Following an inquiry examining the advantages and disadvantages of devolution of Air Passenger Duty (APD) – a tax levied by the UK Government on passenger flights from UK airports – the Welsh Affairs Committee strongly recommends that APD be devolved to the Welsh Government by 2021. The Committee also calls on the Welsh Government to carry out a full environmental impact assessment before decisions are made on any reduction of abolition of the tax.
Commenting on the report, Chair of the Committee David T.C. Davies MP said:
“I’m not often persuaded by arguments for devolution, but the evidence my Committee heard about the benefits of devolving APD was absolutely convincing. The UK Government needs to recognise these opportunities for Wales and demonstrate its commitment to equity within the devolution system by setting out a plan for devolving APD to Wales by 2021.”
Air Passenger Duty
Air Passenger Duty (APD) is a tax levied by the Government on passenger flights from UK airports, which came into effect in 1994. It is currently set and managed by the UK Government for England and Wales, but it has been devolved to Scotland and partially devolved to Northern Ireland.
In September 2016 the UK Government confirmed that following consideration, it did not intend to devolve APD to Wales, despite calls from the Welsh Government for it to do so.
The Welsh Affairs Committee’s report weighs up the arguments for and against devolution of Air Passenger Duty, and draws on evidence taken from tax experts, airlines, airports, the Chairs of the Silk and Holtham Commissions and UK and Welsh government ministers.
The Committee recommends that APD be devolved to the Welsh Government by 2021. However, the Committee notes environmental concerns about reductions in APD which could incentivise increased air travel. Therefore, the Committee calls on the Welsh Government to carefully consider the environmental implications of any reduction or abolition of APD.
Arguments for devolving APD
The Committee heard a range of arguments for devolving APD, most notably the fact that two respected independent commissions – the Holtham and Silk Commissions – have previously made recommendations to devolve APD to Wales.
The Committee argues that if the UK Government has been prepared to devolve the other taxes recommended by the Silk Commission, including the partial devolution of income tax which involves a significant amount of money, it should be able to trust the Welsh Government with APD.
The report also outlines the arguments that devolution of APD could unlock the potential of Cardiff airport, boost the Welsh brand and promote economic growth.
The Committee suggests that the willingness of the UK Government to devolve APD partially to Northern Ireland and fully to Scotland, raises a question of equity in the devolution process and therefore urges APD to be devolved to Wales.
The Chair of the Committee commented:
"The Government has been determined not to devolve APD to Wales, even though it has been happy to do so for Scotland and partially for Northern Ireland. My Committee found the arguments for devolution of APD to Wales compelling, and we urge the UK Government to hand over APD to the Welsh Government by 2021. APD amounts to only a tiny fraction of the taxes the UK has already devolved to Wales, and a continued refusal to devolve it points to a lack of parity within the UK’s devolution framework.”
Arguments against devolving APD
The report also considers the balance of evidence against devolving APD, citing environmental and commercial concerns. Several nearby English airports, such as Bristol Airport, are concerned that devolution of APD could have a detrimental effect on their business if the Welsh Government chooses to lower or abolish APD.
The Committee concludes that given that Bristol is already a strong performer - with far more passengers than Cardiff Airport – it is unlikely that its successful business would suffer significant and lasting damage, even if APD were abolished entirely.
The report notes significant concern that lowering or scrapping APD could incentivise increased air travel, bringing with it higher carbon emissions. The Scottish Government recently abandoned plans to abolish reduce or abolish APD after declaring a “climate emergency”.
The Committee calls on the Welsh Government to carefully consider the environmental impact before deciding what changes it might make to the duty.