Comment: Scepticism greets Nicola Sturgeon

Nicola Sturgeon has outlined her economic strategy. Picture: PA
Nicola Sturgeon has outlined her economic strategy. Picture: PA
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IS FIRST Minister Nicola Sturgeon tacking to the left, or leaning to the right? Is her priority to tackle income inequality, or to boost investment and growth? Are income taxes in Scotland soon to go up, or will they stay the same?

Confused? You wouldn’t be alone after reading her Programme for Government released last week and on hearing her business-friendly rhetoric at the CBI Scotland dinner last Thursday night. She’s the scourge of business. No she’s not, she’s the Angel of Enterprise!

The hints from Holyrood are that there will be no immediate change to income tax

Scotland’s First Minister has wooed tens of thousands of previous Labour stalwarts to the SNP cause by offering “a different politics from Westminster”. That has required a notable swing to the left in her rhetoric and the adoption of that distinctive Clydeside tone of voice. Little wonder the citadels of Glasgow Labour have tumbled amid the recent confusion of what that party now stands for. By contrast, Sturgeon has seemed very clear and unambiguous.

But now the tone has notably altered to embrace a different audience – in particular the business and enterprise sector which has greeted her previous pronouncements with apprehension. Many had started to feel that a Scotland more than ever dominated by a strengthened SNP majority at Holyrood next year would not be a friendly place for them.

For them the First Minister has appeared to change tack. “We are determined,” she told the CBI Scotland dinner, “to focus on the four pillars of our economic strategy – investment in people and infrastructure, innovation, internationalisation and inclusive growth. Small and medium-sized businesses are not only the backbone of the Scottish economy, but are essential to delivering our ambition for Scotland to become the real northern powerhouse, the UK location of choice for businesses looking to locate, expand or invest.”

Wow – feel the love! And this rhetoric has been accompanied by some markedly business-friendly aspirations in the Programme for Government.

These include a more supportive planning system, particularly for housing development, support for manufacturing and exports, a £40 million fund to provide small firms with assistance ranging from loans to equity finance, continuation of the scheme which takes many small firms out of the business rates net, and cuts to Air Passenger Duty.

The problem with all this is that for almost every business positive there’s a negative.

The hints from Holyrood are that there will be no immediate change to income tax rates in Scotland next year – but higher rate taxpayers will almost certainly be hit when the full Smith Commission proposals take effect in 2017 and beyond. There’s every likelihood, too, that council tax will be unfrozen over the next two years, enabling cash-strapped local authorities to tap ratepayers for more funds.

Relaxations to the planning system sound good – but the reality is that the Scottish Government shows itself extremely reluctant to “let go” of planning interventions. So far this year, 77 of the 145 planning appeals have been “allowed” by the SNP, despite councils originally rejecting the submissions. That means applicants who refuse to accept the decision of councillors have been sided with on 53 per cent of occasions by ministers, compared with just 41 per cent when the SNP came to power in 2007. Among the decisions appealed include windfarms, mobile phone masts and housing developments.

Then there’s the proposal to abolish fees for employment tribunals. This would leave employers facing more claims, with all the demands on time and money that these tribunals involve.

There’s to be legislation to enhance private sector tenants’ “security”, meaning a curbing of landlords’ legal rights, with rent controls to be introduced in pressure areas.

And still to come are details of how exactly the SNP administration intends to fund its ambitious agenda of social and welfare improvement.

Many in the business sector will not be inclined to take pro-enterprise rhetoric on trust. Is there really to be a focus on expansion, investment and growth? Previous declarations on tackling inequality, fighting zero hours contracts and exhortations to companies to attend to social objectives have not been taken off the table. So the question for business remains: what does the lady want?

Distinct chill in the air

Meanwhile, the administration should be careful not to take the warm zephyrs of buoyant economic growth for granted and count on ever rising revenues from the business sector to fund the SNP’s big spending ambitions. The latest UK Purchasing Managers’ Survey shows manufacturers are continuing to be held back by weak foreign orders. In particular, sterling’s strength (especially against the euro) is seemingly constraining UK manufacturers. The findings fuel concern that manufacturing output is unlikely to contribute much to UK GDP growth in the third quarter, after contracting 0.3 per cent quarter-on-quarter in the second quarter.

Meanwhile, the service sector, which continues to dominate the UK economy, unexpectedly moved down a gear in August. A Purchasing Managers’ Index produced by data collector Markit fell back in August to show the slowest level of expansion in over two years.

And high street retailers are blaming August’s miserable weather for the biggest month of falling sales since the financial crisis, according to business advisory firm BDO. Cycling, fashion and homeware stores all recorded falling sales, dragging the overall figure down 4.3 per cent in August compared with last year. This marks the fourth consecutive month of sales falls and the worst decline since November 2008.

Finally, the latest report from the Federation of Small Businesses shows that its Scottish Voice of Small Business Index has fallen sharply and is markedly below the UK figure. The proportion of small firms reporting revenue growth has fallen back while the balance of businesses reporting an increase in revenue has fallen from 17 per cent last year to 6.1 per cent.

And concern over a slowdown in the pace of global growth, hitting Scotland’s export ambitions, will add to business apprehensions.

This is no time for mixed signals from St Andrew’s House. «