Nicola Sturgeon ditched the SNP government’s flagship pledge to slash big business taxes in Scotland as she set out her economic vision for the future of the country.
Former First Minister Alex Salmond’s promise to lower corporation tax 3 per cent below the UK rate was a key plank of the referendum campaign, but yesterday’s blueprint insisted ministers would not engage in a “race to the bottom”.
Ms Sturgeon unveiled plans to make the Scottish economy among the best in Europe by raising productivity levels and creating up to 11,000 jobs a year within a decade. The SNP leader said she would “put tackling inequality at the heart of what we do”.
But the economic strategy revealed a surprise change in stance by the Scottish Government in the key area of corporation tax, with it now focusing on “targeted changes in tax allowances” rather than a “blanket approach”.
While corporation tax is still reserved to Westminster, the Scottish Government has long argued for it to be devolved to Holyrood. The new strategy document argues that power over it and other measures, such as capital gains tax, could help rebalance the economy.
At yesterday’s launch at Linlithgow technology firm Calnex, Ms Sturgeon said: “What we are signalling here is we would see in the years to come real benefit of having control over corporation tax, to use that in a targeted way to boost R&D, to encourage investment in growth areas of the economy, rather than in a blanket way.”
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“Different times will demand different approaches to corporation tax and to the use of other taxes, but this is what we deem would be appropriate in the years to come if we do get control of corporation tax.”
It is the latest shift away from the legacy of her predecessor by Ms Sturgeon, who presided over the cancellation of a women’s “super prison” in Greenock.
She also intervened in the “voluntary” stop and search row which was followed by Police Scotland saying they would consult on ending the practice, after this had been stoutly defended by Mr Salmond.
Among the economic strategy proposals are plans for a Scottish Business Development Bank to help small and medium-sized firms expand and grow by offering loans of £5-50 million.
The Scottish Government argues that if the country’s total factor productivity could be increased by just 0.1 per cent a year, after ten years this would boost GDP by 1.3 per cent, increasing employment by 11,000 and tax revenue by £400m a year.
Deputy First Minister John Swinney said: “Fundamentally, what we’re setting out here is an agenda that can drive the Scottish economy in a dynamic way, and we should be ambitious about the Scottish economy.”
But The Federation of Small Businesses Scottish policy convenor Andy Willox last night said the government must overhaul the business rates system so it “fairly reflects how business is done in the 21st century”.
The strategy also came under fire from political opponents who claimed it said nothing about how the SNP would use new tax-raising powers under Smith Commission proposals.
Labour finance spokeswoman Jackie Baillie said: “The strategy underlines the growth in inequality in Scotland but fails to set out how the government will actually tackle this. The document lacks redistributive policy commitments, like Labour’s proposal for the reintroduction of the 50p top rate of tax”
Tory finance spokesman Gavin Brown said: “Companies are calling for changes to the business rates regime which holds them back. Yet, we have become less competitive with business rates in each of the last few years. There is no commitment from the government to use our new tax powers to lessen the tax burden and make us more competitive.”