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1. The Euro zone is moving towards fiscal harmonisation which means that it is unlikely that Euro zone members will be able to compete with each other on the basis of favourable tax rates. The near collapse of the Irish economy and the bail outs in Greece and elsewhere mean that it is likely that this will be accelerated.
I appreciate that on the finer point you're correct. (As usual!) I'm aware that Germany & France have been lobbying Ireland unsuccessfully since the 1980's over the 12.5% corporation tax issue. However, in spite of the large Euro bailout that the Irish Government were able to secure, the Irish (understandably if unfortunately) were not prepared to compromise on the corporation tax issue. I understand that they were utterly immovable despite the best threats the Troika could muster. One could take the view that the Irish aren't going to be able to swim against the tide indefinitely, but on the other hand it's abundantly clear that they have no intention of changing anytime soon. Furthermore, one has to assume that if the Troika weren't prepared to withhold bailout money over the issue (and there was discussion over that), then they aren't yet in the mood to force it. I should point out that I'm not advocating that Scotland try and compete penny for penny with the Irish over corporation tax (nor are the SNP). I mean it's not actually necessary for Scotland to lower tax that far, as even despite the recession, Irish GDP per capita is still significantly higher than Scottish GDP per capita. As such we can get away with a higher corporation tax level and still remain competitive. However the gulf between 12.5% and 24% is the problem, it just isn't leaving Scotland with enough share of foreign direct investment to keep down unemployment.
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Now, I don't know about Dell, but I do know about IBM. IBM did not shift their Greenock operations to Dublin. IBM Greenock was mainly manufacturing for the IBM PC division. This business was sold to Lenovo. Lenovo has gradually shifted all manufacturing to China (with some in India). IBMs' Dublin operation was low skill assembly. Parts were assembled there and then shipped, semi-finished, all over the world as part of a tax planning strategy called BOP. I visited the Dublin plant about 12 years ago and there were relatively few people employed there.
You've caught me with my pants down so to speak, I'm compelled to go against my usual grain and parrot information I've heard from others. You'll understand that unlike most subjects, corporate decision-making isn't something I can reference to in Google. Having sought clarification on this, and while you're correct in what you say, I ain't wrong! IBM Greenock used to employ 6000 people, and you're right that the reduction of this to 2000 (mostly agency) staff in their call centre was largely due to the sale of the manufacturing plant to Lenovo and Sanmina, and thereafter the plants subsequent closure. However, I'm reliably informed that IBM Supply Chain and R&D also formerly operated out of the Greenock site, and at the same time that these operations were closed down in Scotland, the same branches of IBM expanded in Ireland. Many Scottish IBM employees were offered relocation in place of redundancy and followed their jobs to Ireland. I realise that I may have been incorrect when I stipulated Dublin (I thought that IBM were purely based in Dublin based on the location of my source), but it appears that the Irish IBM expansion happened across 3 sites in the Republic of Ireland, which employ over 3000 people. Are you an IBM employee, in which case we might share mutual acquaintances?
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2. You are correct re: the defence budget. But don't forget that defence industries employ many people in Scotland. 5000 at Faslane alone and then warship building on the Clyde and at Rosyth. There are also a great many Scots in the armed forces. What happens to them when they return home looking for jobs, houses and benefits? The savings equation is a bit more complicated than it appears in the politician's sound bites.
Sure, I can accept that what's being advocated will at very least lead to redundancies in certain types of job at Faslane. While I don't like nuclear weapons, I harbour no ill-will to those who work in the place. That said, if the rUK opted to continue maintaining nuclear weapons, it's more than likely that those specifically tied to nuclear propulsion and weapons will find their skills in great demand should they be prepared to move to wherever the rUK decides to put their base. In purely economic terms though, the 'work' done at Faslane isn't an overall benefit to the economy, it's just moving money from the productive sector of the economy through taxation, to pay for maintaining nuclear weapons. Given that I don't value the 'output' of Faslane, the staff there might as well be smashing rocks. If they were being paid to smash rocks it would be mildly preferable because at least then they wouldn't be pumping radioactive isotopes into the Gare Loch (see link at foot of page), but presumably the 'jobs' argument in defense of Faslane wouldn't be raised so often if the staff there were actually smashing rocks?
NB: I do understand that the rock smashing analogy only holds true so long as the person considering the analogy takes the view the nuclear stockpile is of extremely limited or no benefit, but given that is my firm conviction, it's how I see it.
My answer as regards the shipbuilder(s) on the Clyde and Rosyth is along similar lines, but with a sad twist. The new Type 45 destroyers are all built, the modular sections of the new aircraft carriers being built in Scotland are almost complete (if not already finished, I'm not sure), and I believe the order books are looking decidedly blank once they're done. The only other RN project for Astute class submarines are being built in Barrow, and I'm not aware of any other major military contracts on the horizon. While my heart goes out to the workers in the shipyards, even if Scotland remained part of the union they don't have a rosy future ahead of them. The yards aren't internationally competitive for merchant shipping, and while their work on military vessels is first rate, they haven't had any export orders for military equipment either.
I suppose that in the case of Faslane and the shipyards, one could make an argument that because the bulk of the taxation that pays for these things comes from the rUK rather than Scotland, in some sense Scotland is benefiting from Goverment sponsored jobs that wouldn't otherwise exist. Then again, independence would mean the relocation of civil service jobs currently held in Whitehall which pertain to non-devolved issues. Scottish taxpayers are already paying for these services, and while I could accept that a Scottish bureaucrat wouldn't have the same efficiency of scale as a UK-wide bureaucrat, I don't expect the positions to be on the same pay grade. Former cabinet secretary Gus O'Donnell, who I admire greatly for signing his letters, "GOD", was on £240k/annum. Granted that's not a lot compared to the responsibility of his position, but it's an absolute fortune by any other measure. Furthermore, I don't think the attitude that says Scotland should remain part of the UK to capitalise on defence spending is a particularly healthy one. I mean there might be a degree of truth to claims that Scotland benefits overall from these contracts, but it seems to me like a somewhat narcissistic attitude to take. Whether I ultimately vote for independence or not I'm genuinely undecided, but if I vote in favour of remaining in the union, it'll have nothing whatsoever to do with whether Scotland can benefit economically by leeching off rUK taxpayers.
Finally, on the topic of military personnel, you asked, "What happens to them when they return home looking for jobs, houses and benefits?" However I think you may be making an assumption here which I'm not sure is valid. Even as things stand, to join the British forces you merely need to be a Commonwealth citizen and be ordinarily resident in the UK. (Albeit for 5 years to become an Officer). Are you asking your question on the basis that you think the British Army would summarily sack anyone who was Scottish? Or perhaps on the basis that the rUK armed forces would scale down? Or on the basis that Scots in the rUK army would leave of their own accord? I'm not convinced that any of those options are very likely to lead to a large deluge of people. However, my understanding of the SNP's proposal is that Scots in the UK armed forces would be offered a position in the new Scottish armed forces, I don't know to what extent this would be popular amongst the troops, nor do I have any numbers as to how many people it would effect or what the qualifying conditions would be. I expect more details will emerge as the independence campaign progresses, but as it depends a lot on negotiations between the Scottish and rUK Governments, I'm afraid I can't give a better answer at the moment.
I was not employed by IBM but lets just say that I had a very good level of visibility and access to IBM's corporate HQ in Armonk over a period of several years. I also knew their head of tax quite well and a number of other senior executives. It was part of my job to understand their corporate strategy and where the business was going. At the time, IBM's global tax strategy ("BOP") was far more sophisticated than just closing a facility in a high tax country and moving it to a lower tax country. Besides which, you don't need to do that. There are tax efficient ways (e.g. Toll Manufacturing) that allows you to keep on manufacturing in those high tax countries. In fact, IBM's move away from manufacturing Big Iron and PCs and their move into services ... especially strategic outsourcing ..... sounded the death knell of Greenock and we all knew it several years before the axe fell. The movement of work to Ireland was just a question of consolidation rather than a search for tax efficiency. There are a whole bunch of reasons why Ireland and not Scotland and tax is only a small part of this.
There is a lot of talk about corporation tax. It makes a good subject for politicians sound bites and it is plausible for ordinary people but most of it demonstrates a lack of understanding about how big companies and international tax strategy works. In my professional career I worked at a pretty senior level with a lot of large US multi-nationals. Most of them had subs in Europe and one or two had subs in Scotland. In many cases they had subs in high tax countries because it made good business sense. You can do that and still be tax efficient. Diageo, for example, which is headquartered in London and has significant operations in Scotland is highly tax efficient. Companies - and more speciifcally large European HQs - are not going to come flooding into Scotland just because we lower corporation tax. They need a lot more than that.
On defence. My point was that there are a lot of jobs in Scotland that are tied to defence and that the defence 'dividend' is not what many people are trying to make it out to be. I am not suggesting that Scotland stay in the Union in order to capitalise on these jobs but their loss is a potential reality that needs to be taken into account. The fact that work is winding down in the ship yards does not mean that there will be no work in the future. However, if we leave the Union, any UK defence procurement will not come to Scotland. As regards Faslane, the fact is that there are 5000 jobs there and I am not sure that saying that some of them could move to England is a lot of consolation. I understand that you (and others) are opposed to nuclear weapons and that for many, the loss of those jobs is a fair price to pay to get rid of them. I'm not sure that I share your perspective on that.
Finally, on civil service jobs ... I did some reading on this a while ago and came to the conclusion that the loss of UK jobs and the gain of new Scottish government jobs would cancel each other out. In other words, there would be no gain or no loss in this sector.
I was not employed by IBM but lets just say that I had a very good level of visibility and access to IBM's corporate HQ in Armonk over a period of several years. I also knew their head of tax quite well and a number of other senior executives. It was part of my job to understand their corporate strategy and where the business was going. At the time, IBM's global tax strategy ("BOP") was far more sophisticated than just closing a facility in a high tax country and moving it to a lower tax country. Besides which, you don't need to do that. There are tax efficient ways (e.g. Toll Manufacturing) that allows you to keep on manufacturing in those high tax countries. In fact, IBM's move away from manufacturing Big Iron and PCs and their move into services ... especially strategic outsourcing ..... sounded the death knell of Greenock and we all knew it several years before the axe fell. The movement of work to Ireland was just a question of consolidation rather than a search for tax efficiency. There are a whole bunch of reasons why Ireland and not Scotland and tax is only a small part of this.
As it pertains specifically to IBM, I'll bow to your clearly superior knowledge into the subject. However, I think that while you're right that corporation tax is not unto itself the sole reason that a company might choose to invest in Ireland rather than Scotland, I fear there's a danger of under-stating its significance. So that I'm clear, I accept that for large multi-nationals, having a tax presence in a variety of different locations is desirable to capitalise most fully on the tax regimes in those places. However in the Irish scenario we're not just talking about companies opening an office in Dublin with a receptionist for the sake of avoiding taxes. We're talking about large numbers of the worlds top companies basing their European Headquarters in a tiny country with a population of 4 million people. While the EU has a population of close to a billion, does it not strike you as a coincidence they happen to locate in the EU country with the lowest corporation tax rate?
You'll be the first to accept that the Scottish economy has not been as successful as the Irish economy in attracting and retaining FDI. A subsidiary in Edinburgh or Glasgow does not carry the same prestige in London/SE England, does not have the access to a pool of potential employees of the same international standard as London/SE England. Thus we lose out in quality. This would be fine, except for the fact that we also lose out on quantity because it costs as much in corporation tax to open an office on Fleet Street as on Buchanan Street.
I'll listen attentively if you're able to provide me a list of reasons other than tax that Ireland stands out against Scotland as the top European location for FDI. I think you'll have your work cut out though if you're trying to argue that corporation tax isn't the biggest single factor. Before you do though, I wish to stipulate one point because of the example you made below:
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Diageo, for example, which is headquartered in London and has significant operations in Scotland is highly tax efficient.
Of course Diageo have a significant presence in Scotland, because the brand image of their whisky products depends upon their being made in Scotland, just as the brand image of Guinness depends upon it being made in Dublin. My question is not about companies like Diageo which have to locate on the basis of geographical and cultural necessity. It's about Google, Facebook, Paypal, Apple, Pfizer, Microsoft, Yahoo, eBay, Amazon and AOL who could in principle be based anywhere in Europe but chose an Irish location for their European HQ. Over the past decade, US multinationals have invested more in Irish subsidiaries than they have in Brazil, India, Russia or China.(1) While I'm sure the Irish people gave them a warm welcome and Dublin's a lovely place to live, you'd test my credulity if you were to argue that corporation tax hasn't been the formative reason for their decision.
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Companies - and more speciifcally large European HQs - are not going to come flooding into Scotland just because we lower corporation tax. They need a lot more than that.
Sure, but I've never endeavoured to argue that FDI would manifest itself as some sort of deluge. Its taken Ireland decades to amass the number of businesses which they have, and Ireland has already 'won' the battle for new investment from the latest batch of multinational companies. These guys aren't going to up and move to Scotland all of a sudden, all that we can do is make Scotland more competitive for the future, something which can be done with the stroke of a pen. (See macroeconomics: Demand curve) It will take decades of for a policy change like this to be fully felt, I don't anticipate that it will make an overnight difference. What I am sure of is that as part of the UK, the main parties have no clear manifesto for growing the Scottish economy. They are understandably not going to allow Scotland to become more competitive through tax at the expense of the North of England. That's fair enough, I don't blame them, but by the same token they aren't making up the competitiveness deficit through any other means, which is another string in the independence bow.
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On defence. My point was that there are a lot of jobs in Scotland that are tied to defence and that the defence 'dividend' is not what many people are trying to make it out to be. I am not suggesting that Scotland stay in the Union in order to capitalise on these jobs but their loss is a potential reality that needs to be taken into account. The fact that work is winding down in the ship yards does not mean that there will be no work in the future. However, if we leave the Union, any UK defence procurement will not come to Scotland. As regards Faslane, the fact is that there are 5000 jobs there and I am not sure that saying that some of them could move to England is a lot of consolation. I understand that you (and others) are opposed to nuclear weapons and that for many, the loss of those jobs is a fair price to pay to get rid of them. I'm not sure that I share your perspective on that.
There are two issues which are of concern to me. 1. How many people will lose their jobs and what happens to those people post-independence, and 2. What are the wider economic implications.
On the former, Scotland will have its own navy, and at present the Royal Navy only has a single naval base in Scotland - which is Faslane. The idea therefore that Faslane would cease to operate on any level as a naval base, and run into 100% job losses is therefore mute as Scotland will require a deepwater military port for its own navy. The only jobs which would be guaranteed to be lost would be in nuclear propulsion and nuclear weapons, and those specialising in those roles would no doubt find themselves in even greater demand than they are now with the re-location of Faslane to somewhere in the rUK. Of the remaining staff at Faslane, many are tied to their vessels and would no doubt seek to move elsewhere also. However, while I have no idea of the total number of staff required to operate an independent navy, the RN employs 37,790 people (not including reservists). If the Scottish navy were to be exactly to scale (1/8) they would need to employ 4723 people. While a Scottish navy is likely to be relatively smaller, you could probably safely say staff of a couple of thousand would be required. Assuming many of those would be based at Faslane, it's not an armageddon situation for the staff there or for the local economy.
On the subject of the shipbuilders, I don't know what I can say other than what I already have done. There are no further military contracts on the horizon once the current one runs out. Given that the lifetime of naval vessels before refits is in the region of 15-20 years, I don't see there being much hope for that line of work.
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Finally, on civil service jobs ... I did some reading on this a while ago and came to the conclusion that the loss of UK jobs and the gain of new Scottish government jobs would cancel each other out. In other words, there would be no gain or no loss in this sector.
If we're talking numbers then I agree. If however we're talking about the shift in responsibility, then Scotland surely gains? If we lose X number of jobs processing disability benefit claims in Coatbridge for London Boroughs, but gain Y number of jobs of over-arching political significance to Scotland, then we surely raise the intellectual bar that Scottish jobhunters can aspire to. You might be right that the overall shift will be neutral, but I presume you see my point?
I'd just like to point out it's EU policy to deny membership to new countries seceeded from member states.
I'd like to point out that the EU does not 'deny' membership to anyone, let alone successor states of its current members. The sole question is whether successor states are automatically granted membership or have to apply like unaffiliated states. Needless to say, while my opinion of EU bureaucrats isn't always complimentary, I don't see them refusing entry to the country that has 60% of the EU's proven oil reserves...
I'd like to point out that the EU does not 'deny' membership to anyone, let alone successor states of its current members. The sole question is whether successor states are automatically granted membership or have to apply like unaffiliated states. Needless to say, while my opinion of EU bureaucrats isn't always complimentary, I don't see them refusing entry to the country that has 60% of the EU's proven oil reserves...
Wouldn't the current member state have the power to veto the new state?
Wouldn't the current member state have the power to veto the new state?
I confess I'm not sure whether they would have that power within the EU constitution, however I'm as sure as I am of anything that the current member state would not exercise such a power even if it did have it.
I don't think there would be any problem in Scotland being admitted as a member state. The issue is not admission but rather the terms of admission. If Scotland were admitted as a new entrant then she would have to commit to adopting the Euro and Schengen and would not get any of the opt-outs the UK already has. Schengen would, of course, lead to passport controls with rUK.
This is a fairly interesting article from the Economist on the subject.
I'm not scottish. But I only think its fair that they get to vote for their own future.
I mean, why should we who don't live in Scotland get a right to vote for them. In that case, England may vote Scotland in or vice versa when the Scots may not want that.
LOL ask Georgia or Virginia or Louisiana how that worked out for them!
LOL ask Georgia or Virginia or Louisiana how that worked out for them!
It isn't comparable.
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