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The Government Economic Strategy

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SECTION A: THE PURPOSE OF THE SCOTTISH GOVERNMENT

IN OUR 2007 GOVERNMENT ECONOMIC STRATEGY WE PUT FORWARD A BOLD VISION FOR SCOTLAND, WITH THE FOCUS OF GOVERNMENT AND PUBLIC SERVICES DIRECTED TOWARD CREATING A MORE SUCCESSFUL COUNTRY, WITH OPPORTUNITIES FOR ALL OF SCOTLAND TO FLOURISH, THROUGH INCREASING SUSTAINABLE ECONOMIC GROWTH.

Our 2007 Government Economic Strategy put forward a bold vision for Scotland, with the focus of government and public services directed toward increasing sustainable economic growth, with opportunities for all of Scotland to flourish.

Faster sustainable economic growth is the key to unlocking Scotland's potential. It is the avenue through which we can deliver a better, healthier and fairer society and we remain committed to these aims.

This updated Government Economic Strategy sets out how we will continue to deliver on the Purpose we set in 2007:

to focus the Government and public services on creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth.

The benefits from delivering the Purpose will be shared by all of Scotland. It will help to:

  • counter the effects of recession and create greater and more widely shared employment opportunities;
  • promote the transition to a low carbon economy and the reindustrialisation of Scotland as a renewable energy powerhouse and centre for low carbon technologies;
  • tackle key health and social problems that arise from a lack of economic opportunity;
  • reduce crime and anti-social behaviour, which will enable more public services and resources to be focussed on preventing future social problems;
  • foster a self-sustaining and ambitious climate of entrepreneurialism, international trade and innovation;
  • share the benefits of growth by encouraging economic activity and investment across all of Scotland's communities;
  • stimulate higher government revenues and a virtuous cycle of re-investment in Scotland's public services;
  • bring a culture of confidence, creativity and personal empowerment to Scotland; and
  • secure a high quality environment and a sustainable legacy for future generations.

The financial crisis of 2008 and subsequent global recession, has highlighted the importance of responding flexibly to emerging pressures and challenges. It has also emphasised the need to create an economy that is more resilient to shocks and economic uncertainty. Developing a more resilient and adaptable economy are key aims of the Government Economic Strategy.

While we have made progress over the last four years, we are constrained however, by a constitutional framework that inhibits our ability to fully deliver on our ambitions.

Many of the key job creating powers - for example in relation to taxation, welfare, immigration, and industrial and competition policy - lie outside Scotland's control. This lack of autonomy limits our flexibility to respond to key challenges or to take advantage of strengths or new opportunities within our economy.

It also limits our ability to innovate. For example, with greater autonomy we could better coordinate skills and training programmes and reform welfare to deliver a more streamlined and efficient system which promotes employability and inclusion.

Just as importantly, we are unable to use the proceeds of our successes to re-invest in public services or to protect the most vulnerable in our society. If we grow our economy we do not receive all the corresponding boost in revenues. Approximately 90% of our taxes are controlled by Westminster. This also means we are largely powerless to withstand spending cuts from the UK Government which threaten our public services and recovery.

There is an urgent need for change and the Scottish Parliament must secure real 'economic teeth'.

The Government believes that independence is the key to maximising our potential and boosting Scotland's rate of sustainable economic growth.

This chapter sets out the structure of the Government Economic Strategy and how the various elements of our approach fit together. It discusses -

  • the Purpose Framework;
  • where the strategy sits in the Scottish policy landscape; and
  • the different elements of the strategy and how these relate to each other.

THE PURPOSE FRAMEWORK

The Purpose Framework is part of the National Performance Framework ( NPF) alongside the National Outcomes. It identifies the key components of faster sustainable economic growth - Productivity, Competitiveness and Resource Efficiency, Participation in the Labour Market and Population Growth - and our desired characteristics of growth - Solidarity, Cohesion, and Sustainability.

Figure A1 demonstrates how these drivers and characteristics of growth are linked to deliver balanced sustainable economic growth alongside important social, regional and inter-generational equity objectives. In addition to labour productivity a focus on resource efficiency will help ensure that the Scottish economy remains competitive in globally challenging times, and could help establish a long-term competitive advantage.

As the figure highlights, Solidarity, Cohesion and Sustainability are themselves important drivers of sustainable economic growth. Improving the social, health, environmental and economic opportunities for all of Scotland will be key if we are to maximise the nation's economic potential.

Figure A1: The Purpose Framework

Figure A1: The Purpose Framework

A STRATEGY FOR SCOTLAND

The Government Economic Strategy reaffirms our commitment to delivering increased sustainable economic growth with opportunities for all to flourish.

Despite recent global economic challenges, our commitment to this Purpose remains as strong as ever. We recognise the value of certainty and continuity so the fundamental principles of our approach are consistent with those of the 2007 Government Economic Strategy.

The key objectives of the strategy are as follows:

  • to ensure Scotland's government and the whole of the public sector are aligned toward one Purpose;
  • to ensure Scotland's public sector - central and local government, the enterprise bodies and other key agencies - work collaboratively with the private, academic and third sectors, in pursuit of the Purpose and economic recovery;
  • to inform the outcome-based framework which enables the people of Scotland to judge us on the results that we achieve; results which reflect real and meaningful improvements in public services and quality of life; and
  • to provide leadership to support Scotland's transformation to a low carbon economy.

PROGRESS SINCE 2007

As we reflect on developments since 2007, we have made progress, but much more needs to be done. Since 2007, we have:

  • delivered the Small Business Bonus Scheme which has removed or reduced the rates burden for tens of thousands of business properties across Scotland;
  • promoted economic security through no-compulsory redundancies in the areas under our control. Scottish Ministers are wholly committed to supporting those on the lowest incomes. One of the key aims of our annual public sector pay policy is to continue to work towards making sure pay is fair and non-discriminatory and provide employers subject to that policy, with the flexibility to target the lower paid. As we ask for pay restraint to support jobs we have met core economic and social commitments through our 'Social Wage' including -
    • the introduction of a 'living-wage';
    • the freezing of council tax, water bills and the abolition of bridge-tolls and prescription charges; and,
    • maintained our commitments to concessionary travel and free personal care.
  • attracted major international companies to Scotland which will help create thousands of jobs;
  • provided over 300,000 training opportunities - a figure which includes a record 25,000 Modern Apprenticeships in 2011-12;
  • implemented Curriculum for Excellence to equip young people with the skills and knowledge that they need;
  • maintained free higher and further education;
  • established the Scottish Investment Bank to provide both early stage and established businesses with growth and export potential with better access to finance;
  • addressed the drag on the economy caused by poor health with action on alcohol and drug misuse and improvements in health outcomes, such as heart disease, stroke and cancer;
  • delivered vital infrastructure investment across the length and breadth of Scotland such as the Airdrie-Bathgate Rail Link Project, the M74 Completion Project and the M80 Stepps to Haggs upgrade;
  • modernised the planning system making it more effective, reducing delay and helping promote economic growth and sustainable communities;
  • supported the activities of our Enterprise bodies to promote business start-ups and provide new opportunities for existing businesses to grow; and
  • overachieved on our own efficiency targets which have been re-invested in our public services and economy.

Moreover, at the first signs of the economic downturn, our Economic Recovery Plan 1 mobilised the resources of all of Scotland's public sector to deliver a vital economic stimulus, including capital acceleration and new investment in skills, training and support for those at risk from unemployment.

We have also taken significant steps to position Scotland to take full advantage of the economic opportunities that will emerge from the transition to a low carbon economy.

THE TRANSITION TO A LOW CARBON ECONOMY

Climate change is undoubtedly one of the most important challenges that we face as a country. It will have far reaching consequences for our economy, our lifestyles and our natural environment. Only by promoting environmental sustainability, and delivering a significant reduction in our greenhouse gas emissions, will we be able to deliver growth and benefits for all over the long-term.

This challenge also represents an exciting opportunity for Scotland. We are fortunate to have the natural resources and expertise to be at the forefront of the new global economic opportunities that the transition to a low carbon economy is bringing.

Transition to a Low Carbon Economy

Our Climate Change (Scotland) Act 2009 established ambitious emissions reduction targets with a commitment to reduce emissions by 42% by 2020 and by 80% by 2050. In 2010, we published the draft Low Carbon Scotland: Meeting the Emissions Reduction Targets 2010-2022 report (finalised in March 2011), and the Low Carbon Economic Strategy ( LCES) which together set out how we would meet these climate change targets and secure the transition to a low-carbon economy 2.

Scotland has a tremendous opportunity to become a world leader in low-carbon activities. We have 25% of Europe's wind and tidal resource, 10% of Europe's capacity for wave power and the EU's largest offshore storage capacity for carbon emissions - greater than the Netherlands, Denmark and Germany combined. Coupled with our wealth of existing energy engineering, business and academic expertise these key assets offer the potential to establish new industries, new investment and new jobs.

The transition of Scotland's industries and firms to low carbon products and services is both an economic and environmental imperative and it offers significant potential to stimulate and exploit rapidly expanding global markets. A low-carbon economy that promotes the sustainable use of resources (water, land, energy, minerals, etc) will also make us more resilient to unpredictable commodity prices in an uncertain future world and offer greater protection to those who are most at risk from rising and volatile energy prices.

We have seized the opportunity to integrate the transition to a low-carbon economy explicitly into the Government Economic Strategy and we have made it a clear Strategic Priority.

THE ROLE OF THE PUBLIC SECTOR

Our future prosperity as a nation depends on everyone playing their part - as workers, consumers, volunteers and business leaders. We, as government, have a role too in the way we invest in Scotland's people and places. We also have a critical role in ensuring that the recovery continues to gain traction and that we tackle remaining obstacles to growth.

It is important however, to be clear about what the public sector can and cannot achieve.

The Scottish Government responded to the challenge of the recession with a detailed Economic Recovery Plan which provided support to retain jobs, investment and skills and minimise any potential impacts on Scotland's long-term growth potential. This helped ensure that our recession was both shorter and shallower than in the rest of the UK.

The Government also has a vital role in helping the economy emerge from the worst effects of recession and to continue to tackle the causes and impacts of unemployment - particularly amongst our young people. However, long-term economic success cannot be supported solely by growth in the public sector. Growth and investment in the private sector will be key to unlocking Scotland's potential and creating opportunities for all to flourish.

The objective for government is to provide the overarching economic framework - such as a competitive business environment, an effective justice system that protects property rights, an integrated and resource efficient economy and a skilled and adaptable workforce - which is conducive to sustained economic growth. This is what the Government Economic Strategy aims to achieve.

THE APPROACH FOR DELIVERING THE PURPOSE

Our approach consists of:

  • the overall Purpose Framework - supported by a set of National Targets, which include specific benchmarks for economic growth and golden rules for ensuring that growth is shared and sustainable.
  • Strategic Objectives and National Outcomes - which capture our long-term vision for Scotland from delivering the Purpose. The National Performance Framework, presented in Figure A2, sets out the Government's vision, and shows how the Purpose is supported by the Strategic Objectives and National Outcomes and how progress towards the Purpose will be monitored; and
  • Strategic Priorities - which are critical to delivering sustainable economic growth with opportunities for all to flourish.

Figure A2: The National Performance Framework

Figure A2: The National Performance Framework

THE PURPOSE FRAMEWORK

The Purpose Framework sets out the drivers of growth and the desired characteristics of this growth - as shown in Figure A1.

Financial and other resources will continue to be aligned to ensure that policy development and spending programmes are focused on the delivery of the Purpose.

Within this overarching framework, a particular emphasis is given to the interventions which will help secure the recovery and put in place the necessary foundations so that Scotland can take advantage of new and emerging opportunities as the global economy recovers - such as in renewable energy.

PURPOSE TARGETS

Our Purpose Framework is underpinned by a set of ambitious targets which focus on the drivers of sustainable economic growth and ensure that growth is shared and sustainable. These targets set the direction and ambition of our Economic Strategy.

Our long-term Purpose targets are:

Sustainable Economic Growth - To match the growth rate of the small independent EU countries by 2017.

Productivity - To rank in the top quartile for productivity amongst our key trading partners in the OECD by 2017.

Participation - To maintain our position on labour market participation as the top performing country in the UK and to close the gap with the top five OECD economies by 2017.

Population - To match average European ( EU15) population growth over the period from 2007 to 2017, supported by increased healthy life expectancy over this period.

Solidarity - To increase overall income and the proportion of income earned by the three lowest income deciles as a group by 2017.

Cohesion - To narrow the gap in participation between Scotland's best and worst performing regions by 2017.

Sustainability - To reduce Greenhouse Gas emissions by 80 per cent by 2050.

STRATEGIC PRIORITIES

To deliver sustainable economic growth - and secure the recovery - the Government Economic Strategy identifies six Strategic Priorities. These priorities represent the broad policy levers that shape the drivers of growth -Productivity; Participation; and Population - and the desired characteristics of growth - Solidarity, Cohesion and Sustainability.

Strategic Priorities for Delivering Sustainable Economic Growth

  • Supportive Business Environment;
  • Transition to a Low Carbon Economy;
  • Learning, Skills and Well-being;
  • Infrastructure Development and Place;
  • Effective Government; and
  • Equity.

Each priority is critical to the delivery of the Purpose and our Purpose targets. Our policies and resources will continue to be aligned toward them in order to deliver increased sustainable growth, with opportunities for all to flourish (as highlighted in Figure A3). The whole of the public sector has an important role to play in contributing to these Strategic Priorities.

Our ability to prosper and create jobs will depend on the performance of our businesses. They are the wealth generators of society and the greatest source of employment.

This is why we are committed to maintaining and further investing in a Supportive Business Environment. Our approach will focus our efforts on:

  • Creating the right environment for growth companies;
  • Enabling companies to take advantage of growth markets; and
  • Supporting growth sectors with the potential to accelerate economic growth.

This refresh of the Government Economic Strategy establishes a new Strategic Priority - Transition to a Low Carbon Economy - to reflect the opportunity we have at this current time to place Scotland in an advantageous position in the global economy and ensure that the benefits of this transformational change are shared across the economy and our communities.

Figure A3: Inter-linkages of the Government Economic Strategy

Figure A3: Inter-linkages of the Government Economic Strategy

Our Strategic Priority on Learning, Skills and Well-being acknowledges that our people are our greatest economic asset. A skilled, educated and healthy workforce is essential to building our comparative advantage and to the delivery of sustainable economic growth. Learning and skills development is also vital to developing a more adaptable and resilient economy. It is also an effective way of addressing inequality and promoting the health and well-being of individuals and strengthening the fabric of our communities.

Our focus on Infrastructure Development and Place seeks to harness the strength and quality of our cities, towns and rural areas and to ensure that Scotland is positioned to take full advantage of the opportunities offered by the digital age. There is a critical role for government in capturing the opportunities that our geography provides, through the effective alignment of Scotland's planning policy, development and funding frameworks and identifying clear priorities for investment in our physical and digital infrastructure.

Effective Government is critical to successful implementation of the Government Economic Strategy, by ensuring that the actions of the public sector are coordinated to maximise their positive economic impact. Central to this will be nurturing and developing the talents and creativity of all our public servants.

In order to ensure that all of Scotland benefits, the Government Economic Strategy has a vital role in delivering economic growth which provides the most disadvantaged in society with the opportunity to prosper. However, as well as being a desirable outcome and characteristic of growth, Equity - social, regional, and inter-generational - is also a key driver of economic growth. Only by ensuring that everyone has an opportunity to succeed will we fully maximise the nation's potential.

STRATEGIC OBJECTIVES & NATIONAL OUTCOMES

Delivery of the Purpose and the Purpose targets is supported by five Strategic Objectives that describe the kind of Scotland that we want to live in - a Scotland that is Wealthier and Fairer, Smarter, Healthier, Safer and Stronger and Greener.

WEALTHIER & FAIRER - Enable businesses and people across Scotland to increase their wealth and to ensure that more people share fairly in that wealth.

SMARTER - Expand opportunities for all Scots to succeed from nurture through to life long learning ensuring higher and more widely shared achievements.

HEALTHIER - Help people to sustain and improve their health, especially in disadvantaged communities, ensuring better, local and faster access to health care.

SAFER & STRONGER - Help local communities to flourish, becoming stronger, safer places to live, offering improved opportunities and a better quality of life.

GREENER - Improve Scotland's natural and built environment and the sustainable use and enjoyment of it and facilitate the transition to a low carbon economy.

MONITORING PROGRESS: THE NATIONAL PERFORMANCE FRAMEWORK AND SCOTLAND PERFORMS

The Purpose provides a clear and unified vision for Scotland. A vital element of delivering this vision is ensuring that all of Scotland - our people, businesses, and delivery organisations - can envisage a more successful country. In 2007, we moved for the first time towards an outcomes-focussed approach across the whole of government.

To articulate our ambition, support the move towards outcomes, and provide a framework to assess progress, in 2007 we launched the National Performance Framework ( NPF). This overarching framework shapes delivery against the Government's agenda, and is designed to be clear, logical and easy to understand.

The delivery of the Purpose and National Outcomes is monitored through tracking progress on the Purpose Targets and National Indicators on the Scotland Performs website
( www.scotlandperforms.com).

The NPF is a 10 year plan with a refresh of the National Indicator set to be published in Autumn 2011 to reflect lessons learned since 2007; provide a better measure of progress towards the National Outcomes; and, reflect current priorities. By taking this approach we will ensure we best reflect national well-being and success.

DOCUMENT STRUCTURE

The remainder of the document focuses on:

  • an update of economic developments - and in particular the challenges from the global financial crisis and the outlook for recovery; and
  • a detailed discussion of each Strategic Priority and the actions we are taking.