No need for independence - Holyrood has the powers to give business a boost

Published on Thursday 12 April 2007 00:13

AFTER eight years of devolved government, when a great deal of hot air has been expended by all parties about the need to put Scotland's economic growth top among a plethora of priorities, what is there on offer from the four main parties?

Maybe something radical that will cut through swathes of regulation created by the hundred or so laws passed by Holyrood?

Maybe a significant cut in business taxes, not funded by the familiar trick of making the largest businesses pay more, but by reducing the proportion of public spending?

Or maybe cutting the colleges free from funding controls so they can provide the skills training that employees and employers want?

Well, if that's what you are looking for, you can wait until the 2011 elections.

Like so much of the sordid bidding that political parties make over, say, the number of police on the beat, pupils in the classroom or affordable houses in the neighbourhood, all of the mainstream parties are saying pretty much the same thing on our enterprise economy - very little.

Despite what politicians say at staged business lunches or meetings with reliably pliable trade associations, the issue of restoring Scotland's enterprise economy has slipped back down the running order.

The debate surrounding the current level of non-domestic rates is an obvious example where, after years of to-ing and fro-ing about what level the poundage should be, all of the parties seem unable or, more likely, unwilling to cut it significantly below the English poundage.

The SNP likes to talk of cutting corporation tax as the solution to Scotland's ills.

Well it would, because it will probably require independence to have meaningful control of it.

Meanwhile, the party pays lip service to the idea of delivering a significant cut in business rates - a tax charge that Holyrood does have complete control over already.

The other parties are no different. Rather than give businesses located in Scotland a real advantage against their English-based competitors that would help compensate for the poorer infrastructure and greater distance from markets, all they can come up with is posturing by removing some small businesses from business rates while the rest are left to continue carrying the burden.

Having conceded that business rates are damaging enough to help some businesses, why not go the whole way? Why not cut business rates for all businesses and commit to cutting them year on year until they are phased out altogether?

By cutting business rates for the next four years by 12.5 per cent for all businesses, a significant boost can be given that does not require constitutional change and sends out a serious message beyond Scotland's borders - that we mean business.

It will take a radical step to reinvigorate our laid-back or hesitant enterprise culture and the existing levers are there, just waiting to be pulled.

The Balmoral and Caledonian hotels in Princes Street have a rates bill of more than 500,000 each year. Jenners's bill is even more. The business rates for Scottish Widows and Standard Life head quarters are in the region of 2 million. And the Royal Bank and Edinburgh Airport at Gogarburn are a little short of 3m.

Although small compared with these companies' turnovers, these are still large costs that reduce their capacity to invest in what is best for their own operations. They can spend their money better than any politician or bureaucrat and they create jobs in the process.

One criticism levelled against abolishing the business rate is that at 1.9 billion it brings in so much money that it can't be afforded.

Wrong. By phasing in a 12.5 per cent reduction valued at 240m each year for eight years, it can be done without impacting on public services. With a total budget of 30bn, does anyone seriously believe that efficiencies of less than 1 per cent of spending cannot be found?

Put Professor Arthur Midwinter on the case and surely he would sort it out for us.

In fact the savings required are already about 12 per cent less than generally assumed, as the public sector takes part in a bizarre paper chase where it is given money to pay the local authorities the rates on schools, police stations, town halls etc - with the money then passed back to the centre to be redistributed the following year. Not only is there an administrative futility saving to be made, it makes the politics of reducing business rates that much easier.

Critics of the reduction or removal of business rates argue also that it would be cancelled out by rent rises. But so what? If instead of paying taxes some businesses pay more for rentals it will still be beneficial as it will increase profitability in the commercial property sector, attracting greater private investment and encouraging improvement.

Anyway, all businesses are not the same and neither are their lease agreements - some will be fixed and unable to change immediately and many other businesses own their own properties and do not have rentals that would go up.

Forget independence. Holyrood already has powers that are not being used. It's time the SNP and others used them to full effect.

• Brian Monteith is a former Conservative front-bench MSP