IN AT least one respect, Scotland can claim to be a world leader. Few countries can match our record in setting up quangos and bodies to assess and analyse our problems. But the follow-through tails off after a list of noble aspirations and impressive recommendations for action.
Two such bodies in the economic sphere are the First Minister's Council of Economic Advisers (CEA) and the proposed Scottish Investment Bank.
Both are creatures of Alex Salmond's ambition. Both appeared to have an active and, at the outset, sust
ainable part to play in lifting Scotland's economic performance. They have been assigned – rhetorically at any rate – critical roles in leading Scotland out of recession into recovery.
But now the discussion they engender outside of St Andrew's House is which one will be the first to fold. The CEA looks in a state of drift, with members increasingly ploughing their own furrow after a promising start with the first annual report.
This bristled with recommendations on how to improve economic performance. It received a positive if glib response from the government. But since little seems to have changed on the ground for Scottish businesses. And without a strong central momentum for change, the CEA runs the risk of a slow disintegration.
Very little has been heard of the Scottish Investment Bank since its creation was mooted by the First Minister at the STUC conference in April. It does not appear to have a constitution, board, articles of association, statement of aims or indeed funds. Consultation round the business community has been minimal.
A parliamentary question on funding drew the response that the bulk of the initial starting capital would come from raids on the co-investment funds run by Scottish Enterprise. And indeed, if this is the funding route envisaged, a question mark would then arise on whether there was much of a case for keeping on SE.
It has already been shorn of Skills Scotland, the local enterprise companies and much of its land reclamation and factory building work. Its budget has been halved, the headcount reduced from 2,000 to 1,050 and the Atlantic Quay head office on the Clyde vacated for smaller premises in Glasgow city centre. Ironically, the space at Atlantic Quay has now been occupied by Jim Mather's Department of Enterprise officials.
So, out of three publicly funded bodies charged with revitalising economic development, one looks little more than an expensive talking shop, and the second has no means of existence other than by cannibalising the third.
The CEA was set up to advise the First Minister on the best way to improve Scotland's sustainable economic growth rate. It is chaired by former Royal Bank of Scotland chief executive and chairman Sir George Mathewson. Ten other members come from the highest levels of business and economics. They include Professor Andrew Hughes-Hallett, professor of economics and public policy at George Mason University in the US; Professor Sir Alan Kemp, Schlumberger professor of petroleum economics at University of Aberdeen; Professor Frances Ruane, director of Ireland's Economic and Social Research Institute; Professor John Kay, a leading economist and currently a visiting professor at the London School of Economics; Crawford Beveridge, former chief executive of Scottish Enterprise; Professor Finn Kydland, Henley professor of economics at the University of California; and Professor Sir James Mirrlees, professor emeritus at Cambridge University.
The CEA hit stride with its publication late last year of its first annual report. This impressive 60-page document set out recommendations including reform of the planning system, public sector productivity improvement and higher infrastructure spending. Of particular interest to the administration was a proposal to further explore opportunities for borrowing powers.
The council's fifth meeting, held in Duff House, Banff, centred on borrowing powers. In addition, it would "explore options to target investment and encourage the sort of networking that generates useful and commercial invention… Part of our future discussion will be exploring how Scotland can improve productivity and focusing on key sectors including life science and food and drink where there are strong roots and great opportunities for future growth."
Since the supply of finance to business is a key concern of Scottish Enterprise and that life sciences and food and drink are two of five sectors identified by SE for their growth potential, it is odd, to put it no stronger, that SE is neither represented on the council nor invited to attend as an observer. While there is a case for keeping distance been a think-tank and the government's operational arm – or one of them – a courtesy presence may have been in order. Does the council have access to the research SE has done in these areas, or is sector analysis to be duplicated? Travel costs from Glasgow should not be a problem. No less than 22 people attended the sixth meeting of the council held at Dundas Castle near Edinburgh. The total cost of the meeting was £24,815, just over half accounted for by overseas travel costs and accommodation for three council members.
Membership of the council has helped draw attention meanwhile to views of the individual members. And their individual views are arguably more trenchant and noteworthy than the formal consensus. The prolific Professor John Kay recently opined that the SNP government will have to cut a raft of public sector jobs to cope with the recession, and that the First Minister and finance secretary John Swinney will have to take some deeply unpopular decisions after the General Election if they are to achieve long-term economic stability.
Professor Andrew Hughes-Hallett, writing with Professor Drew Scott, has slammed plans to create a new Scottish income tax rate as "unworkable" and "illiterate". They warned the plans would lead to a vicious circle of tax rises and spending cuts. And they said Calman proposals for tax raising "are seriously flawed – if not illiterate – for simple economic reasons."
And Professor Alan Kemp has suggested in recent research that it is too late for Scotland to be given its geographical share of oil and gas revenues. The way that oil and gas money is used to support revenue instead of creating a Norwegian-style fund meant that it would be very difficult for Scotland. If Scotland got its share of oil money, then it would lose out in the block grant. This would mean around one-third of the £30 billion budget would depend on a highly-volatile source of funding with barrels of oil fluctuating between $40 and $140 in the past 18 months.
Whether the council now continues after its two-year term is moot. The danger is that, having urged planning procedure reform, many companies report little improvement and the planning system is widely derided for the arbitrary Section 75 demands for contributions to pet council projects.
Meanwhile, more details are keenly awaited of the Scottish Investment Bank. This would seem to cut across the work Scottish Enterprise is doing through its co-investment funds. And the proposal has also unnerved some private-angel investors concerned at direct political intervention in the process of selecting companies to back. Others say the absence of further details points to a desire within the administration to let the proposal die a natural death. Or it might be that its formation is dependent on European Union funds and Westminster approval. That may be a long and complex application.
As with the CEA, the Scottish Investment Bank is a personal ambition of Alex Salmond's and other enterprise and business finance lobbies may find themselves frozen out if they do not suit his purpose. Some co-ordination is vital if these agencies are going to be effective. But kept separate and with an exclusive membership, their existence looks less, rather than more, assured. And a driving programme for enterprise-led recovery looks miles away.
