Enterprise and Skills Review: report on Phase 1

Phase 1: Findings and Decisions: Stronger Governance of a Coherent System

Vision: Our vision is a Scotland that is among the top OECD nations for productivity and equality. A Scotland where we build on the existing achievements of our enterprise and skills bodies by enhancing coherence and focus, by bringing each of them under the direction of a single board, by de-cluttering and simplifying the system for the user, and enhancing and measuring the impact of our success. A system that facilitates partnership with business, academia, the third sector and local government to optimize what we can achieve together.

Guiding principles: The review's wide-ranging engagement has identified the following key principles that will underpin our drive for deeper alignment:

• we should retain our existing strong coherent economic strategy and focus on improving performance in relation to investment, international, innovation and inclusive growth;
• we should optimize what can be achieved by working across the enterprise and skills system seamlessly with a focus on agreed priorities and objectives;
• we should build on existing analytical and performance measurement capability to improve the measurement of whole system impacts and enhance our capacity to respond quickly; and
• we should simplify and improve the system for business, learners and other users and to enhance partnership working with business, third sector and local government interests.

Current strengths and successes: Scotland has a diverse and resilient economy that provides solid foundations on which to build. The Scottish economy grew 0.7% over the year to Q2 2016, and GDP now stands 10% higher than at the low point of the recession at the end of 2009. The number of people in employment is currently 2,618,000, 54,000 above the pre-recession peak (March-May 2008). The unemployment rate is currently 4.6%, which is lower than the UK as a whole. Other strengths include:

• a strong performance on post-secondary qualifications with one of the highest rates in the EU;
• over £27 billion of international exports a year, an increase of over 17% since 2010;
• the highest level of private sector businesses since records began, an increase of 7.8% between 2014 and 2015;
• the second highest level of Foreign Direct Investment projects in UK in 2015, behind only London;
• five universities in the top 200 in the world, more than any other country per head of population except Luxembourg;
• 25,818 Modern Apprenticeship starts in 2015-16, above the target of 25,500;
• one of the highest rates of spend on Higher Education Research and Development in the OECD, and with Business Expenditure on Research and Development that has increased by 44%, in real terms, since 2007;
• over £1 billion of investment in our higher education institutions in 2016-17, building on over £4 billion over the last four years;
• enterprise agencies that have supported 340 businesses to export and over 1,000 businesses to become innovation active in the last year; and
• being one of the first countries in the OECD to put inclusive growth at the heart of our economic strategy, focusing on the mutually supportive pillars of increasing competitiveness and tackling inequality.

Challenges and opportunities: Whilst Scotland has significant economic strengths, the evidence and views of a broad range of system users suggest scope for improvement around:

• maximising impact by focusing on well-defined goals, shared ownership and clear accountability;
• perceptions of a 'cluttered landscape' where unclear roles and responsibilities may lead to agencies duplicating activity or users finding it difficult to understand access criteria and the entirety of available support;
• simplifying service delivery by developing a 'no wrong door' approach that hides operational complexity for users;
• the need to improve digital performance, to focus on targeted advice (which can be more appropriate than funding schemes or grants), and to streamline funding and more closely align it with the shared national ambition;
• the need for improved system-wide performance measures that evaluate individual and cumulative agency contributions to delivering national targets and outcomes; and
• the need for businesses to influence the development and operation of enterprise and skills support, with views differing on the extent of this relative to academic and other input.

Action: In order to strengthen governance and deliver the benefits of a single system:

• To bring greater integration and focus to the delivery of our enterprise and skills support to businesses and users of the skills system, we will create a new Scotland-wide statutory board to co-ordinate the activities of HIE and SE, including SDI, SDS and the SFC.
• To support the new board, we will review existing data and evaluation functions to further align our enterprise and skills support and to ensure robust evaluation of activity and impact.