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There’s just as much uncertainty with a No vote

says Betty Burke..

The business sector has legitimate concerns about the outcome of the independence referendum. But those same concerns apply just as much to the possibility of a ‘no’ vote as they would in the event of a ‘yes’. And sticking with the status quo doesn’t look all that appealing, when you look at Westminster’s abysmal track record on the issues that matter to SMEs.

When I talk of ‘legitimate concerns’, I’m not talking about some of the fatuous ‘what ifs’  thought up by the No campaign’s teenage, unpaid intern, such as “what will Scotland’s international dialling code be?” (seriously, I haven’t made that up – they really said it).

Rather, I’m thinking about the burden of tax and regulation - the sort of bread and butter stuff that does concern businesses.

Now in the event of a ‘yes’ vote, tax and regulatory systems will depend on what the government of an independent Scotland might decide, after it is elected in 2016.

Equally, however, in the event of a ‘no’ vote, the burden of tax and regulation depends on what future UK governments might decide. So, voting ‘no’ and staying with the Union carries just as much uncertainty as voting ‘yes’. 

There’s a UK general election due in 2015. We don’t know what the outcome might be: a majority Labour Government, a majority Conservative Government, or another coalition, and if so, which parties it will include.

And because we don’t know the answer to that, we can’t know what UK rates of income tax will be, and at what thresholds will those rates kick in. We don’t know what UK Corporation Tax rates will be in three or five years’ time, or what UK employers' NI contributions will be in 2020, or how VAT rules will change. All that sounds like a fair dollop of uncertainty if Scotland were to remain in the UK. 

Now I have heard it argued that we do know that with independence, firms will have to adjust their payroll systems and so forth, to deal with a separate Scottish income tax system. But firms are going to have to do that anyway, under the income tax provisions of the Scotland Act 2012, which implemented, in part, some of the recommendations of the Calman Commission.

I know of nobody who argues that a ‘yes’ vote is risk-free. I know, too, that some of us are tempted by the ‘better the devil you know’ argument. But the status quo just isn’t working, especially when it comes to the things that most concern SMEs. Indeed, in many respects, Westminster’s track record suggests an inability to organize a bacchanalian ceilidh in a distillery.

One of the key determinants of business success is the overall strength of the economy. That’s not been great over the past five years, of course, and I certainly wouldn’t lay all of the blame for that at Westminster’s door. However, if we take the longer view, over last three or four decades, Scotland’s annual average growth in GDP has lagged around half a percentage point below the UK average. That’s hardly a good case for maintaining the status quo.

On the burden of tax, businesses in the UK have to deal with the longest tax code in the world, and quite possibly in the Western Spiral Arm of the Galaxy. The folk at the Federation of Small Businesses say that 60 per cent of small businesses report that the UK tax system has a negative impact on their ability to invest and create jobs.

When it comes to regulation, one third of entrepreneurs surveyed by the FSB say that regulation is the single biggest obstacle to growth; while the World Economic Forum's Global Competiveness Report ranks the UK 89th out of 139 countries for the burden it places on business!

Now some folk might claim that much of the regulatory burden is all the fault of the EU, not the UK.  There is a legitimate debate to be had about EU membership. But plenty of EU member states (and those non-EU members in the EEA) also have to work within the framework of EU rules, and are much more business-friendly than the UK.

Denmark is reckoned by many to be the best place to set up and run a business; and all the Nordic countries regularly feature in the top ten in the Global Entrepreneurship and Development Index, which ranks countries in terms of how well they foster enterprise.

The future is uncertain, whichever way we vote in 2014. But having the world’s most complex tax code and being worse than 88 other countries in terms of encouraging entrepreneurs seems like a pretty poor argument for the benefits of staying in the Union.