Outrage as Westminster rejects APD devolution
THE UK Government has rejected the latest call for air passenger duty (APD) to be devolved to Wales.
The Welsh Government has consistently called for the aviation tax to be devolved, as is the case in Northern Ireland and Scotland.
It has previously stated that if devolved, it would abolish the rate on long-haul flights as a means of attracting more long-haul scheduled routes out of Cardiff Airport.
The latest call came in a report from Westminster’s Welsh Affairs Committee, made up of cross-party MPs.
Its chairman David Davies, Tory MP for Monmouth, also recently wrote to Chancellor Sajid Javid, calling for APD to be devolved as a post-Brexit measure to help support the Welsh economy.
In response to the committee, Simon Clarke, Exchequer Secretary of the Treasury, has ruled out devolving the tax, arguing that it could have a detrimental impact on Cardiff Airport’s closest rival, Bristol Airport, and that devolution was not a symmetrical arrangement – with, for example, Wales having more total tax powers than Northern Ireland.
The Welsh Government responded by describing the position of the UK Government as “totally unreasonable”, with its Economy and Transport Minister Ken Skates saying it constrained its ability to promote Wales to overseas markets at a time when it was needed most.
A report from aviation consultancy Northpoint two years ago concluded that any abolition of long-haul APD on flights out of Cardiff Airport would have a negligible impact on Bristol.
The tax, across the three bands of domestic, short-haul and long-haul flights, currently generates around £10m annually from Cardiff-originating flights.
On a visit to Cardiff earlier this month, Andrea Leadsom, Secretary of State for Business, Energy and Industrial Strategy, said devolution of APD was still a “live issue” after the matter had been raised by business leaders in a round-table discussion.
However, it is understood that Secretary of State for Wales Alun Cairns has advised Cardiff Airport, working with other airports, to lobby for a new tiered APD regime in which the highest rate could apply to London airports, with lower rates for smaller airports.
In a letter to Mr Davies in his capacity as select committee chair, Mr Clarke says: “In the case of APD devolution, the UK Government remains concerned about the competitive impact of introducing tax competition
within a single aviation market.
“We consider Cardiff and Bristol airports to serve the same market. This is consistent with state aid guidelines which consider airports to operate in the same market if they are within 63 miles of each other. Cardiff and Bristol are within 60 miles of each other by road.
He added: “The devolution settlements for the nations of the UK have always been asymmetrical, taking into account the specific circumstances for each nation. It is worth highlighting that, for example, the Welsh Assembly has a number of tax powers, including Stamp Duty Land Tax, that the Northern Ireland Assembly does not.
“In the case of APD, the aviation markets in Northern Ireland and Scotland are fundamentally different to that in Wales, and as such warrant a different approach t devolution.
“In Scotland, the UK Government does not consider these airports to be in a single aviation market with English airports, and as such the competitive impact of any future change in APD in Scotland will have a lesser impact on airports in England. Furthermore, the distance between Scottish airports and those in the north of England exceeds 63 miles by road.
“The UK Government has carefully considered the evidence gathered by the Welsh Affairs Committee and your final report, alongside reports commissioned by the Welsh Government and Bristol Airport.
“Our primary concern is to ensure the best outcome for businesses and consumers on both sides of the border. We do not believe introducing tax competition in this market will be beneficial overall and therefore have no current plans to change APD policy.”
Mr Skates said: “This unreasonable decision constrains our ability to promote Wales to overseas markets, at a time when it’s needed most.
“The UK Government needs to wake up to the clear case to devolve this power for the benefit of Wales and the UK as a whole.
“Devolving APD to Wales is consistent with the UK Government’s approach to devolving taxes that overlap with other devolved responsibilities. Devolution of APD will also be a useful potential lever in delivering other devolved responsibilities relating to regional economic development and tourism.”
Finance Minister Rebecca Evans said: “The UK Government is fast running out of reasons not to put Wales on an equal footing with Scotland and Northern Ireland in terms of APD. With such broad cross-party support for this measure, it is clear this chaotic UK Government is incapable of making sensible decisions.
“The UK Government’s position defies logic. On the one hand, it argues that devolving APD to Wales would give Cardiff Airport an unfair advantage over other regional UK airports because it believes we would cut rates – while on the other hand, the Secretary of State for Wales has said sion.barry@walesonline.co.uk he is concerned that Wales would increase rates.
“But devolving APD would mean Wales would have the right to design a system that works for Wales – not the Westminster Government. This decision does nothing to prove the Prime Minister’s promise to unleash the productive power of the whole of the UK.
“We know there is unanimous support from across the aviation, tourism and business sectors in Wales for APD to be devolved and we will continue to press the UK Government to change its position.”
Cardiff Airport chief executive Deb Bowen Rees said: “Cardiff Airport has always been in favour of the UK-wide abolition of Air Passenger Duty and in support of the ‘A Fair Tax on Flying’ campaign. It is a punitive tax on travel and a cost that hinders the ability for the United Kingdom to remain competitive in what is a very competitive, fast-paced global industry. Not to mention, the UK APD rate is one of the highest in the world...
“It is difficult to understand the timing and the reasoning behind today’s decision. This would have been a real post-Brexit boost to the region, enhancing international connectivity and promoting competitiveness within the industry. Furthermore, it would lead to environmental benefits, enabling customers to fly locally, and in turn drive significant economic benefit to Wales and the South-West of England.”