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Will Osborne present Budget for the Union, with air duty devolved and whisky escalator scrapped?

GEORGE Osborne is set to present a "Budget for the Union" next week, with speculation mounting that he will announce a plan to devolve Air Passenger Duty (APD) to Holyrood and scrap the controversial whisky duty escalator.

The Chancellor is also under pressure to recalibrate the level at which the 40p tax rate kicks in after two of his Tory predecessors, Lords Lawson and Lamont, warned it was bringing in many more thousands of people than originally intended. Political ­pressure intensified last night when Ukip proposed ­raising the threshold for the tax from the current £41,450 to at least £45,000.

However, Mr Osborne appears determined to keep his focus on helping low and middle-income earners with a plan to raise the personal tax allowance from £10,000 to at least £10,500 in April 2015. This would cost more than £1.5 billion.

Having won plaudits for cutting beer duty, the Chancellor has come under increasing pressure from Scottish MPs and the drinks industry to cut duty on whisky. Chief Secretary to the Treasury Danny Alexander is said to be sympathetic to the proposal, as is his Liberal Democrat colleague Alistair Carmichael, the Scottish Secretary.

Scottish MPs have stressed the "unfairness" that whisky is taxed at a far higher rate than either beer or wine, with excise duty and VAT making up almost 80% of the price of a bottle of whisky. They want the whisky duty escalator, which automatically raises duty by 2% above inflation, to be scrapped. Last year, Mr Osborne announced the beer duty escalator would be abolished.

Cabinet Ministers have already been making it known that Mr Osborne wants to use the Budget to underscore why Scotland would be better off remaining part of the UK.

Focus has now centred on the hated APD, which costs passengers anything between £13 and £376 per flight depending on the distance and class of travel. The SNP Government has called for it to be devolved to Holyrood; with independence it has pledged to halve the tax and then abolish it. But in order to wrong foot Alex Salmond and his colleagues, the Chancellor is said to have been considering the devolution of APD to the Scottish Parliament.

"We'd welcome any move to devolve APD to Holyrood," said a spokesman for Edinburgh Airport. "It is a major drag on Scotland's ability to attract new routes and as such should be reduced. We'll be listening to the Chancellor's statement with interest."

A Glasgow Airport spokesman said: "We continue to have the highest levels of taxation in the EU. APD is already proving a significant barrier to attracting new routes and unless there is a fundamental re-think, I have no doubt Scotland's domestic and international connectivity will suffer."

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