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Sturgeon says new strategy will see Scotland competing with Europe's best Corporation tax cut pledge dropped by Scottish government
(about 4 hours later)
Scotland's First Minister Nicola Sturgeon has said her government's new economic plan will allow the country to compete with the best in Europe. The Scottish government has revealed in its new economic plan that it is no longer committed to a "blanket" three point drop in corporation tax.
During a speech in Linlithgow, she outlined the twin-track approach of increasing competitiveness while halting inequality. The switch in policy is a departure for the SNP which promised to introduce the cut if Scotland became independent.
The last Scottish government economic strategy was published in 2007. First Minister Nicola Sturgeon confirmed the change alongside other measures to end economic inequality.
However, the UK government has insisted its austerity policies are working and have resulted in more Scottish jobs. The UK government has insisted its austerity policies are working and have resulted in more Scottish jobs.
Ms Sturgeon told the gathering that productivity "was the key" to "any sustainable long-term improvement in living standards". Scottish Conservative finance spokesman Gavin Brown said Ms Sturgeon's economic strategy was "underwhelming" and called for business rates to be reduced.
Holding the 84-page document, titled Scotland's Economic Strategy (March 2015), she explained: "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 first minister told a gathering in Linlithgow that there would now be a focus on "targeted changes in tax allowances."
'Targeted changes'
While corporation tax remains reserved to Westminster, the Scottish government has long argued for it to be devolved to Holyrood.
And its White Paper setting out the case for independence said: "This government plans to set out a timescale for reducing corporation tax by up to three percentage points below the prevailing UK rate."
However, the newly published 84-page economic plan, titled Scotland's Economic Strategy (March 2015) said: "The Scottish government has made clear that we have no intention to engage in a 'race to the bottom'.
"Instead, we will use these powers to create a long-term competitive advantage, not through a blanket approach, but by using targeted changes in tax allowances."
Ms Sturgeon visited the technology firm Calnex, where she outlined the twin-track approach aimed at increasing competitiveness while halting inequality.
She told the gathering that productivity "was the key" to "any sustainable long-term improvement in living standards".
What has the Scottish government said on corporation tax?
November 2007 - The Scottish government's economic strategy said: "To make Scotland the lowest taxed part of the UK, dropping corporation tax significantly below the UK level."
November 2013 - The Scottish government's White Paper on independence said: "This government plans to set out a timescale for reducing corporation tax by up to three percentage points below the prevailing UK rate."
November 2013 - The Scottish government's Building Security and Creating Opportunity: Economic Policy Choices in an Independent Scotland said: "In 2011, the Scottish government modelled the potential impact of a reduction in corporation tax broadly equivalent to a cut in the headline rate of three percentage points. The results showed this has the potential to increase output by around 1.4% and boost employment by approximately 27,000 jobs."
March 2015 - The Scottish government's economic strategy said: "The Scottish government has made clear that we have no intention to engage in a 'race to the bottom'. Instead, we will use these powers to create a long-term competitive advantage, not through a blanket approach, but by using targeted changes in tax allowances."
Ms Sturgeon explained: "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 are still some 13% below Sweden and 20% below Germany. So we need to do much more."The gap with the rest of the UK has reduced significantly since then, but we are still some 13% below Sweden and 20% below Germany. So we need to do much more.
"That is why we want to focus on closing the gap with the very best in Europe and that really matters.""That is why we want to focus on closing the gap with the very best in Europe and that really matters."
She added that if Scotland increased productivity by 0.1% a year it could:She added that if Scotland increased productivity by 0.1% a year it could:
Ms Sturgeon said that in order for those figures to be realised there was a need to invest in infrastructure and skills, "in contrast to the UK's government deep and and harmful cuts in public spending".Ms Sturgeon said that in order for those figures to be realised there was a need to invest in infrastructure and skills, "in contrast to the UK's government deep and and harmful cuts in public spending".
She believed there was a need to support innovations that lead to new technology, new products and new ways of working. She added that the approach of "promoting equality and competitiveness together is two sides of the same coin - it is in itself innovative, but it is also in tune with a growing international consensus".
The SNP leader added: "And yes we need to tackle inequality.
"Scotland is, I am very proud to say now, leading the way for putting the quest for putting equality at the heart - not just of our social strategy - but at the heart also of our economic strategy.
"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 to enable us to better tackle intergenerational poverty and ensure the benefits of growth are felt across out cities and our towns and our rural areas."
Ms Sturgeon said the approach of "promoting equality and competitiveness together is two sides of the same coin - it is in itself innovative, but it is also in tune with a growing international consensus".
She went on to cite International Monetary Fund research work which examined 173 countries over 50 years.
'Fairest nation'
Ms Sturgeon said it showed that more unequal countries also tended to have lower, and less durable economic growth.
Scottish Labour said the first minister was "right to point out appalling inequality in Scotland".Scottish Labour said the first minister was "right to point out appalling inequality in Scotland".
MSP Jackie Baillie said her party had a powerful vision for making Scotland a "better and fairer country".MSP Jackie Baillie said her party had a powerful vision for making Scotland a "better and fairer country".
Tax burden
She added: "Scottish Labour has a plan to make Scotland the fairest nation on earth.She added: "Scottish Labour has a plan to make Scotland the fairest nation on earth.
"We will make work pay for all Scots by calling time on zero hours contracts, using the mansion tax to invest in our NHS and raising the minimum wage for those in work."We will make work pay for all Scots by calling time on zero hours contracts, using the mansion tax to invest in our NHS and raising the minimum wage for those in work.
"We have also set out how we would close the attainment gap by investing £125m to support working class kids who have been left behind by the SNP government in Edinburgh.""We have also set out how we would close the attainment gap by investing £125m to support working class kids who have been left behind by the SNP government in Edinburgh."
'Underwhelming' Tory MSP Mr Brown said there was no commitment from the government to use new tax powers to lessen the tax burden and "make us more competitive".
Scottish Secretary Alistair Carmichael previously accused Ms Sturgeon of "trying to turn good news into bad" by suggesting the UK economy was performing poorly when in fact it was "growing strongly". He added: "It is also surprising for the first minister to use OECD (Organisation for Economic Co-operation and Development ) figures from 2010 to claim UK government policies aren't working.
Scottish Conservative finance spokesman Gavin Brown said the economic plan was "underwhelming" and called for business rates to be reduced. "Only last week, the head of the OECD praised the 'tremendous progress' made in Britain's economic recovery, and noted the 'remarkable' levels of job creation."
He said: "There is no commitment from the Scottish government to use our new tax powers to lessen the tax burden and make us more competitive. Instead we have the land and buildings transaction tax where the commercial top rate is higher than the rest of the UK and the domestic rate is an eye-watering 10% over £325,000.
"It is also surprising for the first minister to use OECD (Organisation for Economic Co-operation and Development ) figures from 2010 to claim UK government policies aren't working. Only last week, the head of the OECD praised the 'tremendous progress' made in Britain's economic recovery, and noted the 'remarkable' levels of job creation."
'Relentless chase'
Andy Willox, the Federation of Small Businesses' Scottish policy convenor, said the Scottish government's intentions were "admirable" but needed more detailed work to ensure "improvements on the ground".Andy Willox, the Federation of Small Businesses' Scottish policy convenor, said the Scottish government's intentions were "admirable" but needed more detailed work to ensure "improvements on the ground".
He said: "A successful economic strategy is designed for the economy we have, not the one policymakers want. We would therefore caution against the relentless chase of foreign direct investment and extra state support for a small selection of favoured hand-picked firms.
"Further, Scottish government ministers may wish to focus more tightly on delivery - too many well-meaning initiatives suffer because of clumsy implementation."
STUC general secretary Grahame Smith welcomed the Scottish government's commitment to tackling inequality but said it could have gone further.STUC general secretary Grahame Smith welcomed the Scottish government's commitment to tackling inequality but said it could have gone further.
He said: "It 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." Two views on equality V's competitiveness
Take two views...
Ben Southwood, head of research for the Adam Smith InstituteBen Southwood, head of research for the Adam Smith Institute
"We can achieve economic growth and equality in an economic strategy, but we have to be very careful about what measures we use."We can achieve economic growth and equality in an economic strategy, but we have to be very careful about what measures we use.
"It does seem that the poorer counties in the world are unequal, whereas the richer countries are more unequal. That doesn't necessarily mean that reducing inequality lets you get richer."It does seem that the poorer counties in the world are unequal, whereas the richer countries are more unequal. That doesn't necessarily mean that reducing inequality lets you get richer.
"In fact what we tend to see is first you grow very fast, become more unequal, and then you carry on growing and everybody else catches up."In fact what we tend to see is first you grow very fast, become more unequal, and then you carry on growing and everybody else catches up.
"Redistributing wealth is very important for alleviating poverty but in the long run it has barely lifted anyone out of poverty, compared to the amount economic growth has lifted people out of poverty."Redistributing wealth is very important for alleviating poverty but in the long run it has barely lifted anyone out of poverty, compared to the amount economic growth has lifted people out of poverty.
"Economic growth has lifted billions of people around the world out of poverty, redistribution has lifted millions of people out of poverty. Redistribution is important but it isn't nearly as important as growth and we should always be focusing on growth.""Economic growth has lifted billions of people around the world out of poverty, redistribution has lifted millions of people out of poverty. Redistribution is important but it isn't nearly as important as growth and we should always be focusing on growth."
Morag Gillespie, a senior research fellow at Glasgow Caledonian University's Women in Scotland's Economy groupMorag Gillespie, a senior research fellow at Glasgow Caledonian University's Women in Scotland's Economy group
"Once you have a level of growth, and the UK and the United States are well past that, then you start to get diminishing returns from simply focusing on growth alone."Once you have a level of growth, and the UK and the United States are well past that, then you start to get diminishing returns from simply focusing on growth alone.
"And I absolutely agree with Nicola Sturgeon, I think it is essential that we pursue equality as part of our economic strategy."And I absolutely agree with Nicola Sturgeon, I think it is essential that we pursue equality as part of our economic strategy.
"And if you look at some of the richer nations across the world you will see that some of them are much more equal than others and it isn't to do with how long they have been growing, or how much growth they have had, but how much they focus in ensuring that all the people of the country can benefit from economic growth and it isn't just a few people that profit."And if you look at some of the richer nations across the world you will see that some of them are much more equal than others and it isn't to do with how long they have been growing, or how much growth they have had, but how much they focus in ensuring that all the people of the country can benefit from economic growth and it isn't just a few people that profit.
"One of the things that we really, really need to tackle in Scotland is that the jobs being created are better paying jobs and that we are not just creating minimum wage jobs, that we don't have more and more people working in really exploitative work situations, such as zero hours contracts, temporary employment, and that we tackle the really high levels we have of under employment.""One of the things that we really, really need to tackle in Scotland is that the jobs being created are better paying jobs and that we are not just creating minimum wage jobs, that we don't have more and more people working in really exploitative work situations, such as zero hours contracts, temporary employment, and that we tackle the really high levels we have of under employment."