Download What Was – What Next?

What Was – What Next?
What the evidence tells us for next steps for
Scotland’s economic strategy
Professor Anton Muscatelli
Background & stimulus
The aim was constructive & two-fold;
 to encourage the development of effective and strategic
policies for Scotland’s economy based on solid evidence.
 to challenge some assumptions that influence the debate in
Scotland but which don’t stand up to scrutiny.
The report looked at:
• The structure of industry in a global economy
• Competitive advantage
• labour market and skills needs
• Productivity and the deployment of technology, innovation
& skills
It concluded:
Scotland needs an industry replacement strategy
Industries rise and fall in their economic importance as they gain and then lose
competitive advantage in global markets.
The economic problems caused by rapidly-shrinking industry sectors are
mitigated only if there is an emergence of new, rapidly expanding industries.
In Scotland’s recent history each replacement industry had been typified by
higher knowledge content than the one it replaces.
We have to plan to stimulate and encourage new industries and be prepared to
recognise that they may not take the same form as those which have gone
before.
It concluded:
There is only one direction of travel if Scotland is to remain competitive
There is no scope for Scotland competing on the basis of labour costs or business
costs. Other countries are better placed to out-compete us on these grounds and
Scotland will only compromise its standard of living by doing so.
Scotland is well placed to compete on high-level skills and innovation.
However, we cannot be complacent. Others are investing heavily and gaining
ground.
It concluded:
To realise economic growth public investment must be targeted where it will
offer the greatest return
Models of competitiveness encourage countries to invest in factors that will have the
biggest impact dependent on their level of development.
Advanced or innovation-driven economies like Scotland will see the greatest impact
from investment in “innovation and sophistication factors”.
Scotland can only expect to see diminishing economic returns from investment in
more basic “factor” or “efficiency” factors such as mass education or comprehensive
infrastructure networks.
Obviously public investment is made on the basis of other factors other than just
economic, however economic impact is the focus of this report.
It concluded:
Future demand points toward higher-levels skills
The skills debate in Scotland is often misinformed or uninformed.
Rather than skew investment further towards lower- or mid-level education the
evidence suggests that Scotland should in fact emphasise the highest level of
education – degree and above.
Labour market projections point to a polarisation of skills. The growth in demand
will almost all be for degree levels skills and above. Mid-level skills are forecast
to be squeezed out of the labour market.
There are real risks that high-level skills supply shortages could be a major break
on economic growth and transformation in Scotland. A risk exacerbated by
general lack of awareness.
It concluded:
Scotland’s productivity increases will come from innovation, high level skills and
incentives that can reinforce this.
As well as expanding exports, Scotland’s best hope of economic growth is through
improvements in our productivity.
Productivity increases in Scotland will come from better use of skills, innovation
and the deployment of technology, not from squeezing more out of workers.
Incentives and competition will also increase productivity, but mainly when they
encourage the type of virtuous behaviour which results in better skills, more
innovation and more effective technology.
How was the report received?
 Prior to launch of the report we consulted informally with many relevant
external organisations such as CBI and Scotland’s Colleges.
 Positive debate with MSPs at event in Parliament
 Private brief with Fiona Hyslop MSP and John Swinney MSP
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Good media coverage
Some mixed reactions
An element of: “they would say that wouldn’t they”
Many organisations identified with certain aspects of the report
Significant interest & support for moving forward constructively
What Now for What Next?
Now that we’ve got people’s attention, we want to get
them talking.
Universities Scotland to reconvene group of economists. Start to map out
the major challenges as identified by the evidence and start to think about
new approaches to these challenges.
Engage with other stakeholders: CBI, Scotland’s Colleges, NESTA and all
those who are prepared to think differently & move forward informed by
evidence. No room for recycling old policies.
This includes reflection within and challenges for Scottish higher education.
The importance of demonstrating impact
Universities Scotland – evidence based approach to
policy & funding bids.
2007 spending review:
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Measures of efficiency & effectiveness – Making Every Penny Count
Measures of economic impact – Prosperity Scotland
Measures of social, cultural & community impact – Wellbeing Scotland
Perhaps it was imperfect but who else did more?
Challenge within New Horizons
“….In future, though, the Scottish Government will expect the
University sector to demonstrate more explicitly how the funding it
receives from the Government contributes to delivering against the
National Outcomes, thereby ensuring there is alignment of publicly
funded activity against the Scottish Government’s Purpose – its vision for
the whole of Scotland – as set out in the National Performance
Framework. In turn the sector, delivering outcomes so aligned, will
continue to receive public resources at a level to help to keep it
nationally and internationally competitive.”
Section 1.15 in New Horizons