 Fawr y cymdeithasol a chyfnodau sydd yn cyd-ddiwedd wedi'i gweithgaf nhw i ddweud o gyfnodau Cymru yn 2017, a fawr eu cymdeithasol yn gyd-ddiwedd a chyfnodau sydd yn cyd-ddiwedd a chyfnodau o gydag yma. Fy hollwch chi'n mynd i gydag i gyrfaen nhw i'r ddigwyddu iawn, i ddweud i gydag i ddweud i gydag i gydag i gydag, a fawr i gydag i gydag i gydag i gydag i gydag i gydag i gydag i gydag i gydag. I welcome to the meeting, Elaine Morimer, who is the chief executive, Neil Ferguson, who is the head of strategy and change. I invite Elaine Morimer to make a short statement if she wishes. Yes, if I may, convener, and good morning everybody. Thank you very much, convener and committee members, for inviting us to your meeting today. Neil Ferguson, who is sitting next to me, is a programme manager to implement air departure tax in Revenue Scotland. Together, we hope that we can provide some insight and indeed some assurance as to the work that Revenue Scotland is undertaking to ensure a smooth transition to its introduction in Scotland. As the committee is aware, our role is not policy formulation, that is for the Scottish Government, and our interest therefore is primarily in part four of the bill. Revenue Scotland has been operating since 2015 and is the tax authority in Scotland with responsibility for the collection and management of the wholly devolved taxes, and air departure tax is the third tax for which we will assume responsibility. The others being lands and buildings, transaction tax, including the additional dwelling supplement and Scottish landfill tax. The approach that Revenue Scotland takes to its work is grounded in the four principles of taxation set out by Adam Smith—certainty, efficiency, convenience and taxes that are proportionate to the ability to pay. In addition, we have taken a digital first approach using technology to best effect, and those principles will underpin our approach to the implementation of air departure tax. Our electronic system for registration and making returns has proved to be secure, reliable and robust, handling around 115,000 tax returns annually, with 99.97 per cent reliability. It has the capacity to accommodate air departure tax, and our plan is to design a new module that will be added to the existing system. When we considered the options for administering the new tax, that represented the best value for money and was the most sensible from a risk perspective, offering stability and security. It was clear, too, from our early engagement with aircraft operators that there was strong support for an online system, particularly given that the UK system was paper-based until January this year. In our first two years of operation, we have established a strong reputation for working collaboratively with taxpayers, their agents and representative bodies, as well as other key institutional bodies in the Scottish tax scene, including the Scottish Fiscal Commission and the Scottish Government. We are grateful for the continued support and sharing of information by HMRC in helping us to prepare for air departure tax, as well as colleagues in Scottish Government and Transport Scotland. In each of those bodies, as a seat on our programme board, we have established to oversee our work. Air departure tax opens up a new range of taxpayers to our organisation, with many tax operators being global businesses, not domiciled in this jurisdiction. While that may present challenges, we are mindful of that as we develop our implementation programme, where we will build on our external engagement with taxpayers through face-to-face meetings and using digital technology to reach them as best as we can. For example, our advice and review group is meeting again in London this week with a number of aircraft operators. The new tax will also bring different challenges with our compliance work, particularly where enforcement becomes necessary, but those are things that we have time to plan for. We know from our other work that engagement with taxpayers and their representatives is key to the successful development of our systems, processes and guidance. Once again, we will be looking to the aircraft operators to test our systems and to assist in the production of our guidance. It is relatively early days for our programme of work to bring the new tax into effect, and we would be happy to update the committee at any point in due course as that work progresses. The committee has obviously previously heard evidence that the administrative arrangements proposed for the collection of ADT are very similar to the current arrangements for the collection of UK air passenger duty. What would you highlight are the main differences and what improvements can you bring to the system in the way that you are going to go about it? There are two key differences, and I will no doubt add some more, but there are two key differences to the administrative arrangements for aircraft operators. The first is that we will be moving from requiring them to produce a monthly tax return to a quarterly tax return. On the face of it, that would be administratively more convenient for the airline operators, and indeed that is the information that we have had from them and our work that we have done so far with them. The second key difference is that we will be moving to using our online tax system for the aircraft operators to register with us and to submit their tax returns. HMRC has just recently introduced its own digital system in January, but it is obviously very new. If I had been sitting here in November, I would have been saying that it would be a fundamental change, but they have moved towards a digital system in HMRC, so it is less new for the aircraft operators. Are there the two key differences, as I see it? I do not know if there is anything else that you would want to add? There are one or two other minor things. Revenue Scotland will collect the tax rather than HMRC, so that is a change for aircraft operators in terms of who they are dealing with. We have a requirement to publish the register of taxable persons under section 13 of the bill. The other thing that we are going to be introducing is the opportunity to pay by credit or debit card, which is not currently available under UKAPD and is not something that we have done before, but we think that it would be helpful to particularly occasional operators for the purposes of the tax, so they would be some other key differences. In your submission in page 3, you outlined the number of processes that you handle in regard to LBTT and SFLFT returns in that regard. Is there any estimate available that it may be that it is in the financial memorandum that the policy memorandum will forgive me if I have missed it? Do you have any estimate yet of the number of actual transactions and returns that you are going to be dealing with on top of what you are already doing as an organisation? Neil Hamilton will be able to provide some detail for you. If we start from the number of aircraft operators that we are expecting to deal with, I think that it is 150 aircraft operators that we call, I think, legacy airlines, so the main airlines, and then we are expecting a much smaller number from occasional operators. If you set that against 115,000 tax returns that we receive combining landfill tax returns and lands and buildings transaction returns, it is going to be a much smaller amount. It will sit somewhere slightly greater than landfill tax but much less than LBTT. It is helpful to give an overall perspective. There are a range of questions that people want to ask about software issues, the change from paper to computers reporting issues, time issues and some of the complexity. Willie, do you want to kick this off? Thank you very much. Good morning to you. My interest in the software component stems from a long career in software design and development, so I am quite keen to understand a wee bit more about where we are in relation to specification and design of the software. I note from the financial memorandum that the provision for it is about £120,000, which some members feel is a wee bit on the modest side. First, could you tell us where we are in terms of development of the software and the module and how soon do you think you will be able to, you need to require details about the actual operational arrangements for the tax so that you can build it into the software? The starting point in answer to your question is to remind the committee that we have an existing system. A lot of the fundamental elements such as the main platform for the management of the tax, how we would expect operators to register, the fact that it is web-enabled, all that functionality already sits there. When we implemented the additional dwelling supplements, we went through a similar process where we had to make amendments to our existing system, and that went through very smoothly. For this tax, essentially what we are going to do is develop those bespoke areas purely for this tax, which are not that different in many ways from what we have for the returns that we receive from landfill operators. It is very similar. In a sense, that might explain the sort of background. In terms of where we are at, in terms of specifying what we need there, we are at the early stages. We have an established relationship with the supplier because it is our current supplier, so we do not need to go through a procurement process specifically for this. There is provision within the existing contract to enable this module to be developed, and that means that we do not have the time scales associated with procurement. In terms of the actual specifics, we have started our process mapping work now. We have a business analyst working with us who is working that through. We will be working with the developer over the summer with a view to us having a system that we can test late autumn. Neil might want to come in and add some more detail. In terms of how much notice do we need? Part of the beauty of the system that we have is that we have quite a lot of flexibility in there. If bands change or rates change, that does not cause a huge amount of difficulty in terms of design. What would create more difficulty for us, and we are not anticipating this, but what would create more difficulty for us would be if the fundamental framework of the tax is based on altered. Clearly, we are operating on the assumptions about what is in the policy memorandum and what Government's publicly stated intentions are for the broad framework of the tax. Neil, do you want to say anything in addition to that? A little bit more on the business requirements, as Elaine said. We are being dealt with just now. We have a workshop with aircraft operators tomorrow to go through some of that and look at the early screenshots of how the system might look and get some user feedback on the early development of the system. Ultimately, we are looking to prepare the functional specification for the IT system through the course of March and April. That would lead to a work order request around about May time to start the building of the actual system. Again, taking the collaborative approach that we have done in the past with the previous devolved taxis, we are looking to involve aircraft operators again as users of the system to do some user testing and get their feedback on that. In terms of the cost, the reason that it appears low is because we are not building the platform, as Elaine said. We are adding something to an existing platform. The existing platform already deals with user accounts, it deals with security measures and so on. We are not building a system from scratch here. We are not doing a completely bespoke system, which is why it looks perhaps lower than it might otherwise have done. We need some of the risk out of it as well. One other point. I mentioned the experience that we have with introducing the additional dwelling supplement. In terms of how much this will cost, we have a good benchmark there. It is fair to say that we have built in a reasonable contingency into the 120s. As it stands at the moment, we are not expecting to require all of that funding. On the transaction numbers that the convener mentioned, it is likely to be significantly higher in ADT than it perhaps is with the land and buildings transaction tax. In terms of the number of transactions that you will be entitled to take tax from in terms of individual tax payment. No, we are expecting it to be much less than LBTT because the taxpayer will be the aircraft operator. It is the aircraft operator who has the responsibility to submit the tax return. The obligation on them is to collect the data of the passenger numbers and break it down to the relevant bans and apply the rates and make the return. What we will get from them will be an aggregate return, if you like. The powers that we will have will be to drill into that and seek background data from them to test their compliance with the legislation. It is a small number of returns in relation to LBTT. We can do it within the budget that you have highlighted. The departure tax that we are expecting returns to be in the order of under 500 per quarter opposed to LBTT where we get around 10,000 per month. It is a different scale altogether from LBTT and is much more akin to the Scottish landfill tax. We are applying quite a lot of the learning that we have gone through over the years with the Scottish landfill tax to how we are going to deliver the departure tax just because it is similar in scope and complexity. Thank you. It is helpful. You have got a supplementary answer, so I am sorry. Just to drill a little bit further down until you talked about the readiness of the system and the way that you have designed it and what you perhaps could not cope with. I am just coming out from an overview that says that the purpose, obviously, of the policy is to stimulate economic growth. It may be that when we look at my policy point of view we come to some conclusions that say that there might need to be many more bands, there might need to be differentiation between types of passengers, there might be differentiation between time of the week or time of the year. There could be a whole lot of different things depending on how the policy discussion goes that enable it to focus down on specifics to stimulate growth for certain businesses in certain areas, for certain distinguished, perhaps, between outbound tourism and inbound tourism. There are a whole number of variables. I suppose the question is at what point does what you have designed start to not be fit for purpose if the policy does go in those more complex directions? The advice that I have from my team working on this is so long as the fundamental structure of rates and bands is there. It is not that it does not matter, but we can accommodate a number of rates, being accommodate a number of bands. A more complex system, a more sophisticated system such as you are describing, actually places potentially a bigger burden on the aircraft operator because, ultimately, what we will be getting in will be the aggregate return against all those different categories. We can design a tax return that has the fields required. It is the obligation that will be on the aircraft operator to have their systems and processes amended to be able to provide us with that information. It would really be them rather than you that would find most of the difficulty there? I would expect so. It is at least as we can design the tax return. The key thing is that if it is on a per-passenger basis on the basis of tax bands, as we have at the moment, our system—we have done the same with the first two devolved taxis as well— our system has to be flexible enough to accommodate changes of rates, changes of bands, additional bands, removal of bands, and we can handle all of that. It is where the entire structure of the tax has changed. If we did not do a per-passenger tax on the basis of tax bands as is set out in the policy memorandum, that is our assumption at the moment that that is the way that the tax will be structured and framed. It could be something around a type of passenger, for example. It depends on the variables. We can build variables, but, as Elaine said, the more variables you add into the mix, the more complicated it becomes for airlines in particular. It might be that the airlines need more time or have to deal with that complexity. Ultimately, they will be filling in a tax return that we will have online as a form. That complexity comes in the policy memorandum. I suppose that there is a quick follow-up to that that you hinted on earlier. Auditability, because at the end of the deal you will get is something from the airline that says we owe you £1 million. What is the process whereby you are able to go back and drill into their passenger numbers and their records and how often do you expect to be doing that to ensure that you are getting the correct information on the return? Part of the team that will be established in Revenue Scotland for having responsibility for the management of this tax. Part of their role will be to do that. That is what we would be class as compliance work. We will be designing our, if I can call it, strategy for compliance for this particular tax over the next year. We will have powers under the legislation in the same ways that we have for our other taxes, to open inquiries, to require the taxpayer to provide us with information. We will have powers to drill into that information to go and visit them and their premises. We will have powers to get to the information we need. We will also be able to access other information not held by the taxpayers to check against so that we can work with the Civil Age Aviation Authority, for example, to look at passenger numbers, passenger flows, because they will have that information too, and match that against what we are seeing in terms of the data that comes from the aircraft operator. We will also have, as we have with our other taxes, information sharing agreements and MOUs with HMRC. Our compliance work will enable us to access data that the HMRC might have that would also help check against what the aircraft operator is submitting by way of a return. In a sense, the approach that we would take for this tax is pretty similar to the approach that we would take for other taxes. That's great. Liam, you still got some ideas of what you want to add? No, that's fine. Most of it's been covered. In that case, Marie, you had issues on timing. Good morning. I have a slight concern. It might be me that's unable to understand an issue around timetabling, so the airlines are telling us that the tax needs, the bans and rates need to be published or public about a year, a year and a half before it's introduced in order that they can charge it. Is that going to be an issue in terms of collecting? Is that going to add a complexity to the system if it's not made public until a short time before it happens? I suspect that the airlines or aircraft operators would be making that point to the committee because they would be thinking about it from the perspective of planning their business and what they would be charging passengers. From our perspective, it doesn't really impact on us that issue because we will be requiring them to provide us with tax returns for their first quarter of business starting from 1 April next year through to July. The first tax return that they would need to send to us would be summer next year, and that would only cover flights that they have operated from 1 April departing from Scotland. There has also been the situation, as I understand it, in the past where HMRC has made changes that have introduced exemptions to the existing UK tax and introduced them from a date when the airline operator has already charged that tax because they have taken bookings prior. Our understanding from HMRC is that the airlines have all been very co-operative in working with the bookings that they had taken and reimbursing. Not all of the airlines also, as I understand it, pass the tax on directly to the passenger. So their issue with timing is to do with their ability to plan their business. Yes, well, to plan their business. Just to follow up on the questions about implementation, first of all, I am still a wee bit unclear how much flexibility you would be able to cope with without there being an impact on your implementation of the tax. If, for example, Parliament chose to take the bill in a different direction, if Parliament chose a different structure to the tax, if Parliament chose to change the requirements in relation to fiscal representatives, if Parliament disagreed with the Government on the question of monthly versus quarterly returns, how much change would you think is tolerable without having an impact on implementation? Are there particular changes that Parliament might consider that you would think are problematic? There's a lot in that question. Actually, it depends what the changes are. So if Parliament were to decide what to take, for example, of moving from quarterly to monthly, we would be able to accommodate that. If it depends what the changes would be around fiscal representative, I can't off the top of my head think of changes that would affect our ability to implement for the first of April. The fundamental issue for us that might cause an issue for us is the underlying structure of the tax changes. If it moves away from being based on passenger numbers on rates and bans, we would need to look at the detail of what Parliament was wanting to have changed and we would be able to provide Scottish Government and Parliament with advice on that in terms of the impact on us. Ultimately, what we need is the ability to get a tax return in with the data that enables us to be able to check that the right amount of tax has been paid. I think that if there are fundamental changes to the structure of the tax, as we said before, it might have us issues with our IT. It would depend what the nature was. It's more the impact on the aircraft operators and on the airlines. Remember that they also have systems because the obligation is on them is to hold the data and to be able to provide the data in a way that we are able to check that it's right. I also just wanted to ask about the European Economic Area. There are three references, I think, in your written submission to the European Economic Area, mostly in relation to the appointment of fiscal representatives. I was just unclear whether there was an implication in there that if we find ourselves outside the European Economic Area there are consequences which would be problematic. The issue that we wanted to bring to the attention of the committee about the fiscal representatives in the European Economic Area is that it's a change from the current UK system and the reason that it's a change from the current UK system is because of the Parliament's obligations to respect European law in legislation that this Parliament passes. The change that we will experience as the legislation currently stands is that aircraft operators, rather than being obliged as HMRC is able to do at the moment, rather than being obliged to have a fiscal representative within the UK, so that HMRC only has to deal with fiscal representatives within the UK, what we will have to be ready to do is deal with fiscal representatives located anywhere within the European Economic Area. You could imagine from a compliance perspective or a debt recovery perspective that could give us slightly more complexity than dealing with fiscal representatives based within the United Kingdom. The potential problems that you flagged up there are to do with language or communication or enforcement. Would our position outside the European Economic Area if that comes about, would that exacerbate the potential problems around enforcement or collection or any other aspect of how the system is supposed to work? I would need to take legal advice on what the impact would be. It may well be, it depends, of course, what happens with Brexit, but it may well be that, in the event that we are outside of the European Union, that there could be changes made to this legislation to, if you like, give us the opportunity to insist on a fiscal representative within the UK or within Scotland, rather than the aircraft operators being able to have somebody based anywhere within the European Economic Area. That is a legal question, and it would also be a policy question at the time. Do you happen to know what the relevant situation is in other countries within Europe in the broadest sense but outside the EU? Do they require a domestic representative for those kind of arrangements? Or are they able to operate for this purpose that the EEA is a larger area? I am afraid that I do not know the answer to that question. I am not sure about that one. Thank you. It might be useful if you could follow up on some of that and just let us have a note because obviously we will have the minister next week and we can ask him similar questions. Liam, I think that you had a question in this area. Yes, thank you, convener. It is just a very quick one, a matter arising from something that you mentioned, Ms Lorimer, which was, entirely, your area, but you said that not all the airlines pass the tax on to their passengers. Are you able to elaborate on that just because we have obviously had a number of witnesses previously saying that if you cut the tax, then that cuts the cost to the consumer therefore there will be a modal shift. But if the airlines are not passing the tax on in fares, then that might not happen. I just wondered if you were able to elaborate on your statement. My understanding is that there isn't any obligation on aircraft operators to pass the tax on. So it's a business decision that they are making to pass that tax on if that's what they're choosing to do. Do you have any oversight on how many, what proportion are currently passing on? I have no information in relation to that, I'm sorry. All right, thank you. I just have a thought in Patrick's question around the fiscal compliance individual. If the legislation currently is stating that that individual needs to be based on the EE area, in your response to this, could you consider whether or not the legislation needs to be a bit more flexible in terms of the longer term if, for whatever reason, we're outside the European Union and outside the EEA? I think it would just be a reflection that would be helpful for us as well, I think. I think that... If cell in it and our nearest neighbour is still outside of it. Indeed. There's lots of potentials. I'm looking for general flexibility in the legislation. We will see what we can do in relation to that. That's obviously a legal point. It's also perhaps a policy point. Scottish Government would clearly need to have a view, but yes, we will see what we can do. I think that the other thing to say though is that the way it's currently crafted is because of the way the law currently stands. I understand that. At the moment, the fiscal representatives for UK APD are to be based in the UK. There's no obligation, but there's the possibility that any aircraft operator outside the UK with no European economic area that has no presence in the UK may choose to use their existing fiscal representative in the UK that they use for UK APD for the purposes of air departure tax, in which case we would still be dealing with someone based in the UK. There's no obligation on them to do so, but there's a possibility that they might, so that would make things a bit easier. I'm going to this too far, but you could just have a situation where the legislation here requests somebody who's based in Scotland and that deals with everything. That gives us maximum flexibility, but I'll leave you guys to come back and tell me that if you want to. Ash. Good morning. UK APD obviously works on monthly returns as you mentioned earlier in a response location, but Revenue Scotland obviously wants to move to ADT being monthly data on quarterly returns. But the CIOT, I don't know if you've seen their comments, they said that they felt that Revenue Scotland's arguments in this were not entirely valid and they also had concerns around the fact that because landfill tax also is based on a quarterly return cycle that this could create a bit of a workload pinch points on the returns in it once. Would you like to speak to that? I'll answer the second bit of your question first, if I may. That is that the way we will be staffing the organisation, the management and administration of their departure tax returns when they come in will be dealt with in a separate team from the landfill tax team. The way in which we've been developing as an organisation is we recognise the individual taxes that we have and therefore we have different teams specialising in the different taxes. From that very basic perspective there should not be a problem at all in terms of workflow management here and we've already talked about the system's capacity so there shouldn't be a pinch point in terms of the system and there shouldn't be a pinch point in terms of our staffing. In terms of moving from monthly returns to quarterly returns we think that this will benefit the airlines because they still have to keep the data but they will only have to go through the process of compiling a tax return on a quarterly basis so fewer occasions or a year. We shared our thinking about this with the aircraft operators of the airlines early on in our engagement with them and they are supportive of this as a concept because it's less admin hassle for them. I hope that answers your question so from our perspective that's the model that we've got because it works. The airlines so far have said to us that this is a good positive move for them as well. They'll still have to keep the monthly data but they won't have to go through that admin process of collating all of that data and submitting it in a tax return on a monthly basis. The second question is about the register. Is there any conflict between Revenue Scotland's powers in the act on taxpayer confidentiality and the register? Will it be a list of operators or will it be a list of passengers? As you know from our legislation we have an obligation to have a register under landfill tax for landfill operators. We are very, very mindful of our obligations under the Revenue Scotland tax powers act in relation to protecting taxpayer information and therefore we would absolutely not wish to be put in a situation or indeed put any tax operator aircraft operator in a situation where we were breaching those obligations and so our current thinking we haven't finalised it yet but our current thinking is that we would move to a similar model to what we have for landfill tax and that would be that it is on the register. Most certainly would not be the individual passengers, not at all. It's the aircraft operator who is the taxpayer and it's the aircraft operator that we are interested in. Neil, I think you have some questions in this area as well. I understand what you are saying about it would be less hassle for airline operators to do the monthly returns or the quarterly returns because it's not an argument that it's better for the public first to have regular monthly income as opposed to quarterly income. That's a question for the Scottish Government, I think. Obviously, obviously this is the Scottish Government's bill so they've obviously thought that through in terms of what they have put in the bill. Okay, I'll ask them that. Okay, I'll do. A couple of quick questions about staffing estate and operating costs. What's the current staff of Revenue Scotland? We're around 55 staff at the moment. We'll go up to about 60. Are you going up to about 60 because of the additional devolution of this tax? Yes, so you'll see from our what was in the financial memorandum what we have sought in terms of staff costs to enable us to first of all do the work this year with building up a programme so that we can introduce the tax and then on-going costs in relation to putting a small team of professionals together to manage this tax for us. Thank you. What about estate provision? Do you need additional estate provision to house the additional staff? No, we don't. Actually, just last weekend we moved to a different layout within our existing footprint in Victoria Key which means that we can operate much more flexibly in the office so we have got sufficient space within the office to accommodate new staff. Okay, thanks. And the annual operational cost of Revenue Scotland will go up by about how much do you think? It's in the order of £0.5 million additional going forward, yes. Thanks very much. Okay, I thank witnesses for coming in this morning and giving us evidence. I think that it was a very helpful session and I think that it says to us that you are well prepared as well prepared as you can be in the circumstances of dealing with new taxation, so thank you very much. I now suspend the meeting to allow you to change over witnesses. Okay, colleagues, we commence. Our next piece of business is to continue our consideration of the Air Departure Tax Bill at stage 1 and we're joined for our second panel, Vincent, who's a board member of Stop Climate Chaos, and Chris Day, who's a policy adviser for Transform Scotland. I very much warmly welcome you to the evidence-taking session this morning. Thank you for transforming for providing us with some evidence beforehand and we'll just kick straight off with Mary Owens-Wilaski a question. Thank you, convener. Hi there. I'm sure you're aware that I'm a representative for the Highlands and Islands so I wanted to particularly focus on the lifeline nature of flights from the Highlands and Islands initially. There was a number of representations made that said that not only should we maintain the reduction in your in tax for flights out of the Highlands and Islands but we should also consider abolishing it for the flights into the Highlands and Islands and I just wondered what your thoughts were on that. Our view as you'll see from our evidence is that there is a case for treating the islands differently in particular because there is an argument that there is no alternative for some types of journeys to and from the Highlands and Islands. I'm not quite sure what the distinction really in a way is between travelling in and out in the sense that you're charged if you're charged APD or ADT on one leg of the journey. I think that the upshot is that what we're saying as you'll see is a consistent theme through our evidence is that where there is a case for a different regime where there is clearly no alternative I don't want to get into an argument about what life line is because one person's luxury is another person's life line and vice versa so that's quite a difficult one. I think that what the Scottish Government would have to be careful to do however is to ensure that if traffic is generated on air services to and from the Highlands and Islands it does not define the ferry services for reasons that I suspect would be fairly obvious. I'll go into it if you wish but I probably don't need to say more than that. Sorry. In terms of life line services I don't think anybody's really questioning that other than perhaps the issue of connected flights and the issue that you don't pay APD on going flights that are well beyond and it's not just about coming back to the mean cities in Scotland or in New York if you book the ticket in the right place and not pay APD and that doesn't seem to make sense to anybody so I don't think that we have an issue with life line services per se but clearly that connectivity seems a little wrong. I noticed that you specifically said island services do you have a different view for those mainland airports that might be The question would be connectivity I mean the depends on how far into the highlands you're going For example the WIC airport the alternative is an eight hour overland trip to Edinburgh Well I suppose our argument will be that we would like to see the Scottish Government investing in the railway network to reduce journey times between WIC and the central belt It's not a major issue from our point of view It's simply because the scale of travel that we're talking about is not I mean what our prime concern is is to do with the larger flows between the main airports Inverness and Aberdeen Rather than flights which are typically catered for by small aircraft which in any case under the current proposals are exempt because quite frequently although I believe not always are exempt because they're under a certain weight Okay On that just picking up on something that you said there you were talking about the overall number of flights you know it wasn't a huge significant contribution the number from the highlands and islands people giving evidence before have said basically that the contribution for the number of flights in Scotland contribution in terms of the world over and if you look at any increase in flights to or from Scotland that it should really be put in a world context and actually it's not extra flights that wouldn't have happened it is simply extra flights to Scotland rather than some other international destination I wonder if you have a response to that If I put it politely I would say seems as though what Scotland would be asking to be exempted from its obligations to the wider world there is an argument that is sometimes put forward that well why does Scotland bother with its climate change plans given the scale of carbon emissions that are being exempt emitted by China or the United States I think the nature of this is perhaps my area of expertise rather than mine but the nature of the climate change emergency is such that that's not really a moral or sustainable argument to me I mean we are a well developed relatively wealthy country and I don't think it's acceptable to be saying to other countries well you're more of a problem than we are so we would only make a small contribution we are actually in a position where we have a much greater choice than many other countries in the world a much greater opportunity to make a difference in terms of of leading on climate change simply because of the relative wealth we have compared to I was going to say the Maldives but that's perhaps not a good example but you'll be able to think of other examples I mean obviously I tend to concur with that I think it's a spurious argument for a number of different reasons but but also it's not actually helpful in the context of Scotland alone because we have a set of targets and ambitions around climate change and so we shouldn't be exempting one industry from any responsibility to help deliver on that I think that's quite a fundamental point here the rest of society currently is aiming for an 80% reduction in carbon emissions by 2050 and we're watching one industry doubling its carbon impact and expecting to do so again by that period and it has to play a role why is it being treated differently than every other industry out there it seems actually anti-competitive apart from anything else in terms of your question about flights into the highlands and lands as against out of I think that's also an interesting question it's maybe not necessarily purely an environmental question but there seems to be some agreement exactly about the entire purpose of this reduction in APD I have sat on the forum since its inception and it initially began as a way of increasing business connectivity and that was very much its primary purpose if it's actually an economic stimulus that's a slightly different thing arguably because more people in this country fly abroad than fly here we should be recognising that here might actually help our economy but incentivising people flying out helps someone else's economy and maybe we need to think about that that's just as true for the highlands and lands as it is for Scotland as a whole so I think we've just got to be a little bit careful we are trying to deliver against Scottish commitments on the climate and we shouldn't be seeing this as a separate issue I guess the final point I would put to you which has been put very loudly clearly by the many people that we've seen is that the view Scotland is undoubtedly an island nation the UK is an island nation and the western periphery of Europe the highlands and islands which I represent is very dependent on tourism we need people to come we're ranked Scotland is ranked about 140 out of 141 in terms of holiday costs for the world and this particular tax is the second highest in the world so I guess what people giving evidence to us would say is not that we can afford to do more but that we should level the playing field so that we compete evenly rather than gaining a competitive advantage and I wonder what you would say in response to that My view is several fold and it's just really my view one is that any competitive advantage is debatable how long that's going to last and I'm interested to know how we are going to ensure that airlines hold to any commitments they might make for any real length of time because if we're trying to do this for that benefit then as soon as that benefit diminishes are they going to just up sticks and move on so I think there are some issues there around the longevity of this as a measure and I think that's something we need to bear in mind about yes I mean it's useful to bear in mind how much, what the cost of ABT and ADT is to the inbound traveller I mean the typical figure is 13 pounds which in the context of a holiday for four is not an awful lot I would have thought the argument might well be that if you are intending to give a break to the value of 180 million pounds which is designed to bring down costs then you might as well give that directly to the tourist industry to reduce its costs on site for argument's sake rather than doing it indirectly by giving a third party a reduction in costs I mean I suspect what we will see in terms of people's travel decisions certainly within the next year is that any change that was to result from a change in air departure tax is going to be swamped by the value of the pounds declined that's what is critical in people deciding where they're going to go on holiday and even the Civil Aviation Authority reported that there are many factors affecting I mean there's a huge number of factors affecting the cost of a holiday so there's far more than just the flight if it happens that you come by plane although of course most of our tourists don't most of our tourists come by land so first of all it's not actually catering to most of our tourists anyway but secondly actually it's a fairly minimal part of the overall cost of flying and even the CAA said that actually and all sorts of other factors including things like security in the state of the economy have a far greater impact than what you may or may not do in terms of tweaking APDs Thank you I've just got to follow through in that bit because if we take through the logic that the impact of the change of the pound is going to be so significant and I'm not saying it's not going to be what you're really saying in that circumstance it doesn't really matter what less level of taxation is if you were to pose impose a take one logical absurdity of a tax of a thousand pounds that may well do but I think the scale of what the tax is is now is that it's insignificant in the context of the other costs of holiday I think that's borne out also by the evidence that was given by all the evidence that's included in the reports that have been done, for example, for Edinburgh Airport and I believe for the Scottish Government which indicated that actually certainly for the business sector I'm trying to avoid transport jargon here because it talks in terms of elasticities but actually the I can never remember whether its demand is elastic or inelastic it's that the cost the cost of the tax is a fairly small part of a decision about whether to trouble or not that is buried in there in the Edinburgh Airport report and also I think in the note that I think footnote 3 the Transport Scotland's estimate of the impact of emissions of reduction in APD in Scotland William Just first of all excuse me, go back you mentioned about the ferry services you seem to imply us today that there was if we drove traffic to air from ferry services that would be a bad thing and that was obvious why that was a bad thing forgive me I don't know why it is obvious would you mind elaborating on that? Well because ultimately it would undermine the viability of the ferry services and may well incur further cost to the Scottish Government I presume I am a central belt resident so I must admit that my knowledge of the islands and islands is limited but I would assume that it is important for the islands and islands that ferry services continue to be available at a at least at a level of service that meets their needs not carrying passengers because everybody is travelling by air then eventually a question is going to arise I just find that quite interesting because effectively you are talking about as I understand it both of you gentlemen are here with almost an environmental hat on a concern about the environment and of course just running your argument through I would have thought you would approach it at least environmentally damaging mode of transport so have you done any analysis from that perspective whether you would prefer to drive a modal shift from ferries to air for example? I think generally speaking it's the case that sea travel tends to be I mean this is a generalisation but generally speaking sea travel is more produces less emissions energy per passenger or passenger kilometre than air travel does Have you got actual modelling that says that? I would be up in the north east of Scotland if I want to go up to the northern islands for example then I might choose to drive to Thurso and take the ferry there so that there is a huge burden if I can put it that way if I make that choice over air isn't there? There's a lot of statistics out there for this and I mean I don't have them to hand but there's lots of these sorts of things at passenger kilometre consumption of carbon they vary enormously because there's so many factors and it depends how many people are in your car what the capacity is how many passengers there are and all those different issues for example which would look worse than another but the fundamental principle doesn't change and that is as a general rule flying is more expensive per passenger kilometre than any other form of transport that's especially true one of the issues that has come up in the forum is the issue of short-haul over long-haul because part of the energy consumption so obviously over the long a short-haul flight per passenger kilometre is the worst of all having said that obviously there's also a factor and it's in the climate change act that there's a recognition that aviation has a much higher impact as well because of where the emissions take place and there is actually a multiplier in the climate change act Scotland albeit it's currently set at one which is somewhat farcical but the end of the day there's a recognition there that aviation has an added factor beyond just its pure fuel consumption we're driving to a ferry terminal you may well also need to drive to an airport so yes I accept that but I don't want to develop the argument because I think that's quite facile analysis if I may say so taking at face value that consumers are choosing rail over air so you talk to a dressinist of Mr Day just because I've got your report here choosing rail over air because they have a difficulty with the £7 charge the air passenger duty what modelling has been done showing that if you remove or reduce the air passenger duty that there will be such a detriment to cross border rail travel well I'm aware that you've had evidence from Virgin Trains which indicates a very significant impact on their London to Edinburgh figures of course we're not just talking about Virgin Trains there are I think a total of four different operators providing Anglo Scottish services although two of those franchises is operated by the one other than that I wouldn't quote any specific modelling you can look at general trends that where a low cost air operation comes into effect then it has an impact on equivalent rail journeys and vice versa sorry I believe that there is a study that says that when the APD was introduced there was a 3% uplift in train usage on those areas where there was where that alternative existed I don't think there's any evidence I don't know if anybody's modelled what the impact of that done the other way around would be but clearly the train lines have the rail companies having a concern and fairly obviously they view it as anti competitive I just think we need that level of detail somebody needs to be doing that exercise because at the moment so I'm looking at for example understand cross country are about to cut a service or number of services from Aberdeen to Penzans because people simply aren't making that choice and that's got nothing to do with their passenger duty or ADT and everything to do with the mode that they wish to take the journey so someone needs to be providing that data if we're to make a decision it seems to me sorry I would respond to that quickly I totally agree I think that throughout this entire process there's a lack of data a lack of supportive data in a whole number of areas and in fact one of the things that we would ask for very strongly is that there's actually baselining done around this on a whole number of factors right now because if there's also talk of obviously the 50% cut and then another 50 if economic circumstances allow I would actually say that that isn't enough it should be if all sorts of factors and evidence are gathered that prove that this actually had the impact it's set out to have because I'm not convinced by its economic case or its environmental case and I think that actually there's clearly a need to see better baseline information for any decision to be made yeah final thing again Mr Day sorry just because you've got your report here interested in it again I'm going to take a very north east view on this it's something that you alluded to earlier on when you talk about a further tax reduction for aviation would encourage passengers to travel by plane and undermines the case for high speed 2 coming up to Scotland are you able to comment on effectively you're asking the people in the north east who realistically have no other means of getting to the south east if they're business they need to get down there very quickly for example I've seen trains in the north east I'm sure why should people in the north east subsidise effectively a fast rail link to England from the central belt and still be expected to pay ADT for their journeys that they pretty much have to take by air my understanding of the Scottish Government's intentions in respect of HS2 is that it will it will seek to negotiate an arrangement with the Government and Westminster that protects slots to airports in the south east because the regional transport partnerships in the north east have said that they're quite content with the concept of HS2 as a general benefit of Anglo services on HS2 in a fit to Scotland but to pick up on I suppose essentially the point you're making that in order for those if you like the quid pro quo is that they ensure that slots are maintained at airports in the south east for journeys from Aberdeen and Inverness in particular Patrick Thanks very much convener can I just reassure Mr Kerr first of all that he would need to be co-rolling in order for the road element of his journey to be more damaging than the air element I'd like to move on to the wider policy context and how this bell fits into that because obviously even the critics of the bell and the Government's policy are not arguing against mixed modal provision to the islands that's not something that is really being proposed by anyone I think Do you think that the Scottish Government has a policy about aviation emission levels? How much they can be allowed to grow by or how much they should be limited by? I can't find one anywhere Are you aware of a Scottish Government policy statement about that? I've never seen anything like that, no I know I would from the assumption of the point of this is it's slightly responding to the last question as well but it hasn't set out to be an environmental tax it was a tax because people like the IMF and the World Bank said that this industry was under taxed but it has ended up being potentially an environmental tax because perhaps it has inhibited the growth of demand of aviation but actually aviation has not been diminished at record levels as you will have found out particularly Glasgow and Edinburgh airports and therefore it isn't actually inhibiting demand as it's currently set out Yes, the airport certainly say they're having a whale of a time and they're growing massively The Government's climate action plan the one thing it says about aviation it says we might expect to see a 15 per cent improvement in the efficiency of new aircraft by 2035 Now even assuming that all of the aircraft fleet is those super efficient new aircraft which I think is an ambitious assumption would it be fair to say that if we return to the level of growth in aviation that we've seen over recent decades between now and 2035 we would still be more than doubling the emissions from aviation The forecast that I've seen from civil aviation authority suggests that we would be doubled again we've already doubled since 1990 and they would be doubled again by 2050 so yes, the demand is clearly expected to grow very substantially and in your experience on the group that was working with the Scottish Government on its policy was there anyone seriously questioning the idea that having APD or the equivalent tax would lead to the level of emission increase that the Scottish Government itself has predicted Obviously the form itself is primarily made up of airlines and travel bodies so clearly there is a little bit of interest in seeing a cut take place but I don't think anybody's questioning that aviation I mean nobody's not been a specific topic within the forum as you might expect and I don't think there's any question about the impact of aviation on climate emissions I mean the Tyndall Centre reported that aviation would account for the entire emissions budget of the UK by 2050 if we allow it to continue to grow at the current rate so clearly it isn't sustainable I don't think anybody's questioning that so looking at the lack of any acknowledgement of these issues either in the Scottish Government's climate action plan that was published in January or the specific transport sector paper that accompanied it which has one mention of the word plane and actually no analysis about the environmental impact of aviation given the lack of that kind of context what changes would you be looking for to the bill that would require the Scottish Government to consider those issues properly in the setting of rates and bands just remembering that the policy seems to have been decided before the strategic environmental assessment which is the opposite of what the law is supposed to require well not surprisingly we would I mean we support the devolution of the measure but we do not want to see a cut to APD we think it should be held at different levels it's actually there is some debate about different types of taxes that could be brought forward and there's certainly been a debate of that within the forum about having frequent flyer taxes and other types of measures but they're incredibly complex and difficult things to administer and very expensive to enforce so actually the fact that every time you fly you pay is about as equitable as it gets fundamentally I think we've said we don't view this as environmentally equitable because one industry is not being asked to do what every other industry is being asked to do and actually I think that's probably true economically and tax-wise as well but environmentally I mean the fact that the multiplier in the act of 2009 is set at one is probably a fairly good indication of how we're treating aviation as opposed to every other industry I'm just trying to get to specific changes that could make this bill better because obviously we Parliament has to pass something under this bill or another bill otherwise there's no provision to collect APD under the once it's devolved so there has to be some legislation what is it that we can do with this bill that would lock in requirements for the government either to report on the level of emissions that it thinks necessary or to give a an undertaking as to the additional measures the rest of the economy is going to have to take to pull the extra weight that aviation is refusing to pull? For me I guess the only easy answer is that it's more evidence based and that as I've sort of referred to in the previous question I think that there needs to be much sounder evidence based both in terms of its economic and environmental impacts but particularly its environmental impacts and that should form the basis of any decision making so it shouldn't, for me that should be a trigger to a decision being allowed anything to add? The bill as it stands seems to me to be essentially a piece of enabling legislation what's clearly important is the nature of the tax and the bans that's applied to it we do make a reference in our evidence to the point that it's not quite clear how those will be subject to parliamentary scrutiny which seems a bit odd but that's not necessarily going to make anything but be on that Just for the record to be absolute clarity I just want to understand do you support the general principles or the bill as it currently is the general principles because otherwise there will be no legal basis for collection of tax just for the record purposes We're entirely content with a passenger duty being devolved to Scotland The question that I asked was do you support the general principles of the bill or do you not? Yes Mike, can you give us an answer on that? For the record purposes we know who we are in terms of the bill itself With that said, Murdo Thank you I think we understand from what you've said so far obviously you're not keen on passenger duty at all because of your concerns about emissions from aviation It's also a lot, Mr Day, in your submission about the impacts on surface travel and the concerns about model shift away from rail which reflects the evidence we heard a few weeks ago from Virgin Trains Given that we understand you don't like any cut in APD do you have any view on whether in terms of the balance between domestic short-haul and long-haul if there were to be a cut Do you have any preference as to how that might be targeted? One could imagine I think at this stage we've got into the level of highlighting problems with the proposals that have been set out by the Government so far One could imagine there will be a multitude of ways in which the Government's objective appears to be to reduce the burden of tax by 50% I understand that generally interpreted as mean there would be 50% cut in the rate of APD across the board There may be a number of different ways tunes that you could play on that We are certainly as I said in an earlier answer about the islands particularly concerned that where there is an alternative means of transport which is sustainable that that seems bizarre to enable a less to provide a tax price to a less sustainable form of transport If the Government was determined to press ahead with cutting your passenger duty by 50% in the generality would you view it as better for the environment if that cut was not on domestic and short-haul and therefore weighted towards long-haul? My doubt would say that long-haul flights are particularly emissions heavy I think that we would focus in the first stage at looking at where there is an alternative to ensuring that there are alternatives but As a qualified yes to my question Your preface also said that we don't want to see a cut at all I understand that Mr Robinson Do you have anything more to add? Short-haul is worse per passenger kilometre than long-haul but long-haul is the bulk of the emissions because the distance is travelled Ultimately going back to the purpose of the bill if it's about business connectivity this is a very clumsy tool to bring that about Thank you In the previous committee we have some evidence for the economic spin-off regional airports was significant in Ireland where the tax was abolished some years ago and as an Airshire MSP I'm interested in doing what I can to support and promote Presswick airport to encourage both tourists to come into Scotland and so on Is your view that it will have no noticeable impact in the economy of Airshire if we reduce the tax by 50% and expect the number of passengers coming into that airport to rise significantly? I'm not quite sure whether you would be assuming that any benefit was accrued to Presswick as opposed to Glasgow I think it's quite difficult to identify impacts on specific airports particularly where there are a number of airports in close proximity such as Presswick and Glasgow The fundamental view that we take is that the economic growth of Scotland or anywhere else is led primarily by other factors than connectivity and what tends to happen in terms of the growth or otherwise of air travel is that it follows economic growth it doesn't lead it and in fact since submitting our evidence I've produced a graph to circulate to the committee later which indicates that where an APD was introduced and doubled there was practically no change to the trends of air travel at Heathrow and Edinburgh so the point is that that's not quite significant picking up the Irish example and I'm aware that other evidence has been given to you at various times about this I mean Belfast International was quoted that the APD rate at Belfast was reduced to 0% in 2011 because continental airlines as was threatened to withdraw its new Belfast journey and that was regarded as being particularly important that service no longer operates continental was taken by United but they withdrew it because passenger numbers the 0% APD rate that was applied to it went down the tubes and Ireland's kind of mentioned again I've looked at figures for the three major airports in Ireland which are Cork, Shannon and Dublin and it is quite clear that what is happening is if you recall the economy of Ireland was particularly badly affected during the during the kind of latter part of the last decade and that what you see is passenger numbers dropping throughout that period up actually beginning to level off and return to a form of stability that went upward, slight upward trend before Ireland abolished APD now Dublin's actually quite different I mean Cork and Shannon are still struggling along quite a bit but Dublin seems to follow quite a different trend in fact from much of the rest of the European airports as well where you tend to see a rise up until about 2009, 2010 then a big drop and then a kind of gradual rise and that applies across Europe but Dublin whether there's some kind of interaction between with Cork and Shannon I don't know but Dublin seems to follow quite a different kind of projectile but what's noticeable about Dublin is that in fact the upturn in flights at Dublin was in hand before Ireland abolished APD that might not answer your question I think you have a question that's very hard to answer your question's very hard to answer in a way for your sake I hope Prestwick maybe does get a bit more business but I don't know that I think the question you should be asking is more of the airlines to say what commitment they have to support Prestwick in light of an APD cut because to be honest it's just making a marginal reduction in the price of tickets across the whole of Scotland it's very difficult to isolate at one particular airport and say it's going to help that one as opposed to another I can remember the chief executive that if APD went altogether he could double the passenger numbers coming through Prestwick and that's double the number of people that need to eat, to sleep in the tales to hire cars that's surely bound to have a positive impact on the leisure economy you might imagine I would like to thank you Wood but again I would just say that the evidence is according to the CAA and ONS that far more people fly out rather than in to that area but it may equally take twice as many locals away a lot of these airlines are very mobile as well they will introduce flights for one season and then drop them so I would be a wee bit sceptical about statements that are made about the long-term investment in any local economy by an airline thanks thanks thanks for coming along today's panel I know that you've got there's been a lot of discussion around the environmental impact I'd like to just focus my questions on the economic impact if that's okay and it was really just to get a view from you as to how that economic case stacks up you've made some comments on that already because clearly the whole point of any reduction in this tax going forward would be as has been stated to generate economic activity and business connectivity as you've talked about and there's clearly a number of ways to do that and I know that you found some questions earlier from Murdo Fraser about how you would best see that applied so I suppose the question is just to get your if you want to make some comments round about clearly Scotland needs to grow its economy and this is seen as a way of doing that do you have evidence or are you aware of any evidence that says that any numbers that have been done by making this cut in the tax it won't generate the return that has been proposed do you think there'd be value in doing that analysis and also in terms of the segmentation of this clearly we've talked about outbound tourism inbound tourism, business connectivity long-haul, short-haul etc a purely business point of view or leaving aside the environmental aspects that you've talked about already from a business point of view do you see differential impact round it by that segmentation is that something that you'd want to comment on I mean I've tried to answer that as best I can I think the short version is do we believe the economic case absolutely not for the moment but what's my question was do you have data to support that session some of that is about these wider statistics in terms of what impact that has on passenger numbers if you're looking at business connectivity again there are reports on the price insensitivity of business travel because business people tend to need to be somewhere and pay what's going they're much less price sensitive than other travellers so in fact although this is meant to be a measure to do with that business connectivity in fact it's highly debatable whether that will actually have any great impact because of that reason alone whereas it will probably have an impact much more on just people going on holiday which was never really the intention behind this so we don't however they don't I mean we are a fairly small organisation I mean I think what we've tried to do is to look at the evidence if you like the contradictory evidence that's supplied by those who've been arguing the case for reduction and we've challenged that and I kind of touched on my previous answer I think it's very difficult to kind of see certainly the kind of global Scotland wide level the evidence that says if you do this Scotland's economy is going to benefit I mean on a very simplistic level the UK economy compared to the rest of Europe is growing at something like 2% and yet we're told this is the only country that charges APD in Europe so what's that about I mean I have a graph which kind of indicates that that air travel follows the economy but what's also striking about the data that is has been supplied by the industry and by the Scottish Government is that it assumes that if you bring people into Scotland by one mode of transport that is if you like a free game they don't seem to consider that there are other forms of of economy related to the transport that might disbenefit for you know there are claims made about the number of jobs that would be generated at airports and no questions asked about the number of jobs that might be lost by even long-distance coaches or on the railways I appreciate all the points you're making but what I'm asking is and I think I've got the answer at the moment the only analysis that we've seen is the airport analysis which I think came from bigger originally Mike says there is a strong case for further independent evidence gathering it has to be independent though to fill in some of the gaps in the evidence because clearly the result you'll get will depend on assumptions you make and you'll make lots of assumptions there it would obviously help everybody's analysis of this to be able to see that based on assumptions that you make and can support to say if we did this, this would be the impact maybe this wouldn't be as much or maybe this would be less or this would be more but as far as you're aware there isn't anything on that and nobody's doing that there may be but I'm not aware of it That's fine, thank you That's a clumsy tool and therefore the differentiation in the way that it's applied would probably be helpful Okay, thank you very much for coming along today for that evidence taking session I now close this meeting of the France and Constitution Committee