By Ian McConnell

Business editor

AMID the political tumult ahead of the May 6 Scottish Parliament election, The Hunter Foundation-commissioned report focused on how to raise the economic growth rate north of the Border is a breath of fresh air.

In the thorough and thoughtful report, produced by consultancy Oxford Economics for Ayrshire entrepreneur Sir Tom Hunter’s foundation and published today, febrile politics are put to one side.

Major economic challenges facing Scotland are made plain. However, the nation’s situation, taking in pluses and minuses, is set out in a matter-of-fact, evidence-based manner, and various major potential policy measures are put forward, in the hope of fuelling debate.

The introductory summary sets the even-handed, apolitical tone. The report notes, in recent decades, Scotland’s gross domestic product per head of population has consistently lagged the overall UK level. In 2019, Scotland’s GDP per head was £29,100 (in 2017 prices), 8% lower than the UK, and the gap was the same in 2000, the report notes. However, it is also pointed out, compared with other UK nations and regions, Scotland’s GDP per head is “relatively high, and was 4% higher than the UK level in 2019 when London is excluded from the UK figure”.

Yes, Scotland faces major challenges but it fares well in a UK context when London is excluded.

In terms of big challenges, the report highlights slow population growth, the importance of immigration to Scotland, and associated difficulties presented by Brexit.

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It says: “In recent decades, Scotland’s population has grown more slowly than the UK average, but growth in the working-age population—vital to the labour market— has matched the UK, largely due to inward migration.”

The report notes, from 2000 to 2019, population growth in Scotland averaged only 0.4% a year, compared with 0.7% UK-wide. It observes Scotland’s total population would have declined if not for net inward migration of 413,000 people. It points out the population of people aged 16 to 64 grew more slowly, at 0.3% a year, “although in this case the figure was the same as the UK average”.

It also emphasises Scotland has a lower birth rate than the UK, “which may imply a labour supply constraint at some point in the future, unless inward migration rises further – something made less likely by Brexit”.

These are major demographic challenges – growth in working-age population is crucial to economic prosperity.

The report declares: “We estimate Brexit will have a significant impact on future growth.”

It estimates GDP in Scotland and the UK as a whole will, by 2030, be 3% lower than it would have been without Brexit. This is a serious headwind.

The report also highlights the huge importance of boosting productivity, and the challenges in doing so presented by the Scottish economy’s composition.

It notes Scotland’s economy is more highly concentrated in low-productivity sectors and less so in “advanced services”, such as information and communications, professional, scientific and technical services, and financial services, than the UK average.

The report highlights the oil and gas industry as a “significant” exception to this, particularly in terms of its economic output per job, but notes the North Sea sector is in decline.

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The report declares that “real economic improvements require some serious rethinks at either the Scottish or UK levels, or both”. Past experience has shown this is easier said than done.

However, the suggestions on policy measures provide much material for a national debate.

One suggested course of action is a more expansionary fiscal policy to help fuel growth.

And it is heartening to see the report conclude “worries over future debt burdens do not in themselves represent a serious reason for avoiding more expansionary policies for Scotland”.

All too often, there is a focus on cost and a lack of attention to benefits from well-targeted spending and investment.

The report asks whether “UK and Scottish governments could usefully focus more clearly and identify a smaller number of priorities [and] target resources where they would be most effective”. This is a very sensible suggestion, given what seems to be a mind-boggling array of programmes. The report also focuses on the importance of scale and cites a need for “bigger policies” if there are aspirations for Scotland to be the equal, in terms of GDP per head, of Denmark or Norway.

It suggests a “strengthened, enlarged but better focused” Scottish National Investment Bank could be put at the core of a venture capital sector concentrated on renewables and climate change opportunities more generally, drawing a parallel with clusters in California’s Silicon Valley.

The Hunter Foundation-Oxford Economics offering contrasts starkly with many strategy reports which are big on generalities and short on substance. It sets out the big picture but also drills down towards what could be very significant specifics for Scotland’s economic future. It is a good starting point.