Shocking tax hike faced by hostelry on John Swinney's doorstep shows how SNP is ruining the economy
The question of economic growth needs to be at the centre of the Scottish Parliament election debate
On the short drive from my home to my constituency office in Perth, I pass Brown & Blacks in Scone, a popular local hostelry. Taken over by businesswoman Katie Long a few years ago when it was in a near-derelict state, she has transformed it into a lively establishment serving good food as well as drinks, and providing a venue for all sorts of local meetings. It is very much a community hub as well as providing employment for 26 staff.
But now Katie faces a challenge, as she explained to us when she came to Holyrood last week. The current business rates revaluation will see her annual tax bill soar by nearly £33,000 to a level which may well make the business unsustainable.
She told us that she may have no alternative but to close the doors should the revaluation proceed, coming as it does on the back of increasing staff costs, employers’ national insurance, and energy bills.
Meet for a pint?
At First Minister’s Questions on Thursday, Scottish Conservative leader Russell Findlay challenged John Swinney to meet him for a pint with Katie to hear her story.
Her business is within his constituency and he must pass the door regularly, but so far the First Minister has shown no interest in meeting her. And yet her business could be a casualty of his government’s policies.
Katie’s story is just one illustration of the many challenges facing the business community in Scotland today. With a pitiful level of economic growth, and a continuing cost-of-living crisis, consumers simply do not have money in their pockets to spend.
And while demand is flat, businesses in sectors such as hospitality face rapidly rising costs, squeezing profitability. It is little wonder we have seen so many closures in the sector in recent years, with an average of one pub a week closing across Scotland.
Scottish Tories’ plan for growth
It is against that backdrop that Scottish Conservatives launched this week our new policy paper: Growing A Productive Scotland. It brings together a series of innovative proposals to put economic growth first and help businesses like those run by Katie Long.
Economic growth matters. It is what provides the secure well-paid jobs that we all want to see, and particularly for youngsters entering the employment market for the first time. Crucially, it also generates the tax revenues that will sustain the quality public services for the future that we all depend upon.
And here we know that Scotland is lagging behind. Since the devolution of income tax and the land and buildings transaction tax (LBTT), the overall size of the Scottish budget depends on the relative performance of Scottish tax revenues compared to the rest of the UK.
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Scotland’s lost £1 billion
Because we have lower relative earnings growth, and therefore lower relative income tax revenues, that means that even with the SNP’s tax hikes, Scotland is losing around £1 billion annually in revenues that we could otherwise have. Those are the figures provided by the independent Scottish Fiscal Commission.
If only we could match levels of average UK economic growth, or at least average earnings growth, we could have an extra £1bn a year to spend on the NHS, schools and roads. And we could do that without having to raise tax rates by a single penny.
That is why Scottish Conservative plans for a more productive Scotland matter, and have a reach far beyond just the economy itself.
So what would we do differently? Firstly, we have to tackle Scotland’s tax burden. Differential levels of tax penalise hard work, and make it harder to attract talented individuals to move to or stay in Scotland.
The non-domestic rates paid by businesses such as Brown & Blacks need to be addressed, and the way the system discourages property investments because they will result in a higher tax bill has to be reconsidered. So we would cap rises between revaluation cycles and exempt improvements from revaluations for a longer period so businesses can get a return on their investment before they start being taxed on them.
Hundreds of business schemes
We would have a single entry point for business support. At present support from the public sector is delivered through 100 different public bodies with 750 separate schemes. Under our model, firms would enter the system once through Business Gateway, part of a new all-encompassing enterprise body called Growth Scotland, to be able to access advice, grants, loans, skills support and specialist programmes through a single route.
When it comes to skills, Growth Scotland would take overall responsibility for promoting apprenticeships, employer-led skills planning, labour market intelligence, career services, workforce transition and innovation funding, aligning to employer demand and productivity need.
We would move to a demand-led system for providing apprenticeships, filling the 10,000 annual gap between the demand for places and the availability of funding. And we would fund this by ringfencing the apprenticeship levy monies which are collected from Scottish businesses but do not come back to them in the way that operates south of the Border.
We would tackle delays in infrastructure by giving Growth Scotland oversight of coordination of growth and infrastructure projects. This would not only provide a clearer investment pathway for public projects, but also address the excessive delays we see in the planning system which hold up vital projects such as dualling of the A9.
Taken together, this is a set of proposals to transform the Scottish economy. They demonstrate why economic growth needs to be at the centre of the debate around May’s Holyrood election. And they will offer practical support, to those, like Katie Long in Scone, whose businesses are being let down by the current SNP approach to the economy.
Murdo Fraser is a Scottish Conservative MSP for Mid-Scotland and Fife
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