A new report by Oxford Economics has stated that radical and ambitious policy changes are required if Scotland’s economic performance is to be transformed within the 15 years.
The report, Raising Scotland’s Economic Growth Rate , was commissioned by The Hunter Foundation to inform its strategy.
The foundation is hoping it will initiate a national debate with all political and interested parties in the UK and Scotland to help shape policy for growth.
It aims to address the issues around low productivity, poor business ‘birth rate’ and lack of success with scale-ups that help to explain why Scotland’s GDP per head is a mere 44% of Singapore’s level, 48% of Ireland’s, 68% of Norway’s and 75% of Denmark’s.
The report noted that “it is not realistic to think that the current economic policies of either the UK or Scottish governments will produce a transformation of Scotland’s economic performance”, instead proposing those that go beyond current government boundaries, such as:
- Increasing borrowing to stimulate growth in demand and output.
- Significantly cutting taxes and de-regulating industries to improve competition.
- Increasing government spending on infrastructure, skills, innovation and the green economy.
It pointed out that these approaches are not mutually exclusive and, if there is to be radical change, there is a strong case for a combination of all three.
Scotland’s GDP per head has been about 8% lower than the UK as a whole for many years, largely because of poorer productivity.
Scotland’s rate of new business formation came ninth out of 12 UK nations and regions in 2019.
The report also forecast that for the period from 2020 to 2035, Scottish real GDP growth will average just 1.3%.
It recommends an ambitious industrial policy – possibly centred around Scotland’s renewables industry – tapping into tidal, wave and wind resources.
The report says “it is not implausible to suggest that there are business opportunities that resemble those that generated Silicon Valley, several decades ago”.
In terms of the Scottish National Investment Bank, the £2bn funding was deemed “not particularly generous”, with additional clout needed to be paired with a clear focus, sufficient oversight and transparency to ensure that funds were suitably allocated.
Sir Tom Hunter, founder of The Hunter Foundation, said: “It is for everyone in Scotland, from governments, policy makers and businesses to help solve the problem of poor economic growth that Scotland has faced for too many years.
“We need far more focus in our economic investments, not only to make significantly better gains, but also to understand what’s working and what’s not.
“That is only half the picture though – we need to embed innovation in health and education and poverty reduction to free up finance to invest in growing our economy.”
Richard Holt, head of global cities research at Oxford Economics, added: “The findings of our report emphasise the scale of change and intervention that is needed to address Scotland’s long-standing economic problems.
“Much is being done, but if political leaders want to close the gap with comparable nations, then they need to go beyond their present policy offers.”
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