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12 March 2012 Dear George Osborne, UK Government Budget 2012 submission from the Scottish Chambers of Commerce
Scottish Chambers of Commerce is the umbrella organisation for 21 local Chambers of Commerce across the country which have a membership of around 10,500 businesses. These members are businesses of all sizes, drawn from all sectors of the economy, from sole traders right through to large multinationals and they employ over half of Scotlands private sector workforce. Scottish Chambers of Commerce and our constituent local Chambers exist to serve the needs of our members and to represent their interests.

I am writing to you today on behalf of this network to set out our views on what measures the Government must take in setting its Budget if it is to support business to fulfil the potential of its role to drive economic growth in these ongoing difficult economic circumstances. This budget is a major opportunity for the UK Government to respond to the recent downgrade of the economic forecast for 2012 and to introduce measures aimed at supporting businesses over a very difficult period until growth becomes more normalised, probably over the course of 2013 and 2014. In addition, it seems likely that unemployment in Scotland will continue to increase this year, meaning that it is imperative action is taken to reduce costs on business and boost cash flow at this crucial economic phase. While we are aware of the need for a continued focus on deficit reduction, there is an increasingly urgent need for judicious investment to resuscitate the UKs flatlining economy. This must include improving access to finance for SMEs, incentivising capital investment and working with devolved administrations to ensure that rising youth unemployment does not create a long term economic issue across the UK.
Fiscal measures Together with our colleagues in the British Chambers of Commerce, we recommend three clear and substantial fiscal measures to support short term growth at this critical point in the UKs economic recovery. These are:

1. Scrap the 5.6 per cent business rate hike. We are seeking a lead from the UK Government on tackling the unwarranted 5.6% rise in business rates throughout the UK, which is due to take effect on 1 April. The deferral schemes announced by the UK and Scottish Governments are not good enough. Scottish businesses should not be paying a 5.6% inflationary increase at a time when RPI inflation is 3.9% and falling. The UK rate is significant to businesses in Scotland as it creates the context for Scottish Government policy decisions in this area; they have to date matched the UK business rate level. 2. Introduce a UK wide 1bn time-limited capital allowance scheme for medium sized companies. This would incentivise those companies with between 50 and 250 employees, crucial to driving economic growth, to bring forward investment projects. Such projects create jobs and growth not only directly but also right through the supply chain. Scottish Chambers of Commerce concur with the proposal of our colleagues at British Chambers of Commerce for a time limited Special Investment Allowance of up to 1m per firm, with an overall limit of 1bn in allowances, for medium sized companies in the financial years 2012/13 and 2013/14.

3. Expand UK wide elements of the Youth Contract. SCC welcome the focus of both the Scottish and UK governments on resolving rising youth unemployment. However, in order to be effective, the youth Contract must be expended and strengthened, with fixed term contracts allowed for wage incentives and Jobcentre Plus given the flexibility to refer more young people to the Work Programme before they have been unemployed for nine months. To fund such an expansion we recommend that the Government either double the funds available under the youth contract to incentivise the hiring of young people, or enable a similar level of changes to employer National Insurance contributions. SCC are also concerned that available funding is not being utilised efficiently as different agencies fail to coordinate their various activities and initiatives. Of particular relevance in Scotland is the need to ensure that DWP funding and programmes dovetail with activity led by devolved organisations. Monetary measures Scottish Chambers of Commerce welcomed the Credit Easing scheme announced in your Autumn Statement in November 2011 with the national Loan Guarantee and the Business Finance Partnership. However, we are disappointed that implementation has not been faster; whether or not it will have the desired positive effect on business access to finance is not yet apparent. Speeding up the implementation of these previously announced measures must be a priority and the Government must work hard, with organisations such as Chambers of Commerce, to ensure that businesses across the UK are able to benefit from them quickly. Air Passenger Duty

In recent years, we have seen successive increases in the rates of Air Passenger Duty and with travel to and from Scotland so heavily reliant on air services, this has increased costs substantially for Scots and visitors to our country alike. These increases damage the economy by increasing the costs of global business connectivity. They have a negative effect on the crucial tourist industry. We believe that the devolution of Air Passenger Duty would allow the Scottish Government to develop a new air transport policy for Scotland bringing together lower levels of taxation with a new air route marketing fund for the purpose of increasing the number of direct air services to and from Scottish airports. Revenues raised from APD could be harnessed and reinvested within the aviation industry to ensure that Scotland increases its global connectivity. We are calling for a rethink on the UK Governments attitude to Air Passenger Duty, which is compromising the competitiveness of our airports in Scotland. Current rates of APD seem more suited to controlling capacity constraints at Heathrow than they do with the needs of regional airports and devolution of this tax would afford the Scottish Government the opportunity to create a air transport package for Scotland designed to improve our direct international connectivity, combining an advantageous rate of APD with a revamped Air Route Marketing Fund. In the absence of the devolution of this tax, however, it is incumbent on the Government to demonstrate that it governs for all of the UK by taking action to reverse the negative impact that increases in Air Passenger Duty have had on Scottish business. We look for a reduction in Air Passenger duty to assist UK regional airports. Conclusion This submission articulates the needs of businesses across Scotland. Our members comprise businesses of all sizes and sectors. I write on their behalf seeking a Budget that enables businesses members of the Chambers of Commerce to do their bit to drive economic growth. The measures we propose are what business requires to fulfil this role. Yours sincerely, Liz Cameron Chief Executive Scottish Chambers of Commerce