Singapore on the Clyde?

What does “radical” look like? Well, according to a new report published by Sir Tom’s eponymous Hunter Foundation, Scotland should learn from Singapore by creating “a business-friendly environment centred on trade, a strategy for attracting more and value-added inward investment with pro-business policies, low levels of taxation and a market-driven healthcare system.”  

“Nothing is free in Singapore but here everything seems to be,” explains Sir Tom who is worried that “the Pound printing machine can’t keep up”. He seems to believe that telling Scots they don’t pay for the public services they consume (spoiler: they do) is an appropriate platform on which to construct “a coalition of all the talents, political, business, civil society, to unite around a ten-year plan and draw our world class talent together as one”.  

There’s a lot going on here. To be fair, the analysis and recommendations included in the report are somewhat more nuanced than Sir Tom’s introduction – essentially a magnificently portentous non-sequitur – and media interviews would lead you to believe. But it’s the latter that generated the headlines. These are the arguments Sir Tom conveyed so confidently on the Sunday Show and in the Sunday Times. 

How to respond? Length prohibits a careful rebuttal of every erroneous assertion and exaggeration.  So, let’s focus on three things Sir Tom gets wrong. 

First, Singapore is a very poor comparator for Scotland - or indeed, practically for every other country – because in global terms, Singapore is simply too anomalous.

In How Asia Works his peerless study of Asian development, Joe Studwell argues that “offshore centres are not normal states”, pointing to their “built-in fiscal advantage” relative to other nations with “larger, more dispersed populations and agricultural sectors that drag on productivity.” Studwell is rightly scathing of those, particularly the World Bank, who have presented the “port-offshore” city states of Singapore and Hong Kong as models of development that others could and should seek to emulate.  

Martin Wolf has also patiently explained why Singapore is not a “plausible model for the UK’s future…The idea that eliminating tariffs and regulations and slashing taxes will deliver broadly-shared prosperity in post-Brexit Britain is a fantasy.” 

And it’s simply inaccurate to argue, as Sir Tom does, that “Singapore and Scotland are two small countries with similar sized populations.” It is true that populations are similar: 6 million and 5.4 million respectively. But Singapore’s land mass is a mere 735 square kilometres compared to Scotland’s 80,231 square kilometres. Physical scale matters - especially in relation to the delivery of public services – as does location; Singapore’s strategic location between the Indian and Pacific oceans has been a significant long-term advantage.  

Second, Sir Tom’s account of the factors underlying Singapore’s rapid development might best be described - generously - as partial and incomplete. Martin Wolf explains that Singapore “is not a laissez faire paradise”. He’s not wrong. The state is a very active player in the Singaporean economy. 

For instance, Temasek, the state-owned investment firm, owns majority stakes in many of Singapore’s most successful firms such as Olam, GHX, Singapore Telecommunications Ltd, and Singapore Technologies Engineering Ltd . Weirdly, there is not a single mention of Temasek, a pivotal influence on the Singaporean economy, in the Hunter report. Nor is there a wider discussion about the potential benefits to Scotland of industrial strategy and different forms – including public – of ownership. 

As the Hunter report recognises, as of 2020, nearly 80 per cent of Singaporeans live in public housing. 

The housing challenge was not solved by the market.

Sir Tom is quick to compare Singapore’s 24 per cent top rate of income tax with Scotland’s “staggering” 48 per cent (a rate that is not remotely unusual by OECD standards). But he neglects to mention that workers aged under 55 years and employers in Singapore are compelled to contribute 20 per cent and 17 per cent of ordinary wages to the central provident fund from which they can draw support for housing, health and pensions. These are very large numbers.  To be remotely credible, any comparative analysis of fiscal and welfare state regimes must take them into account.  While the Hunter report acknowledges both the role played by the fund and the difficulties in comparing levels of public expenditure, it fails to give them due weight.  

Finally, Sir Tom’s choice of exemplar countries is the result of some extreme – almost comically so – cherry picking. If you choose to study only Ireland and Singapore the conclusion that “we need a low tax regime” will inevitably follow.  

What about other countries of a similar size to Scotland in northern and western Europe with very different approaches to tax and spend but which nonetheless sustain highly productive and dynamic economies?  

Denmark sits just across the North Sea and has a similar population to Scotland. Its enduring economic success is confirmed by its high GDP per capita, high employment rate (especially high for women), high business investment and consistently strong performance across all credible global indices of innovation and competitiveness. Denmark is also home to a number of large, dynamic firms successfully competing in global markets such as Maersk, Carlsberg and Novo Nordisk. 

Why would Sir Tom choose to ignore Denmark? Perhaps because its top rate of income tax is 55 per cent and is paid at a threshold of only 1.3 times the average wage (the equivalent of £46k in Scotland)? It has high trade union density and wide collective bargaining coverage. Social spending is high. Public sector employment as a share of all employment is higher than Scotland. The other Nordic and Benelux countries and Austria share similar characteristics and, to a greater or lesser extent, manage to reconcile economic dynamism with strong social protection. Are these countries not better comparators for Scotland? 

His obsession with inward investment would look a bit odd to Danes given the enduring success of their domestic firms.

The ownership structures and corporate governance regimes of Danish firms are very different to the UK’s way of doing things. All three Danish firms mentioned above are foundation owned. All Novo Nordisk’s A class shares are held by the foundation thereby removing pressure to report ever higher quarterly returns and enabling the long-term patient investment on which its success is built. 

Denmark might not have set out to ‘tax its way to growth’ but it’s entitled to feel very satisfied with the economic and social outcomes achieved through its high tax system (as a proportion of GDP, Danish tax revenues were the highest in the EU in 2021).  

There is a lot more to be discussed about Singapore and the lessons Sir Tom draws from its development model, such as the imbalance of rights between indigenous and foreign workers and the worryingly weak democracy (the People’s Action Party has been in government since 1959). It is ludicrous to attempt, as Sir Tom does, to draw a line of causation between the obscenely high pay received by ministers in the Singaporean government (by a distance the highest in the world) and the success of its economy. We might return to these issues in a future blog. 

It’s a shame that Sir Tom chose to present his foundation’s report in such an inflammatory way, one that risks embedding multiple fallacies about the process of economic development in a modern nation. The full report does raise some valid questions about the longterm funding of public services.  

The debate over the future of Scotland’s economy needs to improve and, yes, it is crucial that the voice of Scotland’s business community is heard (a useful first step might be for that community to organise itself in such a way that it can bring serious analytical weight to the debate). But it’s unfortunate that those with resources can’t use them more judiciously. It’s hardly convincing to call for consensus while offering cherry-picked evidence and a return to failed policies that continue to do such damage to so many people.