THE political turbulence of the last few weeks will hopefully stabilise in the coming days and provide a little more certainty for businesses. However, this is the right moment to reflect on the lessons for the next First Minister from the incumbent’s record.
Humza Yousaf made a promising start as First Minister. He shrewdly recognised the bruising exchanges between the government and business community over a raft of expensive and ill-thought-through regulatory initiatives couldn’t continue.
He moved swiftly to hit the pause button on the deposit return scheme (DRS) and draconian plans to restrict the promotion of alcohol in stores. He pledged to use non-domestic rates to “boost business” and sought to reset the relationship with the private sector through a New Deal.
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There has been progress on red tape. The mothballed Regulatory Review Group has been reinstated and is making its presence felt on the practical concerns of business. Business impact assessments are being revamped and officials are in the throes of mapping out the intended future regulations which will impact firms over the years ahead.
A return to good regulatory habits is critical as a veritable gamut of new initiatives affecting retailers are in the pipeline. These include in-store restrictions on selling products high in salt and sugar; in-store restrictions on the promotion of alcohol; administering the increase in alcohol minimum unit pricing; a ban on selling disposable vapes; a levy on disposable cups; personal licences for selling fireworks; and restrictions on selling peat.
Public spending control should be a focus amid tax moves
Despite this progress, relations between government and business have become strained of late. Confidence was severely knocked due to several decisions in December’s Scottish Budget.
Firstly, it brought in increases in Scottish income tax rates for higher earners. From a retail perspective, this takes another bite out of household disposable incomes, money that could be spent in shops. It also makes it more expensive for retailers to attract the specialist and senior talent they require.
Secondly, the Budget introduced an inflation-busting hike in the business rate for medium-sized and larger commercial premises, escalating it to a 25-year high. Retail accounts for one-fifth of business rates and 4,000 shops saw £31 million added to their rates bills last month.
Scottish Government should shelve retail surtax idea
Finally, secreted away in the depths of the Budget was a threatened business rate surtax on larger grocery stores to help “sustain the public finances”. Implementing this arbitrary cash grab would cut right across and breach the promises in the New Deal for Business of “no surprises”, on engagement with business at the very inception of policy development, and on the competitiveness and predictability of the rates system.
Little consideration seems to have been given to the fact that stores in the crosshairs of this surtax have been lumbered with millions in costs from the DRS farrago.
So, a swathe of expensive regulations and costly new taxes are being loaded on to business, taking little account of trading conditions in the aftermath of the costs crunch. This is the heart of the problem the new First Minister will encounter. It is eminently solvable.
With the Bute House Agreement consigned to history, the next First Minister should make economic growth their priority of priorities. After all, an expanding economy is good for living standards, job prospects, and government revenues. It makes wider policy challenges more manageable.
Central to this should be a growth plan that eases the regulatory burden, scraps the mooted grocer surtax, and finally restores business rates parity with England for medium-sized and larger premises.
The upcoming refresh of the devolved administration’s tax strategy is an opportunity to put this into practice. The goal should be a competitive tax regime that views tax as a means of stimulating private-sector investment rather than just a revenue generator.
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The new First Minister can truly deliver on the spirit of the New Deal for Business by ensuring policy development happens with business, rather than to it. Ultimately, every policy should be tested against a benchmark of will it help or hinder economic recovery.
Scotland’s retailers stand ready to work with the next First Minister to make that happen.
David Lonsdale is director of the Scottish Retail Consortium
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