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Yousaf’s New Deal for Business needs time – BBC News



  • By Douglas Fraser
  • Business and economy editor, Scotland

Image source, Getty Images

Image caption, Humza Yousaf revealed his plans for the year on Tuesday

  • The First Minister’s Programme for Government is intended to boost growth and fight poverty. Across the short and the long term, it brings aspiration but also contradictions.
  • It is in education and training that the long-term legacy will be created. While childcare can be a big help, problems with college finance and schools reform will also leave their mark.
  • The politics of tax cuts for business could be a smart move for the SNP in blunting attacks from Conservatives and critics inside his own party, but it risks alienating his party’s left.

It doesn’t take much to lose trust, but a long time to re-establish it. The ropey state of relations between the SNP government and business is under repair, and the evidence of the Programme for Government statement is that it’ll take time.

It will be the focus of debate on Thursday afternoon, as MSPs consider Humza Yousaf’s plans for the year and the years ahead, announced on Tuesday.

Much of what was announced and published to back the New Deal for Business was in small step-by-step measures – to support entrepreneurs, winnow out unnecessary red tape, to create units of government for small business and for investment, to try to find new ways to boost small firm productivity, to “consider” changes to business rates, and more widely to move on several fronts that opened up when that New Deal panel reported in June.

If you missed that amid the pre-summer recess wash-up, it’s worth another look at the robust and critical response the Scottish government received from business representatives on its advisory group.

Poonam Malik, at the Strathclyde Business School and co-convener of the New Deal group, commented in a blog after its publication: “With the best will in the world, a culture change doesn’t happen overnight. It is made up of smaller actions being taken over the short, medium and longer-term, so our recommendations are allocated in those timescales.”

But she also put down a marker that the approach to business and growth cannot be the status quo. That has led, wrote Dr Malik, “to lower productivity challenges, continuous removal and leakage of diverse entrepreneurial talent from our ecosystem, resulting in an anaemic economy, year after year, decade after decade and it is incumbent upon all of us to do something about it.”

Wealth creators

The bigger, longer-term and political picture for the start of the new parliamentary year was towards tax cutting to incentivise business, but doing so by persuading the UK government to devolve the powers necessary.

This could be clever politics. It is much less of a blunt instrument than the 2014 referendum plan to slash an independent Scotland’s corporation tax as Ireland did.

It allows the SNP to argue that it is willing to use tax cuts in a targeted way, and is not only interested in putting tax rates up on higher earners (though subsequent to Tuesday’s statement, signals of that in the budget is where reporting and discussion has gone).

And it presents Rishi Sunak with a dilemma – concede Holyrood a limited power over corporation tax, undermining the consistency of the UK’s approach to it, or say “no”, and find himself being portrayed in Scotland as anti-growth and to his backbenchers as anti-tax cut.

But it may be less clever politics with the left, where such a tax-cutting approach is seen as “neo-liberal”‘ and deeply disliked. The argument from there is for more progressive taxation – higher tax on the well-off rather than tax breaks for investors.

They see Shona Robison’s first budget, due in draft form later this year, as the time to make good on the first minister’s anti-poverty, redistribution rhetoric.

Image caption, Roz Foyer from the STUC raised concerns for workers

Roz Foyer, general secretary of the Scottish Trades Union Congress, welcomed the (eventual) increase in minimum pay for social care and childcare workers, but said: “We cannot pretend this was the radical, redistributive prospectus Scotland desperately needs.

“The first minister was right on the need to pick a side. We agree. But he has done neither and sets out a misaligned Programme for Government that promotes economic growth through a pro-business, profit-driven prism and gives very little detail, if any, on redistributing wealth from the top of our society to those most in need.

“Workers are the real wealth creators in our country, not the profiteers.”

That’s the problem with trying to please everyone. Humza Yousaf can simultaneously give everyone something to complain about.

Unintended consequences

One of the more significant measures for business was an offer to business to slash consent times for onshore windfarm developments, with improvements also on offshore wind, which comes at a cost to the industry: there must be clearer benefits for nearby communities.

More widely, the Scottish Renewables trade association sounded delighted there is to be a Green Industrial Strategy. They have work to do to get everything into it that they want.

It’s in the long, slow grind of government that Humza Yousaf’s Programme for Government may come to be seen to bear fruit after several years.

The housing bill is an opportunity to tackle some deep-seated and long-term problems with long-term solutions. Its provisions on rent controls will be politically popular with many, but as we’re already seeing from temporary rent controls (new tenancies driving up rents faster than the rest of the UK, which does not have rent controls), these have to be well designed if they are to avoid unintended consequences.

Image caption, The housing bill will introduce rent controls

Rural and island Scotland got a lot of attention, including a land reform bill and particularly on housing. Some measures could have an effect soon, including a rise in council tax on second homes.

One measure that could do a lot of damage to rural tourism, through its unintended consequences, is the imminent introduction of licensing short-term lets – at a cost that is likely to drive a lot of self-caterers and bed and breakfasts to put up the “no vacancies”‘ sign.

That could be good for easing the rural housing crisis. But not everyone wants to take a room in a guest house, or live through the year in a fixed caravan or yurt.

Glacial reform

It is in the long term also that Humza Yousaf’s further moves on childcare could make a difference. Better support for early learning and childcare is aimed at freeing up parents for the workforce in the next few years, but it’s also aimed at giving more children a sound footing for school and beyond.

But life chances can equally be affected by damage to the college sector. That did not feature in the Programme for Government, but the auditor-general is warning about the effects of an 8.5% real terms cut in only two years in funding for Scotland’s 24 further education (FE) colleges, when staff costs (more than 70% of their costs) have gone up.

As staff strike, and principals warn they may have to move from voluntary to compulsory redundancies, Stephen Boyle is warning that some of the continuing staff cuts may make it impossible to offer a viable curriculum.

Ayrshire College is reported to have had a bad-case scenario in which 70% of teaching staff have to go. Buildings and facilities have a large backlog of work required, making it very hard to see how the sector can meet its net zero ambitions. RAAC concrete, if it’s found in college buildings, won’t help.

Image caption, Some college staff staff are at risk of redundancy

And this is a learning forum of disproportionate importance to lower income families – 25.5% of young people go to FE college, but 35.6% of those are on low income, not including those who go into colleges to start a higher education course.

In terms of the twin ambitions of Humza Yousaf’s administration, allowing colleges to fail is not much of an anti-poverty strategy, or pro-growth for the businesses that look to local colleges to provide recruits and employee training.

And the response from the Scottish government is not a model of reassurance; it’s a tough spending environment, ministers are allowing more financial flexibility, and there may be a wider funding reform of post-school education. Without more money in the pot, that could also make universities nervous.

When the history books are written, it’s education and training that are likely to be the long-term legacy of decisions being made now – in pre-school, in funding colleges and in the glacially-paced re-arrangements of the education quango furniture, of curriculum and qualification reforms.

That is where the workforce of the more distant future and the prospects for the Scottish economy will be shaped.

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