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Supporting Business and Enterprise - Taking forward our National Conversation

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2 Scotland Today

Chapter Summary

  • In the last 10 years devolution has delivered some clear benefits for Scottish businesses and communities. Devolution was always expected to evolve further to meet Scotland's emerging needs.
  • Most key policy levers relating to supporting businesses and enterprise and improving business infrastructure are reserved to the United Kingdom at present.
  • Experience of the last 30 years demonstrates that the status quo will not deliver sustainable economic growth in Scotland which matches UK performance, or indeed the higher levels of long-term growth enjoyed by similar, independent nations.

2.1. It is now 10 years since the Scottish Parliament was established, giving the people of Scotland a direct democratic voice in decisions across a wide range of government activities already administered in Scotland. The Scottish Parliament and Scottish Government have responsibility for many policy areas that affect Scotland's economic performance.

2.2. The Government's Economic Strategy describes how those policy levers are being used to support businesses and develop related infrastructure. In the context of the global recession, the Government's Economic Recovery Plan sets out how full use of all existing levers is supporting economic recovery and sustainable growth during these difficult times, by focusing on three key areas:

  • Supporting jobs and communities
  • Strengthening education and skills
  • Investing in innovation and the industries of the future.

2.3. All of these factors come together in the context of transport infrastructure. With the majority of transport functions devolved, including some post-1999, the Scottish Government has put in place distinctive policies designed to create a well-connected, safe and reliable transport system which underpins business and economic growth as well as providing the people of Scotland with a range of wider benefits.

2.4. The experience of enhanced rail devolution (Box 1) demonstrates what more Scotland can achieve with greater responsibility for policy and delivery and a strong focus on objectives for the specific benefit of the Scottish people. The Scottish Government's view is that further constitutional reform would allow such achievements to be replicated in other areas of policy and delivery.

2.5. The starting point for further improvement is of course the current devolution settlement. From the outset there has always been recognition that the responsibilities of the Scottish Parliament and Scottish Government could be extended.

Box 1: Benefits of Devolution: Rail Services

In 2005, responsibility for railways in Scotland was transferred to Scottish Ministers following the passing of the Railways Act 2005. Before then, rail investment decisions were taken at UK level and important Scottish projects competed for priority status in a hierarchy set by the UK Government. Opportunities to benefit the Scottish economy were missed.

Since 2006, the Scottish Government has taken forward a range of investment projects in Scotland that may not have been achieved at a UK level, as they would potentially have competed for funds against projects in areas with larger population densities and greater congestion in larger English cities.

In July 2007, the Scottish Government took an independent approach from the UK Government to Network Rail's High Level Output Specification. For the first time, the Scottish Government specified industry deliverables on behalf of Scottish rail passengers and freight users, with a view to securing the most positive outcomes for Scotland. Different priorities included a focus on faster journey times to benefit business, which has resulted in substantial planned investment in the important Glasgow to Edinburgh line and from Inverness and Aberdeen to the central belt.

Responsibility for investment decision-making has allowed the Scottish Government to target investment in the Scottish rail network to most effectively meet Scottish Government objectives. These objectives go beyond the rail specific, such as improving connectivity, to the challenging climate change targets recently agreed by the Scottish Parliament.

Under the direct authority of Scottish Ministers, the ScotRail franchise has delivered improved performance, with delays for the year to March 2009 12% lower than the previous year compared with 2.4% across the UK as a whole.

2.6. The Scotland Act 1998 reserves respectively to the United Kingdom Government and to the United Kingdom Parliament executive and legislative powers in relation to the large range of matters listed in full at Schedule 5 to the Scotland Act. The reservations which are most relevant to business and enterprise are:

Constitutional and general reservations

  • Foreign affairs, international relations, and representation.

Financial and economic matters

  • Fiscal, economic and monetary policy, including the setting of interest rates, the vast majority of taxes and excise duties, government borrowing and lending, control over United Kingdom public expenditure, the exchange rate and the Bank of England.
  • The currency: coinage, legal tender and bank notes.
  • Financial services.
  • Financial markets, including listing and public offers of securities and investments, transfer of securities and insider dealing.

Home affairs

  • Immigration and nationality.

Trade and industry

  • The creation, operation, regulation and dissolution of types of business association.
  • Insolvency in relation to business associations.
  • Regulation of anti-competitive practices and agreements; abuse of dominant position monopolies and mergers.
  • Intellectual property.
  • Import and export control.
  • Consumer protection.
  • Product standards, safety and liability.
  • Weights and measures.
  • The Post Office, and postal services.
  • Designation of assisted areas.
  • Protection of trading and economic interests.

Transport

  • Roads - regulation governing use of roads, vehicle standards, driver and vehicle licensing and driver training, operator licensing regime and enforcement for HGVs and PSVs, national speed limits, and renewable Transport Fuels Obligation.
  • Rail - GB wide rail network issues, policing, responsibilities under the Disability Discrimination Act, standards and regulation frameworks, representation of passenger interests and complaints, and specification of cross-border franchises.
  • Marine - marine regulation and policy, internal, international and cross border shipping policy and security, and design regulations for passenger accessibility on ferries.
  • Aviation - economic, security and safety regulation, and international representation.

Employment

  • Employment rights and duties and industrial relations.
  • Health and safety.
  • Job search and support.

2.7. The Scottish Parliament and Scottish Government have responsibility for many policy areas that affect Scotland's economic performance, and in particular have responsibility for enterprise interventions. However as shown above many key policy levers are reserved to the United Kingdom. This includes the key roles on regulation and competition, including the responsibilities of the Office for Fair Trading, the Competition Commission, the utility regulators and the promotion of trading interests by UK Trade & Investment.

2.8. Experience of the last 30 years demonstrates that the status quo has not been able to deliver sustainable economic growth in Scotland which matches UK performance overall. Scotland's economic growth has underperformed relative to both the UK, and other small European countries, in recent decades. Figure 2 shows that between 1977 and 2007, Scotland's average annual GDP growth was 2.0 per cent, lower than the average growth rate in the UK of 2.4 per cent, and significantly below the growth rate among comparable small European countries of 2.7 per cent. Scotland's growth has also lagged that of the UK, in nine out of the past ten years.

2.9. Scotland's businesses are the primary driver of economic growth and increasing their size, competitive strength, productivity and ambition is a crucial challenge.

Figure 2: Scotland's long-term GDP growth performance (1977-2007)

Figure 2: Scotland's long-term GDP growth performance (1977-2007)

Source: OECD, Scottish Government ONS

2.10. Under the existing devolution settlement Scotland lacks the full set of levers for building a wealthier and fairer nation. That is something we cannot and should not accept.