Greater fiscal powers will help to bring out the very best in our producers, writes Simon Howie
As the Royal Highland Show gets under way, it is a good time to reflect on what’s been happening in the farming community. It has been a record period of growth for the food and drink industry as a whole, but what does that mean for food producers and farmers? And with the media firmly focused on the pending independence referendum, what does it mean for us?
Clearly, the weather has had an impact, making it tough for farmers, and for many it is having a serious impact not just on their livelihoods, but also on land, livestock and produce.
As a farmer, a butcher and processor, I am involved in all angles of meat production. I speak to farmers across Scotland and it is obvious that they are not having an easy time. While we have a Scottish Government doing what it can for the sector with measures introduced swiftly to help farmers to get through the bad weather, there is still a longer-term issue that cannot be fixed by short-term cash. We need to protect our farmers and give them help to ensure that they can put cost-effective food on our tables.
The fact is, ten years on, farming is still suffering from the aftermath of the foot and mouth outbreak. The sheer numbers of stock culled is still having an impact on the food chain and that is starting to hit the price of lamb and cattle.
Primary producers struggling with market prices and costs is a serious issue and I think a direct and positive intervention is the way forward. We need to control the cost of production, or producers will go out of business, with a subsequent impact on supply and demand.
We must increase our herd and flock numbers. This is vital, not only for the farmers involved, but also for the whole agricultural community and, of course, consumers who buy the meat. Unless we give stockmen incentives to commit to calving and lambing, we will never regain our status as a serious animal producing country.
This issue can be looked at now. But with the referendum around the corner, what could we do in the future with new economic levers at our disposal?
This will be debated by both sides of the independence argument at Ingliston this week. The opportunities for agriculture and the food and drink industry with fiscal levers and country status are worth thinking about, but I am more interested in what we can do in practical terms to get on with growing our food industry, helping our farmers and driving forward Scotland.
The drinks business has been the darling in the rise of the food and drink industry in Scotland. Salmon and our high-quality beef herds have been leading the way in driving forward the strong Scottish food brands, but it is the drinks industry that has achieved record level. Years of work on branding, coupled with a relatively high gross margin, has made this possible.
It shows what the food sector can aim for and I think that we can significantly up our game and raise our platform to the world markets with competitive fiscal levers and a stronger brand Scotland.
It is remarkable to think that 40 bottles of whisky are shipped overseas each second. What if beef, salmon, pork or haggis was exported throughout Europe and further afield at similar levels?
Turnover in the food and drink growth sector has grown 50 per cent since 2007, reaching £5.38 billion in 2011 – making it one of the biggest export sectors. It is a real success story. But we could be more competitive in the world markets with greater financial powers at our disposal.
I am not convinced that independence would have a negative impact on Scotland’s trade with the rest of UK. We are also one of England’s biggest markets. For the past five years, retail sales of Scottish food and drink brands across the UK have steadily increased. In the end, it will come down to simple supply and demand – and quality – not politics. So, providing we do not grandstand about being independent or not, our neighbours will continue to trade with us.
I am really interested in a fairer taxation system and VAT is a good starting point. It is an indiscriminate tax and, at 20 per cent, highly punitive. People pay their taxes and are then asked to pay 20 per cent for everyday goods such as fuel, home improvements and eating out.
We should be using fiscal powers to modify our taxation system. I think we should start with VAT breaks for Scotland. I would begin immediately with home improvements to boost Scotland’s economy, create new jobs and help those who cannot afford home repairs and protect consumers from rogue traders.
The hotel and restaurant trade has been suffering in the downturn. VAT cuts for tourism-related businesses, pubs and restaurants would bring a significant boost to this key sector in Scotland, which in turn would benefit the food and drink producers. Lots of other countries in the European Union have done this, why shouldn’t Scotland?
The ability to adjust VAT rates is just one example but, overall, I think a more competitive Scotland with fiscal levers would be good for the whole of Britain, not just Scotland.
If fiscal powers give Scotland the ability to attract inward investment, then that can only be a good thing. It is key to developing infrastructure and inward investment for all sectors of Scotland, not just mine.
We need to grow our economy by expanding our key sectors such as food and drink and continue to see the benefits of a government in Scotland working with industry.
Scotland needs a political, economic and social system that benefits the majority not the minority. If that comes by way of increased devolved power, or by way of full independence, fine by me.
• Simon Howie is an entrepreneur and owner of Simon Howie Group