Small Businesses
The next item of business is a debate on motion S2M-4863, in the name of Jim Mather, on small businesses.
I am here to move the motion and to debate the Scottish National Party's commitment to optimising the Scottish economy and Scottish living standards. I will consider specifically what we will do for small businesses, because they are the key drivers that help to grow our economy and sustain local communities. Crucially, they are rooted in Scotland. In short, the viability and success of small businesses dictate the vibrancy of Scotland.
What we propose recognises that the key factor in any plan for the perpetual improvement of an economy and for ensuring the vibrancy of our small businesses is constancy of purpose. That factor is absent from the current Executive's track record. We have had rhetoric on economic growth, but we think that such growth has been triggered largely by the success of our economic case around the boardrooms and committee rooms of Scotland. All we have had from the Executive is Jack McConnell originally hiking business rates above the prevailing United Kingdom level and then doing the same with business water charges, leaving Scotland with a development blight and a development bottleneck right across the country.
Belatedly, we have had some reversing of those hikes, but it is not enough. Unlike the current Executive, our constancy of purpose is real. We want the power to make Scottish business more competitive to create the vibrancy, jobs and true prosperity that Scotland needs. Today, we are signalling what we will do with the existing powers and independence to encourage people to invest their capital and their lives in Scotland, while highlighting the total impossibility of converging on other countries with only a subset of the powers, motivation and rewards that are available to them.
We must create the wider conditions for growth if we are to get higher growth, increased affluence, population growth and more people in work, which we crucially need. Today, we will spell out exactly what we will do to increase the viability of small business in Scotland. Specifically, we are tabling our small business bonus scheme, which the Federation of Small Businesses in Scotland warmly welcomes. Under that scheme, I, along with 119,999 other small businesses, will be taken out of the business rates net, while another 20,000 businesses will be better off. We are also announcing a further reduction in red tape and overheads because small businesses will have to apply for the scheme only every five years, to coincide with revaluation.
I read the member's paper on a better deal for business and had his proposal costed at circa £184 million gross and £155 million net. Where will that money come from?
I suspect that, as usual, the minister's costings are amateur and sell us out. He has probably not considered charitable relief, rural rate relief, which is already in place, relief for businesses with a combined rateable value of more than £20,000, the lack of relief for chains of businesses and empty premises and so on. However, much more important, he has forgotten that if Scotland was running its own economy, the £122 million—40 per cent of the increase in gross domestic product—would percolate back to us. He is ignoring the potential for higher growth and the fewer failures that would ensue.
Will the member take an intervention?
I will in a second, but I have just got to nail this one more time.
In essence, what we have is a Government whose own attempt at producing business rate relief with a link to research and development has totally failed. It was not checked with the European Commission, the Inland Revenue or the Executive's own legal opinion. The minister should get his facts right before he comes at me.
If I understand Mr Mather correctly, he is saying that there would be further economic growth. However, that is predicated on further constitutional change. Is he telling us that if a new, SNP Administration came into office after next May, it would have to delay implementation of its scheme until we had further constitutional change?
I advise Murdo Fraser to read "The Making of the Celtic Tiger" and to go in particular to page 284 and read about the impact of signals. When we make a signal—a declaration of intent—people make investment decisions and move forward. I read the Conservatives' press release yesterday and I am shocked that the former party of business has totally capitulated. We are carrying that banner and moving business forward.
Of course, we want to do other things and we will make other signals. We want to lower corporation tax and business burdens, as we announced today, and begin an era of infrastructure and skills improvement, which needs to be driven by independence. That strengthens our case and moves it forward. It will create a new positive attitude in Scotland and it signals the death of the zero-sum mentality that assumes that Scotland cannot grow. Scotland can grow and move forward. People are coming to that conclusion right, left and centre. Even Sir John Ward has concluded that 1.7 per cent trend growth is inadequate and we need 3.5 per cent.
That requires radical change, which our proposals would put in place. We are persuading more and more people that we can end the era of relative decline that has lasted all my business lifetime and enter an era of perpetual improvement in which the personal and national economic cakes get progressively bigger. That is what has happened in Ireland. Charlie McCreevy's simple adage is that, for a country to become more competitive, it should invest in skills and infrastructure and get more and more people into work—the rest is detail. That process will trigger economic vibrancy. That insight recognises the prerequisite of economic power and the social and democratic imperative of dealing with low life expectancy and population decline, such as we have in Scotland.
We can match what Ireland is doing, because we start from a better place. We have better infrastructure, better and more universities, stronger industry sectors and fantastic natural resources. We have everything that Ireland has, except the cider, plus everything that Norway and Switzerland have. It is important to have national objectives to drive change, and the minister does not have such objectives. The ones that we have include becoming one of the top 15 most competitive countries in the western world; matching the average growth among small European nations of 4 per cent per annum; and reversing population decline by attracting and retaining people so that the population grows at 3 per cent per annum. We want to focus on the fact that true prosperity is shared prosperity that motivates everyone.
We can start that process by energising small businesses and giving an important signal or declaration of intent that Scotland will grow and prosper. That is needed urgently. Since 1997, growth here has been at least 30 per cent below that in the UK, even if we accept that gross domestic product is a good measure for a branch economy, which it is not. The wages gap between Scotland and the rest of the UK has widened by £1,500 per head. That is if we accept the crazy system in which the annual survey of hourly earnings ignores those who work fewer than 18 hours a week. We also have lower life expectancy.
All those issues must be addressed. The only way forward is to make a start, which is what we are doing today—our proposals would be a fillip for small businesses. We welcome the FSB's endorsement of our proposals and the demise of the Tories as the party of business.
I move,
That the Parliament recognises the critically important role that small businesses play in delivering economic growth and local services and confirms the need to deliver specific tangible measures to bolster the competitiveness of Scottish small businesses, such as the SNP's recent Small Business Bonus Scheme which would result in 120,000 small businesses being freed from the burden of business rates, and also recognises that, in implementing such schemes, it will help to increase the viability of individual small businesses and contribute to creating the growth that would allow Scotland's living standards to converge on the higher living standards enjoyed elsewhere, thereby encouraging yet more small business start-ups, creating many more jobs, widening the tax base, increasing local economic vibrancy and improving local services and confidence across Scotland.
I could not agree more with Jim Mather that the key to our future prosperity is a successful economy. He is absolutely correct that an economy that is populated by successful businesses drives economic growth. In Scotland, we have in place an excellent business environment and a support framework that works for Scottish firms, the majority of which are small and medium-sized enterprises. The Scottish economy has performed well. The growth in GDP in the year to quarter 1 of 2006 was 1.9 per cent, which is above our long-term annual average. Our most recent quarterly growth rate of 0.5 per cent is the strongest first-quarter performance for the Scottish economy since 2001.
As we all know, the labour market continues to perform exceptionally well, with more than 160,000 Scots having entered employment since the creation of the Scottish Parliament. Employment levels are at their highest since quarterly records began. Of that growth, 40 per cent has come from jobs in small businesses.
How does the Executive intend to close the drastic gap that exists in expenditure on business research and development between Scotland and the rest of the UK and our European Union competitors? Unless we fill that gap, we will not move on the economy as we should be doing.
I largely agree with the thesis that underlies Bruce Crawford's point. As he probably knows, we have a range of support mechanisms for businesses in Scotland, including the small firms merit award for research and technology, or SMART; support for products under research, or SPUR; SPUR plus; and the small and medium-sized enterprises collaborative research programme, or SCORE. All those measures seek to boost industrial research and development and have been successful in that objective.
The Executive's internationalism is no longer an optional add-on but a fact of economic life. In 2004, small businesses accounted for £2.2 billion of all Scotland's exports. I presume that members accept that we do not and cannot control global factors, but we have considerable powers to influence growth, build prosperity and grow entrepreneurship. Total early-stage entrepreneurial activity—TEA—in Scotland, as measured internationally, was 5.8 per cent last year, which is the highest that it has been since 2000.
Does the minister accept that, in large parts of rural Scotland, TEA is boosted by the fact that people are in what I call subsistence self-employment—they have no other option but to start a little business?
We want to ensure that earnings rise with inflation, which is why we introduced the minimum wage to protect people who are at the lower end of the earnings scale. On TEA, Scotland has moved up from the bottom of a league of 15 comparator countries in 2000 to being in the third quartile of a group of 23 comparator countries in 2004. That real progress in total early-stage entrepreneurial activity in Scotland is not an accident; it has come about not by mistake, but because of the policies that we have pursued.
To give another example, Scottish corporate statistics show that the number of small businesses in Scotland has risen from 226,510 in 1999 to 264,660 in 2004. Those new small businesses employ an additional 32,640 people in Scotland. That is 32,640 people in work in small businesses who were not there in 2001. Small businesses in Scotland now employ 760,000 people. That is real progress, involving real people in real jobs in real and growing small businesses here in Scotland. Those businesses have an encouraging turnover of about £52 billion.
I have mentioned some of the positive aspects of our support for small businesses. We have seen small business growth and an increase in total early-stage entrepreneurial activity, with a consequential growth in employment. However, as the devolved Government in Scotland, we are determined to provide further incentives to improve business competitiveness. An important part of that is to demonstrate, wherever possible, that we take account of businesses, big and small. As members know, we have listened to small businesses. Since 2003, about 70 per cent of non-domestic subjects in Scotland have benefited from a rates reduction of up to 50 per cent through the small business rate relief scheme. We have devised a scheme that assists small businesses significantly with paying their rates bills.
Of course, small businesses—indeed, all businesses—in Scotland benefit from our decision to reduce the business rate poundage by 1.2p this year. We are determined to build on that to ensure that Scottish businesses achieve and maintain a competitive advantage in relation to their counterparts in the rest of the UK. That is why we have announced our intention to go further in April 2007 and cut the rate poundage again to the level in England. My ministerial colleagues and I will continue to stress to the business community that we look to them to take full advantage of what is a once-in-a-lifetime opportunity by investing the savings in the future prosperity of Scotland. We want to make the best of Scotland, to create more wealth, employment and small businesses and, by doing so, to create the type of Scotland in which we all want to live.
I move amendment S2M-4863.2, to leave out from "critically important" to end and insert:
"central role that small businesses play in delivering both economic growth and local services and welcomes the success that the Scottish Executive has had in supporting the growth in the total employment and overall number of small businesses and new business start-ups in Scotland since 1999; welcomes the benefit that small firms gain from a range of grant schemes that encourage the development of new products and processes, the creation or safeguarding of jobs and becoming more energy efficient, and also welcomes the Executive's Small Business Rates Relief Scheme that results in around 70% of non-domestic rate subjects in Scotland receiving rates relief of up to 50% and the decision to equalise the poundage with England from 1 April 2007, which demonstrates our determination to deliver the right conditions for all businesses to grow by encouraging yet more small business start-ups, creating more jobs, widening the tax base, increasing local economic activity and improving local services across Scotland."
It is to the credit of the minister that he almost managed to keep a straight face as he talked proudly about the reduction of business rates, when it was his First Minister who increased them.
I am grateful to the SNP for giving us the opportunity to discuss the future of the small business sector. We should remember that the great majority of businesses in Scotland are small ones. Recent figures suggest that about 93 per cent of Scots companies employ fewer than 10 people. Those firms are the bedrock of the economy and have a crucial role in growing the economy, providing jobs and boosting town centres and local economies. Despite their importance to the economy, it is obvious that small businesses are among the most vulnerable of enterprises. They are far more likely than larger firms are to suffer the ill effects of Government regulation or an excessive tax burden. It is therefore essential that the state does all that it can to make the business environment for small companies as competitive as possible and steers clear of policies that will stunt their development. The record over the past 10 years has been poor. We have a much lower level of business start-ups than in the United Kingdom as a whole and the lowest three-year business survival rates in the UK. According to the labour force survey, the number of self-employed people in Scotland is now 7,000 less than in 1997. The picture has not been a rosy one.
I agree with Mr Mather that we should consider reducing the rates burden for small businesses. Comparatively speaking, they feel the burden of rates more than larger enterprises. Up and down Scotland, in small towns and villages, we see the depressing sight of empty shops because the rates burden often makes it uneconomic for a small or growing business to take them on. Some alleviation of the burden of rates on those properties would be welcome and would provide a boost for town-centre economies.
What is the Tory policy on business rates these days? How does the Tory party intend to reduce the burden of business rates? What will be the Tories' manifesto commitment?
Mr Neil will find that out when we publish our manifesto. [Interruption.] We will announce our policy in due course. I could have asked Mr Neil that same question a month ago and he would not have been able to tell us. The problem with the SNP's proposal is that it lacks credibility. The SNP says that it has costed the scheme at £150 million, but from recent parliamentary answers it is clear that it would cost £150 million to abolish rates just for companies with a rateable value of less than £8,000. As the SNP's scheme is much more generous than that, I wonder whether it has a problem with the arithmetic somewhere.
Another problem with the SNP's plan is that there is no indication of how it is to be funded. For the second time in two weeks, the SNP front bench is showing remarkable generosity. Two weeks ago, it promised to spend billions wiping out student debt and replacing student loans with grants for all. Today, we have another pledge: to spend at least £150 million reducing the rates burden on small businesses. Perhaps next week we will hear another pledge: to double the state pension, or to build 100 new schools or 10 new hospitals. However, we have not heard one word from the SNP on how that largesse will be funded. Where is the money coming from? When I put that question to Mr Mather earlier, he did not have an answer. Now he does.
The answer is this: when we produce our manifesto, Murdo Fraser will see our position. I guarantee that John Swinney will have the books balanced. That is how successful countries do it. People adopt what works, and this party is adopting what works. Watch this space.
I look forward to seeing the huge tax increases that will have to be proposed to pay for all those commitments. I was mocked by Mr Neil a moment ago for saying that he would have to wait until he sees our manifesto. Now the SNP is using the same defence.
Where the SNP's credibility really runs into the sand is on its proposals for a local income tax. The great majority of small businesses are unincorporated and pay income tax rather than corporation tax. A total of 240,000 Scots are registered as self-employed in Scotland and all pay income tax. Every one of them will be hit hard by the introduction of a local income tax. Every penny of their profits is deemed as earnings and will be taxed at the local income tax rate. A reduction in business rates would directly benefit small businesses that occupy premises, while doing nothing for small businesses that operate in people's homes, for example. However, all small businesses would be hit by local income tax rises. What the SNP gives with one hand it would take away with the other. It may pretend to be supporting small businesses, but when we consider the full picture, what it is proposing is quite different. The overall effect of the SNP's proposal is no more than a smash-and-grab raid against hard-working people in small businesses up and down the land.
Small businesses are suffering from the high level of rates that they are paying and would undoubtedly benefit from a reduction in their bills. Any proposal that is not properly costed, for which we have no idea where the money is coming from, and that will be coupled with a local income tax that will claw back any savings, is not the way forward.
I move amendment S2M-4863.1, to leave out from "confirms" to end and insert:
"believes that there is a need for government to create a business environment which will improve the competitiveness of Scottish small businesses; further believes that any detailed proposals to reduce the business rate burden for small businesses should be properly costed and the source of such monies identified; notes the impact of excessive regulation and poor levels of investment in infrastructure on the capacity of small businesses to grow; calls on the Scottish Executive to bring forward policies to create a more business-friendly environment in Scotland, and notes that the introduction of a local income tax as proposed by the SNP and the Liberal Democrats would directly penalise hundreds of thousands of unincorporated small businesses throughout Scotland."
I too thank the SNP for securing this debate. It has been interesting to listen to Jim Mather—a businessman of some distinction and repute—telling us his thoughts about the future economy of Scotland. There are perhaps not as many businessmen in public life as we would like; indeed, I cannot think of any party leader who comes from a business background such as that of Jim Mather. That said, I fear that Jim Mather has been listening to some of his colleagues a touch too much. Without wishing in any way to emulate Murdo Fraser—God forbid that I should; I concede that that would be fatal—there is the point about where the money will come from. We look forward to John Swinney's books, which we shall crawl over with a large magnifying glass. Last week, we heard about all the money that will go to students; there is at least a big question mark about how those figures stand up.
I remind the member of the commitment given by his leader, Nicol Stephen, to a 2p reduction in income tax, which is within the power of the Parliament. Where will that be funded from?
We can have great fun crawling over each other's books. Our figures are there for examination; we await the SNP's with interest.
The economics that we hear about are based on the idea of a fiscal surplus. We need detail on that. Where is the long-term security? We cannot base it on oil stocks. I will return to that matter. Population has increased and the economy is growing steadily, but we still have to work out the costings. We need more precision on the tax situation, which perhaps we will get when John Swinney brings us the fully costed proposals. On 12 January 2005, Jim Mather—seen by many, including the Scottish media, as being somewhat on the right of the SNP—pledged the trickle-down style economics of cuts to business rates to let the economy grow and to redistribute wealth. He said:
"The stark facts are that we need to set more competitive rates on taxes, business rates and water charges, and leverage our oil wealth and other advantages."
One week later, my good friend Christine Grahame took the socialist line and said:
"We can tackle Scotland's poverty only if we have the economic power here. Members have differences over how far that economic power should go, but those differences run throughout the parties."
What is important is what she went on to say:
"We need to raise taxes and redistribute the wealth in Scotland."—[Official Report, 19 January 2005; c 13601.]
The everlasting growth argument does not enjoy huge support. Brian Ashcroft of the Fraser of Allander institute said that growth of around 2 per cent
"is the lot of most mature economies large or small. Yes, the Irelands, South Koreas and Chinas of this world are growing significantly faster. But, for them it is about a ‘catch up' from a low level of development, which will not be sustained."
Can the member tell the difference between raising taxes and raising tax rates? We can raise taxes by generating economic growth. That is the objective.
I have to say to my good friend Jim Mather that, as he enters an election period, being clever with words is not the way to persuade the electorate, who want to know how much of the stuff in their pockets will be wheeched out by a future Government.
There are two points that we must address, away from the political argy-bargy. One thing that is certain is that the price of oil will continue to rise steadily. We may not like it, but that is probably an economic reality. I see Mr Mather nod in agreement. For small businesses, therefore, the issue of energy becomes ever more crucial. That is a challenge for the Executive as much as for every other party. I am talking about microrenewables. How do we encourage small businesses to go down the route of small wind generators and solar panels? That is one thing that they can do to tackle the problems that we will surely face.
Finally, no debate about business would be complete if I did not mention one of my favourite subjects—
Cheese.
It is corporate social responsibility. The linkage between business, the future of our young, and empowering our best and brightest needs to be made. Until this moment I have not mentioned any dairy products whatever.
I will come to Jamie Stone's quip shortly. I wish to approach the subject from a social justice point of view by considering the blight in our town centres, referred to by Murdo Fraser, and the impact on communities of boarded-up shops and the expansion of charity shops, which are exempt from rates and some of which sell goods in direct competition with local retailers. That has a knock-on effect: pavements are not maintained, streetlights do not work, shopping trolleys lie broken and there is graffiti. The impact on the heart of the community is one of disintegration. There can be a domino effect: one shop goes, another shop goes and so on. Communities often feel that there is no way for them to retrieve the situation.
There are examples in my constituency, and I will start with Galashiels. Thankfully, it has recovered somewhat in recent years from the body blow of mill closures and the plundering by Viasystems. It is by no means out of the woods yet, however. The small shops adjacent to my office on Bank Street come and go, sometimes within months. The onward and upward expansion of Tesco and the arrival of Sainsbury's will add to the pressure on locally rooted shops providing local jobs.
The result of such supermarket sweeps is even more apparent in Penicuik, whose town centre is the despair of many of the town's inhabitants. Buildings are not only boarded up; they are literally falling down. Pavements are unkempt and the square is blossoming with "to let" signs. The town's development trust, crime prevention panel and community council are all trying to do their bit, despite the fact that the local authority appears to have little regard for the community, as witnessed by the closures of leisure centres and so on. Without support, the small businesses that provide jobs in the local economies and communities in which they are rooted will have an uphill struggle.
There is no conflict between Jim Mather and me on this—his business rates proposals are practical and crucial to the balance sheet of small businesses. I have in my hand a list of 122 Penicuik businesses—I am also working on various areas of the Borders. Those businesses would save a total of £151,500 under Jim's proposals. Some, I admit, would save as little as £59 per annum, but others could save up to £3,500. That sum alone would give oxygen to businesses on the brink and to those that wish to consolidate or, even better, expand.
As for the alleged cost, I will express that from a different perspective. Job creation, health, the well-being of communities and crime prevention are sometimes not easy to cost, yet we know that when a community thrives there are fewer police patrolling the streets, fewer people go to their doctors for depression and fewer people feel isolated and develop illnesses. That is what the impact could be. As we all know, the cure for many ills is a decent, well paid job.
You have one minute left.
In that regard, no one can do better than someone in a local business. That is why I commend Jim Mather's proposals.
I am sorry, but I have only a minute left. I would have taken the minister's intervention otherwise.
Members have mentioned raised taxes. Yes—the tax base would be increased, and more people in the community would pay taxes into the system for everyone else. That is what I mean by it. Any idea of a division between us is not correct. I like Jim Mather's metaphor of bigger cakes—I am for bigger cakes, and we both agree that they shall be more equitably divided. That is Jim's recipe for the economy, and it is my recipe for social justice.
On Christine Grahame's last point, we must recognise that we have only one size of cake. The cake cannot get any bigger—it is the size of the slices that needs to be changed.
I am grateful for this opportunity to speak on the subject of small businesses. They are the bedrock of the Scottish economy, with no less than 99 per cent of Scottish businesses classed as small and medium-sized enterprises. More than half of Scottish jobs are in the SME sector. With SMEs constituting such an important part of the Scottish economy, we might think that the enterprise agencies would be falling over themselves to support and nurture them. It is clear, however, that Scottish Enterprise is far more interested in wooing inward investment and attracting big-name companies. We know the rest: they come and invest here, they enjoy the grants and perks and, as soon as the novelty has worn off, they vanish, leaving us worse off than before.
In an age of increasing globalisation when jobs, commodities, money and services pay less and less attention to national boundaries, we believe that the only way to build a secure, stable economy is to relocalise. For that to happen, we need to place small businesses at the heart of any economic strategy. How do we go about supporting this vital part of our economy? We need to ensure that SMEs are able to compete with larger businesses on a genuinely level playing field. That means amending business rates in such a way that the larger players cannot fiddle the system to their benefit. It means changing the planning system so that the larger players cannot manipulate it. It means moving towards a system that puts people before profits.
While we are on the subject of business rates, I was interested to hear that the Liberal Democrats have come round to our way of thinking and adopted a policy of land value tax to replace business rates. I look forward to their adopting some of our other core green policies.
We need a more effective business gateway system—one that does more than simply offer advice when businesses are starting up. We need gateways to follow through with long-term, on-going advice. We need them to be able to support the increasing number of social enterprises that are springing up throughout Scotland. It is heartening that so many entrepreneurs recognise that there can be more to a business than profit. The wider social benefits are just as important.
For a healthy mixed economy, we need to ensure that bigger businesses do not abuse their market clout and buying power and wipe out smaller businesses. In the grocery market—we heard descriptions of the situation from Christine Grahame—we need much more effective regulation and a tougher code of conduct, with an independent regulator. Otherwise, more and more small shops and local high streets will be killed off by aggressive competition from supermarkets. That is already happening, and the situation cannot go unchecked.
It should not be a question of either/or. We need to recognise the vital role that small businesses play in the Scottish economy. We ignore them at our peril.
Like many colleagues, I know that there is a commitment across parties to ensure that small businesses grow and develop, not just because they help their local economies, as was described in the last speech, but also because of the substantial role that they play in the Scottish economy. That is why I welcome the Executive's commitment in the years since the creation of the Scottish Parliament to investing in skills and education as key drivers to ensure that the quality of the people we recruit for businesses is of a range and level that allows us to maximise the opportunities for those businesses to grow—whether those businesses are small, medium-sized or large enterprises. I recognise the work that has been done to invest in the knowledge economy and in the transport and planning frameworks over the past few years, by which we are trying to address the concerns that have been raised at all levels of both small-scale and large-scale business, ensuring that we develop a more business-friendly approach.
I will not concentrate on the figures that have been produced so far by the spokespersons for the Executive and other parties. Suffice to say that small businesses play a critical part in the Scottish economy, £2.2 billion-worth of Scottish exports being associated with small businesses.
There seem to be three fundamental issues. First, how do we improve productivity? I agree with Jim Mather that that must be done, but we probably have different perspectives about how best to do that. We could do it in what I call the stable framework of the United Kingdom, working in partnership with our largest economic partners, or we could take the risk, as Jim Mather argues we should, of going down the route of independence and separation, which he thinks would make economic growth more powerful. I do not agree with that. Those are legitimate areas of disagreement, but we need to amplify these debates over the forthcoming period so that voters have a clear choice of their direction of travel.
The second issue is the burden on businesses themselves. That is why the small business rate relief scheme has been welcomed by the small business community throughout Scotland. There will surely be debates about enhancing that scheme and improving and refining it, but I do not think that anyone can disagree with its principle. We have listened and learned from that debate in recent years, irrespective of what previous positions people might have taken in it. People can develop different positions. There was a noble time in Alex Neil's career when he was an economic researcher for the Scottish Labour Party, and he was a very good economic researcher. Unfortunately, however, he took a wrong turn around 1976, and his expertise has been lost to the Labour movement. That is a great regret not just to me, but to many people in Scotland.
I turn to the third, most fundamental, issue. We have had an interesting debate. Jim Mather's motion does not mention independence. It talks about how to help small businesses—a noble objective.
Frank McAveety is obsessed with independence.
It is not me who is obsessed with it.
Funnily enough, although every speaker from the SNP has said that we can deliver real change for small businesses only if we can get independence, no one was brave, courageous or committed enough to include the word "independence" in the motion. If we cannot use the word in a motion, how are we to believe that it can be delivered in reality?
In the past month, commitments have been made by the SNP that would dwarf the commitment that it has made on small businesses, although even that pledge is a big one. A sum of £150 million is a reasonable figure; in terms of an economic assessment, it is probably reasonably well within the ball park. However, taking that sum away from the culture and sports budgets would halve the amount of money that is available to those two critical areas of economic growth in terms of tourism and hospitality. If the SNP makes a pledge, it must demonstrate where that money will come from.
In this debate, we have heard about what I call transitional nationalism. If Jim Mather were to launch a new national soft-drink product, it would come in a can, it would have a saltire on the front, it would contain a fair amount of hot air, it would lack a wee bit of sparkle but, if not handled with care and if it went through a period of significant turbulence, it would cause significant damage. That new product would be called "independence lite". It strikes me that we cannot take a risk with that product.
In The Scotsman today, Ruaridh Macdonald, of Macdonald Hotels and Resorts, talks about what he has learned from the growth of that great hospitality and tourism business. He says:
"Growing a business is done by the quality of people and product."
If we get those two elements right we will make a real difference to the Scottish economy. Business rates relief will help, but the two critical areas are the quality of staff and what we want to sell. If Jim Mather can get that right, he might be in with a shout.
In the previous debate, the SNP came in for some criticism for raising an issue that, apparently, had nothing to do with the Scottish Parliament and was more to do with independence. Yet, in this debate, Frank McAveety has spent the best part of his speech criticising us for raising an issue that is within the competence of the devolved Scottish Parliament. For heaven's sake, the Executive parties should get their arguments consistent for the space of one quiet Thursday morning in the chamber and should decide what the line of argument will be against the SNP.
I did not understand that from Frank McAveety's speech. The gist of what he was saying was simple: where does the £150 million that the SNP proposes to spend on small business rates relief come from?
I will answer that question in the course of my speech but, with the greatest respect, I must say that that is not the point that Mr McAveety was making.
Would Mr Swinney allow me to amplify my point?
I gave way to the minister for a pointless intervention, so I will not let Mr McAveety make what would probably be another pointless intervention.
Shiona Baird, who is not in her seat just now, said that the argument was not about the cake getting any bigger, because it cannot. What a ridiculous proposition. Scotland's trend economic growth over the past 25 years has been 1.7 per cent. If it had been 2 per cent, the cake would be bigger and if it had been 4 per cent, the cake would be even bigger still. To say that all that we can do is cut up a cake that is probably diminishing in size and not try to transform the economic life chances of the people we have the privilege of representing is to lack the ambition that the SNP has for the future of Scotland.
We have also been criticised this morning by people who have said that our proposal has not been effectively costed. Accordingly, I want to inform the chamber of the comments that were made by the Minister for Finance and Public Service Reform, Mr McCabe, in a letter to the convener of the Finance Committee, Mr McNulty, dated 18 November 2005. He wrote:
"I would like to reassure the Committee that the decision to proceed with this commitment"
on the small business package
"was made on the basis that it had been carefully costed".
However, we find out now that the Government cannot implement the small business package that it announced to this Parliament because it breaches the state aid rules of the European Union. At a meeting of the Finance Committee, Mr McCabe told me:
"There is no connection between the costing of the project and some of the legal obligations that we have as part of the European Union."—[Official Report, Finance Committee, 19 September 2006; c 3896.]
Mr McCabe wants us to believe that there is no connection between the costing of a policy initiative and the ability to implement that policy initiative. The Government, therefore, has a brass neck to criticise even slightly our ability to cost our proposals, particularly as it has increased business rates during the past seven years—I am sure that that is what Mr Wilson was going to talk about if I had allowed him to intervene earlier. That policy, which has punished the small business community month after month, was started by the former Minister for Finance, Jack McConnell, who is now our First Minister.
I want to speak about how the proposals would be paid for. Later, Mr Neil will also speak about that and will tell us about of some of the research that he has been undertaking. On that point, I would say to Mr McAveety that Mr Neil's research is of great benefit to the Scottish National Party and I am glad that we have his skills on this side of the chamber.
In the short term, the SNP intends to fund its policy commitments out of the £1.4 billion—the people's money—that is currently held by the Treasury. In the medium term, the SNP is advancing proposals that have been well trailed in the press—if members have not been paying attention, I suggest that they go and read their newspapers—and which will reduce the role and the significance of the quango state that this Government has expanded month after month since 1999, even though it promised a bonfire of the quangos. In the spending review for 2008, we will apply our priorities to those commitments. Members should not dare to come to chamber and say that the SNP is not prepared to look wisely and sensibly at its proposals and come to a conclusion.
Finally, I must comment on Mr Fraser's speech, which seemed to consist of him reading out this morning's Conservative press release—if I had known that, I would not have come to listen to it but would have just read it at half past 8 this morning, or whenever it came out.
Mr Fraser's argument seems to miss the point. Small business people who might be liable to pay the local income tax will not have to pay the council tax, which will have been abolished. If Mr Fraser cannot understand the rudimentary arithmetic that is involved, there is no prospect of the Conservative party succeeding.
I welcome the opportunity to contribute to this debate. I am well aware of the importance and relevance of small businesses to the communities in my constituency. They provide small villages with shops and revitalise our town centres. I welcome the steps that the Executive has taken to support those small businesses.
I am certainly not criticising the SNP for bringing this debate to the chamber, but I think that Frank McAveety made some worthwhile points—
Hear, hear.
Cheers, Frank. Culture.
Frank McAveety talked about the fact that Jim Mather said that the SNP policy is a signal. I am disappointed that Jim Mather has not bothered to stay in the chamber to listen to the debate, given that he led it. I wanted to ask him what he meant. Is the policy a signal that the SNP would do what it proposes once we had independence, on the first day of an SNP Administration, once the negotiations between the UK and Scotland started, or at some other time? What was the signal? Are we talking about a policy or a signal? That was certainly not clear from Mr Mather's speech.
In The Independent today, a headline to a story about consumer debt talked about people living in "never, never land". Judging by Mr Mather's speech this morning, it would appear that the SNP now has policies designed for Never Never Land. Perhaps Mr Mather, who has just returned to the chamber, could comment on what is a signal and what is a policy.
I think that you are being offered the chance to intervene, Mr Mather, but I am not sure that you heard the question.
If Karen Gillon repeats the question, I will gladly answer it.
Mr Mather indicated in his speech that the SNP policy is a signal. [Interruption.] Pardon? If Ms Robison has something to say, she should stand up and say it.
I am happy to repeat what I said earlier. This policy is a signal to Scottish business and the Scottish population that the SNP is serious about economic growth and that, like every other country, we should invest and prepare to have that investment rewarded over time. That is the signal.
Can the signal be delivered through independence or through devolution? If the member is saying that it can be delivered through devolution, he has to say where the money will come from and what budget within the Scottish block will be cut to pay for it. Mr Swinney said that it would come from a fund of £1.4 billion that is held by the UK Government. Is the policy dependent on negotiation or can it be delivered through the Scottish block grant?
Karen Gillon criticised Jim Mather for being out of the chamber for a moment. I will not speculate about why he was not in the chamber. However, I wonder whether Karen Gillon was here to listen to my speech. I said quite clearly that the policy can be delivered within the devolved competence of this Parliament. The £1.4 billion fund that I mentioned is Scottish taxpayers' money that is held at the UK Treasury and has not been spent. It cannot be simpler than that.
The SNP spends that money in the chamber every week. It spent the money this morning, last week and the week before. It spent it almost singularly on writing off student debt. Any good housewife knows that they can spend only what they have got and that they cannot spend it more than once. If SNP members are saying that we can keep spending money, and spend it more than once, they are kidding themselves and the Scottish public, who will see through their shallowness.
The truth is that the SNP does not have costed commitments and has not thought through the adding up of its commitments. It is all very well to make commitments here and commitments there, but they have to be added up. The SNP cannot keep on spending the money.
I ask the minister to comment on the revitalisation of town centres, which is a particularly important issue in my constituency. How will the Executive—within the powers of the Parliament and through local government—revitalise our town centres? What direction is it giving Scottish Enterprise, as the agent for change, to do that? Frankly, Scottish Enterprise is not at the forefront of driving forward that agenda in my constituency. It is taking a back seat and is not taking on the obligations that I believe it has as the driver for economic change here in Scotland.
In my constituency, local government has taken a leading role, but Scottish Enterprise has not been at the table. I want to know what the Executive will do to ensure that that situation changes and that our important town centres are revitalised, not through a Never Never Land policy from the SNP, but through practical action by the Executive.
We should concentrate on what we can do to increase and improve the performance of small businesses and attract more of them. We can argue about money and rates and all that, but the Executive has introduced some good ideas, as have other bodies such as charitable trusts, and we should examine those and build on them. We should build on success—that is a good parliamentary motto as well as a good military motto.
There has been some improvement in the education world, but we need a lot more in schools and youth clubs. We should involve young people in community planning, which works well in some areas but does not exist in others. We should also involve them in training projects and instil in them the frame of mind in which they realise that they can alter things in their communities. One way of doing that is to get them involved in small businesses. We need to remove the feeling of helplessness that a great many people in our society have.
Good training projects are run by many organisations, including the Prince's Trust, Barnardo's and other youth organisations. They help young people by teaching them how to get involved in business, how to start a business and so on. Training projects are important. Often, the more difficult a youngster is, the more potential he or she has as a businessperson because of his or her energy, bloody-mindedness and determination. In many areas young people can use those things only in illegal ways at the moment. We want to get them to start up legal businesses. If they are part of the black economy, our friend Gordon Brown does not hear from them. It is much better for young people—and older people—to be encouraged to do constructive things rather than to sell drugs to one another, which is the only outlet for many people's energies at the moment. We should encourage and harness the energies of our young people, who are potentially better than some of their older confrères.
We must also consider regulation. Everyone in our profession, wherever they go, hears that everything is overregulated, whether it is small businesses, big businesses, the police, schools, colleges, hospitals or whatever. Everyone is overregulated. For heaven's sake, can we not get stuck into tearing up a lot of the regulations? We take regulations far too seriously. A lot of them are idiotic and we should get rid of them. We are far too po-faced and we are frightened of bureaucrats and insurance people. They should be told to get lost and business should be allowed to get on with it.
A lot has been said this morning about the importance of small businesses to the economy, and particularly to the economy of town centres. I agree with a lot of what has been said. It is crucial that we do whatever we can to encourage small businesses to thrive. Christine Grahame and others made valid points about regeneration of town centres. If they are to be regenerated, it will, by and large, be small businesses that do it, so they should be given every encouragement.
I congratulate the SNP on using at least part of its time today to debate small businesses. It should have used all its time to debate that, rather than for debating something that is not—and, in my view, should not be—within the competence of the Scottish Parliament. However, let us give the SNP credit where it is due for debating small businesses at least to some extent.
I also give the SNP credit for suggesting some new ideas today. Quite a lot of new ideas have come from the SNP of late. I am sure that when John Swinney told Mike Russell to "grasp the thistle" it was probably meant literally, but it has nonetheless led to a number of interesting emanations. I thought that I would look to see what Mike Russell is actually proposing, but being the prudent sort I did not want to spend money on his book, so I turned to Google, which is a helpful source for anyone whose researcher has gone home for the evening.
First, I found a reference to "The Geochemical Origins of Life" by Michael J Russell. I knew that he was clever, but he must be seriously bright, I thought. Next, I found:
"Mike Russell; is he the last of a dying breed?"
We can only wonder. Finally, I found:
"Celebrity Circus
Mike Russell now reveals secrets he has kept for years".
There was nothing in that, either.
Eventually I found what Mike Russell had said that might interest small businesses. He was talking about a separate Scottish currency; about the abolition of inheritance tax, which will be music to the ears of many small businessmen; and about ending the bar to working with the Conservatives. I look forward to hearing what the SNP makes of that—it will be interesting.
Murdo Fraser made a number of points about the credibility of what the SNP has been saying. He made his points well, but I have to say that Mike Russell made them better. He said:
"For the SNP … it is not enough to argue that independence will solve everything. In order to be credible … it needs a more robust set of policies which anticipate harder times ahead and which determinedly eschew the traditional opposition solution of throwing cash at any problem".
That is absolutely right. I could not argue the point better. To be fair, Jim Mather does not mention independence in his motion, although he did talk about it in his speech.
Let us consider the costings of the SNP's small business bonus scheme, which have been debated this morning. The SNP's document "It's time to help small business" states:
"over the medium term the cost of the SBB scheme is likely to fall as more small businesses grow into larger businesses."
That is true—provided that no more small businesses are created, which I would have thought was the goal that we are looking for in the economy.
Murdo Fraser also talked about the impact of local income tax. John Swinney responded on that point.
Is the member making the assumption that the bigger businesses will stop paying business rates? As I see it, what we suggest would make the cake bigger.
It might, but we would need to see the detailed costings. What Mike Russell said seemed to be predicated on the possibility that there will be no new small businesses.
I turn to local income tax and the challenge that John Swinney made to Murdo Fraser. If council tax were replaced with a local income tax, surely small and unincorporated businesses would pay a disproportionate amount of that local income tax because they would be earning more than the average person. That suggestion comes against the background of the SNP's economic policy document "Let Scotland Flourish", which talks about cutting corporation tax.
Will the member take an intervention?
I do not have time.
"Let Scotland Flourish" also talks about lower business rates and says that
"While the Scottish Executive has few economic levers at its immediate disposal",
it has local business rates. It also says that it is not enough to remove higher tax rates in order to give every Scottish business every advantage. I agree, but the SNP is talking about using one of the few economic levers at the Scottish Executive's disposal to increase taxes. How on earth could that incentivise small business? It would be difficult to design a better way to hit small business hard.
We need to do more to help small business. Donald Gorrie made points about regulation, and I was glad to hear what Jim Mather had to say about that, because the burden of regulation is much too heavy. Last week, at their conference, the Liberal Democrats supported a motion to introduce targets for deregulation. That is all very good, but when we asked the same question of the Deputy First Minister and Minister for Enterprise and Lifelong Learning, he said that that is not policy in Scotland; it is not going to happen. We need some straight talking from the Liberal Democrats on their policy. However, the deregulation that the SNP is talking about is all very good.
Finally, I refer to Frank McAveety's points. We do not need to change our country to deliver for small businesses, but he might want to reflect upon changing the Chancellor of the Exchequer.
I will deal first with some of the issues that have been raised on the Executive's current small business relief scheme, which effectively targets rates relief at small businesses. We all agree that they need our help.
To address Shiona Baird's point, the current scheme is jointly funded between the Executive and larger businesses. There is a transfer of £28 million, £16 million of which comes from larger businesses and goes to help to relieve the rates of smaller businesses. Our independent evaluation of that scheme showed that it was broadly welcomed. It means that about 70 per cent of non-domestic rates subjects in Scotland currently benefit from reductions of up to 50 per cent in their rates bills, which directly contributes to protecting small businesses in our smaller communities and helps to address the town-centre blight about which Karen Gillon and others have spoken.
By itself, however, the scheme is not the answer. If people want to know how to address town-centre blight, I suggest that they come to West Kilbride, in my constituency, which was recently named a United Kingdom capital of enterprise because of the activity of the local community. That is a good example of how the enterprise networks can involve themselves in regenerating local communities.
Amidst all the talk of cakes, I make—with the greatest of respect—a simple point to Derek Brownlee, which is that the Labour chancellor has doubled the size of the Scottish cake during his tenure.
Earlier, the minister said that it was the Executive that had done all these great things for Scottish business. Will he clarify how many of the new businesses that he mentioned earlier are simply unincorporated businesses that are switching to limited company status?
I do not have the exact figure for that, but I would be pleased to get it for the member
Will the minister give way?
I want to develop my point about the size of the cake, because it is absolutely fundamental. By their own admission, the nationalists' proposals would cost £150 million, which is a serious cut of the existing business rates income.
If the minister looks carefully at the document, he will see that the net cost would be £122 million.
I have costed it at £155 million. [Interruption.] Jim Mather says that the total cost of the scheme would be £150 million; we will not argue over £5 million. If we were to make up the Executive funding in full, we could do so only at the expense of other programmes. That is the point that Frank McAveety made. As he said, it would mean halving our spending on culture and sport or cutting the entire rural development budget. [Interruption.] Jim Mather says that John Swinney answered that point but he did not.
Just last week, Fiona Hyslop spent more than £1.4 billion in this chamber, all of which makes me long for the return of the Swinney years. Bring back John Swinney as leader of the SNP, that is what I say. At least when John Swinney was leader, the nationalists had some understanding that if the party wanted to be taken seriously as a prospective Government, it had to balance the books and match spending with saving, or raise revenues elsewhere.
Does the minister accept that when the Government announces a policy such as a rates relief scheme for research and development companies, it is important for it to be able to deliver rather than just to talk a good game in the chamber but find it cannot deliver in the real world?
Mr Swinney cannot even talk a good game in the chamber. If we cannot achieve our objectives because of potential state-aid difficulties, we do not abandon the project; instead, we consider how to deliver the objectives.
After Nicola Sturgeon's putsch and Alex Salmond's latest—and probably short-lived—stint as leader, we are going back to the bad old days. Mr Swinney promises everyone everything with no regard for how it is to be paid for.
I congratulate Jim Mather for one thing at least—his prudence. His proposals would cost only £155 million, unlike Fiona Hyslop's proposals to replace student loans with grants and write off historic debt, the bill for which would start at £1.7 billion. Either the SNP does not know how to balance the books, or it is refusing to tell us how it is going to do it. I have already given two examples of what it would have to do; it would have to cut the entire rural development budget or halve the sport and culture budget to pay for its proposals. If the SNP will not tell us how it is going to do that, it is making worthless, empty promises that will be seen through by the Scottish electorate—as they have been seen through in the past.
It has been an interesting debate. I particularly enjoyed Frank McAveety's speech and I totally agree with him that the quality of Labour's economic arguments in Scotland has been severely damaged by the fact that I am no longer doing its economic research. The speeches of Frank McAveety, Karen Gillon and others proved that point.
It is a great pity that our dynamic part-time absentee Deputy First Minister and Minister for Enterprise and Lifelong Learning is not participating in a key debate on enterprise. Perhaps he could come and tell us how ministers who have all the resources of the civil service behind them cannot get right a simple policy on business rates, when from day one, the civil service advised them that they had announced a policy that could not be implemented. How can ministers therefore criticise us for allegedly not costing our proposals? How can anybody have any confidence in those ministers when they come forward with fairy-tale numbers for Fiona Hyslop's proposals on student debt or Jim Mather's proposals on business rates? They are the ministers who presided over the financial fiasco at Scottish Enterprise earlier this year. They did not even know what RAB was.
I bow to the member's superior knowledge of fairy tales. If Fiona Hyslop's proposals would not cost £1.7 billion, what would they cost?
That is dead easy—£100 million. We will also have a choice about how to fund business rates, so it is a pity that Karen Gillon is not here to—
She is.
I apologise to the member for missing her.
There are four ways we could fund the business rates cut. As John Swinney said, we have a balance of £1.4 billion sitting in the Treasury in London, not earning any interest. If we used that money for nothing else, it could fund our proposal for almost 10 years. Can people not do their sums? If £1.4 billion is divided by £140 million, the result is 10.
I do not wish to rain too much on Mr Neil's parade, but has not the Minister for Finance and Public Service Reform stated that £800 million of that £1.4 billion will be spent on the—no doubt very well-intentioned—schemes that will be announced close to the election?
On what will the money be spent? On what? On what?
Mr Swinney, really.
I suspect that the £800 million will be targeted at every marginal constituency in Scotland, but given how the opinion polls are going, the money will need to be widely spread, particularly if Gordon Brown and John Reid fight it out for the leadership. They will be tearing each other's eyes out and the SNP's position in the polls will go through the roof. We will be in a position to implement our proposals.
However, other sources of funding are also available. According to the Scottish Executive's own figures, the amount that we forgo in business rates from unoccupied business premises is actually more than the cost of our proposal. We could, if we decided, fund it through that.
Another comprehensive spending review is due next year. When we form the Administration, we will reorder priorities, starting with all the quangos in Scotland that are under the control of Labour's retirees. There is no problem about funding our proposal.
When we win the independence referendum, we will be able to fund even more. This year, Scotland will earn a record income from oil revenues of more than £12 billion. That would be a jackpot for Scotland if we had control of the oil money. We would not waste it—we would invest it in Scotland's future. As long as Scotland remains tied to Westminster, we will not see a penny of that money, just as we have not seen a penny of it over the past 30 years. Karen Gillon can be assured that funding our programme, whether under devolution or independence, will not be a problem for us.
Neither of the previous two speakers actually talked about small businesses. Among the many substantial challenges that face our small business community, one issue that has not been mentioned so far is energy prices. Is it not ironic that we who live in gas-rich, oil-rich and renewables-rich Scotland pay energy prices that are among the highest in Europe? We need to take control of the policy framework for energy prices in our country. For example, the way in which the policy of the London-centric Office of Gas and Electricity Markets is biased against small businesses in Scotland that contribute renewable energy is totally unacceptable. We need to help our small businesses to face the energy challenge.
Small businesses also face a skills challenge. In too many sectors, our businesses face real barriers to growth because they cannot get the skilled people that they need so that they can expand and grow. The Scottish Executive has no policy on skills. At the Labour Party conference on Sunday, the First Minister came up with a back-of-the-envelope policy that was not only ill thought out and uncosted, but would have huge implications for the future of our comprehensive education system.
Far from being shy about our proposals, we are proud of our proposals. Unlike the Tories or the Liberal Democrats, we have costed our proposals and we have said where the funding will come from. Unlike Labour, we can add up. The Labour Party cannot even add up. Anyone who cares about the Scottish economy must vote for our motion at 5 o'clock tonight. If our policy was implemented, Scotland would be a much richer place.