Regional economic policy review: paper 1 – the national perspective

4. Delivery of Economic Development in Scotland

4.1 Current Context

4.1.1 In addition to Scottish Government, there are a number of bodies involved in the delivery of economic development across Scotland^[29]:

• Local Government and Community Planning Partnerships
• Enterprise Agencies
• SCDI
• Scottish Futures Trust
• Business Gateway
• Skills Development Scotland
• Scottish Funding Council
• Transport Scotland: Regional Transport Partnerships
• Third Sector
• City Region and Growth Deals
• Regional Economic Partnerships

4.1.2 As NSET sets out, over the next decade, the Scottish Government looks to promote a wellbeing economy supporting socioeconomic recovery in a context strongly characterised by challenges like Covid, the cost crisis, child poverty and reducing regional inequalities.

4.1.3 Through a variety of strategies and action plans the Scottish Government contributes expertise, research and funding in order to effectively fulfil three key ambitions: for Scotland to be fairer, wealthier, and greener. However, many respondents to the consultation were clear that the present scene in Scotland is one of a 'cluttered landscape'^[30] despite several attempts made to review policy and delivery^[31].

4.1.4 This clutter has been added to since Covid, with additional business support being initiated and delivered through the Enterprise Agencies, Business Gateway and Local Authorities, among others. Although entirely necessary, and essential to supporting people and the businesses that maintain Scotland's economy, it has revealed just how acute the capacity challenges are within the system to deliver additional funds as well as "business as usual".^[32]

4.1.5 It is worth nothing the Business Support Partnership, comprised of all those involved in business support, recently published a strategic delivery plan (2022-27) that aims to clear the landscape and demonstrate links to NSET. There are two stated Goals that are of relevance to this review; Goal Four around partnerships and the culture of delivery that has relevance to REPs, and; Goal Two around quality of data, which relates to building analytical capacity within regions.

4.2 City Region & Growth Deals

4.2.1 Supporting regional economic development through £1.9 billion investment in the City Region and Growth Deal Programme is a key policy responsibility of the Scottish Government's Economic Development Directorate^[33]. The outcomes evolving from that Programme, such as internationalisation and increased inward investment plus the long-term economic strategies emerging from the REPs, are of particular relevance to wider regional economic development and what happens after the Deals are completed.

4.2.2 Beginning in 2014 with the Glasgow City Region Deal, the Deals programme, serves as a central economic development intervention in Scotland. As noted earlier, the Deals are a long term financial and strategic commitment between the Scottish Government, the UK Government, local government, and other regional partners, which now cover all of Scotland.

4.2.3 Through the Deals, regional partners have developed a suite of projects that build on existing and emerging regional strengths, intended as a catalyst to boost productivity and encourage further growth and inward investment. For example, Edinburgh has a core focus on data innovation, the North East on energy transition, Ayrshire on aerospace and satellite technology, and South of Scotland on natural capital.

4.2.4 The partnership working that is evident in the Deals programme is one of the best examples of cross government working and demonstrates how a shared goal with equal investment can focus minds to bring about genuine economic benefits through both large scale infrastructure projects, and complementary Community Wealth Building, skills and employability programmes.

4.2.5 City and Region Growth Deals are progressing over 200 projects with a range of purpose including innovation, food and drink, aerospace, energy transition, digital infrastructure and tourism. Paper Two offers more details around the projects and the benefits intended.

4.2.6 There is a great deal of good practice to learn from in terms of collaborative working, and the robust, proportionate and consistent approach to monitoring and evaluation, however REPAG note that there could be stronger representation of business and third sector in the development and delivery of Deal projects, an issue we see replicated in the membership of some of Scotland's REPs. Though it is not the Scottish Government's remit to determine this involvement, they should consider how to work with regional partners to ensure business and communities can engage more meaningfully.

4.3 Regional Economic Partnerships

4.3.1 As noted earlier, recognising the benefits of long term regional collaboration, and securing this beyond the scope and lifetimes of the deals, the Scottish Government has committed to enabling a network of Regional Economic Partnerships (REPs) across Scotland. The bodies that deliver the various City Region Deals formed the basis for the developing REP network, and they are encouraged to involve private, public and third sector.

4.3.2 Some are more well established and well-resourced than others. Scottish Government has provided support for REPs through its agencies and officials but only recently through single year direct funding^[34].

4.3.3 Scotland has eight regional economic partnerships or collaborative equivalents. Whilst it is recognised that not all wish to use this term, for simplicity the acronym "REP" is used in this review. This is not to wash over any sensitivities around the title, including any concerns around a democratic deficit, but its rather intended to act as a shorthand for these forms of collaborative partnerships.

4.3.4 REPs membership across a range of public, private and third sector stakeholders. Membership and involvement does vary in part due to differing remits and levels of maturity. This may also be as a result of a lack of clarity on the expectation from Scottish Government (and UK Government) on what a REP might achieve, how they can contribute to national aims, and what the funding implications might be.

4.3.5 It was the potential within these regional structures that led the Scottish Government to their recommendation regarding delivery of the UK Government's EU replacement funding, as set out in the Bell-Bachtler Report: that the UK Shared Prosperity Fund ought to flow to REPs, via Scottish Government, to disburse. This would have provided REPs with multi-year funding to support the strategic work they are designed to do and would have ensured wide consultation and collaboration in the range of activities supported.

Membership, Purpose and the Benefits of Partnership

4.3.6 The Deals Governance formed the basis for the developing REP network however REPs are a much broader and more flexible entity. Scottish Government does not seek to legislate for the existence of REPs as this may undermine their autonomy and contradict their identity as coalitions of the willing. Furthermore, legislation would be too heavy handed to allow the regional economic nuances to be played out in different memberships and strategic ambitions.

4.3.7 Their membership and remit is intended to be broad and inclusive, with public, private and third sectors all represented in setting the strategic goals for any given region. REPs have the advantage of being able to create their own priorities and purpose by having ownership over their Regional Economic Strategies which will then strengthen the membership by giving specific actions for them to deliver and participate in.

4.3.8 Given the Scottish Government's recurrent emphasis on regional autonomy, REPAG would note that in terms of membership Scottish Government officials remain as collaborators, observers and critical friends rather than as decision making members of REPs. The aim here is for greater horizontal responsibility, accountability, and integration across regional partners, rather than the more traditional vertical reporting lines from regions to central Government.

4.3.9 The reference to policy areas included in this review will also help to support decisions around membership, giving the signal to regional partners that Scottish Government wishes to support this holistic and collaborative engagement at a strategic level – doing more with less, in terms of using the REP as a conduit to more local level discussions. This should also translate to how the national agencies engage.

4.3.10 However, this review suggests that the multi-sectoral and organisational membership of REPs is not the only key factor to sound strategic decision making.

4.3.11 Whilst reference has been made to the link between the Wellbeing Economic Monitor as providing shared outcomes and metrics, it is clear from our consultation that there is insufficient capacity within REPs to develop novel regional data that links to the Monitor or indeed undertake the kind of specialised economic analysis required to create unique regional baselines, using this to then make decisions about the most suitable actions to take given the specific strengths, opportunities, and challenges.

4.3.12 For the most part, when such analysis is required, regional partners inevitably carry out costly procurement exercises for consultants. However, REPAG note the impressive work of the Glasgow City Region's Intelligence Hub, and highlights this as best practice. More will be said on this in Paper Two, including a related recommendation around exploring how regions could benefit from such a Hub.

4.3.13 One of the strongest themes stated that regional working adds value by tackling issues across borders and at scale. Where there is shared endeavour and resource, there has been shared benefits, with the regional partners being generous as REPs mature, agreeing to share risk and costs, trusting the benefits with be multiplied across the region. It is our hope that these benefits, seen in the more mature REPs, help to reassure the emerging REPs that the development of regional governance, which can be tricky both politically and at officer level, is worth the effort.

4.3.14 Collaboration is seldom a negative, particularly when developing strategic aims. Many of the Deals and REP structures have cited unforeseen positive consequences of bringing together partners across a range of sectors.

• Edinburgh City Council noted that by Higher Education partners offering resource outwith their own Deal projects, e.g. Benefits Realisation Plan, this has encouraged a consistent approach to monitoring and evaluation within the national programme.
• Many regional partners cited the benefits of economies of scale in tackling shared challenges: employability programmes accessible regardless of local authority; linked skills plans across boundaries; integrated transport schemes connecting childcare with employment; infrastructure projects spanning boundaries.

Funding

4.3.15 There is currently no legislation nor direct central government funding for REPs which may have contributed to their fragmented development. Against the strong messaging from regional partners of acute capacity challenges but a positive will to collaborate strategically, the absence of funding is notable, especially with the growing emphasis on functional regional economies and REPs (as noted, NSET has a strong narrative on REPs as potentially the primary vehicle for driving strategic long-term plans on a regional scale, not just in terms of economic function, but also in terms of the scale of shared endeavour and ambition).

"Going forward there will need to be a wider discussion on how data is captured to ensure that efforts of collation are meaningful and shape future work. This will require investment and sharing of best practice at a national level."

4.3.16 Although the Scottish Government and the various Agencies work alongside regional partners and do a great deal to aid the development of Regional Economic Strategies, REPAG recommend that they now explore how to support REPs to facilitate the work all would like to see be carried out and alleviate capacity issues. This should include how a better alignment within the Scottish Government itself might improve the use of existing funding that flows into regions via various policy areas that already, or intend to, operate at a regional scale.

4.4 Challenges to Regional Working

4.4.1 Though REPAG largely agrees that there is no requirement to legislate for REPs and regional working, this does leave open the risk of political tensions, where there is no democratic authority granted to members to make decisions on behalf of a region. However, REPAG have seen how robust and agreed governance can alleviate these tensions and political risk, with officials presenting factual evidence upon which members can make informed decisions on shared aims. Without question, the quality of data is central to providing such evidence, and REPAG note once more the benefit of supporting additional capacity within REPs to carry out novel and innovative economic analysis, noting this would not only benefit the region, but that the Scottish Government itself could benefit from this more nuanced and deeper understanding of Scotland's regional economies.

4.4.2 As with most policy areas it has been repeatedly emphasised in the strongest terms by regional partners that the volume, complexity, and challenging timescales, related to Scottish Government funding streams in addition to that provided by UK Government, has created vast capacity challenges and strain among Local Authorities^[35].

4.4.3 As noted, REPAG strongly recommend that the Scottish Government assess the funding landscape in the context of supporting REPs. Indeed, this is something that the UK Government could also consider, looking at the regional scale to disburse the next tranche of UK Shared Prosperity Funds, for example.