Speech

The Scotsman Retail Business Summit

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

David Mundell, Parliamentary Under Secretary of State, talks about retail, reducing the deficit and the coalition's programme for government.

I am very pleased to be in Edinburgh this morning. It is a real privilege to be a Scotland Office minister and to have the chance to address conferences like today’s.

The Scotland Office has a cross-party team for the first time in 65 years. Michael Moore and I are determined to take this historic opportunity to improve our nation’s future.

That’s why I want to speak about three things today. First, I want to take this opportunity to discuss the changing face of retail. Second, I would like to highlight the new government’s overriding commitment to reduce the deficit and restore economic growth. And third and finally, I will set out our vision of the new politics which are at the heart of the Coalition’s programme for government.

Retail

It might come as a surprise but it was that famous son of Kirkcaldy, Adam Smith, who first coined the phrase ‘nation of shopkeepers’. He used it over two centuries ago in The Wealth of Nations. Smith believed that the building of the British Empire was extremely fit for a nation whose government was influenced by shopkeepers.

Subsequently, this term would be used by Napoleon Bonaparte to describe Britain in a disparaging tone. When in fact retail was one of our greatest economic strengths.

The industrial revolution ushered in a retail revolution. The centre of Victorian Glasgow was transformed by a ‘proliferation of new building types, such as… hotels, shopping arcades and retail warehouses’. Enterprising Scots like Sir Thomas Lipton, the grocery store magnet and tea merchant, changed the way Britons shopped.

While Scotland has a rich retail heritage, the retail sector remains a vital component of the modern Scottish economy. Indeed, I think it is fair to say that the state of the retail sector is a key barometer of Scotland’s economic health.

Retail now has such a varied presence. The changing face of retail reflects the changing face of Scotland. The traditional image of the corner shop and the high street, of small specialist shops in town centres has made way for a vast and varied retail experience.

The nature of retail has been transformed. Over the last half century we have witnessed the advent of the supermarket, the building of out of town retail parks and the construction of massive distribution depots adjacent to our motorways.

As Bill [Jamieson] said at the start, in the last decade we have experienced the phenomenal growth of online shopping. Offering the possibility for the smallest online operation set up on a Scottish kitchen table to go global overnight. So the business environment is constantly evolving and innovative Scots face the challenge of staying ahead of the game.

We are all aware that retail has endured tough times in recent years. The recession has led canny customers to make more careful choices in an intensely competitive marketplace.

Sadly some famous names and established brands have vanished from the scene entirely. Others have been swallowed up in fresh rounds of consolidation.

But I remain convinced that retail will be a significant contributor to the economic recovery. For it will be business, with retail at the forefront, which will power Scotland out of recession. To borrow the title of this conference for a moment, we hope to see ‘shopping for growth’.

For the past 11 years the Scottish Retail Consortium has surveyed the Scottish retail scene. I know that your membership is varied and wide both in size and in scale but I salute your admirable determination to showcase the manifest achievements of the sector.

You rightly stress the message that a strong and vibrant retail sector is crucial for the Scottish economy and for employment in Scotland.

The statistics are impressive. Even in recession, Scottish retail sales totalled £24 billion in 2009, that’s 11% of our total turnover.

And so many Scots go to the shops to work - an often overlooked fact. Some 245,000 Scots work in retailing. That’s a figure which exceeds the population of Aberdeen, our third largest city. It means that the sector employs over 10% of Scotland’s total workforce.

We know that conditions remain tough right across the sector. We saw this when the SRC reported falling like-for-like sales last month. It is the reason that we have to restore confidence in the marketplace and among consumers. And our first step, as a government, as I will highlight later, will be actioning a credible plan to cut the unsustainable budget deficit.

Dealing with the deficit and building recovery

We are committed to seeing Scottish businesses succeeding and generating the growth and jobs our economy needs. We are pledged to listen to Scottish business and their industry bodies. I want the business community to know that we want to work with you to realise the common objective of building Scotland’s recovery.

I can assure you that we support sustainable growth and enterprise and that we want to see all regions of Scotland and all our industries sharing the benefits.

But our first priority must be to act on the deficit.

The structural budget deficit that the new Coalition government inherited three weeks ago is the largest since records began. Recent events in the Eurozone underlines the importance of taking action this year.

Reducing the deficit is our most important common mandate as a coalition government. We will take action to significantly accelerate the reduction of the structural deficit over the course of this Parliament. And our plans have already been welcomed by Bill, the Governor of the Bank of England and the Director General of the CBI (Confederation of British Industry) have both welcomed our plans.

The deficit is an issue which affects every one of us across Scotland and the UK. We will set out our comprehensive plans for deficit reduction in the emergency growth budget on 22 June.

As a first step, over £6 billion of UK spending cuts were set out last week. And we have already made it clear that the main burden of budget reduction will be met by decreased government spending rather than by increased taxation. We have demonstrated our political will to cut lower priority programmes and government waste in the first fortnight of the new coalition.

These are cuts with care - for as far as possible we will protect key frontline services and protect people on the lowest incomes. We have taken the first steps on the road to restore good management to our public finances. Fully aware that unless the government tackles the huge public deficit, it could derail the recovery.

The Chancellor underlined that urgent action was necessary. To keep interest rates lower for longer, to boost confidence in our economy and to protect jobs. We are starting to show the world that we can live within our means and will not allow our debt repayments to spiral out of control.

Honesty and transparency will underpin our approach. That’s why we have created an independent Office of Budget Responsibility to maintain confidence in the management of the public finances. Fiscal confidence and credibility are crucial.

And while it is essential that we tackle our record debts, we cannot have a programme of deficit reduction that only applies to England. Scotland, and the other nations and regions of the UK, must pay its share too. Because without sound finances we will be unable to deliver the ambitions that we have for all of Britain.

One ambition which we will seek to realise from the outset is our determination to make it easier for people to start new businesses. These are the fresh and vibrant lifeblood of our economy. Our objective is to cut the time it takes to get a new business up and running. The UK must become one of the fastest countries in the world to get new enterprises started.

More broadly, we are determined to break down the barriers which stifle businesses and employment in this country. The government will get Britain working by boosting enterprise. We will implement measures to make the tax and benefits system simpler and fairer and National Insurance must not be a hindrance to employment.

We are committed to getting Scots back to work. A reformed benefits system will improve work incentives and start lifting hundreds of thousands of Scots currently on benefits into work and out of poverty. And we are prepared to impose sanctions on those who turn down available jobs.

At the same time, a fairer tax system will be created that will help Scots on lower and medium incomes. Central to this is our longer term aim of increasing the personal allowance to £10,000.

It will be business which will power economic growth and innovation. We want to unlock all the undoubted talent in Scotland. Our Programme for government specified our commitment to boost enterprise, support green growth and construct a new and more responsible economic model.

Regulations and red tape have to go on a long overdue diet. No regulation will be brought in without another regulation being cut by a greater amount. And regulations will be regularly reviewed.

The benefits of fairer and simpler regulations are wide and varied. I would like to highlight just 3. They remove undue administrative burdens, they reduce uncertainty among the self-employed and they offer a route to labour market flexibility.

And we are determined to reform the corporate tax system to reduce headline rates. We will do this in two ways. First, by simplifying reliefs and allowances, and second by tackling avoidance. This way we can progress towards our set aim of creating the most competitive corporate tax regime in the G20.

I believe that the new government can bring great benefits to Scotland’s business environment. We are committed to investing in our infrastructure too. That’s why in the Queen’s Speech we set out our proposals to back investment in new high-speed broadband and to enable the construction of a high speed rail network throughout Britain.

Finally, a core priority for this government is to ensure the flow of credit to viable SMEs (small and medium enterprises). We will reform the banking sector to promote responsible banking in a more competitive industry.

In tough times it is imperative that Scotland’s businesses have the best platform on which to survive and thrive.

A new politics

And as we aim to secure economic recovery and look to the future, I believe that this will take place in tandem with a change in the nature of Scottish and UK politics.

We will forge a new politics which has people and policies at its heart and leaves the old differences behind.

The parties in the Coalition government have found common ground. We are united in our determination to build a strong, stable and durable government and maintain a united front at a critical but hopeful time for Scotland.

The Prime Minister has made his feelings clear when he visited Scotland immediately after last month’s General Election. There should be no going back to the bad old ways. They offer Scotland no solutions to the challenges and opportunities of the future.

We want to see a new politics between Scotland and Westminster of respect not rancour. Realising a respect agenda where cooperation not confrontation is key. That means extending the hand of cooperation towards the Scottish government down the road from here too. We understand that a good relationship between Westminster and Holyrood serves Scotland best. That’s why we have given the Scottish government the option of deferring cuts until next year.

I am optimistic that we are entering an era of partnership politics and grown up government. There is a real chemistry among the coalition leadership and a sense of common purpose. That was borne out by the quick settlement of the coalition agreement and in the drafting of our programme for government.

Of course, as we have seen in recent days, it will not be plain sailing. Needless to say, there will be bumps and scrapes along the way. But I have witnessed the determination to make the new arrangement work for the national interest.

At the core of our programme for government is a strong, progressive coalition inspired by the enduring principles of freedom, fairness and responsibility. And it is a programme for five years of partnership government driven by these values.

During which time we are determined to deliver for the people of Scotland. Not hanging around but implementing the Calman recommendations on tax and other powers - and seeking to maintain a dialogue with the Scottish government and Scottish Parliament throughout this process.

I hope it will deliver for the retail sector as it will for Scotland.