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Views presented on Economic Recovery priorities

Published 01 June 2020 by Transform Scotland

Transform has published its comments made in response to the Scottish Government’s call for views on its Advisory Group for Economic Recovery.

Transform director Colin Howden said: “In our response, we’ve focussed on two key areas: the need for the focus on a ‘Green Recovery’, and the environmental tax reform that will be needed in order to deliver this.”

 

Environmental Tax Reform

Environmental tax reform will be needed as a fundamental underpinning of efforts to deliver a zero-carbon economy. In all instances, effort should be made to shift taxation from investment and labour on to polluting activities. In the context of the transport sector, this implies higher taxation on car use, road freight, and aviation. In all of these cases, there is ample academic literature which demonstrates that these modes of transport do not cover their cost externalities (e.g. road damage, congestion, community severance, road injuries and fatalities, local air and noise pollution, biodiversity impacts & climate change emissions). We would be happy to furnish the Advisory Group with this literature, as required.

We would in particular highlight that there is no case for reducing taxation on aviation. This is by far the most polluting form of transport, yet airlines pay no tax on aviation fuel, there is no VAT on tickets, and airports benefit from duty-free retail. The aviation industry has made a series of spurious claims of economic benefits from reductions in Air Passenger Duty (APD) / Air Departure Tax (ADT). However, as concluded by the Scottish Parliament’s Finance Committee in its Stage One Report on the Air Departure Tax (Scotland) Bill (April 2017), there is no independent evidence base to confirm economic benefits from reductions in APD/ADT. Reductions in APD would completely destroy any legitimacy of economic recovery being deemed a ‘Green Recovery’.

Early progress on environmental tax reform in transport could be made at Local Authority level. Local Authorities have existing discretionary legislative powers to implement local road user charging or workplace parking levy schemes (under the 2001 and 2019 Scottish transport act, respectively). We recommend that LAs prepared to bring forward such schemes should be given practical and financial support by the Scottish Government to bring such schemes to fruition.

However, there is also a need for the Scottish Government to itself take action. We recommend that the Scottish Ministers instruct Transport Scotland to work in conjunction with the relevant local authorities and Regional Transport Partnerships to develop road traffic demand management options for Scotland’s four major cities (e.g. workplace parking levies, sharing lanes, road pricing) with funds raised to be reinvested in local transport improvements. This would not only reduce transport externalities, but would improve public health and quality of like in our cities, provide economic benefits, help contribute to national climate targets, and raise revenue for infrastructure improvements.

Green Recovery

All economic stimulus packages must incentivise a ‘Green Recovery’. Given the economic damage that the pandemic will cause, we expect that there will be calls for spending on infrastructure projects to be brought forward. However, in the context of the Climate Emergency — which will remain as intransigent a problem as and when the Corona Crisis has been suppressed — we propose two imperative features of all new capital expenditure programmes:

Firstly, that all new transport capex should be zero-carbon — not least to correct the systematic bias towards high-carbon capex implemented out by Transport Scotland over the past decade. [1] Priority should be given to measures such as: local footpath & cycle path construction, bus priority, and electrification of bus & rail services. [2]

Secondly, in order to maximise multiplier effect benefits for the Scottish economy, priority should be given to capex which has greater potential to be carried out by Scottish companies and Local Authorities. None of the major road construction projects being pursued by Transport Scotland are being carried out by Scottish companies (as Scotland does not have construction companies of a scale to win these contracts). Meanwhile, while Scotland has no volume car manufacturing, and hasn’t had for decades, we do, in Alexander Dennis Limited (ADL), boast internationally-significant bus manufacturing capacity. Not only would a move to smaller, more local, greener investment be more in line with ‘Green Recovery, this would increase the opportunity for Scottish companies or Local Authorities to be able to win contracts.

Only by following these principles can we be confident that economic stimulus packages can incentivise a true ‘Green Recovery’ from the pandemic.

[Note 1] Research by the Scottish Parliament has found that from 2007 to 2018, twice as much capex went into high-carbon rather than low-carbon projects (27% against 14%). Yet this is projected to worsen in the Goverment’s infrastructure pipeline (39% against 7%). See SPICe (15/01/19) ‘Scottish Government infrastructure investment’ briefing, pp37-39. It is understood that this bias towards high-carbon capex has largely been as a result of transport capex investment decisions.

[Note 2] See our evidence to the Infrastructure Commission for Scotland (May 2019) for some more general principles regarding infrastructure investment: <http://transformscotland.org.uk/blog/2019/05/03/infrastructure-plans-must-prioritise-climate-health-and-equalities/>.