Equality action 'at heart' of plans

First Minister Nicola Sturgeon pledged the economic blueprint would "put tackling inequality at the heart of what we do", insisting that work to build a fairer Scotland would also create a more prosperous nation.

The economic strategy also reveals a change in stance by the Scottish Government in the key area of corporation tax, with it now focusing on "targeted changes in tax allowances" rather than a "blanket approach".

This is in contrast to the three-point cut in the levy that Alex Salmond had promised if Scotland voted for independence.

While corporation tax is still reserved to Westminster, the Scottish Government has long argued for it to be devolved to Holyrood, with the new strategy document arguing power over it and other measures such as capital gains tax could be used to help rebalance the economy.

Ms Sturgeon said the blueprint, which she unveiled with Deputy First Minister John Swinney on a visit to Linlithgow-based technology firm Calnex, set out a "long-term vision for Scotland's economy".

On the issue of corporation tax, she said: " What we are signalling here is we would see in the years to come real benefit of having control over corporation tax, to use that in a targeted way to boost R&D, to encourage investment in growth areas of the economy, rather than in a blanket way.

"Different times will demand different approaches to corporation tax and to the use of other taxes, but this is what we deem would be appropriate in the years to come if we do get control of corporation tax."

The economic strategy is focused around four main themes - the need for investment, innovation, internationalisation and inclusive growth.

As part of it, the Scottish Government plans to set up a new Scottish Business Development Bank in a bid to help small and medium sized firms expand and grow.

Mr Swinney is also to chair a new forum aimed at encouraging innovation.

The First Minister said the new strategy would "play an important role in making Scotland a fairer and more prosperous nation in the years to come".

She said: " When we published the first Scottish Government economic strategy back in 2007, Scotland's productivity then was 6% below that of the rest of the UK.

"The gap with the rest of the UK has reduced significantly since then but we're still some 13% below Sweden and 20% below Germany, so we need to do much more. That's why we want to focus on closing the gap with the very best in Europe.

"To do this we need to invest in infrastructure and skills in contrast to the UK Government's deep and harmful cuts in public spending, we need to support innovation which leads to new technologies, new products and new ways of working.

"We need to promote internationalisation and encourage more companies to market and sell their products overseas and build on our export successes of recent years.

"And yes, we need to tackle inequality. Scotland is now leading the way in putting the quest for greater equality at the heart not just of our social strategy but at the heart also of our economic strategy.

"So we will promote fair work and a living wage, we will encourage more women and disabled people into the labour market, we will make the key investment in health and educational attainment that will enable us to better tackle intergenerational poverty and ensure the benefits of growth are felt across our cities, our towns and our rural areas."

Ms Sturgeon said this approach of " promoting equality and competitiveness together as two sides of the same coin" is in itself "innovative".

But she stressed it is in tune with research, which indicates that countries with greater inequality experience lower economic growth.

The SNP leader said: " The OECD (Organisation for Economic Co-operation and Development) has estimated that inequality actually reduced the UK's economic growth by 9% between 1990 and 2010 - by that reckoning the cost of our inequality has been a total loss to the UK economy of £100 billion, almost £1,500 for every person who lives in the country.

"That loss is also an indicator of what we stand to gain economically if we put tackling inequality at the heart of what we do."

The Scottish Government argues that if the country's total factor productivity could be increased by just 0.1% a year, after 10 years this would boost GDP by 1.3% and in turn increase employment by 11,000 and tax revenue by £400 million a year.

Cabinet Secretary for Fair Work Roseanna Cunningham said: " We know that a strong economy is essential in building a fair and wealthy society. But the reverse is also true. It is now widely accepted that a society that is fair and equitable underpins a strong economy.

"Our Programme for Government has a broad range of measures focused on ensuring sustainable economic growth, building a fairer society and tackling inequality.

"Scotland's Economic Strategy builds on this good work and focuses on the dual and shared objectives of boosting competitiveness and promoting fairness to the benefit of all."

Mr Swinney said that while the strategy shows what could be achieved, it also highlights how more could be delivered with further powers for the Scottish Parliament.

The Deputy First Minister said: " Fundamentally what we're setting out here is an agenda that can drive the Scottish economy in a dynamic way, and we should be ambitious about the Scottish economy.

"We should have ambitious goals at the heart of our economic strategy, we have a range of powers we can take forward that will support us in that respect but there will obviously be limitations and the Government will continue to argue for more powers."

He added: " In each of the key areas of innovation, investment, inclusive growth and internationalisation there are powers and responsibilities that remain at Westminster which could help us to achieve more and better jobs.

"Our ambition is for the Scottish Parliament to have the full powers of any normal nation - however our particular focus in the coming years will be on achieving those powers that help us to deliver on our economic ambitions - to boost competitiveness and to tackle inequality."

Business and union leaders welcomed the new strategy.

Hugh Aitken, director of CBI Scotland, said: " Scotland's economy is continuing to grow at a steady pace but there are a number of challenges we face, like the effect of low oil prices on the North Sea and sluggish growth in the eurozone.

"The Government's economic strategy rightly prioritises making Scotland more competitive by investing in infrastructure, education and apprenticeships.

"To make sure growth benefits everyone, we need to boost productivity by fostering investment and making sure our workforce get the skills they need to compete in a globalised world.

"Businesses will also welcome the focus on making it easier for them to access growth finance and support to sell their products and services to new markets around the world."

Grahame Smith, general secretary of the Scottish Trades Union Congress (STUC), welcomed the " strong commitment to tackling inequality which infuses the 'refreshed' Government economic strategy".

He said the strategy was " improved and strengthened by the introduction of fair work as a key priority", and added: "Other positive aspects include the new approach to measuring outcomes and the desperately needed Business Development Bank.

"It is also heartening to observe the Scottish Government quietly dropping its longstanding commitment to deep, blanket corporation tax cuts in favour of a much more nuanced approach."

But he added: "I t is disappointing that many of the factors contributing to rising inequality - such as the falling numbers of workers covered by collective agreements and the scale and power of the financial sector - are largely ignored. The strategy is also somewhat light on specific polices to hasten reindustrialisation."

Opposition parties were more critical of the SNP administration, with Labour finance spokeswoman Jackie Baillie saying it " underlines the growth in inequality in Scotland but fails to set out how the Scottish Government will actually tackle this".

Ms Baillie said: "The document lacks any redistributive policy commitments, likes Labour's proposal for the re-introduction of the 50p top rate of tax.

"Then there is the double standards of declaring support for the living wage but making no mention of the promised summit on this issue or that the SNP blocked Scottish Labour amendments to the Procurement Reform Act 2014, requiring all public sector contractors to pay living wage rates."

She continued: " Much of this stuff was in the SNP's white paper, published last year, an economic strategy based on an oil price of 113 US dollars a barrel. Since then the oil price has plummeted but the SNP have not come up with anything really new, other than drop their independence flagship policy."

Conservative finance spokesman Gavin Brown branded the strategy "underwhelming", and added: "T here are mountains of warm words but precious little in the way of dynamic new policies that will help businesses to grow and innovate.

"The real bread and butter issues facing business today have been neatly ignored.

"There are bland plans to set up refreshed strategies for various policy areas, the oxymoron of a ministerial-led Innovation Forum and the announcement for the fifth time in two years of a Scottish Business Development Bank."

He also said that "b izarrely, the strategy barely touches on the significant new tax powers coming to the Scottish Parliament", saying: " The SNP likes to shout from the rooftops about the need for more powers yet it appears that the First Minister has hardly anything to say about how they should be used."

Scottish S ecretary Alistair Carmichael said: " Scotland's economy is doing well precisely because we are part of the United Kingdom and have benefited from the decisions this coalition Government has taken to rebuild the economy after the recession.

"We are vying with the United States to be the fastest growing country in the G7, unemployment is falling, borrowing costs are at a record low and earnings are now growing faster than inflation.

"When it comes to tackling inequality, the SNP are playing catch up. We have invested billions in the pupil premium targeting disadvantaged school children in England while children are being left behind in Scotland. We prioritised childcare so now 40% of children in England receive free provision while children in Scotland lag behind with only 15% getting free provision. We introduced free school meals in England but despite it being a manifesto commitment since 2007, the SNP only introduced it after we announced our policy.

"Liberal Democrats are committed to creating a stronger economy and a fairer society, creating opportunity for everyone to get on in life. We have been delivering in government and are committed to do more in the next Parliament."