SCC calls on the Chancellor to back Scottish business in the Spring Budget

The Scottish Chambers of Commerce (SCC) is calling for the Chancellor to use next week’s Spring Budget to back Scottish business by working in partnership with industry to develop a long-term plan for growth.

Among the recommendations in SCC’s Spring Budget Letter are:
• Cut VAT for hospitality, leisure and tourism sectors to boost spending, stimulate demand and revive our towns and cities.
• Back the Scotch Whisky industry by cutting alcohol duty to ensure the industry is competitive and is supported to grow, export, and create jobs.
• Commit to maintaining the freeze and 5p cut on fuel duty as consumers continue to feel the pinch from inflation which remains at near record high levels.
• Help deliver the world’s most pro-enterprise tax regime, by introducing a new, internationally competitive, tax-free shopping incentive for overseas visitors.
• Support the North Sea industry to recover lost investment and efforts to decarbonise by removing the Energy Profits Levy.

Dr Liz Cameron CBE, Chief Executive of the Scottish Chambers of Commerce, said:

“Persistently high inflation, higher borrowing costs, frozen investment and ongoing global uncertainty are placing businesses under significant pressure. The Scottish business community is calling on the UK Government to work with us to reinvigorate growth and investment.

“Last year’s Autumn Statement suggested that the government is aware of this growth stagnation, through the move to make full expensing permanent. Now is the time to go further and help firms build towards the sustainable future that we all desire.

“Ahead of the next General Election, this Budget must outline the long-term growth plan businesses sorely need to create jobs and unlock investment.”

Calling for a VAT cut for the hospitality, leisure, and tourism sectors, Dr Cameron said:

“The UK has one of the highest rates of VAT in Europe, which is a significant drag on our competitiveness on the world stage. Cutting VAT would reduce this drag, alleviate the cost burden facing firms and allow those same firms to keep their prices more affordable for the public.”

Calling for an Alcohol Duty cut to support the Scotch Whisky industry, Dr Cameron said:

“Scotland’s own prized Scotch Whisky industry represents 26% of all UK food and drink exports and supports jobs across the UK.

“However, last year’s Spring Budget saw the industry hit with a 10% tax increase, meaning that the average priced bottle faces a tax burden of 73%.

“We now call on the government to rethink last year’s increase in Alcohol Duty, to support one of Scotland’s truly world-leading industries that supports the wider UK economy and brings significant revenue to the Treasury each year.”

Calling for a new tax-free shopping scheme, Dr Cameron said:

“A new internationally competitive tax-free shopping scheme would help turbocharge the UK’s retail and hospitality sectors, bringing benefit to all corners of the UK through economic growth and tax revenue.

“The Government must signal that the UK is open for business by acting upon its review of tax-free shopping by working with industry to create a globally attractive scheme.”

Full Text

Spring Budget 2024
Rt Hon Jeremy Hunt MP
Chancellor of the Exchequer
HM Treasury
1 Horse Guards Road
London
SW1A 2HQ
12 th February 2024
Dear Chancellor,
We write to you ahead of your Spring Budget on 6 th March, representing the priorities and
views of the Scottish Chambers of Commerce Network which comprises over 12,500
businesses.
We share your vision for a more prosperous, high growth economy and welcomed elements
of your Autumn Statement for growth last year. We believe the decisive action you showed
to deliver long-term change, such as making full expensing permanent, in response to the
business community’s calls, will help to create the environment business needs to boost
investment. But more is required.
This Budget is an opportunity to firm up the foundations of growth and amplify the ambition
to make the Scottish & UK economy the most competitive and trusted destination for
investment.
We are not the only country chasing this decade’s prize of sustainable growth and we need
our own long-term, sustainable vision of what the economy could be in 2030 and a plan to
realise it, delivered through deeper collaboration between business and government.
Economic data and our own research continue to indicate that the economy remains stuck in
a cycle of low growth and suppressed investment, as headwinds and uncertainty continue to
weigh on firms.
This Spring Budget is a chance to drive prosperity across all regions and nations of the UK.
We urge you to take this opportunity and recommend the enclosed actions as the priorities
for the Scottish business community.
Yours Sincerely,
Dr Liz Cameron CBE
Director & Chief Executive
Scottish Chambers of Commerce

Overview
Current business conditions are among the most challenging seen in generations as multiple
economic crises converge, with low growth, high inflation, and high costs of doing business,
all impacting firms.
The SCC’s Quarterly Economic Indicator survey for Q4 2023 showed that while business
confidence has improved slightly, most firms continue to report no improvement to sales,
cash flow or investment.
Firms continue to face challenges recruiting and a growing regulation / tax burden is
squeezing many businesses to the limit, all contributing to a concerning growing perspective
that Scotland is no longer a competitive place to do business.
It is within these challenging circumstances for business that we set out the following
recommendations for the Chancellor in the upcoming Spring Budget.
Reduce VAT for Hospitality, Leisure & Tourism
The cost of doing business crisis has dramatically increased the running costs for
businesses and has hit hospitality, leisure, and tourism firms disproportionately.
Scottish Chambers of Commerce is calling for a reduction in the VAT rate for hospitality,
leisure and tourism sectors to boost spending, stimulate demand and revive our towns and
cities.
A study by YouGov, commissioned by UKHospitality, has found that 79% of the public were
in favour of a reduced rate of VAT for hospitality and tourism.
This will support international competitiveness, support the viability of the industry, improve
rate of employment, support regional growth, and improve social wellbeing.
Back Scotch Whisky Industry and Cut Alcohol Duty
A 10% tax hike on Scotch Whisky is now in effect as announced in the last Spring Budget.
This has grown the tax burden to 73% of the average priced scotch whisky bottle which is
the highest rate of taxation in the G7, disincentivising investment, hampering growth and
limiting job creation.
The government must rethink this policy by cutting alcohol duty to ensure the industry is
competitive and is supported to grow, export, and create jobs.
Maintain Fuel Duty Cut
A temporary 5p cut in fuel duty is due to come to an end on 23 March 2024.
The Budget should extend the cut and address inflationary increases to the duty that are
also soon due to be imposed.
We ask the government to commit to maintaining the freeze and 5p cut on fuel duty as
consumers continue to feel the pinch from inflation which remains at near record high levels.

Boost International Competitiveness & Restore Tax Free Shopping
Tourism is a vital part of the Scottish economy, and we were encouraged by your comments
on making the British tourism and retail industry competitive at the Autumn Statement and
welcome your decision to review the economic impact of the removal of tax-free shopping.
We urge you to help deliver the world’s most pro-enterprise tax regime, by introducing a
new, internationally competitive, tax-free shopping incentive for overseas visitors to ensure
the UK competes on a level playing field with the rest of the world.
Research by the Association for International Retail shows that British shops are losing £1.5
billion per year as non-EU international visitors choose instead to spend in France, Italy, and
Spain where tax-free shopping schemes are in place.
Businesses across Scotland would greatly welcome a decision to introduce a new
internationally competitive scheme. From manufacturers and retailers to businesses and
hospitality venues, in towns and cities across Scotland, to both big and small businesses -
we would all benefit from a boost in visitor numbers and spend increase to match those we
have seen in nations we compete with on the world stage.
Grow the Economy by Improving Labour Market Access
The UK Government has announced various changes to UK immigration laws for 2024, to
reduce net migration numbers.
In a major change for the UK’s most popular work immigration route, the minimum salary to
sponsor an employee on a Skilled Worker visa is set to rise by almost 50 per cent from the
current level of £26,200 to £38,700 next spring.
The Home Secretary James Cleverly insisted that £38,700 is "the median full-term wage for
those kinds of jobs" although clearly for some sectors, especially in regions of Britain with
lower wage rates than the capital, this will be a significant jump in salary for many roles that
employers will need to sponsor workers in.
While we welcome that Health and Care visas will be exempt, as will other professions on a
national pay scale such as teachers, this significant threshold increase alongside the 67%
increase in the Immigration Health Surcharge, will make more and more companies struggle
to financially justify recruiting from abroad when that may be their only option if the skills they
need are not available domestically.
From late spring 2024, employers will no longer be able to hire immigrant workers at 20 per
cent below the going rate for that job if their role is on the UK’s Shortage Occupation List
which will be rebranded as the “Immigration Salary List.”
We welcome that the government has launched a review of the list, and we urge the
government to engage with business to create a system that is fair, agile and tuned to
business and economic needs.

Energy
We have concerns about rises in standing charges some energy suppliers are imposing on
business customers.
While standing charges are capped for household customers, many business customers are
seeing hikes for the second consecutive year, with no way to challenge them.
Standing charges are increasing at an alarming rate and starting to force businesses to
close or significantly pull back their operations.
Businesses would like to see greater transparency on suppliers’ calculations, exclusion of
Supplier of Last Resort (SOLR) acquisition costs etc.
The government should also work with Ofgem to implement any recommendations that may
arise from its recent public consultation on the impact of standing charges, that recognise
the impact they have had on firms.
Support the North Sea industry by removing the Windfall Tax:
The government should implement removal of the Energy Profits Levy, which has knocked
investor confidence in the North Sea energy sector and created unwanted challenges at the
very time we should be ramping up investment in decarbonisation and renewables.
A ‘windfall tax’ may have had justification while windfall profits were being made by energy
companies in the wake of Russia’s invasion of Ukraine. Profits have since returned to more
normal levels and this supertax on our energy sector should be lifted as a matter of urgency
before many thousands of jobs are lost in the sector.
Sustainable Aviation Fuels (SAF)
By Spring 2024, publish the consultation on a price stability mechanism for the development
of sustainable aviation fuels (SAF), underwritten by Government, with a decision taken
before the next general election.
The recent Government commitment to implement a revenue certainty mechanism for UK
SAF is a step forward. It is one of the key interventions highlighted by industry as having the
greatest effect on lowering costs to 2040 by ensuring adequate levels of SAF supply,
reducing the risk of suppliers buying out of their mandate obligations, and delivering lower
SAF costs over time through higher levels of UK production.
However, there are growing risks in the absence of government backed policy, that the UK
will lose significant economic opportunities from the development of a SAF market which
could lead to increasing costs to consumers and businesses. It is therefore critical for the
government to kickstart a consultation process to provide investors with policy certainty and
support the industry to decarbonise.
Sustainable Aviation forecasts that a UK SAF industry will deliver 14 new SAF production
facilities by 2035, add £2.7bn GVA to the UK economy, and support 13,600 jobs across the
SAF supply chain.
We therefore call on the government to make the most out of this potential and boost
economic growth by creating the framework for a domestic UK Sustainable Aviation Fuel
(‘SAF’) industry, worth up to £10 billion by 2050.

Boost support for exporting and prioritise free trade agreements
Strengthening Scotland’s links with global economies brings with it increased trade, attracts
investment, and creates an environment to support the economy.
60% of Scottish exports go to the UK, 21% to the rest of the world and 19% to the European
Union with the top 5 export markets being USA, France, Netherlands, Germany, and Ireland.
While bodies such as DBT and UK Finance play a key role in supporting Scottish exporters,
the latter having taken significant steps to support SMEs in recent years, SCC believes that
more can be done to support businesses to get started on their exporting journey.
Exporting Scotland’s goods, services, and produce to the world is a vital part of growing
Scotland’s economy and the UK Government should prioritise support for international trade,
particularly as businesses seek out new and emerging markets and make the most of new
Free Trade Agreements and international trade deals following the UK’s exit from the EU.
The UK Government should increase the funding available to train staff across all economic,
business, trade departments on Scotland’s exporting opportunities, making sure all relevant
staff can identify and source opportunities for Scottish businesses.
The government should also increase funding and collaborative opportunities by working
with business networks and organisations to increase the number of exporters in the UK
through the provision of trade missions, international buyer matchmaking connections and
export support.