Chamber and committees

It is only fair to note that in the exact circumstances that you outlined, the real issue is section 24 of the Finance Act 2015 from Westminster, which provides that such costs cannot be offset as a legitimate business expense. Perhaps you should clarify that for everyone here. In other words, Westminster legislation has greatly contributed to that situation.

It is not often that I get the last word in any session of the committee. I am looking at the four men on the panel, and I am reminded that significant structural inequalities for women remain in the economy. Covid has had a big impact. The cost crisis has had a disproportionate effect.

Close the Gap suggests that narrowing the gap could add £17 billion to the Scottish economy. That organisation has expressed the view, with which I strongly agree, that equality must be seen as an economic issue, not an equalities issue. Will you give a commitment to testing every element of what you bring forward for the Scottish budget as to its impact on women, in terms of contribution and reduction?

Just picking up on John Mason’s point around investment zones, it is good that some initial discussions have taken place. Do you have any concerns that money will be made available for them that bypass the priorities of the Scottish Government with no proper accountability or scrutiny, as has been highlighted as a concern in relation to some of the other levelling-up-type funds? Have you got that far in your discussions yet?

You have made that very clear at this meeting and elsewhere.

One of the reasons why the markets were so spooked was not just the lack of an OBR look-ahead but the fact that the UK Government intended to borrow vast sums of money to fund tax cuts. I wondered at the time whether the same people who were running gleefully to borrow money for those would also run gleefully to press for an increase to the Scottish Government’s borrowing powers, although we would both immediately agree that the Scottish Government would not be so stupid as to borrow money to fund tax cuts.

In light of that, will you commit to an increased emphasis on further proper flexible borrowing powers for the Scottish Government? The situation has laid bare the lack of fiscal resources available to you in the current economic climate.

You have talked eloquently about last week’s pretty disastrous fiscal event. Arguably, too many people in politics and perhaps even the media were too hasty to view the wider economic landscape through the prism of London. That often happens. However, that budget and fiscal event talks to a culture, perhaps, of risk taking. We saw that with defined benefit pensions, where liability lies with the providers. Today’s Financial Times reports some statistics on the dwindling investment of UK pensions in the domestic stock market. The article says:

“as recently as the mid-1990s, pension funds allocated just under half their assets to UK equities, a figure that has fallen to under 15 per cent.”

It goes on to say that the type of pension schemes that, last week, were

“caught up in the liquidity squeeze ... allocate just 3 per cent of assets to UK equities.”

Frankly, it is not a good sign that long-term patient capital vehicles are reluctant to invest in their home turf and the alignment of that. That strikes me as a business opportunity for Scotland whereby you signal a prudent approach, aligned with the Scottish National Investment Bank with long-term patient capital. Are you able to commit that, with regard to all funding towards the Scottish National Investment Bank, and, indeed, in relation to long-term patient investment capital, you will do all that you can to protect that and perhaps even increase it? It would be good if Scotland were seen as a place for some of these defined benefit schemes to invest, where they are not going to invest elsewhere.

I am on record as talking about corruption and how we should reframe the loss of those moneys in gross domestic product terms. People tend to consider corruption as crime rather than a loss to GDP and, therefore, an inability to fund vital public services. I have said in a speech that conservative estimates put the loss to UK gross domestic product at around at around £267 billion each and every year—that comes from figures from the likes of the National Crime Agency.

Can we have a short update about any further discussion of the proceeds of crime? The figure was less than £30 million prior to 2016. As I understand it, that was then folded into the Scottish budget and nothing has come to Scotland since 2016. The UK Government regards it as something that should be deducted from Scotland’s budget, whereas the Scottish Government sees it as something that should come under the no detriment principle.

A loosening of regulation has been trailed, which usually correlates with increased criminal activity—that is what we have seen: history tells us that. Have there been any further, more recent, discussion about the proceeds of crime? In my opinion, that affects Scotland’s international brand—we do not want to be associated with that. If there has been no discussion, will you undertake to look at that more closely, given the correlation with loss to GDP and the impact that that has on Scotland?

I will carry on just now, because I am changing scene.

I sound a note of caution and quote Susan Aktemel of Homes For Good, who said on LinkedIn:

“The Scottish Government seems to be legislating against new housing supply in the midst of a housing crisis”.

Those remarks go to the heart of the difficult balancing act that the Scottish Government must undertake: how does it take action to protect tenants without cooling the underlying supply of housing?

I will open some areas for discussion. The mood music for institutional professionals in the housing market must be right. They must know that Scotland is open for business and that their long-term investment plans can proceed. Pension schemes, in particular, have a long-term focus on patient capital, which must be considered. I highlight the build-to-rent model, which offers a route for Scotland to reach the scale of the housing that is required against a backdrop of undersupply and overdemand.

I do not have any evidence, because I do not have a crystal ball. However, I am pointing out that there is a housing market—we are not debating that here—and what is critical in relation to the housing market is having macroeconomic and fiscal powers. If we had adequate borrowing powers, we could take action, for example, to build more houses. That is the point that I am making. [Interruption.] I will carry on.

I reference the Scottish Property Federation’s remarks that there is a pipeline of new build-to-rent properties that is worth £3.5 billion and its concern that some of those projects might be put on hold. Risk assessments for other businesses such as small and medium-sized enterprises are growing more complex, and they are becoming more risk averse. Access to funding is already problematic, with interest rates increasing and being exacerbated by the current Tory-induced chaos. No one who lived through the credit crisis of 2008 will forget clauses in commercial contracts that allow for a demand for the repayment of bank loans regardless of whether any debt is being serviced regularly. We need strong guarantees that, this time around, the finance sector will act appropriately to support businesses.

I acknowledge that restriction of supply can have an impact—that is true. I am making it clear that the issue is very complex. If Stephen Kerr and Liam Kerr really cared about the housing market, they would be calling for increased borrowing powers for the Scottish Government so that it can build more houses, and for more macroeconomic powers for the Scottish Parliament, so that we can take further action. That is the point that I am making. Conservative members want us to sit passively and leave those matters to the Tory Government in London, and we have seen where that has ended up.

It is worth noting that all those economic factors, and many more that I have not mentioned, are outwith the control of the Scottish Parliament and the Scottish Government, which adds emphasis to my opening remarks. Housing providers are nervous because of uncertainty, and the vast majority of that uncertainty is because of macroeconomic policies that have been set in Westminster.

Any initiatives must look at the overarching housing sector in the round. Therefore, I would like to ask the minister what specific assessment has been carried out of the effect on the availability of housing supply of the proposed changes. Will there be check points on supply against demand?

We are in difficult times. With strictly limited powers, it is hugely difficult to extend tenant protections and to ensure that the environment for investment in new housing is optimum. The UK Government has used the property market to give the illusion of wealth and growth, leading to a bloated asset class.

Given what the member said about the consequences of flawed measures and lack of scrutiny, does he now regret the rush of blood to the head by his Tory chancellor and the impact that that has had on costs for housing providers?