Presiding Officer, I grateful to the SNP for giving us the opportunity this morning to discuss the question of the future of small business sector. We should all remember that the vast majority of businesses in Scotland are small businesses: recent figures suggest that around 93% of Scots companies employ less that 10 people. These firms are the bedrock of the economy and have a crucial role in growing the economy and providing jobs, boosting town centres and local economies. Despite their importance to the economy, it is obviously the case that small businesses are amongst the most vulnerable of enterprises. They are far more likely to suffer the ill effects of Government regulations or an excessive tax burden on larger firms. It is therefore essential that the state does all it can to make the business environment for small companies as competitive as possible and steer clear of policies that will stunt their development.
The record over the last 10 years has frankly been a poor one. We have a much lower level of business start ups in the UK as a whole, and the lowest 3 business survival rates in the UK. According to the Labour Force Survey, the number of self-employed people in Scotland is now 7,000 less than in 1997. The picture has not been a rosy one.
I certainly agree that we should look at reducing the rates burden for small businesses. Comparatively speaking, they feel the burden of rates much more highly than larger enterprises. Up and down Scotland in small towns and villages we see the depressing site of empty shops where the rates burden often makes it uneconomic for a small or growing business to take it on. Some alleviation of the burden of rates on these properties would be welcome and provide a boost for town centre economies.
That said, I am far from convinced that the SNP’s “small business bonus” is a policy which has much credibility. The SNP have costed the scheme at £150m. But from recent Parliamentary answers we have calculated that it would cost £150m just to abolish rates for companies with a rateable value of under £8,000. As the SNP’s scheme is much more generous than this, I do wonder if they have a problem with the arithmetic somewhere.
But there is another problem with this plan. There is no indication from SNP of how it is to be funded. Once again, for the second time in two weeks, the SNP front bench are showing remarkable generosity.
Two weeks ago we had a promise to spend billions wiping out student debt and replacing student loans with grants for all. Today we have another pledge to spend at least £150m on passing money to small businesses. Perhaps next week we will see another pledge to double to state pension for all Scottish pensioners, and build 100 new schools or 10 new hospitals but we have yet to hear one word from the SNP as to how all this largesse is to be funded. Where is the money coming from? Can Mr Mather answer that question today?
But where the SNP’s credibility on this issue really runs into the sand is on their proposals for a local income tax. The great majority of small businesses are unincorporated and pay not corporation tax but income tax. 240,000 Scots are registered as self-employed in Scotland and will all pay income tax. Each one of those will be hard hit by the introduction of a local income tax. Every penny of their profits is deemed as earnings and will be taxed at the local income tax rate.
A reduction of business rates would directly benefit small businesses who occupy premises, whilst doing nothing for small business which operate, for example, in people’s homes. But all small businesses would be hit by local income tax rises. What the SNP give with one hand they would take away with another. They may pretend to be supporting small businesses, but what they are proposing when you look at the full picture is quite different. The overall effect of what the SNP are proposing is no more than a smash and grab raid against hard working people in small businesses up and down the land.
The SNP will have to do much better than this if they are to have credibility as a pro-enterprise Party. Only the other week their Mr Mather had egg on his face tabling a Parliamentary Motion congratulating Standard Life on their demutulisation, without even checking with his absentee Leader, Alex Salmond, who said on 31st March 2004 that ‘the Demutulisation of Standard Life was a sad, bad day for the Scottish Financial Sector’. The SNP needs to stop facing both ways on every issue and decide what it really stands for.
Presiding Officer, small businesses are suffering from the high level of rates they are paying and would undoubtedly benefit from a reduction in their bills. Any proposal which is not properly costed, where we have no idea where the money is coming from, and which will be coupled with the local income tax which will claw back the money handed over is not the way forward.