Scotland must align tax bands with rest of UK - and offer incentives to attract top talent from overseas
Investors don’t want warm words from politicians, they want action and a real commitment to growth, writes Sandy Begbie.
Both the UK and Scottish Governments have said repeatedly that growing the economy is their overriding mission. But investors do not respond to warm words. They respond to clear signals and credible action. What governments choose to do matters far more than what they say.
At Scotland’s Global Investment Summit in October, I noted that three events would define investor sentiment towards our economy: the UK Government budget, the Scottish Government budget and May’s devolved elections.
We have now had the first of these three events, and it was not an encouraging start.
The UK budget did nothing to unlock investment or accelerate growth. Even the Office of Budget Responsibility has said that this budget will do nothing material to improve and deliver economic growth. Politics and vested interests were placed ahead of long-term economic strategy, and weeks of briefing damaged confidence at the very moment it needed to be rebuilt.
The result was a budget that deepened uncertainty rather than dispelled it, while decisions around taxation – not least to continue with the punitive Energy Profits Levy – will further dampen investment across Scotland. Both governments need to accept you cannot tax your way to growth.
READ MORE: Business leaders warn SNP over NHS and living standards after long-term health inactivity
It now falls to the Scottish Government to choose a different path. On 13 January, ministers have the chance to prove growth is their top priority. Scotland cannot afford another budget shaped by vested interests or short-term politics. We need one that focuses squarely on the economy and the people and businesses who power it.
There are practical steps available. Increasing tax thresholds, particularly at the lower bands, would begin the long-overdue process of realignment with the rest of the UK and removing a barrier to the attraction of talent. After all, it is vital Scotland increases its tax base with well paid, good jobs in key sectors rather than increasing its tax take from the existing small tax base.
Governments also need to work with the private sector to crowd in much needed capital for large infrastructure investments. Freezing rail fares would support workers during a fragile recovery. Providing targeted relief for sectors such as retail, hospitality and tourism would help safeguard jobs. And exploring differentiated income tax rates for internationally mobile talent would send an important signal that Scotland is competing to attract skills and investment.
These measures will not solve every challenge, but they would demonstrate intent.
They would show investors that Scotland recognises the need to create a competitive, predictable environment. And they would help restore confidence at a time when confidence itself is an increasingly scarce economic asset.
Our sector is already playing its part. Scotland’s financial and professional services industry is a major engine of economic growth, contributing more than any other sector to our output and sustaining hundreds of thousands of high-skill, high-wage jobs. With major international interest following our investment summit, it is well positioned to help power a more innovative, productive and resilient economy. But to do so, it needs a government that will work in genuine partnership with business.
The Scottish Government now has a pivotal opportunity to set Scotland on a clearer, more confident course. On 13 January, it must show that it will put the economy first. If it chooses growth, the benefits will be felt not just by business and industry, but across every community in Scotland.
-Sandy Begbie is the chief executive officer of Scottish Financial Enterprise, which represents Scotland's financial services industry
Comments
Want to join the conversation? Please or to comment on this article.