SCOTLAND needs bolder and more radical policy changes in order for the economy to grow significantly over the next 15 years, a new report has warned.

The stark analysis by Oxford Economics, commissioned by the Hunter Foundation, points to local taxes being rolled out to mitigate tax cuts needed to stimulate growth – while deregulation is needed alongside more investment in infrastructure and skilling up Scotland's workforce.

The document warns that “it is not realistic to think that the current economic policies of either the UK or Scottish governments will produce a transformation of Scotland’s economic performance”.

The SNP said the report was further proof Scotland needs further powers in order to be more ambitious – stressing it is further proof of the benefits of an independent country.

The report aimed to address Scotland’s low productivity, lack of success in scaling up and poor business birth rates leading to the country’s GDP per head only 48% of Ireland’s, 68% of Norway’s and 75% of Denmark’s.

The document warns that “Scotland would need a business, comparable in size with Google’s total global output, to bring its GDP per head up the level of Norway’s—or of course 20 companies, each one twentieth the size of Google.”

It adds that “current policies cannot be expected to deliver that scale of change”.

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Scotland’s GDP per head has been about 8% lower than the UK as a whole for many years, largely because of poorer productivity.

The study projects that Scottish GDP will rise by 6.2% this year and 5.9% in 2022, but warns that it is then “likely to return to its past trend” and will average 1.9% from 2020 to 2035.

The analysis calls for “increases in government borrowing and/or cuts in interest rates to stimulate stronger growth” as well as “significant tax cuts and deregulation, to improve competition and incentives in the economy”.

It has also pointed to “large increases in government support for businesses, either directly or through increased spending on infrastructure, education and skills, innovation, or key economic sectors”.

The document highlights analysis by the Institute for Public Policy Research (IPPR) which says the tax powers that the Scottish Government has used so far “will bring in just £180 million more revenue by 2023/24”, adding that any economic impact of this “is also likely to be modest”.

The report stresses that one possibility to broaden the tax base “would be to introduce new local taxes”, which it adds would “create the opportunity to cut other taxes”.

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It adds that “one way to broaden the tax base would be a tourism tax”, an idea put forward by the SNP before being paused due to the pandemic.

The documents insists that “if Scotland did have full control over tax rates”, there are “reasons for thinking that a comprehensive redesign towards a system that taxed all income and capital gains the same”, and a system that “did not act to deter saving and investments” and “supported entrepreneurial risk-taking" would “improve economic efficiency and hence growth”.

The report also highlights the potential of the Scottish National Investment Bank (SNIB), warning that the £2 billion of investment in the project “does not appear to be particularly generous”.

It adds: “But additional funding would only be likely to have an impact on Scotland’s growth rate if there was a clear focus on achieving that as a goal—together with sufficient oversight and transparency to ensure that funds were suitably allocated (and reallocated when needed). "

Sir Tom Hunter of The Hunter Foundation, said: “I fully agree with the findings of this far-reaching new report that radical economic policies are needed if Scotland’s economy is to be transformed.

“The report tells us Scotland would need to make changes equivalent in their impact to creating a business comparable in size with Google’s total global output, to bring its GDP per head up the level of Norway’s.

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“Moreover, we need far more focus in our economic investments not only to make significantly better gains but also to understand what’s working and what’s not.

“But that is only half the picture - we need to embed innovation in health and education and poverty reduction to free up finance to invest in growing our economy.”

SNP Finance Secretary Kate Forbes said her party “agrees we need radical and ambitious policies” to help kickstart a green recovery from the pandemic, adding that is why “we also advocate for the powers to deliver this policies”.

She added: “We have set out a national infrastructure mission, which will see capital investment increase dramatically in the coming years, as well as the Scottish National Investment Bank, to invest in growth businesses, increase support for business research and development, for entrepreneurs and to set out ambitious plans to transform Scotland’s tech sector.

“Of course, our borrowing powers and our ability to invest, as well as our ability to attract skills and talent through migration, are restricted by Westminster, which is why the SNP will continue to argue for Scotland to have the full powers we need to build the kind of recovery and economy that we require.”

Ms Forbes said that “despite the limitations on our powers”, the SNP will “outline further ambitious policies to transform Scotland’s economy”.

She added: "However, it is clear we could do so much more as an independent country with everyone working together, using the full range of economic levers, to transform our economy.”