Supporting economic growth in Scotland – 14 July 2016 
Podcast script 
I’m speaking with audit manager Gill Miller, author of Audit Scotland’s new report which looks at how economic growth in Scotland is supported by the public sector, focussing on the roles of the two national economic development agencies. 

Gill, can you tell me a bit more about the report’s scope? 

Scotland's economy is worth around £142billion a year. Increasing sustainable economic growth is one of the Scottish Government’s top priorities and our audit reviewed how its economic strategy is developed and delivered. 

We focused our audit on Scottish Enterprise and Highlands and Islands Enterprise or HIE as they’re known, both of which have a specific remit to support economic growth. We looked at how well they were fulfilling their respective roles, and how they support the delivery of the economic strategy and economic priorities. 

Supporting economic growth is complex though as many factors influence Scotland’s economic performance, most of which are outside the control of the public sector. We therefore considered the wider economic development landscape in which the enterprise bodies operate.

And what did you find? 

We found that the enterprise bodies are performing well and having a positive impact on their customers, which are businesses and communities alike. But more needs to be done to understand how their work specifically contributes to the Scottish Government's economic growth targets. 

We found that although the Scottish Government has had a consistent strategy over the last number of years to support economic growth, it needs to be clearer on the detail about how that strategy will be implemented. It also needs to strengthen its approach to measuring what impact that strategy is having on its economic growth targets. 

For example, although we found that the Scottish Government has refreshed its economic strategy twice since 2007, it hasn’t actually assessed progress against the priorities and actions in its original strategy. 

The landscape is becoming more complicated, with reducing budgets and new financial powers for Scotland, and new regional economic development arrangements. It’s therefore important that the Government is clear on how it will target public funding to ensure that it has the biggest impact on achieving its economic priorities. It also needs to regularly review progress to ensure that its strategy is relevant and fit for purpose. 

So, you touched on there the complicated landscape for economic development in Scotland and it’s likely to become further complicated by the outcome of the EU referendum a couple of weeks ago. Can you explain what the potential implications might be for Scotland’s economic performance following the results of the referendum? 

We note in the report that the European Union is one of the many bodies involved in supporting economic growth, and it provides a great deal of funding towards supporting that aim. 

However, there’s still a great deal of uncertainty following the EU referendum so it’s too early to say what the impact will be on either Scotland’s economy, or on the Scottish Government plans to achieve sustainable economic growth. 

However, we’re closely monitoring developments and assessing what it may mean for our audit work in the future.

And you mentioned as well that the enterprise bodies are performing well and you go into detail on that in the report; can you tell me a little bit more about what you found there?

The two bodies carry out similar types of activity, which include supporting businesses, sectors and infrastructure projects, but also influencing economic development decisions. In total, they spend around £400 million in 2014/15 and they support just over 11,000 businesses and community organisations every year.

Because of geographical challenges of the Highlands and Islands, HIE has an additional remit to support communities. This means that its customers and rationale for offering support can be different from Scottish Enterprise. 

The enterprise bodies perform a range of evaluation work to demonstrate and improve their impact. We found that despite experiencing spending reductions in recent years, there are good examples of the enterprise bodies working well with partners to achieve a positive impact, such as creating jobs and increasing businesses’ turnover.

The enterprise bodies operate in a risky environment, as they should only intervene when the private sector is unable or unwilling to do so. But we found that both bodies have clear, evidence-based strategies in place, and good governance arrangements. This helps them to make informed decisions about the opportunities they support, and also helps them to manage risks. 

How is the performance of the enterprise bodies linked to the Scottish Government’s national priorities? 

As Scotland’s economic development agencies, their activities will naturally support the government’s economic priorities. We found that both bodies are performing well, however they each measure success differently and it’s not possible to accurately measure their contribution to achieving the Scottish Government’s economic priorities. 

This is partly because of the different performance measures used by the individual bodies, but also because there is a lack of detail available on how the Scottish Government plans to deliver its economic strategy.

The Scottish Government is reviewing the role of its economic development and skills agencies over the summer, and as part of this, it is important that it considers how Scottish Enterprise and HIE can best support the delivery of the economic strategy.

For example, while recognising that each body has a distinct role, some common performance measures would help to assess the collective work of the bodies. A clear link between their performance measures and the government’s targets will make it easier for the Scottish Government to assess the contribution the enterprise bodies are making to its goals. 

The report focuses on the performance of the enterprise bodies, but what other public sector funding contributes to supporting economic growth?

As we say in the report, supporting economic growth is complex due to the number of factors, partners and partnerships. We also found that there were a range of funding streams involved, and this is one of the reasons why it is difficult to accurately identify spending on economic growth. 

We found that the full range of public sector support for businesses is not known and we highlight in the report that this creates a risk of duplication. And there may also be gaps in that support. 

As I’ve already mentioned, the landscape for supporting economic growth is changing and becoming more complicated. This includes reducing public sector budgets, new financial powers, the increasing prioritisation of the Scottish Government’s ‘inclusive growth’ priority, and regional economic development arrangements are developing as well, in the shape of City Region Deals for example.  

It’s therefore important that the Scottish Government, alongside its partners, consider how to simplify arrangements and clarify roles and responsibilities, It is also important that businesses are made aware of the types of support available to them. 

So what happens next?

We’ve made a number of recommendations in our report. We’ve recommended that the Scottish Government work with the main partners involved in supporting economic growth to strengthen its approach to developing, delivering and monitoring the economic strategy. 

We recommend that they do this by setting clear targets, timescales and actions for different aspects of the strategy and setting out specific responsibilities for public sector bodies.

We also recommend that it should also work with other bodies to build a full picture of how the public sector supports economic growth, and make sure that information is communicated clearly to potential users of these services.  

Gill, thank you. And the report is available to download from our website, www.audit-scotland.gov.uk 

ENDS.