Enterprise and Skills Review: call for evidence

Annex A: Scotland's Economic Strategy and National Performance Framework

Scotland's Economic Strategy focuses on the two mutually supportive goals of increasing competitiveness and tackling inequality, and we have four priority areas: investing in our people and infrastructure, fostering innovation, promoting inclusive growth and promoting Scotland on the international stage. These four priorities are sometimes referred to as the "4 I's". The diagram below shows how our key policies fit Scotland's Economic Strategy.

The Four priorities

The Purpose of the Scottish Government is to focus government and public services on creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth. It is measured and regularly reported on through the National Performance Framework ( NPF), which includes high level targets relating to the Purpose, along with a set of National Indicators.

There is a wide range of indicators which exist below the National Performance Framework and can be used to further understand economic issues in Scotland and to monitor the performance of specific agencies and specific parts of the economic system.

Overview of Performance

Productivity: Scotland's real productivity level, in terms of GDP per hour worked, is 4.4 per cent higher than in 2007. Although Scotland's productivity level is similar to the UK's, we would rank 19th out of 35 OECD ^[1] countries. A step-change is needed to reach our ambition to rank in the top quartile of countries.

Inequality: Income inequality, as measured by the Palma Ratio, increased slightly between 2013/14 and 2014/15. Although Scotland is less unequal than the UK overall, we would rank 19th out of 34 OECD countries where estimates of income inequality are available. ^[2]

Investment: In 2014 Scotland had the highest percentage of the population with tertiary educational attainment of all European countries. ^[3] However, there are persistent differences in educational attainment, and in school leavers going on to positive destinations, between those in the most and least deprived areas of Scotland. ^[4]

Innovation: Spending on research and development in Scotland has increased between 2006 and 2014, from 1.32% of GDP in 2006 to 1.56% of GDP in 2014. ^[5] However, Scotland's business R&D expenditure as a share of GDP is low by international standards. ^[6] Scotland's small business innovation rate is slightly higher than the European-wide rate. However, Scotland lags in terms of the innovation rates of medium-sized and large-sized businesses. ^[7]

Inclusive Growth: Scotland's labour market has been resilient in recent years. While there are persistent differences in employment rates across Scotland, the gap is narrowing. ^[8] Around 20% of employees in Scotland earn less than the Living Wage. ^[9]

Internationalisation: The value of Scotland's international exports has increased by 36% in nominal terms since 2007, although the value of exports fell between 2013 and 2014. ^[10] However, the share of Scottish SMEs exporting has declined in recent years, from 20% in 2006-07 to 12% in 2014. ^[11]