Enterprise and Skills Review report on Phase 2: South of Scotland Enterprise Agency

4. Implementation

The section sets out the proposals for the new organisation: what it should do to support transformational economic growth; its boundary; and its legal structure.

What will the new organisation do?

The project explored the sorts of activities that a new organisation could undertake to deliver transformational growth in the area. A vital early task will be to develop a strategic vision which is clear and compelling, and align organisational effort to deliver it. Local leadership and engagement will be essential to the way that the body operates and a key part of its success. The new organisation will help foster collaboration and aligned action locally, whilst also recognising the contribution it can make nationally. It will work closely with organisations already operating in the area to maximise impact.

With a clear focus on place, the new organisation will work with the wider programme's Strategic Board, and be able to take forward a range of activities that deliver the vision:

• Drive forward the economy - maximising the area's contribution to Scotland's inclusive growth, supporting a diverse and resilient economy, aligning a simplified and efficient system of support for business and learners.
• Sustain and grow communities - building and strengthening communities with joined up economic and community support.
• Capitalise on people and resources - developing skills, promoting assets and resources and maximising the impact of investment in the area.

The project has identified the sort of practical activity, grouped around those three key areas, that should form part of the organisation's remit. The organisation will operate with a clear understanding of the assets, challenges and opportunities of the economy of the South of Scotland. This activity will ensure that business support is tailored to the needs of the area's business base, looking at how more businesses can benefit from public sector support. It will look at enabling infrastructure, exploring ways to develop business property meeting the needs of growing businesses. Activity will reflect the shape of the South of Scotland economy, ensuring that the area derives benefit from important economic sectors including its primary sectors and the visitor economy.

The new organisation will also look at how to support the development of enterprising communities, helping to build confidence and aspiration. It will also help to identify the skills needs of the area and how they can best be met.

Ensuring that the South of Scotland is able to benefit from the digital economy is vital, from digital infrastructure to digital skills. Our investment in 100% superfast broadband access is opening up a range of new opportunities and markets for Scotland's businesses. The new organisation can build on the current national programmes and initiatives designed to increase the digital capability and maturity of businesses, such as Digital Boost, and provide more focused and tailored offerings in the area. The improved and updated regional data which emerges from the second Digital Economy Business Survey, due to take place later this year, will help inform actions in this area.

The organisation will not operate in isolation. Once established the new Enterprise Agency will be part of the new strategic board and will contribute to the delivery of the Board's strategic plan. Its work will be informed and strengthened by the wider programme's analytical function.

Recommendations from the other strands of the review will also deliver positive outcomes for the South of Scotland. South of Scotland businesses will benefit from the work on business support, innovation and internationalisation. The recommendations of the Skills Alignment and Learner Journey workstreams will strengthen the ability of national and regional partners to respond to the specific people, skills and labour market challenges of the area. Learning from good practice and approaches in other parts of Scotland will be important.

Delivering Inclusive Growth

The remit has also been informed by work to apply the Scottish Government's inclusive growth diagnostic which helps to identify key issues constraining inclusive growth. In 2016, the Office of the Chief Economic Adviser undertook work to analyse national inclusive growth to understand what drivers were constraining sustainable growth and inclusion in Scotland and prioritise areas for intervention based on evidence of impact. The national inclusive growth diagnostic examined over 30 potential drivers of inclusive growth. A number of national-level priorities were identified, with strong evidence of impact across growth, inclusion and/or environmental sustainability.

The project has looked at how this diagnostic might be used to identify barriers to inclusive growth in the South of Scotland. Partners have been involved in the initial stages of the analysis and moving forward this work will help to shape future priorities and areas to address.

Developed in partnership

Shaping the potential activities has involved a wide range of people. It has been informed through the expertise of those currently engaged in providing enterprise and skills support in agencies, local authorities and the wider public sector. There has also been much engagement with other stakeholders, including businesses and the education sector through workshop sessions.

Businesses were enthusiastic in seeing the potential value a new organisation had to drive change and keen to engage with the process. Ensuring the private sector continues to have a strong voice to shape the work of the organisation is vital.

The education sector was also keen to engage and shape the focus for the new organisation. Improving the links between those offering support and those using the support was welcomed.

During the implementation phase, activities will be further developed to ensure the new organisation is able to focus agreed priorities and which align with relevant national strategic priorities. It will want to develop these in further discussion with businesses, communities and learners across the area.

Resources to support the new organisation

In developing the sorts of activities that needed to be undertaken, the project recognised that there would be cost attached to new activity. With the continuing pressure on public sector resources, there would need to be clear prioritisation, innovative thinking about financing and a drive to ensure current resources being used in the area were aligned to deliver maximum benefit. However, to succeed, the organisation would need to be supported by additional resources to broaden business support, deliver community growth, strengthen the area's infrastructure and have an increased on-the-ground presence in the area.

Boundary

The project explored the most appropriate geographic boundary in which the new organisation should operate. It looked at various definitions of the South of Scotland including:

• The two local authorities of Scottish Borders and Dumfries and Galloway Councils.
• Mirroring the South of Scotland Parliamentary Region (covering parts of seven local authorities).
• Adopting the Southern Scotland NUTS 2 area (covering parts of six local authorities).

Through the discussions during phase 2, a consensus has emerged across stakeholders that the new organisation should operate in the local authority areas of the Scottish Borders and Dumfries and Galloway. This reflects the economic context and the similarity of challenges faced in those two areas ensuring clarity for those using services and ensuring a focus on tackling the specific challenges of the area. Annex B shows a map of the proposed boundary for the new organisation.

Working across boundaries

The project also looked at how best to ensure that the organisation could establish effective relationships outwith a geographic boundary so that the South of Scotland benefited from national support and opportunities and that neighbouring areas could benefit. The new organisation will also need to work with organisations delivering local services.

Legal structure

During phase 2, the project focused on the functions of the organisation, but also explored what legal form would deliver those functions most effectively.

In considering the most effective legal structure, the project developed a series of guiding principles to ensure the legal structure enabled:

• Things to be done differently in the South of Scotland to drive transformational change.
• Strong alignment to develop and deliver an agreed strategic vision for growth in the area.
• A focus on user needs to deliver streamlined and joined up services.
• Clear local leadership both from the public and private sectors.
• Transparent governance and accountability which fits with local and national governance.
• Clarity about resources.
• Clear commitment to the South of Scotland Organisation and to partnership delivery.
• Working across geographic and organisational boundaries.
• Involvement of the private sector, further and higher education sectors and the third sector.

It is clear that there is a range of potential structures that would meet those guiding principles. These range from structures that require no legislation to those requiring primary legislation:

• A partnership with no statutory basis supported by a legally binding partnership agreement.
• A structure supported by local government legislation enabling public and private sector participation (a joint committee or a joint board).
• A new company owned by the public sector.
• Delivery under the auspices of an existing public body.
• A new public body established through primary legislation.

A partnership

In this option, stakeholders in the area would be invited to work together to deliver the new arrangement, drawing together a range of partners including: local authorities; national agencies; the private sector and the education sector. Those partners could sign a legally binding agreement. They could create a board, produce a vision and agree its delivery. This approach is similar to the way in which Local Enterprise Partnerships in England have been established.

A local government "committee"

In this option, local authorities could establish a Joint Committee under the Local Government Scotland Act 1973. While established by the local authorities, the legislation enables other organisations to be members of the committee, including national agencies and the private sector. The Joint Committee could agree a strategic economic plan setting out the regional economic priorities, establishing how they could be delivered. This could be supported by an agreement with other partners to make clear their commitment to supporting the committee's work. This is similar to the approach being taken to the structures that oversee the delivery of city deals.

A new company jointly owned by the public sector

In this option, the organisation could be established as a company jointly owned by the public sector. It could take a variety of forms, including a social enterprise. The company could operate with a board of directors accountable to the public sector owners of the company. It could employ staff to deliver agreed activity. There are examples of publicly owned companies successfully operating in various sectors, including the leisure and transport sectors.

Delivery under the auspices of an existing public body

In this option, the organisation could be delivered as part of an existing agency, either as division or as a company. This would enable the organisation to have a clear and separate identity, with ring-fenced resources to support delivery in the South of Scotland while benefiting from expertise and shared services. This structure would enable local leadership and private engagement to shape the work of the new organisation. Investors in People Scotland is an example of this structure, jointly owned by the enterprise agencies.

A new public body

In this option, the new organisation could be established through primary legislation taken through the Scottish Parliament. That would clearly define its boundary and functions and once established the body would operate with its own staff and budget. This would put the new organisation on the same footing as other agencies delivering enterprise and skills support.

Way forward

Each option has its own strengths, delivery timetable and associated costs. For any of the options to be successful there needs to be a strong commitment from stakeholders to ensuring the vehicle's success.

On balance, we believe that the option that will deliver the best outcome for the South of Scotland is that the organisation should be set up as a new public body. It is ambitious and demonstrates our commitment to transformational change and inclusive growth. It will ensure that the new organisation is autonomous, has its own identity, staff and budget and acts as a voice for the area. It will be able to support additional businesses, invest in infrastructure, provide an increased local presence and deliver support for communities. Its functions will be clearly defined in law and its remit will include a social dimension. It will also enable engagement across the private, third and public sectors. The new organisation will be part of the wider programme's governance structure, contributing to our national approach and ensuring the South of Scotland benefits.

Creating a new public body will require the Scottish Parliament to support primary legislation and we will bring forward a bill as part of our legislative programme. We intend to introduce legislation in 2018 to bring into effect the new agency. This will ensure that the South of Scotland Enterprise Agency will be fully operational from the beginning of the 2020 financial year.

Taking legislation through the Scottish Parliament will take time and we want to ensure the South of Scotland benefits from a new approach as soon as possible. We will work with stakeholders in the area to put in place interim arrangements, in advance of the statutory arrangements. These will build on the support and resources already in the area. These arrangements will be in place later in the year.

We will ensure those interim arrangements deliver benefit quickly and support the ultimate goal of a new agency. We will develop the option with those in the area and with the direction of the wider programme's Strategic Board, but we believe an interim approach could take the form of a new partnership, an interim company or be delivered through an existing agency in preparation for the statutory organisation. As options are developed, we will ensure that organisations operating in the area are aligned and looking at ensuring their support is appropriately tailored to the needs of the South of Scotland.