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Quite rightly, much attention has been paid in recent years to the importance of productivity in the economy. An increase of just 1 per cent in productivity would deliver £2.3 billion extra in GDP and an extra £400 million in tax revenues. Less attention has been paid to the most important driver of productivity, which is innovation.
According to the Confederation of British Industry, innovation not only drives productivity but attracts international investment, raises living standards and supports inclusive growth.
However, the reality is that no Government can legislate for innovation. Instead, the role of Government should be to create a coherent and dynamic skills, business and education environment in which innovation can flourish. In his opening speech, the minister set out a list of initiatives that support innovation. Although we welcome those, a patchwork of initiatives is not enough to create an environment in which innovation becomes fully embedded in the economy. That is why, when it comes to innovation, Scotland continues to trail in the third quartile of OECD countries. It is clear that we need to do more to realise Scotland’s potential to be a global leader in innovation.
I will address some of the key points that have been raised in the debate. Alexander Burnett and Rhoda Grant highlighted the importance of R and D spending in Scotland. We welcome the recent increase, but the reality is that R and D spend in Scotland remains well below UK levels, so the gap that the minister mentioned is still quite substantial.
The Fraser of Allander institute also highlighted concerns that R and D activity in Scotland is heavily concentrated, with the remarkable figure that half of total R and D expenditure in Scotland comes from just 10 companies.
To encourage further business innovation and R and D, we need to promote an environment that attracts innovators from across the world to come to Scotland. In doing that, we face competition from the rest of the world and the rest of the UK, which is why we will continue to oppose the SNP’s decision to make Scotland the highest-taxed part of the UK for innovators. That is an example of creating a business environment that does not encourage innovation.
We also need a business environment that encourages innovators to scale up and expand their business, but, again, the SNP has done the opposite by imposing the large business supplement on successful firms with the ambition to expand.
We should also support universities and colleges in promoting their vital innovation activities— a point that was made by the minister himself, Alex Cole-Hamilton and Daniel Johnson. However, a recent Audit Scotland report highlighted that university funding has been cut by more than 11 per cent over the past five years, and the Economy, Energy and Fair Work Committee heard evidence that the university innovation fund has been cut by 25 per cent in the past five years, in contrast to a 15 per cent increase in the rest of the UK.