Chamber and committees

I have spoken to Leon Thompson several times, and I understand the particular frustrations in hospitality and tourism. It has been a pretty tough period. However, taking Leon Thompson as an example, my diary and that of Richard Lochhead will confirm that there is extensive engagement with that sector. The question is whether we can do more to relieve some of the pressures on the sector. I imagine that, if you drill down into what some of the pressures are right now, those will include the massive hike in energy costs and the pressures of employer national insurance contributions going up. There will also be a number of other points that businesses in the sector will wish to make.

We do what we can to relieve some of those pressures. We certainly understand and engage extensively with those businesses on what their issues are. Government then has to make choices, in the round, about how to deploy resources as effectively as possible. That is where I take a more balanced approach that is open and transparent about the ways in which we can meet some of those asks but that acknowledges that, in some cases, we may not be able to meet those asks. That is the case for every Government. Yes, the Government has a focus on economic growth, but we also have to focus on getting to net zero, on having resilient public services and on ending child poverty. We need to balance all those objectives, and it would be foolhardy to say that those objectives do not sometimes come into conflict with one another.

I should have put an interest on the record at the beginning, as I have family members who operate a tourism business.

I do not accept that point about the legislation. I cannot remember precisely when it was, but I think that I came back into government halfway through the legislative process. In the responses to the consultation, there were a number of different calls. Some were very much in favour of a flat rate and some were very strongly in favour of a percentage rate. That proves the point that I shared earlier about the fact that the tourism industry is not homogenous. Some particularly small businesses were very hostile to a flat rate because, for them, it would have been a bigger percentage of the cost of a one-night stay.

The legislation was designed to try to make it as flexible as possible for councils. For example, there are a number of exemptions that can be included, and there are a number of different approaches and processes for collection. My view is that councils are now responsible for how they conduct the consultation, with VisitScotland input, and how they design a scheme that works for their local businesses. Although I am very open to feedback from businesses on how it operates, I stress that it is now a council responsibility. It was councils that wanted the enabling legislation, and they now have it. How they implement it matters, but it is ultimately their duty to engage with businesses on that point.

A review point is baked into the legislation. It is now Ivan McKee’s responsibility, and he is engaging at the moment as to whether there needs to be additional flexibility on the point about a flat rate. You will know that Highland Council was not in favour of a single flat rate, either; it wanted a tiered rate. There is complexity here, because different businesses and different councils wanted different approaches. The legislation tries to be as broad as possible. I strongly encourage councils to engage well with businesses and to design a scheme that mitigates any concerns that are raised.

No, not at all, because we have responded. We have responded to the increase, and, by and large, consenting is no longer identified as the biggest concern. What came through our Monday conference on offshore wind, where I was delighted to sit alongside Michael Shanks, is that the sector’s biggest concern right now is the uncertainty on contract for difference allocations and the fact that the work on grid connections is too far in the future. All of us know that there is a need to respond, but we are very proud of having doubled the resource in the consenting unit without much fanfare. We have just done it. That shows a flexibility of response.

The point about the high street is a bit more challenging, because many different factors impact on that, and some of them are outwith our control. The rapid rise in online shopping, for example, has had an impact on our high streets. There is also the impact of Covid. Where we can respond is by rethinking high streets and what goes into supporting them. It is a bit more complicated.

I am at risk of continually hogging this. Dr Malik, do you have any ideas to share?

I confess to being surprised that it has taken until 11:23 for anyone to raise the subject of non-domestic rates. I commend Daniel Johnson for being the first to do so.

There is a sub-group on non-domestic rates, which has valued the opportunity to engage in a deeper way on many of the issues and to consider how the non-domestic rates system can best support business growth. Although we have made the decision that the new deal for business is coming to its natural conclusion, the sub-group on non-domestic rates will continue to meet and will, I hope, continue to be a forum.

The sub-group has delivered changes. For example, this might seem quite minor, but the deadline for lodging proposals on non-domestic rates valuations has been extended as a result of concerns being fed back. Dialogue and engagement that had not happened previously have taken place through the sub-group on non-domestic rates.

Short-life task teams have got into the weeds on very specific issues, including property improvement, promotion of reliefs, valuation transparency, information flows and the impact of reliefs. That has allowed really in-depth conversations to take place that would not normally happen when we discuss in general terms the changes that need to be made around non-domestic rates.

Daniel Johnson and I have had conversations on other specific changes. I remain very open to and interested in changing the methodology for hospitality businesses. The key is finding consensus on what that change should be. I have shared with Mr Johnson the UK Government’s proposed changes on non-domestic rates, whereby larger businesses will indefinitely supplement the reliefs that are provided to smaller businesses. As we cannot replicate those changes, it is particularly urgent that we look at what the alternative will be in Scotland.

On methodology, there remains an outstanding question on what could replace the current methodology. That is dependent on data.

Judith, do you have anything to add on the specifics of any of that? If not, do not worry.

One area in which I would like greater progress to be made—I imagine that Daniel Johnson will agree with me on this—is on the complexity of the technology landscape for local authorities’ non-domestic rates systems. That point is similar to the one that Jamie Halcro Johnston made earlier in relation to the tourism levy, some of the points about which we recognise. However, the process needs to be initiated by local authorities themselves if fundamental changes to the technology are to be made. The delivery of any changes to the digital systems, such as changes in the level of information that can be accessed through those systems, requires a joint view to be taken by all councils.

I have previously engaged with Revenue Scotland, which has an appetite for helping to support councils to take a far more streamlined approach to non-domestic rates. There are multiple different systems operating. If there was consensus among local authorities on the need to improve that technology, we would be willing to work with them. However, I must emphasise the fact that, although it is easy to ask Government for a number of changes, when we are talking about a local tax, the process needs to be initiated by local government.

I see that Daniel Johnson is looking at me sceptically.

Okay. The point is we have to be flexible, which is perhaps one of the things that has not been raised in this committee session so far. We have to be flexible. The processes need to be able to adapt and flex in response to new issues. We were not anticipating an increase in ENICs to be such a massive issue, and businesses are scrambling to respond. The agriculture sector did not expect various changes to come through, and it is scrambling to respond. Beyond our shores, we might not have expected Russia to invade Ukraine three years ago and what that would mean. My point is that our processes need to be flexible enough to respond, which is why the new deal for business was not about specific policies; it was about processes.

My confusion about the question is that the example that I have given you demonstrates where we have done it well. Recognising the volume of planning and consenting applications, we doubled the resource. We are not still talking here about the fact that that resource still needs to be doubled; I am here with a completed action—it has been doubled.

Thank you very much, convener. I thank the committee for providing the opportunity to discuss the new deal for business programme.

Thriving businesses are key to Scotland’s prosperity, and their success is critical to delivering the Government’s objectives. We are an unashamedly pro-growth Administration that is committed to working with business. Over the past 24 months, the new deal for business programme, which was designed to enhance the relationship between business and the Government, has been front and centre of our approach, and I am proud of what has been achieved collectively.

Before I go any further, I put on the record my huge and sincere thanks to Poonam Malik for her role as co-chair of the new deal for business group and for her commitment in providing her time and thoughts in co-chairing the group. I know how much parliamentarians value the input of business leaders, so we owe Poonam and many others like her a great debt of gratitude. I hope that that does not embarrass her too much while she is on camera.

Over the past few years, we have built good, strong relationships between business and the Government that recognise that Government actions and policies exist for a reason but that those actions have an impact on business. We need to understand the impacts of Government choices on businesses and work in partnership with them to minimise or mitigate those impacts.

The new deal for business programme was designed to kick-start systemic change and, although it was time limited, we always accepted that fully realising the change that we all want would take longer. Delivering the “New Deal for Business Group Implementation Plan”—our road map—for the past 18 months has fundamentally altered for the better how the Government engages with business. I am pleased that we have seen real change in the culture of Government, improved relationships with the business community, new tools and processes that support evidence-based policy development and better outcomes for all, and genuine enthusiasm and a new willingness to work together. I was heartened to hear, in the committee’s earlier evidence sessions, a clear acknowledgement that the desired change in culture across the Scottish Government is already happening.

I am delighted by those tangible improvements, which will be set out in more detail in the new deal for business group’s final report, which is to be published next month. However, I am not complacent. This is just the start, and I look forward to continuing to improve how we work with business and to building on the momentum through the means that are available to us.

Inevitably, there will always be things on which business and the Government do not agree, just as there are differing views within the business community. However, we see the successful conclusion of the new deal for business programme as an opportunity to double down even more strongly on how we work hand in glove with business. Together, we can deliver successful outcomes, minimise adverse impacts and maximise the opportunities for businesses to contribute to creating a fair, green and growing economy as the new normal.

I am very happy to take questions.

That is a great question. We are talking about a cultural change, and sometimes that can be difficult to pin down. However, I have very specific examples of how the culture has changed.

First, we have earlier, more effective engagement with business on policy objectives—we bring people in at an earlier point in discussions. At one of your evidence sessions, there was an indication that there had been change in relation to last year’s programme for government and in the budget, for example. Business felt consulted at a much earlier stage and then could see tangible evidence of asks being reflected back in the budget and the programme for government.

Secondly, there were specific sub-groups. The non-domestic rates sub-group, for example, was brought in at a critical point in the parliamentary calendar so that we had an opportunity to hear back from it. The regulatory review sub-group provided specific advice to ministers and officials on a number of different issues, such as heat in buildings, minimum unit pricing, single-use cups and legislation on non-surgical cosmetic procedures, and a refreshed business and regulatory impact assessment and guidance were co-produced.

Those are just some of the different systemic and process ways in which there has been change. Ultimately, the test is whether there is a culture change across Government so that different parts of Government no longer work in silos.

The economy directorate has always understood that the business community, which is not homogeneous, is a key stakeholder. If you are working in health policy or environmental policy, you have a lot of stakeholders to take into account, and business may not be your first consideration. Through the new deal for business, we have changed things so that there is a means of bringing in business stakeholders at an earlier point.

For example, when I came back into government last summer, one of the first groups that I chaired was a group involving the new deal for business group, which heard from public health experts on improving health outcomes. I cannot recall that happening previously, but we did it to break down silos.

Those are some tangible examples of how process has changed to deliver a cultural change outcome.

I constantly ask that kind of question, because I often hear it said that the business community thinks X, Y or Z, but that completely fails to recognise that there can be disagreement among our wonderful businesses on different things. With subject area policies, some businesses might benefit from a policy change and some might not. Therefore, getting a fresh perspective really matters. Trade associations and organisations often speak on behalf of a group of businesses, but even they recognise that issue. For example, by its nature, the Federation of Small Businesses represents lots of small businesses in different sectors, which means that there are different views on different things.

Bringing in a fresh perspective is important. That is why I do not believe in continuing with particular groups indefinitely, because you want to bring in perspective. It is also why I strongly believe in engaging with businesses on a one-to-one basis. During Covid, I remember inviting officials to engage with businesses that had approached me and that bucked the trend—they were saying a different thing that was not part of the norm. We heard particular messages and then we would engage with small businesses that were saying something totally different. We engaged with them one to one rather than always viewing them as a group.

I am aware that many have said that Tony Rodgers—if I have remembered his name correctly—had a fresh perspective. I am happy to engage with him and others like him on their solutions and suggestions.