Bill Jamieson: Tourism needs help in taxing times
For large parts of Scotland this has been a fantastic spring. Warm, sunny weather day after day, dining al fresco by the loch sides, and bustling outdoor leisure events: on days like these the slowing economy and the EU referendum battle can go to blazes.
My abiding memory of the year so far is a day of spectacular sunshine and scenery by Loch Voil at Balquiddher. I met with fellow Scotsman columnist and food supremo Stephen Jardine at a teeming weekend festival at Monachyle Mhor. Such was the volume of visitors that organisers with walkie-talkie radios and special bus convoys struggled to cope with the traffic on the loch side road – surely one of the loveliest in Scotland.
Down in Callander, the town centre has been heaving. Visitors venturing north along the A84 to Loch Lubnaig and Loch Earn have been drawn to the BLiSS Trail with its roadside art installations, ornamental features and food and drink stops. Over the past few weeks we have hosted two sets of friends from down south who have been enchanted by their visits to the highlands and islands.
It is wonderful to see Scotland at its best and working its charms on visitors. Now one fine spell does not mean the end of our tourist problems. But after the drookit experience of last year, we were surely due a break. Dozens of small businesses dependent on a bustling tourist season have been clinging on by their fingertips in recent years against indifferent weather (at best), an economy struggling to grow, and the lure of Lanzarote.
According to VisitScotland tourism statistics, international inbound tourism was down by four per cent last year compared with 2014 on the previous year, while domestic overnight tourism fell by 4.2 per cent. Every tourist penny has to be fought for – and especially so when we are up against competition from 200 or so holiday destinations worldwide.
So news this week that Keith Brown, Scotland’s new economy secretary, has pledged “a clear and unrelenting focus” on creating a competitive environment for business is to be welcomed. Tourism may make a relatively small contribution to Scotland’s economy – annual spending by tourists is around £5 billion and contributes five per cent to overall Scottish GDP. But it accounts for around 8.5 per cent of overall employment here. And our ability to succeed as a tourist destination can have a positive impact on the standing of Scotland around the world and its ability – whether through major sporting events such as golf or the massive appeal of the Edinburgh International Festival – to attract foreign investment.
Now, there is little difference that a new government minister, however energetic, can make towards boosting our visitor appeal, let alone lifting our overall growth rate. He certainly can’t control the weather. But well outside of that, too much for too long has been made of government strategies, initiatives and targets. Economic performance is much more the product of events outwith political control.
However, there is much that government can do by avoiding the imposition of barriers to growth and obstacles to activity. Two issues in particular are of concern to Scotland’s tourism industry and where the new business minister can make a positive impact.
The first is to lighten – and if possible remove altogether – Air Passenger Duty (APD) at Scotland’s airports. The second is to avoid the imposition of a bedroom tax.
Air Passenger Duty was first introduced in 1994 at a flat rate of £5 for flights to the EU and £10 elsewhere. Since then, on average, the short haul rate has risen by four times, and the long haul rate by twenty times, the rate of inflation.The tax yield has increased more than sevenfold since its first year in operation (£424 million) to around £3.2bn in 2014-15.
As the report of the Independent Commission for Competitive and Fair Taxation commissioned by Ruth Davidson pointed out in January, out of 28 EU countries, only four others levy some form of air passenger tax. Critically, those flying from UK airports pay as much as five times more in departure duties than if they flew from competing airports in Germany, France, Italy and Austria.
This has a direct bearing on competitiveness that the minister has specifically set out to improve. Scotland is on the edge of Europe and has to fight against more powerfully resourced international hub airports. Academic evidence in 2011 warned of a significant loss to the Scottish tourism sector. Mr Brown should, if he has not already done so, commission research to bring data up to date and assess the impact of APD on Scotland’s competitiveness.
Similar concerns surround the proposal to introduce a so-called “tourist bed tax”. Several Scottish politicians have suggested that a new tax on visitor accommodation could help to relieve pressure on council finances.
And the proposal has strong appeal, particularly to Edinburgh residents who have a daily battle against traffic congestion. The sainted trams, far from making the capital’s main streets more navigable, have worked to add to the congestion.
“Let’s hit the tourists!” is a cry that has popular appeal when you’re stuck in a Haymarket snarl-up.
But congested Edinburgh is not typical of Scotland as a whole. And across the highlands and islands, where the economy is notably dependent on tourist visits and spending, any extra impost would be hard felt. Local businesses note that Scottish visitors are particularly sensitive to rising costs and the price of accommodation.
Care here should be taken that we do not weaken our competitiveness. As the Federation of Small Businesses in Scotland (FSB) has noted, four in five Scottish small firms are against the tourist bed tax proposals that would impose a levy on visitors’ accommodation bills.
Its survey of 682 firms shows that 82 per cent of Scottish businesses are against mooted plans to impose such a levy, while the Scottish Tourism Alliance and British Hospitality Association have also voiced their opposition.
It finds the mood among firms operating in Scotland’s tourism industry is even harder. Some 86 per cent of tourism businesses said that the move would have a negative impact on their enterprise, while almost four in five members of the wider business community (79 per cent) said that the move would impact negatively on the local economy.
FSB is urging the Scottish government and local councils to rule out these proposals. Colin Borland, FSB’s head of external affairs in Scotland, said: “While we understand that public sector budgets are under pressure, FSB cannot support the introduction of a regressive tax on visitors.
“Tourism is a key industry for Scotland and the ambitious targets we have to increase the number of return visitors could be undermined by these proposals.”
The minister says he would listen to any “constructive ideas” on how to support economic growth put forward by MSPs. Let’s hope he does.