Towards a robust, resilient wellbeing economy for Scotland: Report on written submissions to the Advisory Group on Economic Recovery

2. Business - economic capital

For business, economic capital (as we use the term) includes physical, intellectual and financial assets. The traditional notion of (physical) capital is the outcome of applying human capital to natural capital to generate physical assets that provide a flow of goods or services, with the classic example being the machinery in a factory but also including wider aspects of public (or private) infrastructure (roads, bridges, power stations). Whilst some notions of intellectual capital are closely related to human capital, a reasonable view is to consider the "intangible assets" of organisations (goodwill, brand recognition and intellectual property) that are wider than a single person, whilst accepting that this also has links to social capital in some respects. Finally, financial capital consists of the financial resources of organisations and is crucial in making decisions around the use of the other capitals.

Use a wellbeing lens to prioritise or refine economic policy. The wellbeing economy framework can be applied to all areas of conventional economic policy in which case it may generate insights, and sensitivities to need, that do not emerge easily or at all from a traditional efficiency-plus-equity approach. The experience of OECD and UNDP can be drawn on here. In this case of governmental response to Covid 19, wellbeing outcomes related to the labour market events can be used to identify issues and opportunities additional to traditional questions of productivity and workforce composition as we demonstrate below

Consider implications of shortening value chains around the world. It has been suggested that in the medium term, some companies and in some cases, countries will take action to shorten their value chains for at least some classes of goods, such as food, health-care supplies and digital related products. This could lead to a reduction in exports combined with greater opportunities for some home based producers. The issues may not be significant for some countries but many will need to consider what might be done if a major export industry were to suffer from other countries reducing their imports.

Ensure taxes due from digital activity follow citizens. The rise of online retailing is causing tax revenues to be diverted from places where people live and work to the jurisdictions where head-offices are located. Because taxes exist to provide public goods within a jurisdiction, this is becoming increasingly problematic for the financing of their provision. Two thirds of the world's privately owned newer companies valued more than $1bn are based in just two countries for example, and so it is important for wellbeing economies that principles of fairness be brought to bear more closely on the taxation of large digital corporations.

Develop early indicators. It is important to recognise that at international level there is considerable awareness of the changing data environment. National statistical offices are involved in developing new measures and methods of data collection and the production of early indicators by the UK Office of National Statistics appears to have been of value. It could be useful to policy makers in Scotland to have early indicators of sales based on monthly reports from a sample of firms across the size range and covering all sectors, employment and investment on a monthly basis for the next 6 to 12 months for internal monitoring purposes. Business confidence data may already be collected in this way but might not be sufficiently specific. A repeated series would give economists in government a focal point set of figures to shape thinking and online panels can be developed at low cost. A similar survey of quality of life could be conducted quite affordably with citizens on a quarterly basis using online panels. Conventional data reporting cycles are often too slow for the needs that might be expected over the next year or two.

Extract from Submission from Paul Anand et. al.

2.1 Investment (general) and the Scottish National Investment Bank

Issues relating to investment featured prominently in submissions to the Group. We received a wide range of responses calling for specific investment in specific areas. Investment in Human capital (Skills and Education) is discussed in section 3 and Natural capital is covered in section 5 and more specific sector based investment is discussed within separate areas later in section 2. This specific section deals with those responses that were more general, or which related to the role and activities of the forthcoming Scottish National Investment Bank (the Bank).

A number of respondents made reference to the importance of the Bank in the economic recovery from Covid-19. There was a general view that the concept of the Bank was now even more important, with no dissenting voices on this issue at all. A number of respondents suggested that the missions of the Bank should be revisited and adapted to a post-C-19 context. For example, the Corra Foundation suggested a specific link to reach existing third sector organisations and social enterprises. A number of respondents, including Friends of the Earth, called for the Bank to have its level of capitalisation increased (from the existing £2 billion over 10 years): others (including the Wellbeing Economy Alliance) focused on how the Bank should align its work to existing frameworks. A significant number of respondents suggested a focus on natural capital.

Others who specifically mentioned Green Investment included:

• Paths for All
• Scottish Environment Link
• Scottish Renewables
• SSE
• Woodland Trust Scotland
• Stop Climate Chaos

The importance of patient capital or long-term investment was also emphasised by a number of submissions, including the Federation of Small Businesses (Scotland), Homes for Scotland and Scotland for Employee Ownership, with each putting forward suggestions relating to their specific areas of interest.

Corra Foundation

The Bank missions should be revisited and adapted to a post-C-19 context, including specific reference to existing third sector organisations and social enterprises.

HIE

Pivot the Bank to be responsive to needs of the recovery phase ensuring criteria doesn't discriminate against remote and rural Scotland. Information provision crucial.

SOSE

Use the Bank and other enterprise areas to develop investments for just transitions and small scale renewables. Maximise the green energy opportunities- offshore and onshore wind.

Unison

Role for an up scaled Bank in strategically targeted support for research and development programmes, including government, companies and universities, alongside investment in start-up companies in the solar panel industry, wind turbines and other forms of renewable energy.

Friends of the Earth Scotland

Increase the level of capitalisation of the Bank.

Poverty Alliance/ Wellbeing Economy Alliance

The Bank needs to align its work with frameworks such as the National Performance Framework and the Business Pledge.

Institute and Faculty of Advocates

The pandemic may lead to deferring a deferral in investment and so SNIB will have a key role to play in leveraging in private capital for enterprise and innovation.

As noted above, the Institute and Faculty of Advocates made specific reference to the potential role of the Bank in leveraging in private investment: this was picked up by several respondents in a wider context, for example the Clyde Gateway initiative, who underlined the importance of derisking investment in regeneration areas; and SOLACE, who suggested accelerating economic infrastructure investment programmes, including measures to strengthen the delivery and maximise the impact of City / Growth Deals (see section 2.8).

Turning to infrastructure investment, the Infrastructure Commission for Scotland^[2] made a number of suggestions as shown in the table below:

Leadership

To provide leadership and demonstrate intent, the Scottish Government should prioritise all new infrastructure investment decisions based on their contribution to the delivery of an inclusive net zero carbon economy.

Place

To achieve an inclusive net zero carbon economy, the Scottish Government should put "place" at the heart of coherent, infrastructure prioritisation and planning.

Making the most of existing assets

Most of the underlying infrastructure that will be used in 30 years' time already exists today. It is therefore essential that these assets are most effectively and efficiently utilised, maintained and enhanced to net zero carbon readiness

Heat and Transport

Key priorities for Scotland in reaching net zero carbon over the next 30 years will be accelerating the decarbonisation of heat and transport.

Regulation

To incentivise investment at the necessary pace and scale to meet future infrastructure requirements for Scotland, regulation will be a critical component to the delivery of a 30-year inclusive net zero carbon economy vision.

Digital & Technology

Ensure every citizen, organisation and business in Scotland has the ability to access digital public services, to undertake trade and commerce and to participate in future global economic markets regardless of geographic location.

The role of the public

Much greater participation of the public needs to be incorporated as an integral part of infrastructure investment decision-making.

Independent long-term advice

To enable government, regulators and industry to make the transition to a long-term, coherent, systems wide approach to place-based infrastructure strategy and planning.

Aspects of this were picked up by a number of other submissions, including the Corra Foundation. Digital and Technology investment is specifically considered in section 2.12 and issues around data in in section 2.9. A number of respondents stressed the importance of a fully updated Infrastructure Investment Plan for Scotland. There were also a number of suggestions around the importance of planning and appraisal systems. This included suggestions from Scottish National Women's Organisation, The Poverty and Inequality Commission, Women's Enterprise Scotland and the WISE Centre for Economic Justice that specifically mention equalities issues (picked up in section 4.2). A more general view on the importance of investor focused planning was submitted by the Glasgow Economic Recovery Group (see box below).

Investor Focused Planning – A critical element in planning the future needs of businesses is to ensure that forums are in place to understand the impact lockdown has had across sectors and develop feedback channels that allow new policies and intervention support to be developed.

It will be important to take existing funding arrangements and reallocate them to businesses most impacted by COVID-19.

Submission by Glasgow Economic Recovery Group

Specifically, the importance of taking a wider than purely economic view on investment was a common theme amongst many submissions. Natural capital components of this topic are discussed in section 5. Of particular note was the promotion of the concept of social return on investment and/or the notion of "preventative spend". See box below on submission from YouthLink Scotland.

A concerted effort needs to take place on the social return for investment in youth work. The youth work sector is therefore crucial to any meaningful renewal. The "common weal" benefits from having young people who are engaged in positive activities – they make valuable contributions to their communities.

YouthLink Scotland commissioned research by Hall Aitken established the huge economic and social value of youth work. The social return on investment of youth work in Scotland is at least 3:1 – this means that for every £1 invested in youth work, at least £7 of value was created and the total value of youth work in Scotland is at least £656 million. This value includes both savings to public spend and economic gains (and this is a conservative estimate to avoid over-claiming – the actual impact could be much greater). Hall Aitken also outlined some of the longer-term outcomes of youth work resulting in reduced costs to the education system, increased personal earnings from better qualifications, reduced wage scar from youth unemployment, positive health behaviours such as reduced incidence of depression, reduced incidence of obesity, reduced incidence of STIs, greater productivity due to reduced absences, reduced costs of criminal justice

In 2011, the Christie Commission report called for moves towards preventative spending, estimating that as much as 40 per cent of all spending on public services is accounted for by interventions that could have been avoided by prioritising a preventative approach. Yet budget cuts have meant that Scotland is moving in the opposite direction and preventative work is not being prioritised. Instead, high levels of public resources are poured into alleviating social problems and tackling "failure demand" – demand which could have been avoided by earlier preventative measures.

Submission from Youthlink Scotland.

Investment in specific sectors was a common theme and is dealt with in the sectoral analysis in subsequent sections:

• Housing (Section 0)
• Creative Industries, Tourism and Hospitality (Section 2.11)
• Digital (Section 2.12)
• Third sector (Section 4.3)
• Care sector (Section 4.4)

2.2 Higher and Further Education (Direct economic impacts)

Submissions stressed how hard the sector will be hit by the consequences of the pandemic. The Scottish Funding Council (SFC) estimated that Scottish universities face a loss of around £72 million in the current academic year. In their more optimistic Scenario 1, where the normal intake of new international students drops by half, Scottish Universities will face a collective operating deficit of £383.5 million in 2020-21: in their more pessimistic Scenario 2, if there is a complete drop in new international students in 2020-21, there could be an operating deficit of £651 million. Somewhere between the two would seem to be a reasonable likely case: even allowing for some new and returning international students, and further mitigating actions by institutions, SFC might still expect a deficit of at least £450-500 million. All 18 Scottish universities are expected to go into deficit in 2020-21 (the analysis does not include OU Scotland). See box for further details.

Universities

The OBR calculates that education will take the single hardest hit, with 90% of output affected. The higher education sector across the UK is particularly exposed to a fall in international students compared to other countries, as international students account for a higher proportion of our student bodies than most other countries. The current funding arrangements in Scotland have encouraged the growth of international and rUK students to cross-subsidise home student tuition, research activities and PhD students that are not funded at full economic cost.

Many universities are modelling 100% reductions in new intakes. Beyond the next academic year, there are cumulative annual effects from reduced international student intakes, with many institutions modelling 25-50% reductions in new intakes in 2021-22; 10-25% reductions in 2022-23; and 5-10% reductions in 2023-24.

Many universities will be operating at a severely increased deficit. 18 universities will report deficits in 2020-21. Three universities are projecting to move into a negative cash position by the end of 2020-21. The forecast net overdraft position for the three institutions amounts to around £54 million.

In the short term, the main impacts are cash-flow from paused grants; disrupted recruitment and inhibited staff retention; and the interruption of research.

Colleges

For this academic year, Scottish colleges face a loss of around £25 million due to COVID-19.

All but three colleges are now forecasting deficits in 2019-20.

The impact in 2020-21 is expected to be even more severe.

The 2019-20 sector-adjusted operating position is expected to move from a near break-even position to a deficit of £25 million. Six colleges had projected deficits pre-COVID; however, only three colleges (two of which are non-incorporated) are now forecasting surpluses.

The main COVID-19 financial impacts include lower income from the following funding streams: European Social Fund; Fair Work Development Fund; tuition fees and education contracts; Skills Development Scotland; nursery; accommodation; catering; short-courses including evening classes; and other commercial activity including international income.

Submission from Scottish Funding Council

Universities Scotland made a number of detailed suggestions – see box.

Current situation

Universities and other organisations have changed and innovated, so has government. For instance, the Scottish Funding Council decided on a range of measures to adjust the bureaucratic burden on institutions whilst maintaining key reporting requirements. A positive legacy of the pandemic should be a fresh questioning of such systems and a resulting streamlining.

Universities' rapid transfer to wholly online delivery, building on a strong foundation already in place, will most likely have an enduring legacy which will enhance the student experience and drive innovation.

Investment in funding an undergraduate degree:

• has a rate of return of 7.2%;
• is repaid 19 years after a student's graduation; and
• generates over a graduate's lifetime a net benefit to public finances of £22,000.

Further, an increased investment in R&D of 8.6%:

• yields a net benefits from increased taxation worth NPV £3.5 billion;
• a rate of return of 27.1%; and
• is exceeded by the tax revenue generated as a result by year 6.

University capital investment yields major direct economic impacts with a GVA of over 5:1 for every £1 invested. A number of other countries, including economies often compared to Scotland such as New Zealand and the Nordic nations have already taken decisions to make additional investment in high level skills as part of a package of measures to support individuals and the post-COVID economy.

Further Policy prescriptions

Support mechanisms should be modified. The definitions of 'innovation' used in many schemes limit the scope to support organisations, particularly small and medium-sized enterprises (SMEs).

Collaborative projects between universities and public or private partners should be increased to address challenges arising from the pandemic.

Increase utilisation of innovation vouchers with larger projects and 'in kind' funding. Investment could be drawn from capital underspends as focused through universities this is categorised as capital spend and maximise use of mechanisms such as Knowledge Transfer Partnerships and sustain/increase capacity for business incubation and 'science parks' .

Consideration should be given to increasing the number of fully funded Taught Post Graduate (TPG) places in key economic sectors and the current TPG loan support package should be enhanced;

The university sector is considering whether, in combination with the above, the reduced fee for TPG courses offered by each institution to their own alumni might be offered reciprocally across the sector;

Developing upskilling and life-long learning through 'microcredentials' modules (standalone skills driven modules)

Submission from Universities Scotland

Reform Scotland noted the 2019 position of the university sector and issues around reliance on foreign students. Colleges Scotland also noted the college sector's role in supporting economic Recovery – and highlighted PACE- type services via colleges and a key role in working with SMEs in terms of engagement and support for innovation. This theme was picked up by the Glasgow Economic Recovery Group who suggested:

• Continuing education for those leaving schools / colleges / university – find ways of keeping people in further or higher education to ensure they continue to develop skills during the downturn including developing an enhanced curriculum for senior phase pupils due to leave school – with young people being encouraged now to stay in school, what will they be learning and how?
• Additional tertiary education provision – support graduates and school leavers in the next 6-12 months via top-up courses and additional postgraduate provision - would require some changes to be made via the Scottish Funding Council.

There was also discussion of the civic role of universities (Carnegie Trust UK) as anchor institutions and the idea of a review of the wider sector. See box.

A short SFC-led review of the Further and Higher Education sectors together with the scientific research institutes should be undertaken to ensure a new collegiate approach to support the broader natural economy in the form of education and training, research and innovation and consultancy, and business advice; reporting within three months.

Submission from Scotland's Rural College

Edinburgh University provided a detailed and technical submission with a range of policy suggestions that are covered under the other capitals and the Data discussion in section 2.9. Stirling University submitted a transport specific analysis that is covered in section 2.13 and section 5.

The role of universities in terms of Human Capital is discussed in section 3.

2.3 Existing institutions (economic development)

A small number of respondents covered issues specifically around the existing institutions in the economic development landscape (note that the City Region Deals and Economic Partnerships are covered separately in section 2.8). This was primarily around encouraging greater links between bodies. For example Kelvin Valley and Falkirk LEADER Local Action Group suggested ensuring research institutions are closely linked to growth hubs.

There was some very limited discussion of the idea of decentralising agencies and departments into locations where the benefit would be felt the most in terms of jobs and salaries and demographic stabilisation. These could act as the anchor institutions, in a similar manner to that suggested for universities in areas that are struggling because of lost sectors such as tourism. However, these suggestions did not really pick up on the impact on existing jobs in those instructions; and there were no specific detailed examples or proposals put forward.

Highlands and Island Enterprise suggested there should be encouragement of the devolution of substantial research and innovation funding to Scotland, especially to increase R&D capacity in institutions in less well-served regions. This was driven by the need for skills to support the "green recovery/revolution" to be assessed in a regional context and institutions resourced to respond effectively; ensuring that rural Scotland has the skills needed to develop and support a green economy

A number of other suggestions are picked up in Place-based Interventions (section 4.1) or under Skills (section 3.2) where the link to existing institutions is more tenuous.

Finally, Social Enterprise Scotland suggested that too many public services in Scotland are organisation-centred to suit institutions; whereas the third sector and social enterprise focus on structural, productive capacity - creating human capital, with local impact and outcomes and the genuine co-production, design and delivery of citizen centred services.

2.4 Fiscal Framework

There were a small number of submissions that related to the Fiscal Framework between the Scottish and UK Governments. Many of these submissions specifically related to tax powers and are covered in section 2.5. The framework itself is due to be reviewed in 2021/22. The situation is summed up well in the submission from Low Incomes Tax Reform. See box.

It should be noted that Scotland's particular combination of funding sources may place constraints upon some of its options that may not be faced by the UK as a whole. This is because the UK government has monetary sovereignty, i.e. the exclusive authority to designate the legal tender forms of payment, and to control the issuance and retirement of the legal tender. Scotland does not have this ability. Instead, it is funded by a combination of revenues from Scottish taxes, the block grant and limited borrowing.

Submission from Low Incomes Tax Reform

The Scottish Council of Voluntary Organisations was amongst those calling for a thorough evaluation of the Fiscal Framework that should then inform future proposals and decisions. Low Incomes Tax Reform were more specific in suggesting an examination of the fiscal impacts of the coronavirus support programmes and how funding announced by the UK Government has translated into funds available for the Scottish Government, via the Block Grant. This will help to establish whether the Fiscal Framework has operated as expected and whether it has worked appropriately in these exceptional circumstances.

A substantial submission on this topic was received from Reform Scotland. See box.

Powers of the Parliament: Prior to this crisis, Scotland did not have an adequate tax basket, borrowing powers and fiscal settlement to allow it to try different fiscal measures. That lack of tools, particularly with reference to borrowing powers, is now even more acute. There is a limit to what can be done, and what stimulus can be employed, when the powers are so hugely restricted. Corporation Tax has been devolved to Northern Ireland. It needs to be devolved to Scotland too. This would also correct the current situation where two self-employed people have similar income/profit levels, with one paying corporation tax to Westminster and the other income tax to Holyrood. Borrowing powers need to be reviewed and the planned revision of the fiscal framework, planned for 2021, should be brought forward.

Immigration: Scotland has a far greater reliance on immigration than the rest of the UK. The crisis has highlighted our need for working-age immigrants in key worker roles. Scottish-specific solutions are required. Current legislation would require this to be managed from Westminster, but Scotland-specific programmes have been used before and need to be again.

Submission from Reform Scotland

2.5 Tax

There were a large number of submissions on tax (or charge) reform. A significant number of these would require further devolution of powers.

A selection of those that could be undertaken with existing powers is shown in the table below.

Built Environment Forum Scotland

Changes to taxation structures for traditional buildings towards Incentivisation for use and reuse of traditional buildings

Citizen's Advice Scotland

The water charging system can be improved - System that links a household's weekly income or wealth with their Council Tax band when determining who should receive assistance

HIE

Review of non-domestic rates and land and buildings transaction tax (LBTT).

mechanisms, including planning regulation and taxation, to address the issues of empty and second homes

Historic Environment Scotland

No rates reduction to empty properties.

Homes for Scotland

LBTT reliefs for energy efficiency

Inclusion Scotland

Reform tax system to reduce regressivity, especially Council Tax.

Scottish Land Commission

Considering bringing all non-domestic land onto the valuation role and replacing existing non-domestic rates with some form of land value tax. Tax incentives - to encourage the repurposing of commercial property, avoid the creation of another legacy of persistent land dereliction and support a smoother structural transition

Scottish Property Federation

Discussion of stability of LBTT revenues.

SOLACE Scotland

Fiscal levers to reflect local priorities

The Poverty and Inequality Commission

Reform council tax and introduce new, innovative local taxes such as those highlighted by IPPR Scotland

Unison

Permitted debt levels for public bodies will need to be sharply increased. The government should make use of its powers to borrow through issuing long term bonds. There is also considerable scope for savings in the use of PFI/PPP/NPD schemes^[3] through closer monitoring and in some cases refinancing schemes. The reform of local government finance to build a stronger more equitable system able to support public enterprise.

In terms of Air Passenger Duty, there were a number of submissions in favour of abolition for economic recovery reasons, perhaps in the short term (for the tourism and hospitality sectors): but a corresponding number that suggested an increase for environmental reasons.

In terms of areas where the SG does not have current powers, the most common suggestions were variations to VAT, to inform local and national policy choices; windfall taxes on digital or crisis-related profits; and the introduction of forms of wealth taxation.

HIE

Power to vary VAT to address other policy priorities and support community led solutions.

Friends of the Earth Scotland

Improve the fairness of the tax system by supporting progressivity of a broad tax base that complements labour income taxation with the taxation of capital.

Highland Boundary Ltd

Lower corporation tax for start-ups and small businesses

Vary taxation between sectors to encourage inward investment and innovation

Follow examples of other countries in positive wealth distribution.

Higher taxation to provide for all in society

Historic Environment Scotland

VAT – repairs vs New Build

Paths for All

Control of taxes aligned to road transport (Vehicle Excise Duty and Fuel Duty) to improve places to live and public transport

Poverty Alliance/ Wellbeing Economy Alliance

A windfall tax should be explored as some firms will have made significant gains from the pandemic.

Reshape the economy to one that creates more equal outcomes from the outset, 'predistribution' – influence bad firm behaviour

Royal Scottish National Orchestra

A renewed ability to claim orchestra or theatre tax relief, unless this could be maintained on the basis of the previous (Pre Covid 19) year's accounts, perhaps at 80% reflecting the principles of the furlough scheme.

Scottish Communities Finance Ltd

A wealth tax will allow the benefits of AI/ Robotics/Social Media to be more widely spread as the implications for employment and social interaction from these developments is significant.

Development of SG tax levers;

Tourist taxes-aid remuneration and up-skilling of tourist industry.

Scottish Communities Finance Ltd

Wealth taxes have to be introduced so that the immediate financial burden of COVID and the longer term transition to greener economy doesn't fall on employees and small taxpayers. A wealth tax will allow the benefits of AI/ Robotics/Social Media to be more widely spread as the implications for employment and social interaction from these developments is significant.

Development of SG tax levers;

Tourist taxes-aid remuneration and up-skilling of tourist industry.

An energy fund based on the proceeds of renewable energy developed.

Road taxes-put towards green transport infrastructure.

Scottish Human Rights Commission

Explore taxation options on wealth and corporate revenues from the digital sector as one which will make extra profits due to the pandemic

Scottish Human Rights Commission

Rights based approach to (progressive) tax reform

Scottish Land Estates

VAT on tourism businesses should be cut. By increasing the threshold for VAT registration or allowing a lower rate for small business, growth will be encouraged and could lead to a positive impact on the amount of taxation collected. Allowing greater use of sideways tax relief will help to secure the future of diversified businesses and enable them to survive for the future.

Skills development and training to be eligible to similar tax treatment to research & development tax credits.

STV

An advertising tax credit to leverage the power of advertising to kick-start the economy;

SURF

Introducing a 'Tobin Tax' on financial trading.

The Poverty and Inequality Commission

Include requiring large companies to publish their country by country reporting, under either OECD or Global Reporting Initiative standards, to level the playing field for smaller and domestic companies. Businesses could be also be incentivised through the tax system to promote positive business practices such as fair work or low carbon approaches.

Transform Scotland

Effort should be made to shift taxation from investment and labour on to polluting activities, particularly highlighting that there is no case for reducing taxation on aviation.

Transition Black Isle

Tax system reconfiguration

Wealth Tax

2.6 Conditionality

There were a number of submissions that suggested various forms of conditionality to government support, both generally and in the context of Covid-19 recovery. Some of these related to Fair Work and the business pledge: but the majority related to climate change. Some specific examples are shown in the table below.

Aberdeen Climate Action

Align government spending to net zero through conditionality on businesses support

Ecometrica Group

Overriding role of the state in the bail out will give it a much stronger say in regulation and performance

Just Transition Commission

Private sector engagement and commitments in relation to transition planning may be one appropriate pre-condition for companies currently lobbying for government funding or bailouts.

Poverty Alliance/ Wellbeing Economy Alliance

Making the adoption of at least the three core elements of the Business Pledge a condition of receiving public funds would do more to encourage best practice.

Scottish Environment LINK

Business support packages must be conditional on net zero measures taken by the company

Scottish Forum on Natural Capital

Decisions on financial or other support should be contingent on how applicant businesses are reducing emissions, managing land (where relevant), selecting suppliers, managing waste, and raising awareness of nature and climate change among employees and customers.

Women's Enterprise Scotland

Gender-based conditionality

2.7 Rural

There were a large number of submissions touching on rural issues. The differential impact of the virus on rural economies dependent on either tourism and hospitality or primary industries was a key theme of these submissions. There were numerous suggestions as to the policy responses that could mitigate these impacts. However, there was significant overlap between specifically rural issues and discussion in submissions around Place based Intervention (section 4.1) Employability (section 3.3), and issues around Natural Capital which is concentrated is Scotland's rural areas (section 5).

Aberdeen Climate Action

Create employment opportunities in rural and island communities through Scotland's blue economy by coastal regeneration, aquaculture and offshore renewables.

Crown Estate

Create employment opportunities in rural and island communities through Scotland's blue economy by coastal regeneration, aquaculture and offshore renewables.

Promote community ownership of low carbon energy generation as a means of reducing fuel poverty and create more resilient local economies in rural and island communities.

HALO Scotland

Commercial farming needs to move towards a sustainable farming industry improving soil carbon and fertility, local/regional food supply, climate-resilience, minimum emissions, and maximum biodiversity

Research into plasma-reactor manufacture of nitrogen for agriculture should be accelerated.

More applied research and appropriate allowances for innovation within the agricultural and rural sector.

National Farmers' Union Scotland

Encourage consumption of local produce through Public procurement practices which support local sourcing.

Adopt measures to protect and enhance capacity of food producers such as:

• Encouraging farm diversification
• Securing inward investment to enhance processing capacity
• Maintaining flows of seasonal labour

Scottish Enterprise Rural Leaders

Planning rules should be updated and fit for purpose with an eye on the growth of the economy and the potential benefits of new developments, whether commercial or residential. A "Rural first" policy is needed for future rollout of 5G and broadband provision

Scottish Environment LINK

Reform agricultural support payments to promote nature and climate-friendly food production.

Scottish Natural Heritage

Nature-based tourism – long-term investment in transforming land use and importance of future rural support

SEPA

Reduce environmental impact of food and drinks industry through working with SEPA and NFUS to move more quickly through regulation and deploy new methods.

Implement Sustainable Growth Agreements with food and drinks sector to improve resource efficiency.

SOSE

Development of traditional national infrastructure such as road and rail will help develop rural economies in the South of Scotland.

2.8 City deals, Local Economic Partnerships, Regional Economic Partnerships

There was widespread confirmation of the importance of the City Region Growth Deals and Local and Regional Economic Partnerships. Whilst it was generally viewed that the SG has a reasonable approach to localised economic development, there were calls for further local devolution of powers and responsibilities.

This was allied to several calls for the City Region Growth Deals to be reviewed and/or accelerated to ensure that investment and wider activity can respond to the post-virus landscape. There are obvious links to other capitals, including the suggestion that the City Region Growth Deals, in particular, be used as a mechanism for promoting policies that assist the transition to net zero.

BT Group

The Scottish Government has a good track record in fostering collaboration across Scotland and addressing barriers that stifle innovation and progress. The City Deals are evidence of this progress but more can be done to ensure transparency behind the projects they support and how the Scottish Government measures their outcomes linked to the National Performance Framework.

Edinburgh Council

Further fiscal devolution should be supported. Local Government, or Local Authorities working together at the regional level, need greater freedom on a range of fiscal measures as well as agreement between central and local on what's most appropriate in differing economic circumstances

Historic Environment Scotland

City and Region growth deals provide good basis for recovery but concern over the impact on high streets due to the move away from historic offices

SLAED

An accelerated process should be put in place to allow Growth Deal investment to be delivered earlier

SOLACE Scotland

Suggest an accelerated process should be put in place to allow Growth Deal investment to be delivered earlier

Accelerated economic infrastructure investment programmes, including measures to strengthen the delivery and maximise the impact of City / Growth Deals including consideration of supply chain management

Stop Climate Chaos Scotland

Establish a city-wide zero emission zone in operation in every city by 2030;

2.9 Data

A number of submissions highlighted the importance of improving targeted, economic and other forms of data to deal with the post COVID-19 economy. A number of submissions made the point of making stronger links between the National Performance Framework and policy delivery, particularly in the context of budget-setting. This has links to the discussion of improved analysis of environmental outcomes in section 5.2.

The Infrastructure Commission for Scotland advocated an approach based on resilience and suggested that to ensure Scotland's connectivity resilience, SG should prioritise support for an indigenous data centre market and investment in direct international fibre optic cables.

The Scottish Human Rights Commission pointed out that data gaps, the impacts of the virus on ongoing on surveys, and the relative lack of real-time data were all factors that would impact on the ability of policy makers to target resources to an effective recovery.

A particularly data-focused submission was received from the University of Edinburgh. See box.

Focus on Data Ethics

Rapid introduction of surveillance technologies and data analysis have been introduced as "magic Bullets" to manage the return to the "new normal", and as we testify in our response, efficient and ethical use of indeed data is in a key role in the recovery. However, the combination of increasingly powerful data analytics, a data-saturated and poorly regulated commercial environment, and the absence of standards for data practice in industry, university, non-profit, and government sectors has created a 'perfect storm' of ethical risks. We need to first consider what sources of data we already had and simply failed to use or act upon effectively. Then we need to identify any real data gaps that directly impede public health efforts and endanger global health, and what missing data will improve our ability to act & intervene. New data streams don't help if the human and institutional failures that underlie the pandemic remain unaddressed.

Capture and Analyse COVID-19 Data

We strongly suggest that the Advisory Group on Economic Recovery should prioritise support for efforts to capture data which can produce timely data-driven insights and support research into the impacts of the pandemic (health, economic, social, environmental, and the interplay between them). If the opportunity to capture these data is missed, a crucial national data asset will be lost and our ability to learn from the impact of the crisis for the future will be severely undermined.

Ensure Access to Financial Data

The supply of financial data to support government economic policy making is extremely challenging. Additional government support to lobby companies to participate would be extremely welcome, as well as engaging around assessment of opportunities to support recovery. After the pandemic, a wider Government and public debate is needed as to how this type of financial data is made available for public benefit research

Harmonise Health & Wellbeing Data Models

Scotland has led the world in providing major insights from linked national healthcare data. However, current activities are built on specific projects with progress fragmented and frequently limited to single conditions or regions. There is a risk that realising value and public benefit from these resources will be squandered unless it is made more easily accessible. We propose an investment in each of our four regional safe havens and the national safe haven, to develop a common data model for Scotland that will ensure the rich local and regional data generated from across primary, secondary and social care is available on all persons living in Scotland with any acute or chronic condition.

Develop more sophisticated methods of tracking and measuring social and economic impacts

We need a more nuanced insight into the pattern of inequalities arising from Covid-19. There is already anecdotal evidence that the experience of inequality is being altered by the pandemic with invisible occupations notably in care, retail, transport, cleaning and maintenance rendered much higher profiles while the material reality and risk associated with low wage work remains unaltered. Data-driven toolkits should be developed to trace the impact on the employment patterns, health and wellbeing of key front-line workers post crisis. This might involve the deployment of inventive and computational methods that can transcend qualitative/quantitative divides and incorporate alternative data sources (e.g. internet search, locational and social media data).

Integrate Environmental Data

An integrated and balanced approach to data would help to redefine success measures, as a society and as an economy. By modelling cause and effect from climate actions to societal impact we can demonstrate the wider benefits of transitioning to a net zero economy, in particular on wellbeing, environment and biodiversity.

2.10 Housing

Numerous specific suggestions were made by a variety of respondents, including housing as tool for recovery with wellbeing benefits; specific financial support for the sector; the importance of mitigation of derelict and vacant land; affordability; and environmental measures.

There were some worries expressed about the regulatory burden on the industry: but this was balanced by significant calls for further intervention to ensure positive outcomes. A concern was expressed over the systems and guidance in place to estimate housing need and demand and the nature of National Records of Scotland population projections. (However, it should be noted that these mechanisms are the first, analytical part of the policy process and they form the basis not the totality of housing policy at a local level.)

Centre for Energy Policy

The continued availability of public and private finance is crucial if the energy efficiency of our housing stock is to improve to the extent required to meet mid-century net zero carbon targets, to reduce fuel poverty and to deliver sustained wider economy gains

Glasgow City Region

Expand social housing investment programmes

Homes for Scotland

Affordable housing – recent affordable housing investments have helped to transform communities. Continuing investment is important to support the revitalisation of communities and support for local residents – not least those young people who are likely to be worst impacted.

Scottish Futures Trust

SG should prioritise the continuation of Help to Buy and the First Home Fund after March 2021 and additional enhanced Help to Buy offer for NHS workers and other identified key workers.

Scottish Land Estates

There is an opportunity for increased housing investment across the public and private sectors to support an infrastructure recovery from COVID-19.

Scottish Property Federation

While environmental measures will be vitally important, they must be undertaken in a way which is sympathetic to the reality of renting and owning homes. Homeowners and landlords should not be put in the position of unrealistic and uneconomic expectations being placed on them which in turn will necessitate the removal of many affordable homes in rural areas from the open market.

SLAED

Negative impact of crisis on purpose built student accommodation.

SOSE

Housing should be considered national infrastructure and supply of new housing should meet the needs of the new economy. National housing guidance and projections should reflect a place rebalancing agenda, including seeking to address rural depopulation

Transition Stirling

Look at ways to encourage people to tackle dereliction, for example for housing where we could support mortgages that encourage self-build and self-restoration developing skills and using local tradespeople and look at how VAT is charged on building supplies to incentivise

Unison Scotland

Investment in housing –a green recovery, good housing stock and investment in social housing are all inter-connected. Better energy efficiency means lower fuel poverty and carbon emissions.

Housing cooperatives can offer different benefits that could be helpful, and social housing could be more creative to offer different alternatives that give similar benefits. Working hubs could be created in towns and villages, or existing community facilities updated for this function. Workers who have realised it is possible to work remotely could use these spaces and their employer or university would pay toward the running costs

Public sector pension funds remain underutilised in Scotland as sources of long term patient investment in social housing developments and renewable energy projects.

2.11 Creative industries, tourism and hospitality

There was fairly widespread support for the three inter-related sectors arguably impacted on most strongly by the crisis.

Many of the submissions dealt with the immediate situation and the need for short-term support: but there were wide acknowledgements of the importance of these sectors both in terms of economic impact and employment but also in terms of wider measures of wellbeing. There were some calls for specific tax reform (or adjustment), covered in section 2.5 but also some wider suggestions. See box.

Scottish Tourism Bonds Scottish Government to be given powers to issue and promote bonds that will in turn offer tourism businesses preferential loan interest and grants along with public infrastructure investment which will enable recovery in the sector. This private sector led source of funds can support investment into tourism: infrastructure, business co-financing, environmental improvements, staff training and leadership development, successful migration programmes, Covid-19 safety enhancements and ensuring that Scotland has a quality, competitive tourism product. We can shine more light on sustainability issues by linking them to eligibility for any funding from the Tourism Bond and support businesses demonstrating circular economy principles.

Submission from Scottish Tourism Alliance

A summary of some of the other wider responses are in the table below.

Archaeology Scotland

Impact of crisis on bodies that promote stewardship for built heritage including prioritisation when resources are diminished with 92,00 jobs in heritage tourism supply chain.

Keep Scotland Beautiful

Encourage more local tourism through better transport links

National Trust for Scotland

Importance of culture and creative industries and tourism

Scottish Community Heritage Alliance

Opportunity to kick-start tourism in areas where visitors will feel comfortable post COVID (away from city centres and usual honeypots).

Scottish Natural Heritage

Nature based tourism makes up about 40% of all tourism in Scotland, contributing £1.4bn to the Scottish economy, supporting approximately 40,000 jobs. Tourism is one of the key sectors that has been heavily impacted by Covid 19. Experience from the Natural & Cultural Heritage Fund (ERDF £5m) shows that there is significant demand for investing in visitor infrastructure to help remote and rural areas recover from Covid, particularly if there is renewed interest in staycations

SLAED

Development and promotion of IT creative industries in rural areas will help to combine quality of life with new opportunities

The Grant Rule Trust

Impact on tourism industry is an opportunity to re-think the strategy, to attract more engaged visitors seeking an "experience" holiday, rather than going for cheap and cheerful/free. Visitors should be encouraged to see themselves as temporary members of a community, not spectators at a zoo.

2.12 Digital

The Covid-19 pandemic has undoubtedly seen many businesses change their business models to adapt to the current situation which could have a beneficial impact on recovery. However, this will not be the case for all and it is therefore important that government continues to support and deliver policies to support digital transformation and skills by SMEs.

The Scottish Government's own Digital Economy Maturity Index shows that only 7% of businesses are classified as either Digital Champions or Digital Pioneers. Our own research reinforces the fact that SMEs need more support on their journey to fully utilising technologies.

Our latest research conducted in May and which polled over 1000 firms in Small Business Britain's UK community found many across the sector are actively embracing digital tools to power recovery:

• Two fifths (42 per cent) of small businesses have moved online due to the pandemic
• Over a third (37 per cent) are planning for less face to face contact in the future
• Over a third (39 per cent) now view digital skills and tools as a key focus area

Covid-19 has accelerated some of the key digital trends which were already underway. Long standing roadblocks are being rapidly resolved, and the crisis is likely to expedite digital adoption by several years. Organisations that were further along with their digital journeys seem to be weathering the storm more effectively. The underlying premise is that being more digital makes you more productive, flexible and resilient. The future of work is also likely to shift from location dependence to a distributed by default/work from anywhere strategy. Disruption due to the climate emergency and the digital revolution means that this makes strategic sense longer term. Remote working will no longer be seen as a barrier to achieving strategic goals, but an enabler.

More broadly, technology - particularly disruptive technologies such as 5G, IoT and Artificial Intelligence - will play an increasingly important role in Scotland's future economy, displacing many existing jobs but also creating many new, high value roles. In responding to Covid-19 it will be necessary to explore how digital technologies and innovation can help businesses respond to the crisis and contribute towards the economic recovery of Scotland, both in terms of the actions we need to put in place now, plus the steps we need to take to maximise the potential of technology and deliver a more resilient, thriving economy fit for the future. In part this will be as a result of SMEs being forced out of necessity to embrace increased digital maturity at an increasing pace and sophistication if they are to survive.

Submission from BT Group

There was a widespread view of the importance of access to digital services, with a clear link to the increases in remote working during the crisis. This was viewed as being particularly important in rural areas, where increasing connectivity is essential to addressing future wellbeing. Poor connectivity not only reduces the flexibility of rurally-based employees, but prevents those living in these areas being able to fully engage with services beneficial to quality of life

COSLA

Further investment in increasing digital connectivity and related technologies.

Close the digital divide

Dumfries and Galloway LEADER Local Action Group

Digital connectivity will be crucial to the recovery in the rural economy

FSB Scotland

Encourage businesses to lock in and exploit digital innovations made since lockdown

Scotland's public sector economic development actors should create a joint programme to improve digital communications, transactions and data-sharing.

FVL Leader Local Action Group

Anything that can be done to speed up the roll out of R100, and support to communities not being covered, should be encouraged to reduce digital inequality.

Global Supply Chain & Procurement, Diageo PL

Accelerating investment in digital infrastructure to facilitate great flexible working and home working, should be considered.

Historic Environment Scotland

Importance of digital skills for remote working

Kelvin Valley and Falkirk LEADER Local Action Group

Increase rural digital equality through infrastructure

Scottish Islands Federation

Importance of digital connectivity for remote areas

SLAED

Support to maximise and accelerate the use of technology and capitalise on the digitalisation agenda will be crucial.

Transition Stirling

Digital economy – there has been an inequality of access to digital resources, which have been really necessary with people working and studying from home. This needs to be closed in order to be able to achieve a lot of what has been discussed- ensuring people are able to work from home.

University of Stirling

To support remote working as above, the immediate strategic investment priority for government should be to accelerate the provision of high speed broadband (fixed and 5G mobile) across all of Scotland.

Virgin Money

The COVID-19 crisis has accelerated public uptake of digital services and this provides an opportunity for the Scottish Government to lead on this change. Scotland should look to opportunities to capitalise on this pace of change and to make targeted policy decisions and investments

Women's Enterprise Scotland

Policy must support innovation in women owned businesses, for example, by developing digital skills for online trading. Technology companies could play a critical role by providing affordable or free access to digital tools and solutions to help the most vulnerable companies upgrade their technology and support them to survive.

Glasgow Economic Recovery Group, amongst others, made a specific point about digital skills: addressing digital inequalities in our communities is critical if we are meet long- term aspirations for our economy whilst addressing Inclusive Growth needs. Their policy proposals included:

• Conversion of digital loans to digital grants - enhancing the CodeClan model^[4].
• Including a digital audit/assessment during initial interaction of employability providers (SDS, DWP, GCC, FSS)

Digital Inclusion issues were picked up by other submissions including the Equality and Human Rights Commission, Carnegie Trust, and Culture Counts.

Equality and Human Rights Commission

All local authorities should seek to understand the incidence of digital exclusion of pupils facing socio-economic disadvantage in their areas and make urgent plans to support these pupils, including pupils formally or informally excluded from school prior to the introduction of social distancing measures

Carnegie Trust UK

Digital inclusion will be more important than ever - invest but need better data.

Virgin Money

Beyond digital infrastructure and broadband speed, there is an opportunity to provide increased access to digital upskilling and training to allow for a truly digitally inclusive society

Culture Counts

launch wide support for digital inclusion, skills and hardware

There was significant discussion of the importance of digital skills training that is picked up in section 3.2.

2.13 Transport

Much of the material submitted on transport relates to the future potential for a greening of the transport network and is covered in section 5. A few submissions made explicit reference to the impact of transport infrastructure on the wider economy.

Submissions confirmed that there were unprecedented reductions in transport (and emissions) during the height of lockdown); and it has been demonstrated through necessity that home working could replace much of the commuting normally undertaken. Business travel (much of which was by car and 'plane) has been (reasonably) successfully replaced by video-conferencing, and there has been an increase in walking and cycling, although much of this has been 'exercise' rather than necessarily serving essential needs such as food shopping.

Detailed analysis was provided by academics from the University of Stirling and University of Leeds. Their key policy prescriptions are detailed below. Whilst there is a clear overlap with natural capital, they also provide a wider view of potential transport- specific interventions.

Heriot Watt University also made specific transport recommendations around introducing a clean bus fund to stimulate domestic bus manufacturing and establishing a fund to support local authorities and regional transport authorities to start up public bus companies, using recent powers under the Transport (Scotland) Act 2019.

Given demand for public transport use may remain significantly suppressed for some time, the single most important intervention for a green recovery is to manage the rebound effect for car travel demand through reducing the need to travel whilst confidence is rebuilt (and a vaccine discovered) and putting in place meaningful alternatives for the duration. This suggests two principal policy responses:

• Digital inclusion and remote working: Strongly support (and for those jobs in the public sector under the direct control of government, mandate) continued working from home permanently. (This need not be full time, as even part time working reduces the demand for travel.) To support remote working as above, the immediate strategic investment priority for government should be to accelerate the provision of high speed broadband (fixed and 5G mobile) across all of Scotland. Recent Scottish Government initiatives on digital inclusion and the provision of connected devices to disadvantaged groups of people should be mainstreamed to all those that can benefit from them.
• Car restraint: Demand for travel by car must be actively restrained otherwise the outcome of the crisis will be that the Scottish Government's decarbonisation obligations will become impossible to meet. The policy toolkit for this is well known: reallocation of road space from cars to buses, cyclists and pedestrians, parking restraint, and road pricing.

It is acknowledged that the car restraint measures outlined above will be controversial and politically difficult to implement. They are, however, essential. Other policy interventions that should be actively considered to aid the green recovery include:

• Consistent reappraisal of the scientific evidence on physical distancing so that increasing the capacity of the public transport network by reducing the 2m rule (maintaining the use of face coverings if necessary) as soon as it is safe to do so is implemented.
• A complete reappraisal of public transport ticketing strategies to support the increase of capacity as above.
• Continued implementation of 'pop-up' space for walking and cycling with these schemes being made permanent segregated facilities via ongoing investment. It is imperative that immediate progress on this is made before the window of opportunity is closed. Above all, this requires a significant acceleration of effort by local authorities across Scotland to put appropriate measures in place as soon as possible.
• Temporary reallocation of road and parking space (including road closures) over the summer period to support the reopening of café, restaurant and other leisure businesses with sufficient outdoor space to enable physical distancing. Before the end of the summer there should be clear criteria for how these will be retained permanently.
• Switching resources from new build projects to road maintenance to eliminate the substantial maintenance backlog (which in itself causes economically costly disruption) whilst at the same time delivering road space reduction to manage demand, especially in cities.
• Accelerating the programme of upgrading the electricity supply grid and the provision of charging points to accommodate the largest possible proportion of electric vehicles in the fleet.
• An E-bike grant purchase scheme.
• Construction of segregated cycling 'super highways' designed to facilitate sustainable commuting up to the range of E-bikes to all of Scotland's major towns and cities.

Policies that are not consistent with a fair and green recovery and should not be pursued:

• Airport expansion and/or reduction in Air Passenger Duty.
• Vehicle scrappage schemes (unless to swap for an E-bike) and subsidies for car Personal Contract Hire schemes as were put in place post 2008 and led to an increase in car use.
• Free or cheaper parking in town and city centres.

Submission by Professor Iain Docherty, University of Stirling, Professor Greg Marsden, University of Leeds, Professor Jillian Anable, University of Leeds