Alex Salmond is chasing away the private sector firms he so desperately needs

If he had any sense, Alex Salmond, the SNP’s leader, would be studying what makes successful economies tick. The recipe is straightforward, yet bizarrely controversial among the Scottish nationalist establishment: low, flat taxes that do not penalise work, profits, savings or investment; a limited and sensible regulatory burden; a decent macroeconomic policy that promotes monetary stability; competitive open markets and consumer choice across the board, including in fields traditionally seen as public sector monopolies; a welfare state that acts as an emergency support mechanism, not an incentive-destroying trap; a high-quality infrastructure; a great education system; a strong rule of law that protects property rights and eases dispute resolution; free trade and an openness to the rest of the world.

Salmond occasionally does make some of the right noises, especially when it comes to corporation tax, which his party says it will cut to attract overseas investors. But companies don’t locate their operations in a country merely because of one tax: they look at the overall picture, including the broader business climate, costs, local productivity and the personal tax rates that their key staff would face. The SNP’s aggressive socialism, its defence of a bloated public sector and the nationalist establishment’s virulent dislike of free markets will put foreign investors off.

This will compound one of the Scottish economy’s greatest problems, one which in the long term will have far greater consequences even than the dwindling of North Sea oil reserves: its lack of private businesses and entrepreneurs and its excessive reliance on the public sector. The Office for National Statistics’ Business Population Estimates reveal that Scotland had just 740 private businesses per 10,000 adults in early 2013, against 753 in Wales, 785 in Northern Ireland and 984 in England.

The English numbers are an average of very different regional performances; the gulf between London and Scotland in particular is substantially greater than the gap between England and Scotland. Tackling this by unleashing an entrepreneurial revolution ought to be Salmond’s number one economic priority; instead, he prefers to spend his time fuelling conspiracy theories about oil and making irresponsible promises.

The result is that Scotland relies to a remarkable degree on employers based outside its borders for jobs. The figures are shocking: companies based in the rest of the UK or overseas account for 3.1pc of Scottish firms, 35.2pc of employment and 58.1pc of total turnover, according to Business for Scotland. When one looks at the largest firms in isolation, one discovers that 82.4pc of corporate giants, 63.6pc of jobs and 78.1pc of turnover is ultimately controlled outside Scotland.

These numbers would worsen dramatically if Scotland becomes independent. Lloyds, RBS, Clydesdale Bank and Tesco Bank would all move their headquarters to England to make sure that they remain under the Bank of England’s umbrella; Standard Life and plenty of others are working on similar contingency plans. In theory, a country can survive and thrive under a range of different monetary and banking arrangements, as Hong Kong and others have shown; in practice, however, the choice is either a chaotic, incompetent vacuum or the Bank’s tried and tested backstop as a lender of last resort.

Salmond’s lack of seriousness on this key issue – he has refused to explain exactly what an independent Scotland’s currency arrangements would be, save from maintaining that London would be forced to offer him a currency union – is the primary reason for the looming exodus. The financial services industry, once one of Edinburgh’s strongest assets, will find itself hollowed out. Many staff would remain in Scotland, serving the local market, but the companies’ centre of gravity and senior employees would end up gravitating to England.

There would be only one winner in all of this – the City of London and its capitalist denizens so hated by SNP class warriors. Salmond should have consulted the history books: London’s financial sector has frequently benefited from the economic suicide of other countries. The City’s rebirth after decades of decline can be traced back to 1963, when John F Kennedy sought to dissuade US investors from buying foreign bonds. He introduced a 15pc interest equalisation tax on payments made by foreign firms to US citizens.

Global firms that wanted to raise financing from abroad turned to clever City bankers, and the first eurobond – IOUs denominated in a different currency to that used in the country of issuance – was organised in 1963, allowing an Italian firm to raise cash. America’s “foreign direct investment restraint program” of 1968, another daft law, encouraged yet more investors to raise money in London. The City’s renaissance allowed it to react fully to the collapse of the Bretton Woods agreement in the 1970s; its experience in Eurobonds allowed it to quickly dominate the new foreign exchange trading market, ahead of Wall Street.

Then in 1999, most of the EU adopted the euro in a historic miscalculation. Britain’s refusal to do so allowed it to collect yet more business as all of Europe’s minor financial centres, including those in France, Italy and Spain withered. Global banks shifted their regional headquarters to London.

The last big boost came from America’s Sarbanes-Oxley laws in 2002: an over-restrictive response to the Enron scandal, they encouraged dozens of firms to list in London. The introduction of a destructive financial transaction tax in the eurozone may also help the City, though it too is being indirectly affected. The stark reality is that an influx of business from Scotland is just what the doctor ordered for the City of London, which is still struggling following the crisis of 2008.

Many international observers will look upon all of this with bafflement, especially in the US, where many otherwise sensible folk misguidedly support Scottish independence. They assume that Salmond or whoever ends up running a standalone Scotland would seek to position the country as a new Singapore, a centre for finance and trade; in reality, however, an incompetent macroeconomic and financial policy, combined with a hostile take on tax and spend, will merely chase away the private sector firms the country so desperately needs and drive the Scottish economy ever-closer to ruin.

allister.heath@telegraph.co.uk