For Scotland to flourish, everyone must benefit from economic growth

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Below is a speech given by First Minister Nicola Sturgeon to Scotland’s first-ever International Inclusive Growth Conference. Check against delivery.

 

It’s always a pleasure to return to Glasgow University – where I spent four very happy years a student.

 

And it’s a particular pleasure to welcome such a distinguished international audience. Today, I understand we have guests here from Australia, New Zealand and Costa Rica, as well as representatives several of our European neighbours and from across the UK. I welcome all of you very warmly to Glasgow and to Scotland – I hope you have a wonderful time.

 

The Scottish Government – and this is a theme I’ll return to at the end of my speech – hugely values the chance to engage with international experts.  That’s why I’m delighted that this Conference also sees the first meeting of the ‘Wellbeing Alliance’.  It’s a partnership, between different regions and countries, that seeks to develop a sustainable economic model focussed on wellbeing.

 

Of course, the broader focus of the conference is inclusive growth.  And I think this is a hugely important time to discuss an immensely important subject.

 

The Office for Budget Responsibility last week indicated just how deep-seated and damaging the UK’s productivity crisis has been during the decade since the financial crisis. Low productivity is closely linked to a stagnation in real wages which – combined with inequality – seems likely to have been a contributing cause to the result of last year’s Brexit referendum.

 

And of course, this dissatisfaction with living standards, inequality, and the current economic status quo is not confined to the UK – it has been demonstrated in elections in countries around the world – perhaps most notably in the USA.

 

So the issues we’re talking about today are being discussed internationally. That’s one of the reasons why we’re so delighted to have experts and ministers here from outside Scotland.  But I do want to start by providing some context for Scotland’s position.

 

Scotland on some measures has done relatively well in the last decade. For example, during that time we have virtually closed what was a long-standing productivity gap with the rest of the UK. We have lower income inequality levels than the UK as a whole.  

 

The value of our international exports has increased by 2/5 in the last 7 years. And our unemployment levels are at a near record low.

 

That reflects many of our key economic strengths. We have more world-class universities per head of population than any other country in the world except for Luxembourg. Glasgow is one of them.

 

Partly because of that, we have the most highly qualified population in Europe. That’s one of the reasons why we are second only to London, within the UK, for attracting international investment.

 

We have an international reputation in economic sectors such as life sciences, creative industries, food and drink, tourism and energy. In fact, if you take energy as an example, just two days ago, I opened the world’s first floating windfarm, 25 miles offshore from Peterhead. It’s an incredible example of the scale of Scotland’s renewable energy resources, and also of the technological ingenuity which is now starting to harness those resources.

 

So on the face of it, we’re a nation of great wealth. But like most advanced economies, we also face long term, structural challenges.  

 

Although Scotland has closed its productivity gap with the rest of the UK, we still lag behind countries such as Sweden, Germany and the USA. We need to adapt to an ageing population, make progress towards the low-carbon age and ensure skilled and well paid job opportunities in an age of automation. Brexit – especially if we end up outside the Single Market – is likely to cause serious harm to businesses in Scotland.  

 

And of course deep inequalities exist in our society – reflected in reduced educational outcomes, poorer health and lower life expectancy.

 

So Scotland needs to use our vast potential to become a more productive economy. But we also need to become a fairer and more equal society.

 

And what Scotland – together with countries across the globe – has increasingly recognised is that those two challenges, of competitiveness and equality, are intrinsically linked. We would have an even more productive and competitive economy, if we had a fairer society.  

 

That’s been borne out by a significant body of recent analysis. OECD researchers estimated that between 1990 and 2010, rising income inequality in the UK reduced our economic output per head by 9 percentage points – that’s approximately £1,600 for everyone in the country.

 

Later today you’ll hear from Gerry Rice of the IMF. The IMF just last week published a report which set out how measures such as more progressive taxation could tackle inequality. The report also made it clear that inequality can “erode social cohesion, lead to political polarization, and ultimately lower economic growth”.

 

It stands to reason that societies are more likely to succeed, if every individual within them has a fair chance to flourish.

 

That’s why, when the Scottish government revised its economic strategy in 2015, we based it upon four interdependent themes – innovation, internationalisation and investment were three, and inclusive growth was the fourth.

 

What that means in practice is that key social policies – such as our expansion of childcare and our work to raise attainment in schools – have a significant economic impact.

 

We are committed to tackling poverty. For example, we continue to mitigate the worst of the UK Government’s welfare reforms. And we’ve introduced legislation to reduce, and ultimately eradicate, child poverty in Scotland.

 

We understand the importance of place. The investments we’re making in transport and digital infrastructure are improving connectivity across our country – particularly for rural, coastal and island communities. And the Scottish Cities Alliance – a partnership between the Scottish Government and the leaders of our seven cities – is working increasingly closely with the OECD, on things like the New York Proposal for Inclusive Growth in Cities, and the Champion Mayors for Inclusive Growth Initiative.   

 

We are promoting gender equality in the workplace and across society. As Gabriela Ramos, of the OECD pointed out earlier this year, if as many women as men were in work, the total output of OECD countries would be 12 per cent higher over the next 20 years.  

 

And more broadly – as part of our distinctive approach to Fair Work – we are encouraging employers to boost productivity and invest in their workforce.

 

When I became First Minister, around 50 companies were accredited living wage employers. Now, there are more than 900. A higher proportion of employees receive the real Living Wage in Scotland than in any other country in the UK.

 

We have developed the Scottish Business Pledge. It celebrates companies which voluntarily agree to progressive business practices. I am delighted that Dougal Baillie – a consultancy and engineering firm, who are here at today’s event – has just become the 400th company to sign the business pledge.

 

A key point here is that inclusive growth isn’t separate from the other strands of our economic strategy. All of them are interdependent. The Scottish Business pledge in some ways epitomises that point by celebrating internationalisation and innovation as progressive business practices -  alongside employing young people, promoting gender equality and paying the living wage.  

 

My vision for Scotland – and this year’s programme for government made this very clear – is as a country whose economy is based on innovation and internationalisation.

 

We want to develop, manufacture and export the innovations of the future, rather than simply consuming them. And we also want all businesses, across all sectors – even if they’re not technological trailblazers –  to adopt innovative methods and new technologies which can make them more productive.

 

We’ve announced some significant measures in recent months to promote innovation – increased funding for business research and development; additional support for manufacturing and key sectors of the future; and continued investment in skills and in our enterprise agencies.

 

We’ve also set out our intention to create a Scottish National Investment Bank. My Council of Economic Advisers – some of whom are here today – identified that such an institution could deliver support for infrastructure development; finance for high growth businesses; and strategic investments in innovation. Today, we are launching a consultation on how the Bank can achieve those aims.

 

However , we recognise that inclusive growth is another essential part of our focus on innovation and productivity.

 

So we’ve also announced a range of measures to ensure that as we transform our economy – we leave no one in our society behind.

 

For example, we will establish a Just Transition Commission – a panel of experts from across society that will advise us on making the move to a low-carbon economy as equitable as possible.

 

We will look at ways in which we can support the growth of employee ownership.

 

And, despite the critics, we will work with interested local authorities to fund research into the feasibility of a citizens basic income scheme. Our work on this is at an early stage. It may not be the answer – but we believe that as work and employment change, it is important to look at the way we support individuals to participate in the new economy.

 

Of course, all of this will sit alongside the wider action we are taking to build a fairer, more prosperous Scotland.

 

Fundamentally, we understand that to boost innovation and productivity, we must tackle poverty – because people who are stressed, unhealthy or hungry as a result of poverty, are less likely to contribute all they can to the economy or to society.

 

We must close the attainment gap and give our children the best start in life – because otherwise we are passing up on the potential of too many young people from deprived backgrounds.

 

We must promote gender equality, because a country which underuses the talents of half its population is less likely to come up with successful businesses and world-changing ideas.

 

And we must build a truly inclusive economy. Because for Scotland to flourish, we need to ensure that everyone can benefit from economic growth, and that everyone has a fair chance to contribute to that growth.

 

All of you will have passed the statue of Adam Smith on your way to the conference. He was of course a student and later a professor here at Glasgow.

 

Smith is sometimes misused and misquoted as though he were a believer in untrammelled free markets, but I think that he would have understood the basis behind the Scottish government’s approach to inclusive growth.

 

As he wrote in “The Wealth of Nations” – “What improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can be flourishing and happy, of which the far greater part of the members are poor and miserable.”

 

Smith recognised that the major choices we make in economic policy aren’t about what sort of economy we want to create, they are about what sort of society we want to live in.

 

That’s something which is reflected in our wider approach to Government.  We recognise that although GDP is an important indicator of economic performance, it is not the only one.  That’s why our economic strategy is linked to our national outcomes framework – the measures we use to see if Scotland is succeeding as a nation. And as we revise those national outcomes – we are in turn linking them to the United Nations’ Sustainable Development Goals.

 

So in pursuing inclusive growth, I believe that we are in tune with the best of Scottish traditions. But that in itself is not enough – we also need to harness new thinking and up to date expertise from Scotland and around the world.

 

And that, of course, is where all of you come in.

 

We think we’re on the right track, but we know we don’t have everything right. We want to identify the areas where we’re falling short, the things we could do more of, the new approaches we need to try.  

 

This conference is one of the ways in which we are doing that.  

 

We want to draw on your perspectives, your insights and your ideas. Because by doing that, we can go further towards building a prosperous, inclusive economy, and a strong and flourishing society.

 

So thank you very much for coming. I wish all of you, all the best, for a very successful conference.

 

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