Labour are feverishly promoting the £7.6bn black hole scare-story to put people off FFA but it’s a myth; firstly because it assumes oil prices won’t ever recover, and even a moderate increase to $70/80 would go a long way to wiping out any additional deficit over time. Secondly FFA will give the Scottish Government powers to balance income and expenditure. The UK has failed to do this and so the UK is running a deficit of £75billion and a debt of £1.5trillion. As black holes go, Westminster has what’s known as a “super massive”.
The choice in this election is between cutting vital services (Tory / Labour austerity) or to borrow modestly in the short term to grow your economy creating jobs and reducing demand for welfare in the medium term (SNP). Westminster austerity will cut off crucial spending that fuels growth so Labour’s desperate attacks on FFA don’t add up economically. FFA is the key to rapid economic growth and prosperity for Scotland. Here are five key ways Scottish FFA can balance the books, cut the deficit, raise revenues and create jobs.
Small to medium sized enterprises create the majority of added value employment in Scotland. SMEs make up 99.3% of Scotland’s businesses, employing 1.1million (54.7% of all private sector employment) and representing the biggest opportunity for economic growth. But despite generating 36.7% of private sector turnover in Scotland, SMEs are largely ignored in PLC and London centric UK business policy. FFA offers flexibility to target tax incentives to encourage growth in the SME sector through encouraging best practice exchange, increasing skills, confidence and ambition, innovation, internationalisation and competitiveness.
2) Targeted tax incentives
3) Increasing Research and Development (R&D)
FFA includes policies to increase overall revenues through targeted tax incentives matched to bespoke grant support for companies to increase investment in R&D. Scotland lags 3% behind the UK average in productivity but up to 40% behind Norway’s, and significantly behind other comparable northern European economies. Scotland spends 1.25% of GDP on R&D, and faster growing, more prosperous smaller nations including Norway, Finland, and Denmark, spend an average of 3.4%. The innovation think-tank NESTA calculated that building towards an R&D spend of 3.4% of GDP over a five year period would grow Scotland’s economy by around £12bn a year.
4) Abolishing Air Passenger Duty (APD)
APD, a tax on international travel, has increased by 160% since 2007 reflecting the level of tax that Heathrow and Gatwick can demand but it is too high for airports outside London and the South East. Scotland’s leading airports jointly stated “APD will over the long-term reduce traffic and connectivity from Scotland’s airports, impacting on inward investment, trade and competitiveness.
It also impacts on Scotland’s inbound tourism industry. By 2016 it is estimated that £210m per annum less will be being spent in Scotland by inbound visitors because of APD”.
21 out of 28 EU nations have lowered VAT on tourism related activity. Unfortunately, as with APD, the rate of VAT on tourism is set by London’s needs and not Scotland’s. Ireland, where the rate is half of the UK’s, provides strong evidence of economic benefit creating 23,324 direct jobs in the tourism industry since the VAT reduction in July 2011 and an additional 10,728 indirect jobs elsewhere due to a multiplier effect. That’s 34,000 new jobs in a tourism sector roughly the same size as Scotland’s.
This move in terms of increased tourism spend and lower welfare spend, combined with higher national insurance and income tax revenues should be worth at least a billion a year to Scotland.
If Scotland had FFA we would have the power to do all of the above and grow our economy at unprecedented rates, thus demonstrating conclusively that Scotland would be better off as an independent partner to the other countries of these isles but worse off by remaining a devo-lite region without fiscal autonomy. Just the few policies highlighted above would make 5% growth attainable for Scotland and that is why Westminster is scared of full fiscal autonomy Scotland isn’t.
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