How do we make Scots richer?

IT IS EASY to talk about the economy as though it were academic – a spreadsheet of statistics, charts and projections. But the Scottish economy is not a spreadsheet. It is your payslip. It is your shopping bill and your mortgage rate. It is the decision a business owner must make about whether they can afford to hire a new employee or whether they are forced instead to make redundancies.

Much has been said about Scotland’s economic underperformance and our persistent lag behind comparable nations. Yet there is a crucial point that must be understood. Scotland is not a poor country. Scotland is a country whose potential is hamstrung.

The wealth of a nation does not originate in government. It begins with the individual. When Scots prosper, Scotland prospers. The real economic question therefore becomes straightforward: how do we make Scots richer? More precisely, how do we make each of you richer?

When people are free to earn more, build more, risk more and create more, they do not merely enrich themselves. They generate opportunity for others. They create jobs. They create growth.

When Scots prosper, Scotland prospers

Small and medium-sized enterprises illustrate this principle clearly. SMEs account for more than 99 per cent of Scotland’s private sector businesses and employ around 55 per cent of the private sector workforce. It is these firms that generate new employment. While large firms seek efficiencies, small ones seek growth.

Secure and meaningful employment, moreover, produces benefits that extend well beyond the economic sphere. Employment is one of the strongest predictors of both physical and mental wellbeing. Prosperity is therefore not simply a matter of economic policy. It is also a matter of public health.

If prosperity is the goal, the question then becomes how we remove the constraints that prevent it.

Some economic powers remain reserved to Westminster, but many important levers are devolved. The Scottish Government controls income tax bands, business rates and council tax, the Land and Buildings Transaction Tax and the Additional Dwelling Supplement. It also controls planning, skills and education policy, and public procurement.

These powers provide substantial scope for reform.

Technical and vocational education, for example, should stand alongside academic education in prestige and opportunity. Professional bodies should be empowered to develop high-skill, high-status career paths by taking ownership of qualifications and certification systems.

The tax system should also reward rather than discourage effort and enterprise. A competitive income tax regime would ensure that those willing to work harder or take entrepreneurial risks are not penalised. The hospital doctor who wishes to take on additional clinics or the successful plumber working long hours should not find their effort undermined by punitive marginal rates.

Similarly, while it is right that very small businesses benefit from rates relief, policy should not entrench permanent smallness. If the objective is growth, relief should be structured in a way that encourages businesses to expand and that helps revitalise local high streets.

Planning reform is equally essential. When planning decisions are slow, opaque or uncertain, developers respond defensively, building in ways that protect margins against risk. The result is rarely the kind of high-quality, enduring communities we want. A more predictable planning system would encourage long-term investment rather than short-term calculation.

Housing policy illustrates the same principle. Scotland should aim for a balanced property market in which individuals are encouraged to invest. Ordinary Scots should have the opportunity to own a part of the country’s housing stock, to build a portfolio, invest locally and create a nest egg while providing homes for others. That aspiration ought to be supported rather than discouraged.

None of this is ideological, it is behavioural

When governments create a hostile environment for private investors, the consequences are predictable. Small investors leave the market, housing supply tightens and ownership consolidates in the hands of large corporations. If entry becomes harder for individuals, dominance becomes easier for institutions.

None of this is ideological, it is behavioural. People respond to incentives. Businesses respond to risk. Growth responds to confidence.

If it becomes easier to employ staff, to expand a business, to earn additional income and to invest in property, people will do precisely that. And as they do, Scotland will become richer – not through redistribution, but through production and enterprise.

It is government’s role to enable change, but ultimately it is individuals who deliver it. Scotland would therefore do well to remember the insight of our great economic thinker, Adam Smith: prosperity begins with the freedom of people to pursue their own improvement. When Scots become richer, Scotland becomes richer.