The budget brought mixed news for the drinks industry in Scotland but little good news for operators. The much requested reduction in VAT was not forthcoming although National Insurance costs were cut by 2p and the duty on alcohol has been frozen. The freeze on alcohol duty, which had been due to end in August, will continue until February 2025.
Although there was no cut in VAT, the threshold for small businesses will rise from £85,000 to £90,000 from April. Kate Nicholls, Chief Executive of UKHospitality commented that although this may help some seasonal and small businesses it is unlikely to unlock growth, adding that the duty freeze is also unlikely to benefit the hospitality sector.
In a statement Kate Nicholls, said, “The Chancellor missed a real opportunity today to show that he backs hospitality and understands the real pain that operators are enduring.
“He had a chance to accelerate and unlock hospitality, but instead he has delivered a cut-and-paste Budget,maintaining the status quo which continues to act as a drag on recovery.
“Over the past year, we have had a Budget for growth and an Autumn Statement for investment – neither have delivered because they were not correctly targeted. The National Insurance cut earlier this year was intended to boost disposable income to generate growth and didn’t have an impact. A different result can’t be expected this time around.
“Government needs to take a different approach. It needs to bear down on the never-ending rising costs that are forcing businesses to shut their doors for good – taking away people’s livelihoods and robbing communities of a vital asset.
“A lower rate of VAT would have been a bold reform that would drive economic growth, keep prices down and unlock investment in the sector, one that was projected to grow six times faster than the economy as a whole. It would have been good for businesses, the public and the economy.
“Hospitality is a sector proven to be a catalyst for growth across the entire nation, as the foundation of the everyday economy. When we perform, the entire economy performs. It’s a great shame that the Chancellor has not recognised that today.”
A spokesperson for NTIA Scotland said that hospitality business, as well as those in retail and leisure will be “bitterly disappointed that there is not further support coming from the Chancellor on reducing the rate of VAT. This is clearly a missed opportunity to provide support directly to Scottish businesses, after the Scottish Government’s recent budget failed to pass on the 75% business rates relief for the third year in a row, despite already being provided with some £260m in Barnett Consequential funding from Westminster to do so.”
Meanwhile, the Scottish Whisky Association has welcomed the freeze on duty saying, while today’s announcement is a positive step, there continues to be great inequities when it comes to alcohol taxation in the UK. Scotch Whisky and spirits remain the highest taxed alcohol category in the UK.
“Longer term action is still needed to address the high tax burden on Scotch Whisky, which is taxed at a higher rate per unit of alcohol than wine, beer and cider, and faces the highest spirits duty rate among G7 nations, despite being a home-grown success story, made in Scotland and employing 67,000 people across the UK. The industry is also unable to access tax breaks available to other sectors through the so-called ‘Brexit Pubs Guarantee’ and small producer relief.”
Chief Executive of the SWA Mark Kent said, “The industry welcomes the Chancellor’s recognition of the benefits of continuing the duty freezes beyond August this year” adding that the SWA will “continue to work with the UK Government to ensure that our tax system is supporting the long-term success and prosperity of our iconic homegrown sectors such as Scotch Whisky, so that Scotch and other high-quality spirits are not put at a competitive disadvantage in the UK and other markets around the world.”