Sir Tom seeking a Singapore solution

Entrepreneur Sir Tom Hunter’s hopes of turning Scotland into the Singapore of the northern hemisphere would require the mother of all transitions, writes TERRY MURDEN

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Sir Tom Hunter has returned to one of his favourite themes – creating a low tax economy to stimulate growth. Two years ago it was Ireland that presented the best role model. Now it’s Singapore, the south east Asia city-state which, like Ireland, has a similar sized population, but outperforms Scotland on practically every measure.

God loves a trier and Sir Tom has spent years banging the drum for a change of thinking on the economy, targeting Scotland’s failure to live up to its past reputation as an innovator in all things scientific, educational and financial.

The exasperation over a mind-set that currently embraces the something-for-nothing culture is palpable. Scotland, he feels, is the great under-performer on the world stage, the talented star that has let its gift for invention and creativity go to waste.

Sir Tom is not alone in calling for a more ambitious, pro-business agenda, but he has become the poster boy for like-minded individuals who feel their voices go unheard. Getting this one over the line, however, would mean tearing up the Holyrood rule-book and starting again, though whether he’s choosing appropriate models for Scots to emulate is questionable.

Much of the frustration is targeted at government policy. He says he is apolitical, but as the SNP has been in power for the best part of two decades then his ire must be directed at the nationalists. It is not difficult to see why. Despite the claims by numerous ministers that the economy is a priority, the view among those in business is that they still play the role of cash cow for an agenda that verges on hostility towards wealth creators.

Business rates and income tax are kept high to make sure the money continues to flow into the Holyrood budget and the countless quangos that support the government machine. Too many MSPs see business profits, not as money to be reinvested in growth, but as a further source of funding for their pet projects: free bus fares, free tuition, free prescriptions… the list goes on and the bill keeps rising. With the scrapping of peak rail fares there will be another £40m to find.

All this needs a rethink. It is not a popular view to take, but so does the funding of the NHS. Nigel Farage’s Reform UK is getting pelters for suggesting some form of fee-paying structure, but he is challenging the status quo which falsely believes the taxpayer alone can continue to fund the ever-expanding cost of healthcare.

Ask anyone with a reasonable standard of income if they would pay for prescriptions, even minor treatments, and you’ll find there is support for charging if it means properly funding the service and speeding up appointments. Healthcare is a good example of Singapore’s approach to public services: patients directly contribute to paying for treatment. Indeed, despite Sir Tom’s abhorrence of Scotland’s public spending addicition, there is a high level of public sector support for Singapore’s economy, not least through its state-owned investment vehicle.

Oxford Economics, which did the research for the Hunter Foundation, notes that Singapore’s economic success rested to a large degree on a shift to higher-value manufacturing, including electronics and precision engineering. By the 1990s and 2000s, it had transitioned into a knowledge-based economy, investing heavily in its own R&D and high-tech services, which it continues to do today.

Where Sir Tom’s arguments fall are on his overestimation of Holyrood’s ability to introduce the radical tax and policy changes that would enable a similar transformation of the economy. At best it could cut income tax and property taxes, put a bit more cash behind the enterprise agencies and skills training, and terminate the freebies.

But would this be enough? Hardly.

Key economic powers still lie with Westminster: monetary policy, including control of interest rates and money supply, corporation tax, employment law, migration, energy strategy, pensions, export support, and numerous other policy areas. If there is to be a Scotland-led revolution that creates a Singapore-style transition then it may have to start with independence in order to gain all the necessary economic levers, and Sir Tom has given no indication that he supports such a move.

All is not lost. There is scope to make a measure of progress within the existing constitutional set-up. The report notes that Scotland has some influence over a number of key areas, including business investment. While Scotland had the highest spending on higher education R&D relative to its size among all UK nations and regions, it also recorded among the lowest spending on business R&D, suggesting a potential disconnect between public and private innovation that could be rebalanced.

Change requires deep collaboration between the public and private sectors. Despite the wringing of hands over Holyrood’s perceived lack of support, there have been positive moves to develop the digital economy, life sciences and renewables. Oxford Economics says Scotland has fast-growing tech clusters, specifically in Glasgow, Edinburgh, and Dundee. Given its existing specialism in financial services, Scotland is also developing a specialisation in fintech, a sector that is expected to continue to expand rapidly.

However, there are other differences between Scotland and Singapore that are unbridgeable: such as the land mass. The populations may be similar, but one is a largely rural country with large sparsely populated areas. In the other the people are compressed into a tight urban environment. This has implications for communications, physical and digital. And for the provision of all essential services.

It is pertinent also to challenge the generally held belief that countries cannot tax their way to growth, one of Sir Tom’s mantras. Denmark has higher taxes than the UK and higher GDP. Indeed, there are those who say the Scandinavian economies offer a more relevant comparison with Scotland. Perhaps the Oxford Economics group will turn to that region for its next role model.

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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