Andrew Dunlop's speech to the Scottish Grocers' Federation
Scotland Office Minister Andrew Dunlop spoke to the SGF at their Success in Scotland Summit.
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Introduction
It’s a pleasure to be here this morning to speak at the Success in Scotland Summit.
I should from the outset declare a personal interest.
My great, great grandfather used to work in a small grocer’s shop in Anderston in Glasgow.
There were obviously “no flies on him”, as they say.
He married the owner’s daughter and went on to expand the business with a chain of wine and spirits shops - a very clear example perhaps of fortune favouring the bold!
In my great, great grandfather’s time grocery businesses played a key role ensuring that the wheels of trade and commerce in Scotland continued to turn.
And today convenience stores remain very much a Scottish success story.
You are part of the lifeblood of local communities the length and breadth of Scotland – and indeed throughout the United Kingdom.
You are a significant sector of over five and a half thousand convenience stores in Scotland.
Collectively you provide over 42,000 jobs and contribute some £4 billion in sales to our economy.
In short, yours is an industry that supports the welfare and prosperity of communities across Scotland and I pay tribute to the contribution you make.
This morning I want to focus on some of the support the UK Government can provide to help businesses in Scotland flourish, complementing the important role played by the Scottish Grocers Federation.
Economic Performance
First I would like to set the scene by saying a little about Scotland’s business environment.
It’s no exaggeration to say that for the last 5 years Scotland has been involved in an almost unbroken period of political campaigning: one UK General Election, two Holyrood elections and three referendums.
Maybe like me you look forward to 24 June when that period of campaigning comes to an end - the big constitutional questions settled.
Then we can all look forward to four years before the next big national elections.
Four years in which we can come together to work together - UK Government and Scottish Government, local and national government and public and private sector - to build a Scotland that is more prosperous and more secure than at any time in our history.
Businesses like yours will thrive and grow in an environment that is more certain and stable.
And we have the opportunity to build on some firm foundations.
The private sector in Scotland is thriving.
There are now over 60,000 more businesses operating in Scotland than in 2010 - 33 more businesses created each and every day.
And the support we give to these businesses is of critical importance if we are to find more jobs and raise the living standards of people in Scotland.
Scotland’s labour market is performing well and employment is now at record levels with well over two and half million people in work.
Since 2010, private sector employment has increased by nearly 160,000 and the government’s work programme has helped secure jobs for over 43,000 people in Scotland.
The creation of these jobs has largely been supported by the expansion in Scotland’s economy, which has now grown continuously for 3 years and is forecast to grow by a further 1.9% in 2016.
This is welcome news but we can’t afford to be complacent.
We continue to face a number of risks.
At the turn of the year, the Chancellor set this out very clearly when he highlighted that last year was the worst for global growth since the financial crash in 2008.
So we need to redouble our efforts to ensure our economic recovery works for everyone and for every part of the country.
Scotland’s two governments need to continue to work together and do everything we can to help create the conditions for sustained economic growth.
Each government has different levers to pull to help make Scotland and the UK the best place in the world to start and to grow a business.
Scotland’s New Devolved Settlement
And make no mistake Scotland stands on the threshold of a new world of possibility.
2016 is set to be a momentous year for Scotland, with substantive new powers coming over borrowing, taxation and welfare.
The Scottish Parliament has always had extensive powers to determine how public money in Scotland is spent.
Now it will have much greater responsibility for deciding how that money is raised.
In future, over half of the Scottish Government’s budget will come from revenues raised locally right here in Scotland.
This will give the Scottish Government every incentive to grow the economy and to increase its revenues.
If the powers are used well – and I’m confident over the years ahead they will be – then Scotland will gain.
And I’m delighted that yesterday the Scottish Parliament (unanimously) gave its legislative consent to the Scotland Bill enabling it to complete its passage the UK parliament next week.
Working Together
This new devolved settlement for Scotland extends the shared space in which the UK and Scottish Governments will be operating together.
This makes it even more important for the two governments to establish a strong and collaborative working partnership.
So let me make it crystal clear today – the UK Government is 100% committed to achieving this and I hope the new Scottish Government elected in May will be too.
We have already shown what the two governments can achieve by working co-operatively together.
Take the new Fiscal Framework for Scotland - the financial settlement that will underpin the powers in the new Scotland Act.
There were plenty of sceptics who thought we wouldn’t be able to reach a deal.
We did – and it’s a deal that’s fair to Scotland and fair to the UK as a whole.
Not only does this deliver on the Vow made to the people of Scotland during the referendum, it creates one of the most powerful and accountable devolved Parliaments anywhere in the world whilst still retaining the economic and national security that comes from being part of the UK - the world’s fifth largest economy.
The successful conclusion of these negotiations clears the way for the debate to move on from what the powers should be to how these new tax and spending powers will be used.
And the Fiscal Framework agreement is not an isolated example of a new spirit of inter-governmental co-operation.
We recently announced a £250m Aberdeen City Region Deal, a deal for Inverness is imminent and yesterday’s Budget made a commitment to open negotiations for a further Deal with Edinburgh and South East Scotland City Region partners.
The UK and Scottish Governments are also working together so that Scottish businesses get more help to sell overseas.
Our Exporting is GREAT roadshow has visited Glasgow, Aberdeen, Dundee and Edinburgh in recent weeks, unlocking the potential of many more Scottish businesses, helping them make their mark around the world, and boosting the economy right here at home.
Like you, I’m ambitious for Scotland.
That’s why I want to set ourselves the ambitious goal of encouraging and supporting an additional 10,000 Scottish SMEs to export their goods and services by 2020.
Support for small businesses
But exporting won’t be right for every business – and probably isn’t the priority for you.
That’s why we need to have the right package of UK Government support for small ambitious businesses and convenience stores rooted right here in Scotland.
The UK Government recognise that promoting success in Scottish businesses also involves setting the right conditions.
In practice this means having the right policies in place which allow businesses to meet their potential and grow.
Many of the policy levers are in the hands of the Scottish Government.
The Scottish government has responsibility for planning, for business rates;
It can set transport policy and invest in infrastructure.
Its education and skills policies determine how able the workforce of Scotland is to adapt to the economy of the future.
As a result of the Chancellor’s decision in the Budget to prioritise frontline services – particularly schools – and to support enterprise through the business rates system – the Scottish Government will get over £650 million more over the next 4 years that the allocations set out in last autumn’s spending review.
And I would urge the Scottish Government to match the scale of our ambition in all of these areas.
So how is the UK Government rising to the challenge?
How are we backing Scottish business and making the economy more productive?
Corporation Tax
First, we’re cutting the rate of corporation tax to 19% in 2017 and as a result of yesterday’s Budget to 17% in 2020/2021 - a tax cut for 73,000 Scottish businesses.
Not only will this be the lowest rate of corporation tax in the G20, but these cuts are estimated to save businesses, both large and small, £6.6bn by 2021.
As well as making the UK tax system more competitive and helping with Foreign Direct Investment, this measure will also enable Scottish business to reinvest more of their profit and create more jobs.
Annual Investment Allowance
Second, to further support investment by small businesses we have also raised the tax-free threshold for the Annual Investment Allowance.
From the start of this year we increased the permanent level of the Annual Investment Allowance from £25,000 to £200,000 for all qualifying investment.
And we’re committed to maintaining this level of investment allowance, to provide businesses with a stable and predictable environment in which to invest.
This measure will particularly benefit small and medium sized businesses, and provide a tax advantage for ambitious firms who wish to invest.
Employment Allowance
Third, we recognise that labour costs are an important overhead for Scottish grocers and small businesses.
To support your businesses with the cost of employment, we will increase the level of the Employment Allowance from £2,000 to £3,000 from April this year.
The employment allowance reduces the burden of national insurance contributions on employers – backed by a further increase in the income tax personal allowance announced in the Budget benefitting 2.6 million tax payers in Scotland – all as part of the move to a higher wage, lower tax, lower welfare society.
Since April 2014, over 1 million employers have claimed the employment allowance. This has reduced the cost of employment for businesses and charities across the UK by over £1 billion.
The Employment Allowance will mean that Scottish grocers can employ 4 people on the National Living Wage and pay no National Insurance Contributions.
Tackling “Red Tape”
Fourth, it has long been recognised that “red tape” presents an unnecessary barrier to businesses achieving their potential.
It can impose a heavy administrative burden on small businesses that may have to dedicate both time and money to navigating complexity in rules and regulations.
This government has made a commitment to reversing the trend of ever increasing regulation.
When it comes to business we have adopted a ‘one in, two out’ rule. This means that where there is a cost of compliance of new regulation, we will remove or modify two existing regulations, halving the cost to businesses.
Reforming the Tax System
Fifth, we want to make the tax system less taxing by making it simpler and clearer.
That’s why we’re establishing the Office for Tax Simplification.
It will review how small companies are taxed and explore the potential for aligning Income Tax and National Insurance Contributions.
Ultimately the main objective will be to support businesses by making the tax system easier, quicker and simpler to navigate.
Now I recognise this is no easy task, if we succeed it will help create a more supportive environment for businesses and entrepreneurs.
Entrepreneurial Scotland
And talking of entrepreneurs, I’m sure there’s an ambition for Scotland that all of us here today can share.
To make Scotland the most entrepreneurial place in the world.
Because if we’re to tackle poverty, address the scourge of long-term unemployment and deliver social justice - and we must - then we first need to generate the means to achieve our social goals.
You all know from your own lives that before you decide how to spend your money, you first have to earn it.
And that’s where Scotland’s entrepreneurs come in. In fact that’s where you come in.
We all have different ideas of what it means to be an entrepreneur.
Ideas creator, opportunity spotter, risk taker, job provider, value enhancer - you name it.
Of course an entrepreneur can be all of these things.
And let’s be clear - you don’t have to start up your own business to be an entrepreneur.
You can work in a FTSE 100 company and be an entrepreneur.
You can work in a business that’s been in the family for years and be an entrepreneur.
And you can work for one of our great public services and be an entrepreneur.
Because the reality is that to be an entrepreneur is not a job or a profession – it’s a state of mind.
It’s about the restless energy to improve things for the better.
It’s about the sense of personal responsibility and pride to always deliver what you’ve promised.
Above all it’s about caring for your business as if it were your own.
Dare I say to the Scottish Grocers Federation - it’s the spirit of Arkwright…
… the “Open All Hours” mentality!
So when I look at Scotland today I see a nation that means business and is bursting with pride, crackling with creativity and exploding with energy. And when I travel around Scotland I meet inspirational people doing inspirational things.
Each - in their own way - spotting a unique opportunity, reaching for that competitive edge - determined to succeed.
Each making a special contribution to the UK’s performance as the fastest growing developed economy in the world and making Scotland our strongest performer after London and the South East.
So, in summary, the role of government is to facilitate rather than to over-regulate; to encourage, not discourage enterprise; to reduce burdens, not erect new barriers; to help, not hinder businesses large and small; to create a positive environment of trust and confidence that empowers people to give of their best.
Convenience stores are the lifeblood of local communities the length and breadth of Scotland.
You are the all too often unsung heroes and heroines – playing important parts in Scotland’s success story.
So my message to you is simple: keep on making the wheels of trade and commerce in Scotland hum and whirr!
And thank you for giving me the opportunity to speak to you today.