Enterprise and Skills Strategic Board minutes: March 2022

Attendees and apologies

Members:

• Nora Senior (Chair)
• Scott McLarty (Vice Chair)
• Steven Heddle
• Sara Carter
• Audrey Cumberford
• Melinda Matthews-Clarkson
• Gillian Murray
• Simon Cotton
• Frank Mitchell (SDS)
• Lord Smith (SE)
• Mike Cantlay (SFC)
• Prof Russell Griggs (Sose)

Other attendees

• Cabinet Secretary for Finance and Economy (item 3)
• Stuart Black (HIE)
• Adrian Gillespie (SE)
• Damien Yeates (SDS)
• Karen Watt (SFC)
• Aiden Grisewood (SG)
• Gary Gillespie (SG)
• Katherine Peskett (SG)
• Colin Cook (SG)
• Chris Brodie (SDS)
• Karen Jackson (Sose)
• Stephen Boyle
• Keith Winters (LA)
• Stuart King (AU)
• Richard Murray (AU/Sec)
• Alex Ritchie (AU)
• Rebecca Rossi (AU)
• Julie Wilson (Sec)
• Natalie Stevenson (Sec)
• Chloe Clark (Sec)

Apologies

• Alistair Dodds (HIE)
• Caroline Barelle
• Alison Milne
• Grahame Smith
• Jane Morrison-Ross (Sose)  
• Elinor Mitchell

Items and actions

Welcome to new attendees

The Chair welcomed everyone to the meeting and noted apologies.

The Chair welcomed Aiden Grisewood who is the SG Interim Director of Economic Policy Delivery and will play a lead role in the delivery of the National Strategy for Economic Transformation (NSET).

Welcome and opening remarks from the Chair

The Chair thanked members for joining the last meeting of the Enterprise and Skills Strategic Board. She praised members for the extensive contributions they have made to improve the enterprise and skills system, which as a result has laid the foundations for the new NSET Delivery Board.

The Chair briefly updated the board on her meeting with Kate Forbes, Cabinet Secretary for Finance and Economy. She explained they had discussed some of the details in relation to the new delivery board, including governance arrangements and continuing with strong connections to business. The Chair informed the board that the Cabinet Secretary was very complementary about the ESSB achievements and saw the transition to the NSET Delivery Board as the natural next chapter. The Cabinet Secretary would join the call at 13:00 to share her ambitions for the NSET Delivery Board.

ESSB’s reflections

During this session the board broke into three groups to discuss the lessons learned in relation to the three key themes identified by the Cabinet Secretary during her discussion with the Chair: (1) Cohesion, (2) Compulsion and (3) Skills. As background the board members received a draft copy of the key achievements paper to help shape discussions. 

The board was split into three groups as follows [a summary of the feedback can be found in item 3]:

• group 1 - cohesion [across agencies/SG/Delivery Board. Structure and remit of the new board] – Lead Audrey Cumberford
• group 2 - compulsion [what levers does the new Board need to make things happen] – lead Gillian Murray
• group 3 –[skills – what skills does the new board need] – lead Scott McLarty

The Chair concluded that it was a very useful session and the feedback would be incorporated into the key achievements document to be published in May. This would include the lessons learned from the board’s work which the new delivery board can build on going forward. 

Update on NSET

The Chair welcomed Ms Forbes, Cabinet Secretary for Finance and Economy to the meeting. Ms Forbes reflected on the ESSB’s work to date and the role of the new NSET Delivery Board, highlighting:

• the historical challenges faced by ESSB have been resolved and we are now starting from a different place because of the success of the board. This needs to be built on by the NSET Delivery Board to ensure the successful delivery of the strategy
• NSET sets the framework for what we do next with the cornerstone being getting the delivery right, with greater cohesion and alignment across delivery partners which extends beyond the enterprise and skills system
• delivery was a common theme raised throughout the extensive stakeholder engagement on NSET
• that is why the new NSET Delivery Board will have stronger powers which will address many of the frustrations the ESSB has faced
• there is an even greater need to take a whole system approach and to avoid any duplication of activity given the fiscal position
• crucially, the delivery board will closely measure and track progress, holding the Scottish Government and partners to account for the successful delivery of NSET

The Cabinet Secretary thanked the board for its valuable input at various points in the development of NSET and reflected that its work over the past four years has put the new NSET Delivery Board in a strong position to ensure the delivery of the actions identified within NSET.

The Cabinet Secretary received feedback from the three groups: (1) cohesion, (2) compulsion and (3) skills. The key points raised are summarised below:

Group 1

• cohesion is more than just alignment, with everyone knowing their role and how they fit into the broader system
• there needs to be collective agreement and understanding on priorities which the Scottish Government and agencies can focus on
• we are not starting from scratch as there is a huge degree of collaboration and alignment going on across the system which needs to be recognised and built on
• however, in some cases there is a lack of clarity of roles, responsibilities and accountabilities
• there needs to be cohesion across the Scottish Government, with more focus on longer term plans rather than short-term initiatives. The NSET Delivery Board should have the power to challenge the Scottish Government to stick to its 10 year plan for transforming the economy
• the ESSB often came up against blockages in the wider system and these need to be addressed to maximise delivery
• there should be clear governance and relationships between the NSET Delivery Board and the boards of the agencies

Group 2

• there has to be increased clarity around the role, responsibilities, governance, accountability and expectations of the NSET Delivery Board
• it is fundamental that there is a clear understanding of what the NSET Delivery Board is there to do
• there is still misalignment in the timing of objective setting across the system
• there are a number of levers available to the Scottish Government to drive greater alignment and stimulate investment and innovation

Group 3

• it is important to have a clear view of delivery goals and what success looks like
• NSET provides the shared mission for the Scottish Government and delivery partners. It is now important that the right structures are in place to reflect this (including Letters of Guidance to agencies)
• clear measurement is needed for innovation funding which has the potential to provide a high financial return. However, an entirely different approach is needed to stimulate greater business investment
• for economic prosperity and growth NSET needs to focus on people. This has been a success within the South of Scotland Enterprise Agency
• form must follow function. A clear statement or terms of reference for the Delivery Board and its relationship to other structures will help to determine the necessary skill set for its membership and identify any gaps in experience and expertise

International productivity study update

Alex Ritchey from the Analytical Unit presented the findings from research commissioned on the board’s behalf looking at the factors driving Scotland’s productivity gap with international countries. The key points raised included:

• the research undertaken by the National Institute of Economic and Social Research (NIESR) looked to add to the existing evidence base by comparing Scotland’s productivity performance with a set of 10 EU benchmark regions, specifically the role played by: Capital Investment, Labour Quality, Total Factor Productivity (TFP), Innovation and Foreign Direct Investment (FDI)
• during the period analysed, 40% of Scotland’s labour productivity growth was due to capital accumulation, and 60% was due to improvements in TFP. Surprisingly, changes in labour quality were found to have a negligible direct impact on productivity growth over the period
• Scotland’s productivity was 75% of the top performing benchmark region over the period, and there gaps across all components of labour productivity. This indicates there is significant room for improvement in Scotland on capital investment, labour quality and TFP
• compared to the benchmark regions, Scotland was found to have by far the greatest levels of FDI, and whilst this investment was highly correlated with job creation, no clear positive relationship with TFP growth was observed. This indicates that whilst Scotland is very good at attracting FDI, it is not necessarily maximising the benefits in terms of knock on impacts for domestic supply-chains
• R&D spend as a % of GDP appears to have a strong and significant effect on TFP growth in Scotland, more so than in any of the comparator regions. Additionally, whilst improvements in human capital do not appear to directly influence productivity growth, it does seem to promote knowledge absorption in Scotland from leading firms to less advanced firms
• NIESR did consider a range of other factors including skill gaps and organisational practices and there effect on productivity, however insufficient data prevented a rigorous analysis. However, it does appear that management practices could have a sizeable effect on productivity, and this is something that should be considered for further research
• a short discussion followed the item and included consideration of (1) capital accumulation as a clear route to productivity improvement (particularly in the north east where there may be some rationale in promoting innovation in this region) (2) the wellbeing economy and (3) an emphasis on capital investment due to Scotland’s investment in skills is starting to see diminishing returns

Education and Skills Impact Framework (ESIF)

Stuart King from the Analytical Unit provided an update on the Education and Skills Impact Framework and will provide a further update in May once the study has been finalised.

The key points raised during the presentation:

• ESIF is an ambitious research programme to enable better understanding of the economic and social impact of various types of education and skills interventions
• the research is a collaborative effort between SDS, SFC, Scottish Government and the AU, with all partners inputting to the analytical programme
• there are broadly 2 workstreams: Economic Impact and Social Returns. Both significantly enhance our understanding of the return from participation in some types of post school education and training, but there are notable exclusions in terms of the extent to which the workstreams capture all of the impact. As a consequence the work should be seen as a contribution to our understanding not a full economic assessment of MAs, or the university or college sector, or indeed any institution in Scotland
• the Economic Impact workstream uses Longitudinal Education Outcomes (LEO) data which matches data about individuals’ highest qualification to HMRC data on employment and wages
• this is a new dataset for Scotland and therefore the first time the analysis has been carried out. There are education pathways and labour market outcomes for around 800,000 learners
• the emerging findings show marginal earnings returns are positive and significant for MAs at most levels; there are positive earnings returns for college vocational courses at all levels between SCQF 4 and 7 but highest at levels 4 and 5 and for men aged 22 and over. At university level, there are consistently positive marginal earnings returns to first degrees
• in terms of employment, there are positive marginal returns to MAs at SCQF level 5 and 6/7; for college vocational the highest employment returns are to courses at SCQF levels 4 and 5; and for degrees, employment returns are also positive across first degrees
• the final stage of analysis in the Economic Impact workstream, which will incorporate a cost benefit analysis, is due to complete in April
• the aim of the social return component of the analysis is to recognise that there are important benefits to participating in post-school education that go beyond employment and wage returns
• COVID-19 has constrained the ability to conduct primary research with stakeholders including learners and instead the focus has been on secondary analysis of datasets such as the Annual Population Survey, HESA Graduate Outcomes and MA Wellbeing Survey
• the findings of the secondary analysis suggest some relationship may exist between acquiring qualifications and subjective individual wellbeing
• having any form of qualification was associated with higher levels of wellbeing compared to those with no qualifications at all
• when comparing those who had school-level qualifications with those who had post-school qualifications, the picture is more mixed, with those with post-school qualifications tending to report equal or lower wellbeing scores than those who only had school-level qualifications
• these findings are associations, and do not necessarily demonstrate a causal relationship between qualifications and wellbeing
• in terms of next steps for both workstreams the AU, SG and agency partners will work together to consider the findings, their communication to a wider audience and possible next steps for the analytical programme
• a short discussion followed the item and included (1) the requirement to consider governance for ESIF going forward to ensure we provide a collaborative forum for decision making and the appropriate authority to maximise the policy utility of the research; and (2) some items to be considered more fully as part of any future research programme including links to wider labour market and skills evidence base

Action: Secretariat to set up a final session on ESIF in May.

Closing remarks

The Chair brought the meeting to a close by thanking members for their contributions, flexibility and patience. She added that members should be proud of the board’s achievements over the past 4 years. The issues raised by the Enterprise and Skills Review in 2016 have been dealt with and the Board’s legacy will be the step-change in the planning and thinking across the enterprise and skills system which has laid the foundations for faster, more effective change.

In terms of next steps, the Chair invited feedback by Friday 1 April 2022 on the draft key achievements paper ahead of its publication in May. There will also be a final evidence session at the end of April/early May to discuss the results from ESIF and the Careers Service Review.