The economy is facing its "most severe financial crisis in recent years", the Scottish Government's key team of economic experts today warned as it published its first annual report.

The council of economic advisers makes a series of recommendations aimed at boosting the planning, education and infrastructure sectors as well as addressing economic activity in Scotland in their report.

Chairman Sir George Mathewson said today that although the council has advised on measures to tackle the current downturn, it is more concerned about long term strategic growth.

The council was formed last summer and has met four times since its first meeting last September.

"Since that time we've seen the bursting of possibly the largest asset bubble in personal history and the onset of the most severe financial crisis we've seen for many years," Sir George said its launch in Edinburgh.

The economic slowdown has spread throughout all economies, the former Royal Bank of Scotland chairman added.

"To my mind it's the speed with which these events have unfolded which makes this economic downturn different."

Among the key areas which the Scottish Government must address is planning which is holding back growth according to the council.

"The business community regards the inefficiency of the planning system as an obstacle to economic growth in Scotland," Sir George added.

"We share these concerns but we believe this issue around planning goes beyond efficiency."

He called for a change in the "whole culture of planning" with councils "incentivised" to promote sustainable development projects and planners seen as contributing to economic growth rather than as regulators.

The Scottish Government is currently not allowed to borrow to fund infrastructure projects like roads and public buildings but the council want the devolution settlement revisited to look again at this in light of experience.

"We're concerned by the long term under investment in Scotland infrastructure and we believe that increased expenditure is required," Sir George said.

The current fiscal arrangements should be pursued with the UK Government to better meet Scotland's needs, he added, with new means of borrowing also considered outside PFI.

"The council noted that the level of real and nominal interest rates for long term borrowing have by historical standards fallen to exceptionally low levels," Sir George added.

"The recent financial crisis has also spread substantially the cost of government borrowing and other borrowing."

A series of "radical actions" to develop the higher education system are set out including a "two tier " approach to the current four year honours course which would allow students to leave halfway through with a stand alone qualifications.

Funding costs through increased contributions from government business, (foreign and local) industry, philanthropy as well as patents and research contracts should also be examined.

"This is not just a Scottish challenge," Sir George said.

"The scale of funding is so large that every country is grappling with it."

The failure of some areas Scotland, particularly Glasgow, to participate fully in economic progress is also of "serious concern" to the council.

The ability and willingness of people to get work, as well as the value and effectiveness of training are among the factors contributing to this.

The council wants to see the possibility of devolving Jobcentre Plus to Scotland examined to provide a more co-ordinated approach to training.

"More needs to be done to resolve tensions between the Scottish and UK policy responsibilities," Sir George said.

The council comprises 11 leading figures from business and economics including Weir group chairman Sir Robert Smith, Clyde Blowers chief Jim McCall, economist professor John Kay and Nobel prize-winner professor Finn Kydland.

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