THE Chancellor of the Exchequer’s decision to freeze spirits duty was the right thing to do for the Scotch whisky sector, though the Treasury could go further to support the country’s rapidly-growing small distilling industry, a conference has heard.
Philip Hammond cheered the drinks industry by leaving spirits duty, beer and cider duty unchanged in Monday’s Budget.
Chaired by The Herald’s political commentator Iain Macwhirter, the panel included Fraser Campbell of Campbell Dallas, Grant Johnston of Wright, Johnston & MacKenzie, Geoff O’Brien of ThinCats, and Heather McGregor, executive dean of the Edinburgh Business School at Heriot-Watt University.
“One of the good things about this Budget was the restraint when it came down to a tax on spirits,” Ms McGregor said. “It has always been an easy, quick and lazy win, in my view, in the past to just tax spirits and keep taxing it. I’m really pleased that someone has realised it is not helping the Scottish economy and has stopped doing it.”
Ms McGregor highlighted the huge number of people who travel to Heriot-Watt to study at its famous brewing and distilling course who go on to establish businesses in Scotland, including many from the US and China. Around 200 new distilleries have opened in recent years, she said, many producing gin for revenue while waiting for the whisky they have distilled to mature.
“It [whisky industry] is not just a revenue earner for actually buying whisky, it’s a revenue earner for tourism as well, because on the whole people don’t come to Scotland for the weather,” Ms McGregor added.
But Mr O’Brien of SME lending specialist ThinCats said the Treasury could do more to support Scotland’s burgeoning craft distilling scene. He suggested small distillers could benefit from an arrangement similar to the small breweries relief introduced by former Chancellor Gordon Brown, a key factor in the rise of the craft beer sector in the last decade. Mr O’Brien said a tiered relief scheme, which would grant tax breaks based on distillers’ output, could be applied to the spirits industry in Scotland.
“Scottish produce means something globally, and I think if the duty [scheme could be changed] for distilleries of a certain size it would give us a real shot in the arm,” he said.
The view emerged from the panel that the Treasury had been right to not make changes to the tax regime for the North Sea oil and gas sector in the Budget. The industry remains in recovery mode following the crude price plunge which claimed thousands of jobs after taking root in late 2014.
“It is too soon for the Government to start changing the playing field for the oil and gas sector in the UK, because it is really only just starting to recover,” said Mr Campbell, partner and head of family business at Campbell Dallas. “We’re probably only a year to 18 months into that recovery, so it’s a long-term investment.”
While Hammond’s pledge to gather evidence over creating an oil and gas decommissioning hub in Scotland has been broadly welcomed, Mr Campbell said it will require a major investment in infrastructure. The focus of that investment would range from deep water facilities to infrastructure around ports such as roads, broadband and accommodation, said Mr Campbell. “Other countries would just pile the money into infrastructure to make it easy to undertake these big [projects],” he added. “It goes back to the short termism we see all the time.”
Hammond also said the personal allowance would rise to £12,500 from April.
Grant Johnston, partner and head of wealth planning at Wright Johnston & Mackenzie, said: “The Herald’s headline this morning (yesterday) about throwing down the gauntlet to the SNP is what we predicted two years ago, and it is now coming to fruition.
“Subject to calculations being done, someone earning £50,000 in Carlisle will pay approximately £1,200 less tax per annum. We are now talking about £100 per month. It is certainly going to be very interesting to see if the Scottish Government do follow it, because if they don’t we are going to have this unenviable situation of having two materially different tax regimes in a relatively small country.”
The Herald Budget Briefing was held in partnership with Campbell Dallas, ThinCats, Wright Johnston & Mackenzie and 200 SVS.
A spokesperson for 200 SVS said: “It was a pleasure to host the 2018 Budget Briefing Breakfast with The Herald for a consecutive year. We hope all attendees enjoyed their morning at 200 SVS and revelled in hearing the valued opinions of the expert panel on, presumably, the last Budget pre-Brexit.”
Grant Johnston, WJM Partner, Head of Wealth Planning and Panel member of The Herald’s Business Briefing said: “The Herald’s Budget Briefing is a great opportunity to find out what the crucial implications of the Budget are for both Scottish businesses and the economy. As an independent Scottish law firm with an in-house wealth management team, we at Wright, Johnston & Mackenzie LLP need to be aware of the many different ways that the budget can impact on our clients. Once again, we were delighted to be asked to partner with The Herald in supporting the wider Scottish business community.”
Fraser Campbell, Partner and head of Family Businesses at Campbell Dallas said, “Once again the level of debate and discussion with local businesses and advisers made for an insightful and lively discussion, with the audience and panellists debating the likely impact of the Chancellor’s latest budget in Scotland and the UK against the backdrop of a fast approaching Brexit”
Geoff O’Brien, Director, Regional Business Development at ThinCats said, “A great discussion this morning with interesting questions raised. The final point was of particular relevance to ThinCats, on stimulating growth – the Chancellor has taken some steps towards this through raising the annual investment allowance, but it won’t impact on the vast majority of businesses. Scottish SMEs have shown themselves to be very resilient over the past 10 years of austerity, but as Brexit looms large, more is needed to help these important building blocks of the economy to really thrive.”