Stormont decides not to scrap air passenger duty
Stormont has killed off any hopes of abolishing air passenger duty (APD) on flights out of Northern Ireland, the Belfast Telegraph can reveal.
The news will come as a hammer blow to anti-APD campaigners, including Belfast International Airport, which cites the levy as one of the main reasons why thousands of Northern Ireland travellers are opting to fly from tax-free Dublin.
This newspaper understands that the Department of Finance and Personnel (DFP) has sided with an independent report that concludes the cost of Northern Ireland going it alone in abolishing the contentious tax could not be justified.
The report - delivered by the NI Centre for Economic Policy (NICEP) at Ulster University over four months ago - suggested that although removing the £26 charge from return flights could generate over 500,000 more airline passengers annually, it could ultimately come at a cost of over £7m per year to the block grant.
In a statement to the Belfast Telegraph a DFP spokeswoman said: "A formal decision has not yet been taken.
"However, the Ulster University research concluded that there is not a strong case for the devolution of short-haul air passenger duty, particularly given the cost associated with this in terms of the impact on public expenditure."
Before taking its stance, DFP also studied a second report, prepared by consultants Mott MacDonald for Belfast International Airport (BIA), which challenged both the methodology and the findings of the Ulster University research.
The 67-page UU report, however, prevailed with Stormont's Finance Department.
In an exclusive interview with the Belfast Telegraph last week, BIA's recently-appointed managing director Graham Keddie accused local politicians of lacking the ambition to abolish APD and thus boosting what he believes to be Dublin Airport's plans to put his airport out of business.
Dublin recently reported a 52% hike in passengers from Northern Ireland. "The politicians seem to be scared it'll eat into the block grant," Mr Keddie said.
"There's also a lack of ambition and a lack of aspiration."
Mr Keddie revealed to this newspaper that proposed new routes from Belfast to Canada and the United Arab Emirates would not be taking off in the foreseeable future.
The mood at Aldergrove is unlikely to be lightened by a statement to the Belfast Telegraph from the Treasury, which reiterated its stance on retaining APD as a UK-wide tax.
"The Government is committed to making sure APD is a fair tax for passengers - that's why we've made it cheaper to fly through freezing APD for most passengers since 2012, exempting children and reducing the number of bands, meaning it's now lower for many more long-haul destinations," said a Treasury spokesman.
Economist John Simpson said abolishing APD would cost £100 per family in Northern Ireland per year.
"There have now been two expert reports on the implications of abolishing APD on flights out of Northern Ireland," he said.
"The more sustainable argument in my opinion is the one which has been presented by the University of Ulster and now has been re-endorsed by the UU, having been challenged by Mott McDonald. The UU has reaffirmed its original calculations and it would be quite surprising if Stormont is prepared to forego the revenue from the block grant to pay for this change."
He added: "Put in simple terms, is Stormont prepared to alter APD at what would be a cost of about £100 per family per year in order to make this small alteration in the way in which airline business develops?"
Meanwhile, a newly-published report, by international accountancy network UHY, concludes that the Republic has a distinct advantage over Northern Ireland following the abolishing of air tax south of the border in October 2013. "Countries and cities that are expensive to fly to lose out on tourism," said Alan Farrelly, a partner at UHY Farrelly Dawe White.
"High air taxes can also be harmful to businesses, as in many commercial relationships there is simply no substitute for face-to-face contact.
"There is now significant concern in Northern Ireland about what kind of impact the scrapping of the air tax in Ireland will have on Northern Irish airports - where travellers still have to pay an air passenger duty".