Vince Cable: UK single market is good for business

Vince Cable has been in Edinburgh today to launch the fourth in the series of  “Scotland Analysis” papers produced by the UK Government about the effect of independence for Scotland on a variety of issues. Today, the spotlight is on business regulation and the changes that independence would force on businesses both in Scotland and the rest of the UK with two separate regulatory systems to get round. The example Vince cited on a Radio Scotland interview this morning (which you can listen to here) was a simple one of buying petrol on either side of the border, having to claim the VAT back through two separate systems.

The paper concludes that:

Currently, Scotland’s integration within the UK’s domestic market brings benefits to all. The size and scale of that market brings opportunities to trade, move jobs, collaborate to develop new and future technologies, travel and communicate with each other efficiently and benefit from economies of scale. The analysis in this paper shows that effective common regulations and institutions, a unified labour market, a shared knowledge base and integrated infrastructures are central to the success of this unified domestic market.

In the event of a vote for independence bodies that support the UK in its present form would continue to undertake their functions on behalf of the remainder of the UK. However much an independent Scottish state sought to stay aligned with regulations and institutions in the continuing UK, a single market between two separate states is not the same as a fully integrated domestic market. Divergence and fragmentation would be likely to lead to short-term and long-term costs, and prolonged uncertainties, for businesses and consumers.

The paper is clear that being part of the EU can’t compensate for what Scotland would lose by removing itself from the UK’s single market, citing examples of how Scottish firms would be disadvantaged:

  • Reduced access to the UK single market
  • Extra administrative burdens for companies doing cross-border trade with the UK,such as EU VAT returns
  • Two different sets of regulations including those covering, company registration, recruitment and competition for firms operating on both sides of the border
  • Extra tax and pension complications for individuals working on both sides of the border
  • Uncertainty and financial costs arising from duplicating a whole new set of regulatory bodies, and disruption caused by the transition to a new set of regulations and monitoring processes.

There is an argument that larger companies who already operate across many borders would adapt with reasonable ease, but small businesses would surely find it much harder.

The benefit of the Scotland Analysis papers is that they state what we take for granted. At the moment, businesses know fine that the paperwork for a transaction in Yeovil  is the same as one in Auchtermuchty. We also know that the UK single market is worth far more than the EU market. Scotland may well choose to vote for independence, but in doing so should be under no illusion about what it means for everyday life.

Speaking in Edinburgh, Vince said:

The union works for businesses on both sides of the border.  Scotland is famous for its world class products and enterprising spirit – and the UK’s truly free, integrated and growing market helps Scottish firms exploit these to the full. 

As the economy starts to heal, now is the time to focus on renewed opportunities to do business.  The last thing firms need is a new set of rules and regulations, new costs on exports, a smaller labour market and less reliable support for innovation and knowledge transfer.

Breaking up Scotland’s most lucrative market would destabilise enterprise and potentially put growth and jobs at risk.  My message to the Scottish business community is that we’re stronger and more secure together.

The SNP Government’s response is tellingly emotive. They simply play the scaremongering card – ramping it up with a Twitter hashtag #projectfear. It’s hardly grown up debate  but we know from the AV referendum that emotive negativity can be very effective. The Better Together campaign has much to do in terms of capturing people’s hearts. The big difference with the AV referendum is that, to be honest, nobody really loved AV. There are lots of practical, emotional and family reasons to want to be part of the UK.  Better Together and the UK Government are way ahead on the first, but are being left behind on the others.

* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings

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4 Comments

  • Al McIntosh 2nd Jul '13 - 5:02pm

    It must be truly embarrassing for the pro-Trident no campaign to be scaremongering on trade on the same day as research by AXA business insurance revealed that no less than 52% of small and medium sized enterprises in Scotland support a Yes vote for independence. Liberals should instinctively believe Scottish businesses about what is good for them rather than reports written by mandarins in bloated Whitehall departments.

    It is not only the SNP which have slammed the Westminster-led no campaign’s tactics as scaremongering. The latest round of scare stories from the Westminster government has been described by the deputy leader of the Scottish Tories, Jackson Carlaw, as ‘silly’ and by former Tory donor John McGlynn as ‘puerile’ and taking the ‘independence debate to a new low”.

    If political freedom were so bad for business then why in a video posted on the UKTI (UK Trade International) website called “Opportunities and Doing Business in Ireland” does Julian King, Former British Ambassador in Ireland (2009-11) point out that investment of UK companies in Ireland has increased by 33%? Far from a common tax regime within the UK over which Scotland has little or no control and which is among the most complex in the world being of any benefit, the Irish Government’s freedom to determine its own corporation tax regime is a reason to for its success. Only an independent Scotland will have the political freedom to set a simpler tax regime, reducing paperwork for businesses and making it a more attractive place to do business than the UK.

    The real threat to Scottish business comes from the country being fettered together with a Westminster obsessed with creating uncertainty by bickering about withdrawing from the European Union. Only a Yes vote in September 2014 will keep Scotland’s membership of the EU and access to EU markets in the hands of the Scottish people. As Scotland’s small and medium sized enterprises realise – a Yes vote is good for business!

  • Liberals instinctively believe that given perfect and complete information, a rational actor can make an optimal choice. A liberal will also accept that in reality, information is never perfect and complete and actors are seldom entirely rational. Questions of nationalism are classic examples of where emotive influences override rational behaviour.

    It is interesting how a nationalist campaign that bases its entire reason for being on opposing right-wing Toryism in Westminster seems to draw much of its pitch for the future from that very same right-wing ideology, though. Nationalists recently were espousing the race to the bottom with corporation tax, now its rational actor theory coming back from the grave courtesy of Mr McIntosh here.

    It is an unavoidable consequence of the nationalist ideology, of course. An exceptionalist, excluding attitude that undermines cooperation and puts us all on that race to the bottom that benefits no-one.

  • Robin Bennett 3rd Jul '13 - 5:43pm

    Sad to see Vince Cable lending his name to this unbalanced report, emphasising all the possible cons but none of the possible pros of independence. There are no concessions to the business case for independence – for example, the transfer of powers from London which would bring in head or representative offices, and help to stem the flow of bright minds to the south, something which is achieved only in the separate legal profession (and the church, though that is only history now).

    “Project Fear” is an epithet which comes from the bowels of the No campaign, apparently. This document fits in well – there are 19 instances of the word “might”, mostly rebuttable conjecture.

    The initial press release claimed (to quote the DailyTelegraph) that “mobile phone users could incur roaming charges while still in the UK if Scotland gains independence”, just the sort of misinformation the Yes Campaign have exposed with gusto and no doubt with silent thanks to Vince.

    And, in the interests of balance, Al McIntosh, I read that the AXA report’s sample of Scottish SMEs was less than 50. Cue derision from the No campaign!

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