The Scottish Government

Priorities to achieve economic growth

Cabinet Secretary for Finance and Sustainable Growth

John Swinney

Scottish Parliament

Debate on Wealthier and Fairer

May 30, 2007

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Presiding Officer, last week we set out our ambitions to deliver a smaller and more effective government for Scotland.

Today I will set out the ways we can deliver a larger and faster growing economy.

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

Scotland can be wealthier and fairer, and that is why this government will act to enable businesses and people to increase their wealth and for more people to share fairly in that wealth.

Wealthier and Fairer: The Key Challenges

Over the last generation Scotland's economy has underachieved compared to similar countries and relative to the potential of our people, given our talents and our resources.

Scotland's growth has been unspectacular - "disappointing" according to the Secretary of State for Scotland earlier this year - and certainly poor by international standards, averaging 1.8 per cent over the past 30 year period (1975-2005).

This rate of growth is around one third of that recorded by Ireland which points the way with average annual growth of 5.2 per cent over the past generation. It is around a quarter lower than the UK average growth rate of 2.3 per cent, and just half of the average rate for small European economies, 3.5 per cent.

And even over the last decade, a time we are told of unprecedented success, Scotland's economy has grown only marginally above trend at 2.1 per cent compared to a far higher UK rate of 2.8per cent and Ireland's spectacular 7.3 per cent.

Scotland can perform better than that and the achievement of that improved performance should be the focus of everyone in the Scottish Parliament.

I can confirm today our target for this parliament is to raise Scotland's growth rate to the UK level by 2011. That means Scotland matching the UK's growth rate consistently and not just when UK growth underperforms. From 2011 it should not be Scotland looking to catch up, but Britain trying to keep up.

Setting a growth target is an important first step. It is fundamental to a wealthier and fairer Scotland. We must escape the mindset that has allowed us to settle for second best in growth. Matching UK growth means benefits for Scotland.

It means Scots earn more, have more opportunities and there will be an incentive for and a greater likelihood our most talented and most mobile will build their lives here.

In aiming to improve this economic performance, the Government will be advised by the Council of Economic Advisers announced last week by the First Minister.

Our Council of Economic Advisers will play a central role, providing advice to our government on the steps we must take to break the cycle of underperformance in the Scottish economy. From its expert and experienced perspective, the Council will assist us in formulating the plans and proposals that will give our country a competitive edge.

The First Minister will make a further statement to parliament before recess on the role and composition of the Council.

A New Economic Approach

The Council will play a significant part in the development of our economic strategy but Parliament must also be central to that process as well.

I hope we can agree together in Parliament to maximise Scotland's economic success.

On lower business tax, deregulation, infrastructure, skills and our enterprise network - key building blocks for a more successful Scotland - I will set out some of my party's ideas and ambitions and will listen with interest to views expressed across this chamber.

On its own, a new politics is not enough. I believe it is time for a new economic approach for Scotland, built on a shared desire to increase our nation's competitiveness. This debate will inform the development of our New Economic Approach, which will be set out to Parliament and published in full in the Autumn.

Our New Economic Approach will set the context for our broader economic growth strategy and for the Spending Review. It will be built on a series of guiding principles around which consensus can emerge in Parliament, business and the wider community.

Guiding Principles

I believe:

Economic success must be a partnership between the private, public and voluntary sectors, with the private sector the principal driver of growth;

We will only succeed together and through our coordinated and joint contributions;

We must listen to the voice of individual businesses and people and understand what really inhibits and motivates economic performance;

We should focus on both the short term levers and on the long term fundamental drivers of economic prosperity;

We must move decisively and rapidly to effect the policy changes that will lever the economic performance that we are seeking and deploy our devolved powers right across the new Government to secure more rapid economic growth; and

We have to influence the conduct of UK economic policy where we see it playing a critical role in driving Scottish economic performance.

I believe we will do best when Scotland has the same opportunities as independent Ireland, Norway, Denmark and the rest to determine our economic future. I know that is a principle shared by some, and not all here today. But until we have responsibility for all the levers of economic success, let us at least agree to work together to secure the best deal for Scotland within the limits of the current arrangements.

Growing Competitiveness

To achieve our objective of a wealthier and fairer Scotland, we must give Scotland a clear competitive edge. We must always be mindful of the costs of business and the challenges and obstacles that face those who want to go into business. The Government will always take account of these pressures and do all that it can - within the powers we currently have - to reduce these barriers.

Presiding Officer, I can confirm that this government will act to make Scotland the lowest taxed part of the United Kingdom for thousands of small and medium sized businesses.

I want to send a clear signal from this chamber today. Our Scottish government will use the responsibilities we have to give Scottish business a competitive tax position.

We will remove the burden of business rates for many and reduce it for more.

It's time to free our small businesses to grow so we can breathe new life into High Streets in towns and villages across Scotland.

I know others in this Chamber put forward proposals similar in nature, though less ambitious in scale, for reductions in business rates or to incentivise business in communities throughout Scotland. I hope that parties across the Chamber will recognise this initiative from the Government as worthy of support to develop and strengthen our economy.

I will be bringing forward our plans in full as part of the budget process in the late autumn of this year. And that means, with the support of parties across this chamber, very many vital Scottish businesses will be paying less local tax by this time next year.

Lower tax is of course just one element of a package to give Scottish business competitive advantage. To create the most conducive environment for growth we must be lighter and more effective in our regulation.

We recognise that sound and effective Regulation is needed to meet our social and environmental objectives. But this must be at least cost to business. Using a risk based approach and undertaking an extensive review of existing legislation will help deliver this.

There is a very high level of political commitment from the whole Scottish Government to Improving the Regulatory Environment for Scottish Business. It will boost Scottish business competitiveness and productivity by stripping out unnecessary compliance costs.

I will arrange an early meeting with Prof Russell Griggs the Chair of the industry led Regulatory Review Group (RRG) and will also use forthcoming meeting of the Small Business Consultative Group to discuss the next steps that we take.

Building blocks of success

Presiding Officer, lower business tax and lighter regulation, are just two important factors in determining our overall competitiveness.

We must also look to ensure the resources we invest in economic growth, through our Enterprise Network, deliver best value and the greatest possible return.

Our intention is to refocus and reform the enterprise network.

Scottish Enterprise and Highlands and Islands Enterprise will continue to have the central responsibility for the delivery of the Government's enterprise development strategy.

We will expect Scottish Enterprise to take a much more strategic overview of the Scottish economy. We want to see it and Highlands and Islands Enterprise increasingly focusing their efforts on where they can make the most effective contribution to improving Scotland's economic growth rate. Creating genuine added value and maximising the return from our interventions must be the hallmark for all the decisions that we take.

We will also expect more streamlined delivery with a shift in resources from the back office to the frontline. VisitScotland and Transport Scotland will be more closely aligned with the Enterprise structure, alongside existing core functions such as Scottish Development International.

We will also de-clutter the complex delivery networks at a local level. The landscape of government is at its most crowded with metro regions, business gateways, local enterprise companies, local economic forums and council economic development departments providing services in duplicate or indeed triplicate.

We have begun discussions with Scottish Enterprise, Highlands and Islands Enterprise and Scotland's local authorities about de-cluttering this landscape and will take these forward over the summer. To strengthen this process, we will also consult with other major stakeholders over the summer period, before reporting back to parliament on how we will create a more streamlined and effective local business delivery and support service for Scotland.

On innovation, I believe there is more we can and must do to support new technology and processes. The Liberal Democrats concentrated on this issue in the election and I think some of their proposals merit further examination.

That should not however mean creating a brand new body. There is merit in looking at how we might make our investment and innovation interventions more complementary, and refocus those to greater effect.

Scottish companies should be able to access advice and support around innovation and investment on a one stop basis. Overseas firms locating in Scotland have long been able to do this.

Our firms should also be helped to commercialise as much as possible of the cutting edge research done in our first class universities.

Collaboration will be crucial. And the Government is absolutely determined to intensify the co-operative working that exists between our universities and the enterprise sector. We now have 2 cabinet secretaries with a clear and direct interest in maximising the collaboration between our universities and the enterprise sector which is an essential part of our economic strategy for Scotland. My Cabinet colleague, Fiona Hyslop will further develop the Government's thinking on the development of these two issues in relation to our broader enterprise aims in her closing remarks to this debate.

On skills, we believe there is a need to increase opportunities for vocational education and to strengthen links between our schools, colleges and businesses to create new opportunities for all of our young people to flourish personally in education and employment. A growing economy requires well-trained and appropriately skilled young men and women entering the jobs market and there are clearly areas where we can co-operate across the parties to deliver that aim.

And finally, we need to align measures to improve our infrastructure with the Government's economic strategy. That means ensuring that Scottish Water plays a significant part in creating capacity where it is required to support economic growth. And it means developing a transport infrastructure that tackles congestion, improves connectivity and reduces journey times. All of these projects must be delivered within a context of tight financial control of spending. I am concerned by current performance on cost management of a number of transport projects and I have instigated a financial review of strategic projects to ensure the public purse is being protected.

I will keep Parliament informed of this process.

A fairer Scotland

Presiding Officer, at the start of my remarks I set out the Government's objectives to enable business and people to increase their wealth and for more people to share fairly in that wealth. At the heart of our approach to creating a fairer Scotland will be the measures we bring forward on local taxation.

Earlier this week I met with representatives of COSLA for very constructive and productive initial discussions.

This government views Scotland's local authorities as key partners and it is a relationship that will be based firmly on parity of esteem.

They have a big role to play building the wealthier and more successful Scotland we seek.

I look forward to working closely with Scotland's councils, through effective community planning partnerships, because maximising co-operation across public bodies at a local level will open up more opportunities for successful delivery.

I want a more outcome focused relationship with local councils, with government providing strategic direction and local councils able to fine tune policy to deliver those outcomes based on their own local circumstances.

I look forward to working closely with Scotland's local authorities to develop this relationship and to deliver a freeze in council tax rates from next April.

The Council Tax has risen by 62 per cent since 1996/7 and 47 per cent in 1997/98 and is now a significant cost that many in Scotland cannot afford to pay. I believe the Council Tax has risen too far and this concern is echoed by many others in the Parliament. I hope other parties will work with us - in co-operation with local authorities - to deliver a freeze in Council Tax that will be welcomed by hard-pressed taxpayers throughout Scotland.

Freezing the council tax is only a first step.

I am pleased to be able to announce today that the Government will bring forward legislation to abolish the unfair Council Tax.

This government is committed to lower and fairer local taxes - we want more money in more people's pockets at the end of every month.

Our proposal is for a Local Income Tax based on the ability to pay, which will reduce the overall burden of local tax, with the benefit felt by pensioners, families and the majority of Scots.

We stood for election on a platform to scrap the unfair council tax and we are determined to deliver.

Presiding Officer, there are clearly divided opinion on this issue in the Chamber. We will engage fully with Parliament as we take forward our plans and I encourage all parties to acknowledge and respond to the real concern. Our electors have made it clear to us that this issue must be tackled in this Parliament.
Presiding Officer,

There is no doubt Scotland can be more successful, that Scots can be wealthier and our nation fairer.

This government will focus our efforts on growing Scottish success and I look forward to working with parliament raise prosperity and improve the quality of life for our constituents across Scotland.