'Financial wilderness' ahead if business left out of debate

The prospect of sweeping new powers for Holyrood will lead to rising taxes and leave Scotland in a "financial wilderness", a leading business figure has warned.

• Professor Andrew Hughes Hallett addresses The Scotsman conference yesterday on the issue of fiscal powers. Picture: Neil Hanna

A zero tax rate to attract big corporations to Scotland was also called for during a conference hosted by The Scotsman yesterday, with business leaders warning they are being frozen out of the debate surrounding the Scotland Bill.

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The legislation will give Holyrood new powers to set income tax and borrowing powers of up to 2.7 billion.

But Norman Springford, executive chairman of Apex Hotels, said: "The raising of taxes is the most likely scenario of the Scotland Bill. I don't believe that increased fiscal powers will create the economic growth that we're desiring."

He added: "Much has been said about bringing additional growth to the economy in a low tax regime, but does a higher tax regime mean a financial wilderness for Scotland? I think the answer here is yes."

Liz Cameron, chief executive of the Scottish Chambers of Commerce, told a panel of MPs and MSPs that some businesses were "confused" by the proposals.

"I think there's a major task ahead in terms of communicating what the benefits are going to be for business," she said.

"We're wanting to become engaged but you're making it rather difficult for us."

Another leading business figure, Jim McColl, chief executive of Clyde Blowers, warned that the proposed powers in the bill did not go far enough to make a real difference to economic development.

"That will only happen if the final product is far more ambitious than the current proposals on the table," he said.

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"We need to be able to offer specific tax incentives to businesses thinking about locating here as well as to support indigenous businesses. There are no such incentives built into the current proposals.We need to have the necessary fiscal levers and that includes having control of corporation tax."

Ben Thomson, chairman of the think tank Reform Scotland called for a zero rate of corporation tax to get Scotland "ahead of the curve" in attracting firms.

Former deputy First Minister Lord Wallace, now the UK Advocate General, who is guiding the Scotland Bill through the Lords, warned against SNP calls for full fiscal autonomy.

"Fiscal autonomy loses what the Scotland Bill preserves - the ability to spread economic and financial risk across the wide and diversified UK economy," he said.

External affairs minister Fiona Hyslop said the Scottish Government had published an analysis demonstrating the "deflationary bias" built into the bill's income tax proposals would have short-changed Scotland to the tune of almost 8bn since 1999.

"The effect of such a shortfall would be a real and damaging impact on Scotland's public services, on jobs and on our economy," she said.