Cross-cutting Expenditure Review on Economic Development
Good morning. I welcome members, the press and the public to the 32nd meeting this year of the Finance Committee. I remind everyone to turn off pagers and mobile phones. Our only apology is from Jeremy Purvis, who will be a bit late in joining us.
Our first item is our third evidence-taking session for our cross-cutting review on economic development. Today, we will take evidence from expert commentators and business. I welcome Alf Young, policy editor of The Herald; George Kerevan, comments editor of The Scotsman; Donald MacRae, strategy and finance director for Lloyds TSB Scotland plc; and John Downie, press and parliamentary officer for the Federation of Small Businesses in Scotland.
We have received written submissions from both the FSB and Lloyds TSB Scotland. I propose that we hear a brief opening statement from each witness and then move to questions from members. I am not sure whether to go from right to left or left to right. If I went right to left, would that inconvenience you?
Do you mean right to left from our point of view or from your point of view?
From my point of view, I suppose.
Okay. Good morning, convener, ladies and gentlemen. I apologise for not having submitted a written statement. As a working journalist who writes four columns a week, writing becomes something of a chore in my life. Given that I have read most of what the committee has considered so far, and having observed that you are already drowning in paper, I thought it better to simply come and talk to you straight about my views on the committee's inquiry.
The inquiry that you are undertaking is extremely complex, and I am not sure that you will arrive at easy conclusions. To assess policy objectives against the resources that are being spent on them is exceedingly complex, and to do so on a cross-cutting basis makes the task even more complex—you will have difficulty coming to significant conclusions.
In analysing the subject against my background, which is 25 years of writing about economic policy and business in Scotland, it struck me that one thing was missing: no one has ever done such a deep study on what we do. I was here yesterday for the Presiding Officer's thinking session, at which we were encouraged to understand the past better so that we could look to the future and do things better. Nowhere do I see any deep analysis of where we are in terms of the various stages of economic policy and the impacts that those stages have had on growth and the economy. I do not see any big studies of inward investment or of specific projects that have started and failed. I am aware that there has been occasional analysis of things such as the creation of enterprise zones, but I do not see in the welter of paper that is before us any serious analysis of our past strategies and of whether they succeeded or failed.
Much of the committee's inquiry is predicated on the almost universal belief that we are failing economically—that our growth rate is off the pace of that of the United Kingdom as a whole and that of competitor nations. In analysing Scotland's growth record over the past 30 years, we are not understanding our past. In that period, the Scottish economy has been through a number of massive and significant shocks. First, we lost our major indigenous industries, which were the primary industries such as coal and the secondary industries such as shipbuilding and heavy engineering. In the 1960s, under the Wilson Government, we tried to replace those industries with a serious of shiny new investments. Some of those were in rural Scotland and all of them failed within about 15 years. We then replaced those with a new wave of inward investment in electronics and other sectors, great chunks of which—although not all of it—also failed within a very short time.
Against that background of past economic development strategy—I have given only a brief précis—and the shocks that have faced the Scottish economy, I would have thought that our present rate of growth's being 0.4 per cent or 0.5 per cent off the pace of the entire UK economy is not bad at all. However, that is not reflected in people's mindset. I looked at the most recent benchmarking of the evidence of the success or otherwise of the smart, successful Scotland strategy. I looked at "Measuring Scotland's progress towards a Smart, Successful Scotland 2004" with respect to how independent assessors had examined the various goals that the strategy had set. That report concluded:
"The overall picture which emerges … is of a relatively low output, high emissions economy characterised by … business sector underperformance"
and
"a skills development system and labour market which perform well for the majority, but not for an important minority."
If we turn over a few pages in the report, we discover that, in terms of its 2002 performance, the Scottish economy was the best performing region—if I may use "region" in this context—in the United Kingdom outside London, the south-east and the east of England. Scotland performed better than all the other regions, but the conclusion that the experts reached was that Scotland is a "relatively low output" economy. If we turn to another page in that report, we discover that, on gross domestic product per capita—although Mr Mather will not consider GDP per capita to be a relevant statistic—Scotland outperformed the average for countries in the Organisation for Economic Co-operation and Development.
My plea to the committee is that we learn from the past and take a more rational view of where we have come from and where we have got to before we try to assess the impact of current economic development spending.
George Kerevan (The Scotsman):
I am honoured to be invited. I do not profess any great expertise in public accountancy, but I thought that, having spent many years pontificating on the Parliament and the Executive, it was time that I let you have your revenge. As Alf Young did, I thought that the best way that I could help would be to read through all the supporting papers with a reasonably objective eye and see what surfaced.
What intrigues me about economic development spending—which is, par excellence, the budget that crosses all departments—is the lack of central targets. I respect the fact that the Executive has decided that it would be dangerous and ineffective to set a GDP growth target because so much in the rest of the world influences what happens to the Scottish economy from year to year that such a target might be seriously misleading. However, if we have no target, how do we know that we are spending the money effectively? Above all, given that support and primary funding go right across departments, how do individual departments know that they are contributing to the overall goal?, As economic development demands a partnership between Parliament, the Executive and the business sector, how do we enlist the business sector if there is no overall goal towards which everyone is marching?
Over the past year, I have been particularly interested in examining economic development strategies in the United States of America because, over the past 10 years, the individual states of the USA have caught up with Europe in creating their own development agencies and in trying to do all the things that we take as normal. It is fascinating to watch them struggle with that. By and large, they are roughly where we were in the 1970s in setting targets for increases in employment—which is just as complicated a surrogate as GDP growth—and are about to make all the mistakes of spending money on easy creation of jobs rather than looking to the long term.
The issue is a universal one, and the committee should press the Executive further on whether there are better targets than GDP growth. I think that there are. We could, for example, consider trend growth, which is average growth over a period. It is not a random average, but is wired into the productivity of an economy and that economy's ability to attract factors of production. The Scottish trend rate of growth is well below the UK rate—by about a third—which seems to me to be a significant gap. A consistent gap between a regional economy's trend rate and the average tends to suggest that the problems lie with the region rather than at the centre, so the problem falls clearly into the committee's court.
It would be possible to experiment with a target for increasing GDP trend growth. That could not be done on a year-to-year basis; it would have to be done over a business cycle at minimum, which would be two of the Executive's three-year budget cycles. What would the target be, however? It could be paced against the UK average, although I accept that there are difficulties in that, because everything in the UK is biased by the London and south-east English economy, which is radically different from the regional economies. It could also be tracked against the European Union 15 trend growth. As Alf Young said, Scottish trend growth is not massively bad compared to the bottom average of the EU 15, but we could go for the higher average.
We could also eschew any kind of external benchmark and simply state that, over a period we will move from 1.6 per cent trend growth to, for example, 2 per cent or 2.5 per cent and benchmark ourselves against our past experience. There are other ways of doing it; that might not be the best and I accept that the device is so technical that it might be difficult to sell it to the general public, leaving aside the issue of what the headline writers in my paper or Alf Young's paper might do to it. However, without some form of overall target for the economy, you are to an extent moving in the dark and you will not quite know whether the cash that you spend is effective. That is the overall message that I get from reading the various documents.
Donald MacRae (Lloyds TSB Scotland plc):
I declare an interest in that I am a member of the board of Scottish Enterprise. Today, however, I am speaking to you in my personal capacity. I will try to follow the headings of the review in my remarks. I have given the committee some written evidence as well.
The Scottish economy has performed weakly over the past few decades. GDP per head is 94.6 per cent of the United Kingdom average and, compared to the OECD countries that Alf Young mentioned, we are in the third quartile—that is, we are near the bottom—in respect of eight of 12 indicators of performance. We come in the second quartile of two indicators and are in the top quartile in only two. We come 20th out of 31 countries in terms of GDP per head.
The UK comparison is a little misleading because, in the OECD, the UK is the most disparate country in terms of how GDP per head is distributed. In terms of growth in the past 30 years, the GDP per head comparison is slightly better for Scotland than the overall GDP figure is because the slowly growing pie of national wealth is being divided by a population that is, as we all know, static or declining. Those figures are not mine, but are from "Measuring Scotland's Progress Towards a Smart Successful Scotland 2004", which was produced by the University of Glasgow.
I will not go into the issue of opportunities in great detail. I will say only that if any small nation is equipped to deal in the knowledge economy, it has to be Scotland.
On the theory of economic development, it is difficult to establish cause and effect. However, through my work on high-growth economies, I have discovered a number of trends that are associated with high growth—there is an important distinction between causing and being associated with. One such trend is, of course, increasing population—I suppose that the ultimate test of an economy is whether people choose to live in it. On that basis, we have a challenge, no matter whose figures you use. A high level of research and development by business is also associated with high growth, on the basis that research and development lead to innovation, which leads to greater productivity, which leads to higher growth. A high level of business start-ups is also found to be associated with high growth, as are adequate infrastructure, a benign corporate tax environment, high productivity—in relation to which we also have a bit of a gap—and adequate levels of human capital as evidenced by training and education.
I suppose that the committee is examining the effectiveness of expenditure over the years and—again—I have to disappoint you and say that it is difficult to be precise in that regard. However, I can say that we should concentrate much more on outcomes than on outputs. Failure to do that has been a bit of a problem in the past.
On the Tribal HCH Ltd review—whose author is present today—I would debate quite strongly the inclusion of common agricultural policy expenditure in the equation. However, I will highlight one conclusion that is fairly relevant. Between 1999 and 2005 the overall budget in Scotland increased by 41 per cent, but primary expenditure increased by only 10 per cent and support by only 22 per cent, which seems to be slightly at odds with the objective of having economic development at the forefront of policy.
I cannot resist making a few recommendations. Unlike Alf Young, I will not look backwards because, once I have understood what has happened, I like to look forwards. I recommend that the impact on the economy of all policy matters should be borne in mind at every instance. Secondly, we should have fewer indicators of performance and instead concentrate much more on outcomes.
We need to tackle productivity in the public and private sectors. We need a much clearer idea of what I call non-recurring expenditure on the building of Scotland's assets, which has benefited from substantial growth in public spending over the past few years that might not be repeated in years to come. We should limit the enterprise network's activities to adding value in the private sector. We should also embed economic development in all areas of policy and shorten and make more efficient the planning process.
John Downie (Federation of Small Businesses):
The Federation of Small Businesses submitted a response—which I will not delve into here—to the committee's inquiry. We have continually called on the Executive to improve, as Donald MacRae suggested, its analysis of spending outputs, but particularly to improve analysis of outcomes, which are extremely important.
The real question on "The Framework for Economic Development in Scotland 2004" and the smart, successful Scotland initiative is where should the public sector intervene? The question is about evidence on the effectiveness of expenditure, but we are really talking about evidence on the effectiveness of public sector spending. In a number of parts of FEDS the Executive refers to responding to market failure. One can respond to market failure, but when we are deciding in a market economy where public money should be spent, we have to go through a process to ensure that the spending is effective. That is the key issue. We do not identify and prioritise areas of market failure and we do not really understand the causes of our underperformance or market failure. We have not seen evidence-based policies being initiated that will help to remedy the situation. Those are three key areas that need to be addressed. The Executive has probably taken steps to address the first one, but we have not made progress on the other two.
The committee took evidence from Highlands and Islands Enterprise and Scottish Enterprise. Scottish Enterprise is unable to answer basic questions on the forms of market failure it is addressing but, if we are to address market failure, we need to be clear why we are intervening. That is not to have a go at Scottish Enterprise—it is just to say that we need evidence on the policies that are effective in addressing the failings in the Scottish economy.
I hope that our response touched upon a range of issues. We are continuing the work and the committee's inquiry will help us to focus on where the public sector should intervene and the policies it should spend money on.
Before I open up the meeting to questions I will make the same two points that I made last week. First, I remind members and witnesses that we are engaged in a cross-cutting inquiry. We are not focusing narrowly on economic development spending; rather, we are interested in how it relates to other spending, for example on transport or and broader policies of the Scottish Executive.
Secondly, I will not allow members to ask all four witnesses the same question—I will ask members to identify from whom they want a response to their questions. I will promote dialogue in that way, so that everybody gets a chance to come in.
I have a question on something that Donald MacRae said, although I suspect that any of the witnesses could answer. I will let you control that, convener.
Donald MacRae said that we are spending record amounts, which is correct, and suggested that the situation might not be repeated in the immediate future and is probably a one-off. Given that opportunity, are we spending resources in the right places, given what the convener said about all areas potentially contributing to economic development? If you think that we are not spending in the right areas, why do you think that?
There were three or four questions there, but I will do my best. By my estimate, total public spending in Scotland is 54 per cent of GDP, which is too high. There is evidence that that will inhibit the growth of the economy and the private sector. The rate is significantly higher than the UK rate and that of many other countries in Europe.
Growth in recent years has been significant. The budget of the then Scottish Office in 1999 when devolution took place was £14.5 billion and will—I am sure that people will correct me if I am wrong—be about £28 billion in 2007, which is a substantial increase. My point is that some of that expenditure might have been better used in sorting out infrastructure and in building up assets for the future rather than in recurring expenditure that will repeat from year to year and for which we do not get the same kind of return.
I admit that there will be some very hard decisions to make. For example, who is to say that we should not increase spending on health? My response to that question is that I am as keen as anyone on improvement of health in Scotland. However, why do we spend about 19 per cent more per head on health in Scotland yet have worse outcomes than the rest of the UK? Perhaps there is a question to be asked about efficiency.
I am intrigued about two areas of spending and about whether the spending was in the right or the wrong place. I was intrigued to see that the rate of growth in funding to local authorities was less than I had expected. In my experience of local authorities, when they are doing well and are focused on their economic development strategy, they probably do better than the other agencies because they are closer to local markets and, because they are in close contact with the business community, are usually better able to judge the best infrastructure projects to go with. Whatever broader negative comments I might have made about local authorities over the years, I think that they are primary tools of economic development. If you are going to micro-manage, they are often the best agencies through which to do that. I therefore urge consideration of funding of local authorities, particularly for economic development.
The other area is capital expenditure as opposed to recurring expenditure. Some of the best broad economic research from north America and Europe suggests that there is a strong correlation between investing with local capital, particularly in transport infrastructure, and overall productivity in the private sector.
More research needs to be done in Scotland because although we have a curiously high element of fixed-capital formation—relative to the other UK regions—our economic growth performance does not match that. In the other UK regions, GDP growth has a bigger share than capital investment, which means that their capital investment is productive. However, for quite a few years, Scotland's share of UK capital investment has been a lot higher than its share of growth, which means that we are investing a lot in capital formation, but are not getting a return on it. That does not necessarily suggest that we need to spend more on capital formation, but that we need to consider where we are spending it and whether we are getting the best value for it. Some of the numbers suggest to me that we are less productive with our capital investment than are other regions.
The point about capital investment is interesting; perhaps someone else will follow it up.
Donald MacRae's point about the total amount of public spending is something that we have heard from other people. Given that we are in the peculiar situation of having a devolved Administration to which money for public spending is given in a block, how would we reduce the proportion of public spending? Obviously we could grow the private sector, but the situation is like the question of the chicken and the egg.
That is really a question for Donald MacRae.
I feared that, convener.
I am on record as having said—I will say it again—that the Barnett formula encourages increased public spending. That will have to be addressed at some point, which will be very difficult and will involve tough decisions.
I will move on to Alf Young's historical perspective. It seems to me that one of the characteristics of Scottish Enterprise during the past eight or nine years is that it has increasingly become a business support and strategic agency and has moved away from the land and property emphasis of the old Scottish Development Agency. If we consider the activities of English partnerships and what we heard from the regional development agencies from south of the border, we see that they operate more in a strategic land and property direction than we in Scotland do. Should we consider that shift and, perhaps, focus on whether we have succeeded in mobilising the opportunities around the Clyde or the Clyde gateway, or in properly co-ordinating developments in Edinburgh?
Scottish Enterprise lost those functions through Government decision making. In the old undevolved Scotland, the Scottish Office decided to sell off much of the SDA estate. Responsibility for physical development became a small feature and many good people left the SDA because the challenges were smaller. At the same time, England was creating time-limited urban regeneration companies on the Tyne, in Manchester and elsewhere. Those companies were set a 10-year timetable and were given a budget and property powers and told to get on with the job. In the late 1980s and early 1990s, I worked with the Tyne and Wear Development Corporation, which was a successful model that was run by Scots—five of the top people in that organisation were Scots from the East Kilbride Development Corporation, the Govan Initiative and the old SDA, all plying their trade elsewhere. The physical regeneration of those two rivers in the north-east of England is testimony to the corporation's impact.
We must reconsider the matter. The story so far of regeneration on the Clyde is pretty poor. Too many warring bodies want to be top dog in delivery. The master plan is taking an awful long time to complete and, to be frank, there is not a lot of vision in it. The plan is for a lot of housing, but there is not much vision about how to reconnect Glasgow with its river. I spent some time in a boat off Greenock the other week looking at sites for the council. Another huge set of challenges exists there, but I do not sense dynamism in the physical regeneration process.
Three linked questions arise. One is the planning or land-assembly question of whether we have sufficient capacity to purchase and acquire the necessary land. The second is about the integration of economic development activity with transport infrastructure. If we identify a project, we need to consider whether we can co-ordinate the different issues that we need to unlock to make the project work. The third is a process issue about where economic development sits in the Executive.
There is also a cross-cutting issue because a lot of players out there want to have a say.
You are saying that the number of institutions is a barrier to progress.
The number of institutions has always been a barrier to progress. I am not sure what the evidence is for George Kerevan's claim that local authorities are a better economic development delivery vehicle at micro level than are the local enterprise companies. There are many agencies.
In the first session of Parliament, I was an adviser to the Enterprise and Lifelong Learning Committee in its first inquiry, which was on the delivery of economic development. I recommended strongly that that committee take a stronger line on rationalisation of the bodies that carry out delivery, but the committee fudged the issue and recommended the creation of local economic forums, which I despaired at. The Auditor General for Scotland now says that the local economic forums should be wound up and that they are trying to create a life for themselves. That is the trouble; if we create a new agency, it will create a life for itself and the system will become even more complex. The great virtue of the regeneration agencies in England in the 1980s and 1990s was that they had to die in 10 years; they had to get the job done and go.
I agree with Alf Young that the Enterprise and Lifelong Learning Committee was not strong enough and that we did not rationalise the system enough. We still have an amalgamation of local authorities and LECs working on economic development, but one organisation should take the lead.
A bigger issue—to which the convener and Alasdair Morgan referred—is about where the Executive might best spend money to improve economic performance. There are three main possibilities. The Executive could spend money on intervening in the market, as Scottish Enterprise has done at certain times to try to second guess where the private sector will underperform. We have tried that with business start ups, high-growth firms and clusters. We can spend money where there is clear market failure, which is about individuals or geographical areas in which there is little or no contribution to the economy. That relates to skills and training and aspects of physical regeneration.
The key, however, is to spend money on public services that improve the economic environment. We are talking about education and infrastructure. In the other two areas there is less evidence to say that we are getting the best economic bang for our buck. On the returns on investment in physical infrastructure and education there is a lot of evidence of policy success. Less risk is involved and the returns are more certain in that type of investment.
Any enterprise agency and any Executive would have a combination of spending on the three areas to which I referred, but it is about how we prioritise things to get the biggest economic bang for our buck. The Executive has spent a lot on transport and we have invested more in broadband, but investment in infrastructure has perhaps been marginalised over the past few years as Scottish Enterprise has moved to being a more business-support type agency.
I am interested in Alf Young's idea of looking in the wing mirror at what has happened in the past and considering indigenous heavy industries, such as coal, steel, shipbuilding and the new industries of smelting and pulp mills, and the electronics industry. The message is that we are not able to sustain long-term competitiveness. On what outcomes and measures of economic performance and competitiveness in the long term should we be focusing?
The debate tends to cluster around the idea that we should set a target for growth for Scotland. I am told—it comes up all the time—that other people set such targets and am asked why we do not. I went looking for the Irish growth target the other day. I read a great many things, such as the national development plan and the economic review and outlook for 2004, but I have still not found the target. Governments make forecasts of how they think their economies are going to grow, but it is not my experience that they set targets, because, being politicians, they are too smart and realise that if they set a clear target for growth and do not meet it that is another stick with which the electorate can beat them.
I am not convinced that we should become pioneers in setting a growth target, but that does not mean that we should not project how we think the economy should grow in the years ahead, in the same way that Gordon Brown has done in his pre-budget report—he went against the city consensus and said that the UK economy is going to grow between 3 and 3.5 per cent next year. I have no problem with projecting expectations of growth; I just do not see that it is politically sustainable to have a target for growth.
Gordon Brown might or might not have made a stick with which to beat himself. In Ireland the rate of economic growth is the stuff of day-to-day debate in the press. The Irish look at what the rate is and what it is anticipated to be in the future. The data that we have in the public domain, such as population figures and international competitiveness indices that come in from the International Institute for Management Development and Robert Huggins and Associates, paint a picture that gives us genuine cause for concern. The prospect of losing 550,000 economically active people by 2043 surely suggests that we need to do something different. If so, what should that be?
I accept absolutely that we face major challenges, such as the demographic challenge and the competitiveness challenge. All I am saying is that the tenor of the debate that I observe and write about regularly seems to be focused so relentlessly on the downside that we make the task of upping our game even harder. The point of looking backwards is not just to be nostalgic—I have turned 60—but to understand the world that we have lived through.
In my lifetime, the Scottish economy has experienced massive shocks and has survived all of them. If I look around this country of mine, I find that it is not exactly an economic basket-case. I want simply to engage in a more meaningful debate about how we move forward. That may include setting a clearer forecast for Scottish growth. It certainly involves focusing on what demographic statistics are telling us, although the registrar general keeps moving the goalposts. He told us that the Scottish population would go below 5 million in 2009, but a year later he told us that that would not happen until 2017. With that margin of error, setting targets becomes fairly difficult.
If we drill down there is a steady trend in relation to people who are economically active that is worth considering. We must ask ourselves why, when the economically active population is dropping like a stone, our forecasts stop at 2043, whereas those for the UK continue until 2073? Is a worse story coming in that gap? Is there something fundamental about which we need to start thinking?
I do not know whether a worse story is coming.
Get your crystal ball out.
Young women may rediscover fertility—I do not know. All sorts of social changes may take place in the next 50 years. We have no way of predicting those. Demographers simply take the graph, point it straight into the future and say, "That's where we're going." They know no more than I about where we are going.
Population decline holds out good prospects for GDP per capita. Donald MacRae tells us that the figure in Scotland is 94.6 per cent of the UK figure, but Nicholas Crafts tells us that it would be 21.3 per cent higher if we could get life expectancy in Scotland up to the same level as in the UK as a whole. That dodgy piece of data, divided by the policy failure of population decline, is no comfort. When we are down to one pensioner and one oil rig, GDP per capita will be great.
Donald MacRae would like to comment.
I will be quick, convener. I am not into counting angels on pinheads. First, I am optimistic about Scotland's future. We should never forget that we have many advantages. History shows that the only time when Scotland's population grew substantially was during the second world war.
The biggest lesson that we should learn from our economic history is that there is no magic bullet. We cannot simply import a new industry, as we have tried to do on various occasions. It is much better to try to improve the indigenous economy. The smart, successful Scotland strategy is all about doing that. Unfortunately, it will take years for the strategy to take effect.
In my opinion, population is the biggest single issue facing Scotland. I will choose my words carefully—our birth rate is low and we are still losing people. We should aspire to be in the top quartile of OECD countries—I have all the figures with me and can give them to the committee, if members wish. GDP is just one of 12 indicators of economic performance. I agree with Alf Young that setting a target will not in itself enable us to achieve it. However, it is important that we have a forecast of growth. If my memory serves me correctly, we have never had one—unlike the Chancellor of the Exchequer, who a few days ago predicted growth of 3 to 3.5 per cent next year.
So yes, we should have targets, but not just for GDP, and yes, in my opinion, we should aspire to be in the top quartile of OECD countries. The lesson from history is that we cannot import magic bullet solutions and must grow the economy. The biggest single challenge relates to population.
The refreshed FEDS sets four principal outcome objectives: economic growth, regional development, closing the opportunity gap and sustainable development. Alf Young referred to the problems that arise even in regions, where there are warring factions and competitive interests and people do not know who leads on what and what they are supposed to be doing. In his introductory remarks, George Kerevan referred to the need for an overall goal towards which everyone marches and that is accepted by the private sector and others.
When we took evidence from Welsh Development Agency officials last week, they suggested that there is a team Wales approach. Of course, we do not know whether their claims that things are an awful lot better in Wales are actually true—we have not looked into them—but the picture that they suggested was one in which people knew their role and were focused on the objectives that were set by the Assembly. People seemed to know their place in the jigsaw.
I do not ask people to judge whether that picture is true—although, if they know, they might want to say—but I want to know what is the best way to achieve a team Scotland approach without having warring factions and the different models of support that we have under Scottish Enterprise and Highlands and Islands Enterprise. How do we get that overall goal?
I am tempted to point out that the Welsh Development Agency is being abolished and is not very happy about it. That suggests that team Wales is a more complex issue than we might otherwise have thought.
Having spent years considering the issue, I think that there is no synthetic formula for getting a common view among all the disparate actors. The Irish found that their lead came together principally because their economy was going nowhere and, after 20 years, they had exhausted every other possible solution. Finland had a major shock when its economy went into meltdown at the beginning of the 1990s and was forced to respond.
The issue is difficult but ultimately—this may not help any of you—it comes down to political leadership. The problem cannot be solved synthetically simply by setting up an agency. That is the problem on Clydeside, on which I agree with Alf Young. The redevelopment of Clydeside could be a big motor for the Scottish economy over the next decades, but it has been stalled because it is trapped between the different agencies and local authorities. An agency cannot simply be imposed over that political friction. Somehow, the issue needs to be solved politically.
Alf Young asked what evidence there was for my view that local authorities have a role to play. The evidence is entirely intuitive—I admit the weakness of that—but I spent 12 years chairing a local authority economic development committee and I have chaired the board of a local enterprise company. It strikes me that, ultimately, the issue comes down to people and to political leadership, which usually emerges once all the other possible solutions have been exhausted. I do not think that the committee can put anything in its report that says how we do that, because ultimately it is a people thing. However, if there is one way in which that people thing might be made to happen more quickly, it is perhaps to have a more area-based approach to economic development rather than the sectoral approach that has been the norm of the enterprise agencies for the past decade. The sectoral approach might have had some merit 10 or 15 years ago, but I believe that we need to return to an area-based approach. Once people start focusing on areas, leadership might emerge.
Do you mean area or conurbation? An important issue is whether we perhaps have too many areas in Scotland.
If I had to vote, I would say conurbation.
In the annex to our submission, we proposed quite strongly that the Executive needs a national development plan, by which I do not mean a five-year Stalinist-type plan. The Irish plan is probably the most well-known example. However, if silicon valley can come up with a development plan, I am sure that we can produce a national development plan for Scotland.
The key aims of such a plan should be: to identify the positive changes to improve growth; to stop the important negative changes that restrict business growth; and, most important, to set out the Government's vision, objectives and priorities for the economy. As George Kerevan said, that takes political leadership.
An example is the refreshed FEDS document, which I do not think anybody disagrees with. However, after reading the document, it becomes apparent that everything is important to the Executive. You must prioritise. They are all issues, but the Executive must take the lead in saying which is the most important and allocate spending to it. That is the part that we have not quite cracked yet. The Executive wants to do everything but, frankly, it cannot. We need to focus on what we can deliver on. That takes political leadership and policy prioritisation, followed by spending allocation.
That is exactly the point that we will put to the minister next week.
We must not misrepresent what the Irish national development plan is or became. Essentially, the plan was the vehicle for spending structural funds. Latterly, as those structural funds declined, it became something more than that. However, from reading the national development plan on the website, it becomes clear that it is about the distribution of resource to projects. In effect, the national development plan is an online auction for who spends what where in Ireland. It is not a national plan in the sense that the federation would like you to think.
Dr Murray asked about the FEDS document. Why do we have both FEDS and "A Smart, Successful Scotland"? Why do we need two big, heavy policy documents on how we manage economic development in Scotland? It seems to me that the confusion about agencies that I talked about is superimposed on confusion about policy, because we have two potentially competing statements of where we are going, although there are huge areas of overlap. We do not need two documents. I have written about the matter and have been professionally involved in it for 25 years, but I do not know what the public makes of it. I suspect that they do not make anything of it, because at every level in the system there is utter confusion about which document is the statement of approach and who is delivering on it.
There has also been an unwillingness to make hard decisions. In one sense, the creation of Scottish Enterprise and the local enterprise company network was about bringing training into the game and not concentrating only on physical development and business support, but it was also about spreading the goodies around Scotland so that nobody felt left out and everybody got them regardless of their economic circumstances. As Donald MacRae pointed out earlier, we have a disparate economy. The performance of north-east Scotland and Edinburgh stands up in comparison to the performance of many vibrant and prosperous areas elsewhere in Europe, but we also have areas of huge challenge and problems. Regardless of that, everybody gets their share. We are not even thinking in terms of economic development when we design the infrastructure for delivery.
If we compare the assessment of the weaknesses of the Scottish economy in the FEDS document with the measurement in "A Smart, Successful Scotland: Strategic direction to the Enterprise Networks and an enterprise strategy for Scotland", which was published in 2004, we see that there is not a particularly close match between the problem areas and Scottish Enterprise spending. There are winners and losers but they do not match up. That seems to me to be a clear problem. When we identify weaknesses, we should spend to address them.
This is perhaps a philosophical question for people in the media, but is it possible to achieve consensus about goals in the Scottish political system, which is based on conflict? The media also play a confrontational role rather than being consensual. Within the Scottish political scene, is it possible to have the type of political leadership that would enable everyone to sign up to a strategy for Scotland?
I call Donald MacRae, as a non-politician.
As a non-politician, I point out that part of the Irish transformation was the achievement of the consensus that Elaine Murray mentioned. Ireland's economy has growth at an enormous rate that is significantly greater than that of many other countries, and its GDP per head is almost at the top of the league of OECD countries. However, the reason why Ireland got that consensus is that its situation was so poor. It was well down the league. Those two things have to be considered together. I agree that competitiveness is critically important, and it too is part of the reason behind the Irish transformation. In answer to your question about whether that transformation is achievable here, there are people in this room who are much more skilled at answering that question than me and they are sitting on the members' side of the table.
Perhaps it is something to do with reaching the magic age of 60, but I recognise many of the frustrations that Alf Young mentioned about the intractable problems with our economy in Scotland that we seem to have had for the past three decades. However, I challenge some of what he said. We went through the difficult period of getting out of heavy engineering when that industry became a branch factory and moved into electronics, but surely the biggest economic opportunity that any country in western Europe was given during those three decades was the arrival of North sea oil. That should have been the catalyst to help us to move away from heavy engineering in the west to something related to developing a major oil economy, perhaps based in the north-east.
Back in the 1970s, Andrew Neil wrote an article in The Economist entitled "Eastward Ho! Westward Woe". What happened to that? Our economic growth rate per annum is currently 1.6 per cent, whereas the economic growth rate of Norway, which is the only other country that had a similar injection, is more than double that. How did we miss our opportunity?
I do not want to get into debate about that, sensing the party allegiances around the table. "Bring it on," says Jim Mather. The obvious difference is that, when the British Government discovered North sea oil, it allowed the multinational corporations in the industry to take over the running and development of the whole infrastructure. The Norwegians were much more canny in exploiting that opportunity, in developing significant players in the sector and in dealing with the revenues that flowed from the production and the rest of it. We missed out on much of that.
The number of Scottish companies that have emerged from 30 to 35 years of oil production in the North sea is very small. A bigger impact has probably been made on the private sector in Scotland by the privatisation and deregulation of things such as milk, transport and the utilities than has been made by the discovery of oil. It is a sad reflection of policy making in that era that we did not do more to exploit that opportunity. People created significant businesses, which I do not intend to belittle. The Wood Group is an obvious example of a business that now has global reach, and others in more specific niches did very well out of the oil industry. However, in general, the impact of that resource on our economic development has been very limited.
At the same time that we had the opportunity to exploit the discovery of oil, we were going around the world touting for big mobile plants almost regardless of their long-term stickability in the Scottish environment. I got terrible stick 20-odd years ago when Roche brought its Dalry vitamin plant to Ayrshire. I rooted around in the numbers and wrote a story about how much that cost per job. Roche flew six executives from Switzerland and London to Glasgow to confront me and my editor because it was thought that I had stolen documents from the company. All that I had done was root about in the public record and assemble a credible estimate of how much it cost—I think that the figure was about £110,000 per job. Was that a good investment? The company is still there, producing vitamins. It has continuously supplied employment in that part of Ayrshire for more than 20 years. Arguably, it was a good investment; however, we do not know because nobody ever conducts post hoc analyses of such things. When Hyundai established its plant in Fife recently, I did the same thing, helped this time by some leaked material about how much it cost—and we know the end of that saga.
Against the big bets that were being made by politicians and their officials, a huge opportunity existed for us to build viable knock-on industries from North sea oil production, but we did not really seize it.
The one thing that our Government had control over was the infrastructure, which could have been recognised as a massive economic opportunity. The road works, the railways and all the rest of it could have been set up as a matter of urgency; however, that was not done at the time. It was 10 years later, in 1980, that the road between Dundee and Aberdeen was dualled. The blame for that could be laid at the door of the politicians.
I once spoke at an away school for the former Scottish Office transport department. I asked who planned the roads strategy in Scotland and why we did not have proper road links with our biggest market, England, and with the North sea oil industry. The apocryphal story is often told of a Japanese inward investor being taken round the M9 to lunch in one of those nice restaurants out in West Lothian and saying, "How nice it is of your Government to close the road for my visit." That says something about roads strategy in Scotland over the past 25 years.
Just on historical accuracy, we always forget that the Scottish financial sector was saved by North sea oil. Without it, we would not have the Royal Bank of Scotland and we would not have had economic development, whereas Norwegian banks just collapsed disastrously during the 1970s. There are swings and roundabouts.
The fact is that, in the year of grace 2004, we still do not have a dual carriageway between Peterhead and Aberdeen, which was the main landfall for North sea oil.
Economic growth is not a major criterion on which we base decisions on transport projects.
The panel will be relieved to know that I will not ask them whether FEDS is really shaping our priorities because I thought that that would waste all our time.
I want to ask a slightly more thoughtful question about the debate on economic development. I am about to flatter the panel. I think that John Downie probably comments on the economy in the public prints more than anyone from any other business organisation does; Donald MacRae is probably the most quoted economist in Scotland; and George Kerevan and Alf Young are probably the most respected economic commentators in Scotland. You are a significant group of people in terms of shaping public opinion about the economy.
My question is how we make the debate about the Scottish economy more sophisticated. Let me touch on three examples from the past week. I do not want to hear an answer that refers to political leadership, because leadership reflects, in part, the issues that are on the agenda. There is a real problem about how economic issues are reported, regarded and placed in Scottish life.
The first of my three examples from the past week is the fact that we are about to have a discussion on public finance in Scotland in which the Executive has used a methodology that is not used in any other document—treble counting has not been used for years. However, in terms of coverage, that merited one very nice paragraph at the end of an editorial in The Herald. We are about to demonstrate efficiency savings of £745 million. However, when we take out of the equation Scottish Water, which should not be there because it is not covered in the departmental expenditure limits, the real savings figure is, in fact, £645 million, so the total savings from 2005-06 to 2007-08 will not be £1.7 billion, as the Executive claims. However, every political correspondent in Scotland reported the £1.7 billion figure, which was believed to be correct. We will not get that story updated, although it is about the spending of a fifth of the Scottish budget.
Secondly, the chief planner in the Development Department sat in front of us two weeks ago and said that of course the Executive published data about major planning applications in Scotland and delays to them. He was wrong. We received a letter from him yesterday in which he admitted that he had never published such data. In fact, the data show that, although the Executive's target figure is 80 per cent, we process only 49 per cent of major planning applications in Scotland on time and that the trend has gone 10 per cent in the wrong direction in the past year. Our two growth spots are Edinburgh and Aberdeen, but only 26 per cent of major planning applications in Edinburgh are processed in time and the figure is similar for Aberdeen. God help us! The chief planner does not know that we do not even publish the data, but nobody cares.
Thirdly, there will be a statement on non-domestic rates tomorrow. We have finally got to the fact that there has been a cumulative windfall based on a cumulative underestimate of almost £400 million in the past four years. The interesting debate is what we do about that.
You guys write and comment on the economy more than anybody else in Scotland does. I do not doubt your commitment to the issues, but we have a problem with the sophistication of the economic debate in Scotland. The issues are not up there in the way that they need to be. It is not solely about the work of the Finance Committee and its advisers. My question to the panel comes back to the Irish example, in which politicians did not put the economy on the agenda. How do we get not just you guys but your newsrooms and your organisations thinking that this stuff matters?
The examples that I gave were just from the past week. I accept there have been only three such examples in the past week, but that is true for many weeks in the year. I do not know how we fix that.
That was quite a long question. I hope that we get shorter answers.
I have two possible answers to that. The first is one that you will not like. I cannot see that economic development will become the central political issue until the Barnett formula runs its course and you guys have to raise the money. At that point, all bets are off, you have to take the issue seriously and it becomes a major issue for the general public.
I will throw brickbats in our direction by saying that I do not think that the media handle economic development discussions well. The problem is partly structural as the print market is extremely competitive. The London newspapers do not particularly care about economic development issues in Scotland and those of us who are left here have to fight our corner for news space. The Sundays probably do it better than the dailies, but journalists have to play to local markets. Television is a linear medium that does not deal with issues in any great depth. I often feel that the lack in Scotland of a weekly news magazine, which the Irish have, is a problem. Having said that, however, although the Irish press environment is slightly different to ours, people are still subject to competitive pressures—like Scotland, it is one of the most competitive newspaper markets in Europe—and I am not sure that the Irish press necessarily deals with the question of economic development any better than we do.
Although there is a problem with the way in which the media deal with the issue, we will handle the issue better when it becomes a much more primary political issue. However, given the fact that the Barnett formula is still in existence and there are still a good number of jobs around, the issue has not become a central one.
We have to communicate more clearly the benefits of economic growth, which are more jobs, higher wages and increased standards of living. We do not relate the issue to people's everyday lives. We have been examining the issue of having a Scottish index of success or well-being and taking into account other considerations. We are talking about standards of living, economic activity, length of life and Scotland's future potential but we have to approach those matters in relation to people's everyday lives. To the man in the street, talk of Scotland's GDP or economic growth figures is meaningless. However, attracting inward investment or creating indigenous businesses comes down to jobs, people's standard of living and the amount of disposable income that they have.
One of the reasons why people do not engage in the economic development argument is that we do not do enough to relate the bigger picture to people's everyday lives. Our members are concerned about how their businesses are doing and what is happening in their local business environment, which, as George Kerevan said, is influenced more by the local authority in terms of planning and so on. Most people do not enter the big, strategic debate. We find it hard to get people to concentrate on and consider the big issue and it would take a strong effort to engage people in the debate. That would be a lot of work and I feel that, until the Daily Record, which is the best read paper in Scotland, has a weekly business section—
It has a daily business page—page 57.
Yes, but until it has the four or five pages of business news that The Scotsman and The Herald have, there will be no impact. We need to get the debate going at that level and engage a wider audience. There are ways of doing that, but it would take time.
I do not have an easy answer to the question. Wendy Alexander gave three examples. When the Treasury started to become engaged in double and triple accounting to try to prove that it was spending £40 billion on health and education in the early years of the first Blair Government, I was one of the journalists who pointed out what it was doing. I should point out that what we are talking about is not triple accounting; it is counting three years together and saying that, over those three years, the saving is £1.7 billion. I have made that point several times in the past few weeks.
The issue is difficult. When I have been writing about efficient government stuff recently, some people in my office have said, "You are the only person who understands this." There is an issue of understanding in the nature of the debate that we have with one another. John Downie is right to say that the man in the street knows nothing of GDP.
As I was sitting at nine o'clock last night trying to cobble something together on the back of some production figures—because I had been here all day and was trying to get a column away before the deadline—I was thinking to myself, "Who reads this?"
We do.
Maybe my answer is that what we all need to do is to think about the nature of the contribution that we are making to the debate and about whether that contribution will encourage other people into the debate in a meaningful way or whether it will simply exclude and alienate them. Part of that is about the tenor of the debate. This is the last point on history that I shall make but, given where we have been, a debate that relentlessly focuses on the negatives in our current economic condition is a debate that raises in people's minds fears of mass unemployment, both in the private sector and in the public sector. That is something that scarred us for decades.
My only brief period of activity in politics was in the 1970s, when Scottish unemployment relative to the UK as a whole was somewhere around two and a half times as bad. Politicians turned cartwheels to try to address that challenge, which is why a lot of those crazy chunks of money were flung at things that we were never going to sustain. Maybe we need not a national plan but an inclusive national debate about our strengths and weaknesses and about how we can make the strengths stronger and address the weaknesses.
The Parliament building cost a lot of money. It is a great venue for having more than just MSPs debating the issues of the day in it. Maybe there is a place for holding a national debate every six months to which not just the great and the good can come along to make their contribution, but to which people who want to discuss the economy can come. When we look back and ask whether the building cost too much, we might actually conclude that it fulfilled more functions than we thought it would at the start.
It is worth pointing out that some of the issues in the examples that Wendy Alexander gave may have come into the public domain because the Parliament in general and the Finance Committee in particular have been focusing more clearly on such issues, so the debate has been different from what was possible six or seven years ago under the old system.
Absolutely.
I am not sure whether I found Alf Young's stimulating comments pessimistically optimistic or optimistically pessimistic.
I am an optimist, John.
That is good.
You referred to the East Kilbride Development Corporation, which was a tremendous dynamic in the East Kilbride area and whose results are still there to be seen. People such as George Young did tremendous work there. When we consider the state of the indigenous industries in Scotland, it is quite remarkable that we are still managing to survive as an economy despite the tragic consequences of the disappearance of the steel, coal and other engineering industries.
I have read the papers that have passed across my desk in the past week. Donald MacRae, I think, referred to the fact that we are not doing a scientific study and that it might take five years for policies to come to fruition and to find out whether they were right or wrong. In a sense, it is a case of financial navel-gazing and keeping one's fingers crossed, because any project—
Ask a question, please, John.
The time it takes to find out whether a project is successful gives quite a bit of leeway.
FEDS and the other targets have been mentioned. All that is happening is that the Executive is hedging its bets. That does not con the people out there, because they can pick up on fundamental things like that. What do we need to do to put the thing on its feet and drive it in the right direction?
I will answer the question in a general way but, before I do so, I must say that, when a politician begins a question by flattering people, their question is usually serious.
I have two recommendations to make, which address both John Swinburne's question and Wendy Alexander's request for a big idea with which we can engage. The first recommendation reinforces what has been said about the need for the Scottish Parliament to raise more than it does at the moment, which is one of the only ways in which the governance gap can be closed and people can be engaged more fully in expenditure choices. People need to realise that the economy and its growth are of paramount importance. The population figures are an expression of people's view of the overall situation: people are voting with their feet and the Scottish population is either static or declining.
My second recommendation comprises two smaller ones. The first is that more use could be made of the Parliament's existing powers. The second is perhaps more controversial, and is that the Executive's overall finance function could do with being strengthened—it could do with being beefed up a bit.
We will pursue the minister on some of the points that you have raised.
It is good to know that Alf Young's thought processes are the same as mine. When I write a speech, I do not know whether anyone is going to listen to what I will say the following day.
Donald MacRae's last comment highlights the difficulty that we face in getting a long-term view. Although he said that the figures show that people are voting with their feet, the figures that Alf Young mentioned also show that more people from other parts of the United Kingdom moved to Scotland than left it over the past year. I appreciate that we are talking about miniscule numbers, but they could indicate the start of a trend.
The member is absolutely right and I was going to take Donald MacRae up on the point. People are quick to talk about people voting with their feet, but the demographic problem in Scotland is one not of out-migration but of the balance between births and deaths.
The last major period of out-migration was in the 1960s. If we look at the picture thereafter, we see that the 1990s was a period of net in-migration—at least it was in seven out of 11 years in that period. I admit that there is a small out-migration at the moment, but it is in penny numbers: the net balance is a few thousand. The days when the net figure for the number of people leaving Scotland on a £10 ticket to Australia or wherever was 40,000, 50,000 or 60,000 were in the 1950s and 1960s. The trouble is that people keep reiterating that people are voting with their feet and leaving Scotland—even political leaders say so—when the fact is that that is not the case.
That adds to Wendy Alexander's question about how we get a mature debate.
I represent a Borders community. We are seeing people move literally a few miles across the border to benefit—I assume that that is how they see it—from the Executive's social policies that have added to the quality of life in Scotland. I am not sure whether we do ourselves any favours by not having comparators to the quality-of-life indicators south of the border. We do not know whether we have made any capture since devolution on the basis of our quality of life.
I want to return to issues of leadership and structures—the boring things, especially the latter. I benefit from the existence of the new ways group in the Borders, which brings together the local health board, the enterprise company, the council, the police and housing associations. The Borders is lucky because of the coterminosity of our boundaries. When Heriot-Watt University's proposal to take away the Scottish College of Textiles arose, I was able to chair a meeting of the new ways group at which the issue was discussed. All the agencies that had an interest in the college staying in Galashiels—from the local health board to the housing agencies—contributed to the solution, under which the university's residence is being outsourced to the local housing agency.
When we heard evidence from Jack Perry last week, he seemed to say that an enterprise company being interested in doing work for others was anathema to him—I accept that I am paraphrasing him. However, I can see the absolute benefit of having such an approach, instead of having three national documents, including the planning one, and multimillion-pound central agencies that do not provide support for local areas.
In my area, coterminosity is crucial in building relationships among agency leaders. Is that situation unique in Scotland and western Europe or are there similarities with other systems? We are trying to get answers from the RDAs in England, which appear to be similar. Do you know of similar models elsewhere that would let us know whether the long-term benefit of such an approach is economic development?
We are getting better in that respect. For example, Alf Young mentioned local economic forums. After this meeting, I will speak at a local economic forum conference. I have always been fairly cynical about them, but our members on the ground have taken a positive approach that has allowed them to get together with the local authority and the LEC and debate the real issues that affect business. As a result, there has been positive partnership working. Some of them have done a good job of reducing duplication of economic development support, whereas others have not done that so well.
Mr Purvis's question relates to the whole community planning agenda. We are trying to ensure that our members give the economic perspective and reflect the local business environment. That should lead to more joined-up government at a local level, and I would love that approach to be replicated nationally. I have sat on a number of executive advisory groups and committees. Indeed, I remember the meetings of the first manufacturing strategy steering group, and you could tell which of the 32 people sitting round the table were not going to give up their vested interest.
If we want to reach a consensus on the way forward, people will have to think differently. The same responses are being made now. People all focus on their organisation, their particular area or their policies. We have not done enough to break down many of the barriers in people's thinking and to show them that the issue is not simply about their organisation—it is about the Borders, for example, or Scotland. The situation is getting slightly better at a local level, but we are not quite there at a national level.
I was struck by the extent to which vested interests coloured the content in Peter Wood's analysis of the written submissions. Until we have a mechanism that rewards organisations that work porously and with common purpose and penalises in a material way those who stay aloof, organisations will stick with the silo view. If the committee seeks fresh thinking on the matter, it might begin to consider rewards for government agencies that work with common purpose and penalties for those that decide to stand aloof and not work in such a porous and effective way. I am sure that the committee could come up with all sorts of carrots and sticks.
We should finish up the discussion by focusing on higher education, which everyone claims is crucial to economic development. Having worked for a long time in that environment, I agree with that. Picking up on Jeremy Purvis's question, I wonder whether higher education institutions collaborate adequately with each other or with other economic development organisations. Could reshaping the system give us better results? Has the Scottish Executive ducked that issue so far?
I was interested to note that Scotland compares quite well with other countries with regard to the percentage of graduates in the workforce. However, I am concerned about the number of people who come to Scottish universities, are educated at our expense and then leave the country. That was what I was trying to get at when I referred to the migration of people.
Perhaps we ask too much of our academics. After all, because of the research assessment exercise, they have to publish many papers every year and we are also asking them to commercialise their research, which is extraordinarily difficult. We have to examine that method and look into how academics are assessed. I appreciate that that does not really come within the scope of the committee's inquiry, but I really think that our academics have been asked to do too much. If we have to improve commercialisation, academics must be given a change of incentives with respect to how their work is measured.
Many people are going into further and higher education—the proportion has fallen slightly, but it is certainly in excess of 50 per cent. Personally, I believe that we should put more effort into nursery and pre-school education, as opposed to the tertiary sector.
I agree with that. The number of graduates has fallen by 2 per cent, but I do not think that that is an issue. However, the skills gaps and shortages in the Scottish economy—where businesses are crying out for people—probably lie below the graduate level. That is more an issue for the further education sector.
We have been producing ever-higher numbers of graduates, but are they contributing to economic growth? There is a bigger issue about where we are spending with the aim of benefiting the economy in the long term. We have been saying for a long time—and Jim Heckman has been saying this as part of the Fraser of Allander lecture series—that investment in pre-school and primary education is the most effective strategy in the long term, as that sets people's learning patterns and ensures that they are literate, numerate and can communicate. Those are the basic skills that we need to get on in life, never mind in work. It is about the bigger picture and deciding where the Executive should spend its money. At the moment, we should be spending it in the pre-school and primary school sectors.
The debate around nursery education relates to where we get the biggest return from marginal increases in expenditure. We should not make a wrong suggestion here. I heard a hint there that we should not be spending money on universities.
No; I was saying that there is a balance.
The debate is about where marginal money is going. I spent 25 years teaching at a university, and I used to despair about the abilities of universities, and even departments, to co-operate with one another. That has dramatically changed. Over the past decade, university principals and senior management have become much more committed to working with each other, particularly on a city basis, and to collaborating with business. If anything, the problem is demanding of universities more than they can achieve in the short term.
There are places where marginal improvements could be made in universities for economic development reasons. Among universities throughout the world that are supported by Governments for economic development purposes, the trend has been to give them money to import major academics and whole research departments from other countries. Singapore is doing that wholesale. That is where you should be looking.
As I have written, I am slightly dubious about the intermediary technology institutes—the ITIs. If you are considering how to put marginal money into the universities, it could be used to attract academics from elsewhere.
I think that we will have to stop at that point, as we are running short of time. We have one or two other items on our agenda. I apologise to Jim Mather, who I think was wanting in again. I thank the witnesses for coming along. As Alf Young said in his opening remarks, this is a difficult and complex inquiry, and I do not think that we expect to get definitive answers out of it. However, I hope that we will be able to probe some interesting areas and that we will raise some questions in our scrutiny of the Executive. I thank the witnesses for contributing to that.
Meeting suspended.
On resuming—