The The country must have a level playing field – or risk not attracting economic growth, writes Betsy Williamson
On the face of it, the Prime Minister’s reaction to “not follow blindly” is perhaps understandable in the wake of Westminster’s most dramatic tax cuts in 50 years.
Chancellor Kwarteng’s ‘mini-budget’ sees budget cuts as the way to usher in a new era for Britain’s growth-oriented economy.
With the focus on Holyrood’s response, Sturgeon was quick to quote the Institute for Fiscal Studies and suggest the changes only benefit the wealthy, while describing the budget as reckless.
That said, she is caught between a rock and a hard place. If the Scottish government decides not to align with the new tax framework, it means Scottish workers earning more than £14,732 will start paying more than those with similar wages in the rest of the UK from ‘april.
This gap grows as someone wins, with someone with £35,000 becoming almost £300 worse off, and someone with £45,000 being hit by £763. At the very top of the scale, people earning £200,000 next year in Scotland would pay £6,045.80 more in income tax than their counterparts in the rest of the UK.
There is a lot at stake. In March 2022, the Scottish Government unveiled Scotland’s National Economic Transformation Strategy. The strategy sets out the priorities for the Scottish economy as well as the actions needed to maximize opportunities over the next decade to deliver our vision of an economy of wellbeing.
To quote the opening paragraph: “Scotland has extraordinary economic potential. Our natural resources, heritage, talents, creativity, academic institutions and business base, in established and emerging sectors, are the envy of many around the world.
The Scottish Government’s Economic Transformation Agenda comprises 18 projects and 77 actions which the government believes will enable us to achieve their vision of building a stronger and more prosperous economy.
Despite global headwinds and the impacts of Brexit and Covid, the strategy calls the next 10 years a “decisive decade”.
The strategy document states that a skilled population is essential to business productivity and economic prosperity. These businesses here in Scotland with the support of the government must”provide rewarding careers and meet the demands of an ever-changing economy and society“that employers must”invest in the skilled employees they need to grow their business”.
Attracting business to invest in Scotland is therefore a key driver of our economic well-being and long-term prosperity.
Ultra-mobile global companies play a key role in Scotland’s economy, giving us access to global technology, talent, markets and investment. They support the formation of globally recognized “market clusters” and the development of local supply chains.
They create jobs with high added value for the economy. This means we need to focus on an evidence-based approach to identifying Scotland’s strengths, aligning them with current and planned investment flows, before setting out a series of actions to attract new investment in Scotland.
Recruiting and retaining the kinds of people needed to meet the Scottish Government’s national strategy must be essential. How are we going to attract global companies and strengthen local supply chains to these companies when taxing business leaders acts as an obvious drag?
To enable our country to grow and prosper, we must to attract and more important to hold ontotop talent nationally and, in some cases, globally.
If we are to achieve the Scottish Government’s National Economic Transformation Strategy and also achieve net zero carbon and renewable energy targets, Scotland must be recognized as a business environment capable of competing on the global stage. Tax harmonization is essential to achieve this objective.
Whether the Prime Minister wants to accept it or not, the only way to achieve the government’s own plans for growth and stability is to remove barriers to attracting and retaining entrepreneurship locally while attracting global companies.
If we can’t compete with the rest of the UK, the very people we need to lead and build the businesses the economy needs for future growth will look elsewhere and Scotland will become the equivalent of Nokia against Apple. Obsolete.
Holyrood can be caught at a very understandable ideological crossroads. But now is not the time for intransigence.
Betsy Williamson is the founder and managing director of Core-Asset Consulting, Scotland’s leading recruiter for the financial services industry.
