These are testing times for Scotland’s 22,000 shops. The cost-of-living crunch is suppressing any real-terms growth in the value of retail sales. The number of unoccupied retail premises is stuck at a fifth above pre-pandemic levels, and shopper footfall, whilst improving, is still one-tenth below pre-Covid times.
This formed the economic backdrop to the recent unveiling of First Minister Humza Yousaf’s policy prospectus. The last three years of pandemic and costs spike have taken a heavy toll on Scotland’s businesses. For the retail industry, bearing down on the costs affecting households was paramount, coupled with an approach to regulation and outgoings which helps rather than hinders retailers’ ability to keep down prices at tills for customers.
There were encouraging announcements, including a pledge on discounted rail fares which could lift shopper footfall in the run-up to Christmas. The delay to the deposit return scheme, if accompanied by a workable system which delivers for customers, was positive. Similarly, the pledge to start again on proposed restrictions on the advertising of alcohol products in store was sensible and should hopefully result in a more evidence-based approach.
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Hopefully, ministers will go further in the coming weeks and rebuild the apparatus needed to ensure sensible regulatory policy-making. Resuscitating the regulatory review group, paused during Covid, would be a good step, as would properly implementing business and regulatory impact assessments at the inception of new thinking on red tape. This would have negated some of the pitfalls that ministers found themselves in over recent months on devolved regulation. Ultimately, it requires our politicians to wean themselves off the constant rush to regulate especially when the economy is in a rut.
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The exact implications of the pledge of a more “progressive” and redistributive approach towards personal taxation remains to be seen. A fear is that without an urgent agenda for public service reform and reduction in the cost of government, as envisaged in last year’s Scottish spending review, then the pressure for even higher taxes will trundle on. We shouldn’t forget that the hikes to council tax and income tax which came into effect last month will take a £250 million bite out of consumer spending. Meanwhile, further public policy initiatives already in the pipeline will increase the cost of living. If there are to be further changes to income tax, then those on modest earnings should be protected and the overall impact on consumer spending and on firms’ ability to attract talent should be factored in.
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Mr Yousaf made two further notable commitments. The first was to look afresh at business rates. Thankfully, there are some quick actions which could build on recent positive steps including the rates freeze and more frequent revaluations. Nearly 2,500 shops are liable for the higher property rate and so stump up more in rates than counterparts down south. Retaining and ideally speeding up the existing pledge to remove this disparity would help. Furthermore, mirroring the rates relief available to shops in Wales and England would aid Scottish firms and retail destinations.
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The second, eye-catching commitment from the First Minister was of a “new deal” for business. His administration will refresh its relationship with the business community. This is very welcome but will take work. Seventeen months ago Scottish ministers and representative groups – including the Scottish Retail Consortium – co-signed the “principles agreement”. It promised more effective communications and collaboration, with all parts of government involving business at the earliest stages of policy formulation and delivery. The cacophony of condemnations of late over some specific devolved regulations testifies it didn’t quite work out as intended.
The experience of the principles agreement is a salutary lesson. The tone and thrust of the proposed new accord with commerce is encouraging. However, the manner with which tax decisions are made and new regulations are developed, and whether ministers both listen and act on the reasonable concerns of industry, will define whether we will be able to call this a business-friendly government. These are undoubtedly positive first steps from the new First Minister, but the outcomes will be crucial.
David Lonsdale is director of the Scottish Retail Consortium
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