Bold new ideas needed to make Scotland a recognised hotbed of business growth


27th September 2016

Scotland’s newly-devolved tax regime demands some big decisions in the face of inevitable cuts: we already knew this and it was confirmed again by Strathclyde University’s Fraser of Allander Institute.

Our prosperity now hangs on the hope that the Scottish Government makes the right choices to support business.

What’s different this time? A big increase in tax powers means that by the end of this Parliament in 2021, Holyrood will be responsible for raising around 40% of the money that it spends. The remainder derives from the UK Government through a block grant exposed to UK Government’s deficit-reduction. Unless Chancellor Philip Hammond announces a major U-turn in his Autumn Statement, the Scottish Budget will fall in real terms.

The good news is that this year, the Scottish Government has more tools with which to carve out a distinctly Scottish, pro-business approach where reality matches the political rhetoric.

Our network of 11,000 member companies have plenty of suggestions about how Scotland can get itself noticed as a pro-business environment. Over the years, devolved government has pondered these ‘cost-of-doing-business’ issues ad nauseam, producing endless consultations and strategies. But more than ever in the new reality of enhanced devolution, Scottish Ministers will be judged on whether or not it can do something to remove remaining obstacles to growing the tax take.

One revenue-booster would be a planning system which gets itself talked about throughout the UK and beyond for working quickly and efficiently to the benefit of would-be investors. Another is the procurement system – a constant bugbear for private and third sector organisations. Why? Because it currently does little to support Scotland’s army of small and medium sized businesses to win local, national and international contracts. In a small country there is no good reason for not effecting “culture change” that business has long demanded.

We can all agree that the Scottish Government’s commitments to expanded public sector spending, such as increasing health spending in real terms and doubling childcare provision are desirable outcomes. But without an increased tax base, they will need to be paid for in cuts to other spending priorities.

Fraser of Allander has estimated that the remainder of the Scottish Budget may have to be cut by 10-17% to balance the books. Either that, or the Scottish Government must look elsewhere to raise new revenues.

Faced with such circumstances, politicians may be tempted by the seemingly easy answer: raise taxes on business. Such deterrence of enterprise would be both wrong and counterproductive.

Bold new ideas to make Scotland a recognised hotbed of business growth, not tax rises, should be in the mind of Scotland’s Finance Secretary Derek Mackay, as he prepares for his first Scottish Budget.

Liz Cameron is chief executive of Scottish Chambers of Commerce

Scottish Chambers of Commerce

The Scottish Chambers of Commerce is at the heart of Scotland’s largest and most influential business to business network.

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