National Strategy for Economic Transformation Delivery Board minutes: March 2023

Attendees and apologies

Present

• Barry White, Co-Chair, Former Chief Executive, Scottish Futures Trust
• Ewan Aitken, Chief Executive, Cyrenians
• Colette Cohen, CEO, The Net Zero Technology Centre
• Audrey Cumberford, Principal and Chief Executive, Edinburgh College
• Gillian Docherty, Chief Commercial Officer, University of Strathclyde
• Uzma Khan, Vice Principal Economic Development and Innovation, and Deputy Chief Operating Officer, University of Glasgow
• Sir Simon Lister, Managing Director, BAE Systems Naval Ships
• Ellis Watson, Former Chief Executive, DC Thomson Media Group

Apologies

• Douglas Millican, CEO, Scottish Water
• Nora Senior, Former Executive Group Chair, Weber Shandwick and past Chair, Enterprise and Skills Strategic Board
• Roz Foyer, General Secretary, Scottish Trade Union Congress
• Jamie McGowan, Managing Director, Essence of Harris

Supporting officials

• Gregor Irwin, Director General Economy, Scottish Government
• Aidan Grisewood, Director for Economic Strategy, Scottish Government
• Kathy Johnston, Deputy Director, Scottish Government
• Richard Rollison, Director for International Trade and Investment, Scottish Government
• Andy Hogg, Deputy Director for Energy Industries, Scottish Government
• David McIntosh. Head of Green Economy Funding Alignment Programme, Scottish Government (New market opportunities item)
• Mark Logan, Chief Entrepreneur, Scottish Government
• Stephen O'Neill, Head of Digital Economy and Data Driven Business, Scottish Government (Deep dive on entrepreneurship item)
• Colin Cook (Deep dive on entrepreneurship item)

Items and actions

Welcome

Barry welcomed everyone to the fifth meeting of the NSET Delivery Board and thanked Scottish Enterprise for their hospitality. He congratulated Gregor on his appointment as Director General Economy and welcomed Mark Logan, Chief Entrepreneur, and Kathy Johnston attending on behalf of Gary Gillespie.

Barry apologised for the delay in issuing papers to members and noted that a harder and earlier cut-off for submitting papers to the Secretariat would be introduced for future meetings.

Barry noted the imminent, significant Parliamentary changes with the appointment of a new First Minister and Cabinet appointments to be announced that day.  He confirmed that he would be writing to the new Cabinet Secretary outlining the work of the board, progress to date on NSET and priorities going forward.

High level overview of the performance of NSET programmes

Kathy provided an overview of the state of the Scottish economy.  She highlighted the key messages, namely: since the January 2023 board meeting the economic outlook has improved slightly with a forecast of weak growth where previously the economy was predicted to be recession; the UK inflation rate rose to 10.4% mainly due to food shortages, but the Office for Budget Responsibility (OBR) forecasts a fall to 2.9% by year end; interest rates are increasing with higher borrowing costs; the labour market remains strong but shortages persist; trade has improved with supply chain issues dissipated; despite outlook and expectations improving, consumer sentiment is quite weak; and instability in banking is an issue but overall  this should shift to improvement and growth in the new year.

Aidan led the discussion on NSET performance and introduced the new programme dashboards, developed on the back of the board’s feedback in January 2023, as a vehicle to provide the board with more comprehensive delivery updates on the individual programmes, as well as to engage, challenge and raise more specific issues for board members to consider.  The draft key priorities document was also shared with members. 

Aidan highlighted:

• the creation of a new Directorate for Offshore Wind to be led by Michelle Quinn
• near completion of the Innovation Strategy which is expected to publish soon
• £2 billion private finance investment pilot between NatureScot and partners
• publication of sectoral export plans
• on Fair Work/Equal Society, ongoing work around labour market inactivity and health and childcare
• in terms of risk, the two key ones were around (i) funding, which remains a challenge and will be flagged early to new Ministers, and (ii) the relationship with business, with recent challenges around alcohol advertising and regulation in particular

On the Action Tracker, Aidan noted the two red actions but highlighted that this reflected a targeting of resource on key areas and cited 85% figure in relation to take-up of the real Living Wage (rLW) and increased efforts to promote it to employers.

Members discussed the papers, and the following points were made in discussion:

• on the rLW, it was noted that all indicators suggest take-up is not accelerating. This is an NSET priority but future direction may be impacted by Ministerial appointments so any action should be held until new Ministers are in post
• members welcomed the dashboards, noted that the trends and indicators are helpful but that it would be helpful to better understand the criteria that sit behind these indicators. On the priorities, particularly skills, further discussion would be welcome.  NSET should help inform political choices and it would be important to reflect on the correlation between investment and return. The need to highlight the connection between the delivery of the actions and their impacts on the economy over the longer-term (as shown in the dashboard) was underlined 
• members questioned whether enough was being done to respond to the issues in global banking.  Although the causes are well understood – high interest rates, liquidity issues etc.  individual banks have been affected differently and as there is no single reason, the systemic risk is low. It is not the same as the previous financial crisis but there is a risk that specific fund managers in Scotland could be exposed
• in the context of a tight labour market and increased funding for child poverty, the impact of the Young Person's Guarantee was clear and there was also evidence, through Developing the Young Workforce (DYW), of impactful spend.  Members advised against creating another new initiative
• Aidan agreed that further work is needed to track our performance in relation to impact and that work will continue to develop the key priorities document further, informed by the views of the board. Work is progressing to identify a set of dedicated NSET indicators that will allow us to better measure the progress of NSET actions against the longer term impacts, and this will form part of the upcoming NSET Annual Progress Report to be shared with the board in May 2023

New market opportunities

Barry welcomed Richard Rollison, Andy Hogg and David McIntosh to the meeting noting that offshore wind and hydrogen are highlighted in NSET.

Richard presented to the board, noting that ScotWind is his area’s number one priority and there are three key issues:

• how the pipeline is co-ordinated
• new structures and the role of the UK Government
• strategic approach to investment

The following points were also made:

• the significance of the opportunity ScotWind represents for Scotland in terms of its potential for economic transformation. It offers a massive pipeline of opportunity but a critical factor in securing expenditure in Scotland is the current lack of infrastructure. Developing ScotWind will require pan-Government cooperation as many of the levers, e.g., planning and route to market, are reserved to the UK Government
• the establishment of the Offshore Wind Directorate on 1 April, bringing together marine planning and energy policy, is a key first step but a pan-Government and pan-Team Scotland approach will still be key. In terms of the market context, there is increasing global competition for capital and technology and members noted the US Inflation Reduction Act, the EU Green Deal and an anticipated major announcement from the UK Government who are expected to publish their NET Zero Strategy this week. The priority actions for SG are to create the conditions for marine planning and an ecosystem to attract capital investment
• the need for urgency as opportunities exist now and the scale requires collective effort by the public sector, not just Enterprise Agencies. Developers are coalescing around these, and Scotland must act within the next two years or it will be too late

Barry noted that ScotWind offers a pipeline of up to 30GW and the opportunity to produce and export large scale hydrogen if early action is taken. He opened up the discussion to members and the following points were discussed:

• on skills, members noted the short window of opportunity and the associated risk without a clear definition of the skill system need. From members’ conversation with James Withers there is still no clear sense of the required skills environment
• one of the biggest challenges is the local supply chain and the need for near-term projects as companies are not investing as far ahead as 2026-2027. SG needs to step into project delivery from 2024 onwards and drive urgency of activity not just intent
• do we understand the pain points for developers - and to the extent we know that, are we making Scotland as attractive as possible?  Are we clear on the role of gas and blue hydrogen more generally?
• issues around consent were highlighted particularly where there were no changes planned to the current system but a need to ensure there is sufficient capacity.  As the traditional government funding model and approach to risk would not work in this instance, the need for a strategic investment mechanism that would bring in investors to share the risk and ensure skills are at the heart of projects was also highlighted

Gregor thanked members for their contributions and noted the compelling case and challenges around urgency and investment.  He noted the difficult fiscal position and confirmed that the new Cabinet Secretary would be briefed on this. Barry also noted that he would raise this with the new Cabinet Secretary.

Deep dive on entrepreneurship

Mark Logan, SG's Chief Entrepreneur, delivered his presentation highlighting:

• not all NSET projects/activities are currently being funded and in some cases funding has been reduced/withdrawn. The Strategy presents a coherent plan which needs commitment to deliver, funding and leadership
• we should all be clear about what commitments are currently being funded and where they are not, they should be removed
• business is changing exponentially and government needs to move at pace, change its operating model and get traction, in the way it did during coronavirus (COVID-19)
• inertia is a major risk, for example the halting of funding for Young Enterprise Scotland will put Scotland in reverse
• Finland offers a vision of the potential prize if Scotland were to normalise entrepreneurial thinking and it could have a transformative effect on the economy  
• we have three complimentary strategies – NSET, Scottish Tech Ecosystem Review (STER) and Pathways which together provide a cohesive model for entrepreneurialism and a route to ‘Scotland as a start-up nation’
• in terms of talent and education, we should aim to normalise entrepreneurship in our young. At university and college level, there is complacency about our strong teaching and research but we are weak on entrepreneurialism
• members were asked to support the case for funding a range of initiatives to provide recruitment, training and upskilling of teachers, fund start-up summer schools, the Talent Attraction Initiative and provide support for Entrepreneurial Campuses
• further funding asks included an integrated grant model for Techscalers and Pathways

Barry thanked Mark for his frank assessment and agreed the importance of being clear in terms of activity and funding.  He opened up the discussion to members who noted the following points:

• similarities with the Skills Programme Board, where there is a lack of clarity on funding, specifically around commitments to fund and whether they will or won't be going ahead. Reflecting the earlier hydrogen discussion, it was acknowledged there is insufficient money and re-prioritisation is necessary, but decision makers also need to take risks and be clear on what activities need to be stopped
• that not all proposals require funding, some just need decisions, for example on Entrepreneurial Campuses where a decision framework and mechanism for directing organisations on Government policy were needed
• agreement regarding the danger of inertia and the need for clarity on whether specific initiatives will be funded or not. Also, the lack of available funding and the merit in progressing those activities with the greatest benefit, even where this means stopping others
• the potential value of supporting school-level activities as students' attitudes to start-up is forged at school. There is a need for inspiring educators and a lack of a pipeline of maths and science teachers. Also, that morale in education is at a low point and inspiring teachers is a challenge. The role of careers advisors was also highlighted and there may be merit in working with their network to identify what they do currently and could do in the future, in terms of enterprise and start-ups
• the value of a whole system approach across the different parts of Government with a member citing a recent trip to Finland where the educational system is based around an enterprise culture with support for incubation, start-up and scale-up. It was suggested that Scotland is missing that opportunity and the challenge is how to galvanise that approach here

Gregor noted that he had taken on member’s views and would take these issues to the new Ministerial Team, however, there are clearly hard choices to be made and a need to identify the blockers so progress can be made.  He agreed that the dashboard needed to be clear on funding issues and what can and cannot be done. There were also connections to be made with social enterprise and community wealth building.

Barry endorsed this, in particular the need for clarity around funding. He committed to following up the discussion in terms of what needs to come back to the board.  He thanked Mark and Stephen for their input to the board.

Stephen reminded members that the SG spends millions in equity investments in start-ups and is Europe-leading with its network of Angel Investors and Scottish National Investment Bank (SNIB).  This investment delivers returns in excess of £17 million.

Forward look and any other business

Barry thanked members and contributors and confirmed that the next meeting will be a longer half-day session on 24 May 2023. He encouraged members to attend in person as the meeting will consider the draft annual report, consider what has been achieved so far and look ahead to those areas where the NSET Delivery Board can make the most impact.

Actions

• NSET Team to bring forward the deadline for submission of board papers to allow them to issue in a single pack where possible 

• Barry to write to the new Cabinet Secretary for Wellbeing Economy, Fair Work and Energy highlighting the NSET Delivery Board’s key achievements to date and priority actions going forward

• members to provide feedback on the dashboards in the next two weeks

• members to provide comments on the priority actions in the next month

• NSET Programme 2 team to articulate in more detail: (i) the scope and scale of opportunity; (ii) provide clarity on the end state to inform budget/resource prioritisation; and (iii) understanding of developers pain points and what Scotland is doing to help. Also, to inform a further discussion at a future board meeting.

• Secretariat to note that this item will return to a future meeting of the board

• DG Economy to follow up with new Ministerial team on the issues discussed

• Barry to follow-up discussion with Mark Logan to discuss what needs to be brought back to the board

• NSET Programme 1 team to come back to a future board meeting with a detailed update on delivery progress and areas that the board can help progress