That APD issue again.........
So no mention of APD devolution to Wales was made in this week’s Budget, despite predictions that it would be by many media commentators, but this may only be a temporary reprieve for BRS.
Once the Wales Bill was withdrawn a few weeks ago, mainly on the grounds that it might lessen the Wales Assembly Government’s (WAG) fiscal powers rather than enhance them and was so full of holes that the European Court of Justice might have been occupied for years dealing with legal challenges, it seemed to me that any decision to devolve APD would await the new Wales Bill which will be presented later this year.
The Westminster government continues to say that English airports will not be disadvantaged through APD devolution to other countries in the UK.
Of the three options mooted last year in a Government Discussion Paper only the one that would see powers over APD devolved fully or partially to local authorities or Combined Authorities (including mayoral city-regions) within England is likely to be both legal and pertinent to all airports irrespective of annual passenger throughput.
EU state aid rules dictate that Member States must not vary national tax rates so that they are more favourable to some regions or a region, because it would be deemed that a selective economic advantage had been provided to businesses operating in those regions or region.
Any devolution of tax powers must meet the ‘Azores criteria’ to comply with EU state aid rules which essentially means that the regional authority within a member state to which tax powers are devolved must bear a sufficient degree of fiscal and economic autonomy from central government.
Clearly the WAG does fall within these criteria but the current local authorities around Bristol don’t; at the moment but see below.
In yesterday’s Budget the chancellor gave the go ahead for a metro mayor for the Greater Bristol area; that’s the area that used to be the county of Avon but is now governed by four separate unitary authorities: Bristol, South Gloucestershire, North Somerset and Bath & North East Somerset. If the proposal is agreed by these local authorities central government would give the mayoral-region power, and cash, to regulate transport and housing. Although not publicly stated the next step could be to extend this into genuine fiscal and economic autonomy.
However, the idea is unlikely to proceed as the short-lived county of Avon was reviled by nearly all the local residents and elected representatives, and this proposal is seen by many as a return to ‘the bad old days of Avon’. Although the Bristol and South Gloucestershire political leadership seem supportive of the idea those in the other two unitary authorities don’t as they believe that most money and power would reside in Bristol itself. Prominent Conservative MPs in these areas, Liam Fox and Jacob Rees-Mogg, have also come out strongly in opposition to the proposal.
Even if the plan went ahead and APD was one of the powers devolved the metro mayor region would find it impossible to cut APD. Devolution of APD would also mean a cut in government grants similar to the amount that could be raised in APD by the devolved authority.
With Wales it’s different because the WAG has a multi billion pound budget and CWL provides a relatively small return in APD, so cutting it to nil/abolishing it would be much more easily achievable within its much larger budget and the WAG leadership says it will do it.
BRS generates a far higher sum in APD and, put against the much smaller budget of the Greater Bristol area councils, cutting it would be impossible as there would be a huge shortfall in the authority’s overall budget. Even the Scottish government will only be able to afford to cut APD by half initially although the long term aim is to abolish it.
So having a metro mayoral region for the Bristol area could be a way for the chancellor to devolve APD to Wales and at the same time say he is not disadvantaging the West Country because they could have the power too if they wished, even though he would know their finances would not allow the sort of APD reduction that would take place in Wales.
Of course, if the UK votes to leave the EU the government would not be bound by any of the EU state aid rules and would be free to explore other ways of minimising any harm to English airports caused through devolution of APD to the rest of the UK.