As I See It: Terry Murden
Three months is not a lot of time to produce a strategy to launch a small business, let alone reboot an entire economy. So Benny Higgins and his seven fellow advisers had their work cut out to produce the goods.
They’ve produced a 77-page report, drawing on submissions from 350 individuals and organisations to view Scotland’s economy “through the lens of four economic pillars of capital”: financial and physical, natural, human, and social. As Mr Higgins says in his introduction, this is not a novel approach, insofar as it has been used elsewhere, including by the OECD, but it is a new approach for Scotland.
Does it succeed? Well, to a point. There are some commendable recommendations, particularly in relation to ensuring the young receive immediate and continued support in work and training in order “to avoid the long-term scarring of a generation.” It promotes laudable, if familiar, government policy objectives on equality, fairness and sustainability.
A number of business organisations issued what read like obligatory, even predictable, messages “welcoming” the document, without offering much elaboration, though CBI Scotland director Tracy Black noted that it identifies a jobs-first recovery and building resilience as the top two immediate priorities for the Scottish economy, “something we raised in a recent letter to the First Minister”.
Other observers cut to the chase and questioned whether it really forms the blueprint for reviving the economy that is urgently required, or will simply be added to the pile of similar reviews that came before it and have been left gathering dust.
“There’s little in the report of substantial policy insight that is new, or different to what has gone before. Many of the recommendations would not look out of place in a summary of the existing Scottish Government Economic Strategy,” said Professor Graeme Roy at the Fraser of Allander Institute in a frank appraisal that echoed my own assessment during the Q&A with Mr Higgins and the First Minister.
For the most part it reads a little like a warmed up version of a hundred other reviews: proposals to speed up planning processes, invest in broadband and the digital economy…. we’ve heard it all before.
Ross Brown, Professor of Entrepreneurship & Small Business Finance in St Andrews University School of Management, was equally blunt, noting that the report mentions SMEs only once (page 39).
“The current Advisory Group on Economic Recovery has largely (and surprisingly) neglected the crucial issues facing SMEs at the present time,” says Prof Brown in his own new paper making a series of recommendations on how to help this key sector.
“This is probably of no great surprise given the lack of formal representation on the group from the small business community such as the Federation of Small Businesses,” he says.
Prof Brown compares the report’s proposals to what he calls “similarly vague plans for the new Scottish National Investment Bank,” saying it “offers vague goals such as a green and investment-led recovery.” He concludes: “Consequently, this document is woefully inadequate at articulating the main problems facing SMEs or providing policy makers with a strategic road map of how to help the vast majority of the business sector recover from the crisis.”
Already Professor Roy at the Fraser of Allander has questioned the advisory group’s proposal that the government take equity stakes in struggling firms. Prof Brown goes further, describing it as “very odd” that the the Scottish Government should take ownership stakes in “failing firms”.
Policymakers, he says, are frequently lambasted for poor decision making when trying to “pick winners” in terms of selecting the SMEs with strongest growth potential for support. “Picking losers could be even more hazardous given the politicised nature of such decisions. This type of policy intervention is likely to be fraught with huge levels of moral hazard. Plus, given their strong desire for operational autonomy and control, smaller firms would baulk at the prospect of such intervention.”
‘A lack of full borrowing powers within a proper fiscal and monetary framework is an underlying theme‘
Prof Brown’s conclusion is that the Scottish Government needs to produce a “sensible set of measures” to quickly address and alleviate the manifest problems facing the crucial 99.3% businesses in Scotland.
If the failure to address the crisis facing SMEs is a shortcoming of the report, more significant is the call for greater powers that will give Holyrood a fighting chance of actually achieving any of its objectives.
Mr Higgins was forced to put a price on the group’s ambitions: £6 billion. Achievable? Not without lashings of Westminster support.
Far be it for me to say this document is heavily doused with a call for independence, but a lack of full borrowing powers within a proper fiscal and monetary framework is an underlying theme.
Twenty years of devolution has given us a government only able to tinker with economic development, still dependent on a UK administration that prefers to hold on to the main levers that control meaningful action: corporation tax, money supply, employment law… This report is an expression of those frustrations.
Mr Higgins and his advisers argue that the report is an action plan, not a shopping list. I would argue that it is neither. It’s more of a wish list, as not much will get done unless those extra capabilities are made available.