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Scots ready for 'devolution'
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May 6, 1999: 11:12 a.m. ET
High hopes await Highlanders' first parliament in almost 300 years
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LONDON (CNNfn) - The last Scottish parliament was dead and gone for 20 years when the Royal Bank of Scotland opened shop in Edinburgh in 1727. Yet as Scots voted Thursday to resurrect their assembly for the first time in nearly three centuries, the venerable Bank's official silence can be deafening.
"We are the Scottish headquarters of the company," a bank official said simply this week when asked how greater Scottish autonomy might affect its business. "We fully accept the decision of the people."
The bank's corporate caginess is a measure of the ambivalence over an election which, whatever its outcome, will yield something short of a fully free legislature but more than the status quo.
* Scottish Office figures in pounds sterling
To be clear, Scots were not voting for full-fledged independence Thursday.
Even the homegrown Scottish Nationalist Party, which was predicted to place second in the balloting, behind Tony Blair's Laborites, tends to shudder at the firebrand antics of Québec's secessionists, Flemish freedom fighters, and Northern Irish militants.
Scottish nationalism, circa 1999, is more furry than fervent despite isolated cases of a more virulent strain.
Devolution, not revolution
Thursday's elections -- which will also elect delegates to a new Welsh national assembly and scores of local councils across England -- are an experiment in "devolution." It's a form of decentralization from complete rule by London to more local control among Britain's various regions.
The new Scottish Parliament, to be based in the nation's booming cosmopolitan capital of Edinburgh, will reserve broad authority over education, arts and culture and health. But the final fiat on defense and foreign policy will flow, as it does now, from Parliament.
Edinburgh: beacon of progress
London will also continue to control Scotland's purse strings, collecting income tax revenue and dispensing the national budget, which totaled about 14 billion pounds ($22.817 billion) last year.
"I don't believe that the powers of parliament in economic terms are sufficient to give people reason to behave differently in any way," said Stephen Boyle, the head of business economics at the Royal Bank of Scotland, echoing a common view.
Under the current administrative regime, Boyle said, "no less than 96.5 percent of personal income tax revenues and up to 100 percent" go directly into the coffers of the British Treasury in London.
North Sea oil creates 100,000 jobs
The new parliament will have the authority to levy, or lower, tax rates by up to 3 pence above or below the current average rate of 23 pence per pound. At most, that could generate an additional 690 million pounds of revenue. But a 3-pence tax hike isn't on the official platform of any of the four major parties contesting Thursday's election.
From a business standpoint, devolution has so far had little tangible impact on balance sheets.
The Royal Bank, analysts say, has spent tens of millions of pounds preparing for European Monetary Union and battling the millennium bug. Expenditures on devolution-related tasks, by contrast, are virtually non-existent.
Overcoming past recession
The Scottish Parliament will have greater latitude to foster change, some observers say, if it provides a psychological boost to Scotland's fledgling economic rebound.
Scotland has been waging a plucky battle to overcome the severe recession that ravaged the country's manufacturing base in the early 1980s. Typical of the spate of plant closures that lacerated the economy was that of the storied Linwood car plant, west of Glasgow, which cost about 5,000 jobs.
Economists note that the Scottish economy has had some saving graces in recent years, including the accelerating development of a nimble cluster of high-tech companies, known generically as "Silicon Glen."
In addition, the discovery of North Sea oil in the mid-1980s helped create about 100,000 oil-related service jobs. But the $2.5 billion in tax revenue the oil business generated in 1998 went directly to London.
Castle Stalker: Off the high-tech trail
Silicon Glen -- a product of calculated policies by London and local planners aimed at jump-starting Scotland's economic rebirth - began with the arrival of IBM in the 1940s.
In recent years it had lured such big-name companies as National Semiconductor, Seagate Technology, Motorola and NEC. However, some of those companies are now pulling out of Scotland due in part to the lingering effects of the Asian crisis -- which reduced demand for microchips -- and to a supply glut that bit into prices.
Firms pulling up stakes
Seagate Technology recently announced the closure of its microelectronics manufacturing facility in Livingston as part of a broader overhaul of its worldwide operations. Meanwhile, Anglo-Norwegian engineer Kvaerner Govan is quitting the shipbuilding business, lowering the boom on 1,800 jobs at one of Glasgow's last shipyards.
Yet some smaller entrepreneurs have proven more resilient. Among them is Ivor Tiefenbrun, the founder of Glasgow-area based Linn Products, which manufactures hi-fi equipment -- much of it for export to the United States.
Linn's marquee product is a 12,000-pound ($19,558) CD player which, company literature boasts, "eliminates the jitter" that makes some CDs sound scratchier than vinyl. Linn's annual turnover is 20 million pounds.
Unlike many of his peers, Tiefenbrun is a staunch opponent of devolution, which he sees as a scourge to Scottish development. In his view, the Scottish parliament is an unwarranted "extra layer of bureaucracy" which can only hinder the revival of Scottish manufacturing and industry.
In a recent letter to a local newspaper, Tiefenbrun pilloried devolution as "an economic, political and constitutional nightmare."
While Tiefenbrun's views may be extreme, his vocation is far less so in the new Scotland of cutting-edge technology and outsized ambitions. Most Scots, analysts assert, prefer to view the new legislative chamber not as a prelude to a breakaway from Britain, but as an incubator of Scottish confidence.
On the economic front, that confidence has gotten a recent boost from firmer fundamentals (See chart above). Economists note that Scotland's wealth disparity with its more powerful southerm neighbor, England, has narrowed in the past decade or so.
Yet wealth distribution remains sorely lop-sided. The eastern Borders region, for instance, has been in decline since a vital rail link to Edinburgh was severed 30 years ago. Financial services tend to cluster around Edinburgh, while oil business is centered around Aberdeen in the north: both regions boats the highest per-capita income levels in Scotland.
These problems will come into sharper focus once the results of the election are digested. However, the vote itself may be reason for increased optimism.
Clive Dyson, chief executive of the Edinburgh-based National Microelectronics Institute, a training, research and supply group created by several big U.S. chipmakers, says semiconductor firms are now slowly coming back to full capacity after the Asian crisis.
But National Semiconductor, one of the firms that formed the institute, won't be among the rebounders - at least not in Scotland. Last October, the company said it will pull out of Scotland as part of a broader "consolidation" of its global operations. The company hopes to salvage about 400 of more than 1,000 jobs by spinning off its operations to a new buyer who's yet to be found.
Despite these setbacks, Dyson remains upbeat that the elections will inject a new vitality into Scotland.
"The biggest thing here is another chance for the British political environment to show its vibrancy," he said.
--By staff writer Douglas Herbert
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