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United financial kingdom

Douglas Fraser | 18:47 UK time, Monday, 14 September 2009

It used to be that business leaders in Scotland kept away from any controversy around the country's constitutional future.

A few lined up on either side of the debate ahead of the 2007 election, when endorsements dominated the final 10 days.

But since then, almost all have been very careful to avoid comment on the prospect of a referendum and how business would view a move towards independence.

But there's a bold opinion been expressed by Scottish Financial Enterprise, the trade body representing the banks, asset managers and insurers.

In written evidence to the Holyrood committee newly embarked on an inquiry into the finance sector, SFE makes it clear where it stands.

In answer to the question: how should Scotland differentiate itself and promote itself in future, the submission reads: "We need to take the initiative and, to do that, continued co-ordination between Scottish and UK agencies and actors is essential. Scotland's position as part of the UK and part of the City of London brand is very important internationally."

It goes on: "More than half of financial services jobs in the UK are outside London and the distinctive nature and heritage of Scotland as a financial centre enhances and broadens the UK's promotional pitch for international business."

There follow a couple of calls for the Scottish Government to avoid actions that damage business's prospects in international markets, particularly in relation to other parts of the UK.

It doesn't actually spell out the possibility of higher income tax, but you can see where they're going with this: "We suggest that all policy proposals at the hand of the Scottish Government should be subject to an 'international competitiveness assessment', similar to environmental impact assessments. If a policy seems likely to harm our international competitiveness, consideration of that should weigh heavily in any decision whether to proceed."

The warning is of a high speed rail network that stops in northern England. That is seen as the most significant infrastructure issue in the immediate future, "and we cannot afford to put Scotland at a disadvantage to competitor areas south of the border by allowing High Speed Rail links to stop short of Scotland".

More when chief executive Owen Kelly is quizzed by MSPs on Wednesday.

Comments

  • Comment number 1.

    "Scotland's position as part of the UK and part of the City of London brand"

    Good grief!

  • Comment number 2.

    Good grief indeed! That sentence alone sent a shiver down my spine. Misguided at best - sinister at worst.

  • Comment number 3.

    Nonsense like this will increase as Independence looks more and more like becoming a reality.

  • Comment number 4.

    Well, well, Douglas I wondered when you would get back to your old Herald line and this is surely it. An uncritical and supportive approach to a unionist argument. City of London Brand indeed! Who in their right minds would want to be associated with that bunch after what they did to the financial structure not only of the UK but most of the world, for which we will be paying for years.
    Your true colours are showing Douglas, you must be looking for promotion in the BBC!

  • Comment number 5.

    Given the financial sector's track record on making judgements and ability to lose money on a gigantic scale I wouldn't respect their opinion on the colour of grass

  • Comment number 6.

    With the fuzzy numbers the SNP has always banded around with regard to the true cost of independence these are questions that should be asked. Without even considering how oil (declining) oil revenues might be parcelled up there is the elephant in the room of the large public sector in Scotland.

    Independence will come with a price and it will be large tax increases to pay for the lunacy.

  • Comment number 7.

    Given the harm that the financial services sector has caused and given the lack of pro-active support it has provided for the Scottish economy I am very surprised that Scottish Financial Enterprise still receives support from Scottish Enterprise.

    People really do have to begin to understand that this sector although it may employ a lot of people directly has been - to coin a phrase - both socially and economically useless.

  • Comment number 8.

    Actually, this statement from the SFE is quite profound. It's seriously positive and supportive of the Scottish financial industry, and of its importance to the City. That's a big deal.

    They can, and should, worry about funding and supporting business post-independence, should it happen. This is important. They don't appear to be toeing any party line here, so why should they toe the SNP's? (Supporting the status quo does not make them Labour or Tory minions.) Their stance seems valid and balanced, and I'd like to see some numbers from them.

    In fact, I'd like to see more numbers in general, rather than the hand-waving both sides of the political fence are guilty of. Despite all parties accepting now that actually it would be entirely possible for Scotland to survive on its own, there are costs and benefits to be considered, and I've not seen anything of worth from the national conversation on this.

  • Comment number 9.

    corporation tax at the rate of ireland, an oil fund the size of norway, a rebuilt financial busines where london is not the aim bit alevel of aptitude to avoid, and no talk about the arc of insolvency now.
    scotland may have people who feel they are better off under the union, but the argument has hollow legs woth a ratio of debt to gdp that is laughable and beyond a joke
    write about debt and pfi and the benefits they bring to the union. it will be a short comment.

  • Comment number 10.

    supasamsun
    Have you, er, taken a look at the fiscal deficit of the United Kingdom goevernment lately? And you can be sure the UK exchequer is counting on those very substantial and continuing oil revenues to fill some of their cashflow shortfall, as they did in the 70s and 80s.

    On the SFE statement itself, read it again closely. It could equally be interpreted as saying that Scotland has a distictive, added-value finance sector of its own, from which London benefits. It is actually very carefully phrased. Douglas Fraser or his editor have spun it one way, when it could equally have been spun another. The statement's intention is in my view carefully balanced rather than agressively unionist.

    The second part of the statement can be seen as part of the current PR effort of the finance industry to push back against regulation, taxation, and government control. Governments and taxpayers have to catch them when they fall and bail them out, but they don't want to be constrained by rules afterwards. They wouldn't, would they....

  • Comment number 11.

    @minceandmealie: "It could equally be interpreted as saying that Scotland has a distictive, added-value finance sector of its own, from which London benefits. It is actually very carefully phrased."

    This is exactly how it appears to have been intended. I don't think there's any other reasonable interpretation.

    @redcliffe62: I do believe you're handwaving. These are all good general ideas which I naturally support, but they don't tell me squat. I want analyses of numbers of business, revenue, projected uptake of new HQs in Scotland under a low business tax, estimations of (finite) oil revenue in the pessimistic case, etc, etc. Case studies, not grandstanding, please.

  • Comment number 12.

    Douglas - these are the same old arguments being trotted out. I would like to see people start looking at another aspect of the debate. If you believe that climate change, peak oil, natural resource shortages, food shortages, etc are or will become a reality in, say, the next 10 to 30 years, then is Scotland best placed to cope with these eventualities as part of the UK (or indeed as part of the EU) or independent? I would like to see some analysis and debate on this.

    The issues are complex but it does strike me that given Scotland's population size and density and its abundance of resources (oil, gas, wind, tidal, etc) as compared with the rest of the UK, then these issues should are at least worth considering.

    Looking at the wider EU membership issue, there are climate change models which suggest that parts of the south of the EU could become very difficult to inhabit due to water shortages in the not too distance futture. Will we all be happy with the concept of of freedom of movement of workers if this happens?

    It surprises me that these type of issues are not being discussed more. I appreciate that the issues may be controversial - they are based on taking a nationalistic approach to protecting ourselves from the effects of climate change, peak oil, etc, and this runs contrary to the approach of finding international solutions to these problems. However, the prospects of international solutions being found do not seem great to me.

    I would welcome any comments on this.

  • Comment number 13.

    Douglas,
    As the business and economy editor, surely you could have produced the complete letter of evidence instead of snipping it down to paragraphs that could then be open to differing interpretation.
    So we are to believe that the financial sector who if we are to believe all that has been written and espoused, have been found guilty of gambling with monies that they held in trust, now in my book that is theft and a breach of trust.
    Douglas how about telling we the poor blankey blank infantry, why we should accept that same financial sector’s opinion on what is our future? When their past is such a mess of incompetency and illegal actions that really is the biggest disgrace over the past 50 years?

  • Comment number 14.

    @nedafo: If our resources are abundant, then of course we should continue to embrace freedom of movement.

  • Comment number 15.

    @14 -

    "If our resources are abundant, then of course we should continue to embrace freedom of movement."

    As I'm fairly certain you appreciate, the reference to adundance was made in relation to the size of its population.

    Anyway, do we currently embrace freedom of movement?

  • Comment number 16.

    This comment should come as no suprise and shouldn't be taken seriously. The business community is naturally resistant to any form of change and will automatically oppose it.

    Remember that the business community campaigned for a 'NO' vote during the debate over the original devolution proposal in 1998, so if we had listened to them back then, we would still be under direct rule from Westminster in 2009!

  • Comment number 17.

    @nedafo: Correct me if I'm wrong, but I do believe that our resources are abundant well beyond our populace. Despite being finite, that's the argument with the oil at least, right?

    And while we may not embrace the Schengen agreement, I believe we adhere to the freedom of movement of workers within the EU. Whether you or I personally embraces this (I do) is beside the point; politically we do, and for good reason, and it would be rather strange and isolationist of us to change our minds.

  • Comment number 18.

    The dominant members of SFE are surely the two government-owned banks. Can't see them coming out for Scottish independence.

  • Comment number 19.

    #12 Nedafo

    These issues are important but it may interest you to know that in his report on energy security Malcolm Wicks noted that UK Govt support for R&D in energy technology was considerably lower than France, Germany, the USA, Japan and most other industrialised nations.

    As a consequence we are well behind in terms of developing new clean tech companies that can not just take advantage of our natural resources and of course creating exports. Given the potential this is an appalling but not unexpected situation.

  • Comment number 20.

    Is the SFE fulfilling its remit? Serious weaknesses in the financial framework still have to be addressed.

    The frustration of banks is evident - the chief executive of RBS, Stephen Hester, says "arguably what we need as an economy is a rather gradual emergence from recession where the economy can complete the rebalancing that has not in any way been completed, where people can save more, borrow less, the balance of payments deficit closes, the government gets its own deficit under control". The trade deficit seems especially alarming.

    Weaknesses in the financial framework are also harming the public. Loose regulation cost the UK £30,000 per person in the latest financial crisis.

  • Comment number 21.

    Does anyone seriously imagine that Scottish Financial Enterprise has any concern whatever for the welfare of Scotland and its people? As vested interests go there is surely none which is less imbued with a sense of social responsibility than the financial services sector. Nor one that is more characterised by the basest and most self-serving of motives.

    Few things are better designed to persuade me of the desirability and efficacy of independence than an assurance that such a course of action would not benefit bankers.

  • Comment number 22.

    @Electric Hermit: Given Scotland's position as an innovative player in the financial market, I'd regard the SFE as actually a fairly important organisation, or at least one which should be if it is not. Scots have always been canny when it comes to money, remember, so of course our financial institutions are important to us.

    Yes, regulation is important, but foresight has a tendency to be hazy, and regulation tends to be based on previous rather than future events. We might be good with money, but we haven't quite figured out yet how to predict the future, Derren Brown aside.

    We need to be very careful in this regard. The financial services sector, when running correctly (acknowledging that it's prone to the occasional crash like every other industry) contributes a lot of money back to Scotland. It is imperative that, in the context of an independent Scotland, we don't push them out. The old juggernaughts of the finance world are important to us, as are the young, growing ones. If new companies and products cannot be generated here in Scotland, then our finances sector will become stagnant, and the City will storm away with all the competition, good ideas, and money. That, my friend, would be a horrendous outcome for Scotland and this, I fear, is the worry of the SFE. Good on them, they're being cautious. They're a finance institution, and they're being cautious. They should be applauded.

  • Comment number 23.

    Yes indeed, regulation is important. Both Holyrood and Westminster are holding inquiries into Scottish banking.

    The frustration of banks is evident . . .Weaknesses in the financial framework are also harming the public. Loose regulation cost the UK £30,000 per person in the latest financial crisis. [#20]

    Here is the submission from SFE to the Holyrood inquiry.

  • Comment number 24.

    New Boss : same old Douglas.


    How is alf doing over at the herald ?


    What we need is access to all the figures and an ACCURATE and IMPARTIAL assessment - You are simply incapable of being impartial. This may not be your fault, I assume it is due to all those years at the herald writing pro-labour mince.


    Scotland deserves so much better.

  • Comment number 25.

    @euroscot: Yes, we're all aware of the debt we're now in. The Government chose to bail out the banks because the other option they had at the time was to let the banks fail, which would have arguably had a much more disastrous effect.

    My point, however, was not that we should introduce no regulation. Far from it. My point was twofold: that we need to be careful with what regulation we do introduce, and that we need to be aware that no regulation can ever be guaranteed to work. Further, we cannot knee-jerk our way through policy creation.

    Now, it's true that we have a massive debt to deal with. But nobody could (and, indeed, nobody credible did) predict the scale of the inevitable slowdown or downturn, whichever it was to be. This will be the case time and time again in the future, and we can only aim to diversify and compartmentalise.

    My point was that over-zealous regulation cripples our chances of getting the gears moving again.

  • Comment number 26.

    invisible swordsman [#25]

    There are competing views on whether it was proper for London to bail out the banks in the UK with taxpayers' money to the tune of £30,000 per person - the largest subsidy pp in the world.

    On regulation, the crucial difficulty is enforcement. Perhaps there was adequate regulation before, but little enforcement. For example, a recent book on the Madoff scandal in the US [$65 billion lost] asks where was the Securities and Exchange Commission. Apparently the downside for regulators and enforcers who annoyed Wall Street was far greater than the upside of exposing what was thought to be the fraud of the century.

    Holyrood’s Economy Committee will this morning launch an inquiry into the future for the financial sector, reports 'The Herald'. “The reputation of the financial services marketplace and all financial centres, including Scotland, has undoubtedly been damaged,” the association of British Bankers says. It is therefore important the inquiry is thorough and is not distracted.

    The committee will today take evidence from Paul Chisnall, of the BBA, as well as Adrian Coles, of the Building Societies Association (BSA), and Owen Kelly, of Scottish Financial Enterprise.

  • Comment number 27.

    The reputation of the financial services marketplace and all financial centres, including Scotland, has undoubtedly been damaged

    Holyrood's economy committee had better hurry up with its inquiry. Finance ministers and central bankers from the G20 countries are due to meet November 7-8 in Scotland.

    The G20 is said to be replacing the G8 as the permanent council for the world's economic co-ordination.

 

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