Council of Economic Advisers Annual Report (Scottish Government's Response)
Item 3 is the Scottish Government's response to the annual report of the Council of Economic Advisers. I felt that it would be useful to put the issue on the agenda as we met the chairman of the council shortly after its report was published. Members may wish to comment or take action on points in the Government's response. There is a debate on the issue in the Parliament tomorrow, so I do not propose to have a full-scale debate now, but there may be issues of clarification that members wish to take up with the Government.
I have a few points. The Government's response is interesting, as it takes the opportunity in the first two pages to give us the first version of its Scottish economic recovery plan in a public document, rather than merely a press release. That is encouraging for those of us who have been asking the Government to put the strategy on paper.
I have several specific issues on which it might be helpful to write to the Government to seek clarification. On many occasions, the document says that discussions are taking place on an issue, and I detect a desire not to share those discussions with the rest of us. Encouraging transparency would be helpful, and one example is the Government's response to the council's recommendation 5, in which it encourages greater efficiency in public services—an issue that has risen to the top of the agenda recently. The response deprecates the potential £500 million additional efficiency savings. It would be helpful to ask the minister to clarify in percentage terms the current targets for efficiency savings—both cash and non-cash releasing—and how they compare with the targets in the rest of the UK. Are our targets for efficiency savings in cash and time both for the past couple of years and for the next couple of years higher or lower than those in the rest of the UK?
The second issue on which we might write to the minister for clarification is the Government's response to recommendation 6, which relates to our energy inquiry. Recommendation 6 reads:
"The Council recommends that the Scottish Government commissions an independent assessment of the full economic costs and abatement potential of the various energy options open to Scotland."
The Scottish Government's response states:
"The Scottish Government is commissioning this study."
That is interesting because, although there is not a generation-neutral approach in the national planning framework, by definition it is a generation-neutral inquiry that is being initiated by the Government. I wonder whether the implication of generation-neutral technology is reflected in its terms of reference. The Government's response also states that
"the paper will be considered by the Council during 2009",
so I presume that it will be a short-life study. Nevertheless, it would be helpful if we were to ask for the terms of reference of and the timescale for the study and who is carrying it out.
In a similar vein, the Government's response to recommendation 8 is, as we would expect, upbeat about energy efficiency measures, but concerns have been raised about its timetable for producing its own energy efficiency strategy. We could ask for clarity on the Government's original timetable for the energy efficiency strategy and when it now expects to produce it. That information would be helpful.
The response to recommendation 11 is:
"The Scottish Government is … working closely with the third sector, COSLA and SOLACE to ensure that there are effective relationships between the third sector and national and local government across Scotland."
We might simply say that we are aware that the third sector has anxieties about how to conduct its activities in 32 different local authorities, and we could ask about the state of play of the discussions on that. Does the Government intend to take any steps to facilitate co-ordination by the sector in its dealings with local government?
The response to recommendation 12, on planning, contains the following interesting sentence:
"The Scottish Government has explored a number of ways to incentivise local authorities to promote economic development and is examining, with local government partners, options such as tax increment financing."
It goes on to talk about the possibility of incentivising business rates income, but it implies that tax increment financing is something distinct and different from or more all-encompassing than that. We might ask the Government for clarity about what tax increment financing is. Is it just business rates, or is it something else? The Council of Economic Advisers refers to it in the context of what we might do to speed up the planning process.
On the Government's response to recommendation 13, we could ask why we have ceased to collect any data on the performance of local authority planning departments. Members will already know my concerns about that. Is there any intention to address the issue in the short-term by collecting comparative data on the performance of local authority planning departments? The idea is that every local authority should produce an improvement plan, but that does not allow us to look across the field.
Those are the main issues that I want to raise—other members may have others. If we can get answers to those questions, we will have some meat for our subsequent discussion with the Council of Economic Advisers. I felt that we had a rather opaque discussion with it last time, and the information that I have mentioned may give us some pointers about issues to approach even as far away as November, when we will have a rematch.
I have a point on planning and sustainable development. It would be logical to require that there is no major increase in carbon emissions from the construction of retail facilities. The position with industrial facilities might be different, because they almost inevitably have higher carbon outputs, but huge out-of-town shopping centres place demands on road haulage and car use and consist of big sheds that have to be warmed and cooled. We should query whether they are the only way in which to supply services.
I, too, am interested in the recommendations on energy and emissions. Wendy Alexander is right to point out that we need to understand the nature of the energy study and whether it will be independent, as the Council of Economic Advisers recommended. I saw some press coverage in which ministers accepted the recommendation but said, before the study had even been commissioned, "Of course, we know that it will justify our policy." That did not fill me with confidence that it will be an independent study that considers the evidence carefully. We need some reassurance on that.
Something that concerns me even more—I think it was quietly announced on the same day that the Government's response was more publicly announced—is the decision to bring the network of intermediary technology institutes into Scottish Enterprise and close down ITI Energy. That is an extraordinary, backward step, given what we heard today about the importance of strengthening the pipeline of support for innovation in renewable energy. ITI Energy has been doing precisely that, yet the Government has chosen to close it down. Recommendation 7 is to
"ensure that environmental and economic goals are given due weight, and … considered in parallel".
ITI Energy was designed to do precisely that.
Perhaps the publication of the Government's response gives us an opportunity to ask ministers immediately to explain their decision to cease the independent operation of the ITIs with an independent board and bring their operations into the fold of Scottish Enterprise.
Wendy Alexander and Lewis Macdonald both touched on recommendation 6. It will be good if there is
"an independent assessment of the full economic costs"
of the various energy options that is technology neutral, but given that the study is to be commissioned and considered during 2009, the recommendation should also be translated into NPF 2, which we will discuss later. That document is not technology neutral, but we are now commissioning a full, independent study that will be technology neutral. There is an argument for translating recommendation 6 into NPF 2.
We will discuss that shortly.
I have a couple of quick points in response to Wendy Alexander's comments on efficiency savings. We have to consider the potentially damaging effects of the additional £500 million of efficiency savings that the Government will have to make in a couple of years' time. We must also pick up on recommendation 20, on the freedom to borrow. Getting the power to borrow is crucial if the Scottish Government is to have the flexibility to manage the budget.
May I guide the clerks, convener? It would be helpful to ask the Government to clarify its efficiency savings targets in percentage terms. Since the outset, efficiency targets have required, for example, 2.5 or 3 per cent savings, with 1.5 per cent in time savings and 1.5 per cent in cash savings. We now have targets in percentage terms for time and cash savings in Scotland and England. Examining whether those targets are comparable or different would be a helpful way of managing the debate that will emerge in the next two years, when both north and south of the border we may be called on to make a slightly bigger contribution to efficiency savings than we have in the recent past.
I will make a couple of points. The first relates to evidence that we received this morning. It may be worth our asking the Government about the scheme for the long-term unemployed, which was mentioned by Stephen Boyd, and how it will translate to Scotland. That is relevant to the skills and training section of the report.
Can we also raise the issue of modern apprenticeships?
Yes, that ties in with the section. It may also be worth our bringing the report and the Government's response to the attention of appropriate committees. The Education, Lifelong Learning and Culture Committee should be particularly interested in the report.
The Council of Economic Advisers makes the point that it is looking at the longer term, but my primary concern is that the economic specialists on the council are not looking at the current crisis. It was Keynes who said:
"In the long run, we are all dead."
If we do not get through the short term, we will not have a long term to look to. I would like to ask the Government whether it is asking the Council of Economic Advisers to advise it on how to react to the current economic crisis, because that is not covered in the annual report or the response and was not addressed satisfactorily when we took evidence from the council's chairman.
We anticipate a tight spending climate, which may make more acute the issues relating to the funding of higher education in Scotland and the emerging distinctive models for that. In its response to recommendation 17, on how additional costs might be funded, the Government states:
"The new TAG"—
the tripartite advisory group—
"will look at the costs of keeping Scottish universities competitive."
We should ask the Government whether it intends to make public any of that work and, if so, on what timescale. It is obviously desirable that the work be published, as there should be meaningful public debate on the issue before the next spending review.
I thought that it might be useful to bring the education and skills section of the report, in particular, to the attention of the Education, Lifelong Learning and Culture Committee, but there is no reason not to add the issue that Wendy Alexander raises to our questions to the Government.
I have taught in German universities, so the notion of a social year between leaving school and going to university as an indirect student contribution to higher education funding is close to my heart. Replacing the gap year with something much more committed would be valuable in any case.
We will put to the First Minister the questions that members have suggested. The clerk will draft a letter for me to send, and we will see what response we get.
That concludes the public part of our business. At next week's meeting, we will return to our energy inquiry, looking at energy prices, affordability and fuel poverty. I am not sure whether Stephen Boyd is due to come to that meeting; I suggested to him that if he does he will have attended three meetings in a row, which means that he wins the committee.
Meeting continued in private until 12:34.