On 1 March 2022 the Scottish Government published its new 10-year strategy for economic transformation (NSET). The 2021-22 Programme for Government indicated that the strategy would be published in Autumn 2021, but in December the strategy was delayed due to pressure in responding to the omicron wave of COVID-19.
This extended blogpost provides a summary and analysis of the strategy. Please use the contents pop out below to aid navigation.
The Cabinet Secretary for Finance and the Economy unveiled the strategy at a private event in Dundee on 1 March 2022 and published this through a Government initiated question in the Scottish Parliament on the same day. On 2 March 2022 the Cabinet Secretary answered questions in the Chamber on the strategy. The Scottish Government also published three evidence papers which have informed the development of the strategy; an overall evidence paper, evidence from Industry Leadership Groups and Sector Groups, and evidence from Regional Economic Partnerships.
The economic modelling suggests that the economy could be 4.9% (£8 billion) larger in 2032 than it would otherwise have been if NSET projects to boost exports and productivity are implemented successfully. Modelling assumes that, compared to a base case informed by the Scottish Fiscal Commission forecasts, the Scottish Government will successfully implement three existing strategies (the Trading Nation exports growth plan, the Inward Investment Plan and the Global Capital Investment plan).
Significantly, this means successfully growing exports from the equivalent of around 20% of GDP to 25% by 2030. The 2019 Trading Nation strategy identified 15 priority 1 markets where export growth could be achieved; 10 of these markets are part of the EU, and a further two are within the EEA or the single market. The Scottish Government published analysis which suggested that, by 2030, Scotland’s GDP could be 6% lower due to the increased trade barriers between the UK and the EU under the terms of the Trade and Cooperation Agreement, so meeting these export growth targets looks more challenging now that it did in 2019.
What does the strategy set out?
The overriding vision for the strategy is to deliver a “wellbeing economy” for Scotland, which the Scottish Government defines as “an economy where good, secure and well-paid jobs and growing businesses have delivered a significantly reduction in poverty”.
This vision is to be achieved through five programmes of actions;
- Entrepreneurial People and Culture,
- New Market Opportunities,
- Productive Businesses and Regions,
- Skilled Workforce, and
- A Fairer and More Equal Society.
These feed into three ambitions – for Scotland to be fairer, wealthier, and greener. The five programmes of actions have been chosen by the Scottish Government as they are the areas where it considers progress is likely to have the greatest impact, with the supporting evidence and stakeholder engagement supporting these areas of focus. The Cabinet Secretary noted at the launch event that:
“This strategy is intentionally focused on a small number of priorities; it does not seek to do everything. It focuses on five policy programmes with the greatest potential benefit and on how to achieve them, rather than address every potentially beneficial action for every industry. The programmes have been carefully chosen, based on the evidence.”Cabinet Secretary for Finance and the Economy, 1 March 2022
The strategy has a chapter devoted to each of these five programmes of actions, along with a chapter devoted to how the plan will be delivered. The strategy also outlines how it aligns with existing action plans; 32 of these are categorised as feeding into the five programmes of actions outlined in the strategy, set out in the image below:
Reaction to the plan is covered in a section later in this blog, but one observation made by several commentators is that the actions contained in this strategy are high level and do not necessarily set out time scales or clear objectives. For example ‘Adapt and review Scotland’s apprenticeship system so that it is available for start-ups and early scale-ups to use’ does not set out the scale of this adaptation, what exactly will be achieved and by when. In addition, several projects and actions simply restate existing aims – e.g. ‘Deliver the Strategic Transport Projects Review 2’, or ‘Implement the next phase of the Green Jobs Workforce Academy’ and ‘launch a new skills guarantee for workers in carbon intensive industries’.
SPICe published a briefing in September 2021 looking at the history of economic development in Scotland since devolution, noting that:
“Measuring the activities of the publicly funded economic development agencies against the Scottish Government’s budget and intended outcomes has been an ongoing challenge for parliamentary scrutiny. Over 20 years ago in 1999, there were concerns around this matter from a parliamentary committee, and despite the passing of time, a 2021 legacy report from a parliamentary committee concluded similar.
A ‘cluttered landscape’ has been something of a recurring theme when in it comes to economic development in Scotland. Over the last six years, we have seen some attempts at rethinking the ‘enterprise and skills’ landscape in Scotland, via the activities of the Enterprise and Skills Strategic Board. But the question is whether this has achieved the change that was originally anticipated, as some would argue the landscape is still cluttered.”
Key actions in the strategy
The strategy contains a total of 77 actions across the five programmes, and some of the new actions include to:
- Adapt the apprenticeship system to be more accessible to start ups and better target under represented groups.
- Develop a network of entrepreneurial campus infrastructure, including incubation spaces, seed funding and access to technical expertise to help with the development of minimum viable products. Similarly, establish a network of ‘pre scalar hubs’ for very early stage founders.
- Appoint a Chief Entrepreneurship Officer in the Scottish Government to work with industry and the skills system.
- Scottish Offshore Wind Energy Council to develop a Collaborative Framework Agreement to encourage the sector the realise supply chain opportunities from the recent Scotwind auction.
- Adopt a cluster approach to attract inward investment and boost Scotland’s supply chain, using Fintech Scotland as a model which was the first cluster in UK to gain silver accreditation in Europe.
- Establish an investor panel to attract investment to a pipeline of projects, and expand the Green Investment Portfolio.
- Undertake a review on how best to increase the number of social enterprises, employee-owned businesses and cooperatives in Scotland.
- Develop a Skills Pact with employers and unions, which will focus on improved investment in skills and that this investment better meets the needs of employees and employers.
- Apply fair work conditionality to grants including requiring payment of the Real Living Wage by summer 2022, and determine how these conditions can be applied to non-departmental public bodies.
- Work with employers and trade unions to deliver sectoral fair work agreements in sectors where low pay and precarious work are most prevalent.
Implementation of the strategy
At the launch event in Dundee, the Cabinet Secretary for Finance and Economy explained that a series of actions would be delivered in the first 100 days following the publication of the strategy, and that there would be a ‘relentless focus on delivery’. The strategy includes a chapter setting out how this enhanced focus on delivery will be achieved, which includes the following measures:
- Restructuring the Enterprise and Skills Strategic Board (ESSB) to become the National Strategy for Economic Transformation Board (NSET). NSET will be co-chaired by the Cabinet Secretary for Finance and Economy and someone from the private sector, and will include worker representation. NSET will hold the public sector, business and third sector partners accountable for delivery of the strategy.
- Provide multi-year budgets through the resource spending review to provide greater certainty to business.
- Finalise detailed delivery plans within six months of the publication of this strategy, publish annual reports from the NSET board, and publish a wellbeing economy monitor.
- Publish annual progress reports to improve public accountability.
Reaction to the Strategy
Business groups have been broadly supportive of the strategy since its publication. The Scottish Chambers of Commerce highlighted that the key test for the Scottish Government and its agencies would be delivery, but:
“Scotland’s businesses will applaud the scale and ambition set out in the strategy, which has the potential to live up to its name and truly revolutionise the Scottish economic landscape over the next decade. The Strategy is a strong starting point for transformation and businesses of all sizes and from all sectors will step forward to help support the initiatives set out to drive forward the renewal of Scotland’s economy.”
CBI also welcomed the ambitions in the strategy and highlighted the importance of delivery, while the FSB welcomed the focus on growing entrepreneurial skills in Scotland and noted that “the headline measures in this strategy could help Scotland realise its long-term ambitions.”
The Scottish Retail Consortium welcomed the focus on skills, innovation, digital and transport infrastructure, as well as the commitment to improve the apprenticeship system, but noted that:
“However, retailers would have liked to see greater clarity on what steps are going to be taken to keep down the cost of doing business. To successfully transform Scotland’s economy to be fit for a net zero future will require investment from both government and businesses; hopefully the necessary fiscal measures will be delivered as part of the commitment to multi-year Budgets in the future.”
Others were less positive about the strategy. Sir Tom Hunter was of the view that the strategy had nothing to say about productivity in the Scottish public sector, stating that:
“What we have here is a long wish list with no magic wand to deliver it, which I do not believe is market tested nor pragmatic. We need a far more focussed approach to economic delivery and one single body with absolute authority and responsibility for that delivery with no one checking their own homework.”
The Scottish Trade Unions Congress (STUC) also highlighted that the strategy made little mention of the public sector, and argue that the strategy should have focused on improving pay and conditions in the sectors which contribute most to Scotland’s economy and labour market. The STUC also suggested that the strategy needs to do more to learn from previous attempts to secure economic gains from renewable technologies to ensure that the transition to net zero is successful. The STUC General Secretary stated:
“Sadly, this is more a strategy for economic status quo than economic transformation. The National Strategy for Economic Transformation has a sprinkling of good ideas and we have successfully argued for some strong lines on the importance of Fair Work, decent pay and the role of trade unions, but overall, it is a missed opportunity to address the challenges before us and make real, transformational change.”
On the wellbeing measures, Oxfam welcomed the wellbeing monitor and the shift to focusing on more than just GDP, but want more to be done to recognise the contribution made by paid and unpaid carers. The Wellbeing Economy Alliance also welcomed these aspirations, but noted that:
“The last decades have shown us that economic models that focus too narrowly on growth and productivity for their own sake fail to translate into more secure jobs, higher wages, decent housing for all, or a healthier natural environment. Assuming growth and productivity will trickle down to all has been debunked – Scotland needs to be bolder in its approach to economic change.”
The Fraser of Allander Institute expressed the view that the plan did not mark a radical departure from previous Scottish Government strategies, and questioned whether the content of the strategy would deliver the vision:
“For those of us familiar with the plethora of strategies and delivery/action plans written over the past decade, the format is familiar. A vision is presented that few would disagree with, then a range of actions (5 programmes, 18 projects and 77 actions) are laid out that sound sensible but lack detail. If we are lucky, we will be presented with a range of data that tells us in detail about the issues at hand. But rarely do we go away any the wiser about why actions have been chosen and what is achieved if they are delivered.”
The think tank raised concerns that while the strategy was published alongside evidence, this did not set out what evaluation had been done as to how achieving the measures included in the plan would lead to success.
Key questions for scrutiny
As noted earlier, measuring the success of economic development activity in Scotland has been a key challenge over successive sessions of the Scottish Parliament, and with this ten year strategy likely to span at least into session 7 this is likely to be an ongoing challenge. Key questions to inform the scrutiny of this strategy include:
- Will the delivery plans provide greater detail on the actions to be undertaken within each programme of the strategy, including the desired outcomes and the effect the success of each action will have?
- How will the NSET board ensure the successful implementation of actions across the Scottish Government, enterprise agencies and other national bodies?
Andrew Feeney-Seale, Senior Researcher, Financial Scrutiny Unit