First Minister Alex Salmond
Scottish Council for Development and Industry
38th International Seminar
Fairmont Hotel, St Andrews
Friday, March 20, 2009
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Good morning. My thanks to Keith Aitken for that kind introduction. I am delighted to be here to address this 38th SCDI Annual Forum.
I had the privilege to address this august gathering last year - amid, it has to be said, a rather different economic environment.
The first clouds were starting to gather. But very few people could have foreseen the financial devastation of the past twelve months, or the sharp recession which has followed.
Today I want to talk about how my government is responding. And I want to explain why all efforts - in Scotland, in the UK, America, worldwide - must be focused on delivering a substantial stimulus, a substantial reflation to the economy.
We must cushion against a major downturn. We must protect jobs. We must support confidence.
And, of course, we must have a strategy for a strong and sustainable recovery.
It is that strategy that I want to discuss with you today.
How we build world-class skills and world-class infrastructure in Scotland.
How we match those strengths to our key sectors of comparative advantage.
And how we equip Scotland to generate new high quality, high value jobs in the vital knowledge industries - sectors like renewable energy, biotechnology, the life sciences, information technology and the creative industries.
Because we must resolve not to let the immediate economic challenge obscure the long-term goal - delivering strong, sustainable economic growth for the benefit of all our people.
Work of the SCDI
Last year I was pleased to be able to honour the vital role that SCDI has played in shaping Scotland's economic history.
Your influence stems from the breadth and scope of this organisation. The quality of your research and analysis. And your impartiality and detachment - with your vision fixed on how best to advance prosperity and enterprise in Scotland.
Today I am reminded in particular of the pivotal role that SCDI played in a major transformation of the Scottish economy - the development of the North Sea oil.
SCDI played a crucial role in advancing that debate, focusing its 1972 conference in Aviemore on oil and Scotland's future.
As we know, there is a new energy revolution underway - through the development of green, renewable energy. And it is only right that this influential Forum considers the special position of the energy sector. And the tremendous potential it offers.
With firm resolve, shared purpose, and wise decision-making, we can ensure that the promise of renewable energy matches that of North Sea oil and gas.
And of course, it is in the nature of renewables that their potential is not finite, but infinite.
Promoting economic recovery
Let me turn first to the economy, and our programme for recovery. There was some encouragement from the most recent labour market figures, showing Scotland's employment remains higher and our unemployment lower than the UK average.
But we must expect that there will be further bad economic news in the coming months. And we must do our utmost to cushion against it, to protect jobs and businesses.
Six point programme for economic recovery
The Scottish Government is pursuing a six point programme for economic recovery. A programme to inject demand and confidence into the Scottish economy. A programme to provide immediate help to those businesses and families worst affected by the downturn.
We are bringing forward more than £300 million of capital spending into the coming financial year. We are ensuring that all government activity, including planning, regulation and public procurement, help to support economic development. We are intensifying our support for Homecoming 2009, seeking to deliver at least an extra £40 million of tourist activity this year alone.
And through Skills Development Scotland and the Scottish Funding Council, we have strengthened the Partnership Action for Continuing Employment (PACE) initiative, to help businesses and individuals facing redundancy.
Latest estimates suggest the measures in the Scottish Government's recovery programme should support 7000 jobs nationwide. And we have been encouraged by the supportive role played by Scottish business.
Take the BusinessClub Scotland initiative, which I launched in February in partnership with SCDI and other business bodies. This is an excellent scheme, of immediate and long-term benefit. It will help Scottish firms seize the opportunities from the Year of Homecoming, the 2012 Olympic Games, the 2014 Commonwealth Games. And much more.
Need for a greater fiscal stimulus
The measures we are taking for recovery are sensible, positive, significant measures. I believe that they show that this government is seeking to use every lever we have to promote economic recovery.
But it remains a fact the Scottish Government's budget is effectively fixed. And in this sharp downturn, we have no inherent ability to reflate the Scottish economy. That power lies with Westminster.
Let us be clear. Whatever is the impact of monetary policy - be it interest rate cuts, quantitative easing, providing liquidity to the banks - there is one sure prescription for the current crisis.
A substantial fiscal reflation
Martin Wolf, writing last week in the Financial Times, said: "The right thing to do is more than enough. It will always be possible to withdraw a stimulus a year or two hence. It will be far more difficult to make action effective if depression, both economic and social, takes hold."
And the International Monetary Fund - so often the guardian of fiscal prudence - is pressing governments worldwide to borrow to reflate their economies and stave off a "great recession".
How should we respond?
Looking to the United States, we see the new Obama administration already injecting a stimulus of over 5% of GDP - $787 billion - into the economy.
The bulk of that stimulus is being delivered where it can work best. On the ground. At state level.
Within one minute of the President signing the stimulus into law, the Governor of Missouri sounded an alarm and a construction crew started building a bridge.
And the state of Maryland - which has a similar population to Scotland - will receive some £2.6 billion extra funding. Which will support 66,000 jobs over the next two years.
Contrast that with the approach in the United Kingdom.
The UK stimulus package is - at 1.5 per cent of GDP - only one-quarter the size of America's. And its centrepiece, the cut in VAT, expires at the end of this year.
Contrast this top-down approach with the state-led approach of the United States. Consider that investing in "shovel ready" capital projects - rather than the VAT cut - would have created twice as many jobs in Scotland and across the UK.
Consider too that from next April, there is planned a programme of public spending cuts. Cuts that will reduce the Scottish Budget by £500 million in 2010-11 and in 2011-12.
Little wonder that last month the IMF reported that in 2010 the UK would be the only one of eight major economies where government will take money out of the economy.
This is a matter of real concern. We are now one month ahead of the UK Budget. And I believe that now is the time to press for a bigger, better stimulus package.
Building a world-class business environment
Let me turn to deal directly with the themes of your Forum. The emphasis is on connectivity, on flexibility, on innovation. This is absolutely right. These are crucial attributes for Scotland's economy.
And in key areas - transport, planning, taxation, skills and the science base - my government wants to build a platform for long-term economic success.
Take transport. We understand that an efficient transport system is essential to deliver faster sustainable growth. That is why we are driving forward the largest transport investment programme Scotland has ever seen. Investing over £2.5 billion in Scotland's strategic transport networks over the current spending review cycle.
This programme is supporting tens of thousands of jobs, almost all in the private sector. And it is a programme with a long-term perspective.
The Strategic Transport Projects Review, published in December, has set out the investment priorities for the next two decades.
At the heart of that strategy is the construction of the Forth Replacement Crossing. The largest civil engineering project in Scotland for a generation. Funded through public procurement. The best, the safest and the most decisive way to fund the project.
Turning to planning, we are making good on our commitment to major reform. This is a long-term and complex challenge - and one where we are grateful for the support of Scotland's business community.
Because we are working to simplify the system. To make it faster. More responsive. And to orient the planning system clearly around the goal of sustainable economic growth.
Turning to taxation, many of you here know of our aspiration, with greater fiscal autonomy, to reduce corporation tax. To give Scottish firms, and firms based in Scotland, a clear competitive advantage.
We are not able to do that under current constitutional arrangements - which is why we are advocating reform.
But we have used a significant lever - business rates - to reduce the tax bill for tens of thousands of small firms across Scotland. In the vital area of skills and human capital, we are continuing to make progress.
To take just one example, the new Budget passed by last month by the Parliament will allow for the recruitment of 7,800 new apprentices - taking the total in 2009-10 to 18,500.
And many of these new apprenticeships will be in our vital growth sectors, such as engineering, the life sciences and electronics.
This autumn also sees the launch of Scotland's Saltire Scholarships - with 200 Masters scholarships to attract students from China, India and North America to study in Scotland.
The challenge for Scotland is not just to retain our best and brightest. It is to attract the most talented graduates worldwide. And to channel this wealth of human capital towards the growth of key sectors of comparative advantage.
Scotland's sectors of comparative advantage
Your discussions today will touch on several of these key sectors.
Take information and communications technology (ICT). You will shortly hear from Steve Robertson, Chief Executive Officer of BT's Openreach programme about their planned investment in super-fast broadband.
This is a tremendous development. It has the full support of the Scottish Government because we ourselves are working with Scotland's universities and colleges to build world-class ICT infrastructure here in Scotland.
The University of Edinburgh, for example, now has an Informatics School that is larger than those at Stanford University and the Massachusetts Institute of Technology.
And Edinburgh's £113m HECToR project has built one of the ten most powerful computers in the world. Its processing power is equivalent to every person in Scotland performing 10 million calculations per second.
These are tremendous assets for Scotland's science base and for Scottish industry.
Biotechnology and the life sciences are not on your agenda today, but they are of substantial economic importance.
In Scotland the sector employs 30,000 people and adds over £2.8 billion to total output.
Scotland's success in the life sciences is based on the same critical factors we see in other sectors. A long history of innovation - in this case, medical innovation. A strong research base. A dynamic, collaborative approach, led by our universities. And a global outlook.
These strengths are recognised internationally. For example, the Wyeth Corporation is already part of the Translational Medicine Research Collaboration with the universities of Aberdeen, Dundee, Edinburgh and Glasgow.
And on Tuesday of this week I opened Wyeth's new Protein Therapeutics Laboratory in Aberdeen. A groundbreaking scientific development. Potentially a major advance in medical treatment. And, of course, a firm vote of confidence in the future of Scotland's life sciences.
Let me now turn, as I promised, to one of our greatest economic prospects - renewable energy. Energy is a vital issue - for the global economy, for global security, and for the environment.
And it is an issue that this country will help to shape substantially. We have already done so in relation to hydrocarbons. Indeed, SCDI's own survey showed that our oil and gas supply chain generated sales of £14.2 billion in 2007. A figure that was up 10% from the previous year.
Now Scotland stands at the cusp of an enormous growth in the market for offshore renewables. The European Commission estimates that the potential offshore wind capacity in 2020 could be between 20 - 40 GW. And that by 2030, total capacity could reach 150 GW.
These are big numbers, big milestones. There are tremendous economic rewards on offer. And for Scotland this is no pipe dream. Because we have a major competitive advantage in this race. We hold up to 25 per cent of Europe's offshore wind, wave and tidal energy potential. And we punch well above our weight in terms of scientific research capacity.
A growing number of friends worldwide - National Geographic, Fortune Magazine, the U.S. Secretary of State - have been struck, not just by Scotland's potential, but by our progress.
The Pulitzer Prizewinning journalist Tom Friedman wrote that 'a developed country's competitiveness now comes primarily from its capacity to innovate'.
Perhaps nowhere is this capacity greater than in Scotland, with our reflex to question, to invent, to advance. And with the extraordinary energy potential off our shores.
There is a transformation is underway in Scotland's energy sector. And the pace of change in recent months should give us confidence about the scale of what we can achieve.
Last summer saw nearly £1 billion of new private sector investment flow into Scottish renewables. In the autumn the European Commission confirmed - as we had advocated - that it would pursue a North Sea supergrid as a strategic energy priority.
In November, the Commission approved funding for a full feasibility study for a grid across the Irish Sea.
In December there was the launch of the Saltire Prize, the world's biggest innovation prize for marine renewables. A Prize which has already spurred 90 formal registrations from 21 countries, and sparked ambition worldwide.
And just last month, the Crown Estate awarded Exclusivity Agreements to 10 offshore wind sites in Scottish territorial waters. Sites with the potential to generate 6GW of electricity; more than a third of Scotland's total electricity demand.
In the near term, market growth for offshore wind in and around the North Sea will be enormous. Much of the planned investment is in the Southern North Sea.
Scottish companies are well placed to bid for work, based on the expertise we can transfer from oil and gas - particularly in placing structures in difficult maritime conditions.
We also know that in a few years there will be investment in deeper waters around Scotland, where the wind resource is greatest.
Our aim should be to work closely and constructively with Scottish companies. To help them gain a key place in the emerging market now. And to become world leaders in the next decade and beyond.
Conclusion
I believe, many in our industry believe, and our friends worldwide believe that there is almost no limit to what Scotland can achieve.
If we mobilize the talents of our people. Build our research base. Engage our international partners.
Harness the best science and the best minds, here and worldwide.
And if we have the confidence to invest. To commit fully. To accept nothing less than total success.
There is a tremendous opportunity awaiting us.
Together I believe we will seize it.
So, now and in the coming years, I want to work with you to transform our economy. To energise our industry. And to write a new chapter of Scottish economic success.