Scottish Government will not cut Air Passenger Duty at start of next financial year, Derek Mackay confirms

The Scottish Government has confirmed it will not cut Air Passenger Duty at the start of the next financial year, with ministers saying the tax cut cannot take place because it would compromise devolved powers and damage the highlands economy.

With control over aviation tax being handed to the Scottish Parliament as part of the latest phase of devolution, the SNP had planned to replace Air Passenger Duty (APD) with an Air Departure Tax (ADT), set at half the current rate.

Ministers then planned to abolish the tax – which generates around £150m per year – “when circumstances allow”.

The Scottish Government has faced criticism from opposition parties, environmental groups and anti-poverty campaigners over the move, with analysis from the Scottish Greens suggesting that the richest 10 per cent of households would stand to gain four times more than the poorest 10 per cent from the cut.

But ministers then put plans on hold, saying they had been complicated by the need for exemptions afforded to the Highlands and Islands to be assessed by the European Commission, under EU State Aid rules.

Derek Mackay today confirmed the tax could be delayed, saying “it has become clear that aiming to introduce the tax at the beginning of the next fiscal year, April 2019, is not possible”.

In a written answer, the finance secretary said: “The Scottish Government has been clear that it cannot take on ADT until a solution has been found to the Highlands and Islands exemption – to do so would comprise the devolved powers and risk damage to the Highlands and Islands economy.

“The Scottish Government and UK Government have continued to work together, at both ministerial and official levels, to seek a solution to the Highlands and Islands exemption issue. Despite these efforts, and combined with the continuing uncertainty as to how Brexit might affect aviation, it has become clear that aiming to introduce the tax at the beginning of the next fiscal year, April 2019, is not possible.

“The Scottish Government has a longstanding commitment to reduce ADT by 50 per cent, and we are doing all we can to work with airlines and airports to help grow the direct routes which are important for our tourism sector and Scottish businesses. While we work towards a resolution to the Highlands and Islands exemption, we call on the UK Government to reduce APD rates to support connectivity and economic growth in Scotland and across the UK.”

The Scottish Greens welcomed the news, with co-convener Patrick Harvie saying: “The SNP must be counting their lucky stars that they’ve found a way of getting out of their commitment to an ill thought out, evidence-free policy. They know that if they were to carry out their proposal to slash aviation taxes, something which is designed only to keep airline lobbyists happy, they would undermine their own climate change objectives as well as their ability to achieve a positive result of the next budget negotiations.

“Greens will continue to oppose this pointless corporate tax break in principle, and advocate for sustainable transport policies which put people’s regular public transport first, and the interest of airline shareholders at the back of the queue.”