Transport CommitteeWritten evidence from the Scottish Chambers of Commerce (AS 59)
Introduction
1. Scottish Chambers of Commerce is the umbrella organisation for 22 local Chambers of Commerce across Scotland, which have a membership of around 10,500 businesses. These members are businesses of all sizes, drawn from all sectors of the economy, from sole traders right through to large multinationals and they employ over half of Scotland's private sector workforce. Scottish Chambers of Commerce and our constituent local Chambers exist to serve the needs of our members and to represent their interests.
2. Scottish Chambers of Commerce welcomes the opportunity to contribute towards the Transport Select Committee's inquiry on the need for an Aviation Strategy for the UK. We will address each of the questions contained in the call for evidence.
What should be the objectives of Government policy on aviation?
3. The UK Government's Draft Aviation Policy Framework states that "[t]he Government's primary objective is to achieve long term economic growth". Aviation policy should have the same purpose. Scotland relies heavily upon its air links to provide connectivity both domestically and internationally. In an increasingly global economic market, it is essential to connect to compete and Scotland's geographical location means that air transport is the quickest method of travel to many UK cities and the only practical option for travel to international destinations. Internally, air transport is also a key mode of transport to remote and island communities, requiring special consideration.
4. Excluding oil and gas, Scotland's international exports in 2010—the most recent year for which figures are available—were valued at £22 billion and our sales to the rest of the UK totalled £44.9 billion. Throughout the recession Scotland's manufactured exports have performed strongly despite dipping slightly at the beginning of 2012.
5. The recession and the Eurozone crisis have driven a number of Scottish businesses to look more towards international markets for new opportunities and to raise their horizons above the traditional export markets that have dominated in recent years. Equally Scotland's tourist industry is targeting new markets, including Brazil, Russia, India China—the so-called BRIC countries—and Sri Lanka, Indonesia, Malaysia, Mexico and Argentina—the SLIMMA countries.
6. Developing Scotland's international air connectivity both in terms of direct flights and through hub airports will be essential in maximising our economic potential. The Government's aviation strategy requires to recognise this ambition and provide a framework that ensures that these transport needs can be satisfied. Such a strategy would require to recognise the different challenges that face the UK's regional airports and the hub capacity, currently centred on Heathrow.
7. The aviation strategy must also reflect the taxation of air travel, notably Air Passenger Duty (APD. The UK has the highest rates of aviation taxation in Europe and this is having a damaging effect on the competitiveness of UK regional airports, including Scottish airports. An independent study conducted by York Aviation found that as a result of the increases in APD announced in 2010, Scotland would lose 1.2 million passengers, 148,000 tourists and £77 million in revenue by 2014, with long haul demand down by 5%.
8. Scottish Chambers of Commerce believe that the UK Government should follow the recommendation of the Commission for Scottish Devolution and devolve APD to the Scottish Parliament, allowing Scotland to set the tax at a rate more appropriate to the Scottish aviation market. There is considerable concern that the current rates may be geared towards the capacity constrained South East of England aviation market more than they are regional airports.
9. The Government's decision to devolve aspects of APD in respect of Northern Ireland has established a precedent in this regard and if this is right for one part of the UK, then surely it is appropriate for other parts of the country.
How should we make the best use of existing aviation capacity?
10. UK aviation capacity is broadly speaking split between the capacity constrained South East of England market and the rest of the country where capacity constraints are less of an issue. In Scotland our airports have, in general terms, a significant degree of spare capacity and airport operators are actively working to attract new services serving a variety of destinations.
11. Scotland's economy requires a mix of both direct international air services and domestic routes. Air travel remains by far the quickest way to travel from Scotland to the South and Midlands of England from most parts of Scotland, and is the dominant mode of transport between Scotland and London. In addition to direct Scotland-London connectivity, it is important for Scotland to retain links to the UK's major hub airport at Heathrow. At the time of writing, these services are being delivered by a single operator linking Heathrow with Glasgow, Edinburgh and Aberdeen Airports, though this remains subject to the allocation of the remedy Heathrow slot pairs made available at the time of IAG's takeover of bmi.
12. Scotland would benefit from action to reserve slots at capacity constrained airports in the South East of England, particularly Heathrow, in order to guarantee domestic connectivity in the face of pressure to turn over pressured slots to more profitable long haul services.
13. Scotland has had some success in developing direct international air connectivity, spurred on by the Scottish Air Route Development Fund, operated by the Scottish Executive/Government until 2007, which provided valuable year one support to airlines for the development of new routes. We have long argued that the Scottish Government should look again at delivering a revised model of support along these lines in a manner compatible with EU rules. Such support could help drive forward further expansion in Scotland international air connectivity.
14. The UK Government's Draft Aviation Policy Framework focuses strongly on the issue of noise in the vicinity of airports. This is virtually a non-issue in Scotland and instead our members are more concerned with surface access to airports. This is largely a matter for the Scottish Government and Scottish Local Authorities, but it is worth mentioning that only one of Scotland's Airports, Prestwick, is directly served by the rail network and all of Scotland's airports require improved servicing by the motorway network. Recent attempts to link Glasgow and Edinburgh Airports to the Scottish rail network have all been abandoned and greater consideration requires to be given by the Scottish Government to facilitating surface access to Scotland's airports across the board.
What constraints are there on increasing UK aviation capacity?
15. The main constraint on increasing UK aviation capacity is in terms of hub capacity, which is currently constrained as a result of the Government's policy of restricting the expansion of the current hub airport at Heathrow. If the UK is to successfully compete in terms of air connectivity with other major European economies, then we must recognise that competitor hubs in Amsterdam, Frankfurt and Paris have more runways and more capacity for expansion. Whilst Scottish airports can and do connect with all of these foreign airports, we can only maximise the benefit for the UK if we provide excellent opportunities for hub connections in this country.
16. Environmental issues are important when considering any mode of transport and it must be recognised that the aviation industry more than pays its way environmentally and that aviation technology is advancing rapidly, with reductions in carbon and noise levels a key facet of developing technology. Indeed, as has already been mentioned, noise is not a significant factor in terms of Scotland's airports, although we recognise that this is a significant consideration in and around London.
Do we need a step-change in UK aviation capacity? Why?
17. The medium term answer to the UK's hub capacity issues is to consent to the expansion of Heathrow Airport. Thereafter, detailed consideration must be given to how best the long term needs of the UK's economy and aviation can be served.
19 October 2012