The Scottish Government

Going for Growth

First Minister Jack McConnell made a major speech - Going for Growth - on the Executive's economic strategy to the Institute of Directors in Edinburgh on Tuesday, September 10, 2002.

Full text

Iain Gray and I are delighted to be here today. I had originally hoped an event such as this might have happened sooner. But we all had to accept the reality of not just my, but your, busy diaries and the holiday period.

So I am very grateful to the Institute of Directors for their patience in the setting up of this event and thank all the business organisations wholeheartedly for their hospitality.

There has been no secret that my intention since becoming First Minister has been to create stability within Scotland's devolved government. It is this stability that irons out the ups and downs, roller coaster ride the first three years of devolution brought. An end to our own boom and bust, I suppose.

These past nine months I have talked relentlessly about the priority of our key public services - health, education, crime and transport. Somewhere along the way though, there has been the impression that my fifth priority - jobs - has somehow been downgraded. Nothing could be further from the truth.

I am acutely aware that successful enterprise underpins our public services. The private sector is the wealth creator in Scotland today generating the jobs and prosperity that sustains the public sector.

It is easier to close gaps in opportunity if we have a growing cake - rather than trying to do more and more with an existing set of resources.

That is why creating growth in our country is so important for me - successful Scottish business creates a successful Scottish economy. They are one and the same thing. You - the leaders within Scottish enterprise and us in Scotland's devolved government are looking to the same goals - and we are more able to meet those goals by working together - than we are working in isolation.

And today I also want to say to the doubters and the cynics - stop talking Scotland down.

This habit of doing down Scotland - our abilities, our performance and our potential - can impact on our future.

Some business leaders have expressed concern to me recently that the negative attitudes of some politicians and commentators will potentially impact on future investment decisions.

This is serious. Lets lift the level of the debate and start talking about what we can do rather than what we can't.

We will not grown the Scottish economy if we are continually negative and pessimistic. Young Scots need to feel proud of their country and have belief in their future.

There is much that is positive in Scotland today - and it is my job to talk Scotland up. I hope you will join me in that too.

We have three key economic development objectives:

• first, we want to accelerate our rate of economic growth. Improved growth rates will support the high levels of employment that we currently enjoy and to secure the resources for the quality of services that we wish to provide in Scotland

• second, we want to provide opportunities for all those who wish to work. We want to close the gap between those who enjoy high quality jobs with high incomes and those who seek work or work only in poor quality and poorly remunerated employment

• third, our economic development must be sustainable. This does not just mean recycling and waste management- important as they are. It also means making productive use of our human resources- avoiding as far as possible using valuable resources to support unemployed people who could work

The policies that we are following in pursuit of these objectives are now comprehensive and well developed. I have every confidence that, if we pursue them with vigour and consistency, we will succeed in delivering our vision of a prosperous Scotland.

I don't underestimate the size of the challenge we face. We are players in a world where there is increasing globalisation of trade, and capital flows and financial markets are international. We have a relatively small and open economy and cannot be immune from global developments.

We have been achieving only moderate growth. As we saw recently, that growth has not been robust enough to withstand downturns in specific sectors. The global economic slowdown and restructuring within key sectors, has had a significant negative impact on the Scottish economy- although it should be noted that the service sector continued to grow.

GDP in Scotland has averaged only 1.6% over last 30 years. I am clear that this long-term growth rate is not enough. My aspirations for Scotland exceed this rate of expansion. And by 2010 - the medium term - I expect the actions we are taking now will deliver a more vibrant, sustainable economy, with a growth rate that more readily reflects our potential.

We will meet this challenge - not through a series of short-term tactics, but through the implementation of a medium term strategy that looks beyond the cyclical nature of both the Scottish Economy and our electoral politics.

There are five areas of policy, which I know, are of concern to you the business community - two of which are mainly matters of policy reserved to Westminster, three are devolved.

First, business is rightly concerned about the stability and integrity of macroeconomic policy. Without this stability, the whole basis of successful business decision-making is undermined. Our position as an integral part of the UK economy has brought us substantial benefits in terms of macroeconomic stability - not just in terms of low and stable inflation, but in terms of unprecedented resources with which to fund the development of our public services.

Interest rates at a 38-year low; inflation at a 30-year low; and the lowest unemployment for a generation - each of these would be at risk with economic independence.

Instead of talking about the powers we don't have in the Scottish Parliament - I intend to focus our time and determination on the powers we do have - and make them work for business growth.

I am certain that higher Scottish growth is more likely within the framework of the United Kingdom than it is outwith.

Secondly, you rightly value an efficient taxation and regulatory framework for business. None of us enjoy the burdens of complying with the demands of the taxation system in our personal lives and business is no different. However, we all appreciate that this is necessary to fund the valuable contribution that public services can make. Equally, we have regulations in society to protect our communities and people and raise our quality of life - not to obstruct and inhibit business.

I acknowledge that there is a cost to business in complying with these various demands. However, I believe there is a balance between setting procedures and guidance that ultimately benefit us all without drowning business in a morass of form filling.

Before any regulation is introduced we carry out an impact assessment and I am clear that the regulatory and taxation framework should be kept under continual review. But I do not accept that all red tape is bad. And I do not believe that the frameworks that protect workers and our best companies should be swept aside.

Thirdly, we hear calls for the business rate to be cut to the level in England. There is a perception that we place an unfair additional burden upon Scottish business. This is not the case.

Yes, the poundagerate is higher here, but only because our rateable values rose by considerably less than those in England at the time of the last revaluation in 2000 - 15% compared to 25%. We cannot simply look at the rate and conclude that we have higher business taxation in Scotland. The rate has been specifically chosen to reflect this point. The net effect is the same.

I want to assure you however, that we are listening to the representations you make and I understand your point that Scotland must never placed at a competitive disadvantage.

Fourth, I hear important calls for the Executive to provide more resources for the development of the economy's physical infrastructure. We share this concern. Later this week we shall be announcing important decisions for future spending that will secure the transport delivery plan. This plan explicitly embraces the needs of business in its thinking and Iain Gray is working with momentum and energy to accelerate its implementation.

Fifthly, I appreciate and accept the comments you make about skills and employability in the labour market.

There is a clear correlation between a nation's competitiveness and educational performance. Not only do you perceive shortfalls in some skills but you want our school leavers and graduates to have attributes of initiative, leadership and an ability to work in a team.

Fundamentally I understand that you are looking to us in government to make sure our education system develops the whole person rather than just academic skills.

I have picked out five areas of policy that I know concern you very deeply. They concern me too. That is why our policy response has been developed with such care in recent years. We now have measures that provide important stability for the critical decisions that you all make each day of your lives.

But - in addition to addressing the environment upon which economic activity is founded - we have to deal with the specific challenges that face the Scottish economy.

I have already said that growth over recent decades has been disappointing and we need to do much better. This requires a sharp improvement in our productivity and our international competitiveness. Productivity in the UK is around 35 to 40% lower than in the United States and around 20% lower than in France.

It is towards the critical determinants of our productivity that we must therefore devote our energies and our resources. This is the heart of my concern and the heart of our economic policy.

In a global economy Scotland has to use and extend its competitive advantages. They do not lie in wage costs. Our competitive advantage needs to come from deployment of knowledge and skills; through innovation; and from an entrepreneurial culture. And we need to be well connected to the rest of the world.

Both business and the Executive have a responsibility to tackle the productivity challenge in a sustained manner and with unremitting vigour.

Even when productivity brings rewards in greater competitiveness and higher economic activity, we shall need to look for yet further improvement. The pressures of the global economy will continually threaten any competitive edge we can establish and we shall need to keep ahead of the game.

Now, more than ever, we need to hold our nerve. We have the right strategy and the right policies. We will not be diverted from this path, which I know most of you support.

It is my job - and that of the Scottish Ministers - to implement this plan and work constantly for the effectiveness of delivery. It is pointless having the right policies if we fail to implement them to the highest standard. This is our task now and I am determined that we shall succeed.

Smart Successful Scotland has three priorities:

• The first is Growing Businesses - We have to encourage entrepreneurship and support new companies. We have to support innovation. That means translating science directly into commercial activity but not just that. It means a climate of innovation, of introducing new products and processes in manufacturing and in services.

• The second priority is Global Connections - encouraging companies to increase their involvement in global markets, and making sure we can communicate - whether electronically or by train and plane.

• Third is Skills andLearning . Scotland's people are a huge resource as many an inward investor has realised. But skills and knowledge must be kept relevant within the modern workplace and nothing less that a national passion for learning will do.

This is a strategy for all of Scotland - and for all the sectors in the economy. From manufacturing to financial services, building Scottish intelligence into innovative products and leading edge processes.

Just as you all know that Scottish companies need to invest in Research and Development. We believe that Scotland's strength in academic research is one we should play to.

That is why we are taking the translation of ideas and research from our Universities to the market place, so seriously - and backed up with real resources. This is exactly an area where devolution can really make a difference in improving Scotland's competitive edge.

So I stand firmly by Smart Successful Scotland. Scottish Enterprise and Highlands and Islands Enterprise are adapting to the future: realigning their activities, cutting duplication and making best use of public money. I support these changes.

Their objective is to support business where that can make a difference: to provide information and advice, sometimes to provide financial support, and to help companies improve their skill base.

The advent of devolution has already begun to make a difference to the business environment:

• The reforms of the enterprise network and the creation of Careers Scotland
• Improvements in regional selective assistance to encourage the growth of indigenous companies
• New funds to support entrepreneurs and Scottish Business with venture capital
• A higher profile for Scotland abroad
• A significant improvement in morale and delivery in our education system

The list of practical measures will expand as our parliament itself grows. But we need to get the focus and context right too. Because growth in the economy and better public services are and must be indivisible.

So I believe, the first and most important job for Scotland's devolved government is to create an environment where our existing talent can be nurtured. There are still too many people claiming benefits in Scotland and there remains tens of thousands of unfilled job vacancies. We need to meet that gap.

But I also know the sort of Scotland I want government to help to create. A society that greets talent to Scotland, as other countries have welcomed Scottish talent to theirs. One where our doors are as open and welcoming as those that have been open to Scots elsewhere for hundreds of years.

We know that Scotland's population is at best static, at worst decreasing - we also know that our demographic profile is ageing. A smaller pool of people can mean less diversity, less variety and less dynamism. And it means less people funding social services for the rest.

An economy that retains its key resource - human capital - and, indeed, attracts skilled people is a healthy economy. It is symptomatic of dynamism and creates a powerful image across the world.

We need only look at the economy of the Highlands and Islands to see how population growth has had a fundamental impact on the local area. Until the last few decades, the economy of the Highlands and Islands had been in relative decline compared to the rest of Scotland.

The area had been depopulating from the clearances until thirty years ago - and for many young people, the only way to get on was to leave. Since then, compared to Scotland as a whole, the population of the Highlands and Islands area has increased by nearly 20%.

Thanks to the vision of Highlands and Islands Enterprise, and before that the HIDB, we have seen in recent years an astonishing turn around in the areas fortunes with unemployment now below the Scottish average.

Inverness Medical is an excellent example of the type of enterprise that is flourishing in the north. A company providing skilled jobs, employing many hundreds of local people - but also attracting talent from all over the world, with twelve different countries represented in their workforce.

While there is much still to be done in the Highlands and Islands - particularly in terms of GDP per head - there are lessons we can learn and put to good use across Scotland.

People are choosing to live in the Highlands and Islands because of the high quality of life. Native highlanders are returning to their home towns and villages because there is rewarding work to be found - and new people are moving north because of they value the natural environment, the quality of the schools and the relative lack of rush hour traffic!

My point is that we can do the same in very different parts of Scotland.

I want to make clear today, that my vision of Scotland in the future is one where we lift our eyes to the horizon, look outwards. We must retain the talent we have, attract former Scots back home and be open to welcome people from new cultures, nationalities and backgrounds.

For a growing economy, we need a growing population, and I am determined to see us focus policy and promote Scotland to meet that objective.

So much of this potential for the future depends upon the extent to which the people of Scotland aim high and can realise their ambitions. We are seen from outside as an increasingly confident country, with high levels of civic pride and a real sense of community. Yet still we are scared of taking risks - there is a fear of failure - and ambivalence about success.

The creation of an aspirational Scotland starts with the current generation of young people. The encouragement of ideas and initiative - their exposure to role models and opportunities to broaden their horizons through connections to other countries and cultures will do much to entrench aspiration deep in the hearts and minds of these young people.

A culture of aspiration will go hand in hand with a culture of entrepreneurship. While government can't change cultures single handedly, or overnight, we know we must break down outdated attitudes that only serve to hold us back.

Government can make a difference - and where we can make the biggest difference is in our schools while our next generation of adults are forming their ideas and opinions.

We will mainstream exposure to enterprise and the concepts of entrepreneurship - to really make a difference within secondary schools and to have changed the experiences the next generation of school leavers. Only then will we have begun to create a truly modern, aspirational country on which our future economic success can be based.

We all need to do more in encouraging schoolchildren to see themselves as creators of business opportunities.

When I say we, I mean the public sector, the private sector, and us all as parents.

To sum up. I am delighted to have had this opportunity to meet with you today.

I am certain of our ambitions for Scotland - a growing economy based on the talents and aspirations of those who live here. Retaining that talent and welcoming new talent is a key part of our ambitions.

This week we will announce our spending plans for the next three years. I hope you recognise that my words today will be backed up on Thursday with concrete plans for modern infrastructure and a culture of enterprise in our schools.

I am determined that devolution in Scotland will provide you - the leaders of Scottish enterprise with the tools you need for continued economic success

I want us to play our different parts with a shared perspective, a positive perspective, thinking about what we can - rather than what we cannot achieve.

I wanted a Scottish Parliament to make a difference. I believe that devolution could help us put the old debates behind us, be more confident as a nation and more aspirational individuals.

Working in partnership with the UK Government, I am sure we can achieve the higher economic growth we need.

We can grow as a nation and be a better Scotland.