Advisory Council for Economic Transformation minutes: July 2021

Attendees and apologies

Attendees:

• Cabinet Secretary for Finance and Economy
• Minister for Business Trade, Tourism and Enterprise
• Mariana Mazzucato
• John Alexander
• Jackie Brierton
• Lynne Cadenhead
• Chris van der Kuyl
• Sharon White
• Nick Macpherson
• Mark Blyth
• Maggie McGinlay
• Emma Parton
• Sean McGrath
• Mark Logan
• Jamie Grant
• Roz Foyer
• Anton Muscatelli

Apologies:

• Graeme Roy

Supporting SG officials:

• Liz Ditchburn
• Gary Gillespie
• Cornilius Chikwama
• Richard Murray
   

Items and actions

Introductions

Ms Forbes welcomed members to the 1st meeting of the Advisory Council and thanked them for agreeing to help shape the 10 year National Strategy for Economic Transformation (“economic strategy”). The Council draws on a diverse range of business leaders and experts and members were invited to quickly introduce themselves.

Remit

Members received advanced sight of the draft remit of the Council and were content with this. Any subsequent feedback can be provided to the Secretariat of the Council.

Presentation on developing the National Strategy for Economic Transformation

Ms Forbes set out the emerging draft vision and strategic objectives for the economic strategy, and the governance arrangements for delivering the strategy. This will cut right across different policy areas and will involve engaging a wide range of stakeholders and experts. The economic strategy will not just be for the Scottish Government but for everyone in Scotland. Broad ownership is vital to ensure its successful implementation. 

Mr McKee presented the initial analysis undertaken to support the development of the economic strategy, highlighting how the Scottish economy had changed over the past few decades, its key strengths and the range of initiatives in place to support the economy. 

Ms Forbes invited members’ initial reflections on the presentation, with the following points identified:

Vision and approach

There was debate over the appropriateness of taking a sector-based approach, with this being adopted in past few decades but without major success. There is a danger that this may lead to a large number of actions. 

However, it was recognised that most business support is delivered on a sectoral basis and this approach is well understood by business, is how they are organised (e.g. Industry Leadership Groups) and is how issues such as pay and conditions are tackled. 

There is an opportunity to follow a mission-oriented approach where support can be offered to businesses of any sector provided they are helping to achieve these missions or challenges.

Important to consider what policy levers are available to the Scottish Government and how they can be better utilised. 

Opportunity for Scotland to use Fair Work as one of its unique selling points to attract firms and people to Scotland. 

Delivery

Opportunities for both the public and third sector in health and social care.

Recognition of the cluttered policy landscape and the need to ensure the economic strategy avoids simply adding another layer of complexity. There is the need to consider what deficiencies the different strategies are trying to address and what are the key blockers/bottlenecks hindering delivery. 

On delivery, there was concern over the capacity of the SG and its delivery partners to successfully implement the economic strategy to ensure it makes a real difference. This reiterates the need for prioritisation over a small number of key enablers for delivering transformation change. 

Scope to enhance the connections between different sectors in the Scottish economy. For example, the combined strength of our financial, technology and energy sectors is extremely powerful. 

Place-based connections have the potential to generate real added value.

Evidence and analysis

Micro and small businesses account for a significant proportion of the Scottish business base but there are still a lack of data on them to help inform future decisions. 

Sectors is only one of many different lens through which we need to consider the challenges and opportunities facing the Scottish economy. Others include people, place, wellbeing, productivity, innovation and sustainability. 

Benefits of benchmarking against other countries, understanding how we can beat global competition to attract firms to Scotland and examining how certain regions/states have successfully transformed their economy.

Need to map out our strengths and be clear on where we want the economy to be, including the industries of the future, and then support that transition.

Ms Forbes summarised the key themes raised during the discussion: (1) need for a clear assessment on where aspects of our economy need to do better; (2) what has impeded past implementation; (3) which approach (sectoral, mission, regional, people) will help us shift the dial on Scotland’s economic performance; (4) relentless prioritisation is needed to work through the cluttered policy landscape; and (5) new ideas are welcome but need to consider delivery. 

Breakout discussion

The Council then broke into two discussion groups, chaired by Liz Ditchburn and Gary Gillespie, to explore these issues in further detail and consider three questions: where we want to get to; how are we going to get there; and who will help us get there?

The main points raised in the group chaired by Liz Ditchburn included:

Where we want to get to?

Further work is required to clarify the vision and how we measure it. 

Language is important in this respect, with concern that simply referring to wellbeing on its own is insufficient, especially when often what we are referring to is tackling poverty. Scope to go further around enhancing opportunities for all and closing the wealth gap. 

As a small economy, with an aging population, we cannot waste the talent we have. Many businesses, including start-ups, are unable to find the right people to fill vacancies. 

When considering where we want the Scottish economy to be, at the heart of this must be the role our workplace will play in such an economy. 

Important to articulate why Scotland is unique (i.e. why should a business choose to locate in Scotland). 

Scotland is not a small open economy but instead part of one of the largest free trade areas with the rest of the UK (the world’s 6th largest economy). Understanding where the Scottish economy is, and the tools available, is vital before considering where we want the Scottish economy to be in the future. 

How are we going to get there? 

Need to take a systems-approach and build on existing interconnections to help drive change in the economy.

Understand the available levers for supporting the economy and how they interact (including with measures from the UK Government).

While GDP has its limitations as a measure, there is no single measure to capture changes in wellbeing.

The interconnections with the rest of the UK are very important, particularly around value chains. Need to consider how the economic strategy connects with UK policy, such as the UK Government’s new innovation strategy. 

With around £13bn annual expenditure on public sector procurement, this is a key lever at our disposal. 

Driving improvements in productivity and innovation are still crucial, with scope to learn from international benchmarking. 

Vital to have the foundations in place first to secure transformational change (such as investment, infrastructure, education system). Build on the work undertaken on the 4 capitals (human, social, economic and nature).

Recognition that implementation will differ across Scotland. 

Businesses are keen to take a different approach and are increasingly concerned about the wellbeing of their workforce. 

Rural businesses are facing increasing barriers to attracting and retaining workers. Lack of affordable housing is a real issue which has become a more significant factor with the rise in second homes during the pandemic. 

The discussion in the group chaired by Gary Gillespie covered:

Where we want to get to?

Initial focus of 10 years is appropriate, but consideration is needed on how this is built on in the longer term.

Need clarity on our ambition first before examining how sectors can contribute to achieving this.

How will we get there?

The importance of place, recognising different opportunities across parts of Scotland and the need to align the skills provision to ensure regions can seize these economic opportunities. The pandemic has demonstrated that running businesses in rural areas is feasible. 

A thriving economy needs businesses of all shapes and sizes and we need to ensure we realise the full potential from our small businesses which make up around 80% of Scotland’s business base.

There is significant economic opportunity from enhancing the contribution women make to the Scottish economy but we need to reconsider how jobs will be done in the future (e.g. greater trust from employers that work will be done but in different ways).  

In the long-run, talent and skills will drive change. Need to ensure we are able to attract and retain inward investment.

The focus on small businesses should be centred on how to enable them to be sustainable and resilient. 

There was a missed opportunity around not including greater conditionality in business support during the pandemic.

Concentrate on infrastructure investment that will make a real difference. 

Education is critical and a national coalition for skills, education, universities and innovation that has cross-party support can deliver transformational change. This includes supporting in-work training to help enhance managerial skills in Scottish businesses. 

To what extent will fair work be delivered without active intervention even if we create entrepreneurial high-growth businesses?

Next steps

Gary Gillespie outlined the next steps, with further analytical work on the 3 scenarios identified and consideration of the data and measurement points raised by the Council. Officials will look to establish a sub group of the Council to consider the analysis further.

Keen to engage directly with members and Gary’s team is there to support them in their engagement with their own networks to bring back further ideas for the economic strategy.

The timeline for the development of the economic strategy was discussed and concern raised over the tight timescales. Ms Forbes recognised this and stressed this will help focus minds.

Reflections and close

Ms Forbes thanked members for participating in the discussion which reiterated that while there is a lot of work ahead of us, we can deliver transformational change to the Scottish economy.