Scottish independence – how would hospitality fare?

11 July 2012 by
Scottish independence – how would hospitality fare?

What would a move to independence mean for the hospitality and tourism sector in Scotland - one of the country's biggest industries? Neil Gerrard reports

"Some people hate the English. I don't, they're just w*nkers. We, on the other hand, are colonised by w*nkers."

So went the tirade by Ewan McGregor's character Mark Renton in the 1996 hit film Trainspotting. If Renton hadn't quite appreciated the finer points of the way in which the union between England and Scotland is supposed to work, he nonetheless captured an extreme version of the discomfort a great many Scots feel about the 300-year-old economic and political arrangement.

And thanks to the overall majority that the Scottish National Party (SNP) holds in the the Scottish parliament, the time for those Scots unhappy with the union to do something about it may be close. A referendum on full independence is slated for 2014 and the "Yes" campaign to support the move has already launched.

And although support in recent weeks has fallen away slightly, there is still strong backing, with 33%-35% of those polled indicating they would vote "yes". But the pro-independence movement faces opposition from a campaign launched last week and backed by the Conservatives, Labour and the Liberal Democrats, which is being fronted by Alastair Darling.

But what would a move to independence mean for the hospitality and tourism sector in Scotland - one of the country's biggest industries? The potential effect could be huge. An independent Scotland would have the power to set its own taxation rates, decide on whether or not to enter the Schengen agreement, and perhaps even adopt its own currency (see Points of Uncertainty, page 16).

tourism boost
For Chic Brodie, SNP MSP for South Scotland and member of the Economy, Energy and Tourism Committee at the Scottish parliament, the freedom that independence could provide Scotland with would boost its tourism industry. "Scottish independence presents a wonderful opportunity for even greater expansion in what is already a key part of Scotland's economy," he said.

"There has been a rise of 8% in the number of visitors in the first nine months of 2011 and a rise of 11% in the overall spend by visitors. However, tourism in Scotland can do even better - with independence, corporation tax would be slashed.

"Political and economic independence for Scotland would be exactly that. With our strong cultural and social ties with England and the rest of the UK and our commitment to staying in a monetary union, with the pound as currency, the number of visitors from England, Wales and Northern Ireland would be bound to increase."

However, Labour, as part of the "No" campaign, takes a different view. "What the Nationalists have been unable to explain is why turning our closest neighbour into our biggest competitor is good for the economy. That applies to all sectors - including catering and hospitality," said Rhoda Grant, Labour MSP for the Highlands and Islands and finance spokesperson.

"Devolution gives us the best of both worlds - a strong Scottish Parliament that should be doing much more to promote tourism, but also we are part of the UK.

"Our biggest market is the rest of the UK and, with staycations, will remain key. Working together makes advertising and promotions much easier. On a really practical level, look at the fantastic publicity for Scotland from the Olympic flame relay. That was a great showcase for us."

With such strongly opposing opinions, it is little wonder that views among business operators in Scotland are mixed (see What the Operators Think, page 17).

And of course, it is not just a question of deciding what is best for their businesses - many operators are balancing those considerations with their own personal political convictions, whether they are pro- or anti- independence.

Nor are they able to look to industry bodies for guidance on which way to vote. The British Hospitality Association (BHA) has yet to come down on either side of the fence.

"The BHA has to be apolitical to a degree and consider what is best for hospitality and tourism industries," said Willie Macleod, chair of the BHA in Scotland.

"At the moment there is a need for clarity. We have identified questions we believe need to be answered as the debate gathers pace. With the ‘No' campaign launching I think there will be clarity and the SNP will be forced to consider some of the points they have not considered yet."

With as little as two years to go until a referendum takes place, no-one can afford to stay uncertain for long.

How things stand

Scotland can already set its own income tax rates, and has borrowing powers worth £5b, as a result of the recently introduced Scotland Act 2012. The Act will also devolve stamp duty, land tax and landfill tax. But new powers will not be available until 2016. And in future, it could have great devolved powers, even if it does not opt for full independence.

The SNP's Alex Salmond already wants to include a second question in the 2014 referendum, on whether or not Holyrood should get more powers while remaining within the UK - an option known as "devo plus". The Conservatives, Liberal Democrats and Labour are already offering to give Holyrood greater powers after the 2015 general election, but are opposed to the idea of a second question on this issue in the 2014 referendum.

Points of Uncertainty

Currency The SNP has stated that it is committed to monetary union, with the pound as the currency. But it could also vote to join the euro. This appeared to be Alex Salmond's preferred option until the Eurozone crisis started to make it look like a politically contentious move.

If Scotland does keep the pound, the Bank of England will still have control over monetary policy.

Visas/border controls An independent Scotland will be treated as a successor state and by the EU, of which it is currently a member, as part of the UK. That means that it will retain the same status as it currently has within the UK, including not being in the Schengen area.

It also means that all EU citizens will still be able to move freely in and out of the country. An independent Scotland would also inherit the Common Travel Area which exists across the UK and Ireland, and provides for no border controls for the citizens of these islands, according to the SNP. But the party indicated that as a result of independence it may alter its migration policy, including its immigration policy, to address skills shortages. It gave no indication whether it would look to enter the Schengen agreement when Caterer and Hotelkeeper posed the question.

Taxation When Caterer and Hotelkeeper asked the SNP about its approach to taxation in an independent Scotland, it referred us to a speech earlier this month by John Swinney, the cabinet secretary for finance, employment and sustainable growth in the Scottish Government.

Swinney pointed out that an independent Scotland would be able to choose its own levels of income tax and VAT, as well as taking control of other sources of revenue such as alcohol and tobacco duty, air passenger duty and landfill tax. He also indicated that VAT rates could be adjusted to support Scotland's hospitality and tourism sectors. However he gave no indications as to how these taxes would be changed. He also indicated that an independent Scottish government would remove what he called the "discriminatory" excise duty on whisky.

Scottish minimum wage Scotland would inherit the same benefits arrangements as the UK but the SNP said it would work to "make them better" and was committed to the living wage, which, if forced on the private sector, could push up labour costs. Cross border transport links Some people have raised the question of whether or not rail and air services, in particular, would change post-independence. The SNP gave few indications as to what it expected to happen but said its position on the periphery of Europe meant it needed to be able to move easily and freely across the UK and to neighbouring countries. It promised to use independence to "deliver the best transport policy for Scotland".

Tourism marketing Scotland currently advertises itself to the world not just via VisitScotland, but also via VisitBritain. It is not currently clear whether that arrangemement with VisitBritain and other cross border tourism marketing agencies would continue.

The SNP said: "Following a vote for independence, the Scottish Parliament and Government would carry forward the people's will. This would involve negotiations with the UK Government. These negotiations would deal with the terms of independence as well as with the arrangements for the transition.

"The terms of independence would include agreement on the scope and arrangements for future cross-border bodies and cross-border co-operation, both transitional and ongoing."

Cross border agencies Several organisations like the Health and Safety Executive, HMRC and the Food Standards Agency serve both England and Wales, and Scotland.

Work is already underway to establish a separate Scottish Food Standards Agency, but the SNP indicated that it would move other services to Scotland in a bid to create more jobs in the country.

What the operators think

"I worry a lot about this whole independence thing. I worry because first of all I have a horrible feeling it might happen. And second, what is actually going to drive the vote for independence is going to be a large proportion of the population who will actually not vote for it for the right reasons.

"As far as the hospitality industry is concerned I think what has happened over the past few years having had an SNP government is not hugely encouraging. We have had a situation here where our business rates have risen by many 100% and that is quite concerning for us. We have seen the fees and administration of our liquor licensing increase considerably. We have moved on to metered water usage, which has increased our costs considerably. We have hugely higher fuel prices up here in the Highlands which the Government doesn't seem to want to do anything about.

"I do also have wider concerns about the philosophical thing. Is it right that we set ourselves off as a small nation when actually we should recognise that the majority of incoming visitors to the UK don't just come to Scotland? It is a UK holiday that they have; not just a Scottish holiday."
David Young, owner, the Cross at Kingussie, Highlands

"I was in America in January and they think we already are independent so I don't think it will affect tourism too much. I don't think it will be good in the long term because of the tax complications of employing people within the UK. I think a devolution tax concept is the way forward with potentially a different variation of tax raising powers in Scotland. My views are well known as my uncle was a devolution MP for a long time."
Beppo Buchanan Smith, owner, Isle of Eriska hotel, Highlands

"The union has been beneficial for a number of years, and I don't see the point of splitting up for nationalism. I don't see that there is going to be any great economic benefit and I think the risks are fairly high.

"Around 80% of my tourist income comes from south of the border - anything that makes them think twice about coming south of the border, whether it is a different currency, or border checks, I would not be in favour of. Even if there is just a perception that it is more difficult to come to Scotland then I would obviously be against that.

"But a lot of the problem is that we don't actually know exactly what independence will entail. I do agree with the policy on minimum unit pricing of alcohol, but nothing I have read says the SNP would lower VAT. If it ain't broke, don't fix it."
Alastair Scoular, owner, the Steam Packet Inn, Isle of Whithorn

"The main problems a small business like ours face are minimum wage hikes, high business rates and high VAT. John Swinney is promising to lower VAT if we were to gain independence, including a reduction of 3% corporation tax. However, I do have concerns over how we are to fund this tax cut and worry that our public services may suffer as a result. There are too many questions that still need to be answered before the referendum takes place. Although I do believe that Scotland should be given more fiscal power to have the authority to cut VAT and spend within our means, I do not support breaking away from the union."
Mandy Davidson, owner, the Cock & Bull, Balmedie

"I don't know if it would have a negative effect on the English market, which is a big market for us. But on the international front it would make no difference. Visitors really don't focus on that. If they visit Scotland they are here to experience Scotch whisky, the culture, and the history. Speaking to a lot of international visitors, they don't understand the make-up of the UK anyway."
Susan Morrison, director and general manager, Scotch Whisky Experience, Edinburgh

"I think we should go independent. As a country we can have a very close look at what we need in terms of the F&B sector. My belief is that the Scottish government really cares about what is happening in our restarants and has an active interest. I have seen Alex Salmond countless times within our restaurant since he has been in office. I don't get that opportunity with Westminster just now.

"Tax is a huge issue for everyone in Britian. I do believe if the tax was lowered it would allow the person to have that glass of wine, that taxi, that night out. But I would still send young chefs down to London to train, down to Cornwall to work with Rick Stein]. I would still buy from the Wright Brothers at Borough Market. I don't want isolation. I just want someone who fully understands and is at your doorstep to look after your interests."
Roy Brett, founder, Ondine, Edinburgh

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