First Minister Humza Yousaf hinted at more tax rises after saying his government pledged to fund public services and tackle poverty through a renewed push on economic growth.

His 14 new bills focused primarily on social welfare measures including tenants rights, free school meals and increasing social security payments as he made the battle against poverty his top priority.

Among measures directly aimed at business, he announced new financial support for small firms and talks on how to improve the rates system. He annouced a dedicated unit representing the interests of small firms within government.

Setting out his Programme for Government over the next year he said the government will “maximise every single lever to tackle the scourge of poverty” and reaffirmed the likelihood that he will introduce a new band of income tax on higher earners.

Mr Yousaf has previously suggested he will introduce a 44% tax band on earnings between £75,000 to £125,140.

“I will never shy away from the belief that those who earn the most should pay the most,” he told MSPs today. “But let me be equally clear, without any equivocation, we also need to support economic growth. Not for its own sake but so we can tackle poverty and improve our public services.”

Once again blaming last year’s Westminster mini-budget and Brexit for Scotland’s financial squeeze, he claimed that the Scottish government is “operating with one hand behind its back” and said Scotland had witnessed the “devastating impact” of these actions.

“In the last five years we have spent more than £700 million in countering the impact of UK Government welfare cuts alone,” he said.

“That’s why this government will never stop believing that decisions about Scotland should not be made by a government based in Westminster, but by the people of Scotland. In proposing the case for independence we will set out a positive vision for Scotland’s future.

“Scotland’s economy already performs better than most parts of the UK, we have world-class universities and colleges, and significant strengths and potential in many of the key economic sectors of the future. Today’s Programme for Government sets out how we will build on these strengths, to make people’s lives better.”

Mr Yousaf repeated his earlier pledge “to develop a new and stronger relationship with business, so we can work together to create jobs and opportunities” and promised to implement the recommendations made by the New Deal for Business Group.

He also offered to work with the UK Government to support growth. “In fact, I wrote to the UK Government just yesterday to request discussions on this very issue,” he said, in an indication of a thawing of frosty relations with Westminster.

“One idea I am keen to explore with them is a recommendation in the recent report from the Hunter Foundation – about using tax incentives and wider economic policy to support investment in key sectors such as renewables.

“Scotland has long been a nation of innovation and invention. But for all the excellent success we have had, we also have to be honest, we haven’t always managed to retain that entrepreneurial talent, and the jobs that they create, here in Scotland.

“So, this Programme for Government sets out a £15 million plan to support innovation and entrepreneurship.”

It includes increased support for Scottish EDGE and the Scottish Ecosystem Fund; continued work to implement chief entrepreneur Mark Logan’s review of the technology ecosystem; a blueprint to make our colleges and universities stronger bases for entrepreneurs; and a programme to deliver the recommendations of Ana Stewart’s report on supporting women into enterprise.

Mr Yousaf said the government will work with local government and the enterprise agencies to “transform” the support provided to small firms, but offered no further detail.

He said there would be support to help small businesses improve their productivity and consider “improvements” to the business rates system, again without offering any firm proposals.

“These early actions demonstrate our determination to listen and to act, as we build a new relationship with business to support economic growth for a purpose,” he said.

He criticised the UK Government for “inertia” over supporting green industries which risked seeing the UK fall behind and said he will agree a sector deal with the onshore wind industry to halve the consenting time for new section 36 wind farms.

He pledged continued investment in important infrastructure, including the construction of six new ferries by 2026, reopening the Levenmouth rail line, electrifying the Glasgow to Barrhead line and opening a new rail station at East Linton.

“We are, of course, committed to improving the A96 – including dualling the road from Inverness to Nairn, with a Nairn bypass, and let me be crystal clear…this government, my government, will dual the A9 from Inverness to Perth. I can confirm today we have launched the procurement for the Tomatin to Moy section as the next step in that work.” 

However, he was unable to provide a delivery date for the A9 when challenged by Tory leader Douglas Ross.

“When?” asked Mr Ross across the Chamber. Mr Yousaf smiled but did not reply.

Mr Ross said the Programme for Government “is pretty much the same as before” and that the “discredited” agenda of Nicola Sturgeon is being continued.

He criticised the prioritising of independence and noted that there was no mention of oil and gas in the documents.

Labour leader Anas Sarwar welcomed Mr Yousaf’s partnership with business but said it must be “more than rhetoric and we will judge them on their actions.”

Comment: ‘Economic growth? You’re having a laugh‘

Business reaction

Federation of Small Businesses’ (FSB) Scotland Policy chairman Andrew McRae, said:  “We called for an unashamedly pro-growth, pro-small business statement and the First Minister was right to acknowledge that his government can’t deliver on any of its priorities – from net zero, to child poverty and more – unless we have a functioning, growing economy.

“There’s obviously a bit to unpack in here – not least the new £15 million package of measures to back entrepreneurs, start-ups and scale-ups.  Our Big Small Business Survey found that over half of small businesses don’t believe there’s enough support to start your own business in Scotland, so we look forward to working with government and enterprise agencies to ensure support is meaningfully ‘transformed’ – as he put it – to better fit entrepreneurs’ needs.

“Any efforts to boost start-ups need to see some of the practical barriers to setting up in business removed.  This includes childcare, so we welcome the announcement of much needed additional support here.  But, to be effective, this needs to reflect the reality of what families lives’ are like – which means flexible wraparound care.

“While the First Minister had already accepted the recommendations of the New Deal for Business Group, we’re pleased to hear him recommit to these this afternoon – not least to a specific Small Business Unit and a commitment to tackling the cumulative impact of regulations, including removing those which are no longer required.”

Russell Borthwick, chief executive of Aberdeen & Grampian Chamber of Commerce, said: “The businesses we represent look forward to seeing a refreshed and improved energy strategy brought forward promptly by the Scottish Government — one that, rightly, sets out how we accelerate our transition to net zero, but one which values the expertise built up over many decades in oil and gas and doesn’t deter investment in the here and now. 

“The First Minister will fail to secure Scotland’s place as a world-leading destination for offshore wind if we make Scotland a hostile environment for investment in energy, including oil and gas.”

Scottish Property Federation chairwoman Maria Francké commented: “Today’s Programme for Government reiterated the Scottish Government’s intention to bring forward a Housing Bill with provisions for rent control. This has been long expected but fails to get to the root cause of the issues. We are simply not building enough homes across all tenures.

“Until Scotland can attract the investment to deliver more new homes on a sustained basis, we will fail to keep pace with the demand for rented accommodation.

“The Scottish Government has also missed an opportunity to use its powers to support town and city centre regeneration. The change in the retail and office demand requires urgent action to help adapt and repurpose vacant buildings.

“However, there are no new support mechanisms in today’s announcement to attract investment and nothing to allay concerns over ever-higher vacant business rates charged on properties struggling to find a commercial tenant.”

Scottish Chambers of Commerce CEO Liz Cameron said: “Is Government on the side of business? That’s the question at the forefront of the business community.

“There is much in today’s announcement that businesses will welcome, particularly the essential focus on inward investment and exporting, but other areas will leave some sectors questioning whether the First Minister’s priorities are balanced to support economic growth.”

Sara Thiam, chief executive of the Scottish Council for Development and Industry, said: “We hope that the Scottish government continues to work with businesses to deliver a new deal that prioritises a competitive business environment to help deliver a greener, fairer and growing economy.

“Implementation of the new deal for business recommendations will contribute to regaining the trust of Scottish businesses and strengthen the partnerships needed to unlock sustainable and inclusive growth.”

David Thomson, of the Food and Drink Federation Scotland, said: “The way in which new laws and policies are made over the next year will be a real test to whether the relationship between Scottish government and business has strengthened.”

Added 6 SEPT:

Struan Stevenson, chief executive of Scottish Business UK, said the statement was “predictable in its inadequacy”.

He added: “His decision to plug the gap in Scotland’s finances, caused by the SNP/Green government’s failure to grow the economy, by imposing even higher taxes on businesses and workers, will cause widespread dismay.

“The First Minister’s boast that he will “use our tax powers in the setting of the 2024/25 Budget to further progress delivery of the most progressive tax system in the UK”, will send shivers down the spine of businesspeople and middle-income earners in Scotland.

“By doubling down on plans to hammer operators of short-term let accommodation, the First Minister has refused to heed warnings from the hospitality sector of the huge damage this will cause.

“By adhering to a long list of policies advocated by his predecessor Nicola Sturgeon, he has confirmed the SNP/Green coalition’s lack of backing for business. Indeed, by announcing plans to support entrepreneurship and innovation with a miserly allocation of £15 million out of a budget totalling £60 billion, he has revealed his government’s shocking neglect for Scotland’s economy.

“Humza Yousaf’s claim that he is “anti-poverty and pro-growth” is left stranded by his failure to grasp the fact that the best way to tackle poverty is to support business and industry and to support economic growth.

“His ‘progressive tax policies’ will achieve the opposite. Thanks to the SNP we already pay higher taxes in Scotland than any other part of the UK, destroying competitiveness and acting as a grave disincentive for people who might want to set up a business and come to work in Scotland.

“Simply adding further to our tax burden reveals a desperate lack of vision from a government that has clearly run out of ideas.”