08/01/2015

By Steve Gilroy, CEO, Vistage


Since Scotland voted ‘no’ to independence in September, the process of devolving further certain powers away from Westminster has picked up momentum.

The Autumn Statement proved that the decentralisation of further power to the Scottish parliament, as well as the respective parliaments of Northern Ireland and Wales, is now well and truly on the political radar.

In his statement, Chancellor George Osborne announced that the UK Government will publish draft clauses for certain instances of devolution in January 2015, transferring to Scotland autonomy in setting income tax rates, their thresholds the non-savings and non-dividend income of Scottish taxpayers, plus the power to charge tax on air passengers leaving Scottish airports.

The HMRC and HM Treasury also concluded that corporation tax rate-setting powers could be devolved to Northern Ireland provided that the Northern Ireland Executive is able to manage the financial implications of the shift. Agreement has also been reached with the Welsh government on the devolution of non-domestic business rates policy to be operational by April 2015.

However, numerous British SME mittelstand business owners and directors have given a less than positive response to the prospect of national devolution.

In a recent poll of 271 Vistage members, all owners of SME businesses or CEOs, tax setting powers for Scotland and other national parliaments was given a luke warm response. In fact only a fifth felt that the power to raise income tax should be devolved to regional Parliaments – whether for Scotland, England, Wales or Northern Ireland.

While an additional proportion (18%) felt that devolution to national parliaments was good and they should have control of “almost everything to do with business and tax matters”, this was balanced by 21% who felt the exact opposite and that national assemblies should have “nothing” to do with tax and major business matters!

Some business owners were slightly more receptive to regional parliaments setting business rates and having control of business support and investment policy (37% showing support), as George Osborne announced regarding the Welsh assembly.

What this survey shows is that policy created in a hurry as a response to the Scottish referendum may have huge consequences for businesses in the rest of the United Kingdom. Business owners throughout the UK are yet to be convinced that this is a good thing.

During the devolution campaign we saw policy-making on-the-hoof with little consideration of its eventual repercussions on the rest of the country. Tax raising and greater powers for Scotland has lead to similar, and not unreasonable, demands for greater powers from other countries and cities in the UK, and policy for a ““northern powerhouse” to balance London and Scotland.

There are pros and cons for continued devolution, and our poll strongly highlights that SME business owners largely remain to be convinced about the upsides outweighing the downsides for them.