One of the UK's leading business figures and philanthropists has called on the UK government to reduce corporation tax in several sectors of the Scottish economy, to grow the country's growth.
Sir Tom Hunter, who was once described in the Sunday Times Rich List as Scotland's first home-grown billionaire, urged both the UK and Scottish governments to “make all of Scotland a 15 per cent corporate tax zone for three global growth sectors: renewables and low carbon manufacture and services; life sciences and medical technologies and software, big data and artificial intelligence".
Sir Tom argues Scotland should emulate the experience of Ireland, which has grown its economy on the back of lower taxation and a favourable investment environment for foreign companies.
Currently, Scottish companies making more than £250,000 ($317,000) a year, like the rest of the UK, pay 25 per cent corporation tax.
Between 2012 and 2022 Ireland’s economy grew on average by 8.9 per cent a year compared to a somewhat slower average in Scotland 0.9 per cent, according to the research company Oxford Economics.
The Irish government has forecast a surplus of 65 billion euros over the next three years.
Sir Tom said that Scotland needs a one-stop shop for foreign direct investment, similar to IDA Ireland, which has opened the door to around 1,700 major multinational companies to invest in the country.
“We need big ideas that can be delivered and we need a one door approach to attracting FDI that rivals IDA Ireland.
“We need to understand, over and above what’s noted here, why their 162 employees in 23 offices globally delivers so well against Scotland Development International and their 348 employees across 30 offices.”
The Hunter Foundation is recommending that three areas of Scotland's economy be subjected to lower taxation, with foreign investment into the sectors being overseen by one agency.
Renewable energy and low carbon manufacturing and services
Oxford Economics said climate change will be the “dominant economic story for the global economy over many decades to come.”
“And Scotland is well-placed to play a large role, with significant economic benefits for all.”
The strength of Scotland in the renewables sector is obvious.
In 2019, 97 per cent of electricity generation in Scotland was from renewable energy sources and Scotland supported 30 per cent of UK jobs in offshore wind and almost a quarter of UK jobs in onshore wind.
According to a UK parliamentary report, Scotland is also a net exporter of electricity. In 2020, 31.8TWh of renewable electricity was generated in Scotland. This is the equivalent of powering all households in the country for almost three and a half years.
The Oxford Economics report states that as North Sea oil and gas decline, the skills from that sector can be transferred to new energy technologies like renewables, carbon capture and storage and hydrogen.
Life sciences and medical technology
Global exports for pharmaceutical and medical equipment products from the top 20 exporting countries stood at over $600 billion in 2020, according to Oxford Economics, with research and development spending estimated at $238 billion in 2021 and projected to rise to $285 billion by 2028.
The Scottish government at Holyrood has identified life science as a particular growth sector within the National Strategy for Economic Transformation.
Software and artificial intelligence
Scotland also has the potential to develop its digital economy further.
According to UK government figures, the UK digital economy generated about £151 billion for the overall UK economy in 2019, around 8 per cent of total GDP.
It also accounted for 9 per cent of the UK workforce.
The consultants PwC estimate that AI could contribute up to $15.7 trillion to the global economy by 2030, $1.8 trillion of that coming from northern Europe.
ICT has been Scotland's fast-growing sector for the past ten years, meaning Scotland is well-placed to use AI. The report states several emerging ICT clusters in the country would benefit from government support, particularly in Glasgow, Edinburgh, and Dundee.
The global travel company, Skyscanner was founded in Edinburgh. CodeBase, the UK’s largest tech scale-up incubator and the supercomputing complex, the Edinburgh Parallel Computing Centre are both located in the Scottish capital.
'Grown-up debate and action'
The Oxford Economics report does urge for the three sectors to be focused on to lead Scotland's economic growth, it also recognises the issues with the relationship between the Scottish and UK governments that “may need to be addressed”.
Doing nothing is not an option, said Mr Hunter.
“It's time for a grown-up debate and action over how we make Scotland an economic powerhouse.
“We need to stop doing those things that don’t add any value and focus on what delivers otherwise, with a ticking demographic time bomb, we will leave an unbelievably appalling legacy for the next generation of Scots to contend with.”