New Deal for Business Group: progress report and recommendations

4. Subgroup Two: Business Partnership

Overview

The Business Partnership subgroup was tasked with developing a shared agreement and commitment on how Scottish Government will not just communicate, but also work in partnership with business on policy development from the earliest stages to ensure that the cumulative impact of policy on businesses is fully understood and that policy implementation is effective and proportionate.

It will also have a strategic role to play in designing the next phase of implementation for the NDBG workstreams, ensuring recommendations arising from all sub-groups which involve the systems and processes of government are delivered in a consistent and efficient way and that the right people are involved to maximise impact.

Issues considered

• Perceived issues from business perspective:
  • There is a lack of openness and transparency in the government policy development process that has led to a lack of credibility and trust in the government on the part of business.
  • Data and insight is not used enough in policy making vs political ideology policy creation.
  • Businesses are not involved at an early stage in the policy cycle when they could help form the potential solution to a policy problem.
  • The Government communicates too late so businesses do not get the chance to prepare.
  • There are unintended consequences to business of policy development from those areas in government not in regular engagement with them.
• The focus of the group is on strategic issues. It is a systemic issue we are seeking to resolve around business input to the policy development cycle as well as at the pre-policy step. Open and transparent discussions with business at the outset on the challenges faced by government would offer up potential solutions.
• We have seen cases where the co-design of policy has been successful e.g. A Trading Nation and aspects of the Visitor Levy. However, there were also examples of where businesses are not consulted before policy announcements are made. The cumulative impact on business of the wide and varying policies and regulations imposed were also not always considered. There is also a need to understand/measure the unintended consequences of policies in some areas of government which might not see business as an important stakeholder.
• It is important to hear the voice of business at all stages of the policy cycle to understand policy impacts at the implementation and delivery phases too. The Scottish Government has adopted an outcome-based approach to policy making.
• One way in which businesses will be able to have faith that the Scottish Government is really including them in policy development is where they recognise their input in plans which government then brings forward. There is a perception that consultations are not always meaningful, they only happen when the Scottish Government has already made its decisions. A failure to act on constructive feedback can breed a justifiable cynicism which harms the ongoing relationship and the quality and quantity of consultation responses in future.
• All of this is about much more than communication. It is about a genuine partnership, a two-way street and open loop, co-designing government interventions at every step in the process. Also Planning Preparation before Execution (PPE) is key. Businesses are looking for dialogue, for no surprises and for lead-in times appropriate to the scale of the change being required of them.
• It is also noted that business appreciate continuity and value the relationships with portfolio Ministers who have knowledge of the policy issues.

Scottish Government Policy Making Approach

Figure 2: Scottish Government Policy Making Approach

• Scoping
• National Outcomes
• Intermediate Outcomes
• Priorities & Planning
• Action Planning
• Implementation
• Evaluation & Reporting

This process is a starting point whilst also recognising that policy making is complex, non-linear and can vary across teams and directorates. For this approach to work, however, we need to ensure stakeholders are engaged at every step.

In order to develop a high quality functioning relationship with business there are 3 key stages – Engagement, Alignment and Partnership. Here is how business needs those stages to work:

Engagement – the conversation between government and business. There is a lot of this already using different forms of communication – but we can always improve. We want this to be a dialogue to enable the SG to listen and build relationships. Communication also means closing the feedback loop and reporting back on decisions taken and their rationale. We also need to be sure that government is talking to the right stakeholders at the right time.

Alignment - avoiding unnecessary tension between SG policy and business needs is good for business and good for the government's ability to meet the wider public policy objectives. Where possible it should also be about finding opportunities for businesses to thrive from the SG policy choices made. This will require a change in the way in which policy is made across government, including (but not only) effective and consistent use of Business Regulatory Impact Assessments (BRIAs). However, SG must go much further than that to get this stage right. The government needs to ensure it has a macro view of its policies and their cumulative impact and ensure policy is properly informed about what business is doing already to achieve their strategic outcomes and potential unintended consequences of their actions beyond narrow sectoral interests.

Good policy design should involve businesses from the start and should result in not ruling out options early in the policy development stage. Understanding the scope and reach of SG policy is vital too.

The SG needs to be able to upstream and escalate issues and share intelligence and concerns with relevant people within government in real time.

The SG and business need to also recognise that there are some things government will deliver that business do not like so "alignment" is not always possible. SG needs to be honest in communication to business (and the public) about the rationale which has informed decisions. Where this occurs, a "good faith" approach should be adopted by all sides to ensure effective policy delivery and minimal business disruption/costs.

Partnership - this is about government working together with business so that they can support shared outcomes. An example might be on the skills agenda, international trade policy, or corralling private finance to support investment in the net zero transition. Another example might be to identify policies in areas like health that can help to keep more experienced workers in the workforce for longer. But we can only maximise the full set of opportunities from partnership if we get the first two steps right.

We have the Business Principles Agreement which was launched in December 2021 and which business organisations and trade associations signed up to. This is a good foundation from which to build but it is relatively unknown both inside and outside of SG due to other priorities and pressures having to be addressed in recent years e.g. Covid, Ukraine and the cost crisis. With NDBG we have opportunity to refresh and embed these principles in our ways of working.

The long term aim is an institutional change in the culture and to create a more open and transparent environment where we are engaging with business at the right time and in the right way.

Subgroup summary

Policies will be more successful where they are easiest for businesses to implement and most closely align with their business model and practices. A better process for engagement with business will give policymakers access to the skills of those in business, who by definition are creative, innovative and practical. Longer term societal and environmental challenges are best tackled by government, business and civil society working together.

Business understands that there are times when government will want or require them to do things that they would not choose to do and that come with a cost. When these situations arise it is even more important to involve them in co-designing an intervention ahead of developing the specific operational aspects of the policy, because they may be able to find ways to deliver the purpose and outcomes desired of the policy in a way that delivers for business and society.

Our ambition is for Scotland to be the best place in the world to do business because of its strong partnership between business and Government.

We will achieve this by creating an active and trusted relationship between business and government in the long-term. The focus will be on the co-development of the delivery of policy aims which draws on the experience and innovation of business to create an economy that is growing, fairer and greener.

Recommendations

Short-term recommendations (6 months)

1. Undertake benchmark metrics on the current views of business via NDBG group and subgroup members.

2. Undertake benchmark metrics on capability across SG on business engagement.

3. Develop a logic model approach to determine a measurement for success.

4. Review and refresh of the Business Principles Agreement, followed by a comprehensive communications campaign.

5. A full and deep dive into the policy development cycle and review the process map to ensure engagement happens at all stages of the policy cycle – including pre-policy engagement. Taking into account the different policy reactions that happen – reactive/interactive/proactive. Ensure the policy development cycle is stress tested to ensure it remains in place in times of crisis and include data-based reporting at each stage of the policy process.

6. Mapping across SG of all policies (existing and future) that impact business to avoid/understand the cumulative impact and adapt accordingly.

7. Develop a phased timeline for implementation of NDBG recommendations.

8. Ensure alignment within the Scottish Government between the New Deal for Business and New Deal for Local Government.

9. The Business Partnership subgroup will continue until August 2023 at which point it will recommend the scope and membership of the New Deal for Business Working Group which will be responsible for overseeing the implementation of all recommendations of the Group.

Medium-term recommendations (12 months)

10. Consider the development of a Business Impact Assessment (BIA) for non-regulatory policy impacts and how that interlinks with the Business Regulatory Impact Assessment (BRIA).

11. Consider the introduction of client relationship managers ensuring join up across Government areas for different sectors.

12. Review the systems and processes that are used when seeking input from business in order to streamline the process, provide better coordination for all and improve the customer experience.

13. Undertake systematic mapping of engagement with business by policy areas to ensure the Scottish Government properly captures a wide range of business voices in the development of particular policies.

Long-term recommendations (18 months)

14. Establish a full cultural shift in the way the Scottish Government develops policy with business including bringing business voice into government as required. Ensure the 'system' works to make the necessary connections to ensure the right engagement.

15. Including opportunities for secondments – to increase business voice

Subgroup membership

• SG lead, Lisa McDonald, Deputy Director, Strategic Business and Economic Engagement
• Business lead, Iain Baxter, Scotland Food and Drink
• Louisa Macdonell, Business in the Community.
• Marc Crothall/ Elaine Wilson, STA
• Fiona Campbell, Association of Self Caterers
• Professor Mairi Spowage, Fraser of Allander
• Hugh Lightbody, Business Gateway
• Steven Montgomery, Scottish Hospitality Group
• Fionna Kell, Homes for Scotland
• Julie Ashworth, Institute of Directors (IoD)
• Claire Phillips, Baker Hughes Aberdeen
• Dr Liz Cameron/ Charandeep Singh
• Shan Saba, Brightwork Recruitment
• Colin Loveday, Scottish Chambers of Commerce