Scotland's Budget: Draft Budget 2017-2018

Chapter 8 Economy, Jobs and Fair Work

PORTFOLIO RESPONSIBILITIES

Economy, Jobs and Fair Work is a wide-ranging portfolio. It has a crucial part to play in fulfilling our purpose of creating a more successful country, with opportunities for all of Scotland to flourish through increasing sustainable economic growth. The portfolio is central to driving progress towards a more competitive and inclusive economy, improving Scotland's ability to withstand economic shocks, sustain higher employment, and to identify, plan for and seize opportunities to create better quality jobs and fairer work.

OUR PRIORITIES

The portfolio works with key delivery partners to grow the economy through its support of businesses, entrepreneurship, trade, innovation, securing inward investment and the promotion of fair work. It is central to the implementation of the nationwide drive to implement economic and productivity growth.

Key to this is the portfolio's support of the energy sector including hydrocarbon production and renewable energy generation, whilst playing a key role in improvements in energy efficiency. We are committed to driving the decarbonisation of our economy more quickly than our competitors, developing the low carbon products and services that will be needed throughout the world in the future and creating new job opportunities.

The Scottish Government also recognises that for the Scottish economy to be genuinely sustainable it is imperative that social and geographic exclusion continues to be tackled, ensuring there is a broad contribution from every section of society in every area of Scotland. We continue to promote workplace policies that value our workforce, recognising that greater employee voice, security, opportunity, respect and fulfilment are directly linked to increasing inclusion and competitiveness.

These principles are at the heart of our approach to fair work and we will continue to support the work of the independent Fair Work Convention and to promote their Fair Work Framework to employers across the country.

In one of the first exercises of devolved powers under the Scotland Act 2016, the Scottish Government will begin to deliver new employment support programmes from April 2017.

Scotland's Labour Market Strategy, published earlier this year, sets out a package of measures which will support a resilient and fair labour market as well as detailing the outcomes we intend to measure to monitor progress in future.

A sustainable economic recovery will be built on higher levels of skills and participation, a key goal as we seek to help mitigate the impact of continued UK welfare reforms on unemployment and inactivity.

The portfolio's work is guided by the 'Scottish Economic Strategy' and by focusing on the two mutually supportive pillars of boosting competiveness and tackling inequality. The strategy also established the four priorities which are vital to our approach to growing an inclusive economy:

• Investing in our people and our infrastructure in a sustainable way.
• Fostering a culture of innovation and research and development.
• Promoting Scotland on the international stage and to boost our trade and investment, influence and networks.
• Promoting inclusive growth and creating opportunity through a fair and inclusive jobs market and regional cohesion.

Investing

We will:

• further develop the city region deals we have agreed with Glasgow, Inverness and Aberdeen and make progress with deals for the Edinburgh city region, Stirling (and Clackmannanshire) and the Tay cities (Perth and Dundee together with Angus and the north of Fife). We will also encourage regions facing economic challenge to identify and deliver a vision for inclusive growth, beginning with the proposals being developed by the three Ayrshire Councils;
• implement our new Scotland's Energy Efficiency Programme ( SEEP) with accompanying regulation to improve the energy efficiency of the building stock over the long term, helping reduce energy costs and tackling fuel poverty;
• continue to invest in Scotland's low carbon infrastructure through the Low Carbon Infrastructure Transition Programme and Scotland's Energy Efficiency Programme;
• continue working with business organisations, the UK Government and the Scottish Parliament to establish a new Scottish Growth Scheme focused on new and early-stage, high growth potential companies, with clear export growth plans. This will provide up to £500 million over three years of investment guarantees and loans;
• ensure SMEs have access to finance through the introduction of the SME Holding Fund, utilising European funding, to provide microcredit finance up to £25,000, loans up to £100,000 and equity investment up to £2 million through delivery partners in the public and private sector; and
• pass on the UK Government's guarantee on European structural funding in full meaning that all projects formally approved will be honoured should the UK leave the EU. We will continue to negotiate with the UK Government to ensure, in the event of the UK leaving the EU, future financial support for the range of initiatives currently supported by European funds is allocated on a fair and equitable basis across the UK.

Innovation

We will:

• simplify and streamline innovation support, finance and administration. Through the Scotland CAN DO innovation forum, work with partners across the public, private and third sectors to deliver our innovation action plan that will focus on maximising the contribution that innovation makes to the economy;
• encourage more business innovation by communicating, celebrating and showcasing the best in Scottish innovation, creating an expanded and collaborative 'Scale Up' programme and improving support for supply chain and business-to-business innovation;
• drive innovation engagement across sectors and regions through actions such as maintaining Scotland's competitive advantage in the development and deployment of nascent wave and tidal energy technologies and offshore wind energy;
• equip people with the tools and skills to innovate by identifying innovative and productive workplace practices through the independent Fair Work Convention and supporting Scottish Enterprise to develop a workplace innovation service; and
• derive greater economic returns from Scotland's world class research base by supporting our network of innovation centres to use academic expertise to address real world business issues, helping them to raise their profile with businesses in Scotland and beyond.

International

We will:

• progress the 'One Scotland' approach set out in our Trade and Investment Strategy, implementing 'Global Scotland - Scotland's Trade & Investment Strategy 2016-2021', driving forward our actions on growth sectors and continuing to target areas where we have a clear advantage, such as food and drink and tourism;
• double the number of people working for Scottish Development International across Europe to market Scotland as an open economy and welcoming society and to help companies expand internationally and attract investment to Scotland; and
• continue our work to establish new Innovation and Investment Hubs in London, Brussels, and Dublin. We will establish a further hub in Berlin.

Inclusive Economic Growth

We will:

• take forward the recommendations within the enterprise and skills review, maintaining locally based and dedicated support managed by HIE in the Highlands and Islands and creating a new vehicle to meet the enterprise and skills needs of the south of Scotland;
• continue the shared mission between government, the trade unions and business on the promotion of fair work, working with the Fair Work Convention and through the Scottish Business Pledge to boost productivity, competitiveness, employment, and workforce engagement and development;
• continue to engage with stakeholders to develop detailed proposals for the implementation of a consumer and competition policy for Scotland;
• expand the level of support available to help local communities take control of their own energy through the Community and Renewable Energy Scheme ( CARES) and the associated Local Energy Challenge Fund. This will include support for community investment in commercial schemes and negotiation of community benefits, as well as for directly-owned community projects; and
• continue to put fairness at the heart of our drive to boost the economy through our Labour Market Strategy, creating more and better jobs, promoting a real living wage and removing any barriers to work.

Table 8.01: Spending Plans (Level 2)

Level 2	2016-17 Draft Budget £m	2016-17 Budget £m	2017-18 Draft Budget £m
Employability and Training	20.0	21.4	43.0
Enterprise and Energy	313.9	309.5	279.6
Accountant in Bankruptcy	1.2	1.2	1.2
Parliamentary Business and Government Strategy	33.9	33.8	60.8
European Regional Development Fund - 2014-20 Programmes	-	-	-
European Social Fund - 2014-20 Programmes	-	-	-
Total Level 2	369.0	365.9	384.6
of which:
DEL Resource	230.5	227.5	246.9
DEL Capital	103.0	102.9	123.7
AME	-	-	-
Financial Transactions	35.5	35.5	14.0

Table 8.02: Spending Plans (Level 2 Real Terms) at 2016-17 Prices

Level 2	2016-17 Draft Budget £m	2016-17 Budget £m	2017-18 Draft Budget £m
Employability and Training	20.0	21.4	42.4
Enterprise and Energy	313.9	309.5	275.6
Accountant in Bankruptcy	1.2	1.2	1.2
Parliamentary Business and Government Strategy	33.9	33.8	59.9
European Regional Development Fund - 2014-20 Programmes	-	-	-
European Social Fund - 2014-20 Programmes	-	-	-
Total Level 2	369.0	365.9	379.1
of which:
DEL Resource	230.5	227.5	243.4
DEL Capital	103.0	102.9	121.9
AME	-	-	-
Financial Transactions	35.5	35.5	13.8

Employability and Training

Table 8.03: More Detailed Spending Plans (Level 3)

Level 3	2016-17 Draft Budget £m	2016-17 Budget £m	2017-18 Draft Budget £m
Employability and Training	20.0	21.4	43.0
Total	20.0	21.4	43.0
of which:
DEL Resource	20.0	21.4	43.0
DEL Capital	-	-	-
AME	-	-	-
Financial Transactions	-	-	-

What the budget does

The Employability and Training budget directly supports the Scottish Government's approach to employability and the essential role fair work plays in growing our economy. Tackling barriers to work, supporting training and promoting fairer work is essential to improve Scotland's economy and improve opportunities for all.

For our new range of employment services our focus will be on helping those further from the labour market, providing continuity of support for those who face multiple challenges in finding work. We will also work on a longer-term programme of joining up services to better align employability support in Scotland.

We will build on the work of the independent Fair Work Convention and this budget will continue to deliver a package of employment and training measures to support a resilient and inclusive labour market.

In 2017-18 we will:

• deliver a Scottish employment service from 1 April 2017 through transitional employment support services for some of the most vulnerable people in society, including disabled people and those with long-term health conditions, ahead of delivering full employment services in April 2018. To do this we have committed up to £20 million to support delivery in 2017-18;
• work to better align employability support in Scotland across the public sector, third sector and other delivery partners;
• continue with our successful 'Opportunities for All' commitment to support 16-19 year olds not already in education, training or employment and support the key component of local authority activity agreements;
• establish a flexible workforce development fund as part of a uniquely Scottish response to the introduction of the UK Government's Apprenticeship Levy;
• develop a new programme, to specifically support young people who have been in care into appropriate work, training or educational opportunities;
• continue support for the STUC for the Scottish Union Learning Fund as part of our ongoing commitment to supporting workforce development and strong industrial relations; and
• continue to provide skills development and employability support to individuals facing redundancy through our initiative, Partnership Action for Continuing Employment ( PACE).

Enterprise and Energy

Table 8.04: More Detailed Spending Plans (Level 3)

Level 3	2016-17 Draft Budget £m	2016-17 Budget £m	2017-18 Draft Budget £m
Enterprise*	273.9	241.9	188.8
Energy	71.3	57.4	80.1
Innovation and Industries	8.7	10.2	10.7
Strategic Forum	(40.0)	-	-
Total	313.9	309.5	279.6
of which:
DEL Resource	206.1	201.7	199.2
DEL Capital	72.3	72.3	66.4
AME	-	-	-
Financial Transactions	35.5	35.5	14.0

*Now includes ESF Programme.

What the budget does

The Enterprise budget funds Scottish Enterprise ( SE) including Scottish Development International ( SDI) to provide practical support and opportunities for businesses to grow and invest in Scotland. SE is determined to develop growth sectors, improve competitiveness and increase productivity, recognising the links between these ambitions and increased participation in the labour market through work which is fairly paid.

The Energy budget will support our ability to respond to a number of drivers of change. It will continue to be focused on development of a balanced energy mix. It will facilitate our transition to a low carbon economy with an emphasis on developing and delivering non-domestic elements of Scotland's Energy Efficiency Programme and low carbon and renewable energy projects and technology, whilst maximising return from our offshore oil and gas reserves and assisting the diversification of energy supplies.

The Innovation and Industries budget will invest in the development and application of research, innovation and technology and support entrepreneurial activity. The budget will support the continuing implementation of Scotland CAN DO; working towards realising our shared ambition of ensuring Scotland becomes a world-leading entrepreneurial and innovative nation.

In 2017-18 we will:

work with our enterprise agencies and others to create the conditions for a competitive and low carbon economy with access to finance through the Scottish Investment Bank;

• support Scotland's manufacturing base through the Manufacturing Action Plan and by developing the business case for a new manufacturing centre of excellence and skills academy, the National Manufacturing Institute for Scotland;
• support a coordinated programme of challenges and inducement prizes, including a collaborative public sector challenge fund and a new innovation prize;
• commit further funding to establish and embed Innovation and Investment Hubs in London, Brussels, Dublin, and Berlin;
• ensure the distinct needs and priorities of Scotland's businesses and investors are reflected in wider trading activity by doubling the number of people working for SDI Europe;
• work with key delivery bodies to establish Consumer Scotland and thus ensure a high quality system of consumer advice which will play a vital role in empowering consumers and tackling inequality;
• support low carbon demonstrator projects and activity designed to bring an increased number of projects to investor readiness stage by delivering the Low Carbon Infrastructure Transition Programme, the Renewable Energy Investment Fund and increasing the support available to the CARES Local Energy Challenge Fund;
• continue to fund Wave Energy Scotland and the European Marine Energy Centre as they work towards progressing wave energy technology to be a reliable, commercial product; and
• fund commercial and industrial projects in Scotland's Energy Efficiency Programme ( SEEP) - including pilot projects, district heating and energy efficiency loans - helping to boost investment and decarbonise heat provision over the long term.

Accountant in Bankruptcy

Table 8.05: More Detailed Spending Plans (Level 3)

Level 3	2016-17 Draft Budget £m	2016-17 Budget £m	2017-18 Draft Budget £m
Operational Costs	13.3	13.3	13.0
Capital Expenditure	0.7	0.7	0.7
Less Retained Income	(12.8)	(12.8)	(12.5)
Total	1.2	1.2	1.2
of which:
DEL Resource	0.5	0.5	0.5
DEL Capital	0.7	0.7	0.7
AME	-	-	-

What the budget does

Accountant in Bankruptcy (AiB) is responsible for administering and supervising the process of personal bankruptcy and recording corporate insolvencies in Scotland. Most of the costs of the Agency are met by fees from those using our services.

In 2017-18 we will:

• continue to deliver, with stakeholders, a range of options for individuals seeking debt relief and debt management, supervise insolvency in Scotland, and maintain the public register of insolvencies and the Debt Arrangement Scheme register;
• implement legislative changes to the Debt Arrangement Scheme and Protected Trust Deeds arising from the recent policy reviews and commence a further review of the wide-ranging reforms introduced through the Bankruptcy and Debt Advice (Scotland) Act 2014;
• complete the modernisation of Scottish corporate insolvency law through the laying and commencement of revised corporate insolvency rules; and
• improve functionality across our core IT systems to help drive forward the government's digital agenda.

Parliamentary Business and Government Strategy

Table 8.06: More Detailed Spending Plans (Level 3)

Level 3	2016-17 Draft Budget £m	2016-17 Budget £m	2017-18 Draft Budget £m
Cities Investment and Strategy	30.3	30.3	56.9
Office of the Chief Economic Adviser	0.5	0.6	0.5
Office of the Chief Statistician	1.6	1.5	1.9
Strategic Research and Analysis Fund	0.8	0.7	0.8
Citizens Advice Direct	0.6	0.6	0.6
Council of Economic Advisers	0.1	0.1	0.1
Total	33.9	33.8	60.8
of which:
DEL Resource	3.9	3.8	4.2
Del Capital	30.0	30.0	56.6
AME	-	-	-

What the budget does

The Parliamentary Business and Government Strategy budget provides high quality analytical support for Ministers and colleagues across the Scottish Government. It ensures the Government can develop the quality, robustness and breadth of coverage of data and make it easier for the people of Scotland to access the data they need. It facilitates informed choices, improved opportunities and an understanding of the positive role of public services in the lives of the people of Scotland.

It funds the Council of Economic Advisers' work on improving the competitiveness of the Scottish economy and tackling inequality. It supports economic development in cities and city regions. It also pays for the provision of detailed information on Scotland's economy and evidence to underpin economic policy.

In 2017-18, we will:

• support economic development in identified cities and city regions through the Scottish Cities Alliance, city region deals and other appropriate mechanisms;
• support social research and analysis to improve policy making in Scotland;
• support the procurement of data and specific technical assistance to strengthen understanding of key developments in the economy and public finances; and
• support statutory functions around the publication of official statistics.

European Regional Development Fund - 2014-20 Programmes

Table 8.07: More Detailed Spending Plans (Level 3)

Level 3	2016-17 Draft Budget £m	2016-17 Budget £m	2017-18 Draft Budget £m
Grants to Local Authorities	-	-	-
Central Government Spend	-	-	-
Grants to Local Authorities - EC Income	-	-	-
Central Government Spend - EC Income	-	-	-
Total	0.0	0.0	0.0
of which:
DEL Resource	-	-	-
Del Capital	-	-	-
AME	-	-	-

These figures net to zero because of matching receipts from the European Union.

European Social Fund - 2014-20 Programmes

Table 8.08: More Detailed Spending Plans (Level 3)

Level 3	2016-17 Draft Budget £m	2016-17 Budget £m	2017-18 Draft Budget £m
Grants to Local Authorities	-	-	-
Central Government Spend	-	-	-
Grants to Local Authorities - EC Income	-	-	-
Central Government Spend - EC Income	-	-	-
Total	0.0	0.0	0.0
of which:
DEL Resource	-	-	-
Del Capital	-	-	-
AME	-	-	-

These figures net to zero because of matching receipts from the European Union.

What the budget does

The European Regional Development Fund ( ERDF) and European Social Funds ( ESF) make significant resources available to Scotland over the EU's seven-year budget cycle. For the period 2014 to 2020 some €941 million has been allocated to Scotland. The Scottish Government will manage these funds and allocate them according to programmes agreed with the EU Commission and in accordance with EU regulations.

The Scottish Government, working through partnership governance structures, will allocate the funds to projects, schemes or programmes devised by public bodies and local authorities across Scotland. When funds have been allocated and spent the lead bodies will seek payment of the funds from Scottish Government. As the Scottish Government pays out to these bodies it will recover the funds from the Commission. The funds do not increase the Scottish Government's overall budget and therefore are represented as zero in the budget.

In addition to managing ERDF and ESF the Scottish Government plays a significant role in the implementation of trans-national and territorial co-operation funding programmes.

ERDF, ESF and the trans-national and territorial funds aim to support economic and social cohesion across the EU. They do this by providing financial support to projects which will encourage economic growth by improving business competitiveness, encouraging business innovation, improving skills, tackling poverty and promoting social inclusion, and facilitating the development of the green economy. The EU priorities for the funds align well with the Scottish Government's purpose and strategic priorities.

During 2017-18 EU funds will continue to be allocated and spent from the 2014-20 EU funding programmes. In addition the process to reconcile the final spend in the 2007-13 programmes commenced in 2014-15 and is expected to be completed in 2017-18.

The most significant change in the 2014-20 programmes is the strategic and thematic concentration of the funds prescribed by the EU Commission. This concentration aims to encourage more rapid growth and ensure the funds contribute as fully as possible to the EU 2020 objective of smart, sustainable and inclusive growth. The Scottish Government's approach focuses funds on strategic interventions which means large-scale projects, schemes or programmes aiming for transformative change, delivered by public bodies and local authorities who are confident they can contribute their share of the total project funding.

The Scottish Government has confirmed that the UK Government's guarantee on European structural funding will be passed on in full.