Moving the Deckchairs at Scottish Enterprise

THE big economic news of the past week – heavily camouflaged by the continuing Covid-19 crisis – was the sudden resignation of Steve Dunlop as boss of Scottish Enterprise (SE), the state development agency.  Dunlop has been in post as chief exec for barely two and a half years.  The word on the street is that he is fed up being ignored by the Scottish Government.

Example: when economy minister Fiona Hyslop wanted a plan to reboot Scotland after the coronavirus lockdown she did not turn to Scottish Enterprise (current budget circa £350m) but to a private businessman – failed Tesco banker Benny Higgins.  Mind you, the Higgins plan was a cosmetic stunt and has been duly filed away in some dusty filing cabinet at St Andrews House.  ScotGov has its hands full fire-fighting the virus emergency and is reluctant to think long-term.

However, Dunlop had other beefs.  Increasingly ScotGov has not known what to do with SE other than cut its budget to fund other political initiatives.  In March, just as the pandemic was getting under way, Dunlop was told his agency budget was being cut yet again.  Dunlop duly emailed his staff ordering a freeze on grants, a hiring embargo, and cuts to internal budget lines.

Dunlop’s email was soon leaked to the media – a sure sign SE staff are disaffected.  It read: “Scottish Enterprise is expected to find savings and our draft resource budget allocation for 2020-21 represents a nine per cent year-on-year reduction.”  One suspects that the nine per cent cut was what made Dunlop decide to quit and lose his £211,000 salary package.

When the SNP came into government in 2007, SE had an annual spend of around £535m.  Successive cuts over the intervening years have obviously impacted on the agency’s activities. True, some of the cash has been diverted to other economic initiatives – for instance, the new Scottish National Investment Bank. However, the central problem is that the SNP Government’s economic strategy has gyrated wildly over time, meaning SE’s core mission has been in constant flux.

This is nothing new of course.  The Scottish Development Agency (SE’s forerunner) was set up by the Labour Government in 1976 as a state industrial investment and holding company, funded from North Sea oil revenues. Under Thatcher’s first Scottish viceroy, George Younger, the SDA was rebranded as Scottish Enterprise and its mission redirected to skills training and local enterprise development (with me serving on SE’s Lothians’ arm, as chair of economic development on Edinburgh Council).

Devolution brought yet another revolution in SE when Enterprise Minister Wendy Alexander launched a plan to make Scotland a global high-tech hub.  The mastermind behind this initiative was SE’s new chief exec, Robert Crawford, a US-based technology entrepreneur.  Interestingly, Crawford was a long-time SNP supporter.  He closed down SE’s regional arms and switched policy away from regional development to funding high-tech start-ups.  Crawford and Alexander committed half a billion pounds to creating a series of so-called Intermediate Industrial Institutes (ITIs) – effectively state investment vehicles to turn technology start-ups into genuine global manufacturers.  (Crawford invited me to join SE to serve as link with the Scottish universities, as part of the project, but I said no.)

We’ll never know if the ITI plan would have worked because (1) Crawford quit early after coming under a hail of media criticism for his management style; and (2) the incoming SNP Government simply shut down the programme with no explanation.  One problem was that the ITI strategy was a long-term project – getting tech firms to a global position is a decade-long affair at minimum and (witness Tesla) burns up lots of cash during the process.  It takes a strong-willed politician to back such a plan.  I think John Swinney, the first economy and finance CabSec, was in too much of a hurry and wanted to use the ITI cash for something that would make a splash quickly.

Also – and here was my own deep criticism of Crawford’s approach to the ITI project – you have to focus on a narrow range of technological opportunities if you want to succeed. Instead, Crawford pretended that Scotland could generate world-beating tech firms in every conceivable market – biotech, energy, and media.  The politicians loved this, but it meant the jam was spread too thinly. I suspect the cash would have run out before Scotland had secured market dominance in any particular sector.  That said, I was also disappointed that Swinney binned the idea without commissioned a detailed review of what had been achieved to date and why he was ending the project.  Robert Crawford went on to be selected as an SNP candidate for the 2010 election but quit before polling to take up a job in England.

Which brings us back to the present.  The now departing Steve Dunlop was hired by SE in 2018.  Previously he was head of British Waterways and before that head of regeneration at Newcastle Council. Dunlop’s pedigree fitted with ScotGov’s decision to turn SE back into a local development agency rather than an industrial restructuring agency.  Fair enough, but this represents the fourth (at least) reinvention of SE.

Common sense suggests that economic development strategy – whatever the actual strategy – is a long-term business. Chopping and changing every decade or so is bound demoralise agency staff, disrupt clients, and reduce effectiveness.  Alas, politicians are wedded to short-termism, largely because of the electoral cycle.

*

The SNP Government has added a new twist to the economic development process: multiplying the autonomous agencies involved.  This runs counter to the approach the Welsh government where development functions have been brought in-house. The Scottish government has created a separate South of Scotland Enterprise to run alongside SE and Highlands and Islands Enterprise.  We also have the new Scottish National Investment Bank (SNIB). It is not at all clear there is sufficient coordination between these bodies – the appointment of traditional, conservative bankers to run the SNIB adds a particular new complication, in the absence of any economic masterplan from ScotGov.

My own predilection is for the Welsh approach and a centralisation of economic management rather than the jumble of agencies we have. The likely prolonged mass unemployment resulting from the Covid-19 and ensuing global recession demands concerted action.  Plus, we are teetering on the brink of independence, which opens up new opportunities. The SNIB is a valuable new economic vehicle as it can leverage capital for industrial development.  But it requires to take risks and they can only be calculated effectively inside a development plan that lays down national priorities.  For that, we need a written plan determined after a wide-ranging and democratic public debate.
*