The Scottish Government

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measuring Scotland's progress towards A SMART, SUCCESSFUL SCOTLAND

fraser of allander institute report
executive summary

In this report, Scotland's performance is, where possible, benchmarked against the set of countries comprising the Organisation for Economic Co-operation and Development (OECD). The Joint Performance Team requested that the approach adopted in this second annual report should follow the first report where Scotland's performance was assigned to one of the four quartiles containing the comparator OECD economies ranked from best to worse on the chosen indicator. For the three themes of Smart, Successful Scotland: growing businesses, global connections, and skills and learning there are 12 lead indicators and 24 supporting indicators, plus 1 overall progress indicator, making 37 in all. As might be expected, there are several data gaps, with data either absent for Scotland, or for the OECD countries, or for both. In addition, for some indicators, data were only available for a subset of OECD countries. These data gaps inevitably complicate the benchmarking and limit the degree of certainty that we would like on the measure of Scotland's comparative performance.

We also felt that it was important for readers to be able to see how Scotland is doing on each indicator, using charts. Six comparator countries were chosen for this graphical analysis in addition to the UK. The graphical comparison was restricted to seven countries for two reasons. First, it avoids the clutter that would be inevitable if we included every OECD country. Secondly, and perhaps more importantly, a restricted set of countries was chosen to minimise the effect of different groups of countries being included in the charts due to variations in data availability for each of the indicators. There are no precise scientific criteria that can be applied to determine the selection of a sub-set of countries. The countries were therefore chosen largely on practical grounds, reflecting differences in size, economic and governance structures, locations and importance to the global economy. The USA, Japan and Germany were the three large countries selected, with Ireland, Finland and New Zealand being of similar scale to Scotland.

The description and analysis of Scotland's comparative performance that is contained in the following pages reveals that the Scottish economy continues to have both strengths and weaknesses.

For the three themes of Smart, Successful Scotland: growing businesses, global connections, and skills and learning, Scotland's relative performance is best in enhancing skills and learning. This theme has a greater number of indicators, for which a comparison with the OECD or UK is possible, above average than is the case for either growing businesses or global connections.

When each indicator is considered separately and using the criterion of a ranking in the first quartile of the OECD countries for which data are available then Scotland's strengths appear to lie in:

• the percentage of business activity transacted through e-business;
• the share of output produced in knowledge-based industries;
• the importance of export sales; and
• the core reading and mathematical skills of its schoolchildren.

However, using the criterion of a ranking in the fourth quartile of OECD countries then the Scottish economy's principal weaknesses can be found in:

• the share of businesses using broadband; and
• the degree of net out-migration.

Scottish performance also tends to be above the OECD average in:

• the proportion of businesses trading online;
• the proportion of households online;
• the cost of broadband access to the Internet;
• the proportion of the working-age population in employment; and
• the core scientific skills of its schoolchildren.

But Scottish performance also tends to be below the OECD average in:

• gross domestic product (GDP) per head;
• business R&D as a proportion of GDP;
• total entrepreneurial activity;
• the likely proportion of high-growth business starts;
• the number of global firms per head of the population;
• labour productivity levels;
• the proportion of 16-19 year olds in education, training and employment; and
• the proportion of graduates in the workforce.

In addition, when the UK or the UK regions are the only comparator then Scotland does relatively better on:

• academic spinouts per head of population;
• the proportion of young people achieving a qualification at level 3 or equivalent at 25; and
• the extent of skill shortages.

But does relatively worse than the UK, or the majority of UK regions, on:

• the number of working age people in education, training and employment;
• the number of new business starts;
• the proportion of innovative firms;
• patents filed per head of the population;
• the proportion of those in employment undertaking training; and
• the demand for learning to enhance transferable skills.

So, while the latest data continue to show that Scotland's comparative economic performance is mixed there is little evidence, from the indicators studied, to suggest any relative deterioration since the first report. Indeed, given that there has been some improvement in comparative productivity performance it would appear that some progress is being made in securing a smart, successful Scotland.

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