Scotland's Economic Progress
1. The first chapter looks at the performance of Scotland over the three years that the Council has provided advice to the Scottish Government. The impact of the global financial crisis on Scotland is described, as is the resulting recession and subsequent deterioration in the fiscal outlook for many governments across the world. The future outlook for the Scottish economy is considered in terms of the possibility of fiscal responsibility and the strengths that have been shown by the key sectors.
Progress Against the Purpose Targets
2. This chapter provides an outline of progress made with each Purpose target over the past three years and provides a view on the outlook for each target.
3. The Council was created to advise the Scottish Government on developing and implementing its Government Economic Strategy. 1 Over the past three years, the Council has provided advice on many of the Purpose targets and key sectors outlined in the Strategy. Progress towards achieving the Purpose has been slowed by global economic conditions, but the Council recognises that the Strategy is long-term and it will take time for policies to have an impact on the targets.
4. As part of advising the Scottish Government on the implementation of its Strategy, the Council has provided advice on several of the key sectors over the past three years.
5. This chapter provides an overview of the key sectors discussed and their common themes. It provides more detail and recommendations on two of the key sectors discussed this year: life sciences and the banking aspect of the financial and business services sector.
6. The Council provides three recommendations on financial and business services, and four recommendations on the life sciences sector.
7. The Council recommends that the Scottish Government:
Recommendation 1: asks the Office of Fair Trading to review competition in the Scottish banking market.
Recommendation 2: seeks, through the outcome of such an investigation and other ways, to secure strong head office presences in Scotland in the banking industry.
Recommendation 3: seeks, by influencing the policies of the Westminster Government and to the extent possible, using the pressures and powers available to the Scottish Government, to secure an increase in trading with, and in competition for, the supply of banking services to SMEs in Scotland.
Recommendation 4: encourages a shift to life sciences sub-sectors with potentially higher productivity - possibly the agriculture, environment and veterinary, diagnostics, or industrial biotech (bio-manufacturing) subsectors, and re-evaluates priorities for diagnostic, testing and precision activities; and especially stratified or personalised medicine and the associated bio-informatics databases.
Recommendation 5: improves the financing of the trials, testing and development phase of innovations.
Recommendation 6: finds ways to encourage interactions between key sectors, e.g. life sciences and digital or IT, and matching of intellectual property.
Recommendation 7: considers changes in public procurement to favour new technologies and offer the possibility of an early order rather than a grant or subsidy.
8. In past Reports the Council has considered how granting borrowing powers to the Scottish Government could help finance public infrastructure investment and recommended ways in which the Scottish Government could make best use of its current limited powers.
9. This chapter sets out what implementation of the Calman Commission proposals would mean for Scotland and then sets out a full fiscal responsibility framework along with mechanisms to ensure fiscal discipline.
10. The Council provides three recommendations for the Scottish Government to consider in relation to fiscal autonomy. The Council recommends that the Scottish Government:
Recommendation 8: seeks to obtain the tax powers outlined above, in order to be in a position to influence the rate of economic growth and employment.
Recommendation 9: engages the UK Government in negotiations to make the necessary institutional changes for this to be possible.
Recommendation 10: gives priority to obtaining the power to borrow; then to obtaining power over taxes that affect the rate of return on labour (national insurance, business taxes, research and development credits).
Employment, Skills and Education
11. Over the past three years, the Council has provided considerable advice on schools, universities, skills and addressing economic inactivity. This chapter draws together these discussions and outlines trends in employment, education and skills over the last few years.
12. The chapter sets out key policy challenges for the Scottish Government in these areas which include improving the employability of individuals; improving the quality of teachers in schools; and maintaining and developing world-class universities.
13. The Council provides six recommendations for the Scottish Government in these areas. The Council recommends that the Scottish Government:
Recommendation 11: more closely coordinates the arms of the Scottish and UK Governments with responsibility for employment and skills issues. In particular, the Council believes that closer alignment and coordination between Jobcentre Plus, careers services and Skills Development Scotland would bring about a more effective approach to improving labour market participation in Scotland. So too would greater Scottish autonomy in setting benefits policy. The Council believes that Jobcentre Plus employability services should be devolved to the Scottish Government and that further consideration is given to bringing benefits and skills policy together within Scotland.
Recommendation 12: puts greater effort into building local consortia consisting of representatives from the DWP, Jobcentre Plus, local government, NHS, Employers Federation, Skills Development Scotland, Chambers of Commerce and other key interested parties. The Council is convinced that the local partnership model is the most efficient way to design and manage the delivery of services to move benefit recipients into work.
Recommendation 13: ensures training and educational institutions pay attention to the subsequent employability of their students. The Council urges the collection and publication of statistics on students' success in finding employment after graduation. Good quality careers advice for university graduates, coupled with short courses to enhance job-seeking and labour market skills, are likely to be cost-effective ways to tackle graduate unemployment.
Recommendation 14: undertakes development of metrics to measure teacher quality, in collaboration with professionals, in order to improve the quality of education in Scottish schools in cost-effective ways. The quality of teachers must be measured, good teachers must be recognised and rewarded, and ineffective teachers must leave the profession.
Recommendation 15: gives fresh thought to involving university students and their families directly in carrying the costs of Higher Education, preferably through a system of deferred payments. The alternative, in an era of extreme pressure on public resources, is likely to be unsustainable financial pressures on Scotland's world-class universities.
Recommendation 16: given the international reputation of Scottish schools and universities, regards education at all three levels as part of the highly skilled services that Scotland markets to the global economy. The attraction of international students to Scotland, at every stage in their education, will raise the international profile and marketability of other sophisticated sectors of the Scottish economy.
14. The Council addressed the Scottish planning system in its First Annual Report and provided several recommendations for the government to consider.
15. In this Report, the Council revisits the planning system and assesses what progress the Scottish Government has made in implementing the recommendations from its First Annual Report. The key observation made by the Council is that significant and impressive progress has been made at the central government level but that at local government level planning policy has not developed. The Council suggests that financial incentives should be used to stimulate improvements at local government level.
16. The Council makes two recommendations to the Scottish Government in this area.
17. The Council recommends that the Scottish Government:
Recommendation 17: increases the pace of improvements in planning performance, particularly at the local authority level, through ensuring that there is a financial incentive for local authorities to commit to high quality developments. This could be achieved by rapid acceleration and development of the incentivisation models currently being piloted.
Recommendation 18: continues to work to ensure that the planning system acts as an enabler to development and focuses on development delivery, where it is vital for local authorities, government, agencies and the private sector to align activity.