New IPPR Scotland analysis said many European countries with high spending on social protection measures such as benefits, childcare and training “also sustain highly productive, innovative and dynamic economies.”

The Think Tank said that “challenging the myth that higher social spending is incompatible with economic success” the new IPPR Scotland analysis said researchers found that countries like Germany, the Netherlands, Sweden, Finland, France, Denmark, Norway, Belgium, Austria and Switzerland “spend much more on social protection per person than the UK and Scotland and have also had far superior economic and social outcomes sustained over the long run.”

IPPR Scotland said: “The UK has had lower GDP per capita throughout this past decade. Scotland’s GDP per capita, meanwhile, has been very close to the UK’s, and well below that of the 10 countries that the researchers focussed on.”

This research showed high spending on social protection does more than just place a safety net for the economically disadvantaged; it helps economies to become more productive. For example:

• Higher unemployment benefits give people the security and support to retrain, upskill and re-enter the workforce in a job that matches their skills, interests and expertise.
• Measures like generous childcare investment enable high employment rates for women.
• High spending on social protection can also encourage entrepreneurial risk-taking and help facilitate economic change.

The research said that high-spending countries also perform well across a range of international indices of competitiveness and innovation.

“For instance, all the high social spending countries achieve a ranking in the top 25 nations in the 2024 Global Innovation Index, with six appearing in the top 10,” said IPPR Scotland.

“Switzerland and Sweden fill the top two places.

“Ahead of this year’s election, IPPR Scotland is urging the Scottish government to take learn from these countries and lead a renewed drive to build a national consensus on economic development. The next government should also examine ways in which spending can shift towards areas such as employability, childcare, and labour market support, that directly address both social and economic objectives.”

IPPR Scotland director Stephen Boyd said:  “The experience of other countries shows – unambiguously – that it is possible to create a virtuous cycle between high social protection spending and economic dynamism.

“Scotland’s political parties should bear this in mind when developing manifestos and engaging in debate around this year’s election. The next Scottish government can and must build a new policy agenda. By focusing on areas like employability and childcare, we can tackle social challenges and boost the economy at the same time.”

Reacting to the report, Professor Patricia Findlay, Scottish Centre for Employment Research, Strathclyde University, said: “This report is a timely reminder that there are no necessary trade-offs between economic growth and high social protection spending – and the many wider social benefits from the latter.

“The report carefully avoids a suggestion of causation between social spending and economic growth, though a positive causal relationship has some intuitive plausibility. The challenge, of course, is in the transition – what should Scotland do now to move from a vicious circle of low relative social spending and stagnant growth to a more virtuous circle present in other successful economies?

“There is no silver bullet, but the recommendations of investing in collective design of economic strategy, more active labour market policies and, crucially, stronger structures of social partnership and dialogue, would represent important steps towards better longer-term outcomes.”