THE Treasury has ruled out axing air passenger duty (APD) in England – even if Scotland ends the tax, undermining North-East airports.

A minister rubbished a study claiming the move could increase revenue – by creating extra routes, attracting more overseas visitors – and pointed out APD raises £3.2bn a year.

Instead, David Gauke again promised a “discussion paper” this summer on how to meet the threat to Northern airports, but dropped few hints on its contents.

Meanwhile, the SNP economy spokesman triggered criticism when he claimed slashing APD north of the border would help the North-East by “rebalancing the economy away from London”.

Stewart Hosie said North-East firms would happily travel one hour north to fly if the alternative was Heathrow, adding: “Edinburgh is the ideal solution for people from Durham.”

But Kevan Jones, the North Durham MP, said such arguments “do not make economic sense” – warning of a harsh impact on Newcastle Airport, in particular.

The Labour MP said: “Up to 1,000 jobs could be lost by 2025 if the situation remained the same, along with £400m gross value to the economy of the North-East."

The clash came during debate in the Commons on the Scotland Bill, which will devolve a raft of new powers to the Holyrood Parliament, including over APD.

All three main Westminster parties agreed that Edinburgh should control the tax – from next year - which the SNP has vowed to cut, or scrap, as quickly as possible.

Earlier this year, transport minister Robert Goodwill warned airlines, as well as huge numbers of passengers, will desert Newcastle Airport if that happens.

Last month, a report by professional services company PwC - commissioned by airlines - suggested scrapping APD across the UK would create up to 61,000 jobs by 2020.

The move could boost the economy by 1.7 per cent, delivering a net gain of £570m from other taxes in the first year alone and benefits of up to £2bn by the end of the decade.

But, in the Commons, Mr Gauke said: “We do not agree with the conclusions of the PwC study.

“We do not believe that the behavioural effects are as great as those set out in the PwC report, which is why we believe APD does raise revenue.”

However, Mr Gauke hinted APD could be cut, pointing to a consensus “that we move on APD” and adding: “On the point about regional airports, we will come back to that later in the summer.”

Mr Jones added: “I would abolish APD altogether - it is a tax that, as the Scottish Government have recognised, stifles economic development.”

However, Rob Marris, a West Midlands Labour MP, attacked the “love-in” leading to lower airport taxes, when flying caused huge environmental damage – and half of people do not fly.