National Strategy for Economic Transformation Delivery Board minutes: 29 November 2023

Attendees and apologies

Present

• Neil Gray, Co-Chair, Cabinet Secretary for Wellbeing Economy, Fair Work and Energy
• Barry White, Co-Chair, Former Chief Executive Scottish Futures Trust
• Roz Foyer, General Secretary, Scottish Trade Union Congress
• Ellis Watson, Former Chief Executive, DC Thomson Media Group
• Douglas Millican, Former Chief Executive, Scottish Water
• Sir Simon Lister, Managing Director, BAE System Naval Ships
• Audrey Cumberford, Principal and Chief Executive, Edinburgh College

Apologies

• Uzma Khan, Vice Principal Economic Development and Innovation and Deputy Chief Operating Officer, University of Glasgow
• Nora Senior, Former Executive Group Chair, Weber Shandwick and past Chair, Enterprise and Skills Strategic Board
• Ewan Aitken, Chief Executive, Cyrenians
• Gillian Docherty, Chief Commercial Officer, University of Strathclyde

Supporting Officials

• Graeme Dey, Minister for Higher and Further Education
• Gregor Irwin, Director General Economy, Scottish Government
• Aidan Grisewood, Director Economic Strategy, Scottish Government
• Sandy Begbie, Chief Executive, Scottish Financial Enterprise (SFE)
• Marcus McPhillips, Deputy Director Economic Strategy and Delivery, Scottish Government
• Colin Cook, Director for Economic Development, Scottish Government
• Michelle Quinn, Director Offshore Wind, Scottish Government
• Kersti Berg, Director of Energy and Climate Change, Scottish Government
• Adam Reid, Deputy Director Skills, Scottish Government
• Kathy Johnston, Deputy Director, Economic Analysis and Head of Economist Profession, Scottish Government
• Mathew Cramb-Low, Head NSET Delivery Unit, Scottish Government
• Sam Hawkins, Head of Economic Strategy, Scottish Government

Items and actions

Welcome

The Cabinet Secretary welcomed members to the tenth meeting of the NSET Delivery Board and noted apologies from Nora Senior, Gillian Docherty, Uzma Khan and Ewan Aitken.

The minute of the meeting on 1 November was approved subject to any final amendments, to be submitted to the Secretariat that week. The action tracker was noted, and no issues were raised.

The Cabinet Secretary repeated the commitment, made with the Board’s support at the last Board meeting, to refresh NSET to ensure financial and resource capabilities are prioritised and the Strategy is delivered in a focussed way. He invited Kathy Johnston to provide a brief economic update before passing to Aidan to update on NSET delivery.

High level overview

Kathy provided a brief update on the current economic position, noting:

• on GDP, economic growth remains subdued. Scotland saw 0.4% GDP growth for the 3rd quarter of 2023, but there remains underlying challenges
• inflation has fallen from its peak of 11.1% in October 2022 to 4.6% in October 2023. However, rates are expected to stay higher for longer and not return to target till 2025, with ongoing pressure on households and businesses
• on OECD comparators, the RAG ratings show that Scotland is in the first OECD quartile for a number of areas including Higher Education R&D. There are, however, a number of areas for improvement, for example the gender pay gap, productivity and skills utilisation. A step change is also required in areas where Scotland ranks in the lowest quartile, for example business base as a share of population. Overall, the long-term structural challenges identified as part of NSET’s development 2 years ago remain

Members noted the following in discussion:

• despite a small increase in GDP the overall growth picture remains subdued
• Board Members want to ensure the dashboard is correctly identifying the challenges and that they are taking the right messages from it
• as well as addressing reds and ambers in the dashboard (e.g. survival rates of new businesses), there is a need to ensure that progress in the green areas (e.g. productivity) is maintained
• in areas like entrepreneurship, innovation and green energy, the challenge is not whether to invest but whether the level of investment made is sufficient

NSET delivery

Aidan introduced the discussion, with an outline of a number of key delivery achievements under NSET since the board last met, including:

• the First Minister’s announcement of up to £500m to support the Offshore Wind supply chain over the next 5 years
• the recommendations of the FM Investor Panel have been delivered to ministers and will be published shortly
• the implementation plan for the New Deal for Business has been published
• positive outcomes on Gender Pay Gap and Real Living Wage

Aidan also provided the Board with early propositions around a future update of the economic strategy, herein referred to as the NSET refresh, to ensure it remains closely aligned with developments in Government priorities. The Board welcomed the opportunity to discuss the update and noted the following:

• the update should balance recognising the strong foundations of the strategy and the need to update it in line with Ministers’ priorities and an evolving economic context
• the Green Economy is critical and must be fully reflected in any new structure
• the update is an opportunity to focus activity on fewer but more impactful priorities
• it was discussed and agreed to review internal governance and Board effectiveness as part of the NSET refresh
• board members invited officials to draw on their expertise and that of industry representatives as part of this work

Deep-Dive on Green Economy

Barry welcomed Colin Cook, Michelle Quinn and Kersti Berge to the meeting and invited Colin to open the item with an update on the Green Industrial Strategy (GIS) before passing to Michelle Quinn and Kersti Berge to update on Offshore Wind and Hydrogen respectively.

Green Industrial Strategy (GIS)

Colin described the key aims of the GIS as:

• maximising the potential of global opportunities from net zero transition and focusing on the benefits for Scotland from the global shift
• focus and prioritisation of policy interventions based on a robust evidence base
• a framework where all government’s policy levers can be aligned behind agreed priorities

He outlined the GIS development work which will refine a long list of around 60 sectoral opportunities to focus on the 5 or 6 with the greatest potential for the biggest economic impact. This will be followed by a policy development and testing period with the aim of publishing the GIS by Summer 2024.

Offshore Wind

Michelle gave a brief presentation to the Board noting that the First Minister’s Investor Panel had identified offshore wind as the single biggest opportunity to attract capital investment to Scotland.

The following points were noted in discussion:

• the public sector has a key role in building market confidence and anchoring core parts of the global sector in Scotland
• analysis indicates that £300-£500m of future additional public sector investment is required for investment into offshore renewables, critical infrastructure and supply chain over the next five years
• options for leveraging UK Government funding, including through the UK Infrastructure Bank, are also being explored
• the projected economic benefits are substantial with potential direct offshore wind jobs in the region of 30,000 by 2040 and up to 50,000 projected jobs by 2030
• Supply Chain Development Statements forecast £25bn of possible investment across the Scottish supply chain
• the First Minister’s announcement in October had been viewed as a positive signal by the sector and potential inward investors are looking closely at the critical window of opportunity in the next 12-24 months
• the wider impact of investment on skills, training, inward migration, transport links and housing will need a coordinated, strategic approach across Scottish and UK Governments

Hydrogen

Kersti noted the significant role hydrogen will have in the global economy. While it is currently more expensive than other sources of energy, the challenge is to invest and bring to production now so it can be available to use in the future when it is more competitive with other energy sources.

The following points were also noted:

• there are significant economic opportunities for the transport and export of hydrogen
• many other European countries are progressing plans, the first step will be to demonstrate that Scotland can also produce hydrogen
• four Scottish projects have gone to the next stage of securing capital funding
• there is ongoing activity on regulatory issues – the UK Government North Sea Transition Authority will regulate pipelines
• there is enormous potential for the wider economy including projections of 70,000 to 300,000 jobs and potential GVA impacts of £5 bn - £25 bn a year by 2045
• he current focus is on getting production up and running at a minimal scale which will require public support and work with the UK Government on their regulatory activity as well as work on planning and consenting

Barry opened up the discussion to members and the following points were noted:

• there is a need to make the whole system economically viable and for there to be sufficient clarity and urgency to progress at the pace required to realise the opportunities. Michelle confirmed that simplifying the environment and injecting pace was what officials are working to achieve through work with the Enterprise Agencies and Scottish National Investment Bank (SNIB)
• job opportunities should be considered from a fair work perspective, with a need for high quality unionised jobs as recognised in the Programme for Government
• there is a need for pace and co-ordination with existing workforces, and this should include working now with colleges on skills and apprenticeship programmes to plan for future skills needs. National skills planning is essential
• on relationships with the supply chain Michelle confirmed that officials were engaging with the Scottish Energy Advisory Board on how best to liaise with Industry Leadership Groups to get more pace and traction on outcomes

• Kersti confirmed that in terms of hydrogen there are a lot of reserved powers and UK standards and regulations which apply, but onshore consenting sits with the Scottish Government and this should be better communicated externally
• members welcomed the positive progress reported in the presentations and the scale of opportunities for Scotland and NSET, highlighting consenting, supply chain and workforce infrastructure as three key areas of focus
• prioritisation means making choices and although some sectors might not be happy the GIS needs to focus on the most investable and transformational opportunities and marrying up the supply chain and developers
• the Board noted the good progress made since the last deep dive on the green economy but emphasised:
  • the need for real clarity on who in the public sector family is leading on what – avoiding duplication and overlap – for instance who is responsible and accountable for: improving the consenting process; attracting OEM investment etc.  Progress is being made but is accountability clear and is it sufficiently systematic?
  • the need to make big judgement calls on what Scotland will ‘make or buy’ and to advance high profile projects that may have greater speculative risk than normal in order to ‘plant the flag’ and, for instance, stimulate to a greater extent the start of green hydrogen at reasonable scale
  • that urgency is needed across the system – while deployment of infrastructure may be some time off, global players are making decisions on manufacturing locations and supply chain locations on a contemporary basis
  • for government to be clear on what is being done centrally in government and to be demanding of the enterprise agencies, SNIB etc and utilise their skills to the maximum

The need to be clear on the above is most pressing for offshore wind but is also applicable to hydrogen.

Barry thanked contributors for their comments, noted the progress made since the last deep dive in this area, and on behalf of the Board offered its support including working with delivery partners.

That SG Offshore Wind/Hydrogen leads will consider the feedback and in particular consider the points on clarity on roles and accountability and being demanding of public sector partners to make the most of existing resources

Deep-Dive on Skills/Withers Review Implementation

The Cabinet Secretary welcomed Mr Dey, Minister for Higher and Further Education and Veterans, and Sandy Begbie to the Board. He highlighted the Board’s keen interest in the Skills programme, which cuts across all areas of NSET, and invited the Minister to open the discussion with his thoughts on the direction of travel following James Withers’ Review.

Mr Dey confirmed that the Scottish Government fully intend to implement reform of the system, including in areas such as skills planning. 

He explained that a breadth of engagement has already taken place with a range of sectors and the skills agencies, and the focus is now on engaging with employers to understand the specific problems they face in terms of skills shortages and the actions needed to address this. Universities, colleges and training providers will also be brought in to ensure that they have the capacity to provide upskilling/reskilling opportunities for both young people and adults. Mr Dey explained that although reshaping the skills landscape presents a clear opportunity, it also brings challenges.

The Cabinet Secretary thanked Mr Dey and invited Sandy Begbie to provide an external stakeholder view on the priorities for skills delivery going forward. He went on to make the following key points:

• improving the skills landscape is achievable. All the components exist to improve the system, but it requires simplification if individuals are to navigate it efficiently
• on the supply and demand chain in the skills space, employers and sectors need to do a better job of articulating their skills direction and needs over the longer term so young people can respond to viable skills demands
• the careers service is not currently fit for purpose and high school aged children are not receiving meaningful advice
• Scotland should be able to provide well skilled, well-paid jobs for young people in the future. The Young Persons Guarantee made progress, but Scotland still has too large a number of individuals not engaged or skilled for the work of the future
• focus should remain on highlighting alternative routes to obtaining the necessary skills beyond just degree level qualifications
• there is support for a National Employers Forum, with a strong employers’ voice and linked to a regional approach to ensure local and individual needs are met

Mr Gray thanked Mr Dey and Sandy for their input and opened up the discussion to Board members who discussed the following:

• further consultation is required on the implementation of Withers and, given that workers voice is an important part of the Review, engagement and implementation of the recommendations should include service users and deliverers, union representatives, colleges and universities from the outset
• in order to ramp up the pace of change required to execute the GIS, players in the skills system must recognise that the current system isn’t fit for purpose
• a long-term solution which demonstrates to young people the long-term prospects of a chosen career path would be beneficial. AI provides an excellent opportunity for various sectors, but this will have implications for available job roles in the future
• we need to utilise the economic opportunities available via Just Transition in order to upskill and support people to transfer skills throughout their careers. Short, sharp courses which re-skill or up-skill individuals and are aligned with the requirements of (SQA) awarding bodies should be considered
• firms looking to expand in Scotland are looking at how to fulfil the demand in their sectors. Consideration needs to be given to how to better flex around these opportunities in order for industries to expand and provide jobs for individuals
• demand for upskilling and reskilling is growing exponentially. Clear leadership is required within institutions to drive change and in order to drive provision in the right direction we need to be clear on employers’/industry needs and have a better balance between regional and national approaches
• clarity is needed on future skills requirements and employers need to articulate the direction of travel over the next 5 years. This may be easier for larger organisations but as it takes around 18 months to plan a university course, institutions need to understand what is needed, where and when in order to plan with certainty

Programme 4- Skilled Workforce

Mr Gray welcomed Adam Reid to provide an update on NSET Programme 4.

Adam confirmed that Government recognises the need for a step change in Skills and the challenges in implementing the Withers’ Review recommendations. Going forward, four key areas of focus for the Skilled Workforce Programme are:

• commitment to skills planning - SDS currently has responsibility for skills planning but SG recognises the benefits of this being undertaken internally and are currently working on a skills planning programme. Adam welcomed Simon’s offer of support on this
• regional skills planning - improving the relationship between colleges and employers will be key
• the role of schools and skills – The role of schools doesn’t sit prominently in the current strategy. The role of the Careers Service and scope for more experiential working in schools are also a priority
• attracting talent from outside UK and rUK - SG will work to ensure Scotland markets itself externally and is clear on the opportunities that Scotland has to offer

Forward Look and any other business

Barry thanked members and confirmed that the next meeting will focus on Programme One (Entrepreneurial People and Culture) and Programme Five (A Fairer and More Equal Society). The agenda will be shared in advance and members were invited to provide any feedback or issues to be raised at the meeting to the Secretariat.

Actions

• dashboard commentary to be reviewed to reinforce messages on key challenges relevant to NSET delivery and progress
• NSET Team to call on input from Board Champions as part of NSET refresh
• SG Offshore Wind/Hydrogen leads consider the feedback and in particular consider the points on clarity on roles and accountability and being demanding of public sector partners to make the most of existing resources