National Strategy for Economic Transformation: speech by the Cabinet Secretary for Finance and the Economy

Well good morning and thanks so much Sean for your opening remarks and also to you John, for welcoming us here to Dundee. They told me that Michelin Innovation Parc was a great place to launch a Strategy like this because it brings together investors, scientists, it brings together thinkers and academic.

What they didn’t say was that the sun always shines on Michelin and certainly in the time I’ve been here the sun has been shining, so it is the 1st March, the sun is shining, the spring is springing and it’s a good day to be launching an economic strategy for Scotland.

Of course, the work that is happening here in Dundee, that combination of innovation and collaboration is right at the very heart of our vision for Scotland.

The work taking place here also continues a very proud tradition – a proud tradition for Dundee – the City of Discovery – but a proud tradition for Scotland, for our country as a whole.

Because since the Scottish Enlightenment, our country has shown a remarkable talent for pioneering new ideas and new innovations. 

In the eighteenth and nineteenth centuries, Scotland helped to lead the world in the industrial revolution.

The ideas of Adam Smith helped to define modern economics.

And through innovations – whether that’s the steam engine, the telephone or the television – our country shaped the modern world but it did so at a time of tumultuous change.

And our aim right now, living through another era of tumultuous change is to be ensuring that the proud traditions of Scottish economic and technological leadership continues – as the world as a whole moves through the unknown.

We want to be recognised here in Scotland as a nation of entrepreneurs and innovators who have embraced the opportunities of new technology, boosted productivity and focused resources on the innovations that will make the biggest differences, not just to our economy and our society here in Scotland but on an international basis.

We want to be dynamic, confident of our place in the world, attracting international investment in research and the industries of the future and critically working with others to solve some of the biggest issues of our day, like climate change. 

We want to have a strong economy, a strong economy that’s clear about its purpose, a strong economy that outperforms the last decade, both in terms of economic output and economic activity but also in terms of dealing with some of the structural inequalities that we’re all well versed in.

And to do that we need people, we need people to be at the very heart of an economy that works for everyone and everybody, no matter where they live, no matter what community they’re part of, no matter what their aims and objectives are, can share in our national success.

And ultimately, it may sound tribe to say it, but we want Scotland to be successful, we want the Scottish economy to be a success we want it to be one of the most successful economies in the world, thriving across economic, social and environmental dimensions.

And before I turn perhaps to the substance of the strategy, I want to acknowledge that I’m setting out this plan this morning, on a bright sunny day in Dundee against the backdrop of a very challenging war in Europe.

The economic sanctions that have rightly been put in place against Russia, and which need to be further strengthened, will I hope continue to have a crippling impact on Russian markets.

And while there will still be some economic impact on the west – in fact any truly meaningful sanctions would have to have impact here as well as in Russia -  any price paid in Scotland, the UK or indeed across Europe, is quite obviously far less than that being paid by the people of Ukraine, and any business based here that is still investing in or active in Russia should be aware that in a globalised economy, business has a moral responsibility to play it’s part and to make clear that aggressor states will not benefit from international trade and investment. 

But what that backdrop also reminds us, what that backdrop reminds any of us who seek to plan for the long term is, that as with the pandemic, the world in which we operate can change quickly, dramatically and at times unexpectedly in just days or hours. So, it’s a brave person who tries to plan for the ten year period, but it is precisely for that reason that one of the additional objectives in this strategy is to ensure our economy is more resilient to shocks whatever causes them.

There are two overarching objectives embedded in this strategy that I wanted to start with today – firstly this strategy offers a renewed clarity of vision for all of us with a stake in Scotland’s success but secondly it demands an absolutely ruthless and relentless focus on delivery. That’s particularly true of Government, but it’s also true for all of us and we all have a role to play in delivering on this ambition.

The next ten years have been labelled the “decisive decade”. 

Every country faces a fundamental choice about how to recover from the pandemic, how transition to a net zero economy and how to create new jobs, embrace new technology and strengthen their position in emerging industries such as environmental technology, genomics, digital, cyber security and robotics.  And as I have just said, the environment we operate in can change, and change quickly.

So in Scotland, we face a choice, we face a choice whether to lead or lag behind other successful economies over the next ten years.

So this morning, this Strategy says loudly and clearly that we choose to lead.

We choose to lead across economic, social and environmental goals – that is what we mean by a Wellbeing Economy.

We have strong foundations on which to build, Sean referenced that. Covid exposed weaknesses in our economy and society, but also highlighted our strengths. It exacerbated existing challenges, of that there’s no doubt but it also showed that our economy can be innovative and can be resilient. Much of the our economic support has been focused on helping businesses to adapt and to survive the pandemic.

In November we reached an important milestone with GDP returning to above its pre-pandemic level for the first time. That continued into December and the employment rate is currently high at just over 74%. 

Our ability to continue to recover at pace requires us to keep the virus under control but there has never been a more important time to focus all of our efforts on rebuilding the Scottish economy. Not just over the short or medium term but indeed, over the long term.

A number of months ago, my colleague John Swinney, the Deputy First Minister, set out the Covid Recovery Strategy and that set out to address the systemic inequalities that have been made worse by Covid, improve people’s wellbeing, and remobilise public services to be more focused on people's needs, taking forward lessons learned during the pandemic.

This economic strategy will build on that because this strategy will create the wealth and the prosperity that underpins our long-term recovery. 

Over the last few months, in developing this strategy, we have not ignored the significant, short-term structural challenges – the impact of Covid-19, rising inflation, rising energy prices, the wall of liabilities facing businesses and the uncertain geopolitical outlook.

But some of the structural challenges that we know about precede COVID-19 and predate Covid-19: slow productivity growth, demographic risks and skills shortages, entrenched regional inequalities and poverty.

And so that strategy is based on extensive data analysis which does not ignore the short or the long term challenges and seeks to meet them head on. It does so by identifying our key strengths as a nation and the economic opportunities with the greatest potential to transform the Scottish economy. 

And through that detailed analytical work we have identified significant and targeted action that can shift the dial in these areas, by doubling down on the work that is producing results and there’s a lot of that and also by working together - national government, local government, public sector, business, trade unions, third sector and social enterprises – to name just a few, working together to maximise our success.

Before I go into detail on the five programmes, I want to address Scotland’s constitutional future. This strategy pushes as hard as possible with Scotland’s current economic powers, knowing that the macro fiscal, monetary and economic levers are all largely reserved along with key policies on migration or energy, as just two examples. We are separately working on an economic prospectus that outlines what additional steps we could take with those additional levers and that will be published in due course, but this strategy focuses on pushing the boundaries as far and as hard as possible within the current constitutional arrangement.

The strategy intentionally focuses on five key priorities, five key priorities that we believe will deliver the greatest impact.  And the actions outlined within the strategy are solidly based on what the data has told us – and the comprehensive evidence paper clearly sets that out. And I would strongly encourage you, if you have a moment to have a look at that analytical paper.

The analytical paper provides the reason and the rationale behind the strategy and so on to the strategy itself. The strategy contains five bold policy programmes of action and a sixth programme of delivery.

Working together to get delivery right, we will reshape and rebalance our economy for the future and so I want to unpack those five bold programmes of action.

The first programme is Entrepreneurial People and Culture. Evidence in the analytical paper shows that Scotland lags behind comparable economies on start-ups, business survival rate and high growth businesses. 

That is why we intend to establish Scotland as a world-class entrepreneurial nation founded on a culture that does far more to encourage, to promote and to celebrate entrepreneurial activity in every sector of our economy – including the public sector. 

Key actions that we will take to do this include adapting apprenticeship schemes, introducing entrepreneurship in the post-16 school curriculum and appointing a Chief Entrepreneurship Officer. And the £50 million National Challenge Competition for Economic Transformation fund will also encourage entrepreneurs to help reshape the Scottish economy.

If we get this culture change right we will see more start-ups and more scale-ups on a par with comparable economies, maximising the new opportunities that will arise over the next 10 years and that entrepreneurial mind-set, we hope will spread across the public sector – to drive more innovative projects of the scale and ambition of Michelin. So that’s the first foundation stone. 

The second, the focus of our second programme is on New Market Opportunities. Evidence  suggests that Scotland has not always maximised on economic opportunities available, including attracting the necessary private investment. That is why we will focus on strengthening Scotland’s position in new markets and industries for both new and existing businesses. 

We’re already well regarded as a pioneer in the net zero space. To capitalise on that and make sure we reap the benefits of the transition to Net Zero, the First Minister will chair an investor panel – targeting the many investors who indicated at COP26, just a few months ago, that they were ready to back Net Zero businesses, Net zero investments and national transitions. As they look for a home, we intend to make sure they find a home in Scotland.

We will also work with business to boost research and development into new opportunities, to develop supply chains and to see Scotland become a test bed for new technologies that can turn into new export propositions.

We know from our data that if Scotland’s productivity matched the productivity of the OECD top quartile, annual wages could be 10% higher.

Which brings me on to the foundations tone because the third programme of action is of Productivity, productive businesses and regions will make Scotland’s businesses, industries, regions, communities and public services more productive and innovative. Our productivity challenges are well rehearsed, indeed it’s one of the example of some of the challenges that preceded Covid, so I won’t repeat them here but I do intend to focus on how we shift the dial.    

The establishment of a new Digital Productivity Fund will help business improve productivity through the adoption of new technologies. And Productivity Ambassadors will offer tailored advice to businesses to drive productivity improvements across sectors and across businesses.

Significantly - and this is something I’m particularly pleased with - the programme recognises the importance of regional plans and regional leadership as the building blocks for national success.

One size does not fit all, what works in Dundee may not work in Skye, which in turn may not work in Dumfries.

Dundee’s success for example is Scotland’s success, as we have seen through the transformation of the waterfront, the growth of the creative and digital sectors, the determination to secure a bright future here at Michelin and the exciting prospects for the city and wider region in renewable industries and tourism through the Eden Project, I think we can learn a lot, precisely about the two overarching objectives I stated at the outset, a clarity of vision and a ruthlessness of focus on delivery and that is what has brought Dundee’s success.

If the first three programmes that I’ve just outlined are to succeed, we know that we need to work with business to deliver on our fourth programme of developing a Skilled Workforce.

Scotland has performed well in post school education, it’s got one of the highest shares of the workforce with at least tertiary education in Europe. But, it is evident and certainly it is evident in many of the conversations I have right now, is evident the economy still faces a wide range of challenges with respect to skills and a general skills shortage. 

We intend to ensure that people have the skills they need at every stage of life to meet the demands of an ever changing economy and society, not least if we believe in transforming that economy. We also want to ensure that people have rewarding careers, and that employers are investing in the skilled employees that they need.

As part of this strand of work, we will implement a lifetime upskilling and retraining programme for individuals and businesses and launch a talent attraction programme to attract key skills and talent from the rest of the UK.

Only through achieving our aims across all of our other programmes, and this is where you see that they are all integrated and reinforcing, achieving our aims through these other programmes will enable us to deliver our fifth programme - A Fairer and More Equal Society.

Scotland still faces challenges with respect to low growth of earning from employment and low pay. There are deep seated regional inequalities in economic activity with many communities in Scotland facing significant social challenges linked to poor economic performance.

That requires us, it demands of us an ambition to raise standards, to deliver good jobs and fair work with higher rates of employment and wage growth, to address structural inequalities - for example the under-representation of women in many parts of our economy – and to reduce poverty through better work.

And as part of our commitment to deliver on this fifth programme of action, we will require payment of the real Living Wage and channels for effective workers’ voices, to all Scottish Government support by summer 2022. And we will deliver an all age guarantee of support for those most disadvantaged in the labour market, building on the success of the Young Person’s Guarantee.

I said those were the five key foundation stones but they are just foundation stones in a strategy on a shelf without the sixth programme. And the sixth programme may not capture headlines but it’s essential if we’re to deliver on the five other programmes because the sixth programme is one of delivery and that programme of delivery underpins all of the work of the previous five programmes and underlines our commitment, the Scottish Government’s commitment, the public sectors commitment to taking a radically different approach.

Of all the commitments in this strategy, the one I probably believe in most strongly is reforming our culture of delivery.

By delivering on the five key programmes of action – each underpinned by specific tasks and backed by date - we will ensure that Scotland is indeed a fairer, a wealthier and a greener nation by 2032 because we were brave enough to take the decisions, some of them difficult decisions, but to take the decisions required to transform our economy as we emerged from the pandemic.

We need to create the conditions to generate significant, systemic change.

We need to be bold, we need to be ruthless and we need to laser-focussed to maximise the impact of the actions that we have identified.

Throughout the development of this strategy, perhaps in every conversation I had, or every submission I’ve read, in all of those conversations one message has been particularly clear - words matter, but actions count. 

As a country we will be judged on the outcomes we deliver, not the strategy that we have written, as good as I think it is.

Therefore, the task of transforming our economy requires a radical transformation in the way we deliver results.

We will deliver these programmes of action by introducing a new, streamlined delivery model in which all participants are clear about their roles and accept accountability for their actions. I do not want to create new layers or new organisations which is hopefully music to your ears but I want to reform and reshape the work we already do.

For example, we are restructuring existing Enterprise and Skills Strategic Board to create a new National Strategy for Economic Transformation Board which I will co-chair alongside a figure from the private sector. To underline our commitment to this we are establishing a Scottish Government Economic Leadership Group to be chaired by the First Minister.  

Where we can move quickly on this strategy, we will, but sustainable and transformational structural change requires patience too. We will hit the ground running with a series of actions within the next one hundred days. We will then continue that momentum and pace as we work to deliver delivery plans within the first 6 months.

Success is going to demand strong, ongoing, determined leadership. It’s going to demand access to the very best advice at home and abroad and I know that there are lots of willing volunteers and it will also require that relentless focus on delivery   

And so we will redesign the way in which businesses receive support and how we deliver our economic objectives. 

Responsibilities and accountabilities will be clearer at a local, regional and national level. 

We will ensure the voice of business is heard at the heart of government, we’ll re-design services from the perspective of their users, and make greater use of private and third sector delivery organisations where it makes sense to do so. 

We commit to providing clear and decisive leadership, but we can’t deliver these objectives alone.

Business and industry must also lead, grow and develop with Government playing a supporting role as required.

And as part of that approach each programme in this strategy, all five of them, will be overseen not just by people in the public sector but also people in the private or third sectors. Ownership of the strategy is shared, because the potential prize is an incentive for all of us to take responsibility and accountability for our nation’s success.

While there have already been many, many conversations over the past few months, this is very much just the beginning. Ownership of the strategy is shared and we can only succeed during the tumultuous years ahead if our action is truly national - drawing on the talents, the resources and the commitment of every citizen. And I know in Scotland, we have all that we need to succeed and to lead.

I want to thank all of you who are in attendance today and all of you who have contributed to date – and in particular the Advisory Council - for bringing your expertise, your challenge, sometimes easier heard than at other times, bringing your ideas and passion to our mission.

We need all of you, whether you’re in the room today or listening virtually, we need all of you to continue to build on what you shared to date and continue to bring your ideas, your energy and your enthusiasm to this work as we move in to the delivery phase.

I started by saying that the next ten years are decisive and that we face a choice. We face a choice to lead or to lag behind comparable economies. Leadership is a choice, and success is not inevitable.

We choose to lead, because we believe Scotland can. We believe Scotland has all the resources, talents, all the ingenuity and natural assets to be one of the most successful economies on the planet.

And so what does this strategy offer? This strategy clarifies our vision, it identifies the building blocks of success, it reforms the public landscape to focus ruthlessly and relentlessly on delivering.

We all know the challenges of our day – we know the short term and the long term – but challenge is nothing new. Indeed, it has been through the tumultuous times of the past, whether a global pandemic or an industrial revolution, when Scotland has excelled. These are the times when we have pioneered solutions, when we have created jobs and established highly successful businesses. And so the opportunities ahead – and yes, the opportunities of decarbonisation, the opportunities of disruptive new technologies and transitioning industries – those opportunities far outweigh the challenges.

This is a unique moment and we are certain ready, we’re willing and we’re able to lead the way and ensure that Scotland capitalises on the opportunity for the next ten years.