Section 3: Implementing the trategy
The Scottish Government's purpose remains: to focus government and public services on creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth. This is the overarching objective of Scotland's Economic Strategy.
Our Economic Strategy sets out a framework for Scotland to use its full powers to fulfil this purpose with a clear focus on two mutually reinforcing objectives - increasing competitiveness and tackling inequality.
As the Economic Strategy documents, we are able to use our existing devolved responsibilities in areas such as local economic development, infrastructure, transport, housing and planning, education, and health and social care to boost the Scottish economy. We have also set out ways in which we can use further powers such as control over the Crown Estate and Air Passenger Duty which have been agreed by the Smith Commission. We believe there is a strong case for further powers to better enable us to achieve the ambitions of boosting competitiveness and tackling inequality.
All sectors have a role to play in creating the best conditions for Scotland to succeed in achieving the framework and ambition outlined in this strategy.
The Scottish Government, its agencies and partners in Scotland, will work together to implement this strategy. Further detail and direction on policy priorities and initiatives on the areas set out in the Economic Strategy, including Scotland's International Framework, Trade and Investment Strategy, Scotland's Oil and Gas Strategy, Fair Work, and Social Justice, will be published in the coming months. 
As this strategy makes clear, improvements in Scotland's economy and society cannot be delivered solely by the public sector. Growth, innovation, investment and risk-taking in the private sector are key to unlocking Scotland's economic potential. Cooperation between Scotland's employers and employees is also essential to making the vision of Fair Work, for example, a reality.
Working with our partners
The Scottish Government's agencies play an integral part in the delivery of the Economic Strategy under existing devolved powers. For example:
- Scottish Enterprise and Highlands and Islands Enterprise work to support business and economic development across Scotland;
- VisitScotland helps attract visitors to Scotland and provides advice and support to Scotland's tourism industry;
- The Scottish Funding Council is responsible for funding teaching and learning provision, research and other activities in Scotland's colleges, universities and higher education institutions; and
- Skills Development Scotland is responsible for supporting Scotland's people and businesses to develop and apply their skills.
Each of our partners' activities will be aligned with the priorities laid out in our Economic Strategy, and each has played a role in shaping this strategy.
Alongside these agencies, an increasingly broad range of organisations now play a central role in shaping and supporting the Scottish Government's economic ambitions. These include local government, Zero Waste Scotland, the Scottish Environmental Protection Agency, the National Parks, Forest Enterprise Scotland, and Scotland Food and Drink.
Businesses in Scotland also play a role in helping deliver this strategy. Since 2007 the Scottish Government has engaged directly with business and civic leaders in the bi-annual meetings of the National Economic Forum, on a range of issues including youth employment, energy, and digital economy. This promotes greater opportunities for partnership working towards common goals and complements the regular dialogue that the Scottish Government maintains with business organisations and their members.
The Scottish Government has a close and productive working arrangement with the Scottish Trade Unions Congress and affiliated trade unions. This covers a wide range of economic and social policy themes and is underpinned by a Memorandum of Understanding that provides a framework for developing genuine partnership.
The Scottish Government recognises the critical role the third sector plays in addressing issues of inequality and the needs of disadvantaged communities, and the contribution that the sector makes to Scotland's economy. The sector is essential to the design and delivery of public services, and to helping us find solutions to the economic and social challenges that Scotland faces.
As we deliver our Economic Strategy we will bring an increased focus on local communities. Consistent with our commitment to community empowerment, local communities will have the opportunity to participate in shaping their local economy.
In implementing Scotland's Economic Strategy the Scottish Government will build on these partnerships to improve Scotland's economic performance and reduce inequalities in communities and in the workplace.
Further economic powers
Whilst the existing devolved responsibilities will continue to be used to boost the Scottish economy and tackle inequality, the key powers to support businesses, to shape the economic structure of the economy and reduce inequality remain reserved to the UK Government.
The Scottish Government will continue to make the case that a more powerful Scottish Parliament with full social and economic responsibilities would be better able to support and stimulate our economy and tackle inequality.
Scotland's responsibility for taxation and welfare is particularly limited. Once the Scotland Act 2012 is fully implemented, responsibility for only 16% of tax revenue in Scotland will be devolved. Under the Smith Commission Agreement this will increase to 29%, at the same time just 14% of welfare expenditure will be devolved to Scotland. This means that our ability to tailor a tax and welfare system for Scotland's circumstances and preferences is particularly limited. Moreover, it means that the resources we have available for devolved spending, which accounts for around 60% of the total public spending in Scotland, are effectively determined by the UK Government's priorities, including their commitment to ongoing austerity and rapid deficit reduction.
The Smith Commission agreement, once implemented in full by the UK Government, will transfer a number of additional responsibilities to the Scottish Parliament, as summarised in Box 3.1.
The Scottish Government will use these new responsibilities to support the implementation of our Economic Strategy when they become available. For example:
- Powers over employment programmes will provide an opportunity to respond to the economic priorities in Scotland and to improve economic outcomes by moving more people closer to, and into, sustainable employment.
- Responsibility for Air Passenger Duty will enable us to set a policy that helps support our internationalisation ambitions, and in particular improve connectivity with major airport hubs.
- Responsibility for the Crown Estate will improve management of strategic assets and integration of Scottish policies relating to use of the seabed (including for renewable energy development) and wider marine planning, as well as providing direct benefits for communities across Scotland, especially our island communities.
- In finalising the detail of the capital borrowing provisions with the UK Government as part of the fiscal framework, we will look to ensure that there is sufficient flexibility to enable the Scottish Government to better prioritise and plan investment in Scotland's infrastructure, boosting productivity across the entire economy.
The new powers will also provide opportunities to complement our existing responsibilities, for example by linking the new powers on ill health and disability benefits to already devolved areas such as health and social care.
The key areas for further devolution of economic policy put forward by the Smith Commission include:
- The power to set Income Tax rates and bands, although the UK Government will continue to control the personal allowance, as well as all other reliefs and allowances and tax rates and thresholds for savings and non-dividend income;
- Devolution of Air Passenger Duty and Aggregates Levy;
- Devolution of control of the housing element of Universal Credit;
- Control over some benefits, including the Disability Living Allowance, Personal Independence Payment, Attendance Allowance, Carer's Allowance and the benefits that make up the Regulated Social Fund;
- Powers over support for unemployed people through employment programmes currently contracted by DWP;
- Licensing of onshore oil and gas extraction;
- Responsibility for the Crown Estate's economic assets in Scotland;
- Devolution of decisions on public sector bidders for rail franchises;
- The power to introduce gender quotas in respect of public bodies in Scotland; and
- Consumer advocacy and advice.
The Smith Commission recommendations are a step forward for Scotland. However, they remain modest and fall short of the powers that the Scottish Government believes are required to help deliver a fundamental change in Scotland's economic performance and tackle rising inequality.
We have been clear that our priority is to secure the full powers that will enable the Scottish Parliament to be able to do what the Scottish people want it to do.
For the Scottish Parliament to be able to create jobs and tackle inequality, it needs more than control over one or two taxes. It needs control over a range of taxes, both personal and business. It needs control of key economic levers like employment policy. It needs full control of welfare policy and the minimum wage. However, under the Smith Commission proposals over 70% of tax revenue raised in Scotland will continue to be controlled by the UK Government, as will 86% of welfare expenditure. Key job creating powers will also remain reserved to the UK Government.
The Scottish Government's priority over the next few years will therefore be to secure further economic powers to tailor policy to maximise the country's strengths and address the specific challenges that we face. Access to such levers will not only assist in responding to the long-term challenges that many advanced economies face, such as demographic change, but also enable us to re-invest the proceeds of our success back in the public finances and public services.  This is key for many of our policies in this strategy which are about enhancing the participation and productive potential of people in Scotland.
Whilst fiscal autonomy and responsibility for all domestic expenditure would enable the Scottish Parliament to respond more fully to the challenges and opportunities Scotland faces, of particular importance is to secure powers for the Scottish Parliament which help both to boost competitiveness and tackle inequality. For example, our priorities include the following economic levers:
- Responsibility for key elements of employment taxation, such as Employers' National Insurance, which would provide opportunities to reduce the cost of employment in key sectors and for key groups of workers such as those engaged in R&D activities. Employees' National Insurance combined with Income Tax determines the level of an individual's post-tax income and it would be more logical for both to be the responsibility of the Scottish Parliament to better deliver fair and rewarding work.
- Similarly, greater responsibility for business taxes - such as Corporation Tax and Capital Gains Tax - could be used to help support the rebalancing and reindustrialisation of the Scottish economy, particularly in manufacturing. Northern Ireland will shortly be granted the responsibility to set a lower rate of Corporation Tax relative to the rest of the UK. The Scottish Government has made clear that we have no intention to engage in a 'race to the bottom'. Instead, we will use these powers to create a long-term competitive advantage, not through a blanket approach, but by using targeted changes in tax allowances to encourage higher levels of investment in capital or R&D, and encourage the growth of SMEs.
- Responsibility for employment rights, including the National Minimum Wage, would provide greater opportunity to set policies to improve working conditions, address in-work poverty and encourage more people to enter the workplace.
- Genuine responsibility for social security in Scotland, such as full powers over working age benefits and full devolution of employability policy including the running of Jobcentre Plus would support our existing work improving employment outcomes, helping to boost economic growth and reduce inequality at the same time as providing coordinated support to those out of work.
- Greater responsibility for energy policy and regulation would ensure that the energy market better-serves the Scottish economy. Policy designed in Scotland would help maximise the economic return from our substantial energy reserves, supporting the growth of a sustainable industry for the benefit of the people of Scotland. Joint oversight of UK energy regulation would ensure that the issues facing Scottish consumers of gas and electricity are fully taken into account.
- Increased powers over aspects of immigration such as Post-Study Work Visas would improve Scotland's ability to retain highly-skilled graduate students from around the world, helping boost the working age population.
A desire for greater responsibility over such powers is shared by many in Scotland.
Securing key economic levers for the Scottish Parliament would provide much greater opportunity to grow Scotland's economy. Such powers are important not just in their own right but for the interactions they have with existing and newly devolved powers. For example, the level of the minimum wage, the tapering of benefits to reflect income, and support to sustain employment could all be considered together when developing economic policy.
In summary, the Scottish Government believes that greater access to further economic powers would provide Scotland with the tools to tailor economic policy in Scotland to maximise the country's strengths and address the specific challenges that we face.
Commitment to continuous engagement and monitoring progress
Scotland's Economic Strategy sets out the overarching framework and priorities to provide a shared direction for the Scottish Government and its partners towards boosting competitiveness and tackling inequality.
As part of the refresh of the Economic Strategy, we have considered the requirement for both environmental assessment and equality considerations (see Box 3.2).
We see this as the starting point for continuous engagement and further development and will progress the partnership approach to developing and implementing the policies and objectives set out in this report. In particular:
- The Council of Economic Advisers will provide authoritative and independent advice to the Scottish Government on how to improve the competitiveness of Scotland's economy and tackle inequality.
- In the spirit of our One Scotland approach, we will continue to work with our delivery partners, businesses, local authorities and communities to identify best practice, share ideas and learning from all areas of Scotland.
- The progress we make against delivering the purpose and the priorities articulated in our Economic Strategy will continue to be monitored through Scotland Performs, based on the approach set out in our National Performance Framework.
Further details and updates on Scotland's Economic Strategy are available at
Strategic Environmental Assessment
As required by the Environmental Assessment (Scotland) Act 2005, the Scottish Government has considered the requirement for Strategic Environmental Assessment ( SEA) of the refreshed strategy. Given the overarching role of the strategy, it has been concluded that the strategy itself will have no or minimal environmental effects and can therefore be exempted through pre-screening.
Any proposals set out here that could have environmental implications when they are developed into more specific policies and plans would be subjected to SEA where it is determined that they are likely to generate significant environmental effects.
Scotland's strong commitment to equality is core to the economic framework outlined in this strategy. In developing the strategy, a consideration of equality has informed the economic analysis that underpins the framework and its priorities. The strategy's development was also informed by a series of discussions on key themes with stakeholders and policy officials, including representatives from the Equality and Budget Advisory Group. The strategy provides an overarching framework and provides a strong focus on promoting equality, tackling inequality, promoting inclusive growth and providing opportunities for all. Any proposals set out here that may be developed into specific policies and plans will be informed by assessment of their impact on equality, where appropriate and in line with the Public Sector Equality Duty, as they are developed.
Email: Natalie Hemmings, email@example.com