Economic report provides optimism about Scotland's future, Nicola Sturgeon says

Living standards for Scots could "equal the best small countries in the world" within a generation of leaving the UK, a major new report has insisted.

The SNP set up the Sustainable Growth Commission in 2016, with party leader and First Minister Nicola Sturgeon saying its report showed how the country could "replace the despair of Brexit with optimism about Scotland's future".

The long-awaited 354-page document sets out plans to grow Scotland's economy, with the commission insisting: "We can lift the growth performance of the country to take living standards to equal the best small countries in the world over a generation."

To achieve that, it set out an approach of growing GDP in Scotland by focusing on the "the three 'Ps' of economic performance" - productivity, population and participation.

The Scotland: A New Case for Optimism report said: "Our central argument is that Scotland should be seeking to emulate the performance of the best small countries in the world, rather than sticking to its current position as the best of the rest of the UK regions and nations outside of the south east of England."

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The commission looked at the economies of 12 small independent states - Austria, Belgium, Denmark, Finland, Hong Kong, Ireland, the Netherlands, New Zealand, Norway, Singapore, Sweden and Switzerland - as part of its work.

Ms Sturgeon said: "The task ahead is to match those other nations, creating more jobs and raising living standards, providing a better future for everyone who lives here."

On the key issue of what currency an independent Scotland would use, the report recommended the country keep the pound during a transition period - with a separate Scottish currency a possibility after six economic tests are met.

In addition, a new Scottish Central Bank would be established, with part of its remit being to act as a lender of last resort.

To attract people to live and work in Scotland and grow the population, it suggested a package of financial incentives.

The "Come to Scotland" deal could see highly-skilled workers offered transitional relief on their income tax to help offset the costs of relocating.

The report said staying within the UK "which concentrates too much economic activity in London and the South-East region is holding Scotland and the other regions and nations of the UK below their potential".

It suggested reducing the gender pay gap in Scotland to the level of New Zealand could increase GDP by £6.1 billion, raising up to £2.5 billion a year more for the public purse.

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Doubling overseas exports - something the report said was a "reasonable target to set" to bring Scotland in line with other nations - could increase GDP by 8% and generate £5 billion more in taxes each year.

There would also be a comprehensive review of UK spending programmes, with the commission setting the target for Scotland to save £1 billion compared to current levels.

The commission was chaired by former SNP MSP Andrew Wilson, who said: "It is important that independence must never be seen as a magic wand or quick and easy step to success.

"Indeed, there is no pot of gold, black or otherwise, at the foot of the independence rainbow.

"But there is a toolbox and using it will mean taking responsibility for choices that seek to create a stronger economy, sustainable public finances and a fairer society."

Ms Sturgeon stated: "What this report shows is that Scotland is a wealthy nation with huge resources, encompassing our traditional strengths in innovation, our hi-tech sectors, our energy reserves, our food, drink and tourism strengths - and perhaps above all our strength in human capital, with a highly-educated population.

"Despite those enormous strengths, similar-sized nations have performed better over decades - all of them independent but most of them with fewer resources than us.

"This report rightly doesn't shy away from the challenges we face but presents ways in which those challenges can be addressed - and sets out recommendations on currency - which as a country we should all debate and discuss."

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Scottish Secretary David Mundell said: "Scotland voted decisively in 2014 to remain part of the UK. That decision should be respected. The public do not want another divisive independence referendum.

"We want to work with the Scottish Government to maximise the opportunities our exit from the European Union will bring.

"We should all put our energies into making sure we get the right deal for Scotland and the rest of the UK as we leave the EU."