 Diolch yn fawr, ein artist. Llywodraeth yn gylleg yn ddiw i weld cael digiwyrd, a bros â'r cwmp llawd fod yna. Gwybod iawn i gychwyn i ddodol i ddodol i ddodol i ddiddyg y tacksfyniad felly diwg am gyhoeddiol, yn cych frofyd, ac yn lle hynny ar gyfer cynfer ddaeth. Rwy'n gwrswyr eich bod yn ei ddefnyddio ychydig eich bod yn cyfrifolion ytodol i ddodol i ddodol a ddodol Welcome to the committee, Liam. Thank you, convener. I refer to my register of interests, but in particular, I think that for good order, I'll highlight. I'm a director and employee of Trinity Care Ltd, which is a provider of legal services. I own a flat in Edinburgh from which I receive rents. And finally, I own a very small number of shares in Aberdeen community energy, which is a community group that has installed a community hydroelectric turbine in Tilly Drone in Aberdeen. Thank you for that, Liam. I'm very much warmly welcome to the committee and looking forward to working with you. That gives me the chance also to express the committee's thanks to Dean Lockhart for the time he was on the committee and his contribution to our proceedings. That takes us to the next item on agenda of society, whether to take item five in private. Members agreed. The next item on our agenda is to take evidence from two individuals who have been nominated for appointment to the Scottish Fiscal Commission by the Cabinet Secretary for Finance and Constitution. I welcome to the meeting Professor Alistair Smith and David Wilson. Members will have received copies of the cabinet secretary's letter of nomination along with the candidate's application forms, which have been redacted to remove any personal data. Members have also received copies of the selection criteria along with a note by the clerk setting out the procedure arrangements for the nominations. However, before we move to questions, I wonder whether either of you or the nominees would like to make any opening statement. Briefly, I have a long-standing interest in how fiscal rules help, guide and economy. I have a broad-based interest in public policy issues. I have considerable experience running a medium-sized university and all the challenges involved in that. More recently, I have now worked with the Competition and Markets Authority, which involves, first of all, the detailed scrutiny of competition and regulation cases. Secondly, I see an interesting interaction between the members of the competition panel of the CMA and the professional staff. The interaction between commissioners, if you like, who come from a background that is relevant to the work of the commission, and the professional staff of the commission of the CMA is one that I have learned a great deal from about how to interact with professional staff. I also, through having served on a number of pay review bodies, as well as on the CMA, have got a broad-based experience of working with bodies that advise Governments but are independent of the Government. I have a great deal of interest and experience in what independence means and how it gets safeguarded and what its importance is. Thank you for the opportunity to make a very brief opening statement. I am sure that we will go through the criteria for the role, but just in terms of an overall picture, I am an executive director of the International Public Policy Institute at Strathclyde University, where we are very much trying to develop an overall big picture of assessment of some of the challenges that are facing Scotland and the UK and internationally and draw together the expertise that exists within Strathclyde on many of the issues that are relevant to the committee and more specifically to the Scottish Fiscal Commission. My background, as you know from the application, I worked for many years initially in the UK Government and then in the Scottish Government as a civil servant, initially as an economist and then more recently as a senior civil servant covering a range of policy areas. I hope that experience provides a very strong grounding in working in public life and extensive experience of work within Scottish public policy issues, particularly economic policy issues. To me, that gives a strong grounding for working in the area of fiscal issues. I am happy to cover more detailed points going forward, but that was an introduction. I would like to put a question to both of you. I should note from your respective CVs that you both have extensive experience in a number of roles in the fields of finance and economics. Can you please tell the committee about any specific experience that you have in respect of production of analysis of forecasts? Please feel free whoever wants to start off. I am an economist and I am not a forecaster in the narrow sense of being someone who is not a macroeconomist concerned with the production of macroeconomic forecasts. I have considerable experience of policy analysis. As I see the work of the commission, it is as important to have an understanding of broader interactions between policies on the budget as to have a background in technical forecasting. That is also the more technical aspects of the job. It is useful to have commissioners who know quite a bit of technical staff, but in the end it is the initial responsibility of the professional staff to have the expertise in areas such as technical forecasting and for the commissioners to have sufficiently deep understanding that they can lead and challenge and guide, but that is the kind of interaction between the members of the commission and the staff that I think can be very productive if it works well and you do not necessarily need all the technical expertise in the persons of the commissioners. Like Professor Smith, I was very clear in my application and the discussion at the interview. I am not putting myself forward as a professional academic macroeconomist. That is not my background, but I have extensive experience working in government on a broad range of economic matters. I was thinking earlier that it is now 30 years ago starting off first role working for Ian Lange at the time on economic issues. Throughout that period working on the Smart Successful Scotland strategy that worked around the Government's economic strategy during the period after 2007, much of that involved quite extensive assessment of economic data, trying to draw out the major issues and understand what was going on amidst a very uncertain macroeconomic picture. Extensive experience of using, assessing and implementing the insights from technical forecasts. Where I have more experience of more detailed forecasting was work I did for about three years again some time ago now as a transport economist modelling of traffic flows and information on that, which gave a solid grounding on use of statistical models to draw out the important issues on transport flows. So, sufficient experience to scrutinise, assess and validate technical forecasts, but I am very clear that I am not a technical forecaster by trade. Professor Smith, I was interested in reading something that you had said about your application where you say that you are interested in long-run fiscal sustainability and the importance of not being misled by public sector accountancy rules. Who do you think is being misled by public sector accountancy rules? It is easier to talk in the past, so I will do that. I think that in the past, the UK Government has made fiscal decisions that have been driven by statistical considerations rather than long-run economic considerations, of which the best is PFI. There are very strong arguments in favour of public-private partnerships, not at all opposed to them. However, there is little doubt in my mind that, in the past and maybe even now, some Governments have embraced PFI because it looks better on the books. It does not show up as borrowing. Therefore, when you look at fiscal issues, you say that the deficit is not growing. We are not building up repayment obligations for future taxpayers, but that PFI builds up repayment obligations for future taxpayers every bit as much as Government borrowing. It would be good when Governments make an assessment of the appropriate ways to fund public investment, but that assessment is done in a way that is not biased by the fact that one future burden shows up on the books and the other future burden is rather hidden away. The OBR, where the second leg of the work that it currently does, has done very good work in looking not just at the costs of PFI but at the long-term costs of the English system of student support. Public sector pensions are the other area where there can be a very big long-term burden that is not quite as explicit as those fiscal burdens that are born through borrowing. That is the general area in which it is important for Governments to be guided by statistics that give a fair picture. That is a very helpful response. One of the things that the committee has looked at recently is the Scottish Government's non-profit distributing model on some of the issues that have led to the reclassification of European accountancy rules and what that meant for the public sector finances. Do you think that we are getting better at understanding the accountancy rules that you refer to across Governments? Yes, we are getting better, but the very strong pressures are pulling in the opposite direction. Governments continue to be tempted by short-term cash flow issues rather than looking at long-term sustainability issues. To take a UK Government example, some of the things that are said about the sale of public assets, some of the things that were said by Mr Osborne as Chancellor of the Exchequer is that the more Lloydsbank shares that we sell, the more we are paying down the debt. Well, again, this is not a comment about whether selling Lloydsbank shares is a good thing or a bad thing. It may well be a good thing, but what it does not do is it does not pay down the debt because the public sector is swapping one financial asset, Lloydsbank shares, for another, which is cash in the treasury. It does not improve the long-term fiscal position. It is interesting. Finally, convener, would you see your role as a commissioner to shine some light on those areas and make sure that the Government is going in the right direction? It depends on how the remit of the commission develops. As I understand it, we have a very well-defined task at the moment to do with the scrutiny of budgets. At the very beginning of that task, it is very important that the commission builds up credibility and does its initial job well. In due course, it is not for us but for politicians to decide how the remit of the commission should develop passionately. Given what I have just disclosed about my interests, I would obviously have some personal enthusiasm for taking a strong role if the work of the commission developed in that direction. However, it is not for me to determine how the role of the commission should develop, except to say it strongly of the view that we need to do our current task well and establish our record before we move on to wider tasks, however attractive they may be. I want to follow up on the convener's initial question about forecasts. More than ever, the importance of these forecasts is absolutely crucial, because it is not just a case of a look ahead to the future. The forecasts are going to be used in terms of the block grant adjustment and will ultimately feed into the actual monies that have been allocated to the public purse, so it is crucial that the forecasts are accurate and we, as the finance committee and Parliament in general, have confidence in that. You both acknowledge that you are not technical forecasters. There is obviously a team underneath that works on the detail of the forecast. How can you demonstrate to the committee that you will have enough in-depth and hands-on knowledge in order to be able to demonstrate that you will be able to interrogate the forecasting process and ensure the integrity and accuracy of those numbers? The important point, perhaps two points to recognise at the outset, is clearly that the commission is not starting from a blank sheet of paper. There has been extensive work already done within the Government in building up the modelling capability to develop forecasts and assessments across the range of different devolved taxes and clearing on GDP modelling. That will transition to the commission. Likewise, the commission has done an excellent start in producing the reports that it has tabled in its scrutiny of the previous year and the coming year's budget. It is clearly building on a strong start. What that has done is identified precisely because of the importance of forecasts as part of the overall fiscal framework. There is now even greater importance to get the assessments as authoritative and as clear and appropriate a judgment on those forecasts as can possibly be the case. Like all forecasts, accuracy will never be 100 per cent accurate and no forecasts ever will be, but they need to carry authority, be transparent in how they are developed and carry an authority that they are the best forecasts and the most impartial forecasts that are available. Along with Chris Smith, I hope to be able to make a very strong contribution to that alongside the other commissioners, along with the team that is being built up in the fiscal commission. Perhaps particularly what that will mean is drilling down and getting, as perhaps we called it, inside the models that have been developed and are being further enhanced, identifying the very granular and detailed issues that will potentially cause uncertainty about the forecasts going forward. The commission has already made a strong start on issues around the Aberdeen economy and how the impact of the challenging situation facing the oil and gas industry has been clearly one key issue that has been looked at, assessing the current uncertainties and quite considerable lack of data that exists on some areas that the commission will have to take a judgment on. That work is under way. I think that what we can bring to that very strongly is shaping and building the information base, the data and the understanding that is available on each of those issues. I will follow up specifically on that. You spoke an awful lot about the process and the process is important. You spoke about how you would drill down as a commissioner. Can you give a more practical example of how you would see your doing that? It is important for us as a committee that we have confidence that you do not simply see your role as robber stamping the forecasts that come out and robber stamping the process. What we are interested in is how you can interact on that and how you can, as you said, drill down. Can you give a more practical example of that? Perhaps give one example of particular interest to me, perhaps building on the work that the commission has already started around the Aberdeen property market and, by implication, the Aberdeen and the founding area labour market. There was a particular issue that Murdo Fraser picked up in the session, both with Lady Susan Rice and the other commissioners and also with Robert Chote, about how Scottish earnings may develop, well, how they are currently developing and how they will develop going forward. Perhaps the particular issue about how the Scottish labour market and trends and the current situation in the Scottish labour market will impact on future forecasts and future outcomes of income tax take. That is a particular issue that has been recognised by the commission as an area that there may be an emerging distinction between earnings forecasts in Scotland and the rest of the UK, which is perhaps the critical issue going forward in terms of variability of tax take, which will impact on the overall Scottish budget. It is an area that I personally would bring considerable experience of in terms of understanding labour market processes and trends and also utilising the mechanisms that we are building up of consultation dialogue with business organisations, external parties and understanding the situation on the ground can greatly help to provide the colour and greater information on the forecasts that we will ultimately make. If I can add to that and stick with the same example of income tax forecasts, income tax forecasts depend on what you can think of as classic economic forecasts of how the Scottish economy is as a whole doing, and that is an important part of it. Income tax forecasts are also very sensitive to the distribution of income because at different points in the income distribution, different people pay very different levels of income tax. Income distribution differentials between Scotland and the UK will be part of the explanation for how the Scottish income tax revenue develops and understanding how economic performance is changing not only in relation to the overall Scottish economy but what is happening to income distribution, and we have seen over the past seven or eight years very significant changes in the relative fortunes in different parts of the labour market. That is an area where I have taken an interest in the past and where I know that good work has already been done in the forecast of the Scottish income tax. I would be very keen to pursue that and scrutinise that kind of work and help to take it forward. Is any other member got any other questions? I have just got one general question at the end here. You have talked about some of your questions. Ash, you have got a question, sorry, on you go. The criteria requires you to demonstrate an appreciation of the strategic fiscal landscape in Scotland. Can you explain what you think the main issues facing us are in the medium to long-term? I think the main fiscal issue facing Scotland in the medium to the long-term is the same as the main issue facing the UK in the medium to the long-term and facing all advanced economies, which is the impact of demographic change and the aging population and the rising relative health and social care costs of the older part of the generation. That is a very big challenge because we, all of us, I am sure want to make sure that an appropriate level of resources is put into areas such as health and social care, but balancing that need against the need to put public resources into the needs of the younger generation is going to be a tougher and tougher challenge. To be frank, as we all know, we will face politicians in all countries with tough decisions, and one of the reasons for having independent commissions, such as the Scottish Fiscal Commission, is as a source of the challenge that politicians need—a pressure where none of us like asking hard questions but having people ask you hard questions and face you with tough decisions is a very desirable feature of a healthy political system. I think that the toughest questions are about the interaction of demography and the public finances. I strongly agree with everything that Professor Smith has said about the long-term challenges, just perhaps to build it and add some comments. Clearly Scotland and the UK face a very uncertain picture in terms of economic performance and economic developments over the coming years, with the prospect of Brexit in particular, of how that will play out over the coming periods, not time to go into now, but that clearly adds a level of uncertainty to what is perhaps already a considerable uncertainty about how the post-recession recovery is developing. Just perhaps to add a couple of points in terms of the key issues for the commission and all of that is that what happens in the wider UK picture is clear that what will happen will happen, but the two areas that I think will be of considerable importance to the commission as it goes forward is firstly developing the understanding and the assessment of how any potential differential economic performance between Scotland and the UK will play out in terms of forecasts, because clearly if there is a differential economic performance then the commission will be, its statutory duties are such that we will need to be forecasting that as it is happening, so the commission plays a crucial role in recognising as early as possible and understanding how GDP in Scotland may develop vis-à-vis the UK, so understanding economic performance because of how critically important that is to the wider fiscal framework and the differential funding that may become available to the Scottish Government, so differential economic performance and understanding the reasons why is critical to the commission, and secondly, in thinking about our forecasts what will also be crucially important is the sense of where the Scottish Government to continue to take decisions in terms of its discretionary tax powers and how that might play out in terms of tax take, clear issues with the additional rate of tax are already a live issue and having the capability to properly forecast the chosen policy of the Scottish Government will be a key issue for the commission going forward. I just want to ask any other questions from the members and all that will actually cover the area that I wanted to go into anyway. That was obviously an unusual appointment process, must be the largest recruitment panel that I think any of you has ever been in front of. I thank both witnesses for answering our questions today. The committee will now consider the evidence that you have prevented to us in private under agenda item five before we publish a short report setting out of recommendations to Parliament. I thank you very much and I briefly suspend the meeting to allow a change over of witnesses. Okay, colleagues. The second item on today's agenda is to begin our consideration of the Air Departure Tax Scotland bill at stage one by taking evidence from the Scottish Government bill team. I therefore welcome to the meeting Scottish Government officials, James McClellan, who is the head of devolved taxis and the bill team leader, Mike Stewart, who is the bill manager and John St. Clair, who is the lead solicitor for the bill and the senior principal legal officer. Members will have received copies of the bill at supporting documents, along with the spice briefing. Before we move to questioning of the government officials, I would like to ask Mr McClellan if he wants to make an opening statement. I thank you for the opportunity to make a short opening statement on the Air Departure Tax Scotland bill. The devolution of air passenger duty formed one of the recommendations of the Smith Commission report published on 27 November 2014. paragraph 86 of the report recommended that the power to charge tax on air passengers leaving Scottish airports will be devolved to the Scottish Parliament. This proposal on the others contained in the Smith Commission report was taken forward in the Scotland Act 2016, which received royalsent on 23 March last year. Following the commencement of section 17 of the act, the Scottish Parliament now has the power to legislate for attacks that will replace APD in Scotland. The Scottish Government announced that a bill for replacement for APD would be introduced in the first year of this parliamentary session. It also reaffirmed the Scottish Government's commitment to delivering a 50% reduction in the overall burden of ADT by the end of the Parliament and to abolishing attacks when resources allow. As the committee is aware, we published a policy consultation on 14 March last year. The consultation generated a range of views and we received 160 responses in total. We are grateful to all who contributed their time and input into the process and we have worked carefully to refine our legislative proposals reflecting the responses received. In addition to the public consultation, the Scottish Government established a stakeholder forum, which is chaired by the Cabinet Secretary for Finance and the Constitution, to provide expert input into the development of our policy and legislative proposals on ADT. The Air Departure Tax Scotland bill itself was introduced on 19 December 2016. It makes provisions for air departure tax, a tax to be charged on the carriage of chargeable passengers on chargeable aircraft by air from airports in Scotland. The tax is to be payable by aircraft operators. Under the terms agreed between the Scottish and UK Governments in the fiscal framework, APD will cease to apply in Scotland from April 2018. If the bill is enacted, ADT will replace it from that date. The bill comprises 42 sections, five parts and three schedules, which establishes ADT, sets out the key concepts underlying the tax, including identifying chargeable passengers and chargeable aircraft. It also sets out the tax rate structure and rules that determine which flights are to be treated as connected for ADT purposes. It provides for the administrative matters relating to the payment, collection and management of the tax. Finally, it makes further provisions, including in relation to subordinate legislation. Details on exemptions, tax bans and tax rate amounts are not included in the bill and will be delivered at a later date. Sections 8 and section 10 of the bill make provisions for the Scottish Government to set exemptions, tax bans and tax rate amounts through subordinate legislation. This approach on tax bans and tax rates is consistent with the approach adopted in relation to the other devolved tax in Scotland. Revenue Scotland, Scotland's tax authority for the devolved taxes, will be responsible for the collection and management of ADT, as it has been since 1 April 2015 for LBTT and Scottish landfill tax. There is a financial memorandum that accompanied the bill and this sets out the estimated costs to the Scottish Administration, giving details of the impacts on the Scottish budget and also to the costs for Revenue Scotland and the Scottish Fiscal Commission in both administering and forecasting the tax. It also demonstrates that the Scottish Government is committed to providing sufficient and appropriate resources to support the new tax powers. The Scottish Government is also currently undertaking a strategic environmental assessment. The key remaining steps of the SEA process is to publicly consult for a 12-week period on the tax rate amount proposals and this will be accompanied by an environmental report outlining the results of the environmental assessment. We will provide further details on the timing of that in due course. We look forward to considering and reflecting on the evidence that the committee will gather at stage 1 of the bill process and to discussing our legislative proposals with you further this morning. Thank you, James, for giving us that comprehensive overview from the Government official's perspective. I note that the Government has consulted on the proposals to replace air passenger duty and published an analysis of the consultation responses. Can you please summarise the main points that were made in the response to the consultation of the bill and explain, if you can, how the consultations helped to shape the bill that was currently before us? First of all, we received a substantial number of responses to the public consultation in comparison to the two previous devolved taxes. We were very grateful for the views that were expressed during that consultation. One of the key findings from the consultation was the fact that, although the structure of the policy consultation paper was predominantly focused on the structure of the tax and how it would be collected and managed by Revenue Scotland, there was a strong majority of views expressed during that consultation on the Scottish Government's wider proposals on the tax rate amounts as well, in particular on the proposed 50 per cent reduction in the overall burden by the end of the current Parliament and to eventually abolish it when resources allow. That drove a large number of the responses to particular questions, notwithstanding those views that were predominantly driven by individual members of the public, but there were a large number of organisations as well who opposed those proposals. For those who actually responded to the specific questions in the consultation on the structure of the tax, there was an overwhelming consensus just generally at the high level on retaining the same structure and administration arrangements for UK APD. That was driven by not just airlines and the aviation sector and the travel sector, but other organisations as well. Even those who perhaps objected to the proposal to reduce the tax, the actual views on changing anything substantially in relation from the UK tax, there was a minority of views expressed with some different suggestions on how the tax might be collected in a slightly different way. The key message that we took from the responses that we received was to look very strongly at how the UK currently does the tax. In addition to the consultation responses, we have also engaged extensively with our stakeholder forum, which James mentioned. We established that on 6 August 2015, and it has met five times so far. We will continue to engage with that group as well as part of our overall stakeholder engagement approach. Again, the strong consensus from there was to model the structure of the tax and the administration of the tax very heavily on that. Going into the specifics of how the consultation responses informed those views, given the fact that that was the overwhelming consensus that has largely driven a lot of the policy discussions and the policy analysis, which has led to the content of the bill itself. In the section 1 of the bill, part 1 of the bill is entirely consistent with the powers that have been devolved. Parts 2 are defined as a chargeable aircraft. Those are exactly the same as the UK APD definitions. In relation to the exemptions, which I am sure will probably come on to a later point, we are still considering our overall approach to those in the round and some further technical and legal details on those. Again, there is a large degree of consensus on those exemptions as well. On the tax banding, the tax bands are not in the bill as well. We will propose to bring forward a detail on those at a later date. The strong consensus was keeping with the two-band UK APD approach, which essentially says that band A is short haul flights, which are all those in Europe and most of Northern Africa, all the way up to and including Libya, but not Egypt. Band B is any other types of flights. We are still reflecting on the banding structure, because we see that that is a crucial part of the tax rate amount decisions that we are doing analysis on at the moment. Again, further detail on tax rate amounts will be brought forward at a later date. Moving on to the administration of the tax, a lot of the proposals that we have used, we have also got the Revenue Scotland Tax Powers Act 2014, which provides the general framework for the collection and management of devolved taxes in Scotland. The starting point for how ADT would be collected and managed was to reflect on the views expressed in the consultation responses, which are wider engagement with stakeholders and discussions with HMRC and other bodies, and to then look at how what legislative changes would be required to introduce those. Part 4 of the bill that is introduced and scheduled 2 contains further legislative provision, which was considered necessary for ADT, which was not already covered in the Revenue Scotland Tax Powers Act. There are concepts of registering for the tax in advance. There are concepts of making a tax return and paying tax at the same time as making a tax return. We have taken specific parts of the collection and management of the tax, which are specific to UK air passenger duty, such as the concept of having tax representatives, such as having revenue protection measures in place for handling agents and taking into account the difficulties that some aircraft operators experience with their accounting systems, particularly smaller airlines, allowing special accounting schemes to be applied to revenue, Scotland, etc. Again, the views expressed in the consultation paper were almost overwhelmingly in support of all those types of arrangements. I hope that that answers your question. You have explained in some areas where the policy and the direction of the bill follow what happens in air passenger duty. Are there any particular areas that you could point out to us where we are doing it differently in terms of the air departure tax compared with the existing legislation for air passenger duty? On the detail that is in the bill, there is only a small handful of differences. One of the things that I should say is that the actual legislation, if you look at the legislation for air departure tax in the bill with the equivalent UK APD provisions, which are largely in the finance at 1994, the legislation looks slightly different, but the actual effect of it is broadly the same. The first key difference is in terms of the tax return. Most of the key differences are just in the administration of the tax. First, we have two methods of making a tax return, a quarterly tax return and an occasional return. The occasional return is broadly the same as the provision that is in the UK tax for aircraft operators, which operate in frequent flights or at particular times of the year, where perhaps making a quarterly tax return is not the most efficient method of complying with its liabilities under the tax. Under APD, it is a standard monthly return, so we went for a quarterly return. That is one of the key differences there. Another key difference is with tax representatives, which are essentially a separate contract and body in which the aircraft operator would enter into a contract to provide particular services. The UK APD has a requirement that any aircraft operator, which does not have a business establishment or other fixed establishment within the UK, is required to have a tax representative. We considered that in the course of developing the bill and in order to ensure that we are fully compliant with EU law. We have changed that geographical requirement to any aircraft operator who does not have a business establishment or other fixed establishment within the EEA. That is one small difference. Other than that, there are not too many differences. I think that those would be the key differences. Murdo, you had a supplementary in this area. Thank you, convener. A follow-up to that question from the convener. You pointed out some, if I may say, fairly minor technical differences. Is it fair to say, though, that in effect what you are doing is just replicating the existing UK system in Scotland, albeit that you are giving it a different name? You are calling it the air departure tax instead of air passenger duty, but in effect it is the same tax. Comparing the effect of the provisions of the bill and the structure of the tax that is in place at the moment, in practice, once that legislation is passed and put into effect, the actual practical effect on the ground and the collection of the tax would be broadly the same. That would be correct to say. In terms of the collection and management of the tax and how Revenue Scotland makes its decisions on compliance with the tax and risk-based approach, that is a matter for Revenue Scotland and that may well be different than how HMRC collects and manages the tax. However, the driving factor was not necessarily to just from point zero to directly just automatically assume that the structure of the tax would be copied right across. We did allow people to bring forward alternative proposals in the consultation paper. Some did in some very minor ways, but given the overwhelming consensus from the stakeholders and the consultation responses, that was a large part in our decisions on how we have arrived at the provisions in the bill. The early part of the evidence session, I am going to try to concentrate on the specifics of the bill, then we can get into wider issues. Adam, you have a specific question on the bill itself. I am right in understanding that tax bans, tax rate amounts and tax exemptions are not covered in the bill. I am right in understanding that exemptions, tax bans and tax rate amounts are provided for currently in primary legislation with regard to APD. I am right in understanding that, in the LBTT legislation of 2013, exemptions with regard to LBTT were laid out in primary legislation. That is correct, yes. Why is the tax being treated differently? Why are those matters not on the face of the legislation but being left to ministers? It is a fair point. Clearly, there is an overwhelming consensus from the stakeholders and from the responses to the consultation to retain the current exemptions. With regard to the exemptions, we have provided a power in section 8 of the bill that allows regulations to be brought forward in subordinate legislation. We are considering our overall approach to exemptions in the round. There is some further technical and legal matters that need to be worked through. I cannot comment any more specifically on those, but we certainly recognise the— I understand from your aspect that the reason why those matters do not appear on the face of the bill is because you are not ready. No, it is not that we are not ready in terms of knowing our general approach at this current time. I think that it is just that we have considered that it would be best— If I am wrong but you are not ready, what is the reason for those matters, bans, rates and exemptions, not to appear on the face of the bill? As Mike has set out, we feel that we want to take the opportunity of the bill process to further consider our overall approach to exemptions. In order to reassure you, we will be coming forward with further details in due course, and certainly well in advance of ADT coming into effect in April 2018. The reason why I am not reassured is because what the Smith commission agreement says, and I quote, is that the power to charge tax on air passengers leaving Scottish airports will be devolved to the Scottish Parliament. Not devolved to Scottish ministers, but devolved to the Scottish Parliament. I ask again why is the structure of this tax manifestly different from the way in which it is structured in primary legislation for the United Kingdom at the moment, and manifestly different from the way in which LBTT was structured, with exemptions being on the face of the bill rather than being left to the subsequent delegated authority of ministers? The comparison with the UK process is an interesting one that we can look at. Obviously, in the UK, it has an annual finance bill that enables it to have a regular process to amend primary legislation, but we do not have that in Scotland, which is a key difference between the approach that we took to the ADT bill and the existing legislation in the UK. Just to reiterate, around exemptions, we are still looking at this, and we will be coming forward with further details of it in due course. Certainly, it is well in advance of the bill coming into effect. That addresses the difference between this bill and current UK APT legislation, but it does not address the difference between this bill and this Parliament's LBTT legislation. Why should exemptions appear on the face of the LBTT primary legislation, i.e., enacted by this Parliament, whereas they do not appear on the face of this bill? I think that because of the range of responses that we had to the consultation process, Mike mentioned that it was far more significant than we had from the other fully devolved taxes. Certainly, there are a range of views that we are considering. In terms of our options, so there is obviously the option to bring forward the exemptions through secondary legislation, but it can also be done via amendments to the bill at stage 2 or stage 3. What the Scottish Government currently anticipates doing for itself, bringing forward government amendments to its own bill? We are still considering our options on that. I would not describe it as our stated intent at the moment. It is too early in the bill process. It is more likely that these matters will be dealt with by delegated legislation rather than by amendments to the bill as it goes through, as things stand. We are still considering the options of exemptions. Obviously, we get the minister in front of us at the end of this process, and it will be a chance for Adam to come back and repeat those arguments with the minister. I suspect that you would. Let me just ask a supplementary question in that regard. In terms of the regulations or the statutory instruments that might come forward, what consultation process will you be carrying out about those matters before such instruments were to appear and if such instruments were to appear before Parliament? With regard to tax bans and tax rate amounts, I would say that we are currently in the middle of a strategic environmental assessment process, which the Scottish Government is required by law to carry out, because the effects of the 50 per cent reduction in the overall burden of the tax are considered likely to have an environmental impact. Before any legislation containing the tax rate amounts at least is laid before Parliament, it will be required to publicly consult, and that is to have a 12-week process on those plans, so that is a remaining step that still needs to occur. There will be a further opportunity on a public consultation on those tax rate amount proposals. On the tax bans, the current thinking is that the tax bans are inextricably linked with tax rate amount proposals. We set out tax rates in the bill, so the concept of a standard rate applies to, typically, economy class flights and then a premium rate, which applies to first-class business class flights, and then another one, which is a special category rate, which applies to tax rates. There was overwhelming consensus on the tax rate, so there was a bit more of a difference of opinion on the tax bans, and the tax bans are much more interrelated with the tax rate amount proposals. We are currently considering the best approach on the tax rate amounts, and, as I say, there will be a further public opportunity to comment on those proposals before legislation can be laid before the Parliament on those tax rate amount proposals. On the question of tax bans, we are clear that the Government's current intent is to replicate the system of a band A and band B. Is that correct? I would not be able to provide too much detail on that at this point. Perhaps that is an opportunity to ask the cabinet secretary when he appears. Essentially, the overwhelming consensus from the stakeholders is to have that two-band structure. It provides a simple and effective measure and will minimise any disruption for airlines, so that will be a drive and focus on our decisions in terms of measuring up how efficient and convenient the tax structure is with how it enables us to deliver our policy objectives for the tax on the tax rate amount proposals. Perhaps that is one more question on bands if I can. Was it something that the Government looked at whether it would be possible to have a different band only for domestic fights in the UK, or was there any legal impediment to do that? That is certainly one view that was expressed in the consultation responses. I know that that is one view that Virgin Trains, for example, is particularly interested in, because it is concerned about the impact on the rail sector if there was a reduction on air departure tax charged on flights in the UK, for example, especially when those provide a competition. It is one of the options that we are considering and looking at. I cannot say anything more at this point. You are not aware of a legal impediment to that being done? It is one of the things that we are looking at at the moment. Specifically on the bill, because you have a question on policy, I should probably make policy memorandum. It is the same issue that has been raised there. James, in your opening remarks, you were talking about the bill itself and why the tax band's rates and exemptions were not included in the bill at this stage. However, I took a note of what you were saying that that seemed to be consistent with some of the other measures that we are bringing in. You mentioned landfill tax, could you clarify what you said there? Why were you separating the points in the bill and why we are not doing it at this stage? Yes. The point that I made in the opening statement was that our approach to rates and bands and setting them out through subordinate legislation was consistent with the approach that we had taken to the fully devolved taxes. The rationale around that is partly consistency but I think that the other point that we were picking up on on the exchange that we had before in terms of the differences between the Scottish and UK approach, because obviously the UK have their annual finance bill and we don't. Giving us more flexibility in terms of making changes to rates and bands through subordinate legislation enables us to reflect on operational issues and other feedback that we are getting once the tax goes live. The advantage is that you see it of doing it this way in Scotland? Yes. I suppose that the next question to follow up from that convener is when will we see the detail of this emerging because we are just short of a year away from bringing the new provisions in, so when will we be able to see that and when will we be able to scrutinise it? We will be bringing details on that shortly as I set out in the earlier exchange. It will either be through subordinate legislation, so after the bill itself is passed. Certainly, it is our hope to try and pass the bill in advance of summer recess, so we would be looking to bring forward subordinate legislation in the autumn. The other approach is obviously via amendments to the bill at stage 2 or 3. It is time for one more on the provisions. It is specifically about the bill before I get into financial memorandum. It is specifically about the bill. There is a section on the connected flights rule, and I was just wondering in light of the conversation that we just had, why have we kept the detail of that in the bill rather than leaving it to discussion and consultation and review as it develops in Scotland? It seems to be the same provisions. The wording of the legislation is slightly different, but the effect of it is the same as the connected flight rules. It is linked in with the content of section 9 of the bill, with regard to determining where, for the purposes of attacks, the final destination of a person's journey is determined to be. That was considered necessary just to ensure that, for example, under air departure tax, if someone was taking a flight from Edinburgh down to Heathrow and then connecting off to another destination—perhaps a long-haul destination that was not currently offered in the Scottish airport—that when measuring the final destination, assuming that the flights were connected, that would be a long-haul destination and not just Heathrow, so the departure tax that would be charged from that would be on that further away point, rather than just the shorter point. The effect of it is the same. Patrick Stewart has a supplementary question on the specifics of the bill. On the bill itself and on the questions about the provisions allowing ministers to set bans and rates by regulations, the analysis of consultation responses shows a very strong degree of concern around the environmental impact of the changes. It is barely mentioned in the policy memorandum, but the analysis of responses shows that it is by far the most commonly expressed concern. Can I ask you whether the Government gave any active consideration to introducing elements or consideration into section 10 that ministers would have to give consideration to before reaching a view or before proposing regulations? Was that actively ruled out or simply has not been considered? Actively considering the environmental impacts before coming forward with it? It is fairly—I have seen it in many pieces of legislation requiring ministers to give consideration to certain factors before exercising their functions that they have as whether secondary legislation or ministerial orders or what have you. Was that actively considered? Was that ruled out or has it simply not been thought about? Certainly the environmental effects are something that we are very much alive to, and as part of the development and consideration of our approach to rates and bans, that is something that we are explicitly considering. At a policy level, you have told us that the strategic environmental assessment is being conducted, although, given what was just said a few minutes ago, we are being asked to pass the bill before we get a chance to see that. I am asking whether there was any consideration given in the development of the bill to introducing criteria that ministers would have to consider into section 10 before they propose rates and bans? No. Thank you. That is very clear. Thank you. Okay, we have got the financial memorandum of issues now. James. Okay, thanks convener. Mr McClearn, in your opening statement, you said that the financial memorandum gave an explanation of the impact on the Scottish budget. Bear in mind, the policy objective of the introduction of ADT is a reduction of 50 per cent as the policy memorandum describes the tax burden by the end of the parliamentary session. I do not see any acknowledgement or assessment on the financial memorandum of the fact that that will obviously mean a reduction in the Scottish budget going forward. Can you give an explanation? Yes. Within the financial memorandum, we have included OBR forecasts, which are the currently available published forecasts of what would be raised through APD in Scotland. That gives you the assessment of how much would be raised if the policy was continued and the policy matched that in the rest of the UK. As we have been discussing decisions on quite what the banding structure would look like, how we distribute the 50 per cent cut across that and also the phasing of it have not been finalised yet. It is not possible for us at this moment in time to be able to give an estimate of the potential impact on the Scottish budget. That is one of the things that is being considered as part of our approach. We are clearly looking at the affordability of that within the Scottish budget alongside looking at wider stakeholder views and available economic evidence to support that. You must acknowledge that paragraph 10 of the policy memorandum clearly states that the Scottish Government objective is a 50 per cent reduction in ADT by the end of the parliamentary session. Table 2, as you have pinpointed in your answer on OBR forecasts, says that revenues would be £378 million if we continued in the current vein, but that is clearly not the objective of the legislation. It is not true that trying to spell out that £378 million would be the revenue gained in 2021-22. If there was a 50 per cent reduction, it could logically be argued that that would reduce to £189 million. Bear in mind that there is going to be a reduction, and that will impact on the public finances. Do you not think that the financial memorandum should have given some explanation of that? The figures that we have set out in the financial memorandum have been derived based on what we were able to put within the bill. The decisions around how we distribute the tax and the cut and when it is phased in will determine what the revenue impacts would be. Certainly, in terms of the mechanics of how it will work, so, from April 2018, there will be a deduction to the Scottish Block Grant, and we have set out the approach to how that will happen, so it will be based on, effectively, an estimate of what the APD tax raised in Scotland in 2017, and that will be reconciled once we have outturned. So, there will be a deduction to the Scottish Block Grant in 2018 based on that number. Now, depending on where we get to in terms of the policy for reducing tax and phasing through the bill process, that will then determine how much revenue is coming in. Now, there may well be a difference between the amount taken off and the amount coming in, depending on where we get to around decisions on the tax rates and bans. Do you accept that it is the case that the Scottish budget will reduce following the introduction of the legislation? If we reduce the tax by 50 per cent, depending on when it comes in, certainly the revenue coming in from that tax would be less than the amount that is taken off the Block Grant. The other thing that I should say is that the adjustment to the Block Grant will then be indexed to UK Government policy, so, again, the size of that in future will be dependent on UK Government policy. I think that I need a bit of clarity here, James. Can I just clarify that, in terms of the specific legislation, it will not decide whether, in itself, it does not decide the rates and bans, and therefore the amount of reduction in the Scottish budget will not be decided by the specific legislation, but it will be decided later on by regulation or statutory instrument, depending on what it brings forward in the rates and bans. That is right. Ultimately, the revenue impact will be determined by the rates and bans. The policy objective is outlined in paragraph 10, and the policy memorandum is a 50 per cent reduction in what is called the overall tax burden. Clearly, the Government is an objective of reducing these taxes. Is that the case? I could intervene in that. My colleague is being purposely strict in his language that he is not moving on from the effect on the revenue coming in from the APD replacement to the total effect that those measures might have on the Scottish budget, because there are all sorts of variables. For example, if a reduction in this tax led to increase in economic activity, that could impact on other tax receipts. We are steering clear of answering that question directly. We are not trying to avoid it. I think that it is something that the minister is going to have to be prepared for when he comes in front of us in terms of being able to provide an answer to James Kelly's pretty reasonable question. I will conclude my questions, convener, but I would say that my position is that it is a glaring admission from a financial memorandum that there is no assessment or acknowledgement of the on-going impact on the Scottish budget. Patrick, you have a supplementary in this area. Just to follow that up, clearly there is a question about the direct impact on the Scottish budget from the revenue that would be raised under the policy intention of the Scottish Government as it stands, rather than under the letter of the bell, but under the policy intention. There is also a question about the potential indirect consequences for the Scottish budget, and a great deal of the written submissions that we have had from private sector organisations, which clearly have an interest in the policy area, tries to persuade us that there will be an increase in other forms of revenue through economic activity that is generated through the Government's policy. As far as I can see, the financial memorandum makes no attempt to go into that. Is the Government conducting or has it conducted any assessment of what it predicts to be the revenues specifically coming to the Scottish Government, as opposed to revenues going to the UK Government, as a result of the indirect effects of its policy being put into practice? We are certainly analysing the potential economic effects of our stated policy objective as part of the decision making. That is taking a number of strands. One is about considering recent studies that are currently published. There have been studies from PwC, York Aviation and Edinburgh Airport, which I believe are taking evidence from later today. The existing evidence is available. We are also looking at international comparisons, where that can be helpful. Countries have taken a similar approach to either cutting or abolishing attacks, such as Netherlands or Ireland, to see what that can tell us about the revenue effects. We are also doing our own internal assessment of what we think the potential effects would be. I appreciate that. At the beginning and again at the end, you said that we are conducting or we are assessing. Can I just be clear that that has not been completed yet, it is what is on-going. Prior to completing that, we have a policy intention already signalled before we know what the effect is going to be. Based on existing evidence that is available, the Scottish Government set out the policy aims, which is covered in the policy memorandum. Before taking a final decision on the rates and bans, we are continuing to model that. The result of that work and its methodology will be published before a proposal on rates and bans? We would certainly be looking to bring forward that analysis, either as part of the strategic environmental assessment or to support the subordinate legislation around rates and bans. James, have you finished all your questions into wider financial issues in Ivan? Thank you for coming along. To my mind, I think that the stated aim of this change in terms of the reduction in ADT going forward is to generate economic activity. The 50 per cent reduction is configured as being across the board, if you like, so it need not be the same reduction across all classes. I want to drill a wee bit more into that in a bit more detail. First, I want to find out what the structure of the bill is able to support tackling that in different ways. I will give you some examples to consider. Secondly, I want to follow up and see what analysis you may or may not have done on economic impacts. For example, if you look at the type of air traffic that we want to encourage to generate economic activity, tourism is obviously something that we want to encourage, whereas outbound tourism, for example, could have a negative economic effect because you are taking people who make a holiday here and encouraging them to holiday elsewhere. On the business side of things, there will be markets that we would want to target, either to bring foreign businessmen to business people to do work here and encourage links from Scotland direct flights to certain markets. We might decide to prefer some markets over other ones, which might end up in a situation in which there are long-haul flights that we want to reduce the tax on in shorter flights, where we do not want to do that for the purposes that I have mentioned. In the domestic versus international sphere, and I think that we are going to hear from the Virgin trains later on, there could be an area where we want to not encourage domestic flights, where there is an overground train alternative, whereas we might want to encourage direct flights from Scottish airports to international destinations. There is a whole range of scenarios that could or could come to play in a policy scenario, where we might want to rather have a very blunt instrument that does not give us the desired economic benefit. We might want to be very focused and targeted on specific types of passengers to specific markets, and to discriminate in the words between inbound and outbound passengers. Does the structure of the bill, as it stands, allow us that flexibility to do that, or are we simply going to end up with what the UK has got, which is a very blunt instrument? Secondly, have you done any economic analysis on those different types of segmentation in the market with respect to different passengers and different destinations? I can say a bit on that, and then, if Mike wants to add some detail around the actual bill, there are, as you rightly said, a range of issues here. In terms of our stated economic goals, it is our belief that the power over APD will provide us with the ability to put new arrangements in place, which better supports our strategic objectives to help to generate sustainable growth by improving international connectivity to Scottish airports, helping to generate new direct routes, sustaining existing ones and, importantly, increasing inbound tourism. The sort of analytical issues that you are talking about, so inbound tourism versus outbound tourism and ensuring that the structure of the rates and bans minimises, effectively, leakages from the economy through outbound tourism, is certainly something that we are considering, and we would want to ensure that whatever is brought forward maximises the opportunities around that. The other debate that you raised was long-haul versus short-haul, and again, that is something that we are looking at. The strict economic impacts of that, but there are also wider impacts in terms of rail and how that feeds into it. The short answer is that we are considering all of those issues as part of our assessment or economic assessment, and we would be looking to design the rates and bans of the tax in a way that effectively maximises the benefits based on the picture that we have pulled together, which is as comprehensive as possible. The question was, does the structure, as proposed, allow the flexibility to cope with all of those different variations? Yes, so it will do. On the specifics of the bill, I do not know if Mike wants to say anything additional. I think that the fundamental parts of the ultimate legislation, both primary and secondary, if that is the case, are talking about those particular areas. I think that those are bits of detail still to be set out, because I would view those probably most focused on the tax bans and the tax rate amounts. On the structure of the bill that is introduced at the moment, the core concept of the taxes is that we have to pay due regard to the scope of the powers that have been devolved to the Scottish Parliament. We have tax rates set out there, so that is the only part of the core structure of the tax in terms of the interrelations between the tax rate amounts that is actually in the bill. In terms of the biggest opportunities for delivering those and considering those types of areas, that is in legislation still to be put forward. I would allow that, because you might have up to 10 or 20 bans depending on where you want to target. You might have different rates for different types of taxes. You might have a different rate depending on whether they start somewhere, come here and go home again, or vice versa. You might have a different rate depending on how long they spend here. Is there flexibility to do all of that within the structure that you have? Those types of latter issues in terms of how much people spend and things like that, you would have to pay due regard to the legal constraints, but also trying to keep the tax simple as well. One of the guiding principles of the devolved taxes is keeping to Adam Smith's principles. One of the general acknowledged features of the UK tax is its simplicity, and it is one of the most cost-effective taxes in terms of the collection and management of it as well. We would have to pay with regard to the impact of any policies that were reflected in the structure of the tax to go to those types of areas and consider the impact that it would have on airlines and just overall how the aviation sector and the tourism sector works. Sure. Airlines have very complicated software that does all that stuff anyway. It is an industry that is not unused to complicated sharding structures. The final part is to bring forward analysis on that and to follow up on what Patrick was asking earlier. You will bring forward analysis on looking at the segmentation of the different market aspects of that in due course. Is that correct? It is one of the many factors that we are including as part of our economic analysis, and we will look to bring further details on that in due course. In the policy memorandum paragraph 7, it says that the strategic objective of the Scottish Government believes that the tax to be an increase in burden on airports, airlines and passengers, which holds back air route development. That was published at the end of last year, but at the start of this year, we have seen figures that Glasgow airport recorded a record 9.4 million passengers in 2016, Edinburgh airport recorded 12.4 million passengers in 2016, and that is up 11 per cent on 2015. I appreciate that there is a debate to be had about the rate in which the tax will be set, but I want to ask why does the Scottish Government believe that it is necessary to change the rate of tax if passenger numbers are already increasing? What other factors and policies have been considered to support aviation growth? For example, has the Scottish Government done an analysis if we are concerned about increasing tourism? Is the Scottish Government done an analysis on the effect of a fallen rate in a pound in attracting investment? Does it not consider that there may be an increase in passenger numbers and tourism without changing the rates of APD? The first thing to say is that the trend for air passenger numbers globally is upwards, so it is not just a fact that is reflecting in the Glasgow and Edinburgh airport numbers, and that is reflecting the return to economic growth and the increase in available airline capacity. In terms of the current APD rates, it is one of the highest taxes of its kind in the world. If you look across the overall aviation tax, the UK is second only behind Chad. I suppose that the competitiveness of the tax rate is something that we are looking at and concerned about. Certainly, cutting the tax burden helps to ensure that we believe a more level playing field with many of the other European airports, often competing to secure the same airlines and routes. Through doing that, that enables us to develop those new routes and sustain the existing routes. My other question was based on the principles around taxation and one of the principles, the Adam Smith principles of proportionality and the ability to pay. Has the Scottish Government, following on from Ivan McKee's question about the impact on individual groups, has the Scottish Government done an analysis on the demographics of airline passengers in Scotland, and do airline passengers tend to be the poorest in society or the most well-off in society, and what impact will that have on those particular groups? The impact on specific groups is something that will be factoring into our analysis. It is a range of things that will be considering. Ultimately, the effect will depend on the decision around rates and bans. I want to ask about the issue of climate change impact. I see that the Committee on Climate Change advised that any increase in emissions from reducing ADT is likely to be manageable. Their assessment is that it will be about a 4 per cent increase in emissions, and that that would be able to be offset by other changes that we might make in the transport sector. Would you broadly agree with that and with that conclusion? Would the people putting forward opinions in your consultation be in agreement? We certainly recognise that there will be environmental impacts from the policy. You are right to say that the Committee on Climate Change has advised that the increase in emissions should be manageable. We are going to work harder in other areas in order to mitigate the effects of that. We have mentioned before that the environmental impacts are being carefully considered through the strategic environmental assessment process. Is there debate at all around those numbers? Poor per cent does not seem like a huge difference to me. I am aware of that. The other thing that I wanted to ask about is that I am a representative for the Highlands and Islands. I am particularly interested in hearing about what people had to say about the exemptions. At the moment, the Highlands and Islands airports are all exempt from the taxation. Is that likely to be continued in the future? In terms of the consultation responses that we touched on before, there is certainly overwhelming support to keep the tax structure similar, but also to keep similar exemptions. As we touched on in response to some of the earlier questions, we cannot at this stage say anything more on specific exemptions, but we have committed to coming forward with further details on that shortly. Can I just pick up on the timescales of the further details that you said about the bill going through in September and that the detail would be available subsequent to that, is that correct? The hope is that we get the bill passed before summer recess, so that is certainly what we are planning to do. Issues to be brought forward through subordinate legislation would be after that in the autumn, September and October. To clarify, it is likely that tickets will be sold and subsequently taxes will need to be charged for already made sales, if they are on sale about 340 days before. Is that correct? On those specific tickets, that would be correct. The other thing to add is that through the other routes that we have, we mentioned the stakeholder forum, which draws on a range of stakeholders, so industry is one of those. Through that forum, we are trying to give the airlines as much advanced certainty ahead of final decisions being made on rates and bans, as we can. Just to make sure that I have understood that answer to Mary Todd correctly, you are talking about retrospective taxation by a secondary instrument. What legal advice has the Government sought or taken to ensure that proceeding in that manner would not be vulnerable to judicial review in the court of session? Apologies of any confusion was caused with my initial answer. We are not talking about or what I was not talking about in my answer was retrospective changes to taxation. I was picking up on the specific point about the timing of when the details of tax rates, bans and exemptions would come in. Perhaps I have misunderstood in which case, I apologise, but if you are talking about applying a tax in the autumn to a ticket sale that has preceded the point of tax liability, that is retrospective taxation, is it not? Yes. The tax will come in from 1 April 2018, and from that point we will have full details of the tax rates and bans. When you say that the tax will come in on 1 April 2018, do you mean that this bill will take effect or that secondary instruments that establish what the bans and rates are will take effect? I am not quite sure if I understand exactly the chronology of this. Yes, everything. That is our ambition to have the bill passed by summer recess. Any additional points that were not covered around things such as exemptions, rates and bans through secondary legislation well in advance of the tax coming in from 1 April 2018? I wanted to follow up the questions on climate change, because I did not think that they needed to be quite that softball. The UK Committee on Climate Change has, which has a formal role in advising the Scottish Government on climate change under the Climate Change Scotland Act, has clearly recommended that aviation emissions by 2050 need to be limited to 2005 levels. That allows some degree of demand increase, but not unlimited demand increase. The UK Government nominally accepts that advice, whether we think that its actions are consistent with achieving that outcome is another matter. Does the Scottish Government, in how it is framing this aviation tax, take a similar view that aviation emissions need to be limited to 2005 levels by 2050, or does it have no policy on that? I think that on the specifics of our commitment to overall aviation emissions and how that feeds into our climate change plan, we will need to write to you on that if you want further details. So, there is no policy context on what you expect aviation emissions to be going forward, which has informed the development of this bill? There has been in terms of the overall effects. The bill is set out in our approach to the strategic environmental assessment, and there will be an update to that as part of the 12-week consultation that we will do. In that, we will set out our assessment of what we think the effects will be around that. As we discussed earlier, it is still on-going. Just to be clear, in framing the legislation and its policy intentions in relation to those replacement tax, the Scottish Government has no view yet formed on whether it will comply with the UK Committee on Climate Change's recommendation that aviation emissions by 2050 should not exceed 2005 levels. Is that correct? I mean, again, until the full analysis is done of the effects of it, we can't comment. I mean, I suppose, on the specifics of the target. The minister, but I think that even an official is able to comment on whether the Government has a view on that question. On the specifics of the target, I mean, we would be happy to write on that issue. On the basis of the assessment of the environmental impacts that we have done to date and those that have been published, how that interacts with the wider UK target, I'm afraid that I don't know the details of that, but we would be happy to write. In addition, when you're writing, can you tell us, when you're bringing forward considering the rates, etc., later, can you make sure that you tell us how you're going to go through that same exercise on the rates and when you're bringing forward the secondary legislation, what the process will be, because it's not just about the primary legislation, it's also about the secondary legislation that will follow? Because, obviously, anybody, and it would be up to members round the table to propose different rates, they could suggest rates that go up and that would have an environmental impact or they could suggest to stay the same and that would have an environmental impact. This is the principle of bringing in a piece of legislation, but I think that Patrick's questions are fair enough. I think that that just leaves Liam to deal with IT matters. Yes, just a couple of wrap-up questions very quickly. First of all, to follow up on something that Neil Bibby asked about, I understand from your answer that there hasn't been any particular analysis done of the socioeconomic profile of people flying. Going beyond that, can we extrapolate to say that there hasn't been any analysis done on who is flying, where to and why in terms of, for example, business travel and what can be expensed in terms of passenger duty? Is that correct? There isn't that analysis yet? That is a core part of the analysis that we're undertaking to pick up this inbound, outbound dynamic, but also of the categories of people taking flights. Whether it's a leisure or business, we're looking at that. Just on the IT issue raised, I note in the financial memorandum that there's an estimate of £120,000 to set up the IT to make this work. Given the costs and difficulties that are experienced in setting up various other IT projects and the current costs associated with those, how accurate is the £120,000 estimate because it feels rather low? The costs that are provided in the financial memorandum represent Revenue Scotland's best estimate of the resources that will be needed to deliver ADT. I should say that it's the development of a new ADT module on the existing Revenue Scotland tax collection system, so it's not something completely new. In terms of the costs in general, they were based on a robust business case, which was compliant with Treasury Green Book methodology, and it was also approved by the Revenue Scotland Board, so there was a thorough process of scrutiny of those costs. Just a final quick thought. We've received various representations and, indeed, Evan McKee suggested that the way to stimulate economic activity, the way to stimulate growth, the way to stimulate the economy in this instance is by reducing tax. Presumably, the converse is true that if we increase tax, potentially that stifles the economy and growth and jobs. So, I just wondered if you accept that analysis and how will that ultimately inform thinking about bans and policy? Our broad position on this is that APD is one of the highest taxes of its kind in the world. As we've set out before, we believe that cutting that tax will give Scotland a competitive advantage against other airports who are trying to attract the same new routes, so that's the overall rationale sitting behind it. Thank you very much. I thank the witnesses for coming along this morning. I now suspend the meeting to allow a change over our witnesses. Colleagues, our next piece of business is to continue our consideration of the Air Departure Tax Bill at stage 1. We are joined for the second panel of witnesses by Tim Aldis Lake, who is the chief executive of airlines UK, Jonathan Hincliffe, who is the managing director of Logan Air Ltd, Gordon Dewar, who is the chief executive of Edinburgh Airport and David Horne, the managing director of East Coast Route Virgin Trains. Members have received copies of written submissions from each of our witnesses, so I think that we'll just go straight to questions. I could have asked you all to make an opening statement. We might not get finished with business today. Obviously, you'll be aware that the bill does not specify the proposed rate of taxation to replace the existing UK air passenger duty, which we consider by the Parliament further down the line. However, some of you have experience of the administrative arrangements governing the current system. Are there any ways in which you would suggest that a new devolved Scottish system could improve on the current one in terms of administrative arrangements and what changes would you like to see and why? Feel free, whoever wants to kick that off. The new arrangement to be as similar as possible to the UK Government arrangements for our members, that was absolutely vital for them. We were quite pleased when the Scottish Government put out their consultation documents stipulating that the arrangements, the bands, the capital cities and the exemptions would be as similar as possible to the UK. We are very pleased with that. From our perspective, as simple as possible and as close as possible to the UK is what our members want. This is much more of an issue for the airlines in terms of the administration of this. As you know, what is very obvious is that it is one of the most efficient tax collection methods. I think that it is the most efficient. I think that there are two people in entirety managing that for the whole of the UK at the moment, so there are huge benefits of that simplicity as well for the consumer, where it is very clear to the consumer what that tax is and what they are paying for. I think that there is an argument that says, while we want to keep the bands and the administration, that there is potentially some argument for variation in levels. Clearly, that is the secondary legislation and the policy that we are probably more interested in in terms of its impact on the economic benefits. We would similarly say that keeping the tax collection structure as close to that of the rest of the UK in terms of being able to have the back of house administration that goes into collecting the tax would be helpful. We clearly have views on levels of APD, which perhaps we will come on to, but in terms of the actual structure and collection of it, yes, the administrative burden is a big factor in an airline's life making that happen and retaining that along the lines of something that we already have would be our view. Do you think that the collection process that is outlined in the bill is robust? Is it satisfactory or would you like to see any changes in it? We do not have any fundamental issue with what has been proposed in the bill. We are content with the suggestions that have been made and all that that we have heard in meetings with Scottish Government, which have been held with airlines to consult around that in the preparation to the bill. The line collection is more than adequate for our members, so there is no problem with that at all. Currently, we have monthly paper, so it is an improvement, so we are very happy with that. David, I am not sure from a train's perspective whether you have any view on that at this stage. Not on the administrative issues that the airlines face now. Okay. One of the key concepts underlying the proposed taxes in relation to chargeable passengers and chargeable aircraft follow the structure of the APD, as we know. What is your view of the definitions used? Are there any changes in the definitions that you would wish to have seen in the bill in order to improve the operation of the tax? That is probably Tim and Jonathan in particular. Again, in terms of the chargeable passengers and chargeable aircraft, we are very happy to have the same arrangements as what we have currently got with the UK, so we do not want any changes to that at all. We are very happy with what we have seen. In terms of the chargeable aircraft, it protects the exemption for small aircraft of below 5.7 tonnes take-off weight, which operates many of the lifeline air services. That is fundamental to us. We believe also that the other element is more around the existing exemptions being retained for connected passengers and for passengers who are travelling on routes that are operated under a public service obligation, primarily with either Scottish Government or with local councils, depending on the administering body for the PSOs. Broadly, we are comfortable with what we think is essential that those existing exemptions are maintained within the definitions of chargeable passengers and chargeable aircraft. I want to try and get in some of the members who did not get a chance to ask questions as early as I possibly can, but to enable that to happen, I need to get a more general question. First, Ivan, I am going to come to you to talk about the general— To go by it and reflect on the—or ask for your comments on the points that I was making earlier. The main point of the tax reduction going forward would be to generate economic activity, but clearly there is a differentiation there because some types of travel that you encourage will actually reduce economic activity in Scotland and the range of other economic activity that you might encourage. There is quite a range there in terms of the positive impact that it might have. I saw in the Edinburgh Airport analysis that you did two different scenarios based on the type of passengers that might be encouraged to travel, but that was a very passive approach to it. You were saying that this might happen or that might happen. I suppose that I am coming at it from the angle of what do we want to happen and how do we make it happen. Notwithstanding the fact that you have already commented on, you want to keep the thing as simple as possible, do you have any analysis or any comments to make on the type of travel that we might want to encourage for the good of the whole economy and not just to get more people buying their duty free for the good of the whole economy and any comments on that? I think that there are two fundamental impacts of our reduction, whatever the form that reduction takes. One, it reduces the price for travel in some shape or form and therefore makes it more accessible to people. That is more impactful on lower income people, I suspect, in terms of that being a meaningful change. The other thing that is really the bigger driver of the wider economy is the encouragement of further connectivity. That is obviously new routes and new airlines coming in. It is clear that different routes will have different impacts. It is fair to say that long-haul routes are seen as very attractive propositions, particularly those that are bringing inbound visitors. Equally, the whole of Europe is very, very fertile ground for inbound tourism in Scotland. In terms of volume and impact, that would be a bigger impact, even though the rate of growth may be larger on long-haul if there was a significant reduction. The advantages of that are that, even though offering more choice to Scottish residents will undoubtedly allow them to go to different places, it probably does not generate a huge amount of more outbound trips. People are largely constrained by their affordability and their time constraints on it, rather than the choice that they may just go somewhere different. Whereas, if we make Scotland accessible and affordable to get to and direct services are the best way of doing that, what we see every time is a very large increase in the number of inbound visitors. In fact, every single long-haul route in particular and most of the short-haul international routes that have arrived at Edinburgh over the past four years have seen a majority of inbound passengers over outbound. Is there international comparisons then? If you look at, for example, Copenhagen or Oslo, which I have got 21 million passengers just going through their main airports alone, never mind all their other airports. A step above where Scotland is in terms of the amount of travel that it has gone through for similar-sized countries, do you see in that scenario a significantly more outbound-type travel coming through? Outbound from Scotland? No, not from into those countries. I do not know if you have done any analysis on that, because clearly that is where we want to get to. We want to get to the level where you have got 21 million going through Edinburgh, same as Copenhagen. I absolutely aspire to 20 million. They do it in a certain way. They have a home-based hub operator, so a lot of the passengers that you see at Copenhagen, as they would in Heathrow, are actually through passengers making very little difference to the local economy, so that is not necessarily a great comparator. However, what we see is that if we have a significant reduction of having, we are going to see a very significant interest in airlines bringing new routes. We already have on record Call of Ease jets saying that she would increase passengers in Scotland by 30 per cent to the back of this. Michael Leary has been very robust about his intentions to increase if he sees it. If we do it quickly and if we do it very clearly, we will probably get an over-response because they want to demonstrate the impact. I say an over-response because we should not forget that even if we have to cross the board, we would still be the most expensive air passenger duty anywhere in the world other than Chad. All we are doing is reducing our discrepancy and our disadvantage. We are not getting ahead of the curve in any shape or form. On that context as well, there was a question earlier about, should we be worried about, that there is already success? We should remind the members that we only got back to the 2008 passenger numbers last year. While Edinburgh was in a lucky position that we have a very strong economy growing well and doing well out of that, you would not see the same about Aberdeen and Prestwick and many other airports at the moment. Ash Denham. It is important to say that last year we had 251 million passengers across the UK as a whole. Absolutely, it is great that Edinburgh and Glasgow airports are doing well, but that is not unique across the whole of the UK, with the exception of probably one or two airports in Liverpool and Dome Tees, for example. Most airports in the UK as a whole are experiencing very strong passenger numbers, but, as Gordon says, that is only getting back to where we were in 2008 before the economic crisis. It is also important to say that at Edinburgh and Glasgow and Aberdeen, there is still significant growth of existing runway infrastructure that we can utilise. I would rebut the point that you were making earlier, that, just because we are doing well in Scotland and across the UK, there needs to be a cap on passenger numbers. That is absolutely not the case. When you have existing infrastructure and spare capacity, we should be doing everything that we can to get more routes in and more connectivity. Jonathan, do you want to respond to someone as well? In terms of the economic activity, we believe that there is a strong opportunity here to make a real difference in the Highlands and Islands. This is around the current exemption that exists for flights from the Highlands and Islands and reciprocating that so that passengers departing from Glasgow, Edinburgh and Aberdeen to the Highlands and Islands are lifted out of APDs that it is today and ADTs that it will be in future. We believe that that will actually give the fastest return on investment in terms of the Scottish Government's funding of that, which will be well below £2 million a year in absolute cash terms of the tax currently collected from those customers. The reasons that we say that around a quarter of passengers travelling on those routes today are funded directly by public service such as NHS patients travelling, councils, all of those areas. Around a quarter of the tax income currently coming from customers flying from the mainland airports out to the Highlands and Islands is already funded by Government and therefore on the basis of not wishing to perpetuate a money merry-go-round, it would make sense to do that. In terms of growing the traffic travelling into Highlands and Islands airports, that will also allow us to generate more income for Hyal through the charges that levies to airlines like Loganair that will have reduced the subsidy that that has to take from Government. There is a fairly direct case before you get into what we think is some strong economic impact about encouraging tourism and encouraging business through the Highlands and Islands to do that. We carry around half a million passengers a year on routes exclusively within Scotland and all by one of those routes crosses a body of water. Trains are not a substitute in the markets in which we serve and also from an environmental perspective, the sum of a car plus a ferry journey to travel, for example, between Glasgow and Stornoway, is generating, depending on the way that you do it and the number of passengers travelling more emissions than an air journey directly from Glasgow to Stornoway. We believe that there is a strong case economically, a strong case environmentally and a strong case really for the indirect economic benefits through the Highlands and Islands of reciprocating that exemption that is there today. One of the early things that we would like to see happen under the Scottish Government's powers to levy the air departs tax is that those routes from Glasgow and Edinburgh are lifted out of ADT for flights departing to the Highlands and Islands. I know that Maureen Watt is going to ask you some of the questions, specifically on rural areas. Do not worry, David, we are going to get to trains as well. I have a couple of supplementaries. Ash Denham first. Yes, hello everyone. I am an Edinburgh MSP, so obviously we know Edinburgh airport is Scotland's busiest airport and it is also a really big employer in the area as well. I think that you have done a number of studies. Edinburgh airport have done a study themselves on what you see as the economic impact of reducing this tax. I wonder if you could share with us some of the findings that you have had there, particularly around the wider economic impact for Edinburgh and the surrounding area, but also in terms of the monetary value, maybe in terms of the GVA? The value that we think in terms of across Scotland of the reduction, and we have modelled this on just a halving of all because that was just based on the statement that we want to reduce the tax taken. It would vary if there were different bans and rates, but effectively we think that it is 10,000 extra jobs across Scotland, largely in the tourism industry, some of them directly involved in the aviation with new routes and new airlines, for example, and about 300 million gross GVA added across of that. I think that it was even more interesting that the revenue take is positive as well very quickly. There may be a modest lag as things take time to bed in and we get the growth that we are seeing, but if we have a very clear statement on policy, the airlines are actually very quick at responding and the benefits that we get from additional passengers, albeit playing a lower APD, is bridges some of that gap. We get all sorts of other revenue income streams with new taxes from employment, for example, and one of the biggest wins of the reduction in the unemployment benefits being paid is that people get back into employment and, obviously, are independently living their lives as a result of that. That is before we get into all the indirect economic values of the wider spend of tourists, for example, in the Highlands and Islands. Across the piece, it is one of the best investments that you are likely to see where not only do you get economic return but you actually get a cash return in through the Government's coffers. Obviously, you heard some of the session this morning when we were talking about, as somebody mentioned, that for a tax of this type it was one of the most expensive in Europe and possibly wider than that. The direction that the Scottish Government is looking at going at, how do you think that fits into the wider context, like what are other countries doing on this tax at the moment or recently? Although, with the exception of Norway, which has only just recently announced an increase in its tax, and I think that they are about to find out the folly of that, every other country has gone in the opposite direction and mostly have abolished. The only benchmark, which is an interesting one, I have never compared Scotland with Chad before, but it is the only country that we have actually on a par with. Every other country in Europe is either down at the two or three euros or free. We are a complete outlier in that regard, which is counterintuitive given that we are at the very north-west periphery on an island and we are incredibly dependent upon inbound tourism, where tourism is the largest employer in the country. That seems to me to be completely perverse logic. Effectively, we can reverse or at least address some of that by having it. Remember, we will still be significantly more expensive than just every other country. In fact, we will still be the most expensive than any other country in Europe, even if we have to across the board. That would seem to be a very logical policy to pursue. We did a report on this last year. If Scotland pushes ahead with a 50 per cent reduction and Scotland would improve for Shore Hall, it is standing by 38 places over the rest of the UK. For Long Hall, it would rank the ninth highest in the world, leaving England and Wales at the top of the league table. It would still be one of the most uncompetitive nations in the world, both for Shore Hall and for Long Hall, but it would be getting somewhere up the league tables. I would hasten to add that I do not think that Chad is the kind of place that we should be comparing ourselves with when it comes to air-ticket taxes and charges. I think that that is quite a useful analysis in terms of where Scotland would sit, compared to where it sits currently. One more question, just to bring in the train aspect of this. A lot of business travellers fly from Edinburgh to London. The train networker is concerned about the impact that it may have, so do you see that as being a factor for you? In our statement, we have said that there are clear benefits from reducing APD in terms of generating better international connectivity. Clearly, we all want to improve trade. We want to attract more tourists to Scotland and the economic benefits that that will bring. However, on domestic routes, our analysis is that reducing APD will simply result in a switch between modes, from rail to air in this case, if APD is reduced on the domestic routes, as is currently being discussed. That is absolutely something that we are concerned about. Rail has a great success story over the past few years with more services coming to Scotland investment in improving services and there is further investment either under way or being developed that will absolutely benefit Scotland's connectivity and Edinburgh's connectivity. Our view is that we absolutely need to protect that because that is as important as the international connectivity that Scotland is seeking. I will get deeper into real issues, so I will come back and let other responses. I know that Murdo Fraser has a question on that, but I want to follow through on other supplementaries in the area that we were in earlier, so Neil. Just for the record, I did not say that there should be a cap on passenger numbers. I was asking the very legitimate and reasonable question, which is why is it necessary to cut APD when passenger numbers are increasing. Obviously, I hear what has been said about getting up to the levels of 2008, but we have had a global financial crash in 2008. Obviously, there are wider economic reasons for that, but I just ask generally why have passenger numbers been increasing at Edinburgh and Glasgow over the past couple of years and do you expect irrespective of what happens with APD? For example, over the next year, do you expect passenger numbers to increase again over the coming year without cutting APD? I think that you are going to come at this from the wider market view. The wider European market, aviation market, is growing about 5 per cent per annum at the moment. If you are at 5 per annum, you are on market place. That is a fairly benign position where the UK economy is doing reasonably well overall, comparatively speaking. Oil prices are low, so fuel prices for airlines are reasonable and manageable. We are in one of the upswings in terms of the general economic. You should only really be taking any comfort from above 5 per cent growth, because otherwise you are just marking time for the rest of the wider economies. I would argue that one of the reasons you are seeing getting back to 2008 levels is a market correction. Effectively, you are seeing quite a significant move from presswick to Glasgow, for example, so that is not market growth overall. That is just market transfer. Edinburgh has done well because our economy has done exceedingly well in comparison to the rest of the UK. I would also like to think that we have done something right in terms of the way that we engage with airlines and point out the benefits that they can have. We are out there competing with hundreds of other airports around the world trying to make the case why airlines should make very risky and large investments into Edinburgh and Scotland rather than somewhere else. We have got good at that and we have come off of a position where we were shared ownership with Glasgow and, if you like, the gloves are off and we are prepared to fight our corner to get our fair market share within Scotland. All of that is true, but I do not want to over-encourage the idea that we are doing marvelously and it will continue. That is not the case. The economy is driving most of it. There is some modest upside in terms of some of the things that we are doing, but we are going to have to work really hard. My competition is not with presswick or Glasgow or Aberdeen. I am competing every day with the easy jet in Ryanair against Copenhagen, Barcelona, Rome and all of our other European competitors. That is the market that we should be looking at. We are massively under a guest against the wind because, physically, we are further away, so we have to burn more fuel and more staff time to get here. Our tax is the highest in Europe by a long way. Can I just—obviously, you recorded an 11 per cent increase in 2016. Can I just press it again? Do you expect passenger numbers to increase over the next year, 2017? We will grow in 2017, but we do not expect to grow by that much. The reality is that the aviation market is highly leveraged against general economic growth, and then you will get some local conditions. If the economy is growing at 2 per cent, aviation will grow at 4 or 5 per cent, but the converse is true. Most airports were seeing double digit declines in 2008 over to 2010, so it is not like it just lands on a lap. We have to work really hard at this. What happens in a constraining or flat market is that the airlines work even harder to find the margins on where else. If I put that in context, if we took a £13 APD departure tax that is levied, my average charge to an airline per passenger is under £10. I am out there competing, offering discounts to airlines to entice them away from Copenhagen, and I cannot even get close to matching what APD is before I even start. Even if I go free, we are still more expensive than all that tax, as most other European airports. I think that it is worth putting on the record that, according to, I answer the average profit per passenger for airlines is $7, and when you have a UK rate of APD at £13, that puts it into context. Our members have spent upwards of about $50 billion over the last 10 years buying 470 new aircraft. We have got 400 more on order. Some of those are replacing existing aircraft, but some are new aircraft that airlines are trying to get into new destinations to set up new routes and greater connectivity. They will go where they can get the biggest bang for their buck. EasyJets are a UK carrier, but they have got bases all over Europe. When you are only making a fraction of several pounds per passenger, if you have to, you will go into Europe, to Copenhagen and elsewhere in Europe, where you will make a bigger profit. Patrick, do you think that you have issues on the economy and on this as well? Yes, thank you. Good morning. Gordon Dure has talked about some of the economic analysis that is included in the written submission, and I just wanted to look at that. You have talked about the potential for additional revenues being generated for the public purse. I think that you have said for Government coffers that you were not clear which Government you meant. You have cited value-added tax, only a proportion of which is to be assigned in future to the Scottish Government. You have talked about co-operation tax, which is not devolved at all. You have talked about savings from the welfare bill, from the social security bill, which is not devolved, and it seems not to include any analysis of the proportion of people working in the aviation industry, who are claimants at the present time. You have talked about employment taxes using a study by Oxford Economics from 2013-14, at which point the personal allowance was significantly lower than it is now, and lower again than it is intended to be by the end of the parliamentary session. Is it not clear that not only there is no indication in your analysis of what proportion of the purported additional revenues would come to the Scottish budget, but that you are relying on research and studies that are out of date and cannot be considered as a reliable forecast of the revenues that might come through those taxes that are not devolved? I would welcome the request that I heard earlier when I was sitting on the back benches here about having the Government do a full and frank analysis of this. I think that that has been missing for some time. The fact that I am using 1314 data is because I have been arguing this case for seven or eight years, so we are a long way away from where we started. I think that it would be fantastic, because it is one of the accusations that we get if we commission it with a woody that wouldn't they? I think that that is unhelpful, given that if nobody else commissions it, we are the only ones that did. They are a very reputable company and they are independent in terms of their findings. However, I think that the right answer is that the Government brings forward a full analysis of the benefits of this revenue and economically. I hold up my hands. I have probably used the woody wouldn't they response myself from time to time, but you would agree, for example, just to boil it down. Your written submission, which still cite the Oxford economics research, talks about generating £900 million in revenues from income tax and £1.3 billion in revenues from national insurance. National insurance clearly is not devolved either. If we are looking at a substantial gap between 9,440 years of personal allowance when that research was done and 12,500, which the Scottish Government intends it to be by the end of the current Parliament, you would need to be looking at people earning significantly above 12,500 to generate any meaningful income tax from theoretically generated employment. We are talking about the tourism and hospitality sector, which are pretty notorious for poverty wages. I would not agree with that second part of your comment, but I do not think that it is for— You might, if you were on minimum wage. I am very closely associated with Visit Scotland and Scottish Tourism Alliance, and I understand the economics of tourism. I think that what they are is a very successful employer that has got lots of opportunity for growth, and I am very afraid of employers for this. You would agree with the basic point that employment generated would have to be significantly above 12,500 in order to generate any income tax revenue structure. I would agree with the point that the analysis should be done by those who understand those things. I think that if I may just add one point, the average salaries, certainly in Loganair, are almost double the level that you are talking about across the Highlands and Islands network. In terms of any job creation within our organisation, the salaries will be above that level. I am prepared to take your word for that. We are mostly talking about induced employment in the wider economy, though hotels, tourism, nightlife and all the rest. Before we move on to issues of Marie and the rule of issues that she has wanted to raise, I think that Liam did as well. Can I just clear this chad matter up a bit more? I know that in FIFA rankings, Scotland is 67 and that chad is 151. I understand why that has arrived at, but who has come up with the analysis that says that chad is the highest in the world and the UK's second in the Unscotlands. It is a world economic forum study. It does a study every two years on tourism and air taxes and airport charges, and we were 136,000 of 137 countries. Chad was below us, but it did not submit any figures, so it is conceivable that we could have been completely lost. I am really glad to ask that question now. Why we are so ineffective in terms of pricing in airports is all down to Heathrow. I think that what we should do is get the clerks just to do a bit of—so we can source that as a proper thing for members to be aware of, because it has been mentioned a few times. Thank you, convener. I agree with the concerns expressed by the panel to characterise the tourist industry as entirely a low-wage economy. I think that we would be doing it a disservice. It is a vital industry in the part of the country that I represent. I want to ask you particularly—I am very interested in your figures—about 25 per cent of the passengers' fares being directly paid by two Highland and Island airports being directly paid by either government bodies or council or NHS. I wonder if I could get a little bit more detail around that. I do not need much convincing that those are lifeline flights coming from the Highlands and Islands, so could you give me a little bit more detail about that? Does that include staff going on training, for example, or participating in networking opportunities? I used to work for the NHS and I did regularly have to fly just simply to maintain my ability to do my job. Yes, it does include those categories. We are able to take the data of customers booking with us, and we can clearly identify those travelling under the NHS patient travel arrangements that we have in place, which is around 50,000 passengers a year out of the half million that we carry within Scotland. Based on the information that the customer provides us when they book, such as an email address, if that is then registered to NHS police councils, we are able to then ascertain from that information where that customer is effectively working by the email address of the person who has booked the flight for them, and it is on the basis of that that we have come up with those figures. In fact, that might be an underestimate because I certainly myself booked flights using a personal email. It may, yes. I wonder if you could give me any numbers from the submissions that were received in the consultation around whether all flights from the Highlands and Islands should be categorised as lifeline. There was some questioning of whether flights to sun and ski destinations from Inverness airports should be included. Have any of you got any information about what proportion of flights that might account for from Highlands and Ireland airports? Small, if we look at the Highlands and Islands airports, total throughput of their route network, which is around 1.1 million passengers a year, and that includes Inverness, Loganair accounts for over half of their business. On the basis of that, when you also look at the Inverness to London air services, which have grown significantly, and the Inverness to Manchester and Dublin flights that we provide, I think the remaining level of services from Inverness to if I can call them sun and ski destinations is relatively small. Of course, it is something that they are trying to encourage to grow, and we support that because it brings down the overall cost-sharing burden of running those airport facilities. From memory, I think that there have been six flights this year to Mallorca, versus probably six a day from Gordon's. There is something of that nature at the height of the season, so it is a miniscule part of the wider piece that we are looking at within the Highlands and Islands network. I also want to ask about alternative modes of transport. You mentioned that all routes go over a body of water, and the one route that does not go over a body of water would that be Wick to Edinburgh? It is indeed Wick to Edinburgh, which, of course, is a journey that might as well be over a body of water by surface transport, given the alternatives, which is why it still flies. Train journey, six-hour car journey. We have a direct competition in terms of ferry services, and we see a direct interaction between ferries and air. For example, the road equivalent tariff introduced on ferries, the introduction of that to the Islay market in 2012 has had a direct impact on the Glasgow to Islay air service, where passengers are leaving Glasgow paying air passenger duty on that, and the ferry fares have been brought down through the introduction of RET. It is against that background that we believe that there are strong benefits in now, essentially through the form of aid of a social character, reciprocating that exemption that currently applies on the flights from the Highlands and Islands to flights departing from Glasgow, Edinburgh and Aberdeen to the Highlands and Islands from the new tax. Did I understand correctly that you had done some climate change impact comparisons so that you were looking at flights? For example, did you do Glasgow to Islay and compete it with a single-occupied car and ferry journey? We have done some outline work, so I will not profess to say that we have had a bevy of consultants working away in the background around this, but in terms of looking at the average emissions figures generated by both CalMac, but more particularly on the longer ferry routes, Circo Northlink, which operates the North Isle services from Aberdeen and Scrabster. Essentially, the longer the ferry journey, the worse the emissions get to that. Of course, ferries tend to depart from the closest point that they can sail from, which means that, normally, by implication, there is a long car journey to get to the ferry in the vast majority of areas in which we compete with our services. I think that you had some questions around this area as well. Did I get that right? A number of questions. Let me go to evidence and specifically the evidence submitted by Virgin Trains. There are some quite big claims in that evidence. Around 33 per cent of the southbound rail market would switch to air if APD were abolished, for example. What evidence are you basing that on? What studies have been done to draw those conclusions and how robust are they? It is based on conventional transport modelling, and it is based on the information that we have available to us at the moment. Clearly, there are a range of outcomes that all the research that has been discussed today and discussed in each item of the evidence needs some proper scrutiny, as was mentioned earlier. However, we believe that the research that we have undertaken is robust. We know that rail competes strongly at the moment with the aviation market. We know, for example, that the initiatives that we have launched in the past year have been successful at attracting customers from airlines to rail in part, as well as boosting Scotland's connectivity. 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 and a switch from rail to air. That will fundamentally undermine the case for further investment in the rail routes between London and Scotland. Have you taken robust evidence that suggests that your customers are making an active choice to take the train because they do not want to pay a £13 charge such that, if that charge were only £7, they would make an active choice to do something different? We have evidence that customers compare the price of the choice of the modes that they have, as well as factors such as the journey time and the connectivity, whether they want to go to Heathrow, for example, and then make the journey into the city centre or go directly to the city centre. Customers consider a number of things, and we absolutely know that price is one factor. Yes, but I am asking about the 50 per cent reduction. Clearly, when you are doing transport modelling, the prices of alternative modes are aggregated. You will look at the cost that a passenger would pay for the airfare, including the taxes, and you would compare that with the rail fare. In our analysis, we have applied the reduction proposed to the tax element and the results that we have shared reflect that effect. I want to reflect on what you are saying to me. It is your conclusion that, if the airlines were suddenly able to display a £7 reduction in their fare, that would cannibalise 33 per cent of your rail market. On the south boundary, that is what our research today has found. What does the airline say about that? As an ex-public transport modeler and a rail operator, I have never seen the elasticity of anything of that scale in terms of impact. I do not recognise where the numbers come from or how plausible that is. I am really happy to be in a competitive market, and we will stand on the customer service and the choices that we offer. It is a bit galling when a heavily subsidised industry is asking for their competitors to be taxed to be competitive. Can you comment on that? Our services between London and Scotland are not subsidised. This year, we paid £280 million in premium to the Government on a per-passenger basis that equates to slightly more than airlines pay under the band A for each aviation passenger. It is a real cost for the debate between you guys. I get enough debate to control between the politicians. I have a few folk who will ask supplementary questions, so I will get another chance because I have another three folk who want to contribute in the train area. Murdo, Willie, and then Neil are in that order in terms of... Murdo. Thank you, convener. I do apologise. My sincere apologies. On you go. If I may. I just wanted to turn the figures on to Mr Dure, because you talk about in your submission that the impact of a reduction in APD could be an extra 18 million passengers being flown from Scotland. On your analysis, where are those passengers coming from and where are they going to? They are largely driven. Those incremental passengers are driven by a bit of economic uplifting because that cost reduction will generate some outbound Scottish-based travel, but that is very modest. If we look at what is happening in a growing market at the moment, we are pretty flat on domestic travel, for example, but we are up at 20 per cent growth in international travel. Some of that is outbound, but the majority of all those new routes are inbound because it is making it easy for people to come to Scotland for the first time. The vast majority of that is international-based inbound travel that is coming through the attraction, and that is driven not by a £6.50 or a £37.50 reduction in the fare price, although some of that will contribute. It is driven by the fact that more routes can start because they become economically and financially viable for airlines to do so. Just on that point, because your submission makes a number of suggestions about the economic impact and positive economic impact of the change, logically, you would have gone on to say, well, there will be a negative or a potential negative impact on the train service and the supply chain to the trains and the jobs associated with that. Is that analysis being done? I think that there is definitely a different impact in different segments of the market. It is a natural thing to say that if you have got a well-established, mature, competitive market in this case with rail in terms of domestic, that the opportunity for economic growth out of that is lessened. Whereas if you open up long-haul markets where they have had no real attractive proposition to come to Scotland, you will see a massive increase in that. Europe sits fairly in the middle, but Europe is critical because it is such a massive pool of existing and future travel, whereas long-haul can grow at very high percentages but will never be a huge part of the total. The real win is going where people genuinely cannot make easy or affordable access to Scotland. When we do it, we see them responding in huge numbers. On average, when we have a connection that has gone from indirect, i.e. you have to fly through London or through Amsterdam or through Paris or whatever, we would typically see between a three and four multiple increase in the number of people making that trip, which is pretty heroic in the first place. We know that strong and that is the average. For example, when we easily get started up a Hamburg route, where obviously it is not very far away in distance and therefore travel time, but it was really inconvenient to get to via one of the hubs that we used to be, they actually increased travel between Hamburg area and Scotland tenfold, and 80 per cent of that was Germans coming to Scotland. I wonder then if, going forward, there is an argument for disaggregating the conversation away from—at the moment, it seems to me that we are talking about reduction in APD or changing it across the board when, in fact, what we should be doing is talking about international air travel and then having some regard to the alternative travel structures and what we do with that. On that point, I wonder, do we need to be thinking in a more sophisticated way, from an airline point of view and from an airport's point of view, in terms of what we do going forward in relation to stimulating the more northerly airports, where perhaps there are fewer alternatives? Rather than talking about a blanket reduction in APD, do we need to start talking about perhaps Edinburgh airport takes a hit, but Aberdeen airport gets a 0 per cent APD? I could start at the legal end of that discussion and tell you that you wouldn't be able to achieve that under the existing legislation, but I think that we should let the economy speak. What we're seeing is that Scotland led by Edinburgh at the moment, but that's because we're competing and because we're putting service out there and we're putting pricing offers out there to airlines are being effective. There's none to stop our competitors competing and they do so very aggressively, but we should back a winning agenda. The winning agenda here is not Edinburgh airport, the winning agenda is the Scottish economy, Scottish tourism industry as a whole and the education centre, the largest driver of passengers in Edinburgh these days is education and that's us exporting as well as people coming in. Effectively, we have got a hugely strong market, we should create the economic conditions and allow that to flourish. I think too much tampering, one gets into complexity and actually starts to undermine the value of it and secondly starts playing with things that you probably don't have as much control as you'd like to have and I include myself in that. You have to acknowledge that the market will speak and therefore just putting ourselves, not about the trying to play the game between up the A9 or across the M8, but actually we are trying to get into a competitive environment against the rest of Europe and the world, that's the reality. This is not about how we manage what's in within Scotland, it's how we make people want to come to Scotland in the first place. If you made it free in Venice, oh it is already, that hasn't had the impact that says all of the airlines are going to pile into Venice in the exception of Edinburgh. What it has said is making Edinburgh £13 as they'll go to Copenhagen. Under current EU law, as long as we are a member of the European Union, it would in fact be illegal under EU state aid guidelines 2, which use APD for one airport over another, as long as it was within I think about 60 miles. The UK Government has looked at this across the whole of the UK in response to this actual debate and it does pose a number of very challenging legal issues, which is why they have so far shied away from it. Can I get back to trains? That's all right, because I thank you for that contribution, because I think that you had an issue wanting to reason that trains at one stage is well turned, so that would give us a chance to get back there. Okay, thank you. I could go back to David Horne and just follow up some of the earlier questioning about trains. Personally, I thought that it was self-evident that anything that affects the cost competitiveness of trains versus airlines is bound to depress the number of journeys on trains. I think that we've been interested in hearing more about your specific evidence about the claims that you're making about reductions, but let me just move on a little bit, if I can, because we're looking at the policy that the Scottish Government's policy intent is a 50 per cent reduction in APD, but it's not specified whether that's an across-the-board reduction or how that might be split against a band A or band B, or whether those bands will be retained or whether some other new band would be introduced. The question that I've got from Mr Horne is, from the point of view of Virgin Rail, if the reduction in APD was targeted at a long haul that has been proposed, would that satisfy your concerns if domestic flights were left with APD at current levels? In simple terms, yes, it would. Our concerns are entirely relating to the domestic routes where we do compete strongly with air. I absolutely welcome Scotland's continued outlook internationally. Clearly, we all want Scotland to thrive. We benefit from a strong Scotland in terms of our core markets. Scotland is so important to us as a business, and if Scotland can attract more international flights through this policy, then, of course, it's good for Scotland and we would absolutely support it. Our concern is absolutely that reducing APD on domestic routes would simply achieve a modal switch, and that would be damaging in terms of environmental policy objectives, for example, as was touched on earlier, as well as economic objectives, because of the loss of connectivity that would result in the medium to long term. If I understand you correctly, what you're saying is that you see a potential reduction in long haul only as complementary to the provision of rail travel, and therefore that could actually have an economic benefit by bringing more people to Scotland who might then use rail services whilst they're in the UK. There's one more question if I can, because there's that. At the moment, we're comparing like with like. You're comparing Edinburgh or Glasgow down to London. Our short haul domestic carriers, you look at an airline like Flyby, most of their services are exeter to Aberdeen or exeter to Newcastle or Norwich to Aberdeen. It's very unlikely that someone is going to get trained to run those services. I completely buy the argument that you're making in terms of the straight journey from Edinburgh to London, but if you're looking to promote domestic connectivity from Scotland to secondary regions and cities in the rest of the UK, I would argue that reducing short haul by 50 per cent is going to have an impact on that. Also, by reducing APD on short haul, you are making it easier to... The argument doesn't take any... In terms of interlining through London, this doesn't have any impact on that whatsoever. You're talking about going from A to B and Edinburgh to Glasgow to London. If you're interlining through Heathrow to go to the States, it's very unlikely that you're going to go into use in the station and then get another train through to Heathrow. You're going to go via Heathrow to interline out of Heathrow. That's my argument around the trains and the planes. I get that, but connecting flights to an international flight would be exempt. From which airport? All airports. If I'm flying Aberdeen or Edinburgh to San Francisco... If you were going from Edinburgh to New York, for example, you would pay and you were interlining. I understand the legislation. It is your point of destination that you pay your APD on. If I'm flying to San Francisco from Edinburgh via Heathrow or wherever it's via, I wouldn't pay APD if the policy was to scrap APD for long haul only. If the policy is to scrap APD, yes, that's correct. Currently, you would pay APD on the long haul rate. One more question for Mr Horne first. There's a headline in a Scottish newspaper today that says this, and I might be paraphrasing slightly, Richard Branson on the collision course with Scottish Government over APD, which I think refers to Virgin trains evidence to this committee. However, Virgin Atlantic, I'm assuming, who are a member of Mr Aldersdale's organisation, will take a different view. Perhaps he could confirm that. I'm just wondering, do we know what Mr Branson thinks or is he in two minds on the issue? A bit of background for the committee. Virgin Trains East Coast is a joint venture between the Virgin Group and Stagecoach Group, 90 per cent owned by Stagecoach Group, of the views that we are putting forward, our own views as a company. Clearly, both of our shareholders have wider interests, but we are very much today, and in the submissions that we've made, we've been putting forward our views and our analysis that we've undertaken as a company. There's Tim Worcester, respondent. We all come as no surprise to you to learn that we represent both short haul, long haul, domestic carriers, so I'm not going to get into a discussion around the bandings or the Virgin Group. As we've said, we want to see the 50 per cent reduction across both bands, and I think I might leave it there before we get into 12-of-sale. Willie Coffey. As an earshore MSP, I'm really interested in the potential beneficial effect to the policy in some of the press week. I was fortunate to be at a meeting in Dublin the day before the Irish Government abolished the rare passenger tax, and Michael Leary was at the same meeting, who immediately the day after announced a series of investments, major investments in Dublin and so on and so forth. Gordon Eudes said, quite rightly, that the winning agenda is for Scotland and tourism, so I'm interested as a west of Scotland MSP in what the potential regional benefits will be for some of the press week. Is there any evidence that points us towards that, say elsewhere in Europe, that regional airports in particular countries and jurisdictions do get a spin-off benefit from policies like this? I think that the straightforward answers every airport that sees a reduction in tax is going to improve their chances of growth. That's probably the best way I can put it. That probably doesn't help me giving you my view and press week's proper possibility of achieving that, but it is a massive drag. I mean, what I would say is that we are generously provided for why good airports in the centre of Scotland are actually very well provided for in the Highlands and Islands as well. The opportunity to harness that asset base and the enthusiasm and capability of the management teams around Scotland is there, if we just take the handcuffs off. There was some of the displacement that occurred when the convener came from press week to Glasgow. We were in here with the Dublin flights from press week, and that, in my view, if we were to have this measure in, Aliri promised himself that if this measure were to come in, that he could double the passenger numbers at press week from a million to about two and a half million, he made that quite clear commitment on record. If that kind of policy were to happen for an airport like press week, that would, in my view, surely have a huge and beneficial impact on the natured economy. I think that there is some fairly clear evidence in Ireland following the abolition of the APD equivalent that the regional airports do benefit. It hasn't just doubling as grown by 40 per cent over the last three years in terms of traffic levels there, but I think that it's also very clear that there are additional links now into Cork, Shannon, Kerry and a wide range of points. At the same time as that, Derry, which is subject to UK air passenger duty, is losing its sole remaining air service to London and the Government is having to step in to do that because it is still subject to the APD. The model of what has happened in Ireland and the impact on the immediate periphery around that is something that I think would be a good benchmark for the scrutiny into the likely effects of the Scottish proposals. The Northern Ireland and Belfast international only retained its United New York service because it abolished the APD for it, so that was the difference between keeping that route from being cancelled. I just wanted to go back to the issue of potentially encouraging air travel within the UK at the expense of rail travel. I looked at an example yesterday of travelling in a couple of weeks' time from Edinburgh to London, and you could get a Ryanair flight from Edinburgh to Stanstead. Even including travel from Edinburgh City Centre to Edinburgh and including a train journey from Stanstead Airport to London City Centre, it came in at £63. On the same days, there was a Virgin train from Edinburgh that cost £115 return. I appreciate Virgin East Coast to special offers and £20 returns on sales, etc., but any time I have looked at travelling options between Edinburgh and London or Glasgow and London, it seems more frequently that it is cheaper to get a flight than it is to take the train. Why is rail travel so expensive between Scotland and the rest of the UK? Is that not something that needs to be looked at in general with respect to our position on the APD? If we want to increase rail travel, we have to make it more affordable for people to go from Glasgow to London or Edinburgh to London by train? I think that we would say that it is absolutely important that rail travel is affordable between Scotland and London, and that is absolutely what we have been seeking to achieve over the past two years since we have been operating the east coast route. Last year, we expanded our services, so between Edinburgh and London, there is now a half-hourly service. You do not get a half-hourly service to Stanstead with Ryanair, and the half-hourly service enabled us to offer many more than 1,000 cheaper tickets on the route each week. We are absolutely addressing the affordability point, and it is clearly important to our market. We are offering a different proposition and seeking to offer a different proposition to airlines. We are trying to take people between city centres to cut out the journey to and from airports, and the experience that people have these days is getting through airport security, for example. Our focus is on providing a high-quality frequent service where, on board, people can work with free wi-fi and entertainment systems on board between Scotland and London. We are attracting people through the customer experience as well as price. I fully agree with you that price is absolutely important. I do not really want to get into the debate between rail and air on whether or not who is giving the best deals, because that is not really about the bill. I think that you are probably going somewhere with us, Neil, in terms of the end of that. It was just to explore the reasons why rail travel is currently more expensive than air travel on a lot of occasions. Before you start, I really need to make sure, because times are marching on a bit, but I need to get the public finances issue and what James wants to raise on the agenda before. We haven't touched on climate change yet, either. I know that climate change is still to come into the rough. I assumed that you were going to pick up on some of that just now as well. I can deal with that now, if you'd like. I was just going to follow up on one issue from Mr Horn's written submission. It is just about understanding clearly the implications of what you are saying. You said that, as a business, you have no objection to increased international aviation coming to Scotland, but you are concerned about the environmental impacts of a modal shift away from rail within domestic flights. I think that we are half on the same page. I am concerned about the environmental impacts of both. Is your analysis of the modal shift that you are predicting predicated on the Scottish Government only reducing the equivalent tax on domestic aviation? If the UK Government responded in kind by having a similar tax cut south of the border on domestic aviation in the other direction, would that increase the modal shift that you are projecting? We will confirm that to you separately if I am wrong, but my understanding is that our analysis is purely regarding changes that the Scottish Government would take. Going back to an earlier point about our analysis, the reduction of 33 per cent is the impact we have assessed based on an abolition of ADT on Edinburgh to London rather than the 50 per cent reduction. However, we have not assumed anything in relation to how the UK Government may respond— It would be reasonable to assume that if the UK Government was to respond by implementing the same kind of cut on APD, on domestic travel from their angle, from their perspective, it would have a similar impact on the attractiveness of rail in general for those long domestic connections and on, for example, the value of the franchise that was put out to tender again. It would clearly have a further impact and that would need to be assessed. Do you want me to touch on the climate change? Before I explain that point, I know that David Horne had real issues in terms of time. David, are you okay now? I think that midday was your original position. You need to be away by. I am happy to stay. That is what I am saying. Okay, you are happy to stay. James, I was going to bring you in. Are you content if we just get on now to climate change? I am okay, so I am managing this properly. Thank you. On climate change. The most recent commitment that I could see from the aviation industry is from a number of years ago, 2009, to commit to international negotiations to halving CO2 emissions. I am assuming that that means overall climate change impact, but it says that CO2 emissions by 2050. Can the aviation industry representatives tell me whether that is still the commitment of the industry and whether that approach to a new tax is compatible with achieving that goal in terms of Scottish aviation? Yes, so aviation has signed up to global targets from 2020 carbon neutral growth, and by 2050 a 50 per cent reduction in CO2 emissions based on 2005 levels. So I can give you that assurance. That is still the commitment. That is a voluntary commitment from the industry, so I can give you that assurance. Thank you. That is very key. Can you explain to me how the increase in aviation levels that you are aiming to see as a result of the Scottish Government's policy in this area is compatible with halving emissions from aviation by 2050? The industry working through sustainable aviation has predicted that if you look at demand forecasts, that will go up by around about 50 per cent up to 2050. We can comply with our climate change commitments and still meet that additional increase in passenger numbers through a variety of mechanisms. The increase in Scottish flights will be relatively small compared to the increase that we are going to see in terms of the UK and globally, but through a variety of mechanisms we can see an increase in passenger numbers while reducing our emissions and hitting our global target. There should not be any objection to locking in that requirement for ministers to achieve that impact on aviation emissions when they set the rates and bands of the tax. It is not something that I have given great thought to. All I can say is that as a global industry, the other commitments that we have made for a number of years and we are absolutely on target to hit them, and by 2050 we would like to see a reduction by 50 per cent on 2005 levels. We are now seeing, as a result of the measures that we are taking, we are now starting to see emissions come down. The primary method through which those emissions will be achieved is the adoption of new technology, and in particular improved engine technology within the industry that will bring the fuel burn down. The other point, particularly in respect of our business within the Highlands and Islands, is that operating with a lower cost base will allow us to increase the number of passengers. That will probably be initially done through operation of larger aircraft, which per passenger carried will still generate the growth, but will have a lower emission per passenger through economies of scale by operating larger aircraft. I do think that there is no contradiction between reducing or abolishing ADT and continuing to see reductions in emissions, because the industry, hugely cut-throats place to operate, will continue to adopt new technology all the way through that because it has to remain competitive. The one thing that we cannot guarantee with any certainty is around the price of aviation fuel, so airlines will always make every effort to try to minimise their level of aviation fuel burn and run their business as efficiently as possible, which is consistent with minimising the emissions that we generate by burning that same fuel. Without wanting to get into a technical discussion about the achievability of this, which would take a very long time, and we might not end up agreeing by the end of it anyway, the confidence that you are suggesting exists not just on increasing efficiency but on halving emissions compared with that target. Overall, emissions are not just efficiency. The confidence that you are saying that you have in that surely would leave us with no problem at all in placing a legal requirement on ministers to achieve that impact when they set the rates and bans of those tax? First of all, there is a level of global impact around the whole question, but the other question is, if you do not achieve that, what mechanism are you going to use to recover the ADT that has not been collected from customers over the period of that time? I am struggling to see how what you are proposing, while I understand the rationale behind it, could actually be put into practice. Over the course of 10 or 15 years, passengers have been charged either no ADT or a reduced level of ADT. At the end of that time, the industry has not met its target. How could you realistically go to each and every customer retrospectively with a setting the captain's hat around for a whip round to collect the tax that you have not collected? I cannot understand how the concept of driving that would work. What I have suggested is that a requirement on ministers to ensure that the rates and bans of tax that they propose are compatible with that objective, that the industry seems confident that it is on track to achieve. I want to say that those are global targets. Obviously, aviation is an international industry, so we cannot look at those targets in a Scotland-specific way. The Committee on Climate Change has been quite clear that action to tackle emissions needs to be taken globally or regionally. Looking at it purely from a Scottish perspective, I do not think that it is quite a blunt instrument. It probably means by everyone rather than by someone else. Gordon Drew has been quite eager to get in as well, Patrick. It is just the observation that, while that is utterly crucial for us, we should get carried away about what impact it is going to have on the global aviation industry. This is a market share play. EasyJet has got fleet orders. Riding has got fleet orders. They are not going to order more aircraft because Scotland has reduced HBD. What we are going to do is take the same aircraft away from other European countries. This is a market share play simply by getting down towards the levels of tax that others charge, which is largely nothing. Effectively, we are not going to have any net impact on emissions as a result of this. There will be of course some marginal additional travel, but, fundamentally, this is a market share play. One of the other benefits of doing direct services, which is what we are going to get out of that, is that we avoid the very inefficient hubbing through other airports. Clarif, are you saying that there will be no net emissions impact from the Scottish Government's policy on halving and then abolishing APD? I am saying that, in global terms, it will be extremely small. I think that the climate committee said that it was 0.1 per cent impact of doing this. I think that that was an abolition called the put on it as well, so utterly manageable, because the vast majority of what happens as a result of this is that you take aircraft that we are going to be assigned to Spain, Italy or Germany, and you assign them to Scotland. There is no net impact on what that aircraft emits. As we have yet to hear the environmental impact assessment from the Government, it seems that everybody is unclear whether it is small or non-existent, but let's wait and see. Our members have invested in... Patrick is just making a statement. He wasn't asking a question. If we just stop making statements back and forward, we are not going to get anywhere, so forgive me. Let's get on to the public finances issues now, and James, please. In the interests of time, convener, I will try to boil this down to one question. We heard in the previous session discussion about the potential impact on public finances. Obviously, the objective of this is a 50 per cent reduction in ADT by the end of 2021. The financial memorandum shows that OBR forecasts for APD revenue, if there were no change, would for the Scottish element of that would be £378 million in 2020-21. Therefore, a 50 per cent reduction could mean up to a reduction in nearly £200 million in the Scottish budget. In those circumstances, the budget then becomes about choices in terms of the priorities that people have to make. Do you think that it's right, therefore, if there was a reducing budget, given everything else that's going on, that a council would not be able to pay a care worker employed in a care home a living wage, whereas a couple on a joint income of £60,000 would be able to enjoy a reduction in their airline tickets? The strongest answer that I can give to that is to refer to the point that I was making about the economic effects in Ireland, where this has been done, it has been proven. That is an economy with a strong tourism base, exactly the same as Scotland. There will be economic evidence to draw on, rather than just being a leap of faith into the deep end of the swimming pool before those decisions are taken. I would strongly encourage benchmarking to be done in terms of the wider economic impact that that has had in Ireland from doing exactly the same thing as it has been proposed here. I think that that will take the guesswork, the uncertainty, out of the whole equation, particularly in respect to the committee of ministers taking this ultimate decision. I would just echo that. As I said earlier, it would be really helpful to get one baseline to model that people can trust from independent resources. I think that the evidence that, if you look at it within the whole UK, that both the economic growth is unchallangibly positive and the revenue to the state, if we call it that for the moment, with the combination of Scottish and UK, is positive as well. I am not even going to step into the equation about how you then reconcile that between Scotland and the UK Governments. However, to me, as a UK and Scottish resident, that is wooden dollars. I know that that is not the reality in terms of the way that the Government has run in Scotland. However, this is one of the best investments that you are ever going to see. This is not a tax cut and a giveaway, this is a huge investment. If you listen to the tourism industry, you are entirely neutral in aviation per se. They are saying that if you wanted to hit the 2020 tourism target, one of the biggest economic engines that Scotland has got in front of it, the most important single thing that you could do is follow through on the stated policy of having APD. Even if that means that care workers with care homes are not able to pay the living wage? It does mean that. What I am calling for is someone to have a look at the data and see where the implications are. Within the UK, it is undoubtedly going to be a renewable generative. I would hope that you are very close to that, even at the Scottish dimension, but I am not a tax expert and I cannot do the modelling for the civil service for them. I think that the economic benefit, even if there is a lag in that overall benefit for Scotland, the economic wider thing of having more people employment, better standards of living and everything else that goes with that says that this is one of the best investments that is facing it. A policy question for the minister to ask and then understand what James has come from. In the interests of transparency for all of us on both sides of this argument, that is the Scottish Government investing not a huge amount of money in an economic study, I think would be very, very beneficial. I think that we have come probably to the end of that particular evidence session, so I thank very much to the individuals who have come along today to give us evidence as part of our consideration of the Air Departure Tax Bill. I guess I will be paying a lot more attention to the comparisons between Chad and Scotland in the future and in a lot more areas. I will now close this public part of the meeting. We are moving to private.