How axing APD can grow GDP

How axing APD can grow GDP

by Steve Daley

Scotland’s economy is strong with certain sectors such as the construction sector outperforming the rest of the UK. However Scotland’s economy recently has been slowing for the last two consecutive quarters. Tourism is a huge part of Scotland’s economy with an expenditure of nearly of nearly £5 billion and with 40 percent of that coming from oversea students

It has been noted numerous times how British Air Passenger Duty (APD) is the most expensive air passenger tax in the world with only five other European countries using this regressive tax.  With APD being devolved to the Scottish Parliament, it is no surprise that the biggest stakeholders with an interest in its reduction or abolition are Scotland’s main airports, airlines, the tourist industry in Scotland and of course passengers who pay between £13 to £438 in APD.

A policy proposal to help counter Scotland’s recent slow growth and boost Scotland’s ever growing tourist and service sector is halving APD. An in-depth report conducted for Edinburgh Airport by York Aviation concluded the benefits of merely halving this tax. If the tax was to be halved it would create up to 4,000 more jobs by 2020. It would also add £200 million of economic benefits every year to Scotland which by 2020 would add £1 billion extra to the Scottish economy.

The policy is widely back by a wide range of different actors from the Scottish Chambers of Commerce saying it is vital for Scotland to attract business from round the globe and to make Scotland an economic powerhouse. VisitScotland has long been critical of the impact APD has on the Scottish tourism sector with Chairman Mike Cantle saying that “APD is and has been a major deterrent for potential visitors”.

Airlines are also unsurprisingly supportive of this measure with Ryanair saying if the tax was to be completely abolished in Scotland then it would lead to Ryanair alone increasing at least 1 million more passengers a year and double its passengers in Scotland in the next 3-4 years. Ireland abolished its APD in 2014: the benefits have more than offset the initial loss in revenue by adding 21 new routes alone in the year since the tax was abolished and it has stimulated the wider Irish economy. Glasgow and Edinburgh airports without the tax being reduced have already seen increases in their passengers but if the tax was halved it could add further growth.

Critics have argued that reducing or axing APD would mean Scotland would increase its C02 emissions which may be so, but what those critics fail to take into account is that by having more direct flights to Scotland it means less Scots using two flights to get to the same destination. Other “disadvantages” include competition with airports such as Newcastle losing customers to Scotland but PM David Cameron promised if Scotland reduced APD he would do the same for the North East. This could benefit both Scotland and North East England, with both acting to counter the economic hegemony of London and the South East.

All in all halving APD has the makings of a great policy as it leads to a win-win for Scotland, with cheaper and more direct flights for Scots and more jobs and growth for Scotland’s economy.

Steve Daley is an honours student in politics at Stirling University and a member of the SNP Youth National Executive Committee.