Fiscal sustainability delivery plan

Pillar 2: Supporting sustainable, inclusive, economic policies with the greatest potential to grow Scotland's economy, expand and broaden the tax base to fund public services

Measures

• Increasing aggregate business activity
• Increasing employment levels
• Increasing average wages

Key Actions

Delivering on our economic strategy to drive growth including:

• Seizing new opportunities in offshore wind and its supply chains through our public investment of up to £500 million.
• Accelerating developments through planning reforms.
• Ensuring we have the right skills in the right places through our national skills system reforms and targeted support for priority sectors.
• Investing in and expanding access to housing and transport infrastructure.

Economic growth is an important driver of fiscal sustainability. By supporting a dynamic and flexible business environment, where productive businesses are able to scale up and generate better and higher paying jobs, we create the opportunity for people to take on more or better work. This increases economic activity, alleviates pressure on public spending, on social welfare programmes, and generates more Income Tax revenues. These positive feedback loops on government spending and revenues enable us to re-invest to support more businesses and families to thrive.

The main economic interventions to support economic growth and fiscal sustainability are set out in the National Strategy for Economic Transformation (NSET)^[24], Green Industrial Strategy^[25] and the 2024^[26] and 2025 Programmes for Government.^[27] In this Delivery Plan, we are highlighting the economic interventions that are expected to grow the economy and expand and broaden the tax base. These measures are not mutually exclusive, as actions being taken to drive growth will have an impact across all three.

Pillar 2 measures and actions are as follows:

Increasing aggregate business activity. By supporting Scottish businesses and making it easier to do business through providing regulatory certainty and stability, the following are actions expected to make a positive contribution to the fiscal outlook via supporting tax revenues through increased business activity:

• Implementing a Six Point Export Plan with Scottish Development International (SDI) to ensure we support our exporters to meet the emerging challenges, but also potential opportunities.
• Supporting women-led businesses to export more, including by increasing the number of women who participate in international trade missions.
• Delivering two Green Freeports and two Investment Zones, to help new markets grow, attract investment and support innovation.
• Implementing the recommendations of the Housing Investment Taskforce to unlock new investment opportunities across all tenures, we will ensure more people can access good, affordable, homes.
• Supporting our transport network to become more available, affordable, and accessible, maintaining vital links between communities and across Scotland.
• Boosting planning capacity and reducing barriers to delivery, including reversing the decline in professional planners, reducing complexity, cost and speeding up the planning process, providing local authorities with additional capacity through the Planning Hub, supporting delivery of three Masterplan Consent Areas, removing dated national planning advice, and consulting on mechanisms to accelerate housebuilding.
• Delivering a financial support and guidance scheme to support industry clusters to emerge, grow, and remain internationally competitive.

Increasing employment levels. Through improving access to good, well-paid employment and attracting investment to start new and grow existing employment opportunities in Scotland, the following actions are expected to support tax revenues while also reducing the forecast growth in social security expenditure, by creating increased opportunities for employment:

• Investing up to £90 million in 2025-26 for the delivery of devolved employability services, including Specialist Employability Support from Summer 2025 for disabled people. This will ensure “place and train” models are in place across all 32 local authority areas, supporting closer working between employability provision and employers.
• Investment of up to £500 million over five years in offshore wind, which is expected to leverage additional private investment of £1.5 billion in the infrastructure and manufacturing facilities critical to growing the sector.
• Edinburgh Innovation Hub will grow innovation-led enterprise, aiming to deliver around 100 new start-ups over its lifetime.
• Delivering Scotland’s Migration Service and continuing to make the case for tailored migration routes for Scotland.
• Launching ‘Invest Scotland’, a new portal that will showcase investment opportunities and information for investors.
• Transforming the number of women starting and scaling businesses by investing up to £6 million to implement Ana Stewart and Mark Logan’s Pathways report^[28].

Increasing average wages. Wage growth is critical to fiscal sustainability through income taxation. Through improving skills and growing as well as attracting high-wage sectors to Scotland, to take full advantage of economic opportunities, we will ensure employers have the supply of skills they need by investing in workers and attracting talent to address critical skills gaps in the economy. The following actions are expected to drive wage growth:

• New national approach to skills planning and reforming the education and skills funding system.
• Launching ‘AI Scotland’, a new national transformation programme founded on a partnership of business, academia, agencies and government, including a national AI adoption programme for Small and Medium-sized Enterprises (SMEs).
• Continue to provide additional targeted support across a range of sectors including investing in offshore wind, social care, engineering, and advanced manufacturing.
• Providing £3.5 million so that colleges can deliver the pipeline of skills our economy and public services need with new programmes focused on care and offshore wind.
• Widening access to higher education for students from the most socio-economically disadvantaged communities.
• Award new regional contracts alongside delivery of the £600 million+ R100 programme (Reaching 100% broadband), so more households, communities and businesses can access reliable gigabit connectivity.

Forecasting and quantifying the direct impact on tax take of any individual or set of economic growth commitments is challenging and complex. Each of these policies individually, and as a package, can be expected to have a positive impact on tax revenue, assuming that wider macroeconomic and global conditions also remain supportive of growth. We will use wider economic indicators, such as Gross Domestic Product (GDP) per capita, employment rate, and median income, to track the progress of growth in these areas and enable comparison between Scotland, the rest of the UK, and against peer nations. To supplement this, the impact, progress, and delivery of economic policy interventions is reported within the NSET Annual Report.

As a small, open economy, even with the best possible combination of economic policies, Scotland will be subject to global macroeconomic trends, including the current uncertainty that is slowing growth globally. This approach maintains the ability to measure our progress in context against other similar countries and the rest of the UK.