David Lonsdale

MORE cynical observers were sceptical when the new First Minister announced that he wanted to reset relations with business. While there was little doubt a reboot was necessary, the gap between oratory and action was thought to be a likely sticking point.

Yet two months into Mr Yousaf’s leadership and there are clear signs of the rhetoric being backed up, most recently with the publication of the New Deal for Business Group he commissioned.

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The tone and thrust of the new accord with commerce is encouraging. It contains plenty of proposed actions over the short and medium-term, including on engagement with business, non-domestic rates, and red tape.

The Scottish Retail Consortium has been at the heart of these discussions and it’s promising to see many of our proposals being adopted.

Resuscitating the mothballed Regulatory Review Group, properly implementing impact assessments at the inception of new regulatory initiatives, introducing common commencement dates, providing clarity over the regulatory pipeline, and being alive to similar initiatives under way elsewhere in the UK – these are measures retailers can get behind.

That’s crucial as a welter of devolved regulatory issues are in the pipeline which will affect shops and their customers including: restrictions on alcohol marketing in stores; a coffee cup levy; new rules on selling foods in-store which are high in salt and sugar; and a review of minimum unit pricing.

However, these principles of good regulatory behaviour should be extended to Parliament too.

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Two recent examples prompt this. Three years ago, the uniform business rate was under serious threat in Parliament without so much as an economic impact assessment. Thankfully, at the crunch moment, MSPs voted to retain the UBR. However, it was profoundly troubling that a change to the rates system of such magnitude could reach such a critical point with negligible consideration for the economic implications.

It’s a deficiency that raises questions about whether the parliamentary mechanisms for making tax and regulatory changes are sufficiently rigorous.

A second example came only last week. A Holyrood committee has initiated a consultation among tourism firms on the visitor levy. This was perfectly sensible, but the deadline for responses from the industry is slap bang during the peak trading period. Hardly the optimal time to solicit feedback.

So, a more coherent approach to regulation and engaging business is required across the devolved institutions.

It must equally apply to tax. The New Deal’s focus on business rates was unfortunately limited to operational and administrative matters. Hopefully, the Scottish Government’s newly established Tax Advisory Group will get to grips with the onerous rates burden and deliver on the government’s ambition to “use business rates to boost business”.

The business rate is at a 24-year high, and the government’s fiscal forecasters have pencilled in a chunky uplift for next spring. If implemented, this would add £34 million to Scottish retailers’ rates bills. So, a shift in mindset is needed on business rates with a switch from trying to squeeze tax revenues from commercial premises to one which encourages investment into retail destinations.

The tax advisers will have personal and household taxes in their crosshairs too, especially if asked to help plug the forecast £1 billion gap in next year’s devolved finances. The First Minister has mooted an increase in income tax rates for higher earners. Something similar seems on the cards with council tax, with The Herald reporting that changes to the tax base could see some households stump up an extra £177 million each year.

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This comes after this year’s uplift to council tax and some income tax rates, which will take a £250m bite out of disposable incomes. Whether the strategy of plucking the goose with the minimum of hissing works in an era of higher mortgage rates and elevated inflation remains to be seen.

Ultimately, the manner with which new regulations are developed and tax decisions are made, and whether ministers both listen and act on the reasonable concerns of industry, will define whether we will be able to call this a business-friendly administration. The upcoming Programme for Government and Scottish Budget will be early tests.

David Lonsdale is director of the Scottish Retail Consortium