WATCH: Thirty recommendations to grow the Scottish economy

The document opens with the claim that: "Scotland is without question a rich and successful nation, in the top 25 of global economies in terms of income per head and ranks near the top in the UK on most long-term indicators."

Throughout the first part of the report thirty seperate recommendations are made. They are:

1. National Economic Strategy: The creation of an overarching national economic strategy that (as far as is possible) focuses on long term goals and secures broad cross partisan and sectoral support should be the central goal of growth policy. This is and of itself a necessary but not sufficient factor for success.

Growth goals: The Strategy should include globally ambitious growth goals, to i) First 10 years: catching up with the small advanced economies average growth rate (currently 2.5%) (ii) Years 10 to 25: closing the GDP per capita gap with the small advanced economies (with period of 3.5% growth) (iii) maintaining a GDP per capita position in line with the top half of the small advanced economies group.

2. Next Generation Economic Model: A national debate should be commenced on the model we seek for the long-term. Choosing matters and the manner of choosing helps determine the sustainability of the choice, since the central lesson from the success of small advanced economies is that they have achieved consensus about long-term priorities and have a collaborative approach to pursuing those priorities. Our recommended starting point for that national debate, is based on learning the lessons from benchmark small advanced economies and applying them intelligently to Scotland’s circumstances, needs and opportunities. The features of that model (leaning especially on the lessons of Denmark, Finland and New Zealand) include: quality of governance, long-term cross partisan strategy, a focus on innovation, being a competitive location for international investment, exploiting Scotland’s resource endowment, an export-orientation, migration-friendly, where flexible labour markets combine with fair and progressive work and active employment policies, maintaining a highly skilled workforce with transferable skills, using taxation as a tool for economic development but not competing as a low tax location, placing inclusive growth at the heart of the strategy and viewing quality of life as both an asset and objective.

3. Delivering Cross-Partisanship and Collaboration: A cross-partisan collaborative approach to policymaking against the long-term national strategic framework should be institutionalised. Direct engagement across sectors, business representative, employee representative and other policy groups should be institutionalised to ensure that the national economic strategy remains a vital and dynamic part of policymaking.

4. Identifying comparative advantage and strategic priority sectors: while we are leery of the idea of ‘picking winners’ a clear choice should be considered in identifying and promoting those areas (rather than particular firms) in which we judge the Scottish economy to have sustainable comparative advantage. The process of selecting strategic priorities should be a key output of the process identified in (2) and (3).

5. Productivity Commission: We recommend the establishing of a Productivity Commission in Scotland, to identify opportunities for productivity improvement would be useful. Adopting a fixed-term model, as in Denmark or Norway, would be an easy way to start – with an option to establish a New Zealand style Productivity Commission model if appropriate.

6. Frictionless borders and market access: Securing frictionless borders with the rUK and EU should be a top strategic priority of the Scottish Government. Brexit places a material risk on Scotland’s access to export and import markets and the free movement of people, capital, goods and services and must therefore be resisted vigorously. The alternative will be a severe reduction in living standards, growth and employment levels. Scotland has more at stake than most small nations in the coherence of the process of fair global integration. The lessons of the Scottish enlightenment and history since must be kept front of mind by all.

7. Population growth: Targeting a growing population of working age and the attraction of talented migrants should be a top priority of Scottish Government economic policy and marketed vigorously to the rest of the UK and the world. Scotland should seek to be regarded as the most talent friendly country in the world. 8. A new ‘Come to Scotland’ package should be created with a package of incentives including:

• A ‘transition relief’ package of tax incentives to reduce the cost of moving to Scotland, and for graduates of Scottish Universities to stay on should be the headline instrument.

• A reduced capital threshold for investors who are required to provide this

• A reduced investment threshold for business start-ups

• A new visa system benchmarked on the most efficient and easy to use in the world

9. Marketing of ‘Come to Scotland’: The marketing of this package and the overall approach should be a major part of the country’s international and UK marketing investment and the communications strategy for the internationally facing Scottish agencies. As far as possible the intention will be to secure cross partisan support for the whole approach which also attracts engagement from our major employers, exporters and universities. The budget should reflect the priority as should the engagement of senior Ministers and officials.

10. Celebration of the contribution of migrants: A complimentary programme of internally focused public engagement on the contribution of our migrant and ‘new Scots’ communities should be embedded in the work of the Government, Local Authorities and across Parliament.

11. International Students and Graduates: The attraction and retention of international students should be a priority of policy and changes made immediately to alleviate the constraints caused by UK policy. These changes should include both visa changes to allow more students to stay in Scotland long enough to secure employment appropriate to their qualifications and tax incentives for the first three years of employment (in recognition of the social, economic and exchequer contributions already made).

12. International Government and Multi-national Organisation Strategy: One of the existing internationally facing elements of the Government or indeed a combined international department or agency should be tasked with creating a strategy for engagement and transitioning of the staff of international governments and multi-national organisations to Scotland. As well as providing a great home for countries and organisations that wish to engage with Scotland the strategy should aim to provide a home for as many international facing organisations in function or headquarter as is possible. A warm welcome should be matched with a professional service to ease transition costeffectively.

13. A Commission on Gender Pay Equality should be created with a remit to consult and engage across the economy and consider the best policies and incentives to produce a purposeful reduction in the gap with the performance of the best performing small advanced economies, especially New Zealand.

14. The JRF target of a 50% reduction of poverty to 10% of the population should be agreed within a stretching but achievable time frame. This policy should be elevated to central strategic importance in the overall strategy and prioritised accordingly in resource allocation.

15. Long term strategy on participation and inclusion: agreement should be sought on the central importance of participation and inclusion to sustainable economic growth and a framework set up to oversee long term policy intervention and resource allocation from e.g. The Fund for Future Generations. Whilst inclusive growth is already a policy priority of the Scottish Government, the full powers of independence will provide an opportunity to expand the priority across all policy areas that can contribute, including fiscal policy, industrial strategy, social security, economic participation and fair work, education and skills and community engagement. Strategic communication on the costs of inequality should be a priority of government and political strategies. It is important to build a wider public understanding of the realities of the short and longterm costs so that agreement and support can be obtained for longer term interventions.

16. Labour markets and flexicurity: Scotland can learn from Denmark and move to a flexicurity model, with flexible labour markets but without the insecurity the UK benefits system promotes. This would be expected to deliver lower unemployment, particularly lower youth unemployment and enhance productivity by stabilising investment incentives. We recommend a consultation of how a move can be made to establish a Scottish flexicurity model.

17. Competitiveness rankings: Improving the rankings of Scotland in the main competitiveness rankings should be a core long-term aim of economic policy and the trade-offs involved considered and solutions agreed for the long term. 18. Competitive Business Taxation: As part of the review of taxation recommended in Part B we recommend that the impact of business taxation on growth performance is carefully assessed. We are interested in the potential to tailor the Dutch R&D tax credit scheme, enhance incentives for longer term equity investment and improve capital allowances. While we do not consider that competitive use of profit taxation (corporation tax) is an optimal strategic tool, we do recommend that the headline rate of corporation tax should not rise above the level prevailing in the rest of the UK. As with all taxation the impact of the overall structure on both the tax base and revenue generation should be carefully assessed to ensure the more effective system is deployed.

19. Engagement of International Companies and Sectors: organisational capacity should urgently be designed and recruited to create and support sector facing business Ambassadors, building on and increasing the prominence of the Global Scots network. This is intended to create a world class dialogue and engagement with those major companies located in Scotland or considering investing in a presence in Scotland to ensure opportunities are maximized and risks mitigated.

20. Improved data and analysis: There are gaps in the data that are available on Scotland’s trade balance, and on the wider balance of payments position which should be addressed in the short so that the evidence is available on which decisions on policy and assessments of its success can be based. This is an immediate priority.

21. Infrastructure Commission: An Infrastructure Commission should be established to provide strategic advice, based on a research programme, to align investment with long term economic development aspirations. This should engage across sectors to seek a national agreement on the long-term priorities and plan. A significant increase in annual investment should be costed and the best means of delivering it identified. If 0.8% of GDP is identified as a go-ahead optimal steady state by some, there is a strong case for a significant increase in this in the short to medium term to ensure catch up in digital and physical infrastructure which will further carry economic benefits that could secure the ‘pay-back’ to investment in due course.

22. An Export Growth Strategy should be created urgently in consultation with the main exporting sectors, companies and potential exporters especially in smaller companies. The aim of this strategy must be to dramatically increase the value of exports overall and to diversify the source of export income very considerably as countries such as Ireland have achieved in recent decades. The promotion of Scotland’s exports should be a central part of the marketing effort of the country alongside migration encouragement. Measures could include the following elements:

• establish a Ministry for Trade and Foreign Affairs to oversee a new and heavily integrated approach to trade, investment and economic diplomacy;

• build a new embassy and consular network with economic diplomacy as its core purpose and with the ability to help harness and direct all of Scotland’s international activity;

• retain the link between internationalisation and wider business support through the enterprise networks but with increasing emphasis on, and incentivisation of, growing the number of domestic firms engaged in exporting activity;

• establish a stronger, better funded inward investment agency with an independent and high level Board including representatives of indigenous and investor business communities;

• direct more resources to trade and internationalisation activities recognising that comparator countries spend more on supporting exports, attracting inward investment and promoting tourism than Scotland currently does; and

• provide financial support mechanisms for exporting businesses e.g. export credit guarantees that are at least as generous as those provided in comparator nations.

23. National brand strategy: The development of a national brand and campaign is critical to support broader export. Increasing Scotland’s position in the Anholt-GfK Roper Nation Brands Index is a useful benchmark. Resourcing of national brand strategy: The investment in marketing and communications behind Scotland’s reputation internationally must be review urgently and benchmarked against the scale and effectiveness of Ireland, New Zealand and Norway, which would imply a ten-fold increase in resourcing. A longer-term view of risk and reward should be central to the judgement on the investment level and major exporters engaged to enhance the overall offer.

24. National Digitalisation 2030 Strategy: a core focus on growth strategy must be the adoption of the target to become a world leader in digitalisation by 2030, building on the Scottish Government’s Digital Strategy. A report by Deloitte for the Scottish Futures Trust suggests this could deliver £13 billion to GDP, 175,000 jobs, £2.5 billion in exports and £4.5 billion in tax revenues. The Scottish Futures Trust should be asked to create this strategy immediately identifying the measures required, the role of government and the collaboration needed by the private and other sectors.

25. Universities Growth Strategy Review: We recommend a central role for Universities in Scotland’s growth strategy and an immediate review of the policies that are required to help them maximise their contribution. This should be led by a combination of academic, investment, business and policymakers.

26. Government Led Innovation Review: There should be a policy review to assess the impact of previous interventions and to identify the policy requirements to close the R&D gap, improve the commercialisation performance and identify the role of workplace skills in innovation and the creation of a learning economy. Tax measures such as a Dutch-style R&D tax credit scheme and need for a innovation agency such as Finland’s Tekes should both be subject of feasibility studies.

27. Top 5 Strategic Development Projects: at any one point in time we recommend that the Scottish Government, Local Authorities and Economic Development agencies should combine to select the top 5 strategic sites for urgent economic development and devote leadership effort and resource to fast-track them. These are likely to be in or around the main cities where the anticipated return on investment is greatest and likely to unlock greater economic activity. The focus of these projects is likely to combine infrastructure, transport and commercial property and residential development in some combination. The Infrastructure Commission could lead the process of selection and oversee delivery. Hub airport development and the opportunity for a freight hub could be specific opportunities to investigate further.

28. Scottish National Investment Bank: We support the creation of the SNIB and recommend that the bank participates with other investors on long-term risk bearing projects requiring equity investment and return. We further recommend that this policy move is considered alongside a more comprehensive review of policy in this area and the organisations and structures that deliver it from local government to national agencies. Close co-ordination with the British Business Bank and its investment priorities would make sense short, medium and long term as would an equivalent dialogue with the Irish Government.

29. Housing and Growth: A target should be set for all tenures of housing construction to align to broader migration and population strategy and the development of the planning process. In particular all options should be considered to ensure the investment is made in high quality housing that is far more affordable at all levels than at present. Housing should be seen as an integral part of economic and competitiveness strategy.

30. Stop Strategy: It is a relatively simple task to identify more tasks, resources and initiatives that any organisation must engage to improve its performance. It is far more difficult to ensure it stops doing peripheral activity or less impactful work. As part of the economic strategy it is critical that this is a work stream that is prioritised and resourced under senior leadership and governance.