HUGH AITKEN
As we move closer to the UK Government’s deadline for triggering formal Brexit talks with the EU, businesses across Scotland are wondering what the two-year negotiation period and its aftermath will mean for them.
The CBI has stressed that the voices of all devolved nations, including Scotland, must be heard as we approach the triggering of Article 50. Yet while it is vital that the negotiations see the UK retain its reputation as a place where companies can thrive – underpinned by a clear and stable regulatory system – we must also focus on domestic policy.
While there’s no denying the importance of Brexit, it is one of many issues facing the Scottish economy.
This week we’ll see the final reading of the Scottish Government’s Budget Bill. At the outset of the Budget process we wrote to the Finance Secretary stressing that tax and spending plans must send a clear message that Scotland is a good place to do business. That means stable and competitive taxation, alongside long-term commitments to invest in skills and infrastructure.
While there are some welcome features in the Scottish Government’s plans, we’re concerned that when it comes to tax in particular, this Budget risks putting companies off investing in Scotland’s economy.
Take business rates for example. Some of the unsustainable increases in rates bills across Scotland highlight how the current system hampers productive investment, a key driver of prosperity. Our evidence to the ongoing Barclay Review suggested that more regular revaluations can ensure rates bills avoid dramatic jumps, and remain responsive to local economic conditions.
We also recommended changes that would take productive investments in plant and machinery out of rates altogether, while making sure Scottish firms paying the large business supplement aren’t paying far more than their peers south of the border. Penalise companies unfairly and we risk undermining the very foundations for economic growth while reducing the tax receipts that the Scottish Government needs to invest in services and infrastructure.
In addition, as the respected independent Fraser of Allander Institute recently suggested, there is scope to reform the Scottish Parliament’s Budget process to make the causes and effects of tax and spending decisions more transparent for taxpayers, businesses and service providers alike. Indeed, providing costings and economic impact assessments would help ensure there is sufficient consideration of the economic and fiscal impact of any changes, particularly at a time when the Scottish economy is lagging behind the UK as a whole.
To succeed, there must be a true partnership between business and the Scottish Government. That’s why it’s encouraging that MSPs will also find the time this week to debate the idea of a modern Industrial Strategy for Scotland. Last month the CBI welcomed the UK Government’s Green Paper on an Industrial Strategy, stressing that it must be treated as a landmark opportunity for government and businesses to work together to build a successful, modern economy as the foundation for a prosperous, fairer and more inclusive society.
The same is true for any industrial strategy tackling weak growth in Scotland’s economy. It must help to fix Scotland’s productivity deficit with the more productive areas of the UK, delivering rising living standards, wages and more opportunities in our communities.
These are issues CBI Scotland will be grappling with this year. We’ve been speaking with our members about how to close Scotland’s productivity gap and power economic growth over the long term. Our forthcoming Scotland Growth Strategy will set out a new business-led direction for the economy.
Ultimately, businesses in Scotland are committed to supporting both the UK and Scottish governments to develop a positive response to Brexit and its aftermath. Yet Brexit mustn’t allowed us to be distracted from growing our economy by supporting businesses to deliver prosperity right across the country.
Hugh Aitken is CBI Scotland director
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