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At a recent talk I was asked if wellbeing economics was a reinvention of socialism. I answered: “If it is, then it's equally a reinvention of capitalism”.

Socialism and capitalism have at their core a set of values that form the two elements of the formula for success. For generations, politicians have used those values to manipulate and divide us.

However, the wellbeing approach recognises that quality of life, equality, fairness, sustainability, happiness, and health are all outcomes that should be given equal weight to GDP in economic planning. Society and economy are in equal standing; one cannot thrive without the other.

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Two sides of the same coin

Under Nicola Sturgeon, the Scottish Government talked a lot about wellbeing but was very focused on the societal element of the equation. The current Scottish Government has admitted it needs to reinvent its relationship with business, but that's not going to happen unless they get the business side of the wellbeing equation right.

The National: Nicola Sturgeon and John Swinney pictured in March this year before her final First Ministers

This requires greatly enhanced business community engagement. The business community currently views the word wellbeing as only appearing in sentences that end in bad news for business. The Scottish Government needs a major business re-engagement programme and national discussion on wellbeing economics with the business community. The goal should be to reinvent our economic approach in a way that provides truly sustainable economic growth and offers wellbeing-focused businesses a significant competitive advantage. 

Wellbeing corporation tax credits

The father of neoliberal economics Milton Friedman once said: “I am in favour of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.”

Well, I am in favour of appropriate levels of taxation being collected from those highly profitable corporations who pay poverty wages to workers but large bonuses to senior managers operating tax avoidance schemes. 

The wellbeing think tank Scotianomics has suggested introducing a benefit corporation tax credit system based on the mantra that if big companies want to pay less corporation tax, let them earn it.

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Boris Johnson, who was heavily influenced by Friedman, had planned to reduce corporation tax to 17% - but the post-Brexit economy and the fact that there was no evidence that such a cut would deliver any benefit meant this was abandoned. Now, businesses with profits of over £250,000 pay 25% and those declaring less than £50,000 will pay 19%. In other words, there are more incentives for the larger companies to pay their armies of accountants to avoid corporation tax, while smaller companies simply pay the 19%. 

The UK Government won't devolve corporation tax to Scotland, even though it’s devolved to Northern Ireland. So let's imagine an independent Scotland with a balanced, forward-thinking approach to taxation. Creative policies could be implemented that met the aspirations of both the left and right of the traditional spectrum.

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Giving substance to an empty pledge

The Scottish Government has a business pledge which asks companies to behave in a way that benefits both the company and wider society by changing its corporate behaviour. It's pretty inspirational but sadly also pretty pointless: There is no profit in signing the pledge other than gaining a bit of PR or to curry favour with the administration. 

This is not the Scottish Government’s fault – they don’t have the tax powers to offer either carrot or stick. If it did, then instead of something-for-nothing tax cuts, solutions such as benefit corporation tax credits could be implemented. Imagine a simple, credit-based system which allowed companies to earn tax credits through activities that drive national wellbeing. Imagine if Scotland could link a system of corporation tax credits to the business pledge. This would allow corporations to earn wellbeing tax credits that would drive targeted investment and incentivise corporate behaviours that create a better, fairer, more prosperous Scotland – where business and society were aligned.

Taxation can change corporate behaviour for the better

Imagine if big business could be persuaded by wellbeing tax incentives to invest in sustainable practices which boost our environmental and recycling sectors.

If they pay the Real Living Wage, increased consumer spending power would enter the economy and lead to massive savings on benefit payments. Increased National Insurance and PAYE tax contributions would be worth another £1bn a year to Scotland’s revenues while increased exports would improve Scotland’s balance of payments.

Businesses increasing the percentage of turnover on applied R&D and downstream innovation could be the foundation of a move to raise R&D spending in Scotland from 1.8% of GDP to 3%. This could add £12bn to Scotland’s GDP within five years. Combine that with enhanced employee engagement and you rapidly increase productivity.

Hitting equality targets and employing young people and apprentices would tackle the blight of youth unemployment and discrimination. Prompt payment of invoices to SMEs would increase turnover by between five and 10 percent a year, improving cashflow, boosting entrepreneurialism and increasing the speed of investment in Scotland’s real economy – the most effective way to create jobs with value and purpose.

This would lower taxation for wellbeing-focused businesses but increase overall tax income over time, whilst giving Scotland’s economy competitive advantage versus the rest of the UK.

Business and society in sync?

Benefit corporation tax credits would lead to businesses delivering a benefit to society, raise overall taxation revenues, whilst also making wellbeing-focused business more profitable and competitive – what’s not to like?