Scotland needs a new government department, similar to the Treasury, along with a more powerful investment bank.
This is according to John McLaren, who, in a paper for Gordon Brown’s Our Scottish Future think tank, said a long-term plan was needed to address the lower rates of economic growth in Scotland.
The political economist, who has worked in the UK Treasury and the Scottish Office, said the Scottish Government’s recent plan for economic transformation was “ill focussed”.
His paper said that since 2014 and pre-pandemic, Scottish GDP growth per capita has been growing at half the rate of the UK as a whole.
He highlighted recent findings by the Scottish Fiscal Commission, saying there could be a budget funding shortfall of £1bn next year due to lower tax receipts.
Based on economic growth trends, this shortfall could exceed £2bn at the start of the next decade, he said.
McLaren said: “The reality is likely to be that, instead of this shortfall feeding through as Budget cuts, the Scottish Government will keep on imposing higher taxes than are seen elsewhere in the UK.
“Instead of working with each other in a single market setting, the Scottish and UK Governments are often working in isolation and, at times, in an actively confrontational, rather than collaborative, manner.”
The report noted that economic development spending is higher in Scotland than the UK average, but argued that this is not translating into higher productivity or growth.
It recommended instead increasing the budget of the Scottish National Investment Bank and focussing its remit.
McLaren’s paper also stated that there should be a new Scottish “Treasury” department in order to improve the prioritisation of spending, introduce more growth incentives and to enforce better value for money.
“The most important recommendation is to have a consistent and long-term approach to economic growth policy, as few of the recommendations here will make a difference quickly.
“Rather, they have the capacity to make an impact over time, as has been experienced in other countries who have taken a patient approach.
“The alternative approach, chopping and changing over time and with funds dispersed widely and intermittently, will inevitably lead to familiar failure experienced in the past,” he added.
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