AIRLINES – as well as huge numbers of passengers – will desert a North-East airport if Scotland slashes its taxes, a transport minister has admitted.

But Robert Goodwill appeared to rule out lower rates of air passenger duty (APD) in the North, if Scotland presses ahead with plans to cut - or abolish - the tax.

And he admitted the Government was struggling to find a solution to the threat to Newcastle Airport, telling MPs: “We are pretty much limited by EU competition rules.”

The comments, in evidence to the transport select committee, will increase alarm about the new freedoms hastily pledged to Edinburgh after the narrow’ no’ vote in last year’s referendum.

All three main Westminster parties agreed that Holyrood should control APD, although the legislation will not be passed until after the May general election.

Late last year, Chancellor admitted that a Government study had predicted that Newcastle Airport would lose ten per cent of its “traffic”, or about 450,000 passengers.

But Mr Goodwill has now gone further – suggesting the more likely scenario is that low-cost airlines will make the switch to Scotland.

He told the committee: “If you live in the North-East, it’s a long way to go to Edinburgh, so it’s unlikely that the APD would be sufficient.

“But, on some of the profit margins that the low-cost operators are operating on, £13 is an attractive amount of money for them to consider relocating their operation.”

He added: “I think that would have a major impact. I’ve seen some figures that it could be as much as 25 per cent at some airports. It’s certainly of some concern.”

Some Labour MPs, led by Sedgefield’s Phil Wilson, have called for regional variations in APD rates in England, to protect the North-East if the SNP presses ahead with its cuts.

But, speaking to the committee, Mr Goodwill, the Scarborough and Whitby MP, said: “We don’t have a regional federal structure, we don’t have tax-raising powers for the North-East.

“So there’s not something that would allow the North-East to reciprocate in terms of cutting their taxes.”

The minister said the constraints imposed by EU competition law had been laid bare when Britain was forbidden from abolishing APD on return domestic flights.

The comments were strongly criticised by Mr Wilson, who said: “It’s not good enough for the minister to shrug his shoulders – they need to find a solution.”

He pointed out that the Smith Commission, which put together Scotland’s devolution package, had concluded there should be no “detrimental effect on the rest of the UK”.

And he said: “It’s now obvious there will be a detrimental effect. The Chancellor told me he wanted to work on a cross-party basis, but I’ve seen no evidence of that.”

Labour opposed devolution of APD, but did a U-turn to avoid SNP anger with the general election looming – to the fury of many of its MPs in the North-East.

Newcastle Airport has warned of devastating consequences if the SNP slashes APD, suggesting 1,000 jobs will be at risk, draining £40m from the region's annual economic output.