The SNP would risk slashing public spending still further with their plans to devolve Corporation Tax, warns JUDITH FISHER
The SNP Government have not just called for the devolution of Corporation Tax; they have also set out their case for why, they believe, the rate of Corporation Tax should be reduced.
The SNP claim that “lower corporation tax is a vital source of competitive advantage in an integrated global economy, helping to attract new businesses and highly-skilled jobs.”
In reality, cutting Corporation Tax in Scotland would undermine investment in public services and engage us in a fruitless race to the bottom that will have no winners.
We should have learned by now that marketing ourselves as a bargain basement destination for inward investment is not going to work for Scotland, even in the medium term. Scotland can’t compete on operational cost, the outsourcing of services to India amongst our countries is proof enough of that. It’s just not our market.
Where Scotland needs to compete is through our skills base - our natural resources and our quality of life – but to do that we need to invest in our public services and in exploiting our existing advantages.
This month, BP announced that they would be recruiting for between 150 and 300 positions a year in their North Sea operation, but that their biggest challenge was in recruiting the right people with the right skills to fill the positions. That’s not just a challenge for BP, but also for the Scottish education system. Cutting investment in education and skills training is not the way to address it.
We also need to ensure we invest in encouraging business start-ups and in our indigenous enterprises, businesses which will be rooted in Scotland and will contribute both to the economy and to wider society in the long term.
With a current main rate of 26 per cent, excluding North Sea oil, Corporation Tax generated £2.6bn in revenue for Scotland in the year to 2010. If we were to cut Corporation Tax to 12.5 per cent, the rate in Ireland, this revenue would be cut by more than a half.
We’ve been here before. In the run up to the 2003 elections we heard much from the SNP on the importance of cutting Corporation Tax in order to emulate Ireland’s rate of economic growth. Few would now wish us to model our economy on that of the Irish, but as the world economy has changed, the SNP’s commitment to what is essentially a neo-liberal approach to economics remains unshakeable.
It’s peculiar. The SNP like to present themselves these days as a left-of-centre political party and have, along with most of the rest of Scotland, criticised the Coalition’s slash and burn approach to public sector funding. Yet in Scotland the SNP are making the case for reducing income to the public purse still further.
Do the SNP really believe their own argument? Or is this just another example of the SNP using issues of national importance to feed their own constitutional obsession?
We need to invest, not cut deeper and deeper. We need to compete on quality, not sell ourselves short.
Whether Corporation Tax is devolved to Scotland or not, cutting our way to the bottom is not in Scotland’s best interests.