Advisory Council for Economic Transformation minutes: October 2021

Attendees and apologies

Attendees

• Cabinet Secretary for Finance and Economy
• Minister for Business Trade, Tourism and Enterprise
• First Minister: John Alexander
• Jackie Brierton
• Lynne Cadenhead
• Maggie McGinlay
• Sean McGrath
• Mark Logan
• Roz Foyer
• Nick Macpherson
• Anton Muscatelli
• Dame Sharon White

Apologies

• Mark Blyth
• Mariana Mazzucato
• Chris van der Kuyl
• Graeme Roy
• Emma Parton
• Jamie Grant

Supporting Scottish Government officials

• Liz Ditchburn
• Gary Gillespie
• Richard Murray
• Lisa McDonald

Items and actions

Introduction

Ms Forbes welcomed members for the 4th meeting of the Council and the First Minister who was joining the council for the first time.

Considerable progress has been made since the last meeting, with all sub-groups of the council producing reports which include draft actions for the Council’s considerations. An early rough draft of the strategy has also been produced and members will be asked to provide their initial feedback on this.

Further analysis has been undertaken, drawing on lessons from what is currently working well and where a more fundamental rethink is needed.

At a crucial point in our work and by the end of today looking to have broad agreement on the key actions for transforming the Scottish economy and how we will take forward work to ensure these actions are successfully implemented.

Introductory remarks from the First Minister

Ms Forbes invited the First Minister to give some introductory remarks on the importance of the National Strategy for Economic Transformation. The First Minister welcomed the opportunity to join the Advisory Council today and thanked the Council for their contributions over the past three months to support this crucial work, highlighting:

• with the duel challenges of EU exit and coronavirus (COVID-19), there is a real opportunity to design an economic recovery that works for all of Scotland’s people
• putting wellbeing at the heart of our economy is both the right thing to do and can also unlock creativity and confidence
• this in turn helps our businesses to innovate and grow, making them more globally competitive
• this means an economy that enables all of Scotland’s people to contribute to and benefit from our national prosperity, helping to tackle deep-rooted inequalities and ensuring we address barriers to economic participation across society
• it means that creating wealth is not an end in and of itself, but is a vital and celebrated means for tackling poverty, improving the standard of living and creating opportunities for everybody, and transformation is required if Scotland is to become a net zero economy
• ensure we have the right actions, with greater prioritisation and ensuring we do better than in the past
• the Council’s recommendations are very important to us and there is a huge opportunity to address the long-standing weaknesses and build an economy with wellbeing and innovation at its heart
• keen to hear the summary recommendations and a real sense of where the priorities are for the Scottish Government

Summary of recommendations from the sub-groups

Ms Forbes thanked those who have contributed to the sub-group meetings and worked at pace to deliver summary reports, and invited the sub-group leads to provide a brief summary.

Sir Anton Muscatelli set out the key actions emerging from the Productivity and Innovation sub-group:

• the productivity challenge is not something unique to Scotland but other countries have successfully coordinated their actions (for example, through national productivity boards) to ensure concerted action on a number of different dimensions of productivity

• build on existing capacity, such as productivity clubs, and consider how to scale them up to ensure they suit different parts of Scotland
• innovation is a key area and we need to translate our key strength in university research and development into productivity gains within the Scottish economy
• developing an innovation strategy is a key part of enhancing productivity and there are hard choices on where higher education can translate into higher business research and development
• Scotland’s export strategy needs to fit in with a productivity strategy
• technology readiness is really important, lack of digital penetration holds back many countries, technologies such as artificial intelligence are key and Scotland needs to strengthen in these areas and build value chains which will help the transition to net zero

Mark Logan provided an overview of the report from the Entrepreneurship sub-group where it is proposed that a 3-stage approach is taken:

• stage one: complete the existing Scottish Technology Ecosystem Review (STER) implementation to establish a base platform
• stage two: generalise the STER backbone to establish an entrepreneurial platform (create a national incubation environment, align grants and investment, enable international peer-to-peer learning; and better pathways from education into the entrepreneurial environment)
• stage three: iterative process for specialising this platform for certain areas such as creative industries

Roz Foyer highlighted that the Human Capital sub-group focused on two inter-related issues: skills investment and training and wider workplace relationships and practices. The sub-group recognised four key themes:

• improve fair work conditionality and fair work processes (such as sectoral bargaining)
• promote progressive workplaces and workplace innovation
• increase the responsiveness of skills system, more agile, full-life approach (extending beyond FE/HE age) 
• target skills programmes to support marginalised groups, recognising the different challenges faced by communities across Scotland

For the Regional Equality sub-group, Jackie Brierton outlined:

• the rich diversity and innovation across regions in Scotland
• there is the need to harness this in rural and island communities, where often the strong entrepreneurial activity is not recognised
• look at community-led solutions, working with agencies and the public sector to provide more effective and supportive services to small and medium businesses outwith urban areas
• there is the need to support those existing businesses which form part of the backbone of Scotland's economy and will play a key role in moving to net zero
• the Community Wealth Building framework provides real opportunities to address local procurement, access to finance and help retain wealth within regions to build stronger local economies
• look at sectors which can deliver for communities, such as social care

Ms Forbes invited the First Minister for any final reflections on the sub-group reports.

The First Minister highlighted that all of the points raised by the sub-groups are important but the challenge is joining the dots between them and focusing on fewer, more impactful actions.

Fair work is important in and of itself, but if the fair work agenda is to have its full impact then it will lead to improvements in productivity and innovation.

There are a number of key strengths in the Scottish economy, such as research in the higher education sector, and we need to build on these to drive economic growth.

Recognised there needs a step-change in delivery. Partnership working is more important than ever and is essential going forward to ensure we have the right measures in place to enable the Scottish economy to flourish.

Ms Forbes thanked the First Minister for attending the Advisory Council.

Plenary feedback on high-level summary and draft strategy

An early draft of the strategy was shared with the Council for comment alongside a summary paper of the emerging actions for the five key objectives. This draws on the actions identified by the Council, sub-groups and through extensive engagement with stakeholders.

Ms Forbes stressed that nothing is tied down yet and at this stage keen to test whether this captures the key actions identified by the Council and sub-group, are any key actions missing and collectively, will these actions transform the Scottish economy?

During the discussion the following issues were raised:

• the draft strategy does not provide the script for delivering transformation change and needs to better reflect the discussions taken place at the Council which have stressed the need to radically overhaul the economy
• it needs to be more bold, powerful, focused and visionary, setting out how we are going to deliver jobs which matter to everyone, this includes setting out our ambition on maximising the opportunities as we transition to net zero
• need to make the strategy more hard edged as there is concern that in trying to please everyone you will lose the growth and productivity focus
• while a lot of the actions on their own are good, if we go back to the objectives we are seeking to achieve, for example on innovation and resilient business base, many are small-scale and need to be joined up, considering the scale of impact will help when prioritising the actions
• there is a major opportunity to reindustrialise our economy towards net zero and this strong narrative is missing from the current draft (e.g. off-shore wind and hydrogen), the Green Industrial Strategy will help set out the priorities
• the area which needs specific focus is on unlocking economic opportunities and new markets as this was difficult to follow and unclear what the implications are for industries not referenced, however at the same time if we are ruthlessly prioritising action then we cannot refer to all sectors in the strategy, this does not mean we are abandoning these sectors
• finance options need to be bottomed out and needs to be in the plan to ensure we know what can realistically be achieved, there is risk in investing in a green economy but this is necessary, ensuring investors are behind the actions taken by the Government can help mitigate this risk
• have to set out how we think economic development in Scotland needs to be done over the next 10 years, this includes being more explicit on the activities underway (such as the Careers Service review), where we are looking to build on existing initiatives and where something new is required to be transformational
• engagement is required with the enterprise agencies as they will be required to take forward many of the emerging actions
• the draft recognises the vital role inward investment can play but could be stronger on the key role big corporations currently in Scotland can play in transforming the economy
• welcomed the references in the draft to fair or fairer prosperity and the need to spread the wealth across the economy
• there is an opportunity in the strategy to recognise the disconnect between business and the public sector and use the strategy to communicate a greater sense that the government is in this with business and that its door will always be open for business to engage with them
• scope to draw on the recent event held by Scotland's Rural College which looked at how to support and grow the rural economy
• a meeting of the sub-group leads was proposed to help ensure greater join-up between the emerging actions, potentially a one-day, facilitated session

Mr McKee and Ms Forbes reflected on this feedback and agreed that further work is needed to identify and fill in the gaps within the strategy. The analytical work undertaken can help with this.

The discussion recognises that there will need to be follow-up work after the strategy is published, such as developing an innovation strategy and potentially a productivity strategy. 

Risks will need to be taken when transforming the Scottish economy but these will be calculated risks whilst ensuring they can be delivered. Open to using all the tools and levers at the Scottish Government's disposal, including tax.

Enterprise agencies have been engaged throughout the process and these discussions will continue.

Gary Gillespie highlighted the strong themes coming through the discussion on net zero and green reindustrialisation, and reported that there is work underway within Government which the Council has yet to see. The actions are very different and therefore work can be progressed on their framing and sequencing as well as prioritisation.

In summing up, Ms Forbes highlighted that there is further work officials need to undertake before the Council meets again.

Action

• a set of slides will be quickly developed which playback the Council's feedback and tests what this means for the vision, objectives and actions, thereafter, the strategy will be revised and a further meeting of the Council set up

Delivery sub-group

Ms Forbes highlighted that the Council has already identified a number of immediate actions which can be taken to help enhance delivery of the strategy. For example, setting multi-year budgets, have fewer initiatives and ensure sufficient time for actions to deliver their intended impacts, track progress annually, and undertake robust monitoring and evaluation. 

These actions on their own will go a long way to transforming the way we support the economy but they are unlikely to be sufficient on their own. We cannot expect to see transformational change in the Scottish economy unless we have transformational change in the way we deliver support to the economy.

Going forward, Ms Forbes proposed setting up a delivery sub-group of the Council which would undertake work in two phases:

• phase one: a high-level review of the current delivery landscape, identify the key blockers to change and set out a number of principles which will guide future decisions on delivery, the outputs from this work will be included in the National Strategy for Economic Transformation
• phase two: following the publication of the strategy, the sub-group will undertake more detailed work to set out proposals for changes to the delivery landscape, for the proposals to be robust, this work will be undertaken over the first quarter of 2022 and will involve engagement with current key delivery partners

The Council raised the following points on the proposed approach:

• broad agreement on the two-stage approach, with the strategy making reference to what work will be undertaken on delivery immediately after the strategy is published
• there will be other areas, such as the innovation strategy, where further detailed work will come after the strategy is published, however within the economic strategy it is essential that the connections are made between the subsequent work to ensure there is alignment
• recognised the sensitivities on reviewing delivery arrangements, but there was agreement that this is not a wholesale review like the Enterprise and Skills Review
• instead, this should be an opportunity for agencies and stakeholders to respond to the proposals in the strategy on the best way to deliver the actions, this engagement is crucial and will provide the chance to consider what delivery mechanisms are working well and what needs to change
• having shared goals across the delivery agencies and organisations is essential for the strategy to be successfully delivered, however, this in itself will not be sufficient and it was proposed a central delivery unit within the Scottish Government be set up
• this would involve senior Scottish Government officials and work directly to the Cabinet Secretary to identify what the blockages are and ensure the achievement of the strategy’s outcomes
• there are potential lessons from the Scotland Food and Drink strategy which set out clear targets and KPIs which was relatable and easy to understand, this also included an ambitious target which helped inspire the sector and clear communication of the strategy

In response to the feedback, Ms Forbes and Mr McKee agreed that having subsequent work post-publication in specific areas such as delivery is necessary. This provides the opportunity to ensure the strategy lands well with stakeholders.

Keen to explore what evidence there is of the customer’s experience of trying to access business support. 

Reflections and close

Ms Forbes welcomed the extensive feedback from the Council and noted that substantive work is required before the Council meets again.

Specifically, there needs to be a more coherent narrative in the strategy, prioritisation of actions, making connections between the actions and addressing any gaps, and greater clarity on how the delivery work will be undertaken.