Meeting of the Parliament (Hybrid)

Meeting date: Thursday, December 3, 2020

Official Report 993KB pdf

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Portfolio Question Time

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Finance

Good afternoon. I remind members to observe the social distancing measures that are in place throughout the campus, in particular when they are entering or leaving the chamber.

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Retail Businesses (Taxation)

To ask the Scottish Government what changes to taxation it can make to address the reported widening inequality between small retail businesses and large corporations as a result of Covid-19. (S5O-04817)

The Scottish Government is restricted by the devolution settlement in what changes to taxation it can make to address any inequality between small retail businesses and large corporations.

We are committed to delivering a taxation environment that is fair and sustainable for all taxpayers. Where we have powers, for example on non-domestic rates, we have decided to prioritise small businesses through the small business bonus scheme, which is more generous than any equivalent scheme elsewhere in the United Kingdom, and is lifting more than 117,000 ratepayers out of paying rates altogether.

Before Mr Ruskell asks his supplementary question, we will pause for a moment to ensure that the sound in the chamber is fully operational.

Yesterday’s announcement by Tesco that it will voluntarily repay £585 million of rates relief has been warmly welcomed. However, Tesco is only one of several mega-retailers that have benefited during the pandemic. What discussions will take place with other large retailers about similar voluntary measures? Is the Scottish Government able to ring fence those repaid reliefs in order to support smaller high street retailers? What discussions will the Government have with the UK Government on the possibility of an additional windfall tax, through the corporation tax scheme, for companies that have made astronomical profits during the pandemic?

We welcome yesterday’s announcement by Tesco—as has been noted by the Cabinet Secretary for Finance—and the follow-up news today that other big retailers intend to follow a similar path. Yesterday, the cabinet secretary committed to utilising the resources that are being returned to support businesses in Scotland through mechanisms and means that will be considered in due course.

As Mark Ruskell would expect, the Scottish Government is engaged in discussion with the UK Government on a windfall tax. If the Scottish Government were to have determination of such a tax, it would require permission from the Treasury through the mechanisms of the Scotland Act 2016. Alternatively, the tax could be delivered by the UK Government. We encourage the UK Government to use its powers to make tax decisions and policy in a progressive way, and to continue dialogue on reserved taxes and new taxes, such as a windfall tax.

As the minister said in his initial reply, the vast majority of powers over taxation remain reserved, which clearly limits what the Scottish Government can do to address any inequalities. Does the minister agree that further powers over taxation should be devolved as soon as possible in order to better enable a Scotland-specific response to Covid?

Absolutely. The Scottish Government believes that all tax powers should be devolved to the Scottish Parliament so that fiscal decisions that affect the people of Scotland can be made in Scotland. The devolution of tax levers would enable us to tailor measures to fit Scottish needs and circumstances, as we build the path to economic recovery. Having all the powers would also enable us to deliver a comprehensive, progressive and competitive suite of tax policies. The more powers we can bring together coherently, the better.

Tesco yesterday and Morrisons today—who knows who will come tomorrow? I am keen to know what action the Scottish Government will take to actively encourage businesses that have made substantial profits during the pandemic to return their business rates relief. How quickly does the Government think it will receive the money back? How quickly will it ensure that the money goes out the door to businesses that are truly struggling?

Again, I refer to the cabinet secretary’s public statement yesterday. Updates have come rapidly in the past 24 hours from supermarkets that have engaged on the matter. The Scottish Government continues to engage with large retailers, as appropriate. We encourage businesses that are still considering what to do to consider that the moves by Tesco and other large retailers have been well received among the public, and to consider how good use of public finances can be maximised in these times. It is absolutely right for large retailers to return reliefs in a period in which they have made substantial profits. We continue to liaise with large retailers, as well as with the UK Government, on such matters.

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Economic Recovery (Funding Support)

To ask the Scottish Government what its latest engagement has been with the United Kingdom Government regarding the funding provided to support the economic recovery from Covid-19. (S5O-04818)

Ahead of the UK spending review last week, I wrote to the Chancellor of the Exchequer to stress the importance of delivering a fiscal stimulus package that will support businesses and households while regenerating the economy. I reiterated those points on the morning of the spending review.

Sadly, there was instead a cut to the Scottish Government’s capital and financial transaction budgets and a freezing of public-sector pay rises for many hard-working front-line staff. The chancellor ignored the proposal for a £9.21 per hour national minimum wage, and he failed to replace European Union funding in full, or to even to offer a proper plan on how to do so.

Many countries, including France, Germany and New Zealand, have introduced substantial economic stimulus packages in response to Covid. The cabinet secretary has just described the UK Government’s response. Has the UK Government articulated an argument to show that its response will help us, or will it do otherwise?

Stewart Stevenson mentioned other countries that have introduced much more generous economic stimuli than the one that the chancellor provided last week. As I said, ahead of the spending review, I urged the chancellor to follow the lead of those countries and to prioritise public services and economic recovery through a fresh stimulus. We suggested that the stimulus should be at least 5 per cent of gross domestic product, which would equate to £98 billion.

That investment is even more necessary, given the uncertainty that has been caused by the UK Government’s reckless approach to EU exit. Headlines today continue to prove that point. As we know, the UK spending review fell far short of what we proposed, which will only make it harder for us to deliver the fairer, greener and more prosperous Scotland that we all want.

I call Murdo Fraser.

I am afraid that we do not have sound from Mr Fraser at the moment. If it is possible, we might come back to him.

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Strategic Framework Business Fund

To ask the Scottish Government how much it has allocated to the strategic framework business fund. (S5O-04819)

The support package offered through the Scottish strategic framework business fund is available to all eligible businesses from 2 November and will continue to be made available indefinitely while levels remain under review. As the member will appreciate, it is difficult to forecast what the costs will be, because it is a demand-led programme that will last indefinitely. On top of that, we have allocated more than £30 million for local authorities to give discretionary payments to businesses that still need support.

Since East Lothian was happily moved to level 2 of the framework, some businesses have found themselves having to have recourse to the business fund when they would rather not. They are so-called wet pubs that have been forced by law to close because they do not have a kitchen on the premises, even if they have a beer garden. Identical premises that have a kitchen on site can open. Those businesses want to open but have been forced to make demands on the business support fund because of an illogical aspect of the law that underpins the framework. Will the cabinet secretary look at that again?

Iain Gray’s question has more to do with the businesses that are captured at each level than the support that is available. When it came to establishing the levels, we tried to make it clear that we did not want a single business to be closed for any longer than it had to be, and we tried to make the scheme as fair and realistic as possible.

On the specifics about the wet pubs, perhaps Mr Gray could write to me—or would he like to clarify the point right now?

I thank the cabinet secretary for the invitation to clarify. I am not asking about the differences between levels. The question is about two businesses at the same level, which are carrying out exactly the same business; one has a kitchen on its premises and the other has not. By law, one has been forced to close while the other is allowed to open.

That is what I was alluding to in my first answer. It is to do with the fact that the restrictions have detail on businesses that are able to provide food, for example, what time they close, and whether they provide alcohol. All those points are captured in the restrictions.

When it came to capturing the right businesses in the right levels, we tried to make sure that no businesses would be required to close for longer than they had to, and the levels will remain under review.

Will the cabinet secretary provide an update on the effect that the delay to the United Kingdom budget has had on the Scottish Government’s ability to plan business support in the longer term?

Throughout the past few months, the challenge has been in planning ahead, forecasting costs and finding support for those costs when UK Government policy announcements generated consequentials, sometimes after the need in Scotland.

The UK Government changed its approach to guaranteeing the consequentials, which was very helpful, but we do not have a guarantee for next year. The autumn budget is usually the basis on which we set our budget, so the delay to that means that there are huge uncertainties for us, particularly in terms of knowing what changes might be made to tax policies. Clearly businesses are facing challenges now and those challenges will not end at the end of the current financial year; they will continue into the next financial year, so it is important that we can provide long-term clarity to those businesses. However, that clarity and certainty are denied to us as a result of the UK budget being delayed.

We return to Murdo Fraser for his supplementary to the previous question.

Thank you, Presiding Officer; I hope that you can now hear me.

We know that the Treasury has guaranteed an additional minimum £8.2 billion in the current financial year. Last week, we heard from the well-respected Fraser of Allander institute that it believes that £1 billion of that money is currently not committed, and this is at a time when many businesses, as we have heard, are crying out for additional financial support. Is the Fraser of Allander institute correct? If it is not correct, what is the correct sum? When will we get a full report to Parliament on the allocation of those funds?

On the point about a report, the member will know that the spring budget revision is due to be published in February and, with the full understanding that the Parliament and the Finance and Constitution Committee want as much transparency as possible on those figures, I committed to writing to the Finance and Constitution Committee in December with additional information. We are now in December, so that should be relatively soon.

The Fraser of Allander institute is right to highlight that the changes that the United Kingdom Government has made to how it generates and provides us with Barnett consequentials has been helpful in providing a guarantee. However, it means that the consequentials that are generated are divorced from the money that actually comes to us, if that makes sense. It is therefore difficult to link announcements that are made by the UK Government to the funding that we have here.

That means that although we forecast as many of the costs as possible—they might be for transport systems, vaccinations or business support—when additional funding such as the welcome £1 billion is made available, we must ensure that that money goes out the door as quickly as possible and that we provide certainty and transparency to Parliament. We must also ensure that we can fund initiatives and programmes up to the end of the financial year. The strategic business fund will be demand led to the end of the financial year, so I must ensure that there is sufficient cover for that and for deployment of the vaccine programme and for other costs that are, as yet, uncertain.

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Renewable Energy and Decarbonisation (Business Support)

To ask the Scottish Government what financial support it can give to businesses that face an increase in their non-domestic rates because they have invested in renewable energy and decarbonisation. (S5O-04820)

Rateable values are derived by independent assessors on the basis of the notional rental value that a property could be expected to achieve on the open market. Where a property is improved for any reason, its rateable value may increase accordingly.

The Scottish Government provides business growth accelerator relief, which suspends increases in rates liabilities due to property improvements and expansions for twelve months. That support is unique and is also the United Kingdom’s most generous package of reliefs for the renewable energy sector.

The community and renewable energy scheme provides financial support to rural small and medium-sized enterprises that are seeking to develop renewable energy projects in Scotland. In addition, support is provided through the smart export guarantee obligation and through its predecessor, the subsidy feed-in tariffs scheme, which closed on 31 March 2019.

Metaflake in St Andrews was keen to reduce its carbon footprint by installing solar panels, but could not afford the system of over 50kW as it would have cost thousands of pounds in extra business rates. That does not make sense when we are trying to battle climate change.

Why is the Government penalising businesses that are trying to do their bit on climate change? I know that that was part of the Barclay review. Is the minister prepared to look at that again to provide the necessary support to incentivise those businesses?

I would be happy to receive correspondence from Mr Rennie on that specific case and to hear the Liberal Democrats’ views on how to support businesses as part of the forthcoming budget process.

Properties that have invested in renewable energy and decarbonisation may be eligible for business growth accelerator relief. We also provide a non-domestic rates exemption for renewables for subjects with a capacity of up to 50kW, which may apply to the situation that Mr Rennie mentioned.

I am keen to hear more about that case and I look forward to written correspondence and to further engagement with Mr Rennie.

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European Union Funding (Replacement)

To ask the Scottish Government what its latest engagement has been with the United Kingdom Government regarding plans to replace EU funding. (S5O-04821)

We have had little meaningful engagement across a number of programmes, including fisheries, structural funds and competitive programmes such as Erasmus plus and horizon Europe.

We have been clear and consistent in our position: we expect full replacement of European Union funding from the end of December to ensure no detriment to Scotland’s finances and we expect the UK Government to fully respect the devolution settlement in any future arrangements.

Unfortunately, the chancellor’s spending review last week provided little clarity on replacement funding for a number of EU programmes, particularly structural funds, Erasmus and horizon.

That is a depressing answer. Scottish ministers have successfully delivered EU funding programmes for decades. Is there any further clarification of whether full control of replacement funding will be given to Scotland? Does the cabinet secretary agree that a failure to do so would clearly constitute a power grab?

It is still unclear whether full control of some replacement EU programme funding, particularly structural funding, will be given to Scotland. The United Kingdom Internal Market Bill, as introduced, included provisions that presumed Whitehall control over the delivery of EU programme funding replacements in Scotland, a programme that Scottish ministers have delivered successfully for decades for the sake of our communities, businesses and research institutes. Any attempt by the UK Government to introduce powers that give it full scope to reduce or redistribute replacement EU programme funding in areas of devolved competence would be a clear assault on our devolved spending powers. It is not just the Scottish Government that says that but the Welsh Government and the Northern Irish executive. Such an attempt would disrupt productive relationships that we have forged with stakeholders over many years and create the potential for confusion, duplication and unnecessary additional bureaucracy.

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Local Authorities (Funding Settlements)

To ask the Scottish Government what discussions it is having with local authorities regarding their future funding settlements. (S5O-04822)

As Liz Smith would expect, particularly in these challenging times, the Scottish Government regularly meets the Convention of Scottish Local Authorities and local authorities to discuss constructively a range of issues, including the future funding settlements. Negotiations on the annual Scottish local government finance settlement are conducted between the Scottish Government and COSLA, on behalf of all 32 local authorities.

The Scottish Government constantly complains about the uncertainty that it believes the United Kingdom Government has forced on it in relation to budget planning, but has it considered the uncertainty that it is forcing on local authorities by giving no indication of how they might benefit from some of the £2.2 billion of Barnett consequentials, the allocation of which the Scottish Government has disclosed no information on?

As I stated in my first answer, we regularly engage with COSLA on consequential announcements and other aspects of funding, and will continue to do so to work constructively to support our colleagues in local government in this challenging time, so that we can respond as collectively and as effectively as possible.

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Project Funding (Lothian)

To ask the Scottish Government how much funding it plans to allocate to projects in Lothian that will help support people and jobs. (S5O-04823)

Supporting people and jobs is at the heart of our pandemic response. The four Lothian councils have been allocated an additional £70 million to help meet the challenges posed by Covid, plus a further £162 million to support local businesses. The infrastructure investment plan includes a range of projects in Lothian, including new schools and healthcare facilities. That is in addition to our £300 million investment in the Edinburgh and south-east city region deal. Lothian residents will also benefit from the tens of millions of pounds we are investing across Scotland in initiatives that will help people find and secure employment.

The City of Edinburgh Council has stated to the Scottish Government that a replacement for Liberton high school is the council’s top priority for funding from ministers. I pay tribute to both the school and the parent council for the campaign that they have run over many years now to secure a replacement school for the local community. When is an announcement likely from Scottish ministers on whether Liberton high school will finally get the funding that it needs in order to be replaced?

I am aware of the campaign. Members across the chamber and I all take a great interest in when the next funding for the replacement of school estates will be made. I know that the Deputy First Minister is actively working on that and hopes to make an announcement in due course.

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Enterprise Agencies (Funding)

To ask the Scottish Government what additional funding it has made available to its enterprise agencies, which have been supporting economic recovery during the pandemic. (S5O-04824)

Throughout the course of the pandemic, Scottish Enterprise, Highlands and Islands Enterprise and South of Scotland Enterprise have reprioritised activity to help businesses and communities and support economic recovery in their respective areas and regions. As a result of additional funding made available by the Scottish Government, more than £144 million has been distributed by the enterprise agencies through the creative, tourism and hospitality enterprises hardship fund—which I know that many of Jamie Halcro Johnston’s constituents benefited from, because they are also my constituents—and the pivotal enterprise resilience fund. The enterprise agencies are distributing a further £14 million through the hotel recovery programme.

The cabinet secretary will be aware that the concentration of tourism and hospitality businesses in the Highlands and Islands has meant that the region’s economy has been hit harder than most by the pandemic. However, before Highlands and Islands Enterprise was given responsibility for administering the schemes, as she mentioned, it started the year with overcommitted resource and capital budgets. HIE’s chief executive has been clear that, in order to free up the budget to deal with the pandemic response, there was a

“need to remove or defer commitments”

on their normal priorities.

Given the need to rebuild, will the cabinet secretary ensure that the extra responsibilities of the enterprise agencies are reflected with appropriate operational support? Does she now regret her Government’s cuts to HIE’s operating budgets before the pandemic hit?

I always regret that a bigger pot of funding is not made available to the Scottish Government, which could then be distributed more fairly across all the public bodies, agencies and initiatives that would benefit from that.

Jamie Halcro Johnston makes a good point. Although we are still responding to the immediate crisis and helping businesses that are in distress, there is also a need to look at long-term recovery. Indeed, where businesses were looking for funding not only in HIE’s area, but in the other two areas, we have provided that funding for long-term recovery.

The member might be aware of, for example, the recently announced £100 million green jobs fund. The funding will help businesses to create new green jobs and support businesses in that pipeline. Our enterprise agencies will provide £50 million to businesses in order to do that.

More information about budget allocations will be announced on 28 January 2021.

That concludes portfolio questions. I apologise to those members who wanted to ask questions but could not be taken.