Advisory Council for Economic Transformation minutes: August 2021

Attendees and apologies

Attendees:

• Cabinet Secretary for Finance and Economy
• Minister for Business Trade, Tourism and Enterprise
• Mariana Mazzucato
• John Alexander
• Jackie Brierton
• Lynne Cadenhead
• Chris van der Kuyl
• Sharon White
• Graeme Roy
• Mark Blyth
• Maggie McGinlay
• Sean McGrath
• Mark Loga
• Jamie Grant
• Roz Foyer
• Anton Muscatelli

Apologies:

• Nick Macpherson
• Emma Parton

Supporting SG officials:

• Liz Ditchburn
• Gary Gillespie
• Cornilius Chikwama
• Richard Murray
• Kathy Johnston
   

Items and actions

Introductions

Ms Forbes welcomed members to the 2nd meeting of the Advisory Council and thanked them for all their contributions since the Council last met. A significant amount of work has been undertaken in a short period of time and we remain on course to deliver a strategy which will transform the Scottish economy.

The Council gave a clear steer at the last meeting: the need to take a systems-based approach; the strategy must be easy to understand; central to the strategy’s success will be ensuring the right delivery mechanisms are in place; recognise the cluttered policy landscape and scope to consider as part of our work the deficiencies in existing strategies; and awareness of the key blockers hindering transformational change which need to be addressed. 

The focus today will be hearing from the members on the revised vision and missions, the key themes to be included in the strategy and begin to identify the key blockers and enablers to transforming Scotland’s economy. 

Revised vision and outcomes, latest analysis and emerging themes from engagement

Ms Forbes invited Gary Gillespie to provide an overview of the feedback received from members and stakeholders and how this has fed in to the latest draft vision and missions. 

Gary Gillespie outlined that the feedback received on the original framing of the vision and missions was largely positive, but further refinement was needed on the language and that the transition to net zero should be at the heart of the vision. The revised text now has the transition to net zero and fair work at the centre of the vision, with more straightforward language used for the missions. In addition, we have set out some draft measures of success to help articulate what it is we are seeking each mission to achieve. 

Ms Forbes invited initial reactions to the revised vision and missions, where members highlighted:

• the need to be able to rank the top priority actions within the three missions
• further refinement needed on the vision as the current draft will not transform our economy. Looking to produce an economic strategy rather than a net zero strategy
• care is needed on the language around just transition, recognising that this needs to be managed carefully to provide the confidence for businesses to invest in the transition to net zero. How this transition is managed could have major implications for the number of green jobs in the Scottish economy
• the missions could be narrower in focus
• recognition that public support can play a key role in helping industry innovate and transform. Conditionality is very important and has been used successfully in other countries, such as the steel sector in Germany. This is also an important lever for ensuring fair work
• need to keep open the “how” as often dynamic spillovers from certain innovations can lead to growth in other sectors

Ms Forbes highlighted there will be an opportunity for members to continue the discussion on the revised vision and missions in the breakout groups, but recognised the importance of getting the vision right and that there will be a number of different ways of achieving the vision. 

Mr McKee stressed the importance of fair work and the role the analysis can play in helping us understand the transformational change we need the Scottish economy to make. There is scope to make the missions much more granular.

Developing actions to deliver transformational change

Ms Forbes highlighted that a significant amount of additional analysis has been undertaken since the Council last met to inform the key challenges and opportunities facing Scotland. This was included in the background evidence slides members received in advance and will be used to inform the breakout discussions.

Each group will focus on three areas: feedback on the vision and outcomes; reflections on the challenges and opportunities identified; and discuss the key blockers and enablers. 

 For the breakout group chaired by Cornilius Chikwama on “Investing in and supporting industries of the future”, the main issues raised included:

Vision and mission:

• the vision needs to have people at the centre and be clear how the strategy will make a difference to people’s lives
• it also needs to use clear language and avoid using terms that may be viewed as subjective
• the missions need to relate to three key outcomes (a) strong economy; (b) net zero and (c) fair work. In so doing the role of talent in driving economic transformation should come out more strongly
• the vision and missions need also to have a stronger gender and/or equalities focus and should appeal to the various stakeholders who will need to work with Government in delivering the strategy
• strong impactful and aspirational marketing messages around the strategy is essential to encourage buy-in from business

Challenges and opportunities:

• when looking at productivity as a challenge, we need to recognise that the relationship between pay and productivity has broken down and more need to be done to translate productivity into improvements in living standards
• it is important to pay close attention to Scotland’s micro and small businesses and the challenges they face in achieving the outcomes we set.  Most micro and small businesses cannot lead the way, they largely react to the market
• when looking at skills, we need to be clear the purpose is to improve people’s lives.  We also need to look beyond technical skills, and start investing in non-technical aspects like building ambition and confidence.  We also need to understand the skills challenge is not uniform, with Scotland performing well at the top end and but at the lower end of the skills spectrum
• there was a request to look at labour market mobility data to understand where we are losing people to and to start thinking about how we create incentives to retain people in Scotland. Need to promote Scotland as a destination to attract the right skills
• nto consider how the challenges interact. Some people may be leaving Scotland because of challenges with mobilising capital.  It takes a very long time to mobilise capital in Scotland when compared to London and the USA
• look at opportunities to develop environmental and social governance as a marketable commodity that we can use to sell Scotland
• transferring growth and prosperity outwith the major geographical sites of growth (Central Belt), is comparatively easier in Scotland than elsewhere in the rest of the UK
• need to ensure business support from the enterprise agencies and local authorities is able to deliver transformational change in the Scottish economy

Enablers and blockers:

• government needs to make tough choices about what it focuses on if it is to succeed. The economic strategy needs to be focused on a few critical things that will deliver impacts
• connectivity, in the sense of social capital, is a challenge for Scotland’s emerging entrepreneurs. We need to think about how we network our new entrepreneurs
• support for new enterprise ideas / proposals to a stage where they can attract funding is crucial. There is no shortage of capital in Scotland, but need to develop a strong pipeline of credible projects to attract investors

Richard Murray chaired the group on “New, Good and Green Jobs. Jobs that are satisfying, pay a high wage and are fair” and the key points raised included:

Vision and missions:

• need to reflect the important contribution from rural and island economies
• have to look at the transition with excitement and be blunt about what needs to de-prioritised. The vision should be simplified into one clear statement of ambition which can be aspirational, such as “Scotland will be the best at….”. It needs to energise the nation to take action
• net zero and fair work are not specific economic outcomes but a necessary means for where we want the Scottish economy to end up. The IPPC report highlighted that we are heading towards a global catastrophe unless change happens now
• the transformation needs to close wealth and income inequality gaps, and include the creation of jobs. Economic growth is a tool for human wellbeing/welfare not an end in itself
• at the heart of the strategy is the wellbeing of the planet and its people
• does the current vision sufficiently differentiate Scotland from other countries? 

Opportunities and challenges:

• Scotland is a small country and there is scope for it to become a demonstration economy where we can show the world what is possible in specific areas. For example, we can do more to exploit existing technologies (e.g. electric cars) and in planting more trees/rewilding parts of Scotland
• for novel technologies such as green hydrogen, the Government can create the environment to help support business investment. This may require bold Government investment to help solve specific problems
• opportunity for enhancing wellbeing through the four day week
• securing the jobs which flow from transformational change, such as offshore wind, is vital as Scotland has missed similar opportunities in the past for onshore wind
• for many people in rural areas, setting up a business is the main option available to them
• local authorities and schools have a key role to play in green retro-fitting which can help support place-based apprenticeships
• scope for more efficient public sector R&D by joining up current support

Enablers/blockers:

• there is a key role for skills as we currently have jobs which cannot be filled but at the same time have a significant number of children living in poverty
• when creating future job opportunities, it is essential that we have a pipeline of skilled workers ready to take these roles. Further join-up is needed between schools and the further and higher education system. For example, the system is not currently feeding the high tech sectors. Have to link up with schools to create apprenticeship opportunities in these sectors
• access to capital and skills are stopping Scottish businesses taking the next step. Business R and D is not where it needs to be – need to invest in the right technologies to get the right financial returns
• greater role the education system can play in supporting future entrepreneurs, including the Young Person’s Guarantee
• need to identify and address the many blockers which are preventing women from participating in the labour market (e.g. state nurseries which close early)
• need to revisit the living wage as it is not enough to give a good level of standard living, secure employment and high value employment
• have appropriate support available to business throughout their lifecycle
• training needed of public sector works and agencies on fair work
• consider where the private sector can play a greater role in delivering the strategy (e.g. mentoring)

The key points raised in the group chaired by Kathy Johnston on “Delivering across Scotland in a national or regional way” included:

Vision and missions: 

• need to be more inspirational. Missions identify problems that require many different sectors to innovate and invest. Missions can be used to focus sectoral activity around without micro-managing sectors. Need to be clear what the strategy does that we have not had before
• the diagram summarising the vision and missions is complex, tries to fit too many things in, and has a lot of words that are not potentially well-understood by the public. There is the need to be clear on what we want to achieve, what is new and what this framework will help us do which we couldn’t do before
• important to check what is not mentioned, such as growth. Have to be clear that this is about growing the Scottish economy in a way that directs us towards sustainability and inclusion. It is about redirecting growth

Challenges/opportunities:

• there was positive feedback on challenges identified, although they also capture wider infrastructure beyond digital
• reliance on public sector in some regions could be included and turned around as an opportunity to innovate public services. Remote working and repopulation are further opportunities which could be included
• recognised that local areas do not all want the same thing and we need to reflect that and consider what success would look like in these areas
• there are a lot of regions but they have too few levers. There is a danger of spreading ourselves too thinly. Focus on existing assets we can build on within regions and prioritising the levers we use to deliver real impact

Enablers/blockers:

• we live in a global economy and our ability to pull a single lever and have the impact we want to see is not straightforward
• the strategy needs to signal commitment and medium-term stability of the landscape to private sector to ensure businesses have confidence to invest. Businesses in Scotland are well-placed to do this
• when considering stopping things, reframe this as a positive

Ms Forbes thanked members for their contributions and agreed that further work is needed to sharpen and simplify the vision and missions. She reiterated that the strategy has to lead to ruthless prioritisation, a focus on delivery, eliminate the key blockers to change and require leadership to work across boundaries. 

Mr McKee added that there is a duty for officials to share more material and this will be facilitated through the new data room which has been set up.

Next steps

Gary Gillespie outlined the next steps to take forward the actions from today’s meeting and to capture the feedback from the stakeholder and public consultation. We will look to set up sub-groups in two weeks’ time to keep momentum and support the development of the strategy.

Reflections and close

Ms Forbes thanked members again for participating in today’s discussion and for their valuable contributions so far as we continue to develop a strategy which will support transformation change.