Business regulation for an independent Scotland – a view from down under

Dr Warren Mundy, Commissioner, Productivity Commission, Australia, participated in Policy Scotland’s debate on “Regulating an Independent Economy” back in December 2013. This paper was prepared for that debate.

The future prosperity of Scotland will depend on the ability of its people and its firms to innovate and adapt to ever changing global market conditions. Viewed from Australia it seems the debate around the economic outcomes of independence has focused mainly on fiscal issues, resource (read oil) ownership, banking, and relationships with Europe and the remainder of the United Kingdom. Microeconomic policy, which in the era of integrated global markets is, or at least should be, largely about regulation in one shape or another, seems to have received little attention. To the extent that microeconomic policy has received attention, infrastructure and competition regulation, and mainly the institutions that might undertake these functions, have been to the fore .

There is no end of literature from official national and multinational sources, and academia, on what constitutes good regulation and good regulatory processes. All communities face different challenges and given finite resources and that regulatory change is never easy, governments need to prioritise their efforts — what might be most important for the provincial government of Jakarta keen to improve small business formation outcomes will be very different for a small developed European economy on the edge of Europe with a long history of embeddedness in a larger economy.

Regulating the economy in an independent Scotland would be based on some general principles that guide policy makers in all cases:

  • Regulation must be solving a problem that is well understood and be implemented in a transparent and deliberative way
  • The benefits of regulation should exceed the cost and those benefits should be achieved at the least cost
  • Regulators should act in an accountable and transparent way with appropriate frameworks existing to challenge their decisions and behaviour
  • Regulation and regulator performance must be subject to systematic, periodic and independent review.

There is no unique set of measures to maximise the prospects for Scotland’s economic future (although there are identifiable traps to avoid). But what is required is a coherent regulatory framework that, whilst remaining flexible, has a strong degree of commitment on the part of all participants in the policy community.

Given the focus on competition and infrastructure regulation mentioned above and the position already adopted by the Scottish Government on these issues , this paper focuses on the regulation of business activity more generally. Informed by Australian experience, it is hoped this paper will throw some light on these issues for an independent Scotland and stimulate further debate.

The opinions expressed in this paper are those of the author alone and should not be attributed to the Productivity Commission or the Australian Government in any way.

Click Full Business Regulation Report to read the report in full.