Meeting of the Parliament 19 November 2024
The outstanding recommendation from the Bew review relates to the discussion that was due to take place between the four nations about the intra-UK allocations of the convergence funding. Despite our pursuing those discussions, they have never taken place.
The imposition of a new funding approach and the changes to relief from inheritance tax have made the headlines, and the impact of the budget will be felt throughout rural Scotland. Tenant farming is a key part of Scottish agriculture and the rural economy. Improvements made by tenants, particularly those in secure tenancies over generations, have the potential to make the value of those leases subject to the inheritance tax threshold. For productive tenancies on good land, it is highly likely that the tax will apply on any tenancies of 300 acres or more. Agricultural leases are subject to capital gains tax, but the improvements made by a tenant farmer on a holding are not. In Scotland, more than half of agricultural tenancies are secure. Those are a unique feature of Scotland and might be disproportionately affected due to the incentivisation of generational planning of improvements.
Our rural economy is a major source of growth and prosperity for Scotland. It plays a vital role in Scotland’s journey to becoming a prosperous net zero economy, and it will continue to do so. Food and drink is a major contributor to Scotland’s economy and is Scotland’s biggest non-energy export. In 2022, around 17,495 food and drink enterprises were registered in Scotland, and they employ around 125,000 people. That is where the UK Government’s decision becomes even more curious and ill thought out, because Scotland’s food and drink successes are also the UK’s. Whisky, for example, depends hugely on arable crops that are grown on some of Scotland’s best, most productive and potentially most valuable land. Labour could be hurting not only farming, but the wider food and drink industry and all the jobs that go with it.
The removal of agricultural property relief is not the only tax change in the budget that could harm Scotland’s rural economy. Many farms are also employers. Many of the supply chain businesses that support farming are employers, including processors, retailers, producers and manufacturers. Rural business leaders have been reaching out to the Scottish Government, concerned that the changes to national insurance contributions will adversely impact small rural businesses.
The whisky industry and the wider spirits sector play a vital role in our economy and support tens of thousands of high-value jobs, especially in rural and island regions. The chancellor’s decision to raise alcohol duty while reducing draught duty widens the disadvantage that the spirits sector faces and creates an inherent unfairness in alcohol duty, which disproportionately affects Scotland’s national drink. The Scotch Whisky Association criticised the UK Government’s decision, saying that it represents a broken commitment, after Keir Starmer claimed last year that his Government’s trade strategy would
“back Scotch producers to the hilt.”