Air passenger duty cut 'will reduce train travel'

http://www.bbc.co.uk/news/uk-scotland-scotland-politics-38829019

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Virgin Trains has warned that about a third of Edinburgh to London rail journeys could be lost to air travel if Scotland abolishes air passenger duty.

The Scottish government wants to cut the tax by 50%, and later abolish it completely, as part of efforts to boost the economy.

Virgin Trains boss David Horne told MSPs that the move would see passengers switch from trains to planes.

But the head of Edinburgh Airport said the claim was not plausible.

The pair were speaking at a meeting of Holyrood's finance committee.

Air passenger duty (APD) is charged on all passenger flights from UK airports, with the rate of tax varying according to where the passenger is going, and the class of travel, starting at about £13 for short-haul flights to Europe.

Direct flights

The Scottish government wants to replace it with an Air Departure Tax from April of next year. The new tax would be 50% lower than the current level of APD by the end of the current parliament.

Ministers hope reducing the levy, and eventually abolishing it, will increase the number of direct flights to and from Scotland.

The proposals are opposed by environmental groups as well as Labour, the Scottish Greens and Liberal Democrats, but have been backed by the Conservatives and airlines.

In its written evidence to the committee, Virgin Trains said cutting or abolishing APD could have a detrimental effect on efforts to bring high-speed rail to Scotland.

And it said it could have a "significant impact on rail passenger numbers which have grown significantly over the last 20 years, particularly between Scotland's central belt and London".

It added: "Virgin Trains' own initial modelling suggests that as much as a third of the southbound Edinburgh-London rail market could be lost to air if APD were abolished on this route and the tax reduction was passed on in reduced fares.

"This would represent a negative modal shift, lead to a significant increase in carbon emissions, reduce funds available to government through franchise payments and undermine the long-term growth of the cross-border rail market and business case for developing a high-speed rail network to Scotland."

The firm operates on the East Coast and West Coast inter-city rail routes between Scotland and London.

David Horne, the managing director of Virgin's East Coast Route, later told the finance committee: "We know that the market is competitive, and that is why we are extremely concerned that a reduction in the tax paid by air passengers will result, on these domestic routes, in a switch from rail to air.

"That will fundamentally undermine the case for further investment in the rail routes between London and Scotland".

'Most expensive'

But he was challenged by Edinburgh Airport chief executive Gordon Dewar, who said he had "never seen elasticities of anything of that scale in terms of impact".

He added: "So I don't recognise where the numbers come from, or how that's plausible."

Mr Dewar told MSPs that Scotland currently remains a "complete outlier" on the tax compared with other European countries.

He said: "With the exception of Norway, which has only just recently announced an increase in this tax, every other country has gone in the opposite direction.

"We'll still be significantly more expensive than just about every other country.

"In fact, we'll still be the most expensive (in Europe) even if we halved it across the board."

Research previously published by Edinburgh Airport, which it said had been verified by BiGGAR Economics, found a 50% cut to APD in one move in April 2016 would have meant an additional 18 million passengers using Scotland's airports by 2021.

It said: "This will create nearly 10,000 new jobs in Scotland, add more than £300m Gross Value Added per year to the Scottish economy, and generate a range of tax revenues that will comfortably exceed the cost of the cut."

Speaking after the committee meeting, the Scottish Greens said they did not believe Holyrood would support the introduction of the new Air Departure Tax.

The party's co-convenor, Patrick Harvie, said the policy lacked any "robust analysis" around the potential economic and environmental impact,