In one of the most comprehensive and inspiring analyses produced on Scotland’s economy, the “Scotland Means Business” reports published today are commissioned by N56, a new business and economics policy think tank. N56 is the geographic latitude on which Scotland sits and these reports highlight Scotland’s economic strength on an international scale.
The initiative emphasises an ambitious global outlook with a focus on international challenges and opportunities. It is led by one of Scotland’s leading property investors Dan MacDonald of MacDonald Estates and leading entrepreneur Giles Hamilton of life sciences company Accunostics. It has also gathered an impressive list of leading business figures from Scotland and economic experts from around the world to devise a new approach to realise Scotland’s untapped potential.
The experts include Capital Economics in London, Landfall Strategy Group in Singapore, Biggar Economics in Scotland, Damvad business and management consultancy in Scandinavia and Tulloch Energy consultants in Scotland.
A more prosperous Scotland
The goal of N56 is to help develop a strategy to promote Scotland’s rapid ascent through the league table of prosperous economies from 14th wealthiest today (ahead of the UK, France and Japan) to a top five position. The exciting and fact laden set of reports do not set out to answer the Yes/No referendum question but instead looks beyond the referendum. It makes clear Scotland should benchmark itself against small independent and highly competitive economies such as New Zealand, Denmark and Singapore.
Indeed, it makes clear with a strong rationale that an independent Scotland should expect a credit rating at least as good as the UK.
The powers and tailored solutions required to implement the reports’ wide ranging menu of options would not be available to the Scottish Government without independence. A quick look at the list of business contributors and you will see a sizeable number are supporters of a Yes vote including some members of Business for Scotland.
Dan MacDoanld in his forward to the report states that:
“I am confident that with the adoption of the right plan and policies, those objectives are entirely achievable and Scotland can through a re-established global brand be among the league of the five wealthiest and healthiest nations in the world”.
Small countries are more successful
One of the key findings of the report is that small countries with advanced economies are more successful, adaptable and better run. This has also been a key argument of Business for Scotland. The reports’ summary concludes:
“The successful small advanced economies exhibit high levels of trust and a shared sense of purpose, which provides a basis for achieving consensus, with business and others collaborating with government to form policies that reflect local circumstances and local preferences”.
An independent Scotland would be historically better off.
The Scotland Means Business reports also support Business for Scotland analysis on historical tax revenues. We pointed out that since the 1970s had Scotland been an independent nation then it would have had a massive cash surplus of at least £50bn today. N56 has joined another leading think tank, the Jimmy Reid Foundation, and a growing list of well respected economists in validating this Business for Scotland research. The reports states:
“Since 1980, Scotland has, on average, had a public sector surplus (tax revenues have exceeded government spending). Had Scottish public finance accounts been managed separately from UK public finances over the last 30 years, it is likely that Scotland’s public finances would still be benefitting from a significant cumulative surplus”.
The report highlights a package of measures whereby Scotland can improve and build a stronger and more sustainable economy. To its credit N56 also sees its plan for economic growth alongside mutually reinforcing social benefits.
As the founding statement of the report states:
“business should not exist detached from wider aspects of modern society, not least in addressing the persistence of ever greater inequality, which in turn limits economic growth.”
Highlights from the report include the following (but the detail is worth delving into):
Exports: a new exports strategy including further development of the Scottish brand, enhancing the productivity of exporters, learning from success stories such as oil services and whisky on sales and distribution channel development;
Infrastructure: a new national development plan, including a substantial investment in infrastructure, which could be funded by a Scottish infrastructure bond, available on international bond markets and as a long term savings product in Scotland;
Renewables: realising the economic opportunities by commercialising new generation technologies such as wave and tidal power, for global markets, as the Danes have done in wind turbines, including developing co-investment models;
Growth Sectors: strategies to build competitive advantage in a range of other sectors where global growth niches exist, including tourism, transport, food and drink, creative industries, life sciences, universities and healthy ageing;
Energy: building on the recommendations of the Wood Review, a range policy measures in support of the oil and gas sector, including exploration incentives, ensuring fiscal stability, stimulating R&D and investment, incentives for the relocation of corporate headquarters to Scotland, education and skills initiatives and development of the Scottish engineering brand;
Frankfurt of the North: support for the Scottish financial services sector where long term growth opportunities exist, including the global growth markets for fund management. Measures include consistent regulatory and fiscal regimes, supporting innovation and skills development;
Human Capital: continued investment in the education sector including taking advantage of the highly skilled workforce that is associated with Scotland’s university and college system and labour market initiatives to promote high economic participation.
- An allowance for corporate equity, removing the tax disadvantages of equity financing compared with debt. This would make Scotland an attractive location for equity providers and other financial institutions, support the equity model of long term business finance, help to address the impact in pension funds of the removal of advance corporation tax in the UK and encourage increased equity investment in growing Scottish businesses;
- Increasing research and development support in key sectors such as oil and gas, financial services and renewable energy;
- Targeted measures such as reducing VAT and air passenger duty to boost the competitiveness of the tourism sector;
- Incentivising investment in high growth companies;
- Incentivising investment in start-up and growing family businesses; and
- Favourable tax treatment of technology-based businesses that have the potential to become companies of scale.
The hard numbers
The report states that
“increasing productivity to match the top quarter of advanced economies, increasing the employment rate to the average of the top five and halving the gap between UK and Scottish population growth, would increase GDP from the baseline of £145 billion in 2012 to £269 billion by 2037, an 86% increase over 25 years.
This it says can be delivered through increasing:
- Productivity: increasing productivity by an additional 0.6% over historic trends, to match competitor economy, will increase output per person by £6,500 more than continuing with current trends;
- Population: increasing to 6.11 million from 5.31 million in 2012, equivalent to 330,000 more people than current projections predict, mostly of working age people, retained in Scotland and attracted to move to Scotland by a growing economy
- Participation: increasing the employment rate from 71% to 80% to match the top five competitor economies would, when combined with population growth, would mean more than half a million additional jobs in the Scottish economy.
This growth strategy would also increase GDP per capita by two-thirds, by more than £18,000, from around £27,000 to more than £45,000. This is an ambitious but realistic target. However, it will require transformational strategies and a new corporative approach to policy making and implementation.
Even using the Treasury’s projected Scottish deficit of £9.5 billion, the faster growth scenario associated with increased productivity, an increased employment rate and additional population could eliminate this deficit within seven years, and generate significant surpluses thereafter. If oil revenues are higher than forecast by the Treasury, as the industry currently expects, Scotland’s public finances would be stronger than the UK’s (as they have been over the last three decades), providing an opportunity to eliminate the deficit earlier.”
On Corporation Tax
The report also looks at the impact for some of the public companies in Scotland who would benefit significantly from the Scottish Government’s plans to reduce corporation tax in an independent Scotland – £16 million for Standard Life (on reported profits of £547 million), £10 million for Weir Group (on profits of £336 million) and £42 million for SSE (on profits of £1,411 million). It also suggest the Scottish Government has underplayed the positive impact in net revenues of a 3p cut in corporation tax in an independent Scotland to attract company HQs, and investment, not least because of the likely domestic spin-off companies because we have the most senior of businesspeople here in Scotland.
Scotland’s referendum debate has stimulated several new forward looking ambitious plans that ask how we best make a better Scotland with a focus not just on the relatively strong cash flow or balance sheet position today but more importantly stronger and more sustainable economic growth tomorrow. The London centric and largely Westminster funded think tanks produce reports that tend to miss the point of independence all together.
A Yes vote is about ensuring a framework for Scottish policy solutions tailored to the distinctive economic characteristics and domestic and international challenges and opportunities. That is how we will improve Scotland’s economy, our society and our communities. We should focus our energies not on the supposed short-term “costs” of reform but rather the opportunity of growth, jobs and investment for the months, years and generations ahead.
N56 by remaining neutral and objective has proven a set of the world’s leading experts comes to similar conclusions as Business for Scotland and the Yes campaign about the wealth, strength, resilience and potential of Scotland. If Scotland’s people aspire to create the even more successful, fast growing and sustainable economy envisioned in these reports we need to learn lessons from many comparable and successful smaller nations, tailored solutions across the full range of economic powers and most of all a collaborative approach between government and business.
It is clear to us and a growing number of businesspeople that all of these conditions are only possible with independence. Where is the No Campaign’s plan for growth? How can they provide for a full range of tailored solutions within Westminster’s London-centric straightjacket? We still await answers.