Scotland faces a pressing need to spark economic growth and lift productivity to secure better public services and prosperity for all. A new report by economist Sir Anton Muscatelli, commissioned by Scottish Labour leader Anas Sarwar, outlines bold steps to tackle regional underperformance and build a stronger national economy.
Report Background and Commission
Sir Anton Muscatelli, the former principal of the University of Glasgow, took on this task in February 2025 at the request of Anas Sarwar. The goal was clear: examine why some Scottish regions lag behind and find ways to unlock their potential. After nine months of independent study, the report landed amid heated political debates just days ago.
Muscatelli, once a key advisor to the Scottish government, stresses that his work stands apart from party lines. He points to Scotland’s overall economic strengths but highlights gaps in productivity that hold back regions like the Highlands and Islands or parts of the central belt. This comes at a time when Scotland grapples with a projected £5 billion budget shortfall, driven by rising public spending demands and slower growth compared to the UK average.
Sarwar chose this focus to shift Scottish politics toward real economic talk. He argues that Holyrood has ignored growth for too long, letting an “Edinburgh-centric” mindset stifle local opportunities. The report aims to change that by pushing for decisions closer to communities, not just the capital.
Key Recommendations to Drive Growth
The report lays out practical ideas to make Scotland more competitive and productive. Muscatelli calls for a “shared national mission” on growth, with clear actions across government policies. He urges leaders to cut red tape and align efforts on planning, skills training, and business support.
One major push is for a new economic directorate in the First Minister’s office. This body would oversee a cabinet sub-committee to ensure every policy boosts jobs and output. Muscatelli also spotlights the need for better regional deals, giving local areas more say in spending and development.
Here are some standout recommendations from the report:
- Reform planning laws to speed up housing and infrastructure projects, easing bottlenecks that slow business expansion.
- Overhaul business rates to encourage investment in high-growth sectors like renewables and tech.
- Boost skills programs tailored to regional needs, partnering universities with local industries for targeted training.
- Explore clean nuclear energy to meet net-zero goals without ideological blocks, creating jobs in energy transition.
These steps, Muscatelli says, could help Scotland catch up to top-performing small economies worldwide. He draws on recent data showing Scotland’s universities already drive £6 billion in annual economic impact through research and innovation.
Labour’s Pro-Growth Stance and SNP Response
Anas Sarwar hails the report as a roadmap to end Scotland’s “economics-free zone” era. He promises that a Labour government would devolve powers beyond councils, straight to communities along the A720 ring road and beyond. This positions Labour as the party for business and regions, a shift from past focuses on social policy alone.
Sarwar vows to pluck “low-hanging fruits” like ending bans on nuclear power and fostering UK-Scotland ties on energy. He sees untapped potential in every region, from Aberdeen’s oil legacy to Glasgow’s tech hubs. Yet, the report challenges Labour too, especially on handling higher income taxes that fund Scottish services but might scare off talent.
The SNP government pushes back hard. First Minister John Swinney insists his administration already champions growth through initiatives like the National Strategy for Economic Transformation. SNP ministers blame UK Labour policies, such as national insurance hikes and spending cuts, for hurting Scotland more than Holyrood’s choices. They note recent positives: net migration from the rest of the UK hit 40,000 over three years, the highest ever, and Scotland’s GDP growth outpaces similar UK areas since 1999.
Economy Secretary George Adam calls Sarwar’s report a distraction, saying no paper can fix Westminster’s damage. Still, SNP voices avoid direct attacks on Muscatelli, given his past advisory role, and hint at borrowing ideas for their own plans.
Tax Divergence and Immigration Hurdles
A tough part of the report warns about Scotland’s higher income tax rates compared to the UK. Muscatelli argues that diverging too far could deter high-value jobs and skilled workers, especially in a global talent hunt. He calls for ministers to “think carefully” about balancing tax hikes with growth incentives, citing Scottish Fiscal Commission data on budget strains.
On immigration, the report seeks closer UK-Scotland collaboration. It recommends reviewing skilled worker visa salary thresholds, now at £41,700, and creating post-study work visas for international graduates. These changes could help fill labor gaps in key sectors. Muscatelli notes historical schemes that once drew talent to Scotland, urging a revival to support regional economies.
This ties into broader worries. Recent UK visa tightenings aim to cut migration but risk slowing Scotland’s recovery. Labour’s Sarwar dodges direct calls for tax cuts but stresses growth will ease fiscal pressures without slashing services.
| Economic Indicator | Scotland (2025 est.) | UK Average | Notes |
|---|---|---|---|
| GDP Growth Rate | 1.8% | 1.5% | Scotland edges ahead but regions vary widely |
| Productivity per Hour | £32.50 | £35.20 | Lags due to uneven regional development |
| Net Migration from rUK | +40,000 (3 yrs) | N/A | Record inflow boosts workforce |
| Unemployment Rate | 4.2% | 4.1% | Stable but higher in rural areas |
This table highlights Scotland’s mixed picture, with strengths in migration but room for productivity gains.
Expert and Public Reactions Spark Debate
Economists and business leaders largely praise the report’s depth. Groups like Prosper Scotland, which fed into it, see universities as central to innovation. On social media, reactions split: supporters cheer the regional focus, while critics point to overlooked positives like rising wages and low emigration.
Public forums buzz with talk of real impacts. In Glasgow events, attendees worry about job losses in traditional industries but hope for green tech booms. YouTube discussions feature Muscatelli explaining how universities fuel growth, linking to UN sustainable goals.
Some voices question if growth alone can plug the £5 billion gap. Muscatelli admits challenges from demographics and global shifts but insists targeted reforms offer quick wins. Ties to recent events, like the UK fiscal framework review, add urgency, as borrowing limits rise modestly but pressures mount.
Scotland’s Economic Path Ahead
As the 2026 Holyrood elections near, the Muscatelli report could reshape the growth debate. It calls for unity across parties to make Scotland a productivity powerhouse, funding better health and education without endless tax debates. With budget woes looming and global uncertainties like energy transitions, timely action feels vital.
Readers, what do you think of these ideas for Scotland’s economy? Share your views in the comments below and spread the word to spark wider conversation.
