Report on "Government and Business" Discussion
Host: George Lyon MSP, Deputy Minister for Finance, Public Service Reform and Parliamentary Business
Facilitator: Niall Stuart, Parliamentary Officer, Federation of Small Businesses (FSB) Scotland
Introduction
A broad outline of the role of the session was given at the start, with a number of possible discussion points highlighted. These were neither exhaustive nor prescriptive, but resulted in discussion on the following issues:
- R&D Grants
- Universities and HEI
- Planning and Land Use
- Shared Services and Procurement
- Business Rates
The context and importance of the session was set by a reminder that the previous Business in the Parliament Conference (BIPC) in 2005 was seen as crucial in starting the work on public sector procurement, the McClelland Review and subsequent eProcurement programme within the Scottish Executive. Delegates were reminded that "Government" was intended to cover the widest possible interpretation - covering councils, Scottish Executive, the UK government and European institutions. The discussion was highly consensual in nature.
R&D
The role of R&D was seen as crucial in driving forward business and growing the top-line. However, while R&D tax credits were meant to encourage innovation, the process of applying for them - involving moving between DTI guidelines on what constituted R&D and HMRC administration of the scheme - was not easy, and had discouraged some delegates from applying.
There were also several comments from delegates on the difficulties encountered with year-end activity with Inland Revenue, within Scotland, once businesses had received an R&D credit: accounts could take several years to be signed-off, yet in England (once a business had relocated part of its work, for unrelated purposes) the process was seen as taking no more than 2 weeks.
In contrast, the application processes for R&D grants from the Scottish Executive, such as SMART Scotland, SPUR, SPUR Plus, SCORE and SEEKIT, were seen as fairly straightforward, although again there was comment that these were too focused on the process of the grant procedure rather than the economic benefit to the business.
There was agreement that the level of R&D spend was too low, but that other initiatives (such as targets for Higher Education Institutions (HEIs) in respect of graduate employment) were also draining resources and attention away from longer-term R&D needs.
Quite how that longer-term need could be assessed and perhaps measured was also discussed, with agreement that outcomes in terms of economic activity were desired, without undue emphasis on monitoring the minutiae of the processes to achieve that outcome.
Universities and HEI
There was discussion over the interaction between universities and business. In general, where delegates had been able to develop a relationship with universities, it was felt that the relationship was productive for both parties. However, the opportunity to develop that relationship in the first place was not consistent. It was wholly contingent upon what the university was currently doing (in research or outreach), rather than the potential for building longer-term strategic partnership. Yet excellent R&D, plus excellent staff and a world-class product would not only draw multi-national companies into Scotland, it would also be a better base from which to grow local companies to multi-nationals themselves.
Moving on, there was concern over the falling number of students studying science and mathematics . However, setting targets for universities was again seen as counter-productive to the drivers of economic activity and there was a need to attract people to science degrees. It was also felt that it would be useful to have some management and other business skills integrated into courses, as this would be needed for the vast majority of them in future employment.
Planning
There was a useful starting point for the discussion which was that, in relation to land use planning "Scotland needed to behave like a small state": ensuring that the Scottish Executive, regulators, other stakeholders and a company could work together to deliver speedy and timely decisions. Time is of the essence and, under the current system, finding out who can make the relevant decision let alone getting them to make it, can take time. Other comments saw mention of the need to identify blockages in the system and to re-engineer the work.
The current Planning etc. (Scotland) Bill seeks to "improve the planning system to strengthen the involvement of local communities, speed up decisions, reflect local views better and allow quicker investment decisions." [1] Several delegates saw this as the start of a process enabling the current planning systems, practices and underlying culture to be subject to change.
A more strategic approach was suggested by several delegates, with a shift towards an explicit nationally articulated statement of that which was prohibited and a duty to promote that which was therefore permitted. Although the proposed need for councils to update Local Development Plans every five years was welcomed as a step in the right direction, there was seen to be no national driving force behind the planning system. A contrast with the perceived speed of the planning system in England was highlighted as well as the absence of any current direct incentives for councils to "grow" businesses within their area.
A clear need had emerged for a planning system which was open, nationally coherent, transparent, given clear priorities and prohibitions and was capable of dealing with infrastructure schemes of national importance. This would result in a system which encourages and fosters business, in which stakeholders are encouraged (if not required) to work together and which results in a speedier process.
There was some discussion about handing over responsibility for processing building standards consents from councils to private sector contractors, but no firm decision taken on what to recommend, given that speed and responsiveness were key irrespective of which sector the system was run by.
Shared Services
Related to the eProcurement discussions, the role of SMEs in the move towards Shared Services was discussed. Whilst the experience of many delegates was that smaller businesses were subject to lower scaling costs and a better standard of service, there was widespread concern that they were being excluded from competing for contracts. The value added by having a small company carry out, for example, pilot work and then transfer that tacit knowledge into full-scale implementation was noted, (in a theme later echoed by Dr Wolfson in his address to the plenary).
Public Sector procurement was still characterised as being unsatisfactory, but the motivation to address the issue, and a commitment to work with SMEs, had been clearly demonstrated by the McClelland Review. The inability to compel all parts of the public sector to comply was noted, and regretted.
However fears were expressed that when contracts for large public service delivery contracts were let, these would go to global players who would be under no compulsion to use local suppliers, or labour. A contrast with the USA was made, where Federal law requires a minimum of 26% of procurement to go to small enterprises [2]. Whilst EU procurement law would not allow only Scottish SMEs to be considered, delegates expressed an interest in whether SMEs from across the EU could be considered.
The processes of Public Sector procurement were also seen as inefficient, with examples of small companies having to divert proportionally huge amounts of resource into tenders - all of which were similar, but none of which were identical. In addition, delegates felt that the company information required in respect of issues such as equalities policy, sustainable development, margins, staff reward etc were discriminatory, intrusive and irrelevant to the key question of whether they would be capable of delivering the required task.
Business Rates
There was agreement that bringing business rates into line with those in England was helpful, but only as a start: there was wholehearted agreement that business rates LOWER than those in England would give a huge competitive boost to businesses in Scotland - enabling growth, expansion and go some way towards making Scotland more competitive and off-setting the inherent disadvantage of the cost of access to other markets generally being through London and the south-east of England.
Conclusion and Summing Up
In concluding, the following was agreed as the key points which the Rapporteur should feed back to the plenary discussion:
Procurement
- welcomed the prioritisation accorded the enabling of SME access, but noted that this primarily remained at a policy level: there was still a need to drive the work until the impact was felt, and benefits realised, on the ground, by the SMEs themselves
- a substantial step forward would be a standardisation and simplification of the documents required.
Planning
- a hope that the new Bill, once an Act, would enable the system to work better and faster
- a recognition that the administration of any eventual Act would remain with councils and that there needed to have greater incentivisation for councils to grow businesses
Business Rates
- support for reduction in Business Rates below that in England to ensure a competitive edge for businesses in Scotland
R&D Tax Credits
- register concern over the administration of this scheme by HMRC within Scotland
- express support for the Scottish Executive's grant schemes
Shared Services
- a concern that the move towards Shared Services is a threat to SMEs and that the Scottish Executive should consider all ways of ensuring small firms are able to compete for work, including the approach of the US government, exploring targets for SMEs, within the existing European procurement frameworks.
Niall Stuart
Head of Press and Parliamentary Affairs
Federation of Small Businesses in Scotland [1] para 2, Policy Memorandum, Planning etc. (Scotland) Bill, SP-Bill 51-PM
[2] "A Strategy for Increasing Federal Contracting Opportunities for Small Business", Office of Federal Procurement Policy, Office of Management and Budget, Executive Office of the President , 29 October 2002