Our fourth agenda item is to consider commissioning external research. As members will recall, we agreed at our meeting on 1 November that, in principle, we would like to commission external research into the effect that the Scottish budget has had on the economy. Arthur Midwinter said that he and Ross Burnside from the Scottish Parliament information centre would return to us with a more detailed proposal, which we now have before us. If members agree to the proposal, we will seek the necessary approval, as the paper before us says. A tender exercise would then need to be carried out. We need to plan everything well in advance before we conduct any research.
I have no comments, apart from highlighting the statement that Mr McCabe made last week about it being impossible to measure the amount of spending on any of the three cross-cutting priorities. That makes it all the more urgent to carry out the proposed research and to find alternative ways of evaluating performance.
As committee members probably know, I believe that we should consider not just the quantity of growth in gross domestic product but also the quality of economic development. I recognise that the paper deals with the Executive's strategy, which is about economic growth, but I feel that there is a lack of clarity in the aims and objectives of the research proposal. In the second line of paragraph 1, under the heading "Research Proposal—Aims and Objectives", the paper mentions "annual economic growth"; in the second line of paragraph 2, the "economic impact" of spending is mentioned; the fourth line of paragraph 3 has "sustainable economic growth". While recognising that the subject is economic growth, I think that it would be helpful if we could take a wider look at the economic impact of Government spending decisions. It is possible to increase GDP simply by spending more money, but we need to consider the quality of the result of that. We need to consider the Executive's provisions in terms of long-term, sustainable economic development.
I hear exactly what Mark Ballard is saying. There is an interesting review on page 115 of this week's The Economist of a book by Benjamin Friedman called "The Moral Consequences of Economic Growth", which would cover that quite nicely.
We need to ask the Conveners Group whether it will finance the research. The timetable is reasonable—we would presumably be tendering for the work in January for a report that would come to us in September—but this is a phenomenally challenging piece of work. I am happy to leave it to the convener and the clerks, but the sheer scope of the proposal means that there is no point to it unless it is resourced properly. When we invite tenders, there must be some space for people to scope out what it would take to do the work, which might involve a bit of backward and forward with the committee. It is better to do it well.
Arthur, do you want to respond to the points that have been raised?
I will move backwards because it is easier for my memory. We have had preliminary discussions with a number of leading economists. It would be normal practice in an exercise such as this to take advice from them when they are making the bids, to see just what is or is not doable. I am not sure that the work is beyond the pale, particularly as large chunks of it would be a literature review, rather than economic modelling.
Arthur Midwinter alluded to the significance of the public sector. It looks as though the weighting on the public sector in calculating GDP is that it is 27 per cent of GDP. My understanding is that 23 per cent of employment is in the public sector. If that is the case, the assumption is that the balance is private sector employment. What about private sector profits? It does not compute. It does not make sense to me as a viable reflection. In carrying out the review, the question is perhaps to clarify the dubious nature of GDP in Scotland.
I am happy with that—that was in my mind. At times we have an unreal debate because of the lack of comparability between the figures. The research would allow us to see, in a narrow sense, the direct impact of the Scottish budget on those growth figures. That is a straightforward calculation. There is then the wider issue of considering how the Scottish budget and the programmes within it can support the market sector in developing that element of growth in the economy. We would probably come back to the committee once we had feedback from the potential tenderers, who will have a view on what they think is possible and doable.
Is the committee content to try to get this on the stocks and to go through the necessary procedures in the Parliament to initiate the tender process? We will consult the committee at a later stage, once we have established the precise parameters of what we are doing.
Arthur Midwinter's last point was about trying better to understand the impact of public spending on economic growth. That is an essential part of understanding the dynamics of our public spending and would be a worthwhile exercise.
On Jim Mather's point about how we calculate GDP, there are two separate issues: how we calculate GDP and the nature of the debate; and the more substantive issue, which is how spending contributes to economic development. In talking about the wider issue of economic development we have to be careful not to get hung up on a particular way of calculating a measure such as GDP, or even on one particular yardstick such as GDP. I take Arthur Midwinter's point about the remit and what it is possible to do in the research, but it is important, as ever, not to get hung up on one particular yardstick.
I am sure that whatever research we do, different political perspectives will put a different interpretation on it. What is helpful is to get some of the ground-clearing work done.
I agree with Mark Ballard—there is a bigger issue there about how we measure economic activity in the wider sense. However, this measurement is the one that we have to live with in the budget, and the focus should be on it for this exercise. It might be for the Enterprise and Culture Committee or another committee to consider the bigger issue.
I will put the mechanisms in place to secure the necessary approval and to start off a tender exercise.
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