IN its last two articles for The National, the Scottish Banking & Finance Group (SBFG) has been focusing on the importance of domestic ownership of infrastructure and businesses in key economic sectors and on the vital role our banks and other financial institutions have in the allocation of capital to support the domestic economy and domestic ownership of production and infrastructure.
In making this proposition, we are not in any way suggesting Scottish independence should be accompanied by a wholesale expropriation of foreign-owned assets. Doing that would create massive disruption to our economy and to our international standing.
What we are saying is that Scottish-owned companies and infrastructure should be given maximum support when it is needed and that when foreign companies decide to close factories down and relocate production elsewhere the opportunity to bring these factories back into Scottish ownership should be taken. The provision of capital to enable this to happen must come from our own banks and other financial institutions.
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Foreign investment in Scotland can and does make an important contribution to our economy. There are limits to our physical and human resources, expertise and knowledge and our technological base. Some of these gaps can be filled by importing what we cannot produce ourselves and some of them can be filled by welcoming overseas companies to establish production here.
When we accept foreign investment, however, it must be subject to conditions so that we achieve a win-win outcome for Scotland and for the overseas investors. Scotland will need to introduce a new framework of company law with which both domestic and overseas companies must comply.
Here are some important elements that we suggest should feature in Scotland’s company law:
- Full tax compliance so that tax is paid in Scotland on profits generated from production here
- Full and transparent disclosure of financial performance
- Full disclosure of the costs of adaptation of production to a zero-carbon economy
- Full disclosure of environmental and social impacts of the business, the plans to minimise these impacts and the costs of doing so
- Commitment to industrial democracy, worker participation, trade union recognition and collective bargaining
- Commitment to pay the national minimum wage and pay pension contributions into a Scottish National Pension Fund
- Commitments by overseas companies to provide financial support to communities in which the business is based (community benefit funds)
- A binding commitment on overseas companies under which they are obliged to offer first refusal to a management/worker takeover of a business in the event of the overseas owners deciding to close down production in Scotland. The commitment should also include a transfer or sharing of “intellectual property” (IP) such as product brands and patents.
- A requirement for Scottish companies investing overseas to apply these principles to their overseas subsidiaries
The requirement for overseas companies to provide a community benefit fund is important as this mean local communities get real opportunities to benefit from the investment. This element is proposed because it supports the principle of local democracy and community empowerment.
Money being retained and circulating in local economies aids community resilience and will also provide a basis for local mutual banks to flourish, as part of a healthy and diverse banking system.
The relevance of the proposed obligation on foreign companies to offer to transfer ownership to a management/worker buyout, and to transfer or share the IP, is easy to explain.
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If such an obligation existed in Scottish company law the workers at McVitie’s in Tollcross would not be in the dreadful predicament they currently find themselves in because Pladis would have an obligation to offer a transfer of ownership to them, including the various brand names associated with the products made at the factory.
The requirement for full carbon adaptation costs disclosure is important because unless businesses can fully absorb the costs of adapting their production processes and their products to zero carbon standards they cannot have a long term future and capital will have to be re-allocated to support businesses which can afford to adapt.
This is why oil and gas companies have no viable future – while it is possible to decarbonise the production process (eg by converting to renewable energy sources for power supply) the end products cannot be decarbonised at any cost.
Capital re-allocation will require state intervention through a National Investment Bank and by banking reform to create a framework in which private banks and pension funds can also make an important contribution.
There should be an obligation on all companies to pay the national minimum wage and contribute to a National Pension Fund. Every citizen should be entitled to an earnings-related pension on retirement and the only way to provide this is to create a national pension fund.
We will discuss the concept of a national pension fund in a later article.
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