For businesses struggling to stay competitive in the far North of Scotland, new powers over the air departure tax promised to level the playing field.
Although Wick and Inverness Airports have benefitted since 2001 from an exemption from extra taxes due to their poor market connectivity, the introduction under the Scotland Act 2016 of a Holyrood-controlled Air Departure Tax, promised to lower the price of the onward flights from Central Belt airports used by most Northern businesses.
For the first time, it seemed, there was a realistic prospect of the geographical penalty paid by remote Scottish businesses being reduced to manageable levels.
Imagine their dismay therefore when the finance minister Derek Mackay announced in the Scottish Parliament on 4 Oct that “after careful consideration” the Scottish Government felt that the 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.”
Translation: Highlands and Islands airports’ current exemption from the existing UK Air Passenger Duty (APD) is a spanner in the works of the proposed new Scottish Air Departure Tax (ADT).
The Scottish Government’s repeated pledge to reduce it by 50% by the end of the Parliament is therefore looking doubtful, pending Brussels approval of a tax power, wrested from Westminster in the Smith Commission process, can be exercised in line with Scotland’s particular economic needs.
Leaving aside the political ironies contained in the timing of this unforeseen Brussels-related snag, the debate about ADT underlines the depressing fragility of business influence in Scottish political discourse.
Debating and – it was thought – establishing, the details and benefits of reducing air taxes has already burned up countless hours of precious business and civil service time, through consultations and through the APD Stakeholder Forum which met between Aug 2015 and May 2016. The aim of “improving connectivity to Scottish airports, generating new direct routes and increasing inbound tourism” seemed central to Scottish Government’s strategy to use its new powers to promote growth inclusive of all parts of the nation.
Now Mr Mackay refers ominously to “a range of views on whether the tax should be reduced”, including the views of those who think flying per se should be discouraged on environmental grounds or, absurdly, that it is a frivolous luxury indulged in by broad-shouldered “frequent fliers” rather than a necessary chore.
Trudy Morris, chief executive of Caithness Chamber of Commerce has written to Mr Mackay voicing her “extreme disappointment” that, after years of discussion around ADT, “zero progress” had been made on the matter of the Highland and Islands exemption now being held up as a barrier to implementation of the Scotland wide-reduction.
Worse, she suggests, this playing of the State Aid card threatens the existing northern airports exemption, should Brussels find that it does, after all, contravene its rules.
How this issue is resolved will speak volumes about how seriously business input is taken in the exercise of the Scottish Parliament’s new powers.
First published The Herald October 2017
