SELECT COMMITTEE ON ECONOMIC AFFAIRS - Parliament

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Mr John Cridland, Mr Graeme Leach and Mr Simon Walker—Oral evidence (QQ 279–330) the European single market, and he wishes an independent Scotland to remain in the European Union, but I am sure he would not wish to break up the single market that exists between Scotland and the rest of the United Kingdom. If that is so, are you saying that it does not make any difference one way or the other to your members? Is that the only issue—that so long as the single market is retained, there is nothing else to worry about? John Cridland: No, I am certainly not saying that. I agree with my colleagues from the IoD that there are more questions than answers at the moment. There are a series of imponderables and we are looking forward. The position of business in Scotland would, I am sure, be influenced by the attitude of a future Scottish Government if it was in an independent country and by whether it was pro-business or took a more statist view, in the way that Mr Leach has already identified. I concentrated on the single market because I think it is the one thing that we can be clearer would lead to some fragmentation. We have already seen a limited degree of fragmentation of the UK single market as a result of devolution. I should be clear that I am defining the single market broadly. I described it as the framework of legislation, regulation and taxation within which business operates. Clearly an optimal single market is one where there is very limited variation of those rules, such that companies do not have the additional costs of compliance due to operating with different systems in different parts of one market. There is already limited fragmentation. A reasonable hypothesis would be that if there were two completely separate Governments in the one island, their policies would diverge over time. To take a particular example, which on my wider definition of the single market is very relevant—arguments are being made in at least two of the devolved Administrations, as we speak, for the devolution of corporation tax. I think that would be damaging to the single market. It is in the interests of the UK economy to have a single approach to corporation tax. Those were the aspects I was alluding to. Clearly, going forward, it depends just how much fragmentation, which depends on a whole range of factors that we may come back to with subsequent questions. A lot depends on the currency arrangements—whether there is a single pound across the United Kingdom or across two separate countries within this island, whether one country has an English pound and the other has a Scottish pound, or whether one country has the pound and the other has the euro. That would inevitably lead to a fragmentation of the single market. If you did have separate currencies, you would have all of the implications of currency hedging. Q282 Lord Forsyth of Drumlean: To what extent do you feel that your members are going to keep their heads down on this issue because they are concerned about the security of their business and perhaps feel under pressure from the Scottish Government? The example that comes to mind is of Lord Wallace of Tankerness, a distinguished member of the Government who was invited to speak at the 25th anniversary dinner of Loganair, only to find that the invitation was withdrawn by the company following representations from the Scottish Government. To what extent is business feeling a little inhibited in the current environment from speaking out on these issues? I sense a certain amount of hedging in your answers. Simon Walker: I would acknowledge hedging. In the case of the IoD, it is because when I talk to our members in Scotland, they are generally quite divided on the issue. I found a lot of strong feeling both ways, as I would have expected. I am thinking back to the IoD conference in December: it was pretty narrowly divided. The Scottish Finance Minister was speaking there. There was certainly quite a lot of sympathy for the points that he raised, as well as significant opposition. We are asking a lot of questions because we feel there are 36
Mr John Cridland, Mr Graeme Leach and Mr Simon Walker—Oral evidence (QQ 279–330) questions that need to be explored, rather than taking a position, because our membership is genuinely split on the issue. John Cridland: As you know, the CBI is studiously non-party political. That is an article of faith for the CBI. We work with any democratically elected politicians. CBI members in Scotland at the front end of this have asked a series of questions of the SNP Government on the economic implications of independence, and it is on the basis of assessing the answers to those questions that they have concluded—not unanimously; I respect the fact that there are CBI members in Scotland who would favour independence, but by a majority—that they cannot see the economic benefits of independence on the case that has been made so far. However, companies operate within a democratic mandate from society and you would not expect companies to engage in political debate that could be damaging to their business situation. In a sense, that is the role that they expect representative organisations to play. Q283 Lord Forsyth of Drumlean: You have not had any suggestions from your members that they might be disadvantaged in carrying out their business if they took a particular stand in opposition to what is a very dominant Government? John Cridland: These issues have come to the fore very rapidly and, one might argue, somewhat unexpectedly. I am conscious that boards of a number of my member companies in Scotland are assessing the situation. One of the challenges that I am sure you have in this inquiry—I certainly had it in preparing for it, my Lord—is that there is currently very little economic evidence. We are at the beginning of a journey. Companies are assessing, at a time when there is uncertainty—the one thing that characterises the business community on the questions you have asked me is that they do not know all the answers—and they will not tend to volunteer a view. They are keeping their peace. But the CBI Scotland council is an elected body that represents the CBI in Scotland and it has taken the view that it is in favour of the union, and that is the representative view of the CBI. Q284 The Chairman: You are obviously suggesting it is still pretty early days but it is entirely to try to work through the tangle of all these different issues that our inquiry has been set up. From what you have seen so far, do any particular business sectors have great concerns? For example, in the financial community, the location of head offices and so on could be an issue, with not only tax but currency matters, as you suggest, and financial regulation could be dominant in their minds. Is there any indication yet of particular sectors that are concerned? John Cridland: Given the level of uncertainty, I have not picked up a sectoral pattern, but I echo and support your comment about financial services. A lot of the debate is taking place, rightly, in Scottish financial services because it is so important to the Scottish economy. The evidence shows that Edinburgh as a place for financial services is not as well positioned in 2012 as it was in 2007, and that is simply a consequence of the financial crisis that resulted from the subprime housing crisis in the United States. There are very legitimate concerns. As we know, business location decisions and business investment decisions are taken for a range of reasons. They are always taken by boards on the basis of shareholder return, looking at a cocktail of factors. It is very difficult at this point to give you any clear answer as to whether I have member companies who would take different investment decisions if there was an independent Scotland. They are looking at these issues and they are expressing levels of concern to me, but the unknown question here is: in an independent Scotland, would a separate Scottish Government be more or less pro-enterprise? The answer to that would only be known over time, and that would be the most likely factor to affect investment decisions in the medium term. Are they in favour of a bigger state or a smaller 37
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