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  • Ian Ritchie : Scottish Business Insider

Election is time to wring fiscal concessions from the Treasury

IT IS A UNIVERSAL TRUTH that Scotland leads the pack in scientific development and innovation. Scots research universities competitively win some £54 funding per head of population for Scottish-based research compared with £36 per head for England's - and yet we remain stubbornly 'third quartile' in the economic exploitation of such innovation; our level of industrial R&D is at the bottom of any league table.

One of the problems, of course, is the lack of corporate headquarters in Scotland and with the independent futures of ScottishPower and other giants like Scottish & Newcastle and Standard Life remaining under constant takeover threat from abroad, we cannot afford any complacency.

Another small English-speaking country on the edge of the British Isles looked at a similar dilemma some 20 years ago. Ireland didn't have the strong research base that Scotland has and so the Irish set out to build it, which they have done with some success.

However, crucially, Ireland also created a fiscal regime that was friendly to international companies setting up shop there. Corporation tax was set at 12 per cent and tax breaks were granted for companies exploiting intellectual property from an Irish base. The result is that Ireland has attracted several international businesses such as Apple, Microsoft, GlaxoSmithKline and Wyeth to set up there.

If Scotland had the power of fiscal independence, then likely we would have come to similar conclusions and would have established similar rules for companies based here.

Scottish Enterprise struggles manfully to achieve a more enterprising Scotland, but without the fiscal powers of our nearest competitor it is going to continue to fail to deliver. The UK is a single fiscal unit and the economic climate in the UK is, quite rightly, tuned to the needs of the phenomenally strong economy in London and the south east of England, which has become the most successful economic area of Europe.

So what of fiscal independence? Many have argued in its favour - and not just Scottish Nationalists. Wendy Alexander, the most economically literate of Scottish Labour MSPs, has in the past (when an election wasn't looming) pushed for more independent fiscal powers for Scotland.

But the real pressure is likely to come from a different source. The UK Government has been desperate to reinstate devolved government in Northern Ireland and in the key negotiations held at St Andrews a massive bribe was offered if the local parties agreed to work together.

Northern Ireland is to be granted similar fiscal conditions to those of the Irish Republic, with corporation tax lowered to an effective 12 per cent.

That decision opens up all sorts of possibilities. If Northern Ireland can gain this measure of fiscal independence over its corporation tax and remain within the UK, why on earth can't Scotland?

And with SNP candidates breathing down the necks of Labour MSPs at next May's Scottish parliamentary elections, there has never been a better time to wring Scottish concessions out of the UK's Treasury. After all, an independent Scotland would be a disaster for the UK's tax take, as it would remove the very substantial revenues still pouring in from the oilfields in the Scottish part of the North Sea.

Surely it is only a matter of weeks before this concession is agreed also for Scotland.

It will be interesting to see how the residents of English regions such as the North East or Merseyside react to this news.

Unfortunately for them, they don't have an election pending.

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