What next for Scotland?

After a staggering display of the country’s democratic voice which saw an 85% turnout in the independence referendum, Scots decided to remain part of the UK, but what comes next for Scotland, and for local retail?

by Kevin Scott

It was always going to come down to just a single word. In the end that word was ‘no’. Wasn’t it glorious though? The debate, the queues of people registering to vote – many for the first time – the pride and the tension. Whether you were delighted or dejected, relieved or reviled by last month’s independence vote result, there’s no denying that we emerge from it into a new Scotland, one where people and not just politicians have a voice.

We’ll turn our attention to the future in just a moment, but to recap, 3,619,915 votes were cast in the referendum on 18th September – 84.59% of those who had registered. With 55.3% of the vote, the No vote was declared the winner at 6.08am on the morning of the 19th, but in truth the result was clear a couple of hours before then. Only four of Scotland’s 32 council areas voted in favour of independence, among them Glasgow and Dundee.

So, for the first time in two years independence is not at the forefront of politics in Scotland – though don’t think for a second the issue has gone away. The close nature of the vote (think for a moment that just a 6% swing would have led to the end of the UK) along with the surge in membership in the SNP and other pro-independence parties indicates that Yes campaigners are merely dusting themselves down. In truth, to paraphrase the outgoing Alex Salmond, the moment has passed for probably a generation, but not a lifetime.

Where now then? Well, come November we’ll have a new First Minister – in all likelihood that will be Nicola Sturgeon – and one of her first duties if she does inherit the role will be to increase the SNP presence in Westminster in the May 2015 General Election. That can only be in Scottish interests.

And so to our industry. It was grocery which came to the fore late on the campaign when the bosses of the big four supermarkets met with the Prime Minister (apparently on unrelated matters) before publically declaring, if not support for the union, that prices could increase in an independent Scotland. Asda’s Andy Clarke went as far as to explain that the complexity of the company’s business model would lead to said price increases. Whether this is true or not, we will never know, but the fact that grocery featured so prominently in the days before the vote illustrates how vital it is to the overall economy.

Prices will remain the same in stores for now anyway, but this vote has changed Scotland; it’s changed the UK and that will have repercussions for all, including local retailers and their customers.

Work will have to be taken by all sides of the debate to ensure that whatever new powers are proposed for Scotland are identified and implemented with minimal fuss – certainly this will be concluded quicker than even the most amicable of splits would have, which for an industry beset with concerns over currency and the economy, will most likely be welcomed.

Scottish Grocers’ Federation Chief Executive John Drummond says: “We remained strictly impartial during the entire referendum debate but it was clear to us that risk and uncertainty were always the biggest concerns for our members. Hopefully the result means an end to many of these uncertainties. We would urge the Scottish government to now work with us to ensure we create the best economic conditions for a successful, sustainable and independent convenience store industry in Scotland.”

The work to build on that has already begun. There was the inevitable political fall out from the previously united Unionist parties as party politics began to get in the way of a clear pledge made by former Prime Minister Gordon Brown that would see so-called Devo-Max implemented in Scotland. This ‘vow’ was then signed by David Cameron, Ed Miliband and Nick Clegg and plastered on the front of The Daily Record.

Worker’s union Unite says it will be closely watching the discussions. Unite Scottish Secretary Pat Rafferty says that the immediate emphasis should be placed on the progression of the devolution timetable to ensure a transfer of further powers to the Scottish Parliament: “This process will not be without significant challenges, but any failure to deliver on a settlement that satisfies the majority of people in Scotland will be a gross insult to the result and the will of the people.”

What politicians must now do is decide what these powers will be, and lobby groups such as the Scottish Retail Consortium, will play their part. The SRC’s Director David Lonsdale comments: “The retail industry is the country’s largest private sector employer, and the SRC and our members look forward to engaging constructively and positively to ensure that the further powers to be devolved are implemented in a sensible and cost effective manner.”

Lonsdale adds that Scotland remains a great place to do business and that politicians will enhance our prospects even further by prioritising an attractive environment for retailers and others to invest in.

In the wake of the result a new paper was published by economits David Bell and David Eiser which explores what fiscal power could be heading Scotland’s way.

The ‘Scotland’s Fiscal Future’ paper notes that there is wide variation in the proposals coming from the different parties and as such forming a consensus will not be easy. However, there is some consensus around income tax as the most suitable tax to devolve further. It generates relatively large revenues and has fewer problems than the other significant sources of tax revenue in Scotland.

For retailers who believe Scotland should be more autonomous, even the more modest proposals would give Scotland a huge degree of fiscal autonomy, evolving into a semi-autonomous state within a fiscally federal UK. However the paper predicts that further extension to tax powers may not be enough to placate future demands for independence.

“There may come a time where the majority of Scots are prepared to sacrifice the efficiency aspects of the Union in favour of having a less remote government,” say Bell and Eiser.

To look at the facts, Scotland’s current spending substantially exceeds its ability to raise tax. Of the £34bn spent by the Government in 2012/2013 only £2bn was raised in Scotland – through Council Tax and Business rates.

That was always due to change. With the Scotland Act 2012, a Scottish Rate of Income Tax (SRIT) will be established in line with the UK’s in each tax bracket. From 2016 all rates will be reduced by 10p and it will then fall to the Scottish Government to determine the SRIT. This is a complex way of explaining how the Scottish Government will come to control 10% of income tax. The likelihood is that the rate would remain consistent with the UK, at least to begin with.

The SRIT along with further devolution of landfill tax and stamp duty will give the Scottish Parliament control over 27% of money raised, which will lead to a reduction in the block grant from Westminster.

Following the 11th hour intervention from the three leading Unionist parties that came after the Yes campaign took the lead in the polls for the first time, further autonomy is almost certain. The next few months will doubtlessly involve much acrimony and posturing but a commitment has been made to deliver on this before the general election and reneging on that would have severe political consequences.

The LibDems and the Conservatives have previously indicated they could back full devolution of income tax to Scotland, while Labour is more likely to propose extending the measures in Scotland Act from 10p to 15p. The reality then is that while many changes will take place behind the scenes and the way money flows in and out of Scotland will differ from the status quo, day to day business will likely not change much.

Increased patriotism could lead to an increased interest in Scottish food and drink brands, but beyond that, the fears over currency changes and any price increases that may or may not have been scare tactics, will not now come to pass. At least for now.

So for retailers, it’s business as usual, but with a customer base that has emerged from a passionate, enlightening debate that engaged Scots on a political level like nothing that has ever come before it.

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