Enterprize zones and tax cuts not enough, think tank tells SNP

The SNP Government’s plans to revive the economy have been branded “inadequate” by a leading think tank.

Plans to cut corporation tax and create specialised enterprise zones will not be enough to produce a long-term return to growth, according to a report by the Institute for Public Policy Research (IPPR).

It also warned that Scotland’s heavy reliance on public sector jobs could damage recovery.

Opposition parties said last night it was a “shot across the bows” of the Government and warned that a “smarter approach” was needed on the economy.

The SNP Government is lobbying for control of corporation tax from Westminster as part of the Scotland Bill. Ministers believe that cutting this would attract firms to move to Scotland.

Proposals to create four enterprise zones were among the key measures set out in finance secretary John Swinney’s economic strategy yesterday.

But the report warned: “Policies to cut corporation tax rates and regulation will only take place over a number of years and are unlikely to result in increased investment or job creation.

“Evidence also suggests enterprise zones are simply likely to move jobs around and will have little sustained impact on economic growth,” it adds.

Scotland was also boosted disproportionately between 1998 and 2008, by increases in public sector jobs like government, council and NHS staff.

Scottish growth in the private sector continued to fall short of growth in the rest of Britain and could lead to a “particularly difficult” few years as the cuts bite.

“The result could be an increased spatial polarisation of employment growth – relatively depressed in much of the north of Britain, with any increase in jobs concentrated in the south,” the report adds.

The IPPR warns that 32.1 per cent of workers in Scotland are directly employed in the public sector. Between 1998 and 2007, 77,000 jobs were created in the private sector, whereas 168,000 jobs were created in the public sector.

A Scottish Government spokesman said the report is “clearly out of date” as its conclusions are based on 2008 data.

“Our approach to strengthening recovery and boosting economic activity is working,” he added.

“On corporation tax, the report is looking at it from a UK not a Scottish perspective. We are maximising the full economic potential from our existing levers to create jobs and promote growth. However, we need full control of the key economic levers, such as corporation tax.”

Labour’s finance spokesman Richard Baker said the government must come up with a fresh approach.

“With rising unemployment, growth flat-lining and key indicators pointing the wrong way, it is hard to see why policies which failed in the 1980s are sufficient now,” he said.