Scottish independence: John Swinney spells out ‘fresh start’ vision

VAT cuts for the key tourism industry, changes to the burden of red tape for small firms and improved competition law were among the measures set out during a speech to business leaders and academics.

Mr Swinney defended the SNP’s plans to keep the pound if Scots vote for independence in the 2014 referendum. The minister insisted that sterling was as much Scotland’s currency”as that of England and Wales.

He warned that Scotland remained at the mercy of events in the eurozone and that a solution to the crisis in Europe was vital to Scottish companies.

“Independence would allow us to start afresh,” Mr Swinney said in the address at Glasgow Caledonian University.

“I believe it would be better for us all – particularly business in Scotland – if decisions about our future were taken by the people who care most about Scotland: the people and businesses working in Scotland.””

Plans for a new tax-raising body, Revenue Scotland, to collect the new stamp duty responsibility that Holyrood will assume next year, were announced last week by the finance secretary, and yesterday he gave the clearest picture yet of the economic tools he would bring into force under independence to boost growth.

“Good use of economic and tax policy is not just about the headline rate of taxation but also the nuances within the system,” Mr Swinney said.

“Independence would be a distinct advantage, as it would enable us to target, flexibly and efficiently, the levers of growth to address any weaknesses in the Scottish economy and to take advantage of new opportunities.”

Mr Swinney said corporation tax was “one of the chief levers that government can use to promote growth, investment and jobs”.

He said the current system meant that “a company based in Glasgow or Dundee pays the same corporation tax rate as a company based in London”.

He added: “Small countries, and regional economies, need a fiscal edge to encourage these core business centres to settle and prosper. An independent Scotland would enable us to design a corporation tax regime that attracted genuine economic activity to Scotland.”

VAT could be cut in the country’s vital tourism sector, he said, which is worth more than £4.4 billion a year to the economy, with a “step change” in the support for small firms.

This would mean business rate cuts to support the sector, along with tailored enterprise agency support and the use of competition law to ensure that smaller companies are given a better deal.

“An independent Scotland would have much greater scope to shape the regulatory environment so that it not only promoted greater competition, but also encouraged greater technical choice and innovation,” the finance secretary added.

This would include the ability to “better shape” EU regulation if Scotland was a full member state, while also deciding on the most appropriate way to introduce this for Scottish firms.

Tax breaks would also be used in an effort to ensure that Scotland’s university-based research and design excellence was translated into commercial success, where Scotland currently accounts for just 4 per cent of UK activity.

“Independence would provide us with new tools – tax credits for example – which we could use to help create a step change in research and design in Scotland,” Mr Swinney said.

The introduction of a “modernised and cost-effective” system to turn university research innovations into money-making successes would also be high on the priority list after independence

Scotland has control over just 10 per cent of tax revenues at the moment and this will only increase to a “modest” 20 per cent when the Scotland Act comes into effect in 2015, Mr Swinney said.

He insisted Scotland must have full control over all tax and spend levers – complete fiscal autonomy – to flourish.

“We are hampered by the restrictions of the current settlement which mean that the vast majority of key economic levers remain controlled by Westminster,” he added.

“So while we have made progress with devolution, I believe with independence we could do so much more.””

The pound would remain Scotland’s currency, he said. It was hoped the country could appoint a Scottish member to the Bank of England’s monetary policy committee.

“Regardless of what may be said in the heat of constitutional debate, it would simply not make sense for anyone to resist the creation of a formal sterling zone and the mutual benefit it would bring,” he said.

“Sterling is as much Scotland’s currency as it is the currency of England and Wales, and formal monetary union is the clear way forward.”

The SNP insists that Scotland’s North Sea oil and gas revenues bolstered the UK’s balance of payments by £32bn in 2010 – halving the UK deficit. “Retaining the pound would be in Scotland’s interests as well as “the rest of the UK”.

Mr Swinney again criticised Chancellor George Osborne for placing too much emphasis on austerity and failing to provide enough capital investment which could boost growth through a range of building projects.

And with 45 per cent of Scottish exports gong to Europe, the importance of stability in the Continent’s banking markets was critical.

“We are still being buffeted by the cross-wind from Europe,” Mr Swinney warned. “A swift and continued resolution to the crisis is therefore vital for Scotland and business across Scotland.”

Labour’s Ken Macintosh last night accused the SNP of failing to “take responsibility” for the problems in Scotland’s economy. “The SNP did little to boost growth with policies that cut housing and further education as well as cutting capital expenditure faster than George Osborne,” he said. “We need less unsubstantiated assertions on the economy and more in the way of a proper procurement policy from the SNP.”

But Tory finance spokesman Gavin Brown called for the SNP to stick to matters in its own backyard”rather than giving advice to others.

“If it was genuinely focused about economic growth, they would not have slashed the housing or college budgets and they would not have brought in several new taxes for business,” he said. “The SNP would be better working with the UK government to do all they can to create jobs and get the economy moving.

“Rather than being obsessed about constitutional matters, they need to roll their sleeves up and make better use of the substantial economic levers at their disposal.”