2. Element 1: Policy for an overall 50% reduction in ADT
2.1. The first part of the consultation sought views on the policy plan to reduce the overall burden of ADT by 50% by the end of the current session of the Scottish Parliament. This section considers respondents’ views on the four consultation questions set out in the consultation document in relation to the policy plan. 117 of the 121 submissions (97%) addressed this part of the consultation.
Views on the policy plan
Q1: Do you support the Scottish Government’s policy plan to reduce the overall burden of ADT by 50% by the end of the current session of the Scottish Parliament? Please answer ‘Yes’ or ‘No’.
Q2: Please explain your answer to Q1.
2.2. The first two consultation questions asked whether respondents supported the Scottish Government’s policy plan to reduce the overall burden of ADT by 50%. This included a ‘Yes/No’ question, and a question inviting respondents to explain their support for or opposition to the policy plan. Table 2.1 over the page summarises responses to the ‘Yes/No’ question.
2.3. The majority of respondents indicated that they did not support the policy plan; 85 of the 121 submissions indicated this (70%). This balance of views varied across responses from group and individual respondents. The majority of group respondents (23 of 38), including all airline and airport respondents, supported the policy plan, while a large majority of individuals were opposed (75 of 82). Campaign responses were opposed to the policy plan.
Table 2.1: Do you support the Scottish Government’s policy plan to reduce the overall burden of ADT by 50% by the end of the current session of the Scottish Parliament?
|Yes||No||No response / Unclear||Total|
|Airlines and airline representatives||13||13|
|Airports and airport representatives||5||5|
|Other transport and travel organisations||3||3||6|
|Professional tax and accountancy organisations||1||1||2|
|Group respondents (Total)||23||9||6||38|
|Percentage of all respondents||25%||70%||5%||100%|
|Percentage of those answering question||26%||74%||-||100%|
2.4. A total of 116 submissions included written comment at Question 2, including a mix of those who supported the policy plan (29 of those supporting the policy plan included written comment  ), those opposed (84 of 85 including written responses), and a small number who did not offer a clear view on the policy plan.
Comments from those in favour of the policy plan
2.5. Those who support the policy plan raised a range of issues, but comments were focused primarily on the potential for the reduction in ADT to improve Scotland’s connectivity and wider economic growth. This was a particularly common theme amongst airline and airport respondents, but was also referenced by a small number of other transport, environmental, other organisation and individual respondents.
2.6. Several respondents suggested that Scotland has poor air connectivity relative to other parts of the UK and Europe, including specific reference to evidence benchmarking Scotland’s connectivity against European comparators. A small number of respondents also suggested that Scotland’s connectivity is particularly poor for long-haul and direct short-haul travel, including reference to specific studies.
2.7. Reference to the importance of improving Scotland’s connectivity included a substantial number of respondents (including airline, airport, other transport, and individual respondents) stating that UK APD is significantly higher than similar taxes levied by most other countries. Indeed, several of these respondents noted that relatively few countries have a comparable tax, although another organisation respondent noted that some countries have other types of taxes on the airline sector which the UK does not, or which are considerably higher than the equivalent taxes levied on the UK airline sector. A substantial number of airline, airport and other transport respondents suggested that a reduction in tax from current APD rates would help Scotland to be more competitive with countries levying lower taxes, in terms of attracting passengers and airlines, and in the development of new routes.
“Scotland’s airports are in competition with not only UK airports, but those across Europe, most of which have no APD and are therefore more competitive. A 50% reduction, will improve the competitiveness of Scotland with other UK airports, but will still result higher taxes than in most European countries.” (Airline/airline representative)
2.8. This included a suggestion that a reduction in ADT would place Scotland at an advantage over the rest of the UK, although an airport representative respondent noted that this could have a detrimental impact on airports elsewhere in the UK and wished to see a reduction in ADT/ APD across the whole of the UK.
2.9. Most of those in favour of the policy plan suggested that air connectivity has an important role for Scotland’s tourism industry, and in driving economic growth more widely. In addition to stimulating inbound tourism, these respondents saw potential for the 50% reduction in ADT to stimulate job creation, enable businesses to access a larger customer base, and support greater competition and innovation. This included reference to Scotland’s geographical location on “the periphery” of Europe, and the importance of air travel in providing access to European destinations and markets.
2.10. Most of those commenting on the potential for a reduction in ADT to stimulate economic growth, referred to the extent to which they felt that demand for air travel might be sensitive to price changes, and the potential for a reduction in ADT to increase passenger numbers. This was seen as vital in supporting development of new routes. Most of these respondents (particularly airlines, airports and other transport organisations) also referred to a range of estimates of the wider economic impact of a 50% reduction in ADT for Scotland, including suggestions that the reduction and eventual abolition of the tax could be self-funding. This included respondents citing a range of estimates of the potential increase in passenger numbers associated with a 50% reduction in ADT, and what were described as positive outcomes achieved by countries following the reduction or abolition of similar taxes. The extent to which improved air connectivity can stimulate wider economic growth was seen as particularly important in the context of the UK’s anticipated exit from the European Union.
“Air passenger demand is very sensitive to ticket pricing. A 50% reduction in the Scottish ADT rates would undoubtedly boost economic output, employment, and investment, as a reduction in the overall tax burden would improve Scotland’s air connectivity with the rest of Europe and the world.” (Airline/airline representative)
2.11. Respondents also referred to more specific benefits that they thought might follow from the policy plan. This included support for existing regional and other routes which operate on “thin margins”, and which are particularly important for communities where surface travel options are not practical. This included an additional suggestion made by some respondents of reducing ADT on flights to the Highlands and Islands (in addition to the existing exemption on flights from the region) as a means of stimulating tourism and economic growth. However, it was also noted that a reduction in ADT could reduce the relative benefit afforded by the current exemption for flights from the region.
2.12. A small number of respondents also referred to a reported fall in air passenger numbers at Aberdeen airport over recent years, and suggested that there is potential for the policy plan to improve air connectivity for the Grampian and north-east regions, and in so doing, enable economic growth. Potential benefits for passengers were also noted, including improved travel options, shorter travel times, and lower fares.
Comments from those objecting to the policy plan
2.13. Those who objected to the proposed reduction in ADT cited a range of factors in support of this view. Most of these respondents highlighted the negative environmental impact, and in particular the likely increase in carbon emissions associated with an anticipated increase in air travel. This included responses from other transport, professional tax/accountancy, environmental and other organisations, and individuals. Several of these respondents suggested that the likelihood of increased emissions was inconsistent with the Scottish Government’s stated ambitions to tackle climate change, and current emissions targets. A small number of respondents specifically suggested that the Scottish Government should use ADT powers to support a reduction in aviation emissions.
“Climate change is one of the greatest long-term threats to people and wildlife and proposals to reduce ADT are inconsistent with Scottish climate change ambition. Members of [our organisation] are very concerned by Scottish Government’s plans to deliver tax cuts in support of aviation growth and increased emissions given the impact this will have on climate change, the development of Scotland’s low carbon economy, and the natural environment.” (Environmental organisation)
2.14. Those highlighting the environmental impact of the policy plan included some making detailed reference to the basis of estimates for the likely scale of impact - primarily the estimates set out in the SEA Environmental Report. It was noted that these estimates show a considerably larger increase in emissions than was indicated at the time of the 2016 APD consultation, but a small number of responses raised concerns that these estimates may still underestimate the environmental impact of the policy plan. These respondents referred specifically to the Report having not taken account of the potential for a reduction in ADT to cause a modal shift from rail to air travel, of the additional climate impact of carbon emissions at altitude, nor of the “uplift factor” to account for real world performance (for example additional emissions linked to take-off and circling, and potential differences between theoretical and ‘real world’ vehicle performance). It was also noted that an increase in air travel would also contribute to an increase in emissions from (road or rail) travel to and from airports.
“As the SEA Environmental Report acknowledges, a 50% reduction in ADT will result in an estimated increase in carbon emissions by between 87,000 - 101,000 tonnes CO2e in the first year alone. This will rise to as much as 105,000 tonnes CO2e by 2021. This figure is likely still far too low.” (Other transport and travel organisation)
2.15. Several respondents also referred to the more localised negative environmental impacts associated with an increase in air travel. This included reference to the recent growth in concerns regarding the health impacts of poor air quality, and the potential increase in noise around airports - on which the Scottish Government has commissioned research which will be published shortly. 
2.16. Those objecting to the policy plan also raised other concerns regarding the likely impact of the reduction in ADT:
- Most of those objecting to the policy plan described the 50% reduction as a “regressive” proposal which will primarily benefit businesses and higher income households. This included reference to evidence that those in the highest income bands account for a large majority of flights to and from Scotland, and a suggestion that those on lower incomes could benefit more from investment in other modes such as cycling and public transport provision (than from a reduction in ADT). It was also suggested that, as a very small proportion of the total cost of a family holiday (i.e. including accommodation etc.), a reduction in ADT was unlikely to enable more lower income families to access air travel.
- A substantial number of respondents referred to the risk of reduced government revenues, including specific estimates of the potential loss in revenue as a result of the reduction in ADT. This included a suggestion that the current tax has been shown to be an efficient means of raising government revenue, and some concern that the consultation document does not include detail on how any shortfall in revenues will be met. A small number of respondents specifically indicated a preference to retain taxation income (i.e. hypothecate revenues) to support infrastructure, other transport services, and public services.
- The potential for the reduction in ADT to have a negative impact on other, lower carbon transport modes was also mentioned by a substantial number of respondents. This included a particular focus on the potential impact on rail travel between central Scotland and the rest of the UK; respondents noted that rail travel has increased its share of this route in recent years, and raised concerns that a reversal in this trend would contribute to an increase in carbon emissions. A small number of respondents cited estimates of the potential impact on rail travel, and some suggested that more work is required to assess this impact.
- A substantial number of respondents questioned the extent to which a reduction in ADT would deliver the benefits anticipated by the policy plan. This included suggestions the proposals were more likely to benefit outbound air travel rather than inbound tourism, the risk of subsequent changes to UK APD undermining the benefits to Scotland, and scepticism around the extent to which demand for air travel was sensitive to relatively small price changes. On this latter point, a small number of individual respondents also noted that airlines would not be under an obligation to reduce ticket prices in line with the reduction in ADT. It was also suggested that any benefits that accrued for example, in terms of increased demand for air travel and tourism, could be at the cost of a negative impact on other transport modes and/or parts of the economy.
A small number of respondents referred to recent growth in air travel and questioned whether further action was required to stimulate demand, and perceived “a lack of independent evidence” on the economic benefits of a reduction in ADT. 
“[We] consider that arguments suggesting that the effect of a 50% reduction in ADT would be to boost tourism, create jobs and increase growth in Scotland are not well established.” (Other organisation)
Achieving the overall 50% reductionQ3: If you answered ‘Yes’ to question 1, please provide any suggestions you may have on the most effective way, in your view, in which a 50% reduction in the overall ADT burden should be applied across tax bands and tax rate amounts in order to achieve the Scottish Government’s overall connectivity and sustainable growth objectives.
2.17. Just over half of submissions included comment on potential approaches to deliver the overall 50% reduction in ADT. Those providing comment were split between respondents who support the overall policy plan (31 of those providing comment), and those opposed (29 of those providing comment).
2.18. These respondents were varied in their preferred approach and included those who support a “flat” 50% reduction across current tax bands and rates, those who support a reduction focused primarily on either short-haul or long-haul flights, and suggestions for a range of other approaches.
2.19. Several respondents provided comment in support of a “flat” 50% reduction across current tax bands and rates. This included airline, airport, other transport, and individual respondents. Support for this option was primarily related to this being the simplest means of delivering the overall 50% reduction, although a small number of respondents also suggested that this approach would maximise the impact of the change.
2.20. Several respondents highlighted the benefits of retaining consistency with
the structure of UK APD, for example, in minimising the risk of market distortion, avoiding confusion regarding tax rates applicable to specific products, and minimising risks of double taxation (for example by ensuring consistent connected flight rules such that ADT is not charged more than once per journey where the flights are connected). It was also noted that retaining the existing tax structure would avoid potentially significant additional costs to adapt airlines’ systems. This was seen as a particular issue in the context of the Scottish Government’s intention to abolish the
duty when resources permit.
“The Scottish Government should avoid complicating what is an otherwise simple and efficient tax regime. Airlines do not want to have to contend with two separate tax regimes within the UK and from our discussions, we believe airlines will respond if ADT is simple. With this in mind, we believe the Scottish Government should replicate [the structure of] the existing UK-wide APD regime to ensure ease of compliance and administration.” (Airport/airport representative)
2.21. In terms of targeting a reduction in ADT on specific tax bands, views were divided between several respondents who preferred targeting of short-haul flights, and a similar number preferring a targeting of long-haul flights.
2.22. A reduction in ADT on short-haul flights was suggested by several respondents including airline, airport and individual respondents. This was linked to suggestions that this approach would deliver the greatest benefits to passengers and economic growth. These respondents noted that short-haul routes account for the large majority of air travel to and from Scotland, and play a particularly important role in providing access to hub airports. It was also suggested that demand for these routes is more sensitive to pricing, including reference to evidence that a reduction in ADT for short haul flights would have a more immediate impact on passenger numbers as a result of the price sensitivity of this sector.
“The biggest impact of the tax is felt by those flights travelling short distances and we think this is where the Scottish Government should be directing its focus in the first instance.” (Airport/airport representative)
2.23. A small number of airline respondents also suggested that short-haul flights typically operate on tight margins, such that a reduction in ADT could have a greater impact in enabling development of new short-haul routes. It was also noted that ADT is particularly significant for domestic short-haul flights as they are charged on each leg departing from an airport in Scotland.
2.24. A small number of respondents also referred to potential for a reduction in ADT for short-haul flights to support growth in regional economies, and suggested that there is scope to prompt growth in passenger numbers at “underused” regional airports.
2.25. Several respondents preferred a targeted reduction in ADT for long-haul flights – including airline, other transport, environmental organisation, other organisation and individual respondents. This included suggestions from several airlines that current rates for these journeys are disproportionately high, having increased significantly since the introduction of APD. These respondents wished to see a targeted reduction in the long-haul rate to restore the original differential between long-haul and short-haul rates (the long-haul rate was twice the short-haul rate when first introduced).
2.26. Several airline respondents also suggested that supporting growth in long-haul air travel would deliver significant benefits in improving connectivity with new markets outside the European Economic Area, particularly in the context of the UK leaving the European Union. This included suggestions that the current tax rate for long-haul flights is a significant consideration in the planning and launching of new routes, and that a targeted reduction could have a significant impact in delivering new routes. A small number of respondents also cited evidence of higher spending amongst long-haul passengers, such that a growth in long-haul inbound travel could deliver wider economic benefits. It was also suggested that a reduction in the long-haul rate (leaving the short-haul rate unchanged) would avoid negative impacts on the lower carbon surface travel options that compete with short-haul air travel.
“The long-haul rate is now 5 to 6 times higher than the short-haul rate...This disproportionate tax burden on long-haul travellers is both harmful to the economy and contrary to sound economic policy…Long-haul visitors typically spend twice as much as short-haul travellers when visiting the UK, making them more valuable to the country’s economy. In addition, long-haul destinations include many rapidly growing and emerging markets with which the UK is looking to increase its trade.” (Airline/airline representative)
2.27. Respondents also suggested a range of other approaches to deliver the overall 50% reduction in ADT:
- A targeted reduction for reduced rate passengers (those traveling in the lowest class available on the aircraft). These passengers were described as bearing the greatest relative tax burden under the current system, and as being most sensitive to price changes.
- A targeted reduction to support Scotland’s regional airports, and regional economies more widely. This included suggestions for a 100% reduction in ADT for intra-Scotland air travel to incentivise travel between regional airports and Edinburgh/Glasgow; a targeted reduction in ADT for airports with fewer than 3 million passengers per annum; and a targeted reduction for north east region airports to “create a level playing field across the north of Scotland” (i.e. in the context of the current APD exemption for flights from the Highlands & Islands region). These approaches were seen as offering benefits in potentially reducing congestion (and associated environmental impacts) at Scotland’s largest airports by diverting demand rather than reducing it. 
- An “other” organisation respondent noted that the policy plan does not address the potential for return flights within the UK to attract a higher level of tax than journeys of a similar distance that commence or terminate out with the UK. 
- An approach that more explicitly links ADT to carbon emissions and environmental impact. This included suggestions that the Scottish Government considers linking ADT to the carbon impact of flights, or moving to a per-plane duty.
2.28. A small number of respondents included comments on other aspects of the introduction of the policy plan. These included comments indicating a preference for the 50% reduction to be introduced immediately to maximise impact, highlighting the value of the tax being abolished when possible; the importance of providing the industry with sufficient advance notice of the approach to delivering the overall 50% reduction; and a need to monitor the impact of the preferred approach.
2.29. Concerns were also raised by a small number of respondents that a general 50% reduction would reduce the comparative benefit of the existing Highlands & Islands exemption from APD. These respondents wished to see further interventions to support the region, recognising the importance of air travel to communities and businesses.
Other comments on the policy plan
2.30. The consultation invited respondents to provide any other comments on the policy plan; a little more than half of respondents did so. This included a mix of those who supported the policy plan (15 of those providing comment here), those opposed (53 providing comment), and a small number who did not offer a clear view on the policy plan.
2.31. These included respondents highlighting the importance of a carefully managed implementation of the 50% reduction, and several respondents calling for the full 50% reduction to be implemented immediately rather than staged over the course of the current parliamentary session. Some also had concerns about possible future changes, including potential for passengers to incur additional tax on connecting flights if differences emerge between ADT and UK APD. 
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