Chamber and committees

I am pleased to speak in support of the principles of the Moveable Transactions (Scotland) Bill. It is fair to concede that the bill does not have the most toe tapping of titles, but it is an important bill, nevertheless, for Scotland’s small and medium-sized enterprises. My support reflects my memberships of the Finance and Public Administration Committee and the Economy and Fair Work Committee, and my previous life experience of running SMEs in various sectors. However, I bow to the expertise on show today from all the members of the DPLR Committee.

I believe that the bill is an important addition to secured transactions legislation. Stage 1 satisfies in some part the call of Professor Orkun Akseli for a

“modern secured transactions law”

that meets the requirement to be

“simple, transparent, efficient, flexible, and provide freedom to parties in creating their transaction.”

I hope that the legislation contributes towards a reduction in the cost of credit for many thousands of SMEs across Scotland, and I am not alone in my hopes. Professor Louise Gullifer stated in her submission to the consultation:

“There is a great deal of research showing that a functional and friction-free secured transactions law improves access to finance, both in terms of making finance available to those who could not previously access it, and also reducing the cost of finance.”

At present, around the world and not only in Scotland, unincorporated businesses are often adversely affected by the inefficiency of secured transactions laws. I believe that the bill starts the process of correcting some of the current weaknesses, although I respect the wisdom of the DPLR Committee members regarding the definition of sole traders.

As I looked more closely at some elements of the bill, questions—I would not say concerns—arose in my mind. First, the proposal to operate a dual system for assignment of claims means that it will be possible to assign claims either by intimation to the debtor or by registration in the new register of assignations. Given that two routes are possible, it is inevitable that the register will not be comprehensive, but we do not yet know to what extent. At a commonsense level, it seems to me that operating a dual system might create unintended consequences. Dual systems are more complex, and we know from other types of legislation that complexity often goes hand in hand with loopholes. I would be interested to hear from the minister how far scenario planning or other forms of review have been undertaken thus far to assess the potential for unintended consequences.

As I understand it, where a transfer of receivables is made effective against third parties through registration, protections will need to be put in place for the debtor who, if not notified of the transfer, will not know who to pay or may completely innocently act incorrectly in some manner. I know that the minister is aware of that, but is he able to offer reassurance that the bill contains appropriate protections for the debtor?

I have one further area where I seek comment from the minister. As is probably known, I have raised on a number of occasions the on-going problems that exist with Scottish limited partnerships. There seem to be more than enough loopholes in existing law that enable SLPs to operate with impunity, should their owners wish to engage in criminal practices.

The issue with SLPs is that they are able to avoid much of the scrutiny of regular small limited companies, yet they have their own legal personality. Thousands of SLPs are registered that have no identified owners and make no financial filings, and are therefore completely opaque. SLP governance resides with Westminster which, thus far, has shown little regard to tightening the rules. I am uncertain whether the bill as it stands is sufficiently watertight for that type of partnership. Would the minister be willing to meet me and discuss the situation, either to set my mind at rest or to consider an amendment at a later stage of the legislative process?

The questions that I have raised do not detract from the fact that this is a well-intentioned and important bill that proposes much-needed reforms. My hope is that it will enable Scottish SMEs to use their assets to raise finance by selling debts that are owed to them or by granting security over moveable property. Fundamentally, businesses need secure and critical cash flow—never more so than at the present time—and the bill will limit their need to pursue much more expensive routes to finance, as well as limiting the number of businesses that find that they have no viable alternative route. I am therefore fully supportive of the proposals.

Yes, and we need to match ambition with financial enablement.

Good morning, minister. Thank you for attending the committee today.

Before I ask my questions, I want to take this up a level. A multitude of figures are being bandied about on exactly how much finance is required to enable the just transition and the changes that we need to make. The figures are quite eye watering, and it is generally agreed that, globally, we are nowhere near that amount.

However, in the Scottish context, the Climate Change Committee report points out that many relevant powers that are related to areas such as funding, finance and product standards are reserved. Therefore, my question to you is this: are you getting the support that you need from the UK Government in supplying that level of funding, or are you having to take that out of the fixed Scottish budget, which obviously has nearside time parameters in terms of planning? How is the funding that you are able to realise being managed and actualised?

In its report, the Climate Change Committee called out risks that are down to UK Government action or inaction around low-carbon heat in existing homes. It made reference to “details of market-based mechanisms”, associated funding and so on.

I want to explore the £500 million just transition fund a wee bit more to get a bit more flavour of how the Government is able to release the funding and protect it, given the constraints and the real-terms cut in its budget. Can you give us a bit more information about that to help us understand some of the challenges related to that fund?

You have given us a lot of flavour. Being given more money is one route, but are you hearing the calls from across the Scottish Parliament for vastly increased borrowing powers for the Scottish Government—such as there would be for any normal Government that might want to undertake ambitious policies—so that we can crowd in private sector funding?

We all agree that no Government will be able to entirely fund what is needed, and that Governments will need to crowd in private sector funding, so are you hearing, in your private discussions, the agreed calls from across the Parliament for extra borrowing powers to do that sort of activity? You might not be able to disclose that.

I am sorry if I sounded as though I was having a pop at you, David; I totally appreciate that your expertise cannot cover everything. Perhaps, though, we can fold the issue into future sessions, because the fact is that, although we are talking about what feel like quite big numbers, they pale into insignificance when we look at the whole gamut. You are correct in what you have said about cuts to HMRC, which suggests that the issue will get only worse, rather than better. Although you are right that this is a global issue, the UK is well up the league table for this; I think that it is the second most corrupt country in this regard after the US, although people might argue about that. That is important, because we tend to look at what we can see rather than guess at what we cannot see, which is growing at a rate of knots.

Going back to the convener’s point about the Office of Tax Simplification, I note the big numbers that have been bandied about—the £6 billion black hole in the finances, the fuel duty escalator and £10 billion per month on debt interest. The National Crime Agency estimates that about £100 billion each year is lost to the UK as a result of money laundering while—although figures vary here—roughly £190 billion is lost every year, because of fraud.

The scale of those figures is staggering. Might the IFS consider looking more actively at that, given that we have almost a shadow economy running? The UK Government appears to have no appetite to tackle it; indeed, it is getting rid of the Office of Tax Simplification, even though it is the complexity in the tax system that provides the wriggle room for those startling losses to UK GDP. I am surprised to hear that neither of you has followed up on the plan to get rid of the Office of Tax Simplification.

I am honoured to open the debate, which celebrates small business Saturday.

I encourage everyone to support their local small businesses, which are the heartbeat of our local communities. The small business Saturday initiative is a grass-roots campaign that is in its 10th year and is sponsored in its efforts by American Express. I am sure that most MSPs will meet local small business owners and employees on Saturday, as I will. We should tell them that we will increase our efforts to give them a voice and to support their endeavours in the coming year.

I will come to acknowledge the importance of small businesses in economic and employment terms later, but I start by acknowledging their social impact. Indeed, before the term was invented, many small businesses had been contributing hugely to the wellbeing of society in general and local communities in particular, whether through supporting local charities and providing general advice to customers, or just through being the friendly presence that is willing to listen to people in need. The human face of small business provides incalculable support in local communities.

As a member of the Economy and Fair Work Committee, I was pleased to see the launch this week of our committee report—“Inquiry into Retail and Town Centres in Scotland”. To put it bluntly, most town centres in Scotland would quickly die without the active presence of local small businesses. However, the latter are placed at a huge economic disadvantage far too often, compared with large businesses.

To emphasise another point that is often missed, I note that although some large global businesses that have a Scottish presence can move their money around and take advantage of tax havens, local small businesses typically pay their taxes. That means that the proportion of income tax that is paid in taxes is often much greater for small and medium-sized enterprises than it is for many global businesses, which places the former at an added trading disadvantage. Many members who are taking part in the debate will know of small businesses that have struggled in recent years as the pandemic affected them, and whose owners have been taking out of their businesses significantly less than the minimum wage—yet, they continue.

With regard to the wider economy, some small businesses are part of a much larger critical supply chain. We often forget the breadth of small business services. Small businesses span a huge variety of activities—for example, operating a taxi, providing private nursery and childcare services, being the local sparky or plumber, working their croft, providing specialist research services, being the local lawyer or accountant, and often making better and cheaper coffee than the big chains that do not pay their taxes. The list goes on.

Although small businesses often serve larger businesses, too often that is not reciprocated. Many small businesses face late payments from larger businesses and owners sometimes find it difficult to access affordable loans from banks to invest in their business. Too often, the relatively small sums that they need to access are not on the radar of lending houses. Despite that situation, SMEs are critical to the economy.

A Scottish Parliament information centre briefing called “Scotland’s Business Base—Facts and Figures” has indicated that sole proprietors, owner-manager and employee-director companies

“accounted for 70 per cent of”

the 364,310

“private sector enterprises in Scotland”

in 2020. They employ thousands of people in every constituency in the land, and they are often long serving in local communities: in some cases, they are family-run businesses that span generations.

Small businesses have been critical, too, in helping communities to cope with the many privations that the Covid-19 pandemic created. Simple things, such as delivering local groceries to old-age pensioners while checking that they are alive and well, have more than an economic impact.

We all face the cost of living crisis; that is no less true for small businesses than it is for individuals. However, some people seem to imagine that businesses have it easy in comparison with individuals, but that is not true. Inflation is a common and deadly enemy. We have a cost of living crisis and a cost of doing business crisis, both of which are effected by the same enemy.

Some specialist small businesses are trying to support our economy by trading internationally, but they are finding that things have been made immeasurably more difficult because of Brexit and the barriers that have been erected to trading in Europe. The international reach of many small businesses has been critical in keeping open our window to the world. We must ensure that our trading policies reflect the realities that small businesses face. They do not have the luxury of saying, “Brexit is behind us”, because it is not, for them. They are living through the catastrophe that is Brexit to this day, and will have to do so into the future.

As parliamentarians, we must always do more to support our SNPs—I mean, SMEs—and recognise their worth in our constituencies. That was a Freudian slip! We must listen more to their problems and act to support them in difficult times.

I am very much looking forward to hearing other members’ speeches, and I thank all the members who signed my motion. As I close, Deputy Presiding Officer, let me do so by sending out our heartfelt thanks to the thousands of small businesses in my constituency, Falkirk East, and across Scotland that are so critical to the economic and social life of our local communities.

When speaking at this point in a debate, it is often difficult to add something fresh, but I will endeavour to do so.

I must comment on how empty the Conservative benches are. Can Conservative members not bring themselves to come here to defend their policy?

One might have imagined that the UK Government would have learned something about the risks of cliff-edge legislation, but it appears that it has not. The Tories are making the damage of Brexit worse and, regrettably, the Labour Party has become their pro-Brexit handmaiden.

I, like anyone who has been paying attention, am deeply concerned about the implications of the Retained EU Law (Revocation and Reform) Bill, which is taking us down a Tory blind alleyway, with scant regard for standards and protections and for businesses being able to trade effectively.

The sunset date—or drop-dead date—of 31 December 2023 means that, unless the UK Government or the Scottish Government and its respective Parliament review individual pieces of legislation and make amendments, existing legislation will cease to have effect. The scale and complexity of what is involved is staggering, and effective implementation is quite simply impossible in those timescales.

As has been mentioned, the recent letter that was signed by trade unions, the Institute of Directors and others notes:

“It is unclear how the UK’s governments and parliaments will cope with the vast amount of legislation this will involve … There is a huge risk of poor or potentially detrimental law entering the statute book.”

Other commentators such as the Hansard Society have also made their concerns clear. It has determined that the bill represents a complete abdication of the scrutiny responsibilities of the UK Parliament.

The UK Government has suggested that there would be no fewer than 2,400 pieces of legislation involved, spread across 21 areas of government, but it is worse than that. We should note the comments of Brendan O’Hara MP during the bill’s committee stage. He said:

“no fewer than 1,400 other pieces of legislation have been discovered, and goodness knows how many more are yet to be identified. If the Bill passes unamended, all those will be added to the almost 4,000 existing pieces of legislation that will be sunsetted in 13 months’ time. Why on earth did the Government set such an arbitrary deadline for themselves?”—[Official Report, House of Commons, Retained EU Law (Revocation and Reform) Bill Committee, 22 November 2022; c 94.]

Of course, huge swathes of the bill involve areas of law that are devolved to our Scottish Parliament. The Hansard Society notes that the bill

“encompasses a range of policy areas which are within devolved competence, including agriculture, culture, education, environment, fisheries, health, housing, rural development, tourism and transport.”

The process by which powers can be used by a UK or Scottish minister is not clear, and the bill has no provision on what should happen in cases in which a UK minster alone decides to pass secondary legislation in an area of devolved competence. The UK Government’s impact dashboard does not even differentiate between reserved and devolved powers. The fact that the bill is being described as

“creating a framework for these conversations to be had”

shows that there has been completely inadequate planning. Yet again, the UK Government is failing to deal with the Scottish Parliament with respect.

The incoherence continues. For example, only UK ministers are given the power to extend the sunset deadline, but the power to remove the sunset entirely is granted to both UK and devolved ministers. How exactly will that work and give certainty to businesses and the legal profession?

The bill will make worse the already difficult complexities that have been created because of the interaction between divergence from the EU, the devolution settlements and the operation of the imposed internal market act. The final committee stage is being held at Westminster today, but we already know that the Tory Government has rejected a series of amendments that have been tabled.

All that is a nightmare for many sectors, and it invites chaos for many areas, from employment law to health and safety and all else in between. It is legislation that is aimed not at creating stability but at vastly increasing uncertainty, and which is aimed not at making trade with Europe easier, but the precise opposite. It is little wonder that the Hansard Society has said that there are serious implications for the future of the union. At least that is one area where we know what the answer is—Scottish independence in Europe.

I just want to put on the record that I note the presence in the gallery of my constituents Wendy and Ian Thomson, who tragically lost their daughter at a very similar age to the age that my daughter is now. I applaud and salute their bravery and efforts in cascading and getting out information about this tragic disease.