Why is it that a Norwegian can produce 35% more than a Scot?

Solutions to our productivity problem include better mental health care as well as skills training, writes Craig Vickery

The Nobel Prize-winning economist Paul Krugman argues that “productivity isn’t everything, but in the long run it is almost everything”.

How then do we begin to solve our own long-standing ‘productivity puzzle’ – especially as UK productivity fell at its fastest annual pace for five years in the second quarter of the year. To address this often enigmatic issue confounding policymakers, CBI Scotland and professional services firm KPMG created a new index to measure the productivity levels of Scottish businesses and determine the effectiveness of productivityenhancing measures.

The Scottish Productivity Index tracks performance in business practices, skills and training, health and well-being, infrastructure and connectivity.it finds that Scotland’s productivity is lower than that of the UK as a whole, which itself is in the bottom half of productivity internationally, according to the Organisation for Economic Co-operation and Development (OECD).

Scotland languishes in the third tier – the equivalent of football’s League One – lagging behind leaders Ireland, the US and other continental powerhouses like Germany. To illustrate the significance of Scotland’s sluggish showing, workers in Norway – a comparable country in population – are 35 per cent more productive than their Scottish counterparts, meaning they could produce as much as we do in a five-day week in just three-and-a-quarter days.

The index highlights the low rates of innovation, investment and research and development in Scotland. The index’s recommended solutions include employers treating mental health with equal priority as physical health, basic digital training for all in the workforce, and a ‘data bank’ to improve the tracking of data across the public and private sectors.

These radical responses and more are needed to successfully advance the Scottish economy. Innovative ideas are necessary from our Holyrood representatives about the dizzying array of difficulties all governments now face, from declining public trust to technological disruption. There are considerable challenges facing the public sector in particular – from budget reductions to talent shortages – along with an increasing urgency and need to modernise processes, data and technology, and human resources.

Despite the many questions, the answer that accountancy body ACCA identifies in a new report, Innovation in Public Finance, is that governments must shift from incremental to more radical forms of innovation. Policymakers and public sector leaders should share a vision and strategic direction, allowing staff to understand how their organisation can proactively address the complex challenges it faces. Almost 4,500 ACCA members across 142 countries took part in the survey, including 56 accountancy experts in Scotland.

The report asserts there are three specific challenges to overcome for radical innovation to flourish.

First, maintaining a stable environment while innovating – bringing new ideas to life can be disruptive, and this is a risk for public services that often serve the most disadvantaged in society.

Second, the risks of first-mover disadvantage. As the old adage goes “pioneers often die with arrows in their backs” – meaning being the first trailblazer to innovate in a particular area can lead swiftly to increased competition, losses