Devolve aviation tax, insists First Minister
First Minister Carwyn Jones has again called on the UK Government to devolve Air Passenger Duty (APD) to Wales as new research published today shows that such a move would only have a negligible impact on Bristol Airport and the wider economy of the south west of England.
The tax across the three bands of domestic, short-haul and long-haul flights currently generates around £10m in taxation from Cardiff-originating flights. Some £1m of that comes from long haul.
Next spring the first scheduled long-haul flights will start from the airport with a daily service to Doha in the Middle East from Qatar Airways.
A devolution of the tax, with the aim of abolishing the £75 rate on all long-haul flights and seeking a significant reduction on the other bands, would make the airport even more attractive to airlines by helping to improve yields, in a sector where margins are very tight.
It would also make the cost of flights for passengers at Cardiff Airport, currently standing at around £1.3 million a year, cheaper.
Chief executive of Cardiff Airport Debra Barber said a devolving of APD, for the purpose of abolition or reduction, would help increase passenger numbers by 500,000 a year. And she said the cost to the Welsh Treasury would be more than offset by new jobs and investment created from attracting more airlines and routes at the airport in Rhoose, which is owned by the Welsh Government.
Mr Jones made the case again, the latest in a long series of appeals for devolving APD to Wales, in talks with Prime Minister Theresa May earlier this week.
He said that Wales was being “discriminated against” and its economy being undermined compared to Northern Ireland and Scotland, where the UK Government has allowed devolution of the aviation tax.
The sticking point is the perceived negative impact on Cardiff Airport’s nearest rival in Bristol Airport, and as a result on the wider economy of the south west of England.
A 2015 report commissioned by Bristol Airport, and carried out by York Aviation, said APD being devolved to Wales, for the purpose of it being scrapped completely or significantly reduced, could cost the region 1,500 jobs and more than £800m in GVA.
However, the new research commissioned by the Welsh Government, which was independently carried out by aviation consultancy Northpoint – and then separately challenged and validated by Arup – said that from its research “significant questions must be raised about the accuracy of projections presented by York Aviation”. The report added: “It appears that the basis of the figures are a series of worst-case assumptions, which have been compounded together to generate numbers of a completely different order to what we have calculated.
“For example, they have assumed large numbers of existing services will be lost, including long-haul services that Bristol hopes to attract but don’t yet exist, and use very high elasticities in their calculations.”
It adds: “This report finds that, individually and cumulatively, these assumptions are not credible and in broad terms the actual figures are more likely to be in the order of 100 jobs and £2.5m a year in GVA in terms of domestic and short-haul routes and around 500 jobs and £3m GVA per annum associated with long-haul services.
“Moreover, it should be noted that this does not represent a net loss to UK Plc, but rather a transfer of a small amount of economic activity from south Wales, much of which has assisted area status.”
The First Minister said despite the tax being devolved to Scotland and Northern Ireland it was being “denied to Wales”.
Mr Jones said of the UK Government’s current refusal to devolve the tax: “This is discriminatory and undermines the economic position of Wales.”
On the latest research from Northpoint, he said: “It does provide strong evidence to back our case for the devolution of APD in Wales and it cannot be dismissed or put on a shelf to gather dust like the Hendry Review and the decision on the Swansea Bay tidal lagoon scheme.”