State of the nation: Economy experts give recommendations on path forward as Scotland emerges from pandemic

A new 77-page document details the steps required to address the economic challenges Scotland faces as it recovers from the Covid-19 pandemic.

Increased access to capital investment to support the economy and the creation of jobs at an “unprecedented rate” are among the measures called for by the Scottish Government’s independent economic advisory group, led by Benny Higgins, former CEO of Tesco Bank.

Speaking during the government’s daily coronavirus briefing on Monday, Mr Higgins, who is an adviser to First Minister Nicola Sturgeon on the National Investment Bank, warned of a “potential tsunami of unemployment” that requires “urgent action” from the Scottish Government.

Mr Higgins said that as the pandemic comes under more control, efforts must “increasingly focus” on how the economy recovers and renews itself for the long term.

The report by the Scottish Government’s independent economic advisory group sets out 25 recommendations, wide-ranging in scope but covering areas including investment, employment and skills.

What are some of the key recommendations?

Scottish Jobs Guarantee for 16 to 25-year-olds 

• The panel has called for a jobs guarantee for 16 to 25-year-olds.
• This would see the creation of a nationwide scheme that would offer at least two years of “secure employment” to young people, to avoid “long-term scarring” of a generation.
• Under the scheme, they would be paid the Living Wage with access to training, apprenticeships and the possibility of progression.

More autonomy for the Scottish Government to decide how funds are spent 

• UK and Scottish Governments should accelerate the review of the fiscal framework that currently “binds” Scotland closely to the UK Government’s fiscal stance, which remains a key factor in determining the Scottish budget.
• This upcoming review should look fundamentally at the scope of devolved fiscal powers and whether they allow Scotland to make the policies it needs to tackle the “many challenges” of economic recovery.
• There are currently “limited opportunities” for Scotland to have control of its own fiscal policies given that UK tax policy decisions fall back on to Scotland through the block grant it receives from Westminster.

Move to a more ‘regionally focused’ model 

• The crisis highlights the need for collaboration and for responses to be tailored to the needs of specific regions and sectors.
• Differences between geography and sectors need to be “recognised, respected and championed”.
• Call for enhanced collaborative working at regional level and an “urgent need” to support the capacity to deliver large and complex projects quickly.

Call for a ‘reset’ in relationship between Scottish Government and business community

• Feedback, for some sectors and some parts of the business community, is that relationships and dialogue need to be improved between government and the business community.
• Report highlights the “pressing need” for a reset at a time when government will need to hold “much greater stakes” in Scottish businesses.
• One suggestion is to allow business expertise to be seconded to the Scottish Government to work on specific projects where private sector knowledge can prove valuable.
• Another is to consider setting up a Council of Business Advisers to work alongside its Council of Economic Advisers to map out Scotland’s future strategy in partnership.

Digital infrastructure 

• The UK and Scottish Governments should organise investment in Scotland’s digital infrastructure, covering broadband and mobile networks.
• The crisis has confirmed the importance of digital technology in all aspects of life and the report argues that enhanced investment in this area will be a “foundation of economic recovery”.
• Need to accelerate the Scottish Government’s R100 project, which will see new fibre infrastructure installed across rural Scotland, enabling access to superfast broadband.
• Call for Scotland to speed up the funding of new phone masts, as Scotland is “lagging behind” the rest of the UK.
• Action must be taken to tackle digital poverty, as nearly one in five adults in Scotland do not have the skills to make full use of digital technology at home or at work.

Prioritisation and delivery of green investments 

• The report states that the green economic recovery is “central to the recovery overall”.
• Responding to climate change needs to be a “thread through every policy action” and this should be a key task of the Scottish Government’s forthcoming Infrastructure Investment Plan and the update to Climate Change Plan.
• These plans should set out investments to deliver net zero emissions and for green transport infrastructure, carbon capture and storage, energy generation and storage and hydrogen, to name but a few projects.
• For the north-east, the report states that the geology of the North Sea in combination with the pre-existing pipeline infrastructure leaves Scotland almost “uniquely placed” to become a centre for the transport and storage of carbon capture technology.

Tourism and hospitality

• The sectors have been hit “particularly hard” by the crisis and will “struggle” to recover quickly, the report claims.
• Specific action called for in the report includes consideration of a targeted reduction in business rates for tourism venues.
• The report also calls for the Scottish Government to press the UK Government to consider a reduction in VAT.

Care sector review 

• The Scottish Government should speed up its work on reforming adult social care and should “urgently review” the structure, funding and regulation of the sector, including workforce issues.
• The report states that care homes have been at the “front line” of the crisis and calls for action to be taken to make sure that Scotland strengthens sustainability of the care sector as a whole.

Stimulate investment in housing 

• Investment in housebuilding has been identified in the report as having an “important part to play” in supporting Scotland’s recovery, supporting jobs and contributing to both social policy and climate change goals.
• Pre-Covid-19, investment in social housing alone by the public and private sector runs at over £3 billion a year.
• The Scottish Government has been recommended to develop mechanisms to speed up investment in housing, and in particular affordable housing, in rural as well as urban areas, and to leverage private finance wherever possible.

Stakes in private companies

• The First Minister has said she would “look positively” at taking stakes in companies, following a recommendation in the report that the Scottish Government should build its capacity to take ownership stakes in private businesses.
• Asked during the daily briefing whether the Scottish Government would intervene when companies were in danger of collapsing, Ms Sturgeon said she would not rule it out.
• The Scottish Government has already pursued a similar approach with BiFab, Ferguson Marine and Prestwick Airport.
• Ms Sturgeon said ministers were “open minded” to the recommendation but takeovers would have to be done within state aid constraints.

What next?

The First Minister said during her daily briefing on Monday that the Scottish Government will produce a “detailed response” to the report before the end of July.

While she said she would not comment on detail on the 25 recommendations the report makes, she added: “The Scottish Government sees this report as a serious and substantive piece of work and agree with the basic principles.”

Ms Sturgeon said she agrees with the importance of working with the UK Government so the fiscal framework has “enough flexibility” to enable Scotland to support investment for recovery.

Meanwhile, the jobs guarantee could be “potentially very significant” as the government works to ensure young people get the opportunities they deserve in the wake of the pandemic.

The report states that to “maintain momentum”, the Scottish Government should publish regular updates on the strategy and its execution over at least the next year.