NICOLA Sturgeon has abandoned the SNP's commitment to slash corporation tax as she launched a new government strategy designed to make Scotland one of Europe's most competitive countries.

The First Minister put her own stamp on the Scottish Government's third economic strategy since 2007 by emphasising measures to tackle inequality.

She claimed inequality was "holding us back" and said promoting "fair work," - including encouraging firms to pay the living wage of £7.85 - would contribute to closing the gap with Europe's most productive economies.

The strategy also seeks to improve skills, increase research and development in new technologies and encourage Scots firms to export their goods.

Ms Sturgeon stressed the strategy was based on using Holyrood's existing powers "in the here and now" but the 84-page document said the Scottish Government would continue to press for further economic and tax powers, including control over corporation tax, the main levy on business profits.

In a major switch for the SNP, however, it said the tax would be reduced "not through a blanket approach" but to support research and development and the growth of small businesses.

Ms Sturgeon's predecessor, Alex Salmond, put deep, across the board cuts to corporation tax at the heart of his economic case for independence.

He pledged to set the tax 3p below the UK rate in the event of a Yes vote, arguing the move would give Scotland a competitive advantage and create 27,000 jobs over 20 years.

Labour attacked the plan during the referendum campaign, saying it would help the country's most profitable companies while cutting funds for public spending.

Ms Sturgeon's change of tack - which she described as a more "targeted" approach to business tax cuts - was welcomed by the STUC, which described the move as "heartening".

The latest economic strategy was launched at Calnex, a world-leading telecoms tech firm based in Linlithgow.

Ms Sturgeon and Deputy First Minister John Swinney were joined by members of the government's Council of Economic Advisers.

Scotland's level of productivity still lags behind the UK as a whole, despite the gap narrowing since the Scottish Government's first economic strategy in 2007.

But Ms Sturgeon said: "The gap with the rest of the UK has reduced significantly but we're still some 13 per cent below Sweden and 20 per cent 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."

Among a wide range of initiatives outlined in the strategy, she said encouraging firms to pay the living wage would boost productivity by improving commitment

and reducing turnover among the workforce.

Efforts to cut the attainment gap between rich and poor pupils were also included in the economic strategy for the first time.

Mr Swinney highlighted the proposed new Scottish Development Bank, which it is hoped will be able lend fast-growing Scots firms tens of millions of pounds to prevent them being taken over by foreign corporations.

Grahame Smith, general secretary of the STUC Scottish Trades Union Congress (STUC) General Secretary welcomed the commitment to tackling inequality but called for more action to reindustrialise Scotland.

Andy Willox, of the Federation of Small Businesses in Scotland,

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."

Scottish Conservative finance spokesman Gavin Brown said: "The economic strategy is rather underwhelming.

"There are mountains of warm words but precious little in the way of dynamic new policies that will help businesses to grow and innovate."