Chamber and committees

Because I am aware of the time—and I appreciate the witnesses giving up their time—I will direct my final question to Professor Chadha only.

In talking about uncertainty, we talked about how to disaggregate data—Emma Congreve touched on that. Arguably, however, the past is a good predictor of the future. Given that the session is an overview of the current macroeconomic climate, it is worth pointing out some of the statistics about the UK. In 1999, only four of the 12 small advanced economies had a GDP per capita higher than the UK; by 2019, the figure was 11 out of 12. Even since the economic crisis, if the UK had matched the economic growth rates of other large economies, its economy would have been 4.4 per cent larger; if it had matched the growth rates of small advanced economies, its economy would have been 7.7 percent larger. We have considerable certainty, because we can look at the past.

Given those economic stats, to what extent can we be certain of continued decline—if the past is a good predictor of the future—and to what extent is our economy a “hipster” economy or otherwise?

On a point of order, Presiding Officer. Neither my phone nor my laptop would let me log into the system. I would have voted no.

On a point of order, Presiding Officer. I am afraid that I still cannot get into the system. I would have voted yes.

Thank you for putting that on the record. I commented at the beginning that we had talked about that issue, and I understand and appreciate the difficulty in disaggregating data on the impact of Covid, the pandemic and Ukraine.

That said, we are now able to predict with slightly more certainty the impact of Brexit over the long term. Do you think that that issue is being talked about enough? Obviously, I have read your November report, but the issue keeps disappearing as though it is not going to have any long-term impact when, according to your figures, it quite clearly will have.

I saw that, too. It is an interesting area to look at, because it relates to the skills agenda as well as, for example, labour shortages.

Another question that I have is more about the scope of the OBR’s approach to the sustainability of public finances. The convener mentioned the removal of the Office of Tax Simplification; one area that I often like to ask about—indeed, I asked the IFS about it last week—is the cost to the UK’s GDP of money laundering and corruption. It is an absolutely significant factor, because it runs into billions every year.

I am not entirely sure whether the OBR has started to make an assessment of that, but it has a real cost. I was just wondering where issues such as the effect on the sustainability of public finances of this sort of cost to UK GDP fit within your organisation. Where in your organisation would you consider the implications of that, if at all?

Thank you for that. I appreciate the complexity of the matter and your role in all of this, but it strikes me that the issue must at least be approaching that tipping point where it becomes of interest from a public finance point of view.

Good morning and thank you for attending. I want to ask about a totally different matter that has not yet come up this morning—the B-word, or Brexit. I note your comment in November’s economic and fiscal outlook that

“Brexit has had a significant adverse impact”,

with trade volumes declining. Indeed, they are to fall by 8.3 per cent below the present level by quarter 4 in 2023.

An area that I find very interesting is trade intensity, which you say is

“15 per cent lower ... than if the UK had remained in the EU.”

My understanding is that trade intensity is a measure of a country’s integration with the world economy. Given that we will not be able to replicate what we had with the fairly paltry and thin-gruel deals that have been made thus far, can you say anything about the prospect of trade intensity increasing or, indeed, maintaining the percentage that you set out in your report over the next five years and beyond? It would be useful to hear an answer to that question from whoever is best placed to give us one.

Would you consider taking an explicit look at that? I am thinking, for example, of the proposal to remove the Office of Tax Simplification, despite the fact that, as we know, it is the complexity of tax codes that provides the wriggle room in a variety of areas. We also know from the National Crime Agency and Transparency International—although the latter’s figure is an estimate—that we are talking about a loss to UK GDP of approximately £267 billion each year, and the effects of that will flow through in the availability of public finance for doctors, nurses, teachers and so on.

You do not need to answer this just now, but you might consider looking at that explicitly, because it is a very real issue that could ultimately have quite a significant impact on the sustainability of our public finances. If it is “implicit”, as you have said, it is not overtly understood, and it is overt understanding that will drive action. Any comment on that would be helpful—or you could just tell me that I am wrong.

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.