We're in the money ...; Holyrood Commentary: Labour freezing business

Iain McMillan, the director of the Scottish CBI, is a past master of the more-in-sorrow-than-in-anger soundbite. His role has traditionally been to come on TV after the latest spending pronouncement from Scottish ministers to warn that it's all very well spending wealth on public services, what about generating it?

But last week, after finance minister Andy Kerr's budget statement, McMillan was almost lost for words. The headline spending increases on transport and vocational training and the freezing of business rates were exactly what he had been lobbying for. "They listened," he said. End of story.

The Kerr address - by common agreement one of the most profoundly boring since the invention of the speak-your-weight machine - amounted to a modest exercise in fiscal autonomy. However, the beneficiary was not public services, but private companies which will save around (pounds) 35 million a year from the freezing of business rates. Scottish business has long complained that it is disadvantaged against English companies by Scotland's high business taxes. The finance minister evidently agrees.

The dominant theme of Kerr's speech was not cutting hospital waiting times or improving education, but the promotion of enterprise. It followed Jack McConnell's positively Thatcherite address to the Institute of Directors earlier in the week in which he called for the enterprise culture to be promoted throughout the Scottish education system. McConnell's cabinet may be full of left- wingers, but they don't seem to be having much influence.

Before the 1997 referendum, whose fifth anniversary was buried last week under the rubble of Ground Zero, most commentators expected that devolution would be used as a means of defending the public sector and its privileges and arguing for more cash from the UK Exchequer to finance them. It was assumed that the pressure on taxation would be up rather than down. But there is now apparently a consensus against using the parliament's tax powers except to benefit business.

Today, the SNP leader John Swinney is expected to confirm that the SNP has finally abandoned the Penny for Scotland policy of increasing direct taxes to pay for better public services. The plan to use the tartan tax was conceived after Gordon Brown's 1999 tax-cutting budget. But we have heard very little about Scotland's wee pee since the party's poor showing at the 1999 and 2001 elections. What we have been hearing a lot of from the SNP is the call to cut business taxes in Scotland to make Scottish companies more competitive.

Enterprise is the new rock and roll. Everyone in Scottish politics - Tommy Sheridan aside - seems to be power-dressing for the boardroom. Where did Wendy Alexander go last week to console herself for the loss of her ministerial career? To the Strathclyde Business School as a visiting professor. There was a time, not so long ago, when no self-respecting Labour politician would have dared such a bold cross-over while remaining an elected member of parliament.

The Scottish health minister, Malcolm Chisholm, calmly announced earlier this month that millions of pounds are to be spent sending Scottish patients to have their operations in private hospitals. Since the purchase of the HCI hospital in Clydebank the Scottish Executive appears to be overcoming its historic reluctance to enlist the private sector in the fight to cut waiting times.

Last week, in another extraordinary development, Alex Salmond's one-time closest political adviser, Noel Dolan, wrote an article in The Herald calling for the privatisation of Scottish water. For those who remember the SNP's backing for the Strathclyde water referendum in the 1990s, which massively rejected water privatisation, this was a remarkable development. It was a closely argued piece in which Dolan made a strong case for enlisting private finance to modernise Scottish water and release cash for public services. But it was also one of the most remarkable conversions since the great Damascus U- turn. No Scottish Tory has dared to argue for anything so radical as water privatisation since Michael Forsyth left Dover House.

If Alex Salmond ever does return from Westminster he might find the ideological landscape altered beyond recognition. The public- sector-good/ private-sector-bad axioms of Scottish politics for the last three decades are fast disappearing. We are all modernisers now. Socialism, even social democracy, is being pushed to the margins as politicians take care of business.

What seems to have happened is this: the shift in political responsibility from London to Scotland appears to have concentrated the minds of Scotland's legislators on delivery. In the past, it was always possible to blame Westminster, Whitehall and England for Scotland's sluggish economic performance. Now, with devolution, Scottish politicians have been forced to look at the local limits to growth rather than unionist constraints upon it. The dominant post- devolution political issues are not constitutional change or the redistribution of wealth but economic malaise. Symptoms of this are Scotland's poor growth rate over the last three decades, our dismal performance in new business start-ups (one of the worst in Europe) and the failure to exploit the commercial potential of Scottish tourism.

The departure of the electronics multinationals has been a catalyst for this conversion to the growth ethic. Twenty, even 10 years ago, the response to the problems of Silicon Glen would likely have been a demand for state aid and public investment to protect jobs. Before devolution, Scottish politicians would have been blaming London for investment decisions that placed too many economic eggs in the silicon basket. Some still do blame London. But the overwhelming response to Scotland's recent dip into recession has been to devote whatever resources the Scottish Executive possesses toward creating a better climate for domestic business. This began with Wendy Alexander's scrapping of the Locate in Scotland bias in favour of inward investment.

In Kerr's budget statement it was transport - the M8 and airport rail links - which was the big beneficiary of the spending statement, not health. Yet with waiting times still growing, you might have expected the NHS to be first in the queue for more funds. As far as I could tell, the SNP spokesman Alasdair Morgan didn't actually question the allocations in his reply to Andy Kerr, merely the global sums involved, which he said had been grossly inflated by creative accountancy.

Now that the Scottish nationalists are apparently dumping their policy of increasing direct taxes, the centre of gravity of Scottish politics is shifting. There may soon be a consensus across all the main Scottish political parties, not for increasing income tax, but for reducing business taxes. The First Minister Jack McConnell isn't a convert to the SNP's policy of fiscal independence. Corporation tax isn't in his remit anyway. However, the new enterprise consensus cannot but shift the entire fiscal thinking of the Scottish Executive towards the promotion of enterprise.

The very existence of a Scottish government has created a new entry point for lobbyists. In the past, interest groups like the CBI had little leverage in the Scottish administration. All important decisions were taken in London, so lobbying the old Scottish Office was largely a waste of time. Now, however, lobbying organisations like the CBI can target their message on ministers who can actually get things done. This is what Scottish business has been doing with considerable success. Andy Kerr is understood to have frozen business rates against the advice of many officials.

To anyone who has been watching Scottish politics these last two decades or so, this development is extraordinary. No one expected that the old socialist values of the Scottish political classes would be ditched so readily. The pity of it all for Scotland's traditional business party, the Scottish Tories, is that they aren't getting any of the credit.

Copyright 2002
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