Humza Yousaf needs to work with the power brokers south of the border to have any chance of growing the economy, writes TERRY MURDEN
There will be no getting away from putting the economy at the forefront of Scottish government policy as Humza Yousaf lays out his plans for the next year. With a growing clamour to re-prioritise the agenda around wealth creation he could do worse than remind his critics that economic growth has not slipped out of sight and that his party understands the needs of business rather more than surveys suggest. The challenge is having the ability to make a difference.
Support for the technology sector, including the appointment of Mark Logan as chief entrepreneur whose recommendations have been acted upon, showed a recognition of a key growth sector, particularly around new industries such as financial and medical technology.
There was the inspired launch of the CivTech initiative, linking startups with challenges faced by the public sector. And the government has actively supported schemes, such as Scottish Edge and various accelerators to drive new business development. Mr Yousaf launched the New Deal advisory group to get ministers and businesses more regularly around the table.
However, government policy has been only a part of this particularly story. Progress on tech startups has been made easier because of the excellent research at Scotland’s universities. The renewables sector has grown because Scotland’s natural environment makes it an obvious target for investment. In other words, this would have happened whether or not government intervened.
If there has been progress in ministerial thinking it has been within the limited powers available to them to affect change. Those clamouring for an economic growth agenda are not wrong, but they need to acknowledge the limitations on the Scottish Government to provide the sort of economic stimulus that has escaped the ability of other countries to tackle weak growth and soaring inflation. If the Germans can’t avoid sliding into recession and the Chinese are struggling to inspire confidence in global markets, what chance Scotland becoming an economic powerhouse?
Mr Yousaf’s ministers can tinker with income tax and business rates, ease (some) regulations and the planning process (this is also an issue for businesses in England), offer a few incentives on skills development and dish out grants via Scottish Enterprise. The Scottish National Investment Bank is also only taking up some of the slack in the supply of finance.
These help make it easier to do business and enhance Scotland’s competitiveness, but by themselves they will not shift the growth agenda in any meaningful way. That’s why Holyrood’s best chance of growing the economy still rests in a closer working relationship with the UK government, the City of London and institutions such as the Bank of England and the providers of private capital. Monetary policy is not within the gift of Holyrood, but it will always be a key driver of growth, along with corporation tax, employment and immigration.
It is an encouraging start to the new parliamentary year that Mr Yousaf has written to Prime Minister Rishi Sunak asking for “an early discussion about the action that our respective governments can take together in order to support growth across Scotland’s economy”.
The SNP leader has taken a hint from Sir Tom Hunter’s recent paper calling for sharp cuts in tax and acknowledged the importance of financial levers to incentivise investment in sectors such as renewable energy, high-value manufacturing, life sciences and medical technology, digital, big data and artificial intelligence. Crucially, he realises that working with, rather than against Westminster, will help his cause.
That’s not to say Holyrood is powerless to make a difference. The clamour for a change of mindset and an end to the stand-off with business is now palpable. Mr Yousaf needs to spare us more consultations and reviews and instigate a list of actions that will maximise the powers at his disposal.
Tax and business rates should be put on hold. A meaningful root and branch cutback on rules, regulations and other paperwork is needed to speed up the planning process. He must commit to dualling the A9. And there is a need to accept that small firms need to be treated differently to large ones when conditions are attached to government support.
There have been calls from business groups, including the Scottish Retail Consortium (SRC), the Scottish Hospitality Group and the Federation of Small Businesses, to bring business into negotiations of proposed changes much earlier in the process rather than impose them without warning or with no real intention to consult. As David Lonsdale at the SRC says, it is much better to be in at the inception of policy rather than push ahead with initiatives, such as the badly-engineered deposit return scheme, which have to be unwound at a later date at huge cost and disruption.
The growing suspicion that too much policy and legislation is driven by a desire to get one over Westminster has become evident through moves like the rushed DRS initiative. This is bad government that leads to bad outcomes.
If Mr Yousaf wants to stamp his identity on Bute House and the country he needs to acknowledge the importance of a better working relationship with those south of the border who wield actual power. It would enhance his standing and give Scotland a better chance to achieve its elusive growth targets.
Terry Murden held senior positions at The Sunday Times, The Scotsman, Scotland on Sunday and The Northern Echo and is now editor of Daily Business