Chris Harte: Comparisons with the rest of UK matter

Chris Harte says extra tax-raising powers bring with them greater fiscal risk. Picture: Contributed

Chris Harte says extra tax-raising powers bring with them greater fiscal risk. Picture: Contributed

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You would think that rising productivity levels in Scotland, particularly when the rate of improvement is four times faster than the UK average, is good news.

UK productivity has risen for four consecutive quarters now, and Scotland is closing the gap on the UK average.

The time has come to engage Scottish business in a nationwide conversation

But let’s not be blind to the realities of our economic performance. Scottish productivity still lags behind the UK average despite this improvement.

READ MORE: Scotland falls behind rest of UK as jobless total rises

The good news masks the impact this could have on Scotland’s spending budget as a whole. There are serious economic concerns much closer at hand than you might imagine.

The Fraser of Allander Institute shot a stark warning across our bows about the future economic health of Scotland just prior to the recent budget: with increased autonomy over domestic tax-raising powers comes greater fiscal risk.

Any additional taxes raised here are ours to keep – and tax revenues are closely linked to economic performance. But here’s the rub: if Scotland underperforms versus the rest of the UK, our budget will effectively fall. The time has come to engage Scottish business in a nationwide conversation about protecting our economy and ensuring growth in this context.

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Our business leaders can no longer accept the adage that Scottish economic growth tends to lag behind the UK average, pointing to the special circumstances of North Sea oil in particular.

We should see the new scope and responsibilities of the Scottish Government as a huge opportunity: no two parts of the UK are the same and a tailored approach must surely work best. So Scotland is in theory already at an advantage over the major metropolitan areas of England, who don’t have the autonomy they want (yet).

Fighting for Scotland is not just about our relationship with the EU – it’s about being seen as a flourishing economic hotbed. By 2019, everything from income tax to land and buildings transactions tax, landfill tax, non-savings, non-dividend income tax, air passenger duty and some receipts from VAT raised in Scotland will be assigned to the Scottish budget.

If our per capita tax revenues don’t match those raised in the rest of the UK in future, it could well be because we took our eyes off everyone else at precisely the time we needed to watch them like hawks.

• Chris Harte is CEO of law firm Morton Fraser

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