White Paper proposes corporation tax cut to lure businesses to independent Scotland

The Scotland's Future White Paper sets out the case for independence, including analysis of the country's financial position, and provides detail of what the current Scottish Government's priorities would be in the first term of the new Scottish Parliament if elected in May 2016. The document also sets out the transitional arrangements which would apply between next year's referendum and the day on which Scotland would become independent in the event of a 'yes' vote. That date has been set as 24 March 2016.

"We know we have the people, the skills and resources to make Scotland a more successful country," said Alex Salmond, Scotland's First Minister. "What we need now are the economic tools and powers to build a more competitive, dynamic economy and create more jobs."

However, business body the Confederation of British Industry (CBI) said that it believed that "the nations of the UK are stronger together" and that Scotland's business and economic interests would be "best served by remaining as part of the UK".

It is the view of the Scottish Government that an independent Scotland would retain the pound as part of a "formal monetary union" with the rest of the UK, with monetary policy set by the Bank of England based on the economic conditions across the Sterling Area. Scotland would participate in "ownership and governance" of the Bank of England on a shareholder basis, according to the document. The White Paper also pledges that Scotland would remain a "constitutional monarchy for as long as the people of Scotland wish us to be so"; and would remain a member of the EU on an "independent and equal" basis.

The paper also sets out a number of policies that would be introduced by the current Scottish Government if elected following independence, including better childcare provision to enable more women to get back into work. It plans to retain the 'triple-lock' pension guarantee as part of a pension system that "meets Scotland's needs"; along with a "guaranteed minimum wage that rises alongside the cost of living" and inflation-linked tax allowances.

The approach to tax set out in the White Paper would focus on "fairness and economic growth" on independence, ahead of a "more significant review" of the tax system once the first Scottish Parliament is established. The paper proposes inflation-linked increases to the personal allowance and tax credits; a 50% reduction in Air Passenger Duty (APD) with a view to its eventual abolition; a "competitive" corporation tax up to 3% lower than the prevailing UK rate. The tax system as a whole would be "simple and transparent", and "designed to minimise the opportunities for tax avoidance ... that have been exposed in the UK system".

The report cites findings by the Scottish Government's Fiscal Commission that Scotland is stronger or as good as the UK on key measures of economic performance. Areas of potential exploitation identified include Scotland's potential to generate 25% of Europe's offshore wind and tidal energy and 10% of wave energy, alongside an estimated 24 billion remaining recoverable barrels of North Sea oil and gas.

The paper proposes a simplified regulatory landscape with a single economic regulator responsible for the energy, communications, transport and water sectors. This regulator would be expected to work in cooperation with the regulators elsewhere in the UK. An independent Scotland would continue to participate in the UK-wide market for electricity and gas, and current market trading arrangements would continue. However, security of supply of energy for Scotland would be the Scottish Government's "central priority" with regards to energy policy.

Energy efficiency would also be prioritised; and environmental protection formally enshrined as part of a new written constitution for the country. A Scottish Energy Fund would be established to invest oil and gas revenues in order to provide investment for future generations and to act as a 'liquidity buffer' if oil revenues fall significantly in any particular year.

Infrastructure investment would remain a central part of the Scottish Government's approach to supporting long-term sustainable economic growth, according to the White Paper; with the full access to capital borrowing available on independence allowing it to take forward the infrastructure priorities set out in the Infrastructure Investment Plan. The Scottish Government would also develop an industrial strategy to promote manufacturing and its links to the local supply chain.

Scotland would retain its status as a leading financial centre according to the White Paper, on the basis that it would remain a member of the EU post-independence. An independent Scotland would also adopt EU-level financial services regulatory initiatives. A Scottish financial regulator would be established, as is the case in all other EU countries; while financial stability policy would be conducted on a consistent basis across the Sterling Area presuming that Scotland retains the pound. The Bank of England, accountable to both an independent Scotland and the rest of the UK, would continue to provide lender of last resort facilities and retain its role in dealing with systemic risk, according to the plans set out in the paper.

The Scottish Government would abolish the UK Government's Shares for Rights scheme on independence, and restore the 90 day consultation period for collective redundancies affecting 100 employees or more, according to the paper. The paper also contains a commitment to consult on a target for female representation on company and public boards, and to legislate for this if this is necessary. A new points-based immigration system to "meet the needs of Scottish society" would also be introduced, and could include incentives to encourage migrants to live and work in remoter geographical areas.