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CBI director Iain McMillan: iScotland will not be a land of milk and honey

Business leaders clashed with SNP politicians at Holyrood over the economic impact of independence.

One member of the parliament's Economy Committee had to be told to stop "badgering" CBI director Iain McMillan.

Another was pulled up for accusing him of engaging in a "polemic" against independence.

The ill-tempered exchanges came at the start of a committee hearing into Scotland's economic future, regardless of what happens after the referendum on September 18.

The first panel included representatives of organisations which have raised concerns about independence.

Mr McMillan ran through a list of key issues, including currency, EU membership, the deficit and what he called the "fragmentation" of the UK market.

"In terms of an independent Scotland, there would be every bit as much need to attack the deficit and deal with fiscal consolidation going forward and that of course would result in many difficult decisions about tax and spend," he said.

"This would not be a land of milk and honey. It would be extremely difficult with many painful decisions to be taken.

"Of course in the future that may well change, and one would hope that it would."

He accepted Chancellor George Osborne's warning that the UK Government will not agree to a formal currency union with Scotland.

"The reality is that if Scotland votes to leave the UK, and that's a vote that in the CBI we will respect, but by virtue of the vote we will leave the pound sterling," he said.

"I don't see any way that an independent Scotland can force its way into a currency union with the rest of the UK. I just don't see how that can happen."

After almost 10 minutes of his statement, SNP member Mike MacKenzie cut him off, asking: "Have you any idea how long this polemic is going to continue for, because we do have questions."

Mr McMillan, who continued for another couple of minutes, was then pressed by SNP member Chic Brodie on his previous criticism of devolution.

"You were wrong then, weren't you?" Mr Brodie asked.

Committee convener Murdo Fraser stepped in when the two men began talking over each other.

"Please don't badger the witness, let the witness answer the question," he said.

During later exchanges, Mr McMillan would not be drawn on who had helped form the CBI's position on independence.

He also refused to answer whether he personally supports calls for more powers at Holyrood in the event of a No vote.

Owen Kelly of Scottish Financial Enterprise (SFE), Ian McKay of the Institute of Directors Scotland (ISD), Colin Borland of the Federation of Small Businesses (FSB) and Gary Clarke of the Scottish Chambers of Commerce also took part in the initial session.

MSPs later heard from the Jimmy Reid Foundation, which says the risks of independence have probably been overstated and are "largely temporary".

Mr Kelly, chief executive of SFE, said devolution and independence cannot be compared.

Responding to further questions from Mr Brodie, he said: "I think you're comparing apples and pears. Most of the issues affecting our industry are reserved to Westminster.

"It's a completely different proposition."

Mr McKay, chairman of the ISD, said both sides are making too many promises on spending for the future.

"In some ways, our members are increasingly concerned that whatever the outcome of the vote we are concerned that what we are seeing from both sides is the prospect of more and more spending and less and less identification of where the money is going to come from to spend," he said.

"We're entering a political phase of the debate where both sides are trying to encourage people to vote for them rather than the other side."

Mr Borland, head of external affairs for the FSB in Scotland, said he wants answers to practical questions.

"While the large macroeconomic questions have been the focus of the debate, the business issues which our members are bringing to us haven't featured particularly prominently," he said.

"Those business issues tend to be matters of overheads and matters of process."

He asked what happens to a VAT receipt picked up from a petrol station south of the border, or to the small bookseller who deals with the rest of the UK and does not know how postage will be affected.

Mr Clarke, head of policy at the Scottish Chambers of Commerce, said the main issues for his members are taxation, EU membership, currency and regulation.

"It's fair to say there are risks attached to most of those areas, but it's also fair to say there are risks attached to most of those areas irrespective of whether Scotland becomes independent or remains part of the United Kingdom," he said.

Stephen Boyd, assistant secretary of the Scottish Trades Union Congress (STUC) said later that constitutional change would help achieve a "rebalancing" of the economy.

He said "to a certain extent" such work could take place just now, under Holyrood's existing powers.

"Would more powers, more taxation powers, allow you to do more in that regard? I think they probably would."

Robin McAlpine, director of the Jimmy Reid Foundation, also argued for more powers to come to Holyrood.

"If we really want to create a manufacturing, low inequality, high wage economy we need to be able to integrate housing policy, welfare policy, industrial policy, procurement and so on and so on," he said.

But Mr Boyd stressed taxation would need to rise for Scotland to achieve a more Scandinavian society, with greater levels of public services.

He told the committee that to "create public services akin to the Nordic nations" more money would need to be raised in taxes.

"The Nordic nations all collect significantly more as a proportion of GDP in taxation," he said.

"I don't think you can seriously contend that in the short to medium, even going into the longer term, that Scotland under any constitutional scenario can create a Nordic society on current models of taxation."

Both the STUC and the Jimmy Reid Foundation spoke out against plans from the Scottish Government to cut corporation tax if there is a Yes vote, with SNP ministers arguing this could help attract companies.

Mr Boyd described it as a "bad policy" and Mr McAlpine told MSPs: "The corporation tax cut is not a good proposal.

"Three pence off corporation tax, that encourages the kind of corporation which has low margins. High value, high productivity companies are looking for other things if they want to be attracted to an economy."

But plans from the SNP to expand free childcare after independence were welcomed.

Mr McAlpine said such a move would help create a large number of jobs in the sector, as well as helping parents return to work.

"We should be looking at childcare as an opportunity to create a professional sector, which creates large quantities of good quality jobs for young women," he told the committee.

Labour and the Tories later criticised the SNP members of the committee.

Scottish Labour MSP Margaret McDougall said: "What we saw this morning was shocking. It was a co-ordinated and concerted effort by SNP MSPs to shout down and drown out senior business leaders who express views contrary to those of the SNP.

"It is deeply depressing that the sort of aggressive and hostile behaviour we see from cybernats on the internet is now being echoed by SNP MSPs in the Scottish Parliament. Those involved should apologise to the witnesses and to Parliament."

Scottish Conservative MSP Alex Johnstone said: "MSPs should at least be trying to set an example to the cybernats who bring Scotland into disrepute.

"Instead, this attempt at ganging up and mob rule in a committee merely gives these people the green light."

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