Aileen (Clydesdale) (SNP)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Bibby, Neil (West Scotland) (Lab)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Beamish, Claudia (South Scotland) (Lab)
Baker, Claire (Mid Scotland and Fife) (Lab)
Arthur, Tom (Renfrewshire South) (SNP)
Allan, Dr Alasdair (Na h-Eileanan an Iar) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Adam, George (Paisley) (SNP)

Against

Whittle, Brian (South Scotland) (Con)
Wells, Annie (Glasgow) (Con)
Tomkins, Adam (Glasgow) (Con)
Thomson, Ross (North East Scotland) (Con)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Smith, Liz (Mid Scotland and Fife) (Con)
Simpson, Graham (Central Scotland) (Con)
Scott, John (Ayr) (Con)
Ross, Douglas (Highlands and Islands) (Con)
Mundell, Oliver (Dumfriesshire) (Con)
Mountain, Edward (Highlands and Islands) (Con)
Mitchell, Margaret (Central Scotland) (Con)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Lindhurst, Gordon (Lothian) (Con)
Lamont, John (Ettrick, Roxburgh and Berwickshire) (Con)
Kerr, Liam (North East Scotland) (Con)
Harris, Alison (Central Scotland) (Con)
Hamilton, Rachael (South Scotland) (Con)
Greene, Jamie (West Scotland) (Con)
Golden, Maurice (West Scotland) (Con)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Davidson, Ruth (Edinburgh Central) (Con)
Corry, Maurice (West Scotland) (Con)
Chapman, Peter (North East Scotland) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Carlaw, Jackson (Eastwood) (Con)
Cameron, Donald (Highlands and Islands) (Con)
Burnett, Alexander (Aberdeenshire West) (Con)
Briggs, Miles (Lothian) (Con)
Bowman, Bill (North East Scotland) (Con)
Balfour, Jeremy (Lothian) (Con)

The Presiding Officer

The result of the division is: For 91, Against 31, Abstentions 0.

Motion, as amended, agreed to,

That the Parliament is fundamentally opposed to the UK Government’s imposition of the two-child limit on child tax credits and universal credit, which will push families into poverty; notes that the Institute of Fiscal Studies states that, across the UK, these cuts will lead to around 600,000 three-child families being £2,500-a-year worse off, and 300,000 families with four or more children being £7,000-a-year worse off, with on average two thirds of the families affected having at least one adult in paid work; utterly condemns the disgraceful and repugnant “rape clause”, which will force victims of rape seeking to claim child tax credits to prove to the UK Government that their third child was born as a result of non-consensual sex; believes this policy to be unfair, unequal, morally unacceptable and deeply harmful to women and their children and a fundamental violation of women’s human rights; further condemns any government that forces women to relive a horrific event in their lives to access social security for a third child; notes the many organisations that have called for a reverse of the two-child cap, including the Joseph Rowntree Foundation, which states that these changes will result in an additional 200,000 children in the UK being pushed into poverty; supports those third sector and healthcare organisations that will not be third party assessors on behalf of the Department for Work and Pensions; agrees with Rape Crisis Scotland, Engender and Scottish Women’s Aid’s view that these changes are ethically unjustifiable; believes that women’s rights and equality are integral to developing a social security system in Scotland that is just and fair; condemns the two-child cap as yet another welfare cut that the UK Government knows will hit women hardest; condemns the pressure being put on them to carry out a procedure for which many will not be trained, and calls on the UK Government to urgently change its position and remove the two-child cap and therefore scrap the “rape clause”.

The Presiding Officer

The next question is, that motion S5M-05283, in the name of Derek Mackay, on the Air Departure Tax (Scotland) Bill at stage 1, be agreed to. Are we agreed?

Members: No.

The Presiding Officer

There will be a division.

For

Yousaf, Humza (Glasgow Pollok) (SNP)
Whittle, Brian (South Scotland) (Con)
White, Sandra (Glasgow Kelvin) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
Wells, Annie (Glasgow) (Con)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Torrance, David (Kirkcaldy) (SNP)
Tomkins, Adam (Glasgow) (Con)
Todd, Maree (Highlands and Islands) (SNP)
Thomson, Ross (North East Scotland) (Con)
Swinney, John (Perthshire North) (SNP)
Sturgeon, Nicola (Glasgow Southside) (SNP)
Stewart, Kevin (Aberdeen Central) (SNP)
Stewart, David (Highlands and Islands) (Lab)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Smyth, Colin (South Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Smith, Elaine (Central Scotland) (Lab)
Simpson, Graham (Central Scotland) (Con)
Scott, John (Ayr) (Con)
Sarwar, Anas (Glasgow) (Lab)
Russell, Michael (Argyll and Bute) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Ross, Douglas (Highlands and Islands) (Con)
Robison, Shona (Dundee City East) (SNP)
Paterson, Gil (Clydebank and Milngavie) (SNP)
Neil, Alex (Airdrie and Shotts) (SNP)
Mundell, Oliver (Dumfriesshire) (Con)
Mountain, Edward (Highlands and Islands) (Con)
Mitchell, Margaret (Central Scotland) (Con)
McNeill, Pauline (Glasgow) (Lab)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
McDonald, Mark (Aberdeen Donside) (SNP)
McAlpine, Joan (South Scotland) (SNP)
Matheson, Michael (Falkirk West) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Martin, Gillian (Aberdeenshire East) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Macdonald, Lewis (North East Scotland) (Lab)
MacDonald, Angus (Falkirk East) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Lochhead, Richard (Moray) (SNP)
Lindhurst, Gordon (Lothian) (Con)
Leonard, Richard (Central Scotland) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Lamont, John (Ettrick, Roxburgh and Berwickshire) (Con)
Lamont, Johann (Glasgow) (Lab)
Kidd, Bill (Glasgow Anniesland) (SNP)
Kerr, Liam (North East Scotland) (Con)
Kelly, James (Glasgow) (Lab)
Johnson, Daniel (Edinburgh Southern) (Lab)
Hyslop, Fiona (Linlithgow) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Haughey, Clare (Rutherglen) (SNP)
Harris, Alison (Central Scotland) (Con)
Harper, Emma (South Scotland) (SNP)
Hamilton, Rachael (South Scotland) (Con)
Greene, Jamie (West Scotland) (Con)
Gray, Iain (East Lothian) (Lab)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
Golden, Maurice (West Scotland) (Con)
Gilruth, Jenny (Mid Fife and Glenrothes) (SNP)
Gibson, Kenneth (Cunninghame North) (SNP)
Freeman, Jeane (Carrick, Cumnock and Doon Valley) (SNP)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
FitzPatrick, Joe (Dundee City West) (SNP)
Findlay, Neil (Lothian) (Lab)
Fee, Mary (West Scotland) (Lab)
Fabiani, Linda (East Kilbride) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Ewing, Annabelle (Cowdenbeath) (SNP)
Evans, Mairi (Angus North and Mearns) (SNP)
Dugdale, Kezia (Lothian) (Lab)
Dornan, James (Glasgow Cathcart) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dey, Graeme (Angus South) (SNP)
Denham, Ash (Edinburgh Eastern) (SNP)
Davidson, Ruth (Edinburgh Central) (Con)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Crawford, Bruce (Stirling) (SNP)
Corry, Maurice (West Scotland) (Con)
Constance, Angela (Almond Valley) (SNP)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Chapman, Peter (North East Scotland) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Carlaw, Jackson (Eastwood) (Con)
Campbell, Aileen (Clydesdale) (SNP)
Cameron, Donald (Highlands and Islands) (Con)
Burnett, Alexander (Aberdeenshire West) (Con)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Briggs, Miles (Lothian) (Con)
Bowman, Bill (North East Scotland) (Con)
Bibby, Neil (West Scotland) (Lab)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Beamish, Claudia (South Scotland) (Lab)
Balfour, Jeremy (Lothian) (Con)
Baker, Claire (Mid Scotland and Fife) (Lab)
Arthur, Tom (Renfrewshire South) (SNP)
Allan, Dr Alasdair (Na h-Eileanan an Iar) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Adam, George (Paisley) (SNP)

Against

Scott, Tavish (Shetland Islands) (LD)
Rumbles, Mike (North East Scotland) (LD)
McArthur, Liam (Orkney Islands) (LD)
Cole-Hamilton, Alex (Edinburgh Western) (LD)

Abstentions

Wightman, Andy (Lothian) (Green)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Johnstone, Alison (Lothian) (Green)
Harvie, Patrick (Glasgow) (Green)
Greer, Ross (West Scotland) (Green)
Finnie, John (Highlands and Islands) (Green)

The Presiding Officer

The result of the division is: For 112, Against 4, Abstentions 6.

Motion agreed to,

That the Parliament agrees to the general principles of the Air Departure Tax (Scotland) Bill.

The Presiding Officer

The next question is, that motion S5M-04995, in the name of Derek Mackay, on the financial resolution on the Air Departure Tax (Scotland) Bill, be agreed to. Are we agreed?

Members: No.

The Presiding Officer

There will be a division.

For

Yousaf, Humza (Glasgow Pollok) (SNP)
Whittle, Brian (South Scotland) (Con)
White, Sandra (Glasgow Kelvin) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
Wells, Annie (Glasgow) (Con)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Torrance, David (Kirkcaldy) (SNP)
Tomkins, Adam (Glasgow) (Con)
Todd, Maree (Highlands and Islands) (SNP)
Thomson, Ross (North East Scotland) (Con)
Swinney, John (Perthshire North) (SNP)
Sturgeon, Nicola (Glasgow Southside) (SNP)
Stewart, Kevin (Aberdeen Central) (SNP)
Stewart, David (Highlands and Islands) (Lab)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Smyth, Colin (South Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Smith, Elaine (Central Scotland) (Lab)
Simpson, Graham (Central Scotland) (Con)
Scott, John (Ayr) (Con)
Sarwar, Anas (Glasgow) (Lab)
Russell, Michael (Argyll and Bute) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Ross, Douglas (Highlands and Islands) (Con)
Robison, Shona (Dundee City East) (SNP)
Paterson, Gil (Clydebank and Milngavie) (SNP)
Neil, Alex (Airdrie and Shotts) (SNP)
Mundell, Oliver (Dumfriesshire) (Con)
Mountain, Edward (Highlands and Islands) (Con)
Mitchell, Margaret (Central Scotland) (Con)
McNeill, Pauline (Glasgow) (Lab)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
McDonald, Mark (Aberdeen Donside) (SNP)
McAlpine, Joan (South Scotland) (SNP)
Matheson, Michael (Falkirk West) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Martin, Gillian (Aberdeenshire East) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Macdonald, Lewis (North East Scotland) (Lab)
MacDonald, Angus (Falkirk East) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Lochhead, Richard (Moray) (SNP)
Lindhurst, Gordon (Lothian) (Con)
Leonard, Richard (Central Scotland) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Lamont, John (Ettrick, Roxburgh and Berwickshire) (Con)
Lamont, Johann (Glasgow) (Lab)
Kidd, Bill (Glasgow Anniesland) (SNP)
Kerr, Liam (North East Scotland) (Con)
Kelly, James (Glasgow) (Lab)
Johnson, Daniel (Edinburgh Southern) (Lab)
Hyslop, Fiona (Linlithgow) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Haughey, Clare (Rutherglen) (SNP)
Harris, Alison (Central Scotland) (Con)
Harper, Emma (South Scotland) (SNP)
Hamilton, Rachael (South Scotland) (Con)
Greene, Jamie (West Scotland) (Con)
Gray, Iain (East Lothian) (Lab)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
Golden, Maurice (West Scotland) (Con)
Gilruth, Jenny (Mid Fife and Glenrothes) (SNP)
Gibson, Kenneth (Cunninghame North) (SNP)
Freeman, Jeane (Carrick, Cumnock and Doon Valley) (SNP)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
FitzPatrick, Joe (Dundee City West) (SNP)
Findlay, Neil (Lothian) (Lab)
Fee, Mary (West Scotland) (Lab)
Fabiani, Linda (East Kilbride) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Ewing, Annabelle (Cowdenbeath) (SNP)
Evans, Mairi (Angus North and Mearns) (SNP)
Dugdale, Kezia (Lothian) (Lab)
Dornan, James (Glasgow Cathcart) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dey, Graeme (Angus South) (SNP)
Denham, Ash (Edinburgh Eastern) (SNP)
Davidson, Ruth (Edinburgh Central) (Con)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Crawford, Bruce (Stirling) (SNP)
Corry, Maurice (West Scotland) (Con)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Chapman, Peter (North East Scotland) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Carlaw, Jackson (Eastwood) (Con)
Campbell, Aileen (Clydesdale) (SNP)
Cameron, Donald (Highlands and Islands) (Con)
Burnett, Alexander (Aberdeenshire West) (Con)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Briggs, Miles (Lothian) (Con)
Bowman, Bill (North East Scotland) (Con)
Bibby, Neil (West Scotland) (Lab)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Beamish, Claudia (South Scotland) (Lab)
Balfour, Jeremy (Lothian) (Con)
Baker, Claire (Mid Scotland and Fife) (Lab)
Arthur, Tom (Renfrewshire South) (SNP)
Allan, Dr Alasdair (Na h-Eileanan an Iar) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Adam, George (Paisley) (SNP)

Against

Scott, Tavish (Shetland Islands) (LD)
Rumbles, Mike (North East Scotland) (LD)
McArthur, Liam (Orkney Islands) (LD)
Cole-Hamilton, Alex (Edinburgh Western) (LD)

Abstentions

Wightman, Andy (Lothian) (Green)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Johnstone, Alison (Lothian) (Green)
Harvie, Patrick (Glasgow) (Green)
Greer, Ross (West Scotland) (Green)
Finnie, John (Highlands and Islands) (Green)

The Presiding Officer

The result of the division is: For 111, Against 4, Abstentions 6.

Motion agreed to,

That the Parliament, for the purposes of any Act of the Scottish Parliament resulting from the Air Departure Tax (Scotland) Bill, agrees to—

(a) any expenditure of a kind referred to in Rule 9.12.3(b) of the Parliament’s Standing Orders arising in consequence of the Act, and

(b) any charge or payment in relation to which Rule 9.12.4 of the Standing Orders applies arising in consequence of the Act.

The Presiding Officer

The final question is, that motion S5M-05286, in the name of Michael Matheson, on the Criminal Finances Bill, be agreed to.

Motion agreed to,

That the Parliament agrees that provisions of the Criminal Finances Bill, introduced in the House of Commons on 13 October 2016, relating to Unexplained Wealth Orders, the seizure and forfeiture of cash in the form of betting receipts, discharged confiscation orders, the Civil Jurisdiction and Judgments Act 1982 and powers to make consequential provision, so far as these matters fall within the legislative competence of the Scottish Parliament or alter the executive competence of the Scottish Ministers, should be considered by the UK Parliament.

MSPs agreed that this Bill could continue

Stage 2 - Changes to detail 

MSPs can propose changes to the Bill. The changes are considered and then voted on by the committee.

Changes to the Bill

MSPs can propose changes to a Bill  these are called 'amendments'. The changes are considered then voted on by the lead committee.

The lists of proposed changes are known as a 'marshalled list'. There's a separate list for each week that the committee is looking at proposed changes.

The 'groupings' document groups amendments together based on their subject matter. It shows the order in which the amendments will be debated by the committee and in the Chamber. This is to avoid repetition in the debates.

How is it decided whether the changes go into the Bill?

When MSPs want to make a change to a Bill, they propose an 'amendment'. This sets out the changes they want to make to a specific part of the Bill.

The group of MSPs that is examining the Bill (lead committee) votes on whether it thinks each amendment should be accepted or not.

Depending on the number of amendments, this can be done during one or more meetings.

First meeting on amendments

Documents with the amendments considered at this meeting held on 17 May 2017:

Video Thumbnail Preview PNG

First meeting on amendments transcript

The Convener (Bruce Crawford)

Good morning, colleagues, and welcome to the 15th meeting of the Finance and Constitution Committee in 2017. I remind everyone to put their mobile phones on silent.

The first agenda item is stage 2 of the Air Departure Tax (Scotland) Bill. We are joined by the Cabinet Secretary for Finance and Constitution, and by Scottish Government officials. Mike Stewart is the bill manager, John St Clair is senior principal legal officer and Fiona Lincoln is from the parliamentary counsel office. I welcome the cabinet secretary and his officials to the meeting. Members should note that officials cannot speak on the record at stage 2, so all questions should be directed to the cabinet secretary.

Members should have copies of the marshalled list of amendments and the groupings of amendments. We will take each amendment on the marshalled list in turn.

Section 1 agreed to.

Section 2—Meaning of chargeable passenger

The Convener

Amendment 1, in the name of the cabinet secretary, is grouped with amendments 2 to 6, 10 to 13, 51, 52, 56 to 58 and 60 to 65.

The Cabinet Secretary for Finance and the Constitution (Derek Mackay)

As I committed to doing in my response to the committee’s stage 1 report, I have lodged the amendments in the group to provide for passenger exemptions under the air departure tax, and to make minor consequential changes resulting from the exemptions. All the exemptions command strong stakeholder support and replicate those that are currently in place for United Kingdom air passenger duty.

However, two of the UK APD passenger exemptions have not been included in the group of amendments. First, as I set out in my response to the committee’s stage 1 report, the Scottish Government strongly supports an ADT exemption for Highlands and Islands flights. However, after careful consideration, the Government has concluded that the exemption must be notified to and assessed by the European Commission under state-aid rules before it is implemented, in compliance with European Union law. The Scottish Government is working closely with the UK Government to resolve that issue; I will ensure that Parliament and stakeholders are regularly updated on the matter. If notification to the European Commission is successful, the exemption will, subject to Parliament’s approval, be introduced in secondary legislation under powers in section 8.

Secondly, the Scottish Government is not minded to introduce an ADT exemption for passengers on flights that last less than 60 minutes and that depart from and arrive back at the same airport. It appears that that exemption would be to the singular benefit of airlines that operate fear-of-flying courses. As airlines already levy charges for those courses, it is not clear that the viability of such services would be impacted by an ADT charge. The courses also have no impact on the Scottish Government’s overall connectivity and sustainable economic growth objectives. Therefore, the Government considers it to be fair that the aircraft operators who run such courses should be liable to pay ADT on the flights. It is important to note that short pleasure flights, such as those that are often run at air shows, will remain exempt under the existing chargeable aircraft conditions, which are set out in section 3.

I move amendment 1.

Patrick Harvie (Glasgow) (Green)

Good morning, cabinet secretary. I understand the idea of broadly following the exemptions that are in the current tax regime. However, deciding what level or nature of exemptions ought to be applied surely demands that first we know what the purpose of the tax is. That seems to have been an open question throughout stage 1. We understand that the purpose of the bill is to levy the tax, but I do not think that the Government is at all clear on what the purpose of taxing aviation is. The only Government policy objectives that the cabinet secretary mentioned in his opening remarks concerned economic growth and connectivity, which would be best served if the Government did not promote the bill at all and exempted aviation from taxation altogether. Clearly, I would oppose that, but I ask the cabinet secretary to tell us what he believes the purpose of taxing aviation is, so that we can decide what the appropriate level of exemptions is.

Murdo Fraser (Mid Scotland and Fife) (Con)

I welcome the amendments in general, which reflect what the committee resolved in its stage 1 report, when it recommended that the exemptions be in the bill. It is helpful that the amendments have been lodged.

I seek clarity on one issue. Section 8, which will be amended by amendment 12, will enable the Scottish ministers to amend or remove exemptions by regulation. What will be the process if a decision is made to exercise that power?

Adam Tomkins (Glasgow) (Con)

I echo what Murdo Fraser said about the exemptions being made by amendment to the primary legislation rather than by secondary legislation thereafter. It is not appropriate to introduce bills that fail to define the scope of taxable activity or behaviour.

What do you understand to be the timetable for notification to the European Commission? Is there any prospect of the notification process being completed in time to include the relevant exemption in the bill at stage 3, rather than its being dealt with subsequently by secondary legislation?

The Convener

The cabinet secretary has been asked questions by three members in a row and I want him to be able to deal with them properly. Two other members also want to ask questions.

Derek Mackay

On Mr Harvie’s question about the purpose of the tax, it could be argued that it was introduced by a previous United Kingdom Government as a green tax. We could argue about whether it achieved its purpose. It has contributed to state revenues and, following the dialogue, discussion and processes that led to the tax being devolved to Scotland, it forms part of our budget. The Scottish Government has aspirations around connectivity and supporting the economy. The Scottish Parliament has power in relation to the tax, which not only generates revenue but can be deployed in a way that supports our strategy on connectivity and general economic growth, as I said.

Mr Fraser asked about the process for amending the exemptions. The order would be subject to affirmative procedure, which means that amending exemptions would require both proactive engagement with Parliament, and Parliament’s approval.

On Mr Tomkins’s question, when there is resolution of the issue of the exemption for the Highlands and Islands, we want to have the power to act through secondary legislation rather than having to go through a bill process. It is about how we use the powers in the bill to effect change, in accordance with parliamentary procedure.

Mr Tomkins also asked about the details of notification. Because the UK is the member state, it will be for the UK Government to progress the matter. From the engagement that I have had with the Financial Secretary to the Treasury, I understand that there will be a UK Government process in which we will engage, with the UK Government. I also want us to engage directly with Europe. I do not have a timescale for that. To say that the process could be concluded by stage 3 would be incredibly ambitious. We aspire to work as hard as possible to have the process concluded before the tax is levied in Scotland in the next financial year, but that is in the hands of the UK Government because the UK is the member state. We will certainly work as hard as we can to achieve it, but completion by stage 3 feels very unlikely, given my engagement with the UK Government.

Neil Bibby (West Scotland) (Lab)

As members know, the belief that exemptions to air departure tax should be set out in the bill—and at the earliest opportunity—was a recurring theme in the evidence that the committee heard. A significant body of expert opinion, including the Institute of Chartered Accountants in Scotland and the Chartered Institute of Taxation, called for exemptions to be in the bill in order to reduce uncertainty, as opposed to their being provided for through regulation at a later date.

Our colleagues in the Delegated Powers and Law Reform Committee also made it clear that delegated powers should not be used as a substitute for proper policy development. I therefore welcome the Scottish Government’s decision to set out the proposed exemptions in the bill, through the amendments in the group.

Willie Coffey (Kilmarnock and Irvine Valley) (SNP)

Are the proposed exemptions consistent with practice in the other nations of the United Kingdom? Are they reciprocated in other jurisdictions in Europe and elsewhere?

The Convener

If there are no other questions, I ask the cabinet secretary to wind up the debate and deal with Willie Coffey’s question.

Derek Mackay

I have no further points to make on the substance of the amendments. I confirm that the exemptions, apart from the two that I have mentioned, mirror the UK exemptions.

Amendment 1 agreed to.

Section 2, as amended, agreed to.

After section 2

Amendments 2 to 6 moved—[Derek Mackay]—and agreed to.

Section 3—Meaning of chargeable aircraft

The Convener

Amendment 7, in the name of Derek Mackay, is grouped with amendments 8, 9 and 53.

Derek Mackay

As I committed to doing in my response to the committee’s stage 1 report, the amendments provide for aircraft exemptions under ADT and will make minor consequential changes resulting from the exemptions. All the exemptions command strong stakeholder support and replicate those that are currently in place for the UK air passenger duty.

I move amendment 7.

Amendment 7 agreed to.

Section 3, as amended, agreed to.

After section 3

Amendments 8 and 9 moved—[Derek Mackay]—and agreed to.

Section 4 agreed to.

Section 5—Meaning of carriage and agreement for carriage

Amendments 10 and 11 moved—[Derek Mackay]—and agreed to.

Section 5, as amended, agreed to.

Sections 6 and 7 agreed to.

Section 8—Key concepts may be modified by regulations

Amendment 12 moved—[Derek Mackay]—and agreed to.

Section 8, as amended, agreed to.

Section 9—Tax structure

Amendment 13 moved—[Derek Mackay]—and agreed to.

Section 9, as amended, agreed to.

Schedule 1 agreed to.

Section 10—Tax bands and rate amounts to be set by regulations

The Convener

Amendment 66, in the name of Patrick Harvie, is grouped with amendments 70 and 71.

Patrick Harvie

The amendments in this group are the only substantial policy proposal that I am making, so I hope that it is all right if I spend a few minutes setting out the rationale for them. I have written far too much, but I promise to try to skip through some of it to save time.

As I observed at stage 1, this is the first time that I can recall any Government asking Parliament to pass legislation to create a tax that the Government itself seems to think ought not to exist. It is a peculiar situation and it is therefore unsurprising to me that the Government seems unclear about the purpose of the tax. However, it is not only the Government that has been unclear; I cannot think of many stage 1 inquiries in which so little evidence has been put forward by so many for so long on a policy change.

On the environmental impact of aviation, I also find it extraordinary that the Government is so completely convinced that actions in other parts of the economy will be able to achieve the additional emissions reductions that will be necessary if aviation levels increase, yet it cannot say by how much it is willing to see those aviation emissions go up. It is just not possible to have confidence in the claim of additional emissions cuts elsewhere if there is no clarity about the scale of the task that is being created by the decision to give airlines a free pass.

10:15  



These amendments aim to put some purpose into the bill. They would require ministers, in exercising the power to propose bands and rates for the new tax, to be clear about what they intend to achieve. Amendment 70 would require the Government, before the first exercise of the power, to consult on and adopt an aviation emissions policy. In deciding how prescriptive to be in framing amendment 70, I looked at the positions of those representing the airlines and the Scottish Government’s chosen adviser on climate change, the United Kingdom Committee on Climate Change, which previously offered advice to both Governments on the capping of aviation emissions at 2005 levels by 2050. As far back as 2009, that was an active discussion between the Committee on Climate Change and the UK Government.

Meanwhile, in the same year, the aviation industry adopted a set of targets to mitigate CO2 emissions from air transport. Those included an average improvement in fuel efficiency of 1.5 per cent per year from 2009 to 2020, a cap on the net aviation CO2 emissions from 2020 onwards—so-called carbon-neutral growth—and a reduction in net aviation emissions of 50 per cent by 2050, relative to the 2005 levels. When Tim Alderslade of Airlines UK gave evidence to the committee at stage 1, he restated those commitments. He said:

“I can give you the assurance that that is still the commitment.”

He went on:

“as a global industry, those are the commitments that we have made. We have made them ... for a number of years, and we are on target to hit them.”—[Official Report, Finance and Constitution Committee, 1 February 2017; c 55,56.]

The Scottish Government’s adviser thinks that aviation emissions can be capped at 2005 levels by 2050 and the industry thinks that it can go much further and get a 50 per cent cut against that baseline. I am sceptical about the industry’s commitments, but amendment 70 requires only that the Government commits to some target for aviation emissions in 2050, expressed as a percentage below 100 per cent of the 2005 levels. Anyone who takes seriously the industry’s commitments must clearly accept that that is easily achievable in its terms. That needs to be set in combination with evidence-based use of the powers in section 16(3) of the Climate Change (Scotland) Act 2009, given the additional climate impact of emissions at altitude.

Amendment 70 would work with amendment 66 to ensure that, in setting rates and bands, the minister acts in the way “best calculated” to help to meet the target that is set in the aviation emissions policy. Clearly, that is not the only measure that needs to be taken if we are to achieve such an aviation emissions policy, but it has to be one of them and it has to be used.

The final amendment in the group, amendment 71, is a response to the paucity of evidence offered for the Government’s stated tax policy of a 50 per cent reduction in ADT take. The minister agreed to come forward with various forms of evidence at a later stage, and I was slightly surprised not to see an amendment along those lines from the Government. If the committee is to achieve agreement on the nature of the evidence that we seek, we should define that in the bill by placing a requirement on ministers. My proposal is for an assessment that covers the fiscal, economic, environmental and social impacts.

The fiscal impacts of course include the revenue that is raised or foregone, as well as indirect impacts. I would be interested to see whether the surprising claims from the Scottish Tourism Alliance of decreased welfare spend and increased income tax generated have any rational basis. An assessment of economic impacts would end the guesswork that seems to have been going on about the number of jobs that would be created by the Government’s policy. On environmental impacts, I have included the impact on greenhouse gas emissions and on local air and noise pollution in the vicinity of Scottish airports.

In social terms, amendment 71 would require an assessment of the share of the increase or decrease in ADT that would be paid by each income decile group. That information is easy to collate from information that is available from the Office for National Statistics. For example, my party recently published figures based on an assumption of a 50 per cent reduction in ADT take, which showed that the richest 10 per cent of society would enjoy four times the financial gain that those in the lowest income decile would receive. If our figures are wrong, the Government is welcome to correct them and publish an accurate assessment. In either case, that assessment would require to be conducted before the Government exercised its power to set rates and bands.

It is clear that, in order to continue to levy a tax on aviation, Parliament needs to pass a bill. However, it does not need to set that power into a policy vacuum. If the Government is unwilling to be clear about the positive purpose of taxing aviation, Parliament should pass legislation that places those requirements on ministers.

I do not have much expectation that the cabinet secretary will agree with my arguments. If he wants to argue against the detail instead of the principle, it is possible that we might agree on adjustments before stage 3. However, the intention of my amendments is to make the bill itself supportable. To pass it without any such constraints on the impacts that the tax power would have would be irresponsible.

I move amendment 66.

Neil Bibby

As committee members will know, many of those who contributed to the Scottish Government’s consultation and the committee’s own evidence taking on the bill expressed substantial concerns about the impact that a cut in aviation tax could have on both the environment and the public finances of Scotland. Indeed, a majority of those who participated in the Government’s consultation opposed the course of action that the Government proposes to take.

We heard from campaigners such as Transform Scotland that the aviation industry is already one of the most lightly taxed industries in the country and that tax reductions would increase aviation emissions. The Government nonetheless proposes to target the industry for a tax cut. We heard that the tax cut that is proposed would reduce Government revenue by over £150 million a year at a time when public services are under pressure. We also heard that frequent flyers and those on higher incomes would benefit disproportionately, as Patrick Harvie has just outlined.

A considerable degree of doubt was expressed about whether a tax cut would boost or benefit the economy in any meaningful way. No credible or convincing evidence has been presented to the committee to suggest that the growth in passenger numbers in Ireland had anything to do with the abolition of its air passenger duty.

In Scotland, airports are reporting record growth in passenger numbers—figures that were released just last week highlighted record passenger numbers at Scottish airports under the existing air passenger tax regime. Domestic and international traffic has gone up in Aberdeen, over a million people passed through Edinburgh airport last month and Glasgow airport reported its 50th consecutive month of growth. That is all with the existing levels of air passenger duty.

The case for the proposed tax cut does not stack up. It therefore seems prudent and reasonable to require the Government to set out exactly what the impact of its plans will be before it proceeds with any changes to rates or bands. We believe that the Government should be required to set out its policy intentions on aviation and to conduct an impact assessment before it sets the new tax levels. It is essential that the Scottish ministers provide details of the evidence and information that they are using to justify the tax cut, and amendment 71, in particular, places a reasonable and clear duty on ministers to keep the Parliament informed about their plans.

Maree Todd (Highlands and Islands) (SNP)

I propose that we reject amendment 66, as a statutory target for aviation emissions would be inconsistent with the approach that is being taken under Scotland’s climate change legislation—in particular, the setting of emissions reduction targets across the economy as a whole, not for specific sectors. The calculation is that the tax would lead to a 3 per cent increase in aviation emissions, which is only 0.1 per cent of the total. That is perfectly manageable and could be managed within the whole economy rather than within the aviation sector.

The impact assessments that are required under amendment 71 would be undertaken anyway, and some of the impacts would be difficult to estimate because they refer to taxation powers that are not within the remit of the Parliament. Before the regulations are laid before the Parliament, we will see a strategic environmental assessment, an updated greenhouse gas emissions assessment, a noise assessment and an independent economic assessment. I think that that is sufficient impact assessment for the policy.

Murdo Fraser

From Mr Harvie’s point of view, these are perfectly reasonable amendments to lodge. My concern is that they are very prescriptive in the detail that they would put in the bill. When we took evidence from the cabinet secretary on these issues at stage 1, he made it clear that, when the Scottish Government lays regulations before Parliament to amend the tax rates and bands, it will present evidence on that. The Parliament will have the opportunity to assess that evidence and either support or reject the Scottish Government’s proposals at that stage. I am not sure that it is necessary to put the proposed detail in the bill, because the Parliament will get an opportunity to consider these matters subsequently. However, before we vote on the amendments, it would be helpful if the cabinet secretary could explain in more detail exactly what evidence will be presented to Parliament at the point when it will be asked to consider the setting of rates and bands.

James Kelly (Glasgow) (Lab)

I support Patrick Harvie’s amendments. It is crucial that the cabinet secretary provides proper impact assessments and that the policy is backed by an evidence base. There is broad agreement about the need for the bill as it will allow the rates to be set. However, given that the Government’s clear policy intention is to reduce the level of ADT, it is incumbent on it to outline the evidence to back up that policy.

There are two strands to this. Patrick Harvie referred to the level of carbon emissions being capped at 2005 levels by 2050. We heard evidence from the airport operators that the reduction of the tax would result in an increased number of air travellers and increased economic activity but, logically speaking, that is at odds with the Scottish Government’s policy of reducing carbon emissions. I do not accept Maree Todd’s argument that we can exempt the airline industry from that policy; it clearly has to be part of the policy. The Government must explain how a policy that will result in more people travelling and, therefore, increased emissions squares with its policy of reducing carbon emissions.

The second strand is the fiscal impact. Reducing ADT by 50 per cent would have an adverse effect on the Scottish Government’s budget of around £189 million. The Government needs to show how that money would be replaced. It also has to address the arguments that Patrick Harvie made about who would benefit. We heard evidence that those in the top earning groups, as opposed to those in lower earning groups, would benefit from a reduction in the tax. There is an argument about fairness and about the impact on the Scottish budget.

For those reasons, I support the amendments in the name of Patrick Harvie.

Ivan McKee (Glasgow Provan) (SNP)

I think that everyone agrees that there should be an economic assessment and an environmental assessment of the policy. The question is how best to give effect to those. I understand that the Government is about the launch the economic assessment, which I look forward to reading to see how the numbers stack up. That will be set in the context of the proposed rates and bands and will give us the opportunity to understand them in detail.

The environmental impact is important, so we want to see the data on it. I understand that the Government has already undertaken a strategic environmental assessment, but that needs to be understood in the context of the whole-economy approach and the TIMES model, which considers the most effective way of driving carbon reduction to meet the targets to which the Government has committed, taking into account everything that is happening across all aspects of the economy and all sectors.

We talk about aviation but, as we highlighted, aviation emissions are a very small percentage of total greenhouse gas emissions. It is important that we look at the whole economy. To put something in the bill that constrains what happens in aviation does not stack up with the way in which we approach policy across the rest of the economy, which accounts for 97 per cent of the environmental impact.

For consistency, it does not make sense to include the provision in the bill. The Government has a process on economic and environmental impacts, and we will see the data on that before we debate and agree to the tax bands and rates later this year.

10:30  



Willie Coffey

We heard evidence at stage 1 about the positive effect in Ireland of the removal of the tax, not just for Dublin airport but for the regional airports. The chief executive of Ryanair is on the record as saying that removing air passenger duty could have a hugely beneficial effect for airports such as Prestwick airport in Ayrshire, which is near my constituency. Enough evidence has been heard at stage 1 to suggest that this kind of measure has a positive effect. Does the cabinet secretary share that view?

Derek Mackay

The Scottish Government does not support the amendments in the group. Amendment 70 and amendment 66, which depends on amendment 70, would set a statutory target for aviation emissions, which would be inconsistent with the approach that is taken under Scotland’s climate change legislation.

Under the Climate Change (Scotland) Act 2009, statutory emissions reduction targets are set at the level of the whole economy, rather than for specific sectors. The whole-economy approach, which has been supported by the Committee on Climate Change, allows for the delivery of overall emissions reductions in flexible and cost-effective ways. The draft climate change plan, which Parliament recently scrutinised, sets out how we propose to meet targets up to 2032 on that statutory basis. Setting a specific target for aviation emissions, as amendment 70 proposes, would establish a precedent for less flexible sectoral emission reduction targets and challenge the basis of the whole-economy approach that is established in Scotland’s climate change legislation. The Scottish Government has noted the committee’s support for an aviation emissions strategy in the climate change plan, and in due course it will respond to Parliament on that.

In relation to amendment 71, the Scottish Government has already committed to publishing a series of impact assessments on its ADT band and rate amount proposals before it lays secondary legislation before Parliament. First, the Government has commissioned an independent economic assessment of our overall 50 per cent ADT reduction plan. A contractor has been appointed, and the report will be published in the autumn. Secondly, a strategic environmental assessment is under way, and the next step of the SEA will be the Government consulting publicly over the summer on our overall 50 per cent reduction plan, as well as publishing an environmental report that outlines the findings of the assessment of the plan on a wide range of environmental topics such as climate factors, air quality, material assets and biodiversity. Thirdly, the Scottish Government is undertaking quantitative assessment of the likely greenhouse gas emissions and noise impacts of the overall 50 per cent reduction plan. The noise assessment will be published in the autumn, and the emissions assessment will be published next month, as supporting information to the SEA consultation.

The Scottish Government fully supports and recognises the importance of robust analysis of policies after implementation. Therefore, in addition to analysis that is being carried out, the Scottish Government has asked the contractor that is undertaking the independent economic assessment to consider the best way to design a robust monitoring and evaluation framework that can be put in place for assessing the socioeconomic and environmental impacts of ADT.

The Scottish Government is carrying out a range of impact assessments that will be published before Parliament is asked to consider our secondary legislation that sets out the plans for tax bands and tax rate amounts. The Scottish Government also considers that requiring the Scottish ministers to undertake a series of detailed and potentially time-consuming impact assessments every time they wish to propose changes to tax bands and tax rate amounts would restrict the flexibility to respond at short notice to economic shocks. Parliament did not consider such assessments necessary for the other devolved taxes—land and buildings transaction tax and Scottish landfill tax.

It is important to note that arrangements already exist for some of the assessments that are listed in Mr Harvie’s amendments. For example, the Scottish Fiscal Commission will assume responsibility for producing independent forecasts of receipts from ADT to inform the Scottish Government’s draft budget for 2018-19 and the budget bill, and those forecasts will reflect the Scottish Government’s policy on ADT.

In addition, if the Government proposes any further changes to ADT beyond its plans for a 50 per cent reduction in the overall tax burden by the end of the current session of Parliament, and if those further changes are considered likely to have a significant environmental effect, the Environmental Assessment (Scotland) Act 2005 will require an SEA to be carried out before those plans can be legislated for or implemented. The Scottish Government does not believe that it is necessary or desirable to duplicate such provision in the bill by requiring an environmental assessment to be undertaken. I therefore invite Patrick Harvie to withdraw amendment 66 and not to move amendments 70 and 71.

To reflect on members’ contributions, I think that Mr Fraser is right to say that we do not want to be overly prescriptive. However, further discussion with Mr Harvie on wording that could be proposed at stage 3, further work to explore the burdens on ministers and what we should consider, and further reflection on the bringing together of the various reports that I have outlined are worthy of further exploration. We do not want to be overly prescriptive or create unnecessary burdens in the bill, but I am happy to consider the matter further.

The Convener

I call Patrick Harvie to wind up and say whether he wishes to press or withdraw amendment 66.

Patrick Harvie

Not for the first time, my favourite quote from the discussion came from Murdo Fraser, who said:

“From Mr Harvie’s point of view, these are perfectly reasonable amendments”.

If I have ever been damned with faint praise, I think that that was it.

I think that the implicit suggestion is that we should reject my amendments 66, 70 and 71 purely on the basis that the Government has offered to come forward with some evidence base in the future, so the Parliament will then have the opportunity to support or reject the proposed rates and bands. However, the point is that Parliament will have the ability only to support or reject them.

I am asking for us to place duties on ministers about what they have to consider in developing their proposals. Determining the duties in the bill is our only opportunity to affect the process that ministers go through in developing their proposals, which the Parliament then has to accept or reject wholesale, without the possibility of amendment. I restate the case for placing requirements in the bill in respect of those factors.

The cabinet secretary mentioned that the UK Government originally introduced the tax partly as an environmental tax. If that was the purpose of the tax, I certainly agree that it could be improved. It could be a much better environmental tax than it is. However, that does not seem to be the Scottish Government’s purpose. Its only purpose—or, certainly, the only one that the cabinet secretary mentioned in discussing why he introduced this bill to create a new, replacement tax—seems to be revenue raising, yet the Government seems not to want to keep raising that revenue in the long term.

If my amendments fall, I will be willing to discuss with the Scottish Government what else it intends to do, but I am afraid that I will have to do that with a wee dose of cynicism.

There has been discussion of the evidence that has come forward. Parliamentary committees tend to refer to everything that we receive in oral and written submissions as evidence. However, in normal language, there is a big difference between evidence and claims. Many of the claims that have been made for the Government’s policy are without serious evidence.

I do not claim that there will be no economic impact from the Government’s policy; rather, I am saying that it needs to be set in the context of other impacts and that we need to understand the different kinds of economic impact that might be achieved.

The Government says that it will consult not only on the evidence that it intends to produce but on its overall plan for a 50 per cent reduction in ADT. I would be curious to know whether the cabinet secretary is going to consult on what the overall ADT plan ought to be or whether he will merely present the plan and say, “This is what we are going to do; you can tell us what you think.” Consultation can be open or closed.

That does not undermine the argument that I made several times during the stage 1 inquiry that evidence ought to come before a policy is adopted. However, the cabinet secretary continues to restate that a 50 per cent cut in ADT is his policy, before we have any of the evidence that would be required rationally to decide what the policy ought to be.

The cabinet secretary and a couple of other members argued that my approach is somehow inconsistent with the Climate Change (Scotland) Act 2009 and the idea that emissions targets should apply across the whole economy. That is exactly the problem with the 2009 act—and I say that as the member who had the privilege of chairing the committee that led the scrutiny of that legislation, much of which took place in this room.

All the political parties agreed to set the ambitious targets and yet we agreed nothing about how to get there—we all agreed on the destination, but not on the actions. We patted each other on the back for our ambition. To simply repeat the same process and, years after the fact, not begin to differentiate the levels of emissions that we think are acceptable from different parts of the economy and to decide on the necessary actions to reach our objective would be a mistake.

It was suggested that aviation emissions can be managed within the whole economy. Maybe they can be, but only if we know what they will be and how high we expect them to rise. That information is necessary if we are to be confident that other actions in the rest of the economy will be adequate to overcome the additional emission increase.

All that my amendments propose is that we should know what we are dealing with—what level of damage we will allow the aviation industry to inflict on the climate and the level of action that it will be necessary to take to counteract that damage.

I intend to press amendment 66 and I will move amendments 70 and 71. If those amendments fall, I will consider what other possible routes are available to discuss the issues at stage 3.

The Convener

The question is, that amendment 66 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Kelly, James (Glasgow) (Lab)
Harvie, Patrick (Glasgow) (Green)
Bibby, Neil (West Scotland) (Lab)

Against

Tomkins, Adam (Glasgow) (Con)
Todd, Maree (Highlands and Islands) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
Kerr, Liam (North East Scotland) (Con)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Denham, Ash (Edinburgh Eastern) (SNP)
Crawford, Bruce (Stirling) (SNP)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)

The Convener

The result of the division is: For 3, Against 8, Abstentions 0.

Amendment 66 disagreed to.

The Convener

Amendment 66 was not agreed to, as is obvious from the numbers that I just read out.

Patrick Harvie

It would have been nice if that had not been said.

The Convener

Amendment 67, in the name of Patrick Harvie, is grouped with amendments 68 and 69.

Patrick Harvie

This group of amendments might be a bit less controversial; I am open to hearing what the cabinet secretary has to say about it. I have lodged amendments 67, 68 and 69 only because the Delegated Powers and Law Reform Committee made a recommendation following its consideration of the bill, which the Finance and Constitution Committee agreed with in its stage 1 report.

Section 10 of the bill contains provisions that will enable the Scottish ministers to set the tax rates and bands. The Delegated Powers and Law Reform Committee sought clarification from the Government on the scope of the power. In correspondence with the committee, the Government stated that the provision was intended to provide the Government with

“sufficient legislative flexibility to change provisions about tax rates and determination of a chargeable passenger’s final destination with regard to three main criteria.”

The DPLR Committee accepted that in principle but considered that section 10(2) appeared to have been drafted

“more widely than necessary to give effect to the Government’s stated policy intention.”

Accordingly, the committee recommended that the Government should lodge an appropriate amendment

“to more closely align the power in section 10(2) with its stated policy intention”.

This committee agreed with the DPLR Committee’s recommendation, so I discussed with the legislation team what amendments might be necessary to give effect to it. I am interested to hear what the cabinet secretary has to say in response.

I move amendment 67.

10:45  



The Convener

As no other member wishes to contribute at this stage, I invite the cabinet secretary to respond.

Derek Mackay

The Scottish Government does not support the amendments in this group and considers that amendments 67 and 68 are either unnecessary or too wide, depending on what is intended. If they are intended to clarify that section 10(2) of the bill does not duplicate the power that is already provided by section 10(1), we think that the amendments are unnecessary. When section 10(2) is read in context with sections 10(1) and 10(3), it is clear that its use of the word “other” provides the power to do only what cannot be done under section 10(1); in other words, section 10(2) already excludes the power to set tax bands and tax rate amounts. However, the wording of amendment 68 suggests that Mr Harvie wishes to narrow the scope of section 10(2) by ruling out any provision that relates to tax bands and tax rate amounts. The purpose of the power in section 10(2) is to revise the structure of the tax when necessary. Because the structure of the tax currently comprises bands and rates, it is difficult to imagine what section 10(2) could in practice be used for if amendments 67 and 68 were accepted.

The Scottish Government has a similar concern about amendment 69, which could be read as restricting the Scottish ministers’ power to amend section 9. If amendments 67, 68 and 69 were accepted, section 10(2) would be so restricted as to provide no power at all. The amendments would rule out any provision being made that amended section 9 or that related to tax bands or tax rate amounts. The Scottish Government needs to retain the flexibility to adjust the structure of the tax in whatever way it considers appropriate, which could include, for example, redefining the tax rate categories that are currently set out in section 9 or changing definitions of terms that are used in section 9.

The current wording of section 10(2) provides the necessary flexibility. The power does not need to be constrained in the way that Mr Harvie proposes; it is already constrained by the tight wording in section 80L of the Scotland Act 1998, which devolves power only on

“A tax charged on the carriage of passengers by air from airports in Scotland”.

The nature of the tax may not be changed in any way and any change that is proposed would require an affirmative vote of the Scottish Parliament. I therefore invite Patrick Harvie to withdraw amendment 67 and not to move amendments 68 and 69.

The Convener

One member would like to ask you a question, cabinet secretary. I know that it is not normal to do that at this stage, but Adam Tomkins has an issue that he wants to raise with you.

Adam Tomkins

Thank you, convener. I am not sure that I fully understand something, so my question is designed to enable me to do so. Section 10(2) talks about the structure of the tax and section 10(1) talks about bands and rates. I am not sure whether I understand what is encapsulated within the structure that is not encapsulated within the bands and rates. What will section 10(2) allow you to do that you will not be able to do under section 10(1)?

Derek Mackay

I know that the provision is one that feels quite technical. Essentially, there is clarity on what the Government is required to do if it makes a substantive change. Such a change will be mainly about rates and bands; any other amendments might be around terminology or the understanding of that terminology in relation to the tax. Section 10(2) gives us flexibility there, but its use will not change in any substantial way the nature of the tax or how it is levied through the rates and bands.

The Convener

I ask Patrick Harvie to wind up and to indicate whether he wants to press amendment 67.

Patrick Harvie

I still think that the situation is a little unclear, and I am not entirely convinced by the cabinet secretary’s comments. However, I seek leave to withdraw amendment 67. I will consider how the issue that it relates to might be addressed, if necessary, at stage 3 in light of the cabinet secretary’s remarks.

Amendment 67, by agreement, withdrawn.

Amendments 68 and 69 not moved.

Section 10 agreed to.

After section 10

Amendment 70 moved—[Patrick Harvie].

The Convener

The question is, that amendment 70 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Kelly, James (Glasgow) (Lab)
Harvie, Patrick (Glasgow) (Green)
Bibby, Neil (West Scotland) (Lab)

Against

Tomkins, Adam (Glasgow) (Con)
Todd, Maree (Highlands and Islands) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
Kerr, Liam (North East Scotland) (Con)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Denham, Ash (Edinburgh Eastern) (SNP)
Crawford, Bruce (Stirling) (SNP)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)

The Convener

The result of the division is: For 3, Against 8, Abstentions 0

Amendment 70 disagreed to.

Amendment 71 moved—[Patrick Harvie].

The Convener

The question is, that amendment 71 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Kelly, James (Glasgow) (Lab)
Harvie, Patrick (Glasgow) (Green)
Bibby, Neil (West Scotland) (Lab)

Against

Tomkins, Adam (Glasgow) (Con)
Todd, Maree (Highlands and Islands) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
Kerr, Liam (North East Scotland) (Con)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Denham, Ash (Edinburgh Eastern) (SNP)
Crawford, Bruce (Stirling) (SNP)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)

The Convener

The result of the division is: For 3, Against 8, Abstentions 0

Amendment 71 disagreed to.

Sections 11 to 13 agreed to.

Section 14—Duty to register for tax

The Convener

Amendment 14, in the name of the cabinet secretary, is grouped with amendments 15 to 22, 28, 47 and 54.

Derek Mackay

These amendments deal with the requirement to apply to Revenue Scotland to register and deregister for ADT. The bill as introduced requires any aircraft operator who either is, or will become, a taxable person to apply to Revenue Scotland to register for ADT. The bill also requires a registered aircraft operator who is making quarterly tax returns to apply to Revenue Scotland to deregister for ADT if they cease to be a taxable person.

Further engagement by Revenue Scotland with stakeholders has demonstrated that it would not be practical to register occasional aircraft operators, who by their nature make infrequent or one-off flights from Scottish airports with, in most cases, only a few people on board.

This group of amendments provides that only aircraft operators who are, or will become, liable to make quarterly tax returns under section 17 must apply to Revenue Scotland to register for ADT. The requirement to apply to register for ADT will not apply to aircraft operators making occasional returns under section 18.

I move amendment 14.

Amendment 14 agreed to.

Amendments 15 to 18 moved—[Derek Mackay]—and agreed to.

Section 14, as amended, agreed to.

Section 15—Duty to deregister for tax

Amendments 19 to 22 moved—[Derek Mackay]—and agreed to.

The Convener

Amendment 23, in the name of the cabinet secretary, is grouped with amendments 32, 35, 37, 40, 43, 44, 46, 49, 50, 55 and 59.

Derek Mackay

Some of the amendments in this group have been brought forward as a result of the written evidence submitted to the committee during stage 1. They are all minor technical amendments that either help to provide clarity and consistency in the provisions in the bill as introduced or are considered necessary for the efficient collection and management of ADT.

I move amendment 23.

Amendment 23 agreed to.

Section 15, as amended, agreed to.

Sections 16 and 17 agreed to.

Section 18—Occasional returns

The Convener

Amendment 24, in the name of the cabinet secretary, is grouped with amendments 25 to 27.

Derek Mackay

I will speak to amendment 24 and the other amendments in the group together. The amendments deal with the eligibility criteria enabling aircraft operators, should they wish, to make occasional, rather than quarterly, tax returns to Revenue Scotland.

Following further engagement by Revenue Scotland with stakeholders, it is considered necessary, in order to ensure the efficient collection and management of ADT, to amend section 18 by changing the eligibility criteria for making occasional returns in two areas.

The first is to provide a more precise number of flights condition, such that an aircraft operator who intends to carry out taxable activities on more than 12 days in any 12-month period is not eligible to make occasional returns. That will improve certainty as to the threshold level of taxable activity.

The second is to increase from £5,000 to £20,000 the maximum ADT liability in any 12-month period that an aircraft operator can incur in order to be entitled to make an occasional return. That will ensure that the tax liability threshold is set at a realistic level in light of the threshold level of taxable activities.

It is also considered necessary to amend section 18 by changing the date by which an occasional return is due from seven days to 30 days after the date of the taxable activity. That will give aircraft operators and their representatives more time in which to make an occasional tax return and pay any ADT due to Revenue Scotland.

I move amendment 24.

Patrick Harvie

I ask the cabinet secretary to say a bit more about the change of threshold from £5,000 to £20,000. The explanation seemed a little vague. Why was £5,000 proposed in the first instance? What was the rationale for setting it at £5,000 when the bill was drafted? What is the rationale for proposing the new threshold of £20,000, rather than any other figure? What types of operators will be treated differently as regards returns, as a result of the change in threshold? In the various discussions that the Government has had with stakeholders, have any organisations lobbied for the change in threshold, and, if so, who are they?

The Convener

Cabinet secretary, perhaps you will deal with those points when you wind up.

Derek Mackay

Revenue Scotland has engaged with stakeholders. As I understand it, the UK APD threshold has been sustained at £5,000—the same figure as in the bill. When we had an opportunity to look further at what was appropriate, it was felt that a threshold of £20,000 kept within the area of seasonal flights without extending into the area of the major operators and airlines. On balance, we felt that £20,000 would be an appropriate threshold in comparison with the level that we inherited from the UK, which was £5,000. I can get further information on that, if the committee requires it.

The Convener

The question is, that amendment 24 be agreed to. Are we all agreed?

Patrick Harvie

I suppose.

The Convener

There’s nae suppose about it—it’s either yes or no.

Amendment 24 agreed to.

Amendments 25 to 28 moved—[Derek Mackay]—and agreed to.

Section 18, as amended, agreed to.

Section 19—Form and content of returns

The Convener

Amendment 29, in the name of the cabinet secretary, is grouped with amendments 30, 31, 36 and 38.

Derek Mackay

I will speak to amendment 29 and the other amendments in the group together.

Amendments 29 to 31 make better provision in the bill for agents, who may or may not be tax representatives, to submit ADT returns to Revenue Scotland on behalf of taxable persons. Where that happens, the agent must declare on the return that the taxable person has declared to the agent that the information provided in the return is

“to the best of the taxable person’s knowledge, correct and complete”.

That provides equivalency with the legislation on LBTT and the Scottish landfill tax.

11:00  



Amendments 36 and 38 are considered necessary to ensure that taxable persons continue to be responsible for the accuracy and completeness of information in a tax return, even when they have appointed a tax representative. The amendments prevent a tax representative from making a declaration in a tax return that should be made by the taxable person.

I move amendment 29.

Amendment 29 agreed to.

Amendments 30 and 31 moved—[Derek Mackay]—and agreed to.

Section 19, as amended, agreed to.

Section 20—Special accounting schemes

Amendment 32 moved—[Derek Mackay]—and agreed to.

Section 20, as amended, agreed to.

Section 21—Duty to have tax representative

The Convener

Amendment 33, in the name of the cabinet secretary, is grouped with amendments 34, 39, 41, 42 and 48.

Derek Mackay

The proposed amendments to section 21 will make it clear that the voluntary appointment by an aircraft operator of a tax representative will not take effect, for the purposes of the ADT legislation, until the details of the appointment are notified to Revenue Scotland. The proposed amendments to section 26 will make it clear when the appointment of a tax representative will take effect. Different rules will apply depending on whether the appointment is voluntary or is required under section 21(1).

I move amendment 33.

Amendment 33 agreed to.

Amendments 34 and 35 moved—[Derek Mackay]—and agreed to.

Section 21, as amended, agreed to.

Section 22 agreed to.

Section 23—Fiscal tax representatives: powers, duties and liabilities

Amendment 36 moved—[Derek Mackay]—and agreed to.

Section 23, as amended, agreed to.

Section 24—Administrative tax representatives: powers, duties and limits on liability

Amendments 37 and 38 moved—[Derek Mackay]—and agreed to.

Section 24, as amended, agreed to.

Section 25 agreed to.

Section 26—Duration of tax representative appointments

Amendments 39 to 42 moved—[Derek Mackay]—and agreed to.

Section 26, as amended, agreed to.

Section 27 agreed to.

Section 28—Security required by individual directions

Amendments 43 and 44 moved—[Derek Mackay]—and agreed to.

Section 28, as amended, agreed to.

Section 29 agreed to.

Section 30—Meaning of handle and handling agent

The Convener

Amendment 45, in the name of the cabinet secretary, is in a group on its own.

Derek Mackay

I am sure that the committee will appreciate this being the final amendment that I will speak to.

At the moment, the handling agent services that are defined in section 30 of the bill include only the allocation of seats to passengers and the supervision of passengers during boarding, which matches the UK APD approach. However, business and private jet operators are increasingly self-service, with some using handling agents only for passenger baggage handling arrangements. Therefore, amendment 45 is considered to be necessary to ensure that Revenue Scotland is able to give notice under section 31 of the bill to a handling agent that provides only a passenger baggage handling service to the aircraft operator.

I move amendment 45.

Amendment 45 agreed to.

Section 30, as amended, agreed to.

Sections 31 and 32 agreed to.

Section 33—Inaccuracies in information notified to Revenue Scotland

Amendments 46 to 49 moved—[Derek Mackay]—and agreed to.

Section 33, as amended, agreed to.

Section 34 agreed to.

Section 35—Regulations

Amendment 50 moved—[Derek Mackay]—and agreed to.

Section 35, as amended, agreed to.

Section 36 agreed to.

Section 37—Interpretation

Amendments 51 to 53 moved—[Derek Mackay]—and agreed to.

Section 37, as amended, agreed to.

Section 38 agreed to.

Schedule 2—Minor and consequential modifications to Revenue Scotland and Tax Powers Act 2014

Amendments 54 and 55 moved—[Derek Mackay]—and agreed to.

Schedule 2, as amended, agreed to.

Sections 39 and 40 agreed to.

Schedule 3—Index of defined expressions

Amendments 56 to 65 moved—[Derek Mackay]—and agreed to.

Schedule 3, as amended, agreed to.

Sections 41 and 42 agreed to.

Long title agreed to.

The Convener

That ends stage 2 consideration of the bill, which will be reprinted as amended. Parliament has not yet determined when stage 3 will take place, but members may lodge amendments with the legislation team. Members will be informed of the deadline for amendments once it has been determined.

I suspend the meeting for a few minutes to allow the cabinet secretary and his officials to leave, and I thank them for attending.

11:10 Meeting suspended.  



11:13 On resuming—  



Air Departure Tax (Scotland) Bill as Amended at Stage 2

Additional related information from the Scottish Government on the Bill

Stage 3 - Final amendments and vote

MSPs can propose further amendments to the Bill and then vote on each of these. Finally, they vote on whether the Bill should become law

Scottish Parliament research on the discussion of the Bill

Debate on the proposed amendments

MSPs get the chance to present their proposed amendments to the Chamber. They vote on whether each amendment should be added to the Bill.

Documents with the amendments considered at this meeting on 20 June 2017:

Video Thumbnail Preview PNG

Debate on proposed amendments transcript

The Deputy Presiding Officer (Christine Grahame)

The next item of business is stage 3 of the Air Departure Tax (Scotland) Bill. In dealing with the amendments, members should have the bill as amended at stage 2, which is document SP bill 3A, the marshalled list of amendments, which is SP bill 3A-ML, and the groupings of amendments, which is SP bill 3A-G (Timed).

The division bell will sound and proceedings will be suspended for five minutes before the first division of the afternoon. The voting period on the first division will be 30 seconds. Members who wish to speak in the debate on the group of amendments should press their request-to-speak buttons as soon as possible after I call the group.

Members should now refer to the marshalled list of amendments.

Section 10—Tax bands and rate amounts to be set by regulations

The Deputy Presiding Officer

Group 1 is entitled “Regulations under section 10(1): economic, environmental and social impacts”. Amendment 1, in the name of the Cabinet Secretary for Finance and the Constitution, is grouped with amendments 1A, 1B and 1C.

The Cabinet Secretary for Finance and the Constitution (Derek Mackay)

I will speak first to amendment 1. The Scottish Government fully supports and recognises the importance of robust analysis of policies both before and after implementation. With that in mind, I listened carefully to the points that were raised at the Finance and Constitution Committee at stage 2. I also gave a commitment to work to see whether at stage 3 an amendment on impact assessments could be lodged that the Government could support and which retains the spirit of Mr Harvie’s stage 2 amendment. Amendment 1 is the result of that work. It places two duties on Scottish ministers in relation to the power in section 10(1) to define tax bands and to set tax rate amounts in secondary legislation.

The first duty will require Scottish ministers to

“have regard to the projected economic, environmental and social impacts”

when preparing draft secondary legislation on

“tax bands and ... rate amounts.”

The second duty will require Scottish ministers to keep those impacts under review when the tax bands and rate amounts are in force. The Government considers that amendment 1 is a fair compromise that strikes the right balance between the accountability and the flexibility that are necessary with tax powers.

Amendment 1 will also place in the bill a robust set of requirements that the Government is already on track to meet. First, the Government has commissioned separate independent economic and noise impact assessments of our overall 50 per cent ADT reduction plan. Those reports will be published by the time Parliament is asked to consider the first set of tax bands and rate amounts in the autumn.

Secondly, a strategic environmental assessment is under way. The next step of the SEA will involve the Government publicly consulting over the summer on our overall 50 per cent ADT reduction plan, as well as an environmental report that will outline the findings of the assessment of the plan against a wide range of environmental topics including climate factors, air quality, material assets and biodiversity.

Thirdly, at the same time as the SEA consultations are launched, the Government will publish an updated greenhouse gas emissions impact assessment of our overall 50 per cent ADT reduction plan.

Finally, the Government has asked the contractor undertaking the independent economic assessment, in addition to that analysis being carried out, to consider the best way to design a robust monitoring and evaluation framework so that one can be put in place for assessing the economic, environmental and social impacts of ADT in the future.

I turn to the three amendments that have been lodged by Andy Wightman. The Government does not support them. First, on amendments 1A and 1B, in response to Patrick Harvie’s points at stage 2, the amendment that has been lodged by the Government will require Scottish ministers to

“have regard to the ... environmental ... impacts of ... tax bands and tax rate amounts.”

That will include consideration of the impact on greenhouse gas emissions. Therefore, the Government does not consider it necessary or appropriate to place in the bill a further duty on Scottish ministers.

Secondly, amendment 1C would restrict the Government’s flexibility to respond at short notice to make changes to the tax by requiring that a detailed set of prescriptive assessments be completed every time before secondary legislation for tax bands and rate amounts can be laid before Parliament. The Scottish Parliament did not consider that to be necessary for the other devolved taxes—the land and buildings transaction tax and the landfill tax—and it is not required for any United Kingdom tax. Neither, in the Government’s view, is it necessary for ADT.

The Scottish ministers will, of course,

“have regard to the economic, environmental and social impacts of”

changes to tax bands and rates. Amendment 1, which the Government lodged, will place a duty on the Scottish ministers to do so. However, the Scottish Government thinks that including in the bill a requirement to publish assessments would be overly prescriptive and is not necessary.

I move amendment 1 and invite Parliament to reject amendments 1A, 1B and 1C.

Andy Wightman (Lothian) (Green)

The amendments that I lodged are designed to add some policy purpose to air departure tax, to ensure that evidence informs decisions on ADT rates, and to add safeguards in the event of Scottish ministers of any Government wanting Parliament to give them the power to reduce taxes on what is already an extraordinarily lightly taxed industry.

Amendment 1A is required as part of amendment 1B, which is the first substantive amendment and follows on from discussions with Patrick Harvie at stage 2, as the cabinet secretary indicated. Patrick Harvie argued that APD rates and bands should be set to deliver a fiscal policy for aviation that is based on targets for greenhouse gas emissions reduction.

Witnesses at the Finance and Constitution Committee from the aviation industry said that aviation emissions can be reduced, but science and international treaties say that emissions must be reduced. I do not recall the cabinet secretary disagreeing at stage 2 with the principle of requiring ADT to deliver an emissions reduction strategy. If he disagrees, perhaps he will tell us this afternoon.

The issue that the cabinet secretary identified as problematic is that a target that is specific to aviation emissions would, in his view, be inflexible and would challenge the whole-economy approach in Scotland’s current climate change legislation. Amendment 1B takes account of his comments and would not require a specific aviation target; instead, it would require ministers, in setting ADT rates and bands, to

“act in the way best calculated”

to deliver on Scotland’s climate targets as a whole.

The second part of amendment 1B refers to the Government’s purpose targets. Those are the measures by which the Government will judge its success, as set out in the national performance framework. Sustainability, measured by reducing climate emissions, is one purpose target; others are a reduction in income inequality and increased sustainable economic growth—although the Government has never given a satisfactory definition of that contradictory term.

The Government has argued that its proposed policy for ADT will increase economic growth. That was exposed as an evidence-free assertion by the Finance and Constitution Committee.

Ministers have been less keen to talk about who benefits from cutting taxes on aviation. Air passenger duty is a fiscally progressive tax, which is paid mostly by corporations, visiting tourists and wealthier members of society who fly frequently. Cutting APD is regressive and socially unjust. Amendment 1B would require ministers to start considering not just growth but quality of life and inequalities.

For the avoidance of doubt, let me say that I do not oppose the Government’s amendment 1. Amendment 1 requires ministers to think about—“have regard to”—broader things including environmental and social impacts, but it does not require and mandate ministers to act positively and make choices that will protect the environment and enhance social justice. As it stands, amendment 1 means that ministers, of any colour and at any time in the future, will be acting lawfully if they decide to set tax rates that increase pollution and offer even bigger tax giveaways to the wealthiest. Amendment 1B would constrain a Government, whatever its political persuasion, in that.

Amendment 1C would end the evidence-free vacuum in which someone in the Scottish National Party decided at some point that it would be a clever thing to cut aviation taxes in half. Amendment 1C would require an assessment of emissions and noise and air pollution for communities around airports. My constituents in north-west Edinburgh experience such pollution every day. It would also require information to help Parliament and others to decide whether a tax change is progressive or regressive and whether it would benefit people who are already wealthy.

Amendment 1C does not ask for a tax forecast, because I have taken account of the minister’s comments at stage 2 about the forecasting role of the Scottish Fiscal Commission. The cabinet secretary said that amendment 1 will require ministers to deal with matters, but the amendment requires ministers only to “have regard to” them. The cabinet secretary also criticised amendment 1C for being too rigid, in that it would require information to be produced in response to every rate change. However, amendment 1C simply provides for publication of an assessment; the framework for the assessment would be permanent, but the information that underpins it should be readily available and publication should not be an onerous task. Instead of ministers being required just to think about things, if amendment 1C were agreed to they would be required to think about them alongside evidence and to provide Parliament with the information that it needs in order to scrutinise properly proposals on rates and bands.

I would like to see a lot more about the extraordinary undertaxation of the aviation industry, and to question who really owns Edinburgh Airport Ltd and who will benefit from tax cuts, but I will leave that for another day and remain focused on the bill and on the amendments that I have lodged, which would do as much as possible to ensure that the new tax power is used responsibly, with behaviour changes and impacts firmly in mind. I urge MSPs to vote for all the amendments in the group.

I move amendment 1A.

The Deputy Presiding Officer

Thank you, Mr Wightman. We move to the open debate. I call Murdo Fraser.

Murdo Fraser (Mid Scotland and Fife) (Con)

I will speak briefly on the amendments that are before us.

As we have heard, the Finance and Constitution Committee recommended that, when bringing forward the setting of rates and bands, the Scottish Government should address the evidence base behind them. I therefore welcome amendment 1, in the name of the cabinet secretary, which helpfully responds to that point and looks at the whole question of the

“economic, environmental and social impacts”

that the setting of the rates and bands will have, as he acknowledged. That is a welcome amendment that we are happy to support.

On the three amendments in the name of Andy Wightman, I understand where he is coming from on behalf of the Scottish Green Party. My concern is that the amendments are too prescriptive. They put too many obligations on ministers that might be difficult to meet, particularly given the short timeframe in which rates and bands might have to be adjusted in response to economic conditions. I recognise that, as the cabinet secretary said, there might be a need for greater flexibility than the amendments would allow.

Patrick Harvie (Glasgow) (Green)

Murdo Fraser indicates that a scenario might arise in which a decision on rates and bands needs to be taken quickly. Surely even in a situation that is perceived as urgent such a decision could not be made in the absence of evidence or of an analysis of the factors that are set out in the Green amendments. If the information on which to base a decision is available, surely it can be published.

Murdo Fraser

I thank Mr Harvie for that comment, but I think that his concerns are addressed in the cabinet secretary’s amendment 1, which says that ministers “must have regard to” those aspects before they set taxes and bands.

There is a second point that, with respect, Mr Wightman did not address when speaking to his amendments. When ministers propose taxes and bands, they have to bring them to the Parliament for a vote, so if members are not satisfied that evidence has been presented in support of the setting of those rates and bands, they can reject them and send them back. Members are quite entitled to consider and justify their actions at that point.

Andy Wightman

When those proposals for rates and bands come to Parliament for us to make a decision about them, we will be unable to do that effectively and in an informed fashion if they are not accompanied by an analysis of their social, economic and environmental impacts. Ministers are required only to “have regard to” those factors when setting the rates. Surely Parliament needs a fuller analysis and fuller information to properly do its job.

Murdo Fraser

If members are not satisfied that the evidence is there to support the setting of rates and bands, they can reject the proposal to set them and send it back to the Government to think again. That seems to me entirely sensible. Unlike Mr Wightman, I have more faith in the ability of members to consider those matters properly at the time such rates and bands are proposed. For that reason, my party will be happy to support amendment 1, in the name of the cabinet secretary, but we cannot support the amendments in the name of Mr Wightman.

Neil Bibby (West Scotland) (Lab)

I speak in favour of all the amendments in this group—amendment 1, in the name of the cabinet secretary, and, in particular, amendments 1A, 1B and 1C, in the name of Andy Wightman.

The amendments are important because many of those who contributed to both the Scottish Government’s consultation and the Finance and Constitution Committee’s scrutiny of the bill expressed real concern about the impact that a significant tax reduction could have. They expressed concern about the environmental impact of reducing the tax burden on the aviation industry, and about the implications that a loss of revenue could have on public finances. Indeed, a majority of those who participated in the Scottish Government’s own consultation exercise opposed the very course of action that ministers are committing to: effectively cutting air passenger duty in half with a view to abolishing the tax altogether. I want to explain how the amendments could partially address some of the concerns that have been expressed.

15:45  



The Finance and Constitution Committee heard from Transform Scotland and other campaigners that aviation is already one of the most lightly taxed industries in the world and that further tax reductions would increase aviation emissions. We heard that a tax reduction could reduce Government revenue by up to £189 million a year, at a time when public services are already under severe pressure. We also heard that, as Andy Wightman said, those who are frequent flyers, who are the wealthiest or are on higher incomes, would benefit disproportionately.

There is also considerable doubt as to whether a tax cut would actually boost or benefit the economy in any meaningful way. The Parliament should know that no credible evidence has been presented to the Finance and Constitution Committee to suggest, for example, that the growth in passenger numbers in Ireland had anything to do with the abolition of the equivalent departure taxes. Here in Scotland, airports are already reporting record growth in passenger numbers, and all that growth and success has occurred with the existing levels of air passenger duty.

The case for the Government’s tax cut is not stacking up. It therefore seems reasonable to require Scottish ministers to set out exactly what the impact of their plans will be before they may proceed with any changes to rates or bands. We believe that, at all times, they should have due regard to the economic, environmental and social impacts of their proposals. That is why we support the cabinet secretary’s amendment 1. Let us be clear, however, that having due regard to the impacts of new tax rates is the bare minimum that we should expect from the Scottish Government. We can and should go further.

I turn to Andy Wightman’s amendments 1A, 1B and 1C. Amendment 1C would require ministers to

“publish an assessment of the projected economic, environmental and social impacts of the proposed tax bands and tax rate amounts.”

Essentially, Scottish ministers would have to provide evidence to justify the rates and bands that they chose to apply. Amendment 1C would place a reasonable duty on ministers in requiring them to do just that. Given the direction of Government policy regarding air departure tax, Scottish Labour chooses to support Andy Wightman’s amendments.

James Kelly (Glasgow) (Lab)

I rise to support Andy Wightman’s amendments in particular. The cabinet secretary said that he listened carefully to the debate and the representations that were made at stage 2 and that he lodged his amendment 1 in response. That is welcome because it is a move in the right direction. However, I feel that the amendment is a bit waffly. It says:

“the Scottish Ministers must have regard to the projected economic, environmental and social impacts of the proposed tax bands and tax rate amounts.”

I get the impression that the cabinet secretary, in having regard to those matters, will sit in his ministerial office and ask one of his aides to get the binoculars out to have a look over to Edinburgh airport to see what is happening, and that he will say, “Well, there are plenty of planes going in and out and there looks to be lots of people going in and out, so it’s all going absolutely fine.”

Andy Wightman’s amendments would strengthen the bill considerably. We are debating fundamental issues. The Government will use the power to reduce ADT, and in doing so it will ask us to believe that that will not have an adverse effect on carbon emissions, that it will not adversely affect the Scottish budget and that it is fair. We have serious concerns about that.

Andy Wightman’s amendments require a proper assessment to be published so that we can see evidence on the effect that a cut in ADT will have on emissions, on the Scottish budget and on people in different income deciles. That evidence is crucial in enabling the Parliament to decide whether any such cut is appropriate.

I ask the cabinet secretary, even at this late stage, to look at accepting Andy Wightman’s amendments, because they would strengthen not only the bill but the process of parliamentary scrutiny.

The Deputy Presiding Officer

As no other member has asked to speak, I call the cabinet secretary to wind up on amendment 1.

Derek Mackay

I suppose that I could begin from where James Kelly left off, on what he described as a waffly move in the right direction—that is high praise indeed from James Kelly. Actually, the work that I have commissioned and agreed to undertake is far more robust than he suggests.

I am sure that it is not out of ignorance that James Kelly and Neil Bibby ignore my agreement to publish a range of work, in view of the Finance and Constitution Committee’s deliberations. Andy Wightman’s amendments are partly about making it a duty to publish that information every time the Government wants to make a proposal on rates and bands.

Patrick Harvie

Is the cabinet secretary any more able than he was at stage 2 to tell us why on earth he already feels able to adopt a policy on how he wants to use the tax—on halving it and then scrapping it? How can he adopt that policy before he has conducted any of the economic analyses that he now intends to commission?

Derek Mackay

Patrick Harvie has fairly asked a specific question that Andy Wightman has also asked: what independent Scottish Government-commissioned analysis was undertaken? There is a range of evidence for the policy position, but I was fairly asked about what independent analysis the Government had commissioned. That analysis is being undertaken.

My amendment 1 proposes to look at our powers responsibly and places a duty on ministers to consider all the burdens and considerations in making a proposal on tax rates and bands. However, it must be recognised that work has been commissioned that will be published before Parliament is asked to make a decision on any affirmative order on rates and bands. That is in keeping with other devolved taxes. I would argue that the proposal goes further by including climate and environmental considerations.

I understand the concerns of Mr Harvie and Mr Wightman, but I have looked at who sponsors the evidence, commissioned independent Government analysis and looked at the environmental concerns. We will publish reports and consultations. In view of all that, Andy Wightman’s amendments are too prescriptive and therefore unnecessary, and I will certainly press amendment 1.

Andy Wightman

Air departure tax is a modest tax on a very lightly taxed industry. The effective tax subsidy for the UK aviation sector in 2012 was around £11.4 billion, with no tax on jet fuel, zero rating for VAT and so on. That is more than £400 per household. With fares falling, the number of flights growing and pollution increasing, there is no need to cut that tax, but we need a legislative framework within which to set it, and that is what the bill will provide.

Ministers must make the proposals on rates that they intend to bring to the Parliament fully informed by climate change targets and firm evidence. My amendments create a statutory duty to do certain things, and ministers should welcome those tests. I am very concerned that the Government’s approach to the bill is informed by its predetermined policy to cut the tax as opposed to considering carefully how to design a tax for an industry that is already one of the biggest threats to the planet.

I welcome the assessments that the minister has said that he will table, but there is no statutory duty to table them. The statutory duty on ministers will be to

“have regard to the projected economic, environmental and social impacts”

and to keep those impacts “under review”. There is no statutory duty even to publish those assessments. If our amendments are agreed to, there would be a statutory duty to

“act in the way best calculated to”

meet

“the emission reduction targets set out in Part 1 of the Climate Change (Scotland) Act 2009”

and

“the Purpose Targets set out in their National Performance Framework”

and to “publish an assessment”. That is fairly modest.

I press amendment 1A.

The Deputy Presiding Officer

The question is, that amendment 1A be agreed to. Are we agreed?

Members: No.

The Deputy Presiding Officer

There will be a division. As this is the first division, I suspend the meeting for five minutes.

15:54 Meeting suspended.  



15:59 On resuming—  



The Deputy Presiding Officer

We move to the division on amendment 1A.

For

Wightman, Andy (Lothian) (Green)
Stewart, David (Highlands and Islands) (Lab)
Smith, Elaine (Central Scotland) (Lab)
Scott, Tavish (Shetland Islands) (LD)
Sarwar, Anas (Glasgow) (Lab)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Rumbles, Mike (North East Scotland) (LD)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Rennie, Willie (North East Fife) (LD)
McNeill, Pauline (Glasgow) (Lab)
McArthur, Liam (Orkney Islands) (LD)
Macdonald, Lewis (North East Scotland) (Lab)
Leonard, Richard (Central Scotland) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Lamont, Johann (Glasgow) (Lab)
Kelly, James (Glasgow) (Lab)
Johnstone, Alison (Lothian) (Green)
Johnson, Daniel (Edinburgh Southern) (Lab)
Harvie, Patrick (Glasgow) (Green)
Greer, Ross (West Scotland) (Green)
Gray, Iain (East Lothian) (Lab)
Grant, Rhoda (Highlands and Islands) (Lab)
Finnie, John (Highlands and Islands) (Green)
Findlay, Neil (Lothian) (Lab)
Cole-Hamilton, Alex (Edinburgh Western) (LD)
Bibby, Neil (West Scotland) (Lab)
Beamish, Claudia (South Scotland) (Lab)
Baker, Claire (Mid Scotland and Fife) (Lab)
Baillie, Jackie (Dumbarton) (Lab)

Against

Yousaf, Humza (Glasgow Pollok) (SNP)
Whittle, Brian (South Scotland) (Con)
White, Sandra (Glasgow Kelvin) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
Wells, Annie (Glasgow) (Con)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Torrance, David (Kirkcaldy) (SNP)
Tomkins, Adam (Glasgow) (Con)
Todd, Maree (Highlands and Islands) (SNP)
Swinney, John (Perthshire North) (SNP)
Sturgeon, Nicola (Glasgow Southside) (SNP)
Stewart, Kevin (Aberdeen Central) (SNP)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Smith, Liz (Mid Scotland and Fife) (Con)
Simpson, Graham (Central Scotland) (Con)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Robison, Shona (Dundee City East) (SNP)
Neil, Alex (Airdrie and Shotts) (SNP)
Mundell, Oliver (Dumfriesshire) (Con)
Mitchell, Margaret (Central Scotland) (Con)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
McDonald, Mark (Aberdeen Donside) (SNP)
McAlpine, Joan (South Scotland) (SNP)
Matheson, Michael (Falkirk West) (SNP)
Mason, Tom (North East Scotland) (Con)
Mason, John (Glasgow Shettleston) (SNP)
Martin, Gillian (Aberdeenshire East) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
MacDonald, Angus (Falkirk East) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Lindhurst, Gordon (Lothian) (Con)
Kidd, Bill (Glasgow Anniesland) (SNP)
Kerr, Liam (North East Scotland) (Con)
Hyslop, Fiona (Linlithgow) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Haughey, Clare (Rutherglen) (SNP)
Harper, Emma (South Scotland) (SNP)
Hamilton, Rachael (Ettrick, Roxburgh and Berwickshire) (Con)
Halcro Johnston, Jamie (Highlands and Islands) (Con)
Greene, Jamie (West Scotland) (Con)
Golden, Maurice (West Scotland) (Con)
Gilruth, Jenny (Mid Fife and Glenrothes) (SNP)
Freeman, Jeane (Carrick, Cumnock and Doon Valley) (SNP)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
FitzPatrick, Joe (Dundee City West) (SNP)
Fabiani, Linda (East Kilbride) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Ewing, Annabelle (Cowdenbeath) (SNP)
Evans, Mairi (Angus North and Mearns) (SNP)
Dornan, James (Glasgow Cathcart) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dey, Graeme (Angus South) (SNP)
Denham, Ash (Edinburgh Eastern) (SNP)
Davidson, Ruth (Edinburgh Central) (Con)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Crawford, Bruce (Stirling) (SNP)
Corry, Maurice (West Scotland) (Con)
Constance, Angela (Almond Valley) (SNP)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Chapman, Peter (North East Scotland) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Carlaw, Jackson (Eastwood) (Con)
Campbell, Aileen (Clydesdale) (SNP)
Cameron, Donald (Highlands and Islands) (Con)
Burnett, Alexander (Aberdeenshire West) (Con)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Briggs, Miles (Lothian) (Con)
Bowman, Bill (North East Scotland) (Con)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Ballantyne, Michelle (South Scotland) (Con)
Balfour, Jeremy (Lothian) (Con)
Arthur, Tom (Renfrewshire South) (SNP)
Allan, Alasdair (Na h-Eileanan an Iar) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Adam, George (Paisley) (SNP)

The Deputy Presiding Officer

The result of the division is: For 29, Against 86, Abstentions 0.

Amendment 1A disagreed to.

Amendment 1B moved—[Andy Wightman].

The Deputy Presiding Officer

The question is, that amendment 1B be agreed to. Are we agreed?

Members: No.

The Deputy Presiding Officer

There will be a division.

For

Wightman, Andy (Lothian) (Green)
Stewart, David (Highlands and Islands) (Lab)
Smyth, Colin (South Scotland) (Lab)
Smith, Elaine (Central Scotland) (Lab)
Scott, Tavish (Shetland Islands) (LD)
Sarwar, Anas (Glasgow) (Lab)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Rumbles, Mike (North East Scotland) (LD)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Rennie, Willie (North East Fife) (LD)
McNeill, Pauline (Glasgow) (Lab)
McArthur, Liam (Orkney Islands) (LD)
Macdonald, Lewis (North East Scotland) (Lab)
Leonard, Richard (Central Scotland) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Lamont, Johann (Glasgow) (Lab)
Kelly, James (Glasgow) (Lab)
Johnstone, Alison (Lothian) (Green)
Johnson, Daniel (Edinburgh Southern) (Lab)
Harvie, Patrick (Glasgow) (Green)
Greer, Ross (West Scotland) (Green)
Gray, Iain (East Lothian) (Lab)
Grant, Rhoda (Highlands and Islands) (Lab)
Finnie, John (Highlands and Islands) (Green)
Findlay, Neil (Lothian) (Lab)
Cole-Hamilton, Alex (Edinburgh Western) (LD)
Bibby, Neil (West Scotland) (Lab)
Beamish, Claudia (South Scotland) (Lab)
Baker, Claire (Mid Scotland and Fife) (Lab)
Baillie, Jackie (Dumbarton) (Lab)

Against

Yousaf, Humza (Glasgow Pollok) (SNP)
Whittle, Brian (South Scotland) (Con)
White, Sandra (Glasgow Kelvin) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
Wells, Annie (Glasgow) (Con)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Torrance, David (Kirkcaldy) (SNP)
Tomkins, Adam (Glasgow) (Con)
Todd, Maree (Highlands and Islands) (SNP)
Swinney, John (Perthshire North) (SNP)
Sturgeon, Nicola (Glasgow Southside) (SNP)
Stewart, Kevin (Aberdeen Central) (SNP)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Smith, Liz (Mid Scotland and Fife) (Con)
Simpson, Graham (Central Scotland) (Con)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Robison, Shona (Dundee City East) (SNP)
Neil, Alex (Airdrie and Shotts) (SNP)
Mundell, Oliver (Dumfriesshire) (Con)
Mountain, Edward (Highlands and Islands) (Con)
Mitchell, Margaret (Central Scotland) (Con)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
McDonald, Mark (Aberdeen Donside) (SNP)
McAlpine, Joan (South Scotland) (SNP)
Matheson, Michael (Falkirk West) (SNP)
Mason, Tom (North East Scotland) (Con)
Martin, Gillian (Aberdeenshire East) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
MacDonald, Angus (Falkirk East) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Lindhurst, Gordon (Lothian) (Con)
Kidd, Bill (Glasgow Anniesland) (SNP)
Kerr, Liam (North East Scotland) (Con)
Hyslop, Fiona (Linlithgow) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Haughey, Clare (Rutherglen) (SNP)
Harper, Emma (South Scotland) (SNP)
Hamilton, Rachael (Ettrick, Roxburgh and Berwickshire) (Con)
Halcro Johnston, Jamie (Highlands and Islands) (Con)
Greene, Jamie (West Scotland) (Con)
Golden, Maurice (West Scotland) (Con)
Gilruth, Jenny (Mid Fife and Glenrothes) (SNP)
Freeman, Jeane (Carrick, Cumnock and Doon Valley) (SNP)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
FitzPatrick, Joe (Dundee City West) (SNP)
Fabiani, Linda (East Kilbride) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Ewing, Annabelle (Cowdenbeath) (SNP)
Evans, Mairi (Angus North and Mearns) (SNP)
Dornan, James (Glasgow Cathcart) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dey, Graeme (Angus South) (SNP)
Denham, Ash (Edinburgh Eastern) (SNP)
Davidson, Ruth (Edinburgh Central) (Con)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Crawford, Bruce (Stirling) (SNP)
Constance, Angela (Almond Valley) (SNP)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Chapman, Peter (North East Scotland) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Carlaw, Jackson (Eastwood) (Con)
Campbell, Aileen (Clydesdale) (SNP)
Cameron, Donald (Highlands and Islands) (Con)
Burnett, Alexander (Aberdeenshire West) (Con)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Briggs, Miles (Lothian) (Con)
Bowman, Bill (North East Scotland) (Con)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Ballantyne, Michelle (South Scotland) (Con)
Balfour, Jeremy (Lothian) (Con)
Arthur, Tom (Renfrewshire South) (SNP)
Allan, Alasdair (Na h-Eileanan an Iar) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Adam, George (Paisley) (SNP)

The Deputy Presiding Officer

The result of the division is: For 30, Against 85, Abstentions 0.

Amendment 1B disagreed to.

Amendment 1C moved—[Andy Wightman].

The Deputy Presiding Officer

The question is, that amendment 1C be agreed to. Are we agreed?

Members: No.

The Deputy Presiding Officer

There will be a division.

For

Wightman, Andy (Lothian) (Green)
Stewart, David (Highlands and Islands) (Lab)
Smyth, Colin (South Scotland) (Lab)
Smith, Elaine (Central Scotland) (Lab)
Scott, Tavish (Shetland Islands) (LD)
Sarwar, Anas (Glasgow) (Lab)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Rumbles, Mike (North East Scotland) (LD)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Rennie, Willie (North East Fife) (LD)
McNeill, Pauline (Glasgow) (Lab)
McArthur, Liam (Orkney Islands) (LD)
Macdonald, Lewis (North East Scotland) (Lab)
Leonard, Richard (Central Scotland) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Lamont, Johann (Glasgow) (Lab)
Kelly, James (Glasgow) (Lab)
Johnstone, Alison (Lothian) (Green)
Johnson, Daniel (Edinburgh Southern) (Lab)
Harvie, Patrick (Glasgow) (Green)
Greer, Ross (West Scotland) (Green)
Gray, Iain (East Lothian) (Lab)
Grant, Rhoda (Highlands and Islands) (Lab)
Finnie, John (Highlands and Islands) (Green)
Findlay, Neil (Lothian) (Lab)
Cole-Hamilton, Alex (Edinburgh Western) (LD)
Bibby, Neil (West Scotland) (Lab)
Beamish, Claudia (South Scotland) (Lab)
Baker, Claire (Mid Scotland and Fife) (Lab)
Baillie, Jackie (Dumbarton) (Lab)

Against

Yousaf, Humza (Glasgow Pollok) (SNP)
Whittle, Brian (South Scotland) (Con)
White, Sandra (Glasgow Kelvin) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
Wells, Annie (Glasgow) (Con)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Torrance, David (Kirkcaldy) (SNP)
Tomkins, Adam (Glasgow) (Con)
Todd, Maree (Highlands and Islands) (SNP)
Swinney, John (Perthshire North) (SNP)
Sturgeon, Nicola (Glasgow Southside) (SNP)
Stewart, Kevin (Aberdeen Central) (SNP)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Smith, Liz (Mid Scotland and Fife) (Con)
Simpson, Graham (Central Scotland) (Con)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Robison, Shona (Dundee City East) (SNP)
Neil, Alex (Airdrie and Shotts) (SNP)
Mundell, Oliver (Dumfriesshire) (Con)
Mountain, Edward (Highlands and Islands) (Con)
Mitchell, Margaret (Central Scotland) (Con)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
McDonald, Mark (Aberdeen Donside) (SNP)
McAlpine, Joan (South Scotland) (SNP)
Matheson, Michael (Falkirk West) (SNP)
Mason, Tom (North East Scotland) (Con)
Mason, John (Glasgow Shettleston) (SNP)
Martin, Gillian (Aberdeenshire East) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
MacDonald, Angus (Falkirk East) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Lindhurst, Gordon (Lothian) (Con)
Kidd, Bill (Glasgow Anniesland) (SNP)
Kerr, Liam (North East Scotland) (Con)
Hyslop, Fiona (Linlithgow) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Haughey, Clare (Rutherglen) (SNP)
Harper, Emma (South Scotland) (SNP)
Hamilton, Rachael (Ettrick, Roxburgh and Berwickshire) (Con)
Halcro Johnston, Jamie (Highlands and Islands) (Con)
Greene, Jamie (West Scotland) (Con)
Golden, Maurice (West Scotland) (Con)
Gilruth, Jenny (Mid Fife and Glenrothes) (SNP)
Freeman, Jeane (Carrick, Cumnock and Doon Valley) (SNP)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
FitzPatrick, Joe (Dundee City West) (SNP)
Fabiani, Linda (East Kilbride) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Ewing, Annabelle (Cowdenbeath) (SNP)
Evans, Mairi (Angus North and Mearns) (SNP)
Dornan, James (Glasgow Cathcart) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dey, Graeme (Angus South) (SNP)
Denham, Ash (Edinburgh Eastern) (SNP)
Davidson, Ruth (Edinburgh Central) (Con)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Crawford, Bruce (Stirling) (SNP)
Corry, Maurice (West Scotland) (Con)
Constance, Angela (Almond Valley) (SNP)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Chapman, Peter (North East Scotland) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Carlaw, Jackson (Eastwood) (Con)
Campbell, Aileen (Clydesdale) (SNP)
Cameron, Donald (Highlands and Islands) (Con)
Burnett, Alexander (Aberdeenshire West) (Con)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Briggs, Miles (Lothian) (Con)
Bowman, Bill (North East Scotland) (Con)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Ballantyne, Michelle (South Scotland) (Con)
Balfour, Jeremy (Lothian) (Con)
Arthur, Tom (Renfrewshire South) (SNP)
Allan, Alasdair (Na h-Eileanan an Iar) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Adam, George (Paisley) (SNP)

The Deputy Presiding Officer

The result of the division is: For 30, Against 87, Abstentions 0.

Amendment 1C disagreed to.

The Deputy Presiding Officer

I invite Derek Mackay to press or seek to withdraw amendment 1.

Derek Mackay

I press amendment 1.

Amendment 1 agreed to.

The Deputy Presiding Officer

That ends consideration of amendments.

There has been a procedural change, which I will read out. It will be repeated later.

As members will be aware, at this point in the proceedings, the Presiding Officer is now required under standing orders to state whether, in his view, any provision in the bill relates to a protected subject matter—briefly, whether any provision modifies the electoral system and franchise for Scottish parliamentary elections. If it does, the motion to pass the bill requires support from a supermajority of members. That is a two-thirds majority, or 86 members.

In this case, the Presiding Officer’s view is that no provision in the Air Departure Tax (Scotland) Bill relates to a protected subject matter. Therefore, the bill does not require a supermajority to be passed at stage 3.

I am sure that that is all embedded in members’ memories now.

Final debate on the Bill

Once they've debated the amendments, the MSPs discuss the final version of the Bill.

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Final debate transcript

The Deputy Presiding Officer (Christine Grahame)

The next item of business is a debate on motion S5M-06164, in the name of Derek Mackay, on the Air Departure Tax (Scotland) Bill at stage 3.

16:05  



The Cabinet Secretary for Finance and the Constitution (Derek Mackay)

I am pleased to open this stage 3 debate on the Air Departure Tax (Scotland) Bill. The establishment of air departure tax is another important milestone on the journey to enhance Scotland’s fiscal powers and another example of this Government continuing to move ahead with pace and purpose to ensure that we are ready to begin using Scotland’s new powers once they are devolved to the Scottish Parliament.

I thank the Finance and Constitution Committee and the Delegated Powers and Law Reform Committee for their detailed scrutiny of the bill. Their input has helped to shape the bill that is before the Parliament today, which now includes tax exemptions that were brought forward by the Government at stage 2; it can also be seen in the independent economic assessment that the Government has commissioned to help to inform our secondary legislation plans for tax bands and rate amounts.

I thank those organisations and individuals who contributed to the policy development of ADT, both before and after the bill was introduced to Parliament. As with the other currently devolved taxes, the Scottish Government has taken and will continue to take a consultative and collaborative approach and to engage stakeholders on how ADT should be structured and operated.

The Scottish Government is seeking Parliament’s approval of the bill, which establishes the general structure and operation of ADT—a tax on the carriage of passengers on flights that begin in Scotland. The tax will apply only to the carriage of chargeable passengers on chargeable aircraft and will be payable by the aircraft operator.

With the core foundations of the tax in place, we will bring forward our tax bands and rate amounts proposals in secondary legislation this autumn. The secondary legislation will be subject to the affirmative procedure, which means that it cannot come into effect without Parliament’s approval. That is consistent with the approach taken for the other devolved taxes.

Under terms agreed between the Scottish and United Kingdom Governments in the fiscal framework, air passenger duty will cease to apply in Scotland from 1 April 2018. The block grant will be adjusted downwards and, if the bill is enacted, ADT will replace APD from that date. Revenue Scotland continues to make good progress to be ready to collect and manage ADT from April 2018. Good progress is also being made by the Scottish Fiscal Commission, which will be responsible for producing independent forecasts of receipts from ADT for future Scottish Government budgets. The forecasts will reflect the Scottish Government’s policy for ADT at the time.

Scotland is already an attractive destination for business and inbound tourism but, particularly given the economic threat that Brexit poses, it is important that we continue to be open to key and emerging markets in order to further capitalise on the opportunities that exist. As has been discussed, the Scottish Government’s plans for ADT—a 50 per cent reduction in the overall tax burden by the end of this parliamentary session and the abolition of the tax when resources allow—are a key part of the Government’s economic strategy, in particular to boost trade, investment, influence and networks.

Scotland’s airports are competing on a world stage to secure new routes and capacity. Reducing the tax burden will help to ensure a more level playing field with many other European airports that are competing to secure the same airlines and similar routes.

Patrick Harvie (Glasgow) (Green)

The cabinet secretary is being very clear that, way in advance of having the information or the assessments that he said he wants to commission, he remains committed to the policy of halving and ultimately scrapping this revenue source. What is the Scottish National Party’s view on how the gap should be filled? Should it come from increasing other taxes, which we could do now, or from cutting public services even deeper, which the Government could also propose to do now? Why is he legislating to create a tax that he thinks should not exist?

Derek Mackay

Today is not about tax rates and bands. We will have the discussion about how to use the powers that we are proposing to establish. We have set out a policy, which is based on our view of enhanced connectivity and economic growth and will support the economic drivers of the Scottish economy, in which airports and airlines are central. New routes will enhance business connectivity and tourism as well as providing new jobs.

The Scottish Government agrees with other members that it is important that our plans for ADT are supported by robust evidence and that the impacts are monitored over time. That is why, as I set out at stage 3, we are undertaking a broad range of impact assessments, which will be published by the time Parliament is asked to consider our secondary legislation proposals for tax bands and rate amounts in the autumn.

It is also why the Government lodged an amendment at stage 3, which—now that Parliament has passed it—places statutory duties on ministers to have regard to the projected economic, environmental and social impacts of our plans for tax bands and rate amounts and to keep those under review when the tax bands and rate amounts are in force.

The Government recognises that boosting economic growth by improving air connectivity might lead to an increase in aviation emissions. That should, however, be in the context of Scotland making sustained progress on its statutory emissions reduction targets, which are set across the economy as a whole. We are prepared to work harder in other areas to meet climate targets, and we should also acknowledge that airlines, aircraft manufacturers and engine manufacturers are doing a great deal to reduce emissions through improvements in technology.

Claudia Beamish (South Scotland) (Lab)

Does the cabinet secretary agree that, in view of the fact that transport is now the highest emitter of greenhouse gases, it is extraordinary that that should be the Scottish Government’s position?

Derek Mackay

Our statutory advisers in the UK Committee on Climate Change suggest that even if modelling in a policy proposition around a tax reduction has the outcome of increased emissions, that is still manageable in terms of the climate change agenda. The Scottish Government has a strong track record in meeting our targets and we believe that emissions can be managed by working harder in other areas.

Taken together, the bill’s provisions provide the basis for a tax that is well understood by taxpayers and is efficient to collect and manage. There is general support for the bill among stakeholders and, I hope, among members for the establishment of a tax to replace APD in Scotland. I appreciate that there is still a range of views about the detail of the tax, including rates and bands, and how a tax reduction should be applied to maximise the economic benefit for Scotland.

The Government remains of the view that our approach, whereby the overall burden of the tax is reduced by 50 per cent by the end of the current parliamentary session and the tax is abolished when resources allow, will deliver strong economic benefits for Scotland. I look forward to debating those and other issues this afternoon.

Today, we are not debating the policy; we are debating having the ability to collect the tax in Scotland as a consequence of the negotiations that led to the devolution of the tax to Scotland.

I move,

That the Parliament agrees that the Air Departure Tax (Scotland) Bill be passed.

16:13  



Murdo Fraser (Mid Scotland and Fife) (Con)

I start by welcoming the fact that Parliament is finally going to pass a law, almost 14 months after the Scottish Parliament elections last year. Apart from the Budget (Scotland) Bill, which is a legal necessity, this is the first piece of substantive legislation that will be completed in the current parliamentary session in all that time.

We are at the stage in the bill process at which veterans of stage 3 debates know that there is very little new to say. When a bill has been substantially amended at stage 2 or stage 3, there might be new issues to introduce, but where that does not apply, as in this case, we are effectively rerunning the arguments that we had in committee and during the stage 1 debate, when the bill achieved substantial support across the Parliament.

It is important to reiterate the point that the cabinet secretary just made: that if the bill is not passed, all that will happen is that the Scottish Government will not be able to collect any taxes on air travel. I do not think that any party in this Parliament thinks that that is a sensible outcome. Therefore, I hope that the whole Parliament will vote for the bill at decision time.

Andy Wightman (Lothian) (Green)

If the bill is not passed and the Government is not able to collect any revenue, the outcome will be no different from our passing the bill and eventually setting the rate at zero.

Murdo Fraser

That is an interesting intervention from Mr Wightman. To be fair to the cabinet secretary, I do not think that even he is proposing to collect no revenue at all from ADT starting from next year. He might have an ambition to get there in the end, but I do not think that that is his ambition in the short term, so I think that we can all agree that it is desirable to pass the bill.

The bill will reintroduce the existing UK framework for air passenger duty but gives it a different title—the air departure tax. In other respects and in effect, it is the same as the tax that was there before. That approach was widely welcomed by stakeholders across the board, including the airlines and their management companies, which did not want an entirely new tax structure to be introduced.

Some changes have been made to the bill at stages 2 and 3. At stage 1, my colleague Adam Tomkins raised the question of the scope of the tax, because it is the norm in tax legislation across the UK that the scope of taxation is provided for in primary enactments. That is distinct from the setting of rates and bands, which is normally left to secondary legislation.

As introduced, the bill failed to meet that norm, in that it did not stipulate the exemptions to the definitions of chargeable passengers or aircraft. I was pleased to see that, at stage 2, the Scottish Government amended the bill to cure it of that defect, so it now stipulates the relevant exemptions. The one exception to that relates to the situation in the Highlands and Islands, where I appreciate that there are still unresolved questions around European Union state-aid rules that require clarification.

As amended, the bill is now in tune with not just UK tax legislation but other devolved taxes such as the land and buildings transaction tax. I hope that the precedent has now been established and that all future tax legislation will fully address the question of the scope of taxation when it is originally drafted.

We looked at amendments today on the evidence that is required when setting rates and bands. I am pleased that the recommendations of the Finance and Constitution Committee have been accepted by the Government and are now supported by the Parliament. We will need to see such evidence when the Parliament votes on the detail of the rates and bands.

As we heard from the cabinet secretary, the next stage in the process will be in the autumn, when we will hear from the Scottish Government what its detailed proposals are, the evidence that supports them and the impact that the proposals will have on the environment and on the economy. The hope is that any proposals will be enacted in the next financial year.

Our view, which we have set out on previous occasions, is that we support the ambition of an overall 50 per cent reduction in ADT rates but would prefer to see that targeted at long-haul flights rather than being introduced across the board. There would be two advantages to that approach. First, it is our view that there would be a greater economic benefit from reducing the tax on long-haul flights. The evidence shows that those travelling long haul tend to stay in Scotland longer than those travelling short haul and tend to spend more money while they are here. In addition, if we cut the cost of long haul, there is the opportunity to attract more long-haul operators to base themselves in Scotland, thus reducing the need for Scottish passengers to make connecting flights to hub airports such as Heathrow or Amsterdam.

There is a second advantage to cutting the tax for long haul as opposed to short haul, which is an environmental one. In the evidence sessions, the committee heard from Virgin Trains, among others, a real concern that a reduction in ADT on short-haul flights will encourage a modal shift away from surface travel—such as cross-border rail between Scotland and London—towards the airlines. That would not be helpful in helping us to meet our climate change targets. Interestingly, Virgin Rail is not opposed to a reduction in long-haul ADT. Indeed, it believes that that might encourage more visitors into the UK and complement visitors’ use of the rail network once they are here.

Our preference is for any reduction in ADT to be targeted at long haul. I hope that when the Scottish Government is looking at the evidence base for its proposals, it will consider the relative merits of reducing long haul, reducing short haul and cutting across the board, so that we can weigh all those things in the balance.

I think that I have said all I can say on this particular piece of legislation and I look forward to supporting it at decision time this evening.

16:20  



Neil Bibby (West Scotland) (Lab)

Presiding Officer,

“The power to charge tax on air passengers leaving Scottish airports will be devolved to the Scottish Parliament.”

That is in the Smith commission report and was agreed by all parties—it should not be in any doubt today. Power over what we call air passenger duty is coming to Scotland, but it is a power that we must use responsibly.

As I have said throughout the process, Scottish Labour supports the bill in principle. We believe that the air departure tax should be switched on when air passenger duty is switched off in Scotland next year. However, we will not support the approach to the new tax that the Scottish Government has set out. We will not support a tax reduction for which no compelling case has been made—a tax reduction that is unnecessary and irresponsible. We have argued consistently that a 50 per cent cut to air passenger duty—in effect, that is the SNP’s position—will not make Scotland any greener or any fairer.

Analysis from the Office for National Statistics shows that halving APD would save the top 20 per cent of earners £73, while the poorest would save just £4.50. Indeed, 70 per cent of all flights in the UK are taken by the wealthiest 15 per cent of the population. That is a tax cut for the wealthy, frequent-flying few, not the many who do not fly or who might fly only once a year.

Throughout the debate, the silence from the SNP on the distributional impact of its plans for the new air departure tax rates has been telling, but it must confront the environmental impact of any tax cut, too. I remind the cabinet secretary that his Government is projecting an increase in aviation emissions if air departure tax is cut. As we know, transport is now the largest source of carbon emissions in Scotland. If the Scottish Government does not properly address transport emissions, which must include aviation, it is hard to see how it will meet its obligations under the Climate Change (Scotland) Act 2009, and rail travel, which is a much more environmentally sustainable mode of transport, will lose out in favour of subsidising aviation.

That is the wrong move at the wrong time and there is no economic imperative for it. Barely a month goes by without Scottish airports reporting record growth, with passenger numbers up and new routes opening up to new destinations. Week after week, MSPs lodge motions rightly applauding the growth of airports—and at the same time undermining the Government’s case. Edinburgh airport reported an 11 per cent increase in passenger numbers last year. Glasgow airport reported its busiest May on record last week. Aberdeen airport says that domestic and international passenger numbers are up. With duty-free shopping, no VAT on tickets and no fuel duties for airlines, the aviation industry is already one of the most lightly taxed industries in the world. The economic case for the tax cut simply does not stack up.

I saw that the cabinet secretary was at Glasgow airport this morning. If he is so concerned at the cost of travelling through Scotland’s airports, why has he said nothing about Glasgow airport’s money-making drop-off charge? By his silence on the issue, it appears that Mr Mackay has chosen to side with the aviation industry over his own constituents and the nearly 15,000 people who have signed a petition objecting to the drop-off charge.

The most concerning thing about the Government’s approach to APD is that it represents a completely unnecessary tax break—of up to £189 million a year—for the aviation industry, which will come at the expense of public services and expenditure elsewhere. The SNP cannot, or will not, tell us what it will cut to make up for the revenue that the Government will lose. Will it be the national health service, the bus pass, fire services or the police? Will it be the SNP’s “defining priority” of education? Where is the axe going to fall for that £189 million?

What happens if, having effectively cut or even abolished air passenger duty, the Scottish Government finds out that some other part of the UK has decided to follow? This week, the shadow chancellor, John McDonnell, has written to the Chancellor of the Exchequer, Philip Hammond, asking whether abolishing APD in Northern Ireland will form part of a Tory-Democratic Unionist Party deal. We warned the Government that using air departure tax to cut the rates would trigger a race to the bottom—a race in which public services will lose out and only business interests in the aviation industry can ever win.

The SNP finds itself in the position of siding with big business, the Tories and Arlene Foster and the DUP to make unnecessary and irresponsible tax cuts that are bound to hit already overstretched budgets for public services. Scottish Labour, on the other hand, supports the Air Departure Tax (Scotland) Bill because, unlike the SNP, we actually support an air departure tax. We know that we need to put a legislative framework for the new tax in place now. However, given the level of concern about the Scottish Government’s wider approach to APD, we also believe that the Government must fully assess the economic, environmental and social impact of any changes to tax rates, especially if it persists with tax cuts. The tax reductions that it proposes will have consequences and the Scottish Government should be honest about what those consequences are.

Scottish Labour backs the tax—not the cut—and that is why we will vote for the bill.

The Deputy Presiding Officer (Linda Fabiani)

We now move to the open debate, with speeches of four minutes, please. I call Bruce Crawford.

16:25  



Bruce Crawford (Stirling) (SNP)

I am pleased to speak in this important debate at stage 3 of the Air Departure Tax (Scotland) Bill. I remind colleagues that, at decision time, we are being asked to approve an enabling bill to give the Scottish Government the authority to levy a tax on the carriage of passengers who depart from Scottish airports. Without the bill or something similar, from April 2018, once APD is disapplied in Scotland as a result of the Scotland Act 2012, there will be no legal basis for levying any such tax without appropriate legislation being in place. The bill is categorically not about the Scottish Government’s stated policy intention of delivering a 50 per cent reduction in the overall burden of ADT by the end of the parliamentary session, although I have no doubt that we will hear a fair bit about that, as we already have during the debate.

In its stage 1 report on the bill, the Finance and Constitution Committee supported the introduction of legislation to ensure that a tax on the carriage of air passengers from Scottish airports could be levied. Indeed, by far the majority of respondents to the committee’s call for evidence and those who provided evidence in person supported the principles behind the bill. At the committee meeting on 22 February, when I asked Chris Day of Transform Scotland and Mike Robinson of Stop Climate Chaos whether they supported the introduction of such a bill, both confirmed that they did.

The bill was improved by amendments that were lodged by the Government in response to recommendations made by both the Finance and Constitution Committee and the Delegated Powers and Law Reform Committee, including a recommendation that the Government lodge amendments at stage 2 to make detailed provisions for exemptions from the definitions of “chargeable passengers” and “chargeable aircraft”. The cabinet secretary deserves credit for responding so positively on that matter and on other matters that the committees raised with him.

The Government also lodged an amendment for today’s stage 3 debate in response to concerns that were raised, particularly by Patrick Harvie. That amendment was agreed to unanimously earlier and will ensure that, in preparing draft regulations, ministers must have regard to the projected economic, environmental and social impacts of the proposed tax bands and rate amounts and that they must keep those under review. Those changes may not have gone as far as the Green Party wished to go, but any reasonable person would judge that the Government has come a long way in that regard. I consider that the Government has struck the right balance in responding to legitimate concerns and, as a result, I am strongly of the view that the bill is now fully fit for the purpose that the Government intends for it.

As a side issue, much comment has been made about the Scottish Government’s longer-term policy to deliver a 50 per cent reduction in the overall burden of air departure tax by the end of the parliamentary session.

Andy Wightman

Does Bruce Crawford accept that, given the Government’s stated intention to publish environmental, economic and social assessments, there are circumstances in which that 50 per cent reduction may turn out not to be possible?

Bruce Crawford

I have listened to what the Green Party has said about that at the committee and in the debate. If there was a prize for navel gazing, nitpicking and dancing on the head of a pin—all at once, if that was possible—the Greens would be the first to get that prize—I have absolutely no doubt about that. If the bill did not exist, they would be demanding that we introduce it. It is a quite ridiculous position.

I believe that the most compelling reason to support the Scottish Government’s policy position is the Tory Government’s full-throttle advance towards a hard Brexit cliff edge, which puts Scotland’s economy at risk and threatens many thousands of jobs. Given that, in my constituency of Stirling, the tourism industry supports 5,800 jobs—13 per cent of the total number of jobs—it will come as no surprise to anyone that I regard the position of the Scottish Government as the right one. More than any other time, now is the time to send a signal that Scotland is open for business, and we will do what we can to boost the economy using all the powers that we have at our disposal.

16:30  



Gordon Lindhurst (Lothian) (Con)

Last week, I took part in the debate on opportunities for growth in the Scottish economy. As I said then, the Scottish Government has at its disposal a number of tools to facilitate growth in our economy and it could do more, now and in the future, to build trade and investment relationships with countries around the world, not just in Europe. As we discuss stage 3 of the Air Departure Tax (Scotland) Bill, which will replace the UK-wide air passenger duty, we are dealing with one such economic lever that the Scottish Government could use to foster those deeper relationships.

We have some of the highest taxes on flying in the world, but we have an opportunity to take a different approach and take Scotland on a path to a competitive tax rate that will encourage airlines, businesses and tourists to come to Scotland as well as making it cheaper for our businesses and people to build those deeper relationships with the rest of the world.

The Scottish Conservatives support devolution of the tax to the Scottish Parliament; it is perhaps around the practical application of the legislation—the bands and rates—that we differ from the Government. The Government has made clear its intentions regarding those rates: it wants to cut the tax by 50 per cent initially and scrap it altogether in the longer term. As we have heard, the Scottish Conservatives have consulted widely with stakeholders on how best to use this opportunity and how to target the reduction where it will have the most effect. We have done that in the context of needing to reach out to the world in a post-European Union membership climate. As such, our approach is tailored to differentiate between shorter and longer-haul flights as well as to have a progressive system that encourages reduced rate and standard rate customers to travel.

In practice, the Scottish Conservatives seek to lay out a policy that will incentivise new air links from Scotland to global destinations, giving greater choice of worldwide air travel to those who are less able to afford the higher fares. That includes our small and medium-sized businesses, which have much to offer the world but need the assistance from Government that the policy will provide.

The policy will also ensure that consumers continue to have a choice in how they travel within the UK and Europe, as it will freeze rates for short-haul flights. That will benefit consumers who choose to travel domestically and to the continent by air rather than by other forms of travel, but it will not cause a dramatic shift in consumer behaviour to the detriment of the environment.

I will close by reiterating a point that has been made already. If we do not vote the legislation through today, Scotland will not benefit from the tax that is collected on air travel. Nobody desires that situation. Instead, we can reflect on the opportunities that the devolved policy presents us with while thinking carefully about how we can use the new powers to open up air travel to Scotland.

16:34  



Claudia Beamish (South Scotland) (Lab)

I support the bill, but I will highlight some policy points.

The priority that the Scottish National Party Government is placing on the tax cut is perplexing, and the policy is not progressive. UK passenger data for 2015 shows that 15 per cent of the population take 70 per cent of the flights, and analysis from the Office for National Statistics suggests that a 50 per cent cut in air passenger duty would benefit top earners significantly more than anyone else. The policy is not necessary. Scottish airports are enjoying record passenger numbers, and the number of overseas trips to Scotland was up by 6 per cent in 2016, supporting our thriving tourist industry.

The policy is not clear, either. Once again, the Parliament is expected to scrutinise effectively without having the full picture from the Government. I echo the concerns that were raised by the Chartered Institute of Taxation, which said that, in the absence of such information, it is difficult to say with any certainty what benefits—if any—the change will bring. The Scottish Government should consider that repeated concern seriously.

The policy is also unjustified. Scotland faces a time of financial constraint, and the tax is a valuable source of revenue. APD, which will become air departure tax, was valued at over £270 million in 2015-16. Depriving the public purse of that income seems irrational when coupled with the cuts to public services. Our local services are being squeezed and our communities are suffering for it. Cheaper business class flights will not make Scotland any fairer.

A strategy for airline routes that is based on sustainability and connectivity is important to the growth of Scotland’s economy, but here we are faced with a choice between using the new powers to invest in our economy and introducing a tax cut that will favour the rich and launch a race to the bottom in taxes across the UK. The SNP’s decisions on the matter are revealing.

It is not only a question of social justice, as cutting APD would have implications for climate justice as well. Climate change is one of the biggest issues that every country in the world faces, and it underscores our interdependence. This stage 3 debate has arrived a week after the Scottish Government proudly revealed its success in reducing climate change emissions in the latest tranche of figures and the chamber was filled with warm words and talk of ambition.

The bad news was that the transport sector has now risen to be the heaviest greenhouse gas emitter. Our transport sector, including international aviation and shipping, has dropped its emissions by only 1.1 per cent in 27 years. Between 2014 and 2015, international aviation increased by 9 per cent and, between 1990 and 2015, it rose dramatically by approximately 144 per cent.

Today, the SNP’s talk of climate change ambition could not seem more hollow. In 2015, the UK promised to be a part of the collective action of the Paris agreement. That means that the Government must ensure that every policy in Scotland is stress tested to advance our move to a zero-emission economy. Has the Scottish Government adequately recognised the need to compensate for those additional emissions in our climate change plan? I am not sure.

Given the figures in the greenhouse gas inventory for 2015, it is as clear as day that we need a proper commitment to sustainable travel. Our transport sector—excluding international aviation and shipping—is now more damaging to our climate than it was in 1990. We need a focus on modal shift to improve public transport and infrastructure in order to support more environmentally sustainable modes of transport and to make them an easy choice for passengers. Incentivising people to fly, particularly domestically, is going backwards. It threatens our rail services, which are not afforded the same tax breaks, and it goes against the Scottish Government’s own key objective of bolstering rail services between Scotland and England.

We support a continued exemption for the Highlands and Islands—remote and island areas where air travel can often be the only realistic option—and we hope that the notification to the European Commission is successful. Yet, how can the Scottish Government justify—economically, socially or environmentally—freezing the budgets for bus services and active travel while giving aviation a free pass?

16:39  



Patrick Harvie (Glasgow) (Green)

The debate on the bill is—as it has been throughout the process—characterised by a number of contradictions. The advocates of the Scottish Government’s position look at the rising levels of aviation that our airports continually trumpet and celebrate, yet they say that the tax regime is holding the industry back. They say that cutting the tax in half and then abolishing it will not lead to damaging climate change emissions, but to increased aviation levels. Those things cannot be true. At the heart of the matter is one single contradiction: the Government is legislating to create a tax that the Government thinks ought not to exist. I think that there is good reason to have a specific tax on aviation; the Government does not, yet it is creating one.

In what was an uncharacteristically grumpy contribution—I do hope that his lunch was satisfactory—Bruce Crawford told us that the bill should not be seen as being about the Government’s tax policy. However, to legislate for a tax without having a clear sense from the Government of what the purpose of that tax is—because the Government wants to abolish the tax—is irresponsible. The consequence will be that Parliament will not be in a position to amend the Government’s proposals when it introduces a resolution on rates and bands—on the structure of how the tax will be applied. We will have to take it or leave it, and at that point it will be too late to leave it. In passing a bill that does not constrain ministers, we will essentially be saying that Parliament will accept what they come along with.

Adam Tomkins (Glasgow) (Con)

I would like Patrick Harvie to explain his comment. In what sense will it be too late for Parliament to reject the Government’s proposed rate resolution when it comes to Parliament for a decision? That does not make sense.

Patrick Harvie

We will at some point be forced to agree to a resolution, unless we want the tax to be levied at a zero rate.

There is an alternative to passing the bill. The Government still has ample time to introduce a bill that has a sense of purpose and which imposes clear duties on ministers not just to “have regard to” certain factors, but to act in accordance with meeting the objectives that we have set ourselves on the national performance framework and on climate change. If we pass a bill that includes no such constraints, Parliament will simply have to nod through—even if it must do so on a second go—what the Government proposes. We will have handed too much power to Government, rather than handing power to Parliament.

Let us look at the consequences of the Government’s policy, which it has clearly committed to in advance of having any evidence on the social, economic or environmental impacts. We know from the limited amount of work that the Government has done that its policy will increase aviation emissions. That is a given. At a time when the Paris agreement means that we should be increasing the scale of our ambition on climate change rather than merely meeting the targets that we have already legislated for, that is not acceptable.

We also know that the Government’s policy will have a socially unjust impact. As Neil Bibby mentioned, 70 per cent of all flights are taken by just 15 per cent of people. Most Scots do not fly at all during a given year, so most people will be losers under the policy in that given year. We also know that there is a clear difference between the incomes of those who fly and the incomes of those who do not. In research that we published at the weekend, members can see by income distribution the propensity of people on different levels of income to be frequent fliers. We should not be at all surprised that the wealthiest people are the most frequent fliers and that the poorest people stand to gain the least from the Government’s tax giveaway.

When it comes to economic impacts, the Government has produced nothing to justify its empty assertions. Rather than cut £300 million from aviation taxes, we could use that resource to ensure that people in Scotland have reliable, affordable and decent public transport. That would benefit the economy in a socially just way and it would reduce climate change emissions.

The Greens will oppose the bill, because it is not the bill that we should be passing. We should be passing a bill that has clear and strong constraints on ministers, and which ensures that they act in accordance with the social, economic and environmental objectives that all of us have said we believe in.

16:44  



Liam McArthur (Orkney Islands) (LD)

I thank Bruce Crawford and his colleagues on the Finance and Constitution Committee, as well as all those who gave evidence to the committee, for their work in scrutinising the bill. In response to Patrick Harvie’s comments, I should perhaps declare an interest as the MSP who—with the obvious exception of the jet-lagged Tavish Scott and Alasdair Allan—probably spends more time sitting on aeroplanes every week than any other.

I certainly understand the case that is made for reducing taxes on some air services. For example, as others have mentioned, routes that serve Orkney and other parts of the Highlands and Islands are exempt from APD on outbound journeys, but not for the inbound leg. I have yet to hear a convincing argument for why that is the case, and I hope that that anomaly will be addressed. That is a different proposition from that which is being argued by the Government and the Tory party in the context of the bill—I am talking about lifeline services. In some cases, those services provide the essential link between national health service patients and the specialist treatment on which they rely. Even with the APD exemption and the support of the discount scheme, which was introduced by my colleague Tavish Scott, those services are significantly more costly than those that are offered by the loudest advocates of the bill.

I see no contradiction in continuing to argue for retention, if not expansion, of the APD exemption on lifeline services, while also questioning the economic, environmental and social justification for the tax cut for the airline industry that is being recklessly proposed by the Government.

In the brief time that is available, I will touch on the three justifications for the proposed tax cut. First, on the economic rationale, as others have said, the Finance and Constitution Committee concluded that there simply is not evidence to back up the minister’s claim. The idea of halving, then scrapping, APD or ADT seems to have been plucked out of thin air by the Scottish National Party, with none of the underlying assumptions being challenged or the cost being accurately assessed.

At a time when budgets across the board are under huge pressures, when we hear weekly of crises in education, health, transport and a range of other key public services, we have an SNP Government, with the support of the Tory party, proposing to gift the airline industry a tax cut of up to £150 million a year—a down payment for a tax cut twice that size somewhere down the line. Yet, with continued strong growth in the airline sector, as Neil Bibby rightly highlighted, how is it that SNP ministers have decided that that is the best use of scarce public resources?

If it is hard for the economic case to stand up, the environmental justification is laid out cold. Last week, the Government published figures showing that the transport sector needs to start pulling its weight if we are to meet our medium-term and long-term climate change targets. There has been no progress so far in reducing emissions, and the SNP and Tory plans to slash ADT will not make turning that situation around any easier.

Bruce Crawford

We have heard from Liam McArthur all the reasons why he does not want to cut the tax. Does that mean that, unlike at stage 1, the Liberals will vote for the bill at the end of stage 3? If they do not, their position will be completely contradictory.

Liam McArthur

I do not accept that that is the case at all. As has been pointed out, there is an opportunity to introduce a proper enabling bill that sets the structure in which any future decisions would be taken. To pass a bad bill simply because the Government insists that it needs to be passed is not credible.

The Government seems to take comfort from the fact that only an additional 60,000 tonnes of CO2 will be pumped into our air each year. The notion that that is a mere nothing would be tenable if the UK Committee on Climate Change were advising us to slow the rate of growth in transport emissions. It is not: it is explicitly and strenuously arguing for reductions to be delivered. Taken alongside the Government’s acceptance of the 27 per cent growth in car usage, from where in the transport sector do ministers expect emissions reductions to come?

Socially, too, the proposals fly in the face of what the Government says it wants to achieve. The First Minister talks repeatedly about the need for sustainable economic growth and the case for greater equity, but this tax cut can hardly be described as sustainable or progressive. When budgets and services are being squeezed hard, the Government’s priority appears to be a tax break that will benefit least the people who are least well off.

Last-minute assurances that the economic, environmental and social concerns that I have outlined will be addressed do not cut it. “Have regard to” provisions, in a vacuum, are more loopholes than they are safeguards.

The bill is not supported by evidence; it will give SNP ministers carte blanche and it shows that the Government has the wrong priorities—preferring tax breaks for the airline industry over investment in education and health. On that basis, the Scottish Liberal Democrats will not support the bill.

16:49  



Willie Coffey (Kilmarnock and Irvine Valley) (SNP)

I welcome the chance to speak in the debate and have enjoyed the contributions that have been made by colleagues and witnesses as the bill has progressed through the Finance and Constitution Committee.

Reducing the travel tax on air passengers by 50 per cent over this session of Parliament will help Scotland to compete with other countries on a more level playing field, and it will boost international connectivity and help our national and local economies to grow.

The UK’s air passenger duty is the highest such tax in the world, for almost every category. For short-haul flights it is almost 50 per cent higher than the next-highest such tax that is in place, which is in Greece, and for long-haul flights it is more than double the next-highest such tax, which is in Germany. For years, Scottish air passengers have been paying far in excess of what their counterparts throughout the world have been paying. I welcome the Scottish Government’s plans to address the problem and reduce the tax.

When Ireland abandoned its version of the tax in 2014, passenger numbers grew in Dublin and the Irish regional airports. Jonathan Hinkles, from Loganair, said in evidence to the Finance and Constitution Committee:

“There is clear evidence in Ireland that regional airports benefited from the abolition of the equivalent of APD.”—[Official Report, Finance and Constitution Committee, 1 February 2017; c 52.]

Traffic at Dublin grew by about 40 per cent, but flights to Shannon, Cork and a host of other regional airports brought more people, more tourism and more revenue to the local economies, as the managing director of Dublin airport, Vincent Harrison, has confirmed.

Let me show how disadvantaged Scotland has been by APD policy. Ireland has a million fewer people than Scotland, but 28 million passengers come through Dublin each year—and there have been increases throughout the country. In Scotland, with its greater population, only 21 million people use Edinburgh and Glasgow airports combined. The proposed tax reduction will give both our biggest cities a chance to grow and develop their economies and to compete with similar European cities. As we enter the Brexit negotiations, that is increasingly important.

That brings me neatly to Prestwick airport, in Ayrshire. That fantastic airport has served Scotland since the 1930s and stands to gain from a reduction in tax, just as the Irish regional airports did. Indeed, when Ryanair’s Michael O’Leary was asked at the British-Irish Parliamentary Assembly in Dublin in March 2014 about the prospect of the travel tax being removed in Scotland, he said that he could more than double the number of passengers who come through Prestwick if APD were to be abolished. Last September, he said again that when the tax is scrapped his passenger numbers can go from 5 million to 10 million in two years. As recently as February, Ryanair confirmed that it would bring more aircraft and routes to Scotland, which will create thousands of jobs.

As the cabinet secretary said, the Government recognises that there will be an increase in CO2 emissions and is keen to work harder in other areas in order to meet its targets. We should remember that in Scotland aviation accounts for only about 4 per cent of our total emissions.

Patrick Harvie

Will the member give way?

Willie Coffey

No, thanks.

The additional emissions as a result of the proposed measure were described as “manageable” by the UK Committee on Climate Change.

On jobs, the Edinburgh Airport Ltd study found that if a 50 per cent cut were in place, over five years we could be looking at an extra 3,800 jobs, 900,000 extra passengers and £200 million more for the Scottish economy. That would be of great benefit to Scotland and there would be a huge spin-off for Prestwick airport, where the aerospace industry is well established. That airport’s fog-free status also makes it of strategic importance to Scotland, and it is bidding for spaceport status.

The proposal to reduce and then eliminate the tax presents Scotland with a great economic opportunity—particularly as we will soon know the real cost of Brexit. We also maintain our commitment to manage climate change emissions. I hope that the bill will be passed tonight and that all passengers in Scotland can look forward to a better deal from April next year.

16:53  



Liam Kerr (North East Scotland) (Con)

The bill is a completely logical step. Without it, no tax on air travel would be payable from airports in Scotland from April 2018.

In the early stages of the bill we heard from many interested parties, particularly in the airline industry, who told us that they wanted the mechanisms currently in place in the UK to be replicated as closely as possible, initially. The proposed approach in the bill is not dissimilar to that of the UK; the only substantive difference is the new name of the tax.

In general terms, then, the Scottish Conservatives support the bill. Things get interesting when we consider what the bill does not say. Last May, the SNP said in its manifesto:

“When the power to do so is devolved, we will reduce the overall burden of APD by 50 per cent, with the reduction beginning in April 2018 and delivered in full by the end of the next Parliament.”

The Cabinet Secretary for Finance and the Constitution has made it clear that he believes that cutting air passenger duty will boost growth and the Scottish economy. We think that he is right that a properly targeted reduction in ADT will achieve that, but many in the stage 1 debate struggled to get to that conclusion, and we can see why.

On 1 March, the convener of the Finance and Constitution Committee asked the finance secretary whether the Government had undertaken any economic assessment of the impact of a 50 per cent cut in ADT. The cabinet secretary said that

“we have not commissioned any independent research of our own, but we have certainly looked at all the reports that have been ... provided”.—[Official Report, Finance and Constitution Committee, 1 March 2017; c 5.]

On 25 April, the Scottish Government commenced commissioning an independent economic analysis of its rate reduction plans, to report in the autumn at the point when the Government sets out the tax bands. That is good, but I find it deeply troubling that that is being done only at this very late stage. To my surprise—and no doubt to his consternation—I found myself agreeing with Patrick Harvie in the stage 1 debate, when he said:

“We should make policy on the basis of evidence, not scrounge around to see whether we can work up some evidence after we have adopted a policy.”—[Official Report, 25 April 2017; c 82.]

The lack of such an assessment allows opponents to deploy arguments such as that cutting APD is wrong because such a reduction might benefit the wealthy, and that a reduction in ADT will automatically negatively impact the rail sector and the environment. In response, I would argue that, just because one sector of society might benefit—those it suits others to pejoratively deem the wealthy—it does not inexorably lead to a conclusion that it is a bad thing and should therefore be abandoned automatically. If we accept the argument that those who are wealthier fly, are not those exactly the sort of people we want to attract to Scotland, to invest, to spend, to stimulate local economies and to create growth?

I note that the fundamental premise of what we might call environmental damage arguments accepts that reducing the tax increases the number of flights. Bruce Crawford is right; that is vital economic activity. It means more flights, busier airports, more retail, more support services supplied locally—catering, cleaning, reception facilities, taxis, buses and baggage handlers. It means a greater local economic contribution from more tourists.

As for the modal shift from rail argument, it just does not fly in relation to long haul. [Laughter.] I apologise for that.

The fact is that many in the north-east have little option but to fly if they need to make journeys to London or the midlands. Where the train is an unrealistic alternative, we should encourage flying, and should see Scotland as more than just the central belt.

According to others in this debate, by retaining the tax at full rate, those least able to afford it are being precluded from flying, perhaps on their dream holiday abroad. Those with fewer resources and those businesses with less are forced to use a mode of transport that is not optimal for their requirements, or not go at all. The arguments against the consideration of any form of tax cut simply do not stack up. They appear to be based on the demonisation of one demographic and they fail to embrace the opportunities presented by the bill.

The Deputy Presiding Officer

We move to the closing speeches.

16:58  



James Kelly (Glasgow) (Lab)

As we soar towards the end of the debate, I welcome the opportunity to close on behalf of the Scottish Labour Party and to confirm that we will be supporting the bill at decision time. We do so on the basis that we support the establishment of ADT, so that it can be used positively. However, the establishment of that tax should not be used as the basis for introducing changes that will increase carbon emissions. It should not be used as a basis for taking money out of the Scottish budget, and there needs to be serious and critical analysis of any policy change that benefits flyers who are high earners, while some people in our communities do not have enough to afford the bus fare to the local jobcentre. There are real questions that have to be answered.

It has been quite an interesting debate. On the environmental consequences, we heard two excellent speeches, from Claudia Beamish and Liam McArthur. Claudia Beamish recalled the recent discussion on climate change and said that, whenever it is discussed in the chamber, there are lots of warm words and people are supportive of the measures being taken to reduce carbon emissions. However, the Scottish Government’s own statistics show that, if we reduce APD by 50 per cent, it will potentially result in 50,000 extra tonnes of carbon emissions. There are consequences to the policy that do not sit well with the policy objectives announced in other Scottish Government portfolios.

Neil Bibby raised some interesting questions when he asked who will benefit from the introduction of the tax and the 50 per cent reduction. The top 20 per cent of earners will be £73 a year better off, whereas the bottom 20 per cent will be only £4.50 a year better off. There is a real issue about the fairness of the policy. In a sense, the Government has not been able to tackle this part of the argument. We saw that when Patrick Harvie intervened on Derek Mackay and asked about the consequences for the Scottish budget. Essentially, the Government’s approach seems to be to say, “Let’s just look away now and we’ll deal with it later.”

I find it interesting that it is the Tories, rather than the SNP, that have advanced the arguments for the reduction in APD. Liam Kerr gave the game away in his speech when, in effect, he said, “What’s wrong with helping the wealthy? What’s wrong with cutting APD? If there are wealthy people who benefit, so be it.” That is the logic of the position, and that has to be the challenge for those on the SNP benches who try to portray themselves as the voice of the progressives in Scottish politics.

The reality is that they are going to sign up to a reduction of 50 per cent in APD that will take £189 million out of the Scottish budget. The Tories are quite supportive of that approach, because their position is to say, “Let’s help these wealthy flyers, and that’ll have an overall positive impact on the economy.” Their attitude is that, if that means we have fewer teachers in our schools and fewer nurses in our NHS, so be it. The challenge for the SNP is to say whether they accept that and will sign up to it.

Scottish Labour will support the setting up of the air departure tax, but we will robustly challenge any proposals that will raise carbon emissions, will take money out of the Scottish budget and are not fair and proportionate in their impact on our communities throughout Scotland.

17:03  



Adam Tomkins (Glasgow) (Con)

In my five minutes, I need to say three quick things—why we support the bill; why we supported the Government’s amendments at stage 2 and why they were important; and something about the policy and the fact that, this afternoon, we have heard so many SNP members talk about the importance of cutting taxation in order to grow the economy.

We on the Conservative benches support the bill, first and foremost, because we believe in fiscal devolution for this Parliament. We pushed hard for that in the Smith commission and we strongly supported its view that tax on aviation was one of the taxes that should be devolved in full to this Parliament. The Smith commission said:

“The power to charge tax on air passengers leaving Scottish airports will be devolved to the Scottish Parliament.”

The really important word there is “Parliament”. It said that the power would be devolved to the Scottish Parliament, not to the Scottish Government.

The flaw in the bill as it was introduced earlier in the session—it was a very serious flaw—was that, almost uniquely in British tax legislation, it failed to define in the bill the activity or behaviour that was to be taxed. It is perfectly normal for bands and rates of taxation to be determined by secondary instrument later in the process, but it is very unusual—and it should be absolutely discouraged—for the scope of tax liability itself not to be transparent in the legislation that introduces the tax in the first place.

Bruce Crawford, who is the convener of the Finance and Constitution Committee, mentioned that, but he failed to mention, of course, that he and his SNP colleagues voted against the Finance and Constitution Committee’s recommendation that the bill should be amended at stage 2 to remedy that serious defect. We were nonetheless able to prevail upon the cabinet secretary that we were right and that the convener and his colleagues were wrong, because the SNP does not have a majority on that committee any more.

Andy Wightman

Will Adam Tomkins explain why he did not lodge amendments to that effect at stage 3?

Adam Tomkins

We did not need to, because the bill was amended at stage 2 in the Finance and Constitution Committee by amendments that we supported, so the defects that we identified in the early stages of the process were remedied. That defect was not in the Land and Buildings Transaction Tax (Scotland) Bill or the Landfill Tax (Scotland) Bill, and it is not in the current UK air passenger duty legislation. It is a pity that the SNP sought to introduce such a defective bill into the Parliament and that the defects were supported by all the SNP members of the Finance and Constitution Committee.

It has been a real pleasure to listen to all the SNP members talking about the importance of cutting tax to grow the economy. However, my question for those SNP members is why that argument pertains only to the tax that we are discussing. If cutting APD will help to grow the Scottish economy—I whole-heartedly agree with the cabinet secretary that it would be and that we should get on with it and do it quickly—why does the SNP not also argue that cutting taxation more generally will be good, as doing so will grow the Scottish economy? I know that Labour members will not understand the argument, because they have manifested time and again this afternoon their complete inability to understand taxation. We cannot redistribute wealth within the economy unless we first create wealth in the economy. The argument here is not about redistribution and fairness; it is about creating wealth in the first place.

We propose to remove the air travel tax on flights that are longer than 2,000 miles. That would incentivise airlines to provide new direct links from Scotland to America, China and other global destinations, and that would be important in the Scottish economy with or without Brexit, so that families and businesses do not have to travel via London’s packed airports, Amsterdam or other hub airports in Europe. We hope that the cabinet secretary will make proposals that are based on those policies.

We support an immediate freeze on air passenger duty or air departure tax on short-haul flights to the UK and Europe in order to ensure that passengers can enjoy cheaper fares to destinations that are nearer to home. That is part of our economic strategy ahead of Brexit, which is focused on ensuring that Scotland gets connected to the global economy.

For all the wailing to the contrary from the Greens and others, international evidence supports the existence of a link between air travel demand and departure tax rates. In the Netherlands, for example, a departure tax was introduced in 2008 only to be scrapped two years later following dropping passenger and tourist numbers. Closer to home, the Irish Government abolished its travel tax in April 2014, and annual airport traffic rose the next year by 3.3 million customers.

The gap between Ireland and Scotland on long-haul flights is obvious. In 2015, around 470,000 passengers travelled between the United States and Scotland. In Ireland, that number is more than 2.5 million.

We support the bill and the Government’s underlying policy of cutting the tax not because we think that it is the only tax in Scotland that should be cut in order to grow the economy, but because we believe in the underlying principle of cutting taxation in order to grow the economy. I hope that the cabinet secretary now sees the wisdom of that.

17:09  



Derek Mackay

In my notes, I said that, considering some of the controversy around the policy, the debate has been quite constructive and consensual. Adam Tomkins then contributed and baited pretty much every other party in the chamber, with the exception of the Liberal Democrats.

Sticking with the Tories for just a moment, Liam Kerr made a point about policies being based on evidence, but he did not mention Brexit. Perhaps that is no surprise because, if more evidence was taken into account on that subject, we would all be in a better position. However, Liam Kerr did not say the words, “I agree with Derek Mackay.” The most interesting contribution from Liam Kerr was to say that he agrees with Patrick Harvie on matters relating to the bill. [Interruption.] That seems to surprise many Conservative members who have just come into the chamber.

James Kelly is right that, if we do not pass the bill, we will not collect any of the tax at all, so it is right to create the legislation that gives us a framework to enable us to collect the tax. Of course, we will return to the tax decisions in our consideration of the affirmative order, which will be transparent and done proactively by Parliament.

I have tried to engage on the structure of the tax, and I have responded to what was said in the consultation. I recognise the issue that a number of members, including Liam McArthur, have raised about the Highlands and Islands exemption, which is a significant issue. When I was transport minister, I proposed the increase of the air discount scheme subsidy to 50 per cent, and I am well aware of the issues in the Highlands and Islands relating to aviation as a form of transport and its critical importance to the residents of communities there. I repeat that I am engaging with the UK Government to resolve the matter, and I have a further call planned with the new Chief Secretary to the Treasury, when I will raise that and other matters to progress the issue of a like-for-like exemption for the Highlands and Islands. That is the Scottish Government’s aspiration.

The tax is one of the most expensive of its kind in Europe and the world, so it is right to try to deliver a level playing field in order to sustain what we have in Scotland and establish new routes. We know that the industry and airports are a dynamo of the Scottish economy, and we could do more with the powers that are coming our way. We will do that transparently and in the fashion that I have set out in the debate.

Neil Bibby criticised the airline industry but welcomed airport growth. It is hardly surprising that he welcomed that growth, given the region that he represents, but it is a surprise that he would criticise the airline industry, considering that jobs relating to the industry are so important in that area.

On climate change, the Government has a strong track record of meeting our emissions reduction targets, and we intend to continue to do so. We will take the policy into account in the modelling as we do that.

Patrick Harvie

The cabinet secretary’s position would be more credible if the Government’s climate change plan set out clearly by how much it intends to allow aviation emissions to rise, as a result of the policy or of background levels of growth, and what actions it intends to take to compensate for those increased emissions. When will we hear any shred of detail about what the Government intends to do as a result of the measures that it is taking to increase aviation emissions growth?

Derek Mackay

The Scottish Government has said and has reported that our adviser, the UK Committee on Climate Change, has said that the modelling shows that any increase in aviation emissions is manageable as part of the overall policy. We have acknowledged that it means that we have to work harder in other areas to do that. However, we have a track record of delivery in the area and we will continue with that while delivering on our commitments to boost sustainable economic growth.

The bill is about the fulfilment of devolution and the completion of new fiscal powers. It is about the structure of tax and, taking into account the committee’s recommendations, the exemptions and other matters. Further, in a constructive fashion, I have outlined a commitment to publish analysis and assessment.

Bruce Crawford is right that we want to show that Scotland is open for business. That fits with our economic strategy. It is about internationalisation and supporting business and tourism growth in Scotland in a responsible way.

That is why we will use our fiscal powers in a responsible way, as outlined over the course of the debate. The bill establishes the enabling power and provides for us to come back with an affirmative order to set the tax rates and bands, about which there will be further engagement. I invite the Parliament to pass the Air Departure Tax (Scotland) Bill.

Final vote on the Bill

After the final discussion of the Bill, MSPs vote on whether they think it should become law.

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Final vote transcript

The Presiding Officer (Ken Macintosh)

There are two questions to be put as a result of today’s business. The first question is on the motion to pass the Air Departure Tax (Scotland) Bill.

Following the introduction of new procedures relating to protected subject matters, I am required under rule 9.8.9 of standing orders to call a division on the motion to pass the bill at stage 3. That is because, although I have decided that a supermajority is not required, we are required to record the result. In that way, we can demonstrate in any circumstances the number of members who voted in favour of the bill. I hope that members followed that.

The question is, that motion S5M-06164, in the name of Derek Mackay, on the Air Departure Tax (Scotland) Bill, be agreed to. Members should cast their votes now.

For

Yousaf, Humza (Glasgow Pollok) (SNP)
Whittle, Brian (South Scotland) (Con)
White, Sandra (Glasgow Kelvin) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
Wells, Annie (Glasgow) (Con)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Torrance, David (Kirkcaldy) (SNP)
Tomkins, Adam (Glasgow) (Con)
Todd, Maree (Highlands and Islands) (SNP)
Swinney, John (Perthshire North) (SNP)
Sturgeon, Nicola (Glasgow Southside) (SNP)
Stewart, Kevin (Aberdeen Central) (SNP)
Stewart, David (Highlands and Islands) (Lab)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Smyth, Colin (South Scotland) (Lab)
Smith, Liz (Mid Scotland and Fife) (Con)
Smith, Elaine (Central Scotland) (Lab)
Simpson, Graham (Central Scotland) (Con)
Sarwar, Anas (Glasgow) (Lab)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Robison, Shona (Dundee City East) (SNP)
Neil, Alex (Airdrie and Shotts) (SNP)
Mundell, Oliver (Dumfriesshire) (Con)
Mountain, Edward (Highlands and Islands) (Con)
Mitchell, Margaret (Central Scotland) (Con)
McNeill, Pauline (Glasgow) (Lab)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
McDonald, Mark (Aberdeen Donside) (SNP)
McAlpine, Joan (South Scotland) (SNP)
Matheson, Michael (Falkirk West) (SNP)
Mason, Tom (North East Scotland) (Con)
Mason, John (Glasgow Shettleston) (SNP)
Martin, Gillian (Aberdeenshire East) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Macdonald, Lewis (North East Scotland) (Lab)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
MacDonald, Angus (Falkirk East) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Lochhead, Richard (Moray) (SNP)
Lindhurst, Gordon (Lothian) (Con)
Leonard, Richard (Central Scotland) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Lamont, Johann (Glasgow) (Lab)
Kidd, Bill (Glasgow Anniesland) (SNP)
Kerr, Liam (North East Scotland) (Con)
Kelly, James (Glasgow) (Lab)
Johnson, Daniel (Edinburgh Southern) (Lab)
Hyslop, Fiona (Linlithgow) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Haughey, Clare (Rutherglen) (SNP)
Harper, Emma (South Scotland) (SNP)
Hamilton, Rachael (Ettrick, Roxburgh and Berwickshire) (Con)
Halcro Johnston, Jamie (Highlands and Islands) (Con)
Greene, Jamie (West Scotland) (Con)
Gray, Iain (East Lothian) (Lab)
Grant, Rhoda (Highlands and Islands) (Lab)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
Golden, Maurice (West Scotland) (Con)
Gilruth, Jenny (Mid Fife and Glenrothes) (SNP)
Freeman, Jeane (Carrick, Cumnock and Doon Valley) (SNP)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
FitzPatrick, Joe (Dundee City West) (SNP)
Findlay, Neil (Lothian) (Lab)
Fabiani, Linda (East Kilbride) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Ewing, Annabelle (Cowdenbeath) (SNP)
Evans, Mairi (Angus North and Mearns) (SNP)
Dornan, James (Glasgow Cathcart) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dey, Graeme (Angus South) (SNP)
Denham, Ash (Edinburgh Eastern) (SNP)
Davidson, Ruth (Edinburgh Central) (Con)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Crawford, Bruce (Stirling) (SNP)
Corry, Maurice (West Scotland) (Con)
Constance, Angela (Almond Valley) (SNP)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Chapman, Peter (North East Scotland) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Carlaw, Jackson (Eastwood) (Con)
Campbell, Aileen (Clydesdale) (SNP)
Cameron, Donald (Highlands and Islands) (Con)
Burnett, Alexander (Aberdeenshire West) (Con)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Briggs, Miles (Lothian) (Con)
Bowman, Bill (North East Scotland) (Con)
Bibby, Neil (West Scotland) (Lab)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Beamish, Claudia (South Scotland) (Lab)
Ballantyne, Michelle (South Scotland) (Con)
Balfour, Jeremy (Lothian) (Con)
Baker, Claire (Mid Scotland and Fife) (Lab)
Baillie, Jackie (Dumbarton) (Lab)
Arthur, Tom (Renfrewshire South) (SNP)
Allan, Dr Alasdair (Na h-Eileanan an Iar) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Adam, George (Paisley) (SNP)

Against

Wightman, Andy (Lothian) (Green)
Scott, Tavish (Shetland Islands) (LD)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Rumbles, Mike (North East Scotland) (LD)
Rennie, Willie (North East Fife) (LD)
McArthur, Liam (Orkney Islands) (LD)
Johnstone, Alison (Lothian) (Green)
Harvie, Patrick (Glasgow) (Green)
Greer, Ross (West Scotland) (Green)
Finnie, John (Highlands and Islands) (Green)
Cole-Hamilton, Alex (Edinburgh Western) (LD)

The Presiding Officer

The result of the division is: For 108, Against 11, Abstentions 0.

Motion agreed to,

That the Parliament agrees that the Air Departure Tax (Scotland) Bill be passed.

The Presiding Officer

The question is, that motion S5M-05202, in the name of Derek Mackay, on a financial resolution for the Seat Belts on School Transport (Scotland) Bill, be agreed to.

Motion agreed to,

That the Parliament, for the purposes of any Act of the Scottish Parliament resulting from the Seat Belts on School Transport (Scotland) Bill, agrees to any expenditure of a kind referred to in Rule 9.12.3(b) of the Parliament’s Standing Orders arising in consequence of the Act.

Air Departure (Scotland) Bill as passed

This Bill was passed on 20 June 2017 and became an Act on 25 July 2017 
Find the Act on legislation.gov.uk

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