Andrew Morrison: Reform corporation tax to embrace the home-working revolution

Andrew Morrison

Andrew Morrison, director of MCC Accountants, discusses how regional corporation tax cuts could shift the UK’s London-centric economy.

There hasn’t been much to celebrate for society or the economy as Scotland and the UK has struggled through months of lockdown restrictions.

Businesses are hanging on by their finger-tips, workers are fretting for the future, and the contracts of hundreds of thousands of Scots have essentially been nationalised by the government’s furlough and job retention schemes.

And that’s before we start thinking about how all these billions of pounds spent by the state are going to be repaid by a generation who’ll be lucky to have a job, let alone be able to pay taxes on it.

But look a little harder and some positives are emerging.

People who’ve been working from home have enjoyed more flexibility – perhaps they’ve been able to wallow for a couple of extra hours in bed each morning, or been finished up in time to take part in their children’s bed-time routine each evening when they otherwise would have been travelling home.

The many people who commute between Glasgow and Edinburgh will be saving thousands of pounds and up to three hours a day, not to mention missing out on the frustration and anxiety of relying on public transport.

Put simply, they’re not going back to the office any time soon. And when they do, it will not be with the regularity of before.

So now the working-from-home revolution is underway, we need government to get on board and make it work for everyone.

With the right policy decisions, it could actually make an economic boon out of it, and come good on the “levelling up” rhetoric we saw ahead of the 2019 General Election.

Scotland stands to benefit from this change as much as anywhere.

One policy that would achieve this is the introduction of regional corporation tax cuts. That would immediately encourage large firms to move out of London, perhaps even just in part, and set up satellite offices in the rest of the UK.

If people can and want to work from home, and employers want their teams back together in the office, let’s meet in the middle - let’s look at having teams work together, and collaborating with wider colleagues in other satellite offices remotely. It’s the best of both worlds.

That allows for a hybrid future of working from home and attending the office part-time. In fact, depending on how long social distancing remains in place, that future will be forced upon many large offices who would be breaking the law by having all their staff in at once.

So instead of having one central office sucking everything into London, these companies could open up elsewhere, be it Glasgow, Edinburgh or Inverness.

It saves the company money too – rent will be far cheaper in other towns and cities, and the overall outlay on office rent can be reduced.

Employees win – shorter commuting distances for many, cheaper property prices and the ability to be more flexible in living closer to friends and family.

Such regional corporation tax cuts would be good for the wider economy as well – it could see major company names springing up in places they probably wouldn’t have considered before.

The incentive to welcome this plan would very much be there: if a large firm could pay half its corporation tax at London prices and the other half at a newly reduced rate for, say, Aberdeen, there is an obvious financial saving to be made.

Perhaps this sort of move would frighten decision-makers in London, concerned their world-leading city would see an exodus of skills and income.

But London is bursting at the seams, and a move to change swathes of office blocks to residential space would be of benefit to its millions of residents who struggle to afford astronomical rent and will never realistically buy in the city.

The societal changes from the COVID-19 lockdown are coming whether government or businesses like it or not.

And that’s ultimately a good thing – if the UK’s working population want to adapt their practices for better work-life balance, it would be foolish to do anything other than embrace that.

After all, as a business owner myself, I know that a happy employee working flexibly is far better than a miserable one coming into the office on a strict nine-to-five regime.

So both the Scottish and UK governments should be working now to make this a success. It’s not easy, but there are opportunities within this pandemic to change for the better, but everyone needs to pull together to ensure it can happen.

And it doesn’t mean an end to office working outright. Let’s not forget there are some people who can’t wait to get back to the office, and who just don’t like having no division between home and professional life.

For younger people embarking on a career, mixing with people in the office, and socialising at lunchtime and immediately after work, is a hugely important aspect of life – sometimes the most important.

I know from speaking to the 150 small and medium-sized businesses I represent that it’s not feasible to have all staff working at home for ever more – they simply don’t have the resources or the IT infrastructure for that to be a success.

The commercial property market in Scotland is an economic sector in itself, and that can’t be hung out to dry by government decisions either. Nor can the catering and retail businesses who rely on the coming and going of office workers each day.

As with everything, the balance is critical.

It’s a balance that has to be investigated now and, if struck correctly, the months of enforced change to working habits could actually become a prosperous future to the benefit of everyone.

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