 The next item of business this afternoon is a statement by Derek Mackay on the air departure tax update. The cabinet secretary will take the point of order for Mr Kelly. Thank you, Presiding Officer. The cabinet secretary is about to give a statement on air departure tax. However, the details of the statement are revealed extensively in BBC online and we are discussed by Glen Campbell on Good Morning Scotland this morning. In addition to that, the implications of the statement are reported in the Scotsman online and it is clear from the Scotsman Transport Correspondent, Arthur Dawn's Twitter feed that he has been in discussion with Scottish Government officials about the implications of this statement. I therefore submit that Parliament has been disrespected in this regard. The point of a parliamentary statement is to inform MSPs and the public, first and foremost, not the media. Therefore, I would ask that you investigate the parliamentary rules that have been broken by Mr Mackay and what action can be taken. I thank Mr Kelly for his point of order and for notifying me in advance. As members will be aware, I take this matter very seriously indeed and I recently revised the good practice guidance on announcements to make it clear that Government announcements should be made to the Parliament in the first instance. I note that there has been speculation on the contents of the statement in advance and I would draw the cabinet secretary's attention to the guidance. However, I am sure that all members will welcome the opportunity to question the cabinet secretary on the detailed contents of his statement, which he can now make. The Government has made a strong case over many years for powers over air passenger taxation to be devolved to the Scottish Government. We have set out a clear aim to reduce the burden of air passenger taxation by 50 per cent and to abolish the tax altogether when resources permit. That commitment will help to boost international connectivity and generate sustainable growth, priorities that are even more pressing as a result of the EU referendum. In 2014, the Smith commission recommended devolution of powers over air passenger due to the Scottish Parliament. The Scotland Act 2016 made provision for that devolution. Following extensive engagement at with stakeholders, we introduced the Air Departure Tax Bill to Parliament and the Act for a Gained Royal Assent in July. Under terms agreed between the Scottish and UK Governments in the fiscal framework, APD is due to be fully devolved in April 2018, and Revenue Scotland has worked well in hand to begin collection. If the UK Government were handing over the tax in a fit state, Parliament would now be considering regulations, setting out tax bans and rate amounts, but that is not the case. During stage 1 of the Bill's consideration, I alerted the Parliament to an important matter that has arisen concerning our plans to replicate the current APD exemption for passengers who fly from Highlands and Islands airports. The Highlands and Islands exemption has applied under APD since 2001. It is a feature of air passenger duty and should be a feature of air departure tax, supporting not just residents but also businesses and tourism in the area. As members will know, this Government and this Parliament cannot act in a way which is contrary to EU law. After very careful consideration, we have concluded that in order for the Highlands and Islands exemption to be compliant with EU law and state aid regulations, it must now be notified for approval to the EU commission. As members state, only the UK Government can do this. This is not a technical argument. Aviation is critical to the Highlands and Islands region, helping to support a diverse range of businesses and also enabling residents from the more remote regions to access essential services that cannot be provided in their areas. Without it, there is real risk that the Highlands and Islands will suffer economic detriment. Since informing Parliament of this position in April, discussions and exchanges have correspondence with UK Treasury ministers, most recently with the financial secretary to the Treasury on 25 September. Throughout the conversations and correspondence that I have been clear that, although we remain committed to working with them to secure an acceptable resolution, it is for the UK Government to resolve this issue as the EU member states that it is only the UK that can take forward any notification. The response thus far from the UK Government has been disappointing. The financial secretary to the Treasury made clear in July that they have serious concerns over making an approach to the commission. Correspondence, he stated that before they will agree to do so, the Scottish Government would need to accept full liability for all risks, including the potential for knock-on effects from the Highlands and Islands business. As I will explain, those risks would include liability for the historic operation of the tax, accepting the financial consequences back to 2001, if the commission does not approve the exemption and the cost of avoiding detriment on the Highlands and Islands during the length of time that notification would take. In transferring responsibility for the tax, I am clear that the obligation was in the UK Government to ensure that it could be operated fully. The conditions that the UK Government has sought to impose are clearly not acceptable. Having got into this mess, it is patently unfair that the UK Government is only willing to fix it if the Scottish Government agrees to pay the cost of any mistakes made. Let me be clear. This Government will not put at risk the economy of the Highlands and Islands and it is not for this Government to bear the cost of the actions that the UK have taken if they are found to be not compliant. This Government therefore finds ourselves placed in a deeply unsatisfactory position. We could choose not to introduce the exemption for the Highlands and Islands flight. That would ensure that ADT remains within state aid rules and avoid the need for notification, but it would bring an unacceptable cost to the fragile economies of the Highlands and Islands. Or we could seek an alternative approach that would deliver the same outcome as the exemption. I and my officials have left no stone unturned in investigating ways to deliver the same or indeed better outcome for the Highlands and Islands without a notification process. While there are solutions within state aid that would support the residents of islands and sparsely populated areas, we have no legal viable exemption that would support businesses and tourists and provide the good connectivity that is vital to the city of Inverness on the same terms as is currently available. The UK Government has also suggested that it would consider alternatives. However, it has yet to present any options that we have not already considered or that meet the requirements of the Highlands and Islands and would not also require notification to the commission. The only option that the Scottish Government has identified that does not require notification to the commission and that could be in place for April 2018, securing the benefits of the exemption for the Highlands and Islands would be through the use of rates and bans and in a way not exclusive to the Highlands and Islands. That would involve setting all bans at zero rate to cover direct and connected flights from Highlands and Islands airports. To do so would involve the Scottish Government for going substantial revenues not to deliver any additional benefit but simply to deliver the tax to the same standard for the Highlands and Islands as it currently operates. To match the exemption for all Highlands and Islands flights, including connecting flights, would require the Scottish Government to forgo revenues of more than £320 million and to do so simply for band A flights would mean for going revenues of around half of that. Whilst under the terms of the fiscal framework, this Government would of course bear the cost of any policy changes that this Parliament makes, such as reducing rates to deliver economic growth. It should not cost this Government financially simply to deliver the tax as it currently is. That is the principle of no detriment set out by the Smith commission and which underpins the fiscal framework that accompanies the devolution of powers. That principle is central to the operation of the block grant adjustment. However, the block grant adjustment mechanism for ADT does not take account of the potential flaw in the Highlands and Islands exemption. The block grant adjustment will currently see Scotland's block grant reduced by amount forecast on the delivery of the tax as it currently operates. As a result of the position that we have now been placed in, I have not yet been able to set the exemptions released in rates that I propose for ADT in the coming year. The UK Government has suggested that rather than go ahead with notification or face removing the exemption, we could defer implementation of the tax for an unspecified time period. A change to the timetable is certainly feasible. The UK Government must switch off the tax before ADT can be introduced in Scotland and may be unavoidable if a solution is not found. However, that is not our preference. I have therefore written to the UK Government again today to set out my position. I remain supportive of notifying the commission but not of the Scottish Government taking on the risks for the UK Government's operation of the policy. I am very aware that the European Commission will need time to consider any case made, so it is already unlikely that we could get a decision from the Commission in time for ADT to begin in April 2018. Instead, I have suggested that the UK Government agrees to amend the block grant adjustment to enable the Scottish Government to deliver support for the Highlands and Islands in a way that ensures neither the Highlands and Islands or Scotland's public finances suffer as a result of that apparent defect in air passenger duty. That amendment could be made, although notification is pursued, on the understanding that the UK Government accepts the risks inherent in such a notification, or it could be made on a permanent basis if the UK Government remains unwilling to make such a notification. It is the only solution that either Government has tabled that would enable ADT to be implemented on time in any way that protects the economy and the communities of the Highlands and Islands, so that the devolution of powers under the Scotland Act is consistent with the no detriment principle of the Smith commission. In order to determine our approach, we require clarity from the UK Government by the time of the UK budget at the very latest. We would urge all stakeholders and interested parties to encourage the UK Government to reach a sensible solution. Given the severity of the issue, the potential impact in the economy of the Highlands and Islands and the risk to the devolution of powers is agreed by this Parliament, on Government to air the issues in Parliament and to be clear to the region and industry where we stand in relation to the introduction of ADT. I hope that all members will support the action that we are taking. I know that some members do not support our general position on reducing ADT, but this is a different issue. It is about our ability to deliver this tax as it stands today. A delay is not my preferred option. I could only agree as a last resort, but I cannot see ADT put into operation a significant uncertainty hanging over the Highlands and Islands. Therefore, I urge the UK Government to step up to the plate to recognise their responsibilities and to support our proposal that would enable ADT to go forward as planned without causing harm to the Highlands and Islands communities. Thank you very much. The minister will now take questions on his statement. There will be around 20 minutes. I urge members who wish to ask a question to press their request to speak buttons now. I thank the cabinet secretary for advance sight of his statement. The Scottish Government's policy of reducing air departure tax is a long-standing one and has been eagerly awaited by our tourist industry. It is a policy that, as he knows, has the support of the Scottish Conservatives, so there is a clear majority in this Parliament to deliver it. It is therefore very disappointing to hear today that the Scottish Government seemed to be trying to weasel out our manifesto commitment to deliver on this policy, meaning that we could miss out on the boost that this would deliver to the Scottish economy. There were many in the tourist sector in Scotland who feel badly let down by this announcement. The cynic might conclude, Presiding Officer, that today's announcement has more to do with politics and the SNP's desire to pally up with the Greens again to get their budget through Parliament, rather than with any legal technicalities. Can I ask the cabinet secretary two questions? The Highlands and Islands APD exemption has existed without challenge for the last 16 years. Why do the Scottish Government believe that there is suddenly now, at this convenient point, an insurmountable legal problem which means that the devolution of this tax might have to be delayed? Secondly, can he confirm for the record that it still remains the Scottish Government's policy to deliver an ADD cut as a matter of principle to help grow the economy even if he is today starting to make excuses why he cannot deliver it on time? Cabinet Secretary? Of all the bizarre accusations that Murdo Fraser has ever made about the Scottish Government, to Helen also accused the UK Government with conspiring with the Scottish Government not to deliver an SNP policy as a bewildering one that even Murdo Fraser is willing to make. This is an issue of the UK Government's making. This is an issue of the defective state of the function and the taxation proposition. The question—I know that Labour is partly complicit in that—is well in that you probably weren't compliant either. In terms of Murdo Fraser's direct question, I'm very surprised that a member of Murdo Fraser's standing isn't aware that the Scottish Parliament simply cannot pass legislation orders that contraven EU law and regulations. I am so surprised that Murdo Fraser as a front bench spokesperson doesn't know that simple fact about the function and operation of this Parliament and the parameters in which we have to operate. As to the question of, in principle, yes, SNP policy remains the same, Government policy remains the same, but what we have been asked to do, and I'm surprised to hear heckling from the Labour Party on this, because I know that many Labour members with an interest in the Highlands and Islands will want us to protect the Highlands and Islands as we deliver air departure tax. I'm very surprised from the Opposition from the Labour Party on this one. What we have said is that this power is in a defective state, will co-operate with the UK Government to try and resolve it, but it is for the UK Government to resolve. They have created the potential non-compliance issue, not the Scottish Government. We believe in the outcome of the Smith commission by way of no detriment to the people of Scotland. That's what we're trying to protect in terms of protecting the Highlands and Islands—a like-for-like exemption and ensuring that we protect the devolution of powers—but in a competent fashion, not the typical bombastic, chaotic, incompetent fashion that the Tories have been engaging with recently. We will try and find a resolution. The principle remains the same, but it must be implemented in a competent way. Neil Bibby will be followed by Patrick Harvie. Passengers in the Highlands and Islands have received an exemption for years, and exemptions must continue. The devolution of APD was agreed by the Smith commission three years ago, and it's been SNP policy for many years before that. Now the ministers today telling us that he can't switch on air departure tax despite the Parliament passing a piece of legislation agreeing to do so. Today we see the SNP use a convenient opportunity to kick a bad policy into the long grass. Let me be clear, the SNP's ADT cut is bad policy. Instead of delaying it, it should be cancelled. Will the cabinet secretary confirm that it still has intention to cut £190 million from public services, or will he rule out a cut in the lifetime of this Parliament? In any event, how can the cabinet secretary justify a multi-million pound tax cut for the frequent flying few at a time of real hardship and austerity for the people of this country? Isn't it the case that they support a tax cut that was rejected in their own consultation that would increase aviation emissions and would strip hundreds of millions of pounds out of our public services? I think that the most important point in that commentary or question was the first sentence of what Neil Bibby said, which is that the exemption must continue. The exemption as it stands cannot continue and the UK Government has not found a solution to that, other than to propose that the Scottish Parliament, the Scottish Government and therefore the people of Scotland should bear the risk of liability from that historic lack of compliance because of lack of notification. Not the Scottish Government's doing, but the doing of the UK Government. No wonder they wrote to me to suggest notification, but only if the Scottish Government takes the risk for that. That is in clear breach of the no-detriment principle of the Smith commission and the enhancement of powers under devolution. I agree with Neil Bibby about trying to ensure that the exemption continues. I have raised that in Parliament when we introduced the legislation at stage 1 and I have said repeatedly that I would try to find a resolution working with the UK Government, but it is for the UK Government to resolve any lack of compliance because of the information that I have shared earlier about how this Parliament and Government can conduct its business in accordance with EU law and regulations. In principle, we stand by our position on air departure tax and the economic benefits that would come from reduction, but we will not land upon the people of Scotland pardon the pun, a defective power, a power that may cost dearly the people of Scotland if it is found not to be compliant once you consider that issue. Looking after the economy, supporting tourism, protecting the highlands and islands, ensuring that there is a competent transfer of powers is important to this Government. If the key ask from the Labour Party is that the exemption must continue, that is exactly what I have been trying to achieve. Patrick Harvie to be filled by Willie Rennie. Patrick Harvie. The policy has not exactly had the smoothest of take-offs, has it? Under scrutiny, it is clear that the Government has not even bothered building an economic case. It has been clear that there is no environmental justification for this policy, no social justice justification for this policy and no political support for it other than the Conservatives who want to cut every tax going and keep spending spending from the magic money tree. Now the policy is stuck in a legal quagmire that the minister must have known lay ahead of him. I understand if he needs a technical pretext to spare his blushes on this one, but wouldn't it be simpler and cleaner just to acknowledge now that he won't be cutting aviation taxes in the coming year? The timetable in terms of what we can do is, in accordance with my statement in the hands of the UK Government to consider the proposition that I have put to them in advance of the budget. They can do that and respond at the latest by their budget and that helps to inform the Scottish budget unless they can find a legal remedy to this or a fiscal remedy to this, the UK Government have a responsibility to address the issue. I know that it would be difficult to convince Patrick Harvie or the Greens of this particular policy, but the principle we all agree on is the successful and competent delivery of the evolution, and in that defective state it cannot be delivered in Scotland and it is for the UK Government to resolve in the fashion that I have described. Willie Rennie Liberal Democrats are pleased that the APD cuts have been stopped, but does the minister not think that the statement today will force the European Commission to take action to close down the Highlands and Islands exemption? He describes the scheme as defective and not compliant with EU law. In order to provide himself with political cover, is he not recklessly risking the future of the discount? Is that not the case? Can you imagine the champions of transparency in the Liberal Democrats? What they would have said if I kept this a secret from Parliament as to the complications, lack of compliance and why we couldn't pursue the like-for-like exemption. I think that Parliament has to be fair that I raised this at stage 1. I've raised it in committee. I raised it when being pursued by Conservatives as to why the exemptions weren't on the face of the bill. So I have been transparent with Parliament and I think it's important to tell the truth to this Parliament about the condition of legislation, the arrangements around the Smith commission, the no detriment principle and what it would mean to the region. It would be sacrificed if we didn't address this issue in the correct way. I have kept Parliament up to speed being transparent, engaged with UK Government to find a solution but it is for the UK Government to resolve this issue. Of course there is risk in being so transparent as to how the EU responds to the issue but the request from the UK Government was that the Scottish people should take that risk for the UK Government's lack of compliance over the years. That is the burden that they should bear in resolving this issue so that we can deliver the powers in a competent fashion that protects every part of Scotland. Thank you. The opening questioners and answers have had some time to explore this issue. We've now got less than about nine minutes and ten questioners so progress please, no preambles, no statements to stretch the question. We'll be told by Bill Bowman. Thank you, Presiding Officer. You mentioned that state aid solutions wouldn't apply to Inverness Airport and the UK Government stated that they would also consider alternatives yet hasn't presented sufficient options. Would the cabinet secretary agree with me that the UK Government forgetting to flag highland and island exemptions to the EU is symptomatic of the UK Government forgetting the highlands and islands for centuries? There's a Scottish Government in outlining this statement today is clearly not sacrificing the highlands and islands and I'd encourage the UK Government to do the same. Bill Bowman to be followed by Keith Forbes. Thank you, Presiding Officer. Can the cabinet secretary confirm if he is considered devolving this tax to Highland Council and that the exemption would not then come under state aid roles and if so, why he rolled it out? That hasn't been put to us in a state that would appear to be compliant with state aid regulations and EU law. That, like many other matters, we could consider further, but there's a range of complexities in that and other propositions that may be put to us. If that is now the position of the UK Government, I don't believe that that would be compliant, but I'm happy. I hear the Conservatives shout its suggestion. I've said I'll look seriously to encourage the UK Government to deliver this power and this tax in a competent way, but it strikes me the suggestion that I've put to Bill Bowman that it wouldn't be compliant, but I'll take all the helpful suggestions into account. Equally, I hope that the UK Government will seriously consider the suggestion that I've put to them today. Keith Forbes. Can the cabinet secretary provide unequivocal assurance to the communities of the Highlands and Islands on wavering efforts to protect the Highlands and Islands and recreate a like-for-like replacement of the current exemption, one that covers residents and businesses and tourist visitors? Yes, I will, and I hope that that statement makes that clear. That's exactly what I'm endeavouring to do. James Kelly to be followed by Richard Lyle. Thank you, Presiding Officer. Does the cabinet secretary accept that, week after week, we hear in this chamber from members in the health service, education services and local councils? Therefore, does he not accept that it's time to dump this discredited policy that would strip £190 million from the Scottish budget every year? Cabinet Secretary? I'm sure that James Kelly probably now having seen my statement and probably wasn't quite what he had read in the press, which probably removes the complaint from the start of the statement. We'll now understand that that is not what this debate is about. It's about the compliance of the regime to ensure that the power can function competently in Scotland in keeping with the Smith commission and the agreement that all parties signed up to to enhance devolution but in a way that didn't bring detriment to the people of Scotland. Surely the Labour Party haven't given up on that as well. Richard Lyle to be followed by Rachel Hamilton. Does the cabinet secretary agree with me that it is an absurd situation that the UK Government can effectively block the implementation of Scottish Government policy by refusing to notify the European Commission? It's true to say that the UK Government will not go through the notification procedure unless the Scottish Government bears the risks of doing that. That means that the Scottish taxpayers would bear the risk from the operation of a historic policy under the UK Government. That's the difference and that's what I'm trying to point out to members in the chamber. It is an absurd position but hopefully the UK Government will work constructively with us to be able to proceed. Rachel Hamilton to be followed by Ivan McKee. Thank you. May I bring members' attention to my register of interests? To ask the cabinet secretary what the cost of his U-turn on air passenger tax will be to the tourism industry and wider Scottish economy. Of course it's the Tories that did U-turn their position on the tax reduction in any event. Let me be clear to Rachel Hamilton and others. We are trying to proceed but we need the UK Government to give us the mechanism to deliver the tax competently. It's back to the UK Government to resolve this power which is currently in a defective state. If you want to talk about cost to the economy before we even mention Brexit then it would be wise for Rachel Hamilton to turn their attention to UK Government to find a resolution to this issue. Ivan McKee to be followed by Jamie Greene. Does the cabinet secretary have any information on why the UK Government failed to notify the commission of this exemption for 16 years? Was there not a requirement on the UK Government to do so and were they not aware of this requirement? Cabinet secretary. You can tell from the content of the statement and the correspondence that I have had with the UK Government that they are very reluctant to seek notification. That would suggest to me that they are concerned about compliance and that's why they are trying to pass the cost to the people of Scotland and that's a compromise but a sacrifice we shouldn't be willing to make. Jamie Greene to be followed by Bruce Crawford. Jamie Greene. Presiding Officer, contrary to the cabinet secretary's statement today my understanding is that the UK Government has bent over backwards to work with the Scottish Government to find a solution on this so I can't be the only person that's deeply suspicious about the motivation to do that. Does the cabinet secretary really believe that the Parliament will be filled by his full concern over the devolution of this tax and why doesn't he admit that this has nothing to do with the EU and everything to do with backtracking on his promise in return for support from the Greens? Cabinet secretary. I should ignore all the officials advice I've had, all the engagement I've had with UK ministers, successive Treasury ministers to believe that under Jamie Greene a Tory minister or someone in the Tory party told them that it's all okay and I'm just making it up. I can assure Mr Greene that my correspondence and engagement with UK Government ministers I think will show that they accept the issues that are here and I think that's why to be fair to them they want to find a solution to this but thus far they fail to do so. Bruce Crawford to be followed by David Stewart. Cabinet secretary, I think you recognised in your statement that the cross-party Smith agreement that helped deliver the devolution of the air passenger duty the Smith agreement is also very clear on the principle no detriment as a result of the further powers devolved in the 1916 act. Can I ask the cabinet secretary if he agrees that failure to replicate the Highlands and Islands exemption as a result of the UK Government's negligence would be a significant issue of detriment and therefore contrary to the intent and purpose behind the Smith commission proposals and it's nothing to do with the EU Mr Greene is everything to do with the UK. Cabinet secretary. Yes, that's right. This is about the competent devolution of powers as agreed by the Smith commission and in fairness the issue wasn't raised over the course of those negotiations as far as I understand it by the UK Government to say oh we have an issue here around compliance. It's fair to say the principles that all parties signed up to in terms of successful further devolution and the fiscal framework and how it relates to the block grant adjustment is a political agreement and yes to proceed in the way that the UK Government proposes would be a breach of that political agreement. Finally, David Stewart. Thank you, Presiding Officer. What assessment has the cabinet secretary made of the effect on the Highlands and Islands airports and the Highlands and Islands economy if the exemption does not continue? Of course, I know that David Stewart because he has been lobbying me. As have other members on this issue of exemption, we'll know that many involved in the sector would say it would have a catastrophic impact on the economy, that fragile economy around connectivity if the exemption couldn't be continued. We've looked at a legal remedy. We've looked at the fiscal remedies to try and achieve that but I have no doubt for the reasons that I've given him a statement that would have a profound impact on the Highlands and Islands. That's why we must, together, endeavour to ensure that we can replicate that exemption to ensure that it can continue. That is why UK Government haven't failed to give me a competent alternative. I've put a further proposition to the UK Government today to consider and hopefully they will respond in good time so that I can take that matter forward. Thank you very much and that concludes our statement. I remind you and the chamber that I am the PLO to the cabinet secretary. That concludes our statement on air passenger duty. We'll now move on to the next item of business, which is a statement by Keith Brown on Scottish City Region deals next steps. The cabinet secretary will take questions at the end of his statement. Any member who wishes to ask a question should press their request-to-speak button now.