Exclusive:Labour opens the door for SNP to finally roll out unused devolved tax power

The UK government has moved to reassure SNP ministers they can roll out a devolved tax.

Labour ministers have insisted financial rules “should not prevent the introduction” of a long-delayed devolved tax - paving the way for the Scottish Government to finally take control of air passenger duty (APD).

The tax was devolved to Holyrood in 2016 following recommendations of the Smyth Commission in 2014. But SNP ministers have declined to roll out the levy over the apparent need to obtain an exemption for Highlands and Islands airports, which provide lifeline services.

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The Scottish Government could introduce air departure taxThe Scottish Government could introduce air departure tax
The Scottish Government could introduce air departure tax | PA

Air passenger duty, or air departure tax as it will be called under a Scotland-specific scheme, was long-touted as a way to give Scottish airports a competitive edge over England - but is now seen as a key measure to tackle the climate crisis by controlling aviation demand.

It could also be used to introduce a private jet tax, which First Minister John Swinney has shown support for.

Under the existing UK-wide air passenger duty, Highlands and Islands airports receive an exemption from the Treasury. But SNP ministers have long sought clarity from Westminster that a Scottish air departure tax would receive the same treatment.

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The UK government has confirmed to The Scotsman that rules will not prevent a Scottish tax policy being rolled out, insisting it can be “tailored to local needs”.

In a letter to UK business and trade minister Justin Madders, seen by The Scotsman, SNP finance secretary Shona Robison has warned “the Scottish Government has been unable to introduce the tax while retaining the Highlands and Islands exemption due to concerns around state aid compliance”.

Finance Secretary Shona Robison Finance Secretary Shona Robison
Finance Secretary Shona Robison | Getty Images

Ms Robison said “these issues remain present with the new UK subsidy control regime”.

“Airline connectivity is vital to communities in Scotland’s Highlands and Islands and the Scottish Government has been clear that it will only introduce ADT once a solution to the Highlands and Islands exemption can be found,” she said.

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“The election of your government presents an opportunity to consider how we can overcome the challenges posed by the UK government’s subsidy control regime. Our officials have engaged positively on this matter in recent weeks and have developed a shared understanding of the challenges.”

But correspondence from Holyrood officials to UK civil servants, seen by The Scotsman, sets out the Scottish Government’s “primary concern” the existing exemption “was too broad in scope and no evidence could be established that formal state aid approval had been sought from the European Commission”.

At a meeting between Scotland’s two governments in August, officials confirmed that under the devolved tax, “connected flights from rUK which transfer in Scotland will be treated the same as UK flights which transfer in France”, which means they will be “liable for APD for the whole journey unless they do not qualify as connected flights”.

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Writing to UK officials in October, Scottish Government civil servants stressed that SNP ministers “were concerned that an exact replication of the Highlands and Islands tax exemption within the devolved air departure tax would be open to a challenge”.

But the UK government has told The Scotsman the subsidy control regime poses no barrier to SNP ministers devolving the tax.

A UK government spokesperson said: “Our subsidy control rules should not prevent the introduction of airport departure tax in Scotland.

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“It allows devolved governments and local authorities to give subsidies that are tailored to local needs and drive economic growth, provided that they adhere to its principles and legal processes."

A Scottish Government spokesperson said: “The Scottish Government recognises the critical role air connectivity plays in the lives of residents and communities in the Highlands and Islands, and in the promotion of sustainable economic growth across the region.

“Ministers continue to explore all options for implementing air departure tax in a way that protects airline connectivity in the Highlands and Islands. Any solution that fully protects connectivity must comply with the UK government’s subsidy control regime and we are committed to working with UK ministers to achieve this.”

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