This week’s Report on Jobs from the Bank of Scotland offers more evidence that there are signs of recovery in the Scottish economy. It shows both permanent and temporary jobs rising in February at what the bank describes as a “marked pace”. This, it says, reflects greater demand for new staff. It follows last week’s confirmation of the strongest rise in activity here since June 2007.
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George Osborne has promised a “Budget for growth”, without really saying what that means or what it would involve. He doesn’t appear to have too much room for manoeuvre if the cupboard is as bare as he has previously claimed. Perhaps, as PricewaterhouseCoopers (PwC) has suggested, he may have some “wriggle room” because government borrowing was less than expected. The concerns about what a tough budget would mean for Scotland prompted John Swinney, the finance secretary, to write to the chancellor. In it, he called on the government in London to “match rhetoric with action”. He suggested that Mr Osborne should promote economic growth and protect motorists by scrapping the fuel duty rise, for example. “We need immediate action on fuel prices,” Mr Swinney wrote. “With estimates suggesting that the dramatic increase in oil prices could provide the Exchequer with a £2 billion windfall from the North Sea this year, Mr Osborne must use these additional revenues to ease the crippling burden of sky-high prices on Scottish families and businesses.” Mr Swinney pointed out that the price of diesel had risen to £1.60 a litre in parts of Scotland. He called on the chancellor to “listen and act”, adding that the Scottish parliament, including the Conservative and Liberal Democrat MSPs, had recently asked the UK government both to cancel the increase in fuel duty planned for next month and to establish a fuel duty regulator. “The budget must also show how the rural fuel discount scheme will operate, how long the negotiations with the European Commission will take and when exactly it will be implemented. We have had vague promises from the Chief Secretary to the Treasury for far too long.” In this, he will have the full support of the Federation of Small Businesses in Scotland (FSB). It has just produced a survey should that almost nine out of ten (89 per cent) of its members say that the rising cost of fuel was having a negative impact on their business. It is also concerned that fuel costs are severely affecting sectors which will be key for economic growth. FSB policy convenor, Andy Willox OBE, said that “Scotland is suffering disproportionally due to the spiralling cost at the pumps. FSB members are determined to create and sustain jobs, grow the economy and sustain employment, but every penny spent at the pumps is money not getting spent elsewhere in the economy. “Reversing the planned 1p rise and cutting VAT on fuel duty in the budget will be welcome steps. But to really stem these volatile prices the government must introduce a fuel duty stabiliser as it promised. Small firms are under huge pressures – stabilising fuel prices will be a step in the right direction to really help small businesses in all sectors grow.” Returning to John Swinney, he also wrote about the problems faced by business in securing affordable finance, something he described as “a huge challenge for many of our firms”. He said that business investment was 20 per cent below pre-recession levels. “I want the chancellor to ensure that more affordable and more accessible loans are available this year than last.” There were other reforms, too. He suggested helping Scotland's video games industry by a tax break to allow our “world-class companies” to compete internationally with locations offering similar incentives, such as Canada or France. He said there was “cross-party support for this in both the Scottish and UK parliaments”. Mr Swinney called for more details on the UK government plans for Enterprise Zones, “an option,” he said, “we would be keen to pursue.” Whether that’s a wise decision however was thrown into doubt at the end of last month when the Work Foundation published a report on the historic impact of such zones. It concludes that they don’t work very well. It warned that such schemes are “likely to be ineffective at stimulating sustained growth in depressed areas”. The report also raised major concerns about the cost of such policies. Its analysis of previous Enterprise Zones (in the 1980s) suggested that at least £23,000 was spent each new job created, which it claims is “equivalent to £50,000 in today’s money”. The organisation suggests that, “while Enterprise Zones, tax breaks and other localised incentives may stimulate rapid investment in the short-term, this typically lasts no more than three years before the area begins a long-term reversal back into depression. Prior schemes also indicate that up to 80 per cent of jobs created are displaced from other areas.” The chancellor, therefore, is not short of conflicting advice. In the view of Russell Hills, head of tax at KPMG in Scotland, “although budget 2011 is being billed as a budget for growth, it is unrealistic to expect many grand gestures with austerity measures still at a very early stage. “It’s going to be a hard balancing act for the chancellor who will have to remain on course to reform the tax system to encourage businesses to come to Britain while at the same time still managing to balance the books.” He argued that the chancellor could also be ready to outline priority areas for small business tax simplification. “By bringing together professionals from the business world with those from the tax and legal professions,” he said, “it is hoped that Britain will end up with a much simpler and effective tax system.”Donate to us: support independent, intelligent, in-depth Scottish journalism from just 3p a day
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