Leading Irish finance expert urges Scotland: “Follow our example and go for independence”

By Ian Fraser in Dublin and Colin Donald

Sunday Herald

June 8th, 2008

One of the leading lights of Irish finance has urged Scots to pursue independence to maximise the benefits of its world-class financial services industry.

Mary Fulton, financial services partner with “big four” accountancy firm Deloitte in Dublin, told the Sunday Herald that Scotland would be more likely to build a thriving financial services sector as an independent nation.

The call was echoed last week by Ben Thomson, chairman of Scotland’s leading investment bank Noble Group, and a declared supporter of fiscal autonomy, who said that Ireland’s example showed that Scotland suffered from being “shackled to the UK tax system.”

In an interview in Dublin last week Fulton, head of the financial services group at Deloitte and a technical adviser to the Institute of Chartered Accountants in Ireland (ICAI), said that Scotland should “declare independence” to make itself a more attractive environment for international financial services companies.

She added: “It is self-evident that Scotland would be able to make itself more attractive to global financial services companies if it had greater fiscal powers”.

The importance of control over corporation tax has returned to the top of agenda in Ireland, as the country prepares to vote next Thursday on the EU reform treaty, as the only country constitutionally required to hold a referendum.

Irish business is firmly behind a “Yes” vote on the treaty, which some in the sector assert is a means to safeguard future prosperity. According to Rossa White, chief executive of Davy stockbrokers, it “enshrines our veto over corporate tax changes.”

Fulton said that Scotland would attract more international financial services players if its industry was regulated by an independent Scottish regulator rather than by the Canary Wharf-based Financial Services Authority.

She accused the UK government and the FSA of “gold-plating” European directives – adding supplementary red tape to that stipulated by the EU legislation – and undermining the competitiveness of British business.

By contrast, she said the Irish regulator the Irish Financial Services Regulatory Authority (IFSRA) just “applies” EU directives. “IFSRA is very approachable and some of the things they do are considered to be best European practice,” said Fulton.

From a standing start 20 years ago, Ireland has used tax breaks and other inducements to build up a dynamic international financial services cluster that easily rivals Scotland’s 300-year-old sector. Centred on the International Financial Services Centre (IFSC), established in 1987, it has built a reputation in the listing and administration of mutual funds, becoming a global leader in hedge fund administration and become the biggest underwriter of wholesale insurance outside Bermuda.

Ben Thomson, who is a board member of Scottish Financial Enterprise and the Scottish government’s Financial Services Advisory Board, also an instigator of the pro-free market think tank Reform Scotland, said: “If you look at hedge fund management and listed investment vehicles, Ireland has definitely overtaken Scotland. Its financial centre is still growing at twice the rate of its Scottish equivalent.”

“Scotland’s real competition is in Ireland, Luxembourg, Switzerland, the Channel Islands and other European financial centres. But we’re struggling to compete because we’re shackled to the UK tax system. With fiscal autonomy, we would have the scope to create an environment that would make it much more attractive for people to come to Scotland.

He added: “The FSA covers a huge range of businesses. The benefit that Ireland has is it is a much more limited financial services sector, so the regulator can focus on the things in that jurisdiction.”

Thomson believes that many in Scotland’s financial services industry have an “irrational fear” of both regulatory independence and fiscal autonomy. He pointed out that in the early 1990s many people in Scotland’s financial community said they would “leave the country” if Labour came into power and again in the late 1990s, with others threatening to leave the country should Scotland get a devolved parliament.

He said: “I’ve never heard a complaint in Scotland that the regulation of the legal and accounting professions – which is done by their own bodies in Scotland – is inadequate or that it should be sent to London.”

Currently Scotland’s solicitors are regulated by the Law Society of Scotland and its accountants are regulated by the Institute of Chartered Accountants of Scotland. Both these bodies are fiercely protective of their independence from their English equivalents.

This article was first published in the Sunday Herald on June 8th 2008.

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