Strategic commercial interventions: evaluation guidance

2. Introduction

2.1. What is evaluation? Why evaluate?

Evaluation is a systematic assessment of the design, implementation and outcomes of an intervention. It involves understanding how an intervention is being, or has been, implemented and what effects it has, for whom and why. It identifies what can be improved and estimates its overall impacts and cost-effectiveness.^[1]

Evaluation forms an essential part of the policy cycle, as outlined in Figure 1. Whereas appraisal takes place prior to the intervention and sets out the rationale and objectives of the intervention and appraises the options available to meet those objectives, evaluation takes place after the intervention and assesses what has been achieved with public resources and provides evidence and learning points for future interventions. This ensures government action is continually refined to reflect what best achieves objectives and promotes the public interest.

It is essential that public funds are spent on activities that provide the greatest benefits to society and that they are spent in the most efficient way. It is therefore essential that the SG has a clear process to evaluate its strategic commercial investments in a robust, evidence-based and objective-led way, that can be consistently applied across interventions.

2.2. Background

Although not common-place, Scottish Ministers have, from time to time, directly intervened in private businesses in response to the potential failure of a business considered of strategic national importance or in support of a wider policy objective. It is also possible for these investments to unlock wider economic benefits that might not be possible through commercial markets. Examples of SG interventions include the acquisitions of Ferguson Marine, Prestwick airport, and the Lochaber Guarantee.

This requirement for Scottish Ministers to have a clear policy rationale is set out further in section 8 of the SPFM as follows:

“Scottish Ministers have set out Scotland’s National Strategy for Economic Transformation which highlights Ministers’ expectation for economic ambition as well as their commitment to inclusive growth and to regional economies and place. Any investment proposal should be driven by one or more factors underpinned by these priorities and/or associated policies. This could include, for example, businesses that have strategic importance to Scotland’s economy at regional and national level, sectoral significance, or, links with new/emerging industries.”

Recently, there has been increased scrutiny on SG’s strategic commercial interventions and the ongoing support required across these interventions. Audit Scotland has made a number of recommendations in recent audit reports on SG’s Annual Accounts regarding our approach to business interventions. In particular, “It will be essential for the Scottish Government to learn lessons from its experience of recent financial interventions in private companies.”

This is also an area that Accountable Officers have an active interest in, with the new Strategic Asset Review Group(SARG) chaired by the Permanent Secretary and Executive Team’s Investment Committee each having an understanding of the importance of evaluating and learning lessons from previous interventions.