26 Nov 2014

An open letter to the leaders of the three main political parties

25-11-14

Dear Party Leaders

English airports make valuable contributions to the regions we serve, providing vital connectivity for local economies, supporting jobs, driving inward investment and promoting inbound tourism. We operate in an international market, competing for aircraft to serve routes with other airports across Europe. Air Passenger Duty (APD) puts us at a significant disadvantage versus non-UK airports.

Continued calls for devolution of APD to both Scotland and Wales risk distorting the UK-wide level playing field on which we currently operate, jeopardising up to £1.2 billion in GVA and over 2,500 jobs in the North East and South West of England alone over the next decade according to economic impact assessments carried out by air transport consultants, York Aviation.

In his comments from Downing Street on the morning after the Scottish Referendum, the Prime Minister stated his wish to see a balanced settlement “fair to people in Scotland and importantly to everyone in England, Wales and Northern Ireland as well”. Our research shows that if APD were devolved, this balanced settlement would not be achieved.

Advocates for devolving APD point to the economic benefits it could deliver, but neglect to mention that these would come largely at the expense of neighbouring regions in England. The combination of an intensely competitive airport sector and the porous land borders of the UK would result in a significant redistribution of traffic between airports, but with no net benefit to passengers or UK plc. The argument that tax competition will lead to reduced APD for all in the long term ignores the damage which would be inflicted on the regional economies of England in the interim.

The devolution of the long-haul rate of APD to Northern Ireland is sometimes cited as a precedent. However, the Northern Ireland example recognised the unique circumstances in play there, with a shared land border with the Republic of Ireland – where aviation tax was significantly lower than the UK and has now been abolished. That said, short-haul APD still applies to flights from Northern Ireland, and there are still 1.1 million passengers from Northern Ireland flying from Dublin Airport to avoid this.

Such a redistribution of passengers across borders in mainland Britain would result in reduced tax revenues to HM Treasury, with the loss having to be made good from other tax revenue sources. A substantial reduction in the block grant to the devolved administrations would also be required in order to comply with EU rules – a point recognised by Northern Ireland’s Finance Minister when considering further devolution of APD.

For these reasons, we urge all parties to recognise the potentially damaging impact on airports in England, and the regional economies they serve, by ruling out the devolution of APD to Scotland and Wales. APD is a tax that should be reformed via UK-wide abolition, reduction or via measures to encourage all regional airports to flourish, not by opening up market distortions between constituent parts of the UK.

Yours sincerely

David Laws
Chief Executive Officer
Newcastle International Airport

Paul Kehoe
Chief Executive Officer
Birmingham Airport

Robert Sinclair
Chief Executive Officer
Bristol Airport