Cluttered Policy Landscape' Risks Diluting Delivery Of Scottish Government's Economic Strategy

28th March 2018

Brexit remains biggest challenge on the horizon

The Scottish Government's focus on following a single, unified approach to the economy risks being blurred by a proliferation of strategies, advisory groups and discussion forums, warns the Fraser of Allander Institute (FAI).

In our latest Economic Commentary, supported by Deloitte we caution that a cluttered policy landscape can lead to confusion, a lack of alignment, duplication and weakened accountability.

The warning comes as the Institute's latest analysis shows that over the past 12 months, Scotland's economy grew by just 0.6% - below trend and just over one-third that of the 1.7% for the UK as a whole.

With oil and gas sectors stabilising somewhat, a further sharp decline in construction is pinpointed as the key driver of Scotland's more recent sluggish economic performance.

Professor Graeme Roy, Director of the FAI, said: "The Scottish economy continues to grow, but at a slow pace. However, beyond the construction sector, growth in many other key sectors of Scotland’s economy is actually more resilient than the headline figure suggests."

While there are positives, including low unemployment, a strengthening global economy and rising exports we emphasises the need for effective economic policymaking given the risks and opportunities the Scottish economy faces in the years ahead - whether from Brexit, weak productivity or technological and demographic change.

John Macintosh, Tax Partner at Deloitte said: "The range of issues industries will face during the Brexit process and in the years afterwards is as broad as it is complex. What’s vital is that business and government work together to ensure Scotland remains an attractive place to do business, an attractive investment opportunity, and an attractive place to work.

"Change is going to happen and Brexit does provide an opportunity for business and government to work together to overcome some of the key challenges we’ve faced in recent years, such as slowing productivity growth, by investing further in skills and technology.

"The newly agreed Brexit transition period is a welcome development for businesses in Scotland and has gone some way to restoring wider business confidence across the UK as a whole.

“However, this period is still dependent on agreement being reached on the UK’s withdrawal, and this is not guaranteed at this point with a resolution still needed on the Irish border and definition on the role of the EU courts. That said, given the scale and complexity of some of the business issues related to Brexit, it is critical organisations, if not already doing so, quickly start to prepare for the challenges of operating outside the EU from 1 January 2021. "

The report argues the scale of the challenge presented by Brexit, coupled with technological changes, means clarity of purpose and effective alignment of policymaking is more important than ever.

Professor Roy said: “In 2007, the Scottish Government set out a novel approach centred upon a single economic strategy around which the entire public sector was to be aligned.

“However, the past decade has seen a proliferation of different strategies, advisory groups and bodies which have arguably cluttered the policy and delivery landscape.

“Whilst many will no doubt have improved Scotland’s economic performance, do we know which ones? Is such a structure the most effective way to support the economy in a country of Scotland’s size?

“The risk with such an approach is that it can lead to confusion, a lack of alignment, duplication and weakened accountability. It also makes evaluating what actually works all the more difficult.

“Strategies and advisory groups are no substitute for good policy delivery based on evidence, data and impact.

“Rediscovering a unified vision for the economy which aligns all policies and organisations might just be the most significant and effective step the Scottish Government could take in 2018."

The FAI’s forecast for growth remains unchanged on the last Economic Commentary, with 1.2% predicted for 2018 and 1.4% for 2019 and 2020.

See the full report at

https://www.sbs.strath.ac.uk/economics/fraser/20180328/FEC_Vol_42_No_1.pdf