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Borderland: Assessing the implications of a more autonomous Scotland for the north of England

IPPR North, business and industry, economy, Scotland, taxation

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Author(s):  Katie Schmuecker, Guy Lodge, Lewis Goodall
Published date:  13 Nov 2012
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The precise nature of Scotland’s future relationship with the United Kingdom will emerge over the course of the next few years. In this report, we seek to illuminate a neglected aspect of the Scottish debate by assessing the implications of either an independent Scotland or a fiscally stronger Scottish parliament for the north of England.

Voices in the north of England, especially in the political and business communities, have begun to express serious concerns about how they believe greater powers would give Scotland a competitive advantage over the northern economy. In particular, they worry about the consequences for their economies of moves by a fiscally autonomous Scotland to cut taxes in order to encourage investment and business north of the border.

We also briefly explore whether political and constitutional change in Scotland provides an opportunity for the north of England itself to argue for greater autonomy from the Westminster government. Following the recent failure of directly elected mayors – almost a decade on from the failure of elected regional government – the north of England will need to champion a feasible, deliverable form of decentralised government if it is to seize the opportunity presented by developments in Scotland.

This report argues that, in the current climate, Scotland would be constrained in what she could do, particularly in respect of engaging in aggressive tax competition. In particular, the likelihood of Scotland being able to slash corporation tax to 12.5 per cent – as some leading Scottish business figures argue it should – seems remote.

Nonetheless, a fiscally autonomous or independent Scotland will have the potential to muster other capabilities to complement a targeted industrial strategy. And it may well be that this kind of approach should be of greater concern to northern leaders: given the proximity of the North to Scotland, it may be the small things – such as capital allowances or air passenger duty – that prove to be more significant.

It is not for the North to stand in the way of further devolution to the Scottish parliament, or indeed independence, if that’s what the people of Scotland choose. However, northern leaders do need to ensure that there are not detrimental consequences for the North as a result of how the Scottish debate develops:

  • First, northern leaders should engage with the negotiations currently taking place about Scotland’s future. As Scotland’s nearest neighbours, it is important that the North joins the debate – especially on the point of what any 'devo-max' option looks like.
  • Second, the North should take a leaf out of the Scots’ book when it comes to ambition. Northern leaders should argue that one way to ensure the North does not fall further behind as Scotland becomes more powerful is for it to be given greater control over its own economic future.
 
 

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Guy Lodge, Associate Director for Politics and Power

 

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