Scottish Government
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Greater gains from more fiscal control

Analysis points to significant GDP, jobs and tax revenue boost.

Securing the powers for Holyrood to retain and reinvest the additional tax revenue generated from increased economic activity offers much better potential for significant gains for the Scottish economy than the proposals put forward by the Smith Commission, an analysis paper to be published shortly will show.

Last week, the First Minister highlighted that, under current Smith proposals, increasing total factor productivity by an additional 0.1 per cent a year could boost employment in Scotland by 11,000 and tax revenue by £400 million.

However, new Scottish Government analysis will demonstrate that if Scotland was able to retain and reinvest all the proceeds of improved economic performance, through holding greater economic powers, the overall positive impact on GDP, employment and tax revenue would be significantly increased.

The analysis will show that, over a period of ten years and with additional fiscal control beyond that set out in Smith:

  • Increasing Scotland’s total factor productivity by an additional 0.1 per cent a year over a ten year period could boost GDP by 1.8 per cent, employment by 29,000 and tax revenue by £700 million.
  • Narrowing the gap in investment between Scotland and its international peers could increase GDP by 2 per cent, employment by 51,000 and tax revenue by £1 billion.
  • Achieving the Scottish Government’s target to boost exports by 50 per cent, could boost GDP by 3 per cent, employment by 81,000 and tax revenue by £1.8 billion.

Deputy First Minister John Swinney said:

“What this paper shows is that relatively small changes in productivity, investment and exports together with the ability to retain and reinvest additional tax revenues generated by increased economic activity can have a huge impact on our economy.

“The limited powers proposed by the Smith Commission, mean that a large part of this additional tax revenue would be retained by the UK Government instead of being directly reinvested back into the Scottish economy.

“Once more this means that the fruits of our economic success would be reaped by the Treasury in London instead of being ploughed back into Scotland’s public services and economy.

“Last week we published Scotland’s Economic Strategy and set out how we plan to achieve a more productive, cohesive and fairer country. Our anti-austerity and progressive economic approach is in stark contrast to the path adopted by Westminster.

“If we can increase productivity by an additional 0.1 per cent a year over ten years and retain and reinvest the additional tax revenue we could boost GDP by 1.8 per cent, boost jobs by 29,000 and raise tax revenue by £700 million – all benefits that should stay in Scotland. Under the Smith Commission funding framework the positive impact to the Scottish economy is smaller, with GDP being boosted by 1.3 per cent, jobs by 11,000 and tax revenue by £400 million as much of the benefit flows back to the Treasury in London.

“It is clear to me that the impacts of improving levels of productivity, investment and exports should be felt most keenly by those living and working here in Scotland – the people who are growing our economy.”

Notes To Editors

The Benefits of Improved Economic Performance will be published on March 9.

The recently published Scotland’s Economic Strategy sets out an overarching framework for how the Scottish Government plans to achieve a more productive, cohesive and fairer Scotland. It is available at: http://www.gov.scot/Topics/Economy/EconomicStrategy

 

Channel website: http://www.gov.scot/

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