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Productivity

Will the transformational vision for Scotland’s economy be realised? This week’s strategy doesn’t fill us with much hope.

The Scottish Government set out its 10 year vision for the Scottish Economy this week. But what does this new document tell us about what will be achieved?

Kate Forbes presented her National Strategy for Economic Transformation (NSET) this week, saying that it was a “step-change in how we approach the economy”.

Unfortunately, it wasn’t a step-change in how the Scottish Government writes economic strategies. For those of us familiar with the plethora of strategies and delivery/action plans written over the past decade, the format is familiar. A vision is presented that few would disagree with, then a range of actions (5 programmes, 18 projects and 77 actions) are laid out that sound sensible but lack detail. If we are lucky, we will be presented with a range of data that tells us in detail about the issues at hand. But rarely do we go away any the wiser about why actions have been chosen and what is achieved if they are delivered.

Evidencing the issue

The evidence paper published alongside the strategy provides a wealth of information. Take productivity – not an end in itself as we are reminded, but a key enabler of other ‘good’ things, amongst which includes household income and increasing tax revenues, work-life balance, a more efficient/fairer allocation of resources and improved quality of goods and services.  “International evidence shows that economies with strong productivity score highly on the indicators of a wellbeing economy” we are told in the main report, although which way the causal relationship goes is not alluded to.

Back to the evidence paper and we are given evidence to show productivity ranges across industries and regions, R&D expenditure is lower than we would like, and some businesses are slower at taking up new technologies than others. Reasons for low productivity include digital connectivity, transport and basic digital skills.

It’s a useful review of the evidence, but there isn’t a lot we didn’t already know here. The “new” bit is of course how the Scottish Government is now going to address this issue over the next 10 years.

Too soon for actions?

Although billed as a strategy document rather than an action plan, a range of actions are set out. What was missing was the demonstration of how the actions will lead to improvements in the economy and wider outcomes.

Take one of the actions: “we will establish a Digital Productivity Fund focused on supporting business to improve firm-level productivity through the adoption and successful integration of new and advanced technologies.”

Sounds like a step in the right direction, and on the surface, it seems to link to the evidence that some business may need a bit of a push on adopting productivity improving technologies.

However, it is important that before we commit to a solution, we first assess the extent to which the action will fix the problem identified. We also need to keep focusing on the bit at the end – ensuring that the positive outcomes that productivity is meant to deliver actually happen and there aren’t unintended consequences. Deciding on actions without doing this analysis risks ineffective policy.

Government economists are trained to appraise policy actions so that decisions can be made on how best to achieve the outcomes that the government wants to deliver. It’s more than just understanding how to get from A to B. It also allows policymakers to consider other ways of reaching the same result. Other ways that, for example, may be cheaper or more effective. Or there may be opportunities to better meet mutual objectives such as reducing climate change or tackling the gender pay gap.

Key questions that we would expect to be asked include: do we know that available funds are the main barrier to adoption of new technology? Is there evidence that government needs to step in – i.e. are banks not lending for this type of activity? Given the other options available, would the money better spent elsewhere – on skills for example?

There is no evidence within this plan or the evidence annex that reassures us that this is the case type of appraisal has taken place before actions have been chosen.

Quantity over quality

The Digital Productivity Fund isn’t the only example of actions that have a vague promise of good things to come with little evidence of thought over why or how. To what extent is this the government seeking as many actions as possible to beef-up the strategy? Better to have lots of ideas, right?

No. It should not be about quantity of actions, but about quality of outcomes. This is supposed to be the guiding light for public sector policy focus in Scotland, exemplified by the National Performance Framework. It was interesting how little it was mentioned in the NSET. Of course, the 5 programmes of action identified can be linked into specific National Outcomes, although that is not done in the strategy itself.

How will the success of this strategy be measured? By the completion of these 77 actions? Or will national indicators in the NPF be used to capture progress?

We look forward with interest to the delivery plans that will be published within 6 months where hopefully many of the details lacking will be filled in, including on monitoring and evaluation. Ideally, however, all of this should have been laid out before actions were committed to.

Kate Forbes promised a “laser focus on delivery” at the launch. A “laser focus on delivering policies that have been through the appraisal process” is less catchy, but certainly preferable for ensuring any transformational vision is realised.

Authors

Emma is a Knowledge Exchange Fellow at the Fraser of Allander Institute

Mairi is the Director of the Fraser of Allander Institute. Previously, she was the Deputy Chief Executive of the Scottish Fiscal Commission and the Head of National Accounts at the Scottish Government and has over a decade of experience working in different areas of statistics and analysis.