An alarming loss of corporate decision makers will hold back the First Minister’s twin goals of driving growth and eliminating poverty, says TERRY MURDEN
Some years ago I attended a dinner at the Glasgow Hilton organised by some of Scotland’s wealthiest entrepreneurs who were rallying around a new campaign to Make Poverty History. Supporting such a laudable objective was seen by those with deep pockets as giving something back to those most in need.
One of those behind the dinner, brandishing some expensive jewellery and a fat cigar, leaned over to me and said:”I think we can do this”. He truly believed the rich could solve the problems of the poor.
That was during the boom years, before the realities of the financial crash saw some of those wealthy individuals lose millions and face up to other priorities. Some even left Scotland, never to be seen again. As for making poverty history, that would have to wait.
John Swinney, Scotland’s First Minister and SNP leader, is rekindling the spirit of those tycoons by making the elimination of poverty, or at least child poverty, a centrepiece of his programme for government and his tenure as the country’s leader.
It’s a campaign that he knows no politician can oppose, but which most know to be unachievable. The wealthiest nations on earth have failed to improve the condition of all citizens. It’s a cruel fact of life that while some will spend millions buying a painting at an auction house, there will be children living around the corner going without a decent meal.
Eliminating poverty requires society to undergo the mother of all transformations, from how it values itself, to the way it structures the tax and welfare systems. With the best will in the world, John Swinney, with his limited powers, and even with the extended powers of independence, does not have the means to do any of this. Against a backdrop of £500m in cuts to public services, including healthcare, he already has one hand tied behind his back.
He believes that a starting point to at least alleviating poverty is economic growth and the principle that a rising tide lifts all boats. So far, however, he has also failed to say how growth will be achieved, apart from relying on a continuing flow of foreign investment and the creative thinking and innovation of the Scottish people.
In the meantime, Mr Swinney’s government has no choice but to follow the Labour government by cutting spending, not least because the revenue from taxes is insufficient to maintain the current level of public services.
In Scotland, the size of the tax base is something that is rarely debated but is fundamental, not only to Mr Swinney’s hopes of growing the economy and beating poverty, but to his other goal of completing the journey to independence. In his romanticised vision of a Scotland free from the shackles of the big, bad UK, he promises a more prosperous and more equal nation.
The reality is that the wealth creators are being skinned by a regime that believes they should pay higher taxes and is holding back their ability to invest, let alone prosper.
Furthermore, the number of companies headquartered in Scotland that have underpinned the nation for generations has declined at an alarming rate, a trend that brings the corporation tax factor into the equation if once large firms are reduced to being small subsidiaries of larger entities.
In those Make Poverty History days, famous large companies dominated the Scottish corporate landscape and from their lofty heights a whole range of benefits cascaded through the economy, from legal contracts to the suppliers of parts and other services. Their patronage gave birth to new companies and jobs, and to the societal improvements that John Swinney seeks.
Over the intervening years, many of those who were headquartered north of the border are now in the hands of companies based elsewhere, mostly overseas. Contracts once won on the golf course among members of the local chamber are now awarded to firms many miles away. Scottish SMEs must put out the begging bowl to get on the procurement lists of firms based in the US, France, or Singapore.
Among the Scottish giants, once independently listed on the London Stock Exchange and now subsidiaries of other corporations are: ScottishPower (now owned by Spanish company Iberdrola), Bank of Scotland and Scottish Widows (Lloyds Banking Group), Scottish & Newcastle Breweries (carved up by Heineken and Carlsberg), Stagecoach (acquired by German investment firm DWS infrastructure) and Wiseman Dairies (owned by fellow German firm Muller).
Famous mutuals have followed suit: Scottish Equitable (now owned by Dutch group Aegon), Scottish Amicable (Prudential), Scottish Life and Scottish Provident (Royal London). Both Clydeport and Forth Ports are owned by English firms and none of the big Scottish airports is in Scottish ownership.
Recent corporate champions have gone the same way: search engine and tech unicorn Skyscanner is owned by a Chinese company while fantasy sports company FanDuel is part of the Paddy Power and Betfair group Flutter Entertainment.
During the 2014 referendum Royal Bank of Scotland said it would relocate to England if independence looked like becoming a reality. Under its rebrand as NatWest it has effectively already done that and if independence did re-emerge as a strong probability then the switch to a London registration would become a formality.
On top of this list of departures, the oil and gas companies, who are among the biggest contributors to the UK Treasury, are being chased out of town.
This shift towards a branch economy not only challenges the tax revenues of the country, it also leaves Scotland with fewer decision makers, the people who choose when to invest, who gets the next contract, and what help they can give to the government to enable it to improve society.
It therefore leaves huge questions over who will fund Mr Swinney’s ambitions, including his mooted independent government and making poverty history.
Terry Murden was Editor and Business Editor at The Sunday Times Scotland, Business Editor at The Scotsman, and Business and City Editor at Scotland on Sunday. He is now Editor of Daily Business
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