John Swinney: Give us the tools and we can build a stronger, sustainable economy

THERE has been much discussion recently on the mechanics of independence, how we get there and the framework that we put in place when we do. These are important and necessary debates.

And what is interesting to me in the exchanges of recent weeks is that our ability to be independent, Scotland’s ability to stand on her own two feet and to do so successfully is not questioned.

That is no surprise when the most recent expenditure and revenue figures for 2010/11 show that Scotland accounted for 9.3 per cent of UK public spending, but 9.6 per cent of UK tax revenue, and that our 9.6 per cent of UK tax was generated with just 8.4 per cent of the population – the equivalent of £1,300 extra for every man, woman and child in Scotland.

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However, the acknowledgement that Scotland can succeed is a new one, and a welcome step forward in the debate.

This government has two key ambitions for Scotland in the coming years: to build a stronger, sustainable and more prosperous economy and to create a fairer and more equal society. That is my focus.

In meeting these ambitions we are now entering a crucial period – both in terms of the kind of economy that emerges from the challenge of global recession, and the decisions we make about Scotland’s future.

With independence we will have the tools to build on our strong fiscal base and the natural strengths of our economy to ensure we deliver on those ambitions.

With the decision-making powers of independence we could do more to directly tackle youth unemployment, build and invest in infrastructure, promote innovation, boost skills, and target overseas investment.

Tax, regulation, legal, health and education systems could all be brought together with the specific aim of maximising economic opportunity rather than having Scotland’s public services fighting an uphill struggle to offer economic support against a backdrop of UK austerity.

Independence would also allow us to support the overall business environment as well as specific sectors. An independent Scotland will compete for inward investment primarily by advertising the quality of our workforce, our natural resources and quality of life and communications links. However, small countries, like Scotland, need a fiscal edge to encourage decision-making centres to settle. This fiscal edge would in turn create prosperity.

That edge comes not just from the general rate of taxation and action on corporation tax but from the nuances within the system, and support for specific economic sectors. The creative industries are an excellent example of this – an industry of the future and one in which Scotland deservedly enjoys a world wide reputation. If Scotland had control of the levers of growth, we could provide the right tax environment to boost sectors like this which are of major importance to Scotland but can fall below the UK government’s radar.

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Where we have powers over other taxes the Scottish Government will use them to the benefit of the Scottish people. With the one business tax we do control – business rates – we have delivered the most competitive tax rates in the UK.

Less than a fortnight ago I outlined plans to introduce two replacement taxes from 2015. The proposals include changing the structure of the stamp duty land tax to a more progressive system where the amount of tax paid is more closely related to the value of the property. I also announced the establishment of Revenue Scotland, a small and efficient body which will work with Registers of Scotland and the Scottish Environmental Protection Agency to ensure the collection and administration of the two devolved taxes at a lower cost than estimates produced by Her Majesty’s Revenue and Customs (HMRC).

This has already been well-received in Scotland. We will be able to design systems for Scotland in Scotland, minimising opportunities for tax avoidance and maximising revenues.

In setting up Revenue Scotland we are taking an innovative approach, working with existing organisations, to deliver these two devolved Scottish taxes set by the Scottish Parliament. Furthermore, we estimate that we could save at least 25 per cent of the cost of asking HMRC to administer the taxes. And by going for a Scottish-based approach we will have full flexibility to tailor the taxes to suit our priorities and circumstances.

The Treasury’s wrong-headed decision to levy VAT on Scotland’s police and fire services, effectively a tax on Scottish public sector reform, demonstrates the importance of aligning taxation with the choices of the public and our public services.

The new services will be the only police and fire authority in the UK unable to recover VAT: that is manifestly unfair, amounting to a combined annual cost to the Scottish Fire and Police Authority of around £25m and contrasting starkly with England’s academy schools funded in the same way and exempted from VAT.

The single service will deliver estimated savings of £1.7bn over 15 years. However, the people of Scotland are being penalised by this additional VAT grab.

Taxes set and controlled in Scotland would work in, and not against the public interest. This is an example of the advances that could be made if Scotland had the powers to determine its own future. We would use Scotland’s natural resources and skilled workforce to build a sustainable economy – based on producing goods and services that people actually want.

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Our plans for the referendum will give the people of Scotland the opportunity to make a clear and informed decision on our constitutional future. Independence will enable us to utilise all the economic levers to provide the stable and supportive environment Scottish businesses demand. It is for the people of Scotland to decide if they want to take that course, and I am confident of their verdict. «

• John Swinney MSP is Cabinet Secretary for finance, employment and sustainable growth