21 November 2024
Shona Robison MSP
Cabinet Secretary for Finance and Local Government
Scottish Government
St Andrew’s House
Regent Road
Edinburgh
EH1 3DG
Dear Cabinet Secretary,
Draft Budget 2024-25
Firstly, I would like to thank you for your engagement with the FSB Scotland team in advance of the draft Scottish Budget for 2024-25, through the New Deal for Business group. Our thanks are also extended to the Deputy First Minister and the Public Finance Minister for their time, and I have copied this letter to their respective offices.
I am writing to you in advance of your statement on 4 December to set out the priorities for Scotland’s small businesses, and the actions we believe the Scottish Government can take in its draft Budget for 2024-25 to support them in achieving our shared goal of economic growth.
I know you are acutely aware of the importance of small businesses to Scotland’s economy, however, I find it always bears repeating: micro and small businesses comprise almost all enterprises in Scotland (98%), employ over 900,000 people and turn over £93bn1. What also bears repeating is the challenges these businesses have faced over the last five years, through the pandemic, the energy crisis, severe cost increases and more.
Last month marked a year since the publication of the New Deal for Business implementation plan. We have welcomed both being an active part of the Group and its associated subgroups, as well as the Scottish Government’s commitment to delivery through the Group.
There are some tangible outcomes from this work that we can point to as having the potential to make a real difference for small businesses, such as the revision of the Business and Regulatory Impact Assessment (BRIA) to include an extended assessment of the impact new policies will have on small businesses. We’ve also been pleased to support the development of a new policy development cycle, which should help us avoid challenges we’ve run into in the past, where policies and schemes which would have a significant impact on business have been developed without their input.
It will take time, however, for small business owners to see the impact of these changes on their daily operations. For now, our members tell us they need to see a clear, more immediate, demonstration that there really is a New Deal for Business – and this December, that means a passing on of the non-domestic rates reliefs which have been extended yet again for retail, hospitality and leisure (RHL) businesses in England. As you’ll be aware, Scottish businesses in these sectors have seen no additional relief since July 2022, despite facing exactly the same challenges as their English counterparts.
When the relief for English RHL businesses was set at 75%, we deliberately did not ask for the Scottish Government to pass on relief at the same rate, recognising that the Small Business Bonus Scheme (SBBS) offers greater relief to Scottish small businesses. However, given that the relief has been reduced to 40% in England, and that changes to the SBBS two years ago have meant that some businesses have lost at least some of that relief, we believe that now is the time for the Scottish Government to pass on, in full, what is being extended to English RHL businesses.
We note the Fraser of Allander Institute has estimated the cost of doing so to be £220m2, and that the Scottish Government will receive additional consequentials through the Barnett formula this year. Investing some of this into small retail, hospitality and leisure businesses will not only protect these small businesses, but also the many jobs their operations provide.
I mentioned the impact of the changes to the SBBS and must also stress the importance of maintaining the scheme at at least its current levels this year. Small businesses impacted by the change in thresholds two years ago are still dealing with the effects, and it is imperative that further uncertainty is not introduced into a scheme which so many members describe to us as a “lifeline”.
We have seen further progress this year with regards to Community Wealth Building (CWB), which can only be strengthened by the Scottish Government’s welcome commitment to taking a Bill forward in the most recent Programme for Government. Our key focus with regards to CWB has always been increasing public sector spend with smaller businesses, and it has been encouraging to see concrete evidence of increased spend by a number of local authorities.
This success can be built on through the inclusion of statutory targets for spend with small, local businesses within the forthcoming legislation. Naturally, work to build on progress made by local authorities so far will require staff resource. Therefore, it is key that any spending decisions made in this year’s Budget with regard to local government and agency funding do not lead to a return to ‘lowest common denominator’ decision-making on contract awards. We look forward to continuing to work with all spheres of government as this important piece of legislation progresses.
Lastly, I return to the New Deal for Business, and the importance of maintaining the shoots of progress that we are starting to see emerge from the Group’s work. Key to this is the advancement of the work around assessing the cumulative impact of regulation on small businesses, which I am aware is also a key focus for the Scottish Government.
While I appreciate that difficult decisions must be taken each year around the setting of the draft Budget, it’s vital that those taken which affect business are done so through the lens of the New Deal principles. Specifically, decisions taken should not increase the regulatory burden on business, as we work towards an evaluation of its current size and impact. Our latest figures show that confidence among our members is not where we want it to be, and anything that can be done through the draft Budget to address their concerns would certainly be a step in the right direction in terms of turning sentiment around.
I hope this is useful as 4 December approaches. If you would like to discuss any of the points raised in further detail, please don’t hesitate to ask your team to contact anyone at FSB Scotland.
Yours sincerely,
Andrew McRae
Chair, Scotland Policy Unit
Federation of Small Businesses (FSB)