An industrial strategy for Scotland

John Ruddy considers what an industrial strategy for Scotland – which so many say is necessary but so few have ever defined – might actually look like.

 

A lot of people talk about an industrial strategy; the UK Government has a department devoted to it, the Scottish Government has asked its Council of Economic Advisers to come up with one, and, of course, Scottish Labour’s policy is to have an industrial strategy. Scotland’s economic growth has lagged behind that of the rest of the UK, and even behind many regions of England, and despite promises to tackle this right back to 2007, little has actually been done to improve it.

It must be clear, however, that no matter what government does, the days of a Scotland dominated by the heavy industry of the coal mines, steel mills, ship yards and other heavy manufacturing are gone and are never going to return. Half a century ago manufacturing accounted for over 40% of the Scottish economy, but in 2015 it had declined to less than 12%. Employment in the sector has likewise shrunk. Our industrial strategy must concentrate on supporting existing manufacturing rather than attempting a return to the good old days.

So “industrial strategy” is perhaps a bit of a misnomer. What we actually need is a business strategy, to include major industries, but to develop so much more. That will include an investment bank that will actively support businesses, especially smaller enterprises which are crucial to job creation, and the delivery of super fast broadband across Scotland, at a reasonable price in rural areas, with ultra fast connections to urban areas and new business parks.

Any business strategy must also address the low levels of investment in research and development in Scotland. While traditionally the research that has been undertaken at Scottish universities has been ranked highly in global terms, this has not translated into commercial R&D. More needs to be done to link the higher education sector with business, and encouragement given to link up the two with joint ventures.

Investment levels across Scotland are still low, both by historic standards, and by comparison with other parts of the UK and Europe. One proposal worthy of examination is to consider getting public sector pension funds to use their resources to invest in local production and infrastructure, boost local supply chains and stimulate employment. This could include new council housing, generating a net positive cash flow back into the funds.

There are several methods of enabling this, from capitalising an expanded infrastructure bank as described above, through to pension funds merging funds, or dedicating a proportion of their funds to support local investment opportunities. While pension funds’ trustees have a duty is to ensure that the members’ contributions provide for a safe and secure pension there are surely opportunities for pension funds to invest in Scotland that would both provide the return on investment required and, at the same time, contribute to the delivery of infrastructure and jobs investment to support the modern economy, and not least allow disinvestment of these funds from problematic areas such as fossil fuels.

While recent City Deals have shown the way for targeting investment into the engine rooms for growth, the £370 million bond issue in Aberdeen is another way in which local government has shown how to generate the capital required to develop business and infrastructure. It will be used to support £1 billion of capital investment in major projects in the city. This initiative opens up a new vehicle for generating funds for investment which can be driven by local government. It’s something that all our major cities should be doing.

Central government therefore must be prepared to devolve power to those who know their communities best and are accountable to them – recognising they can work in partnership to deliver major economic change. But cities need support from the centre too. We need a dedicated Cities Minister to signal that driving growth through our cities is a priority for government.

Targeted industrial and fiscal policies will stimulate investment, innovation and jobs in public and commercial services and manufacturing supply chains. We need an economy in which proactive government is seen as a supporter of sustainable industrial development, not a brake upon it. Public as well as private enterprise has a part to play in building a full employment society and nourishing and so developing our industrial base.

We need a Scottish Government with a plan for jobs and economic development, instead of one which sits back and leaves it entirely to the market.

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7 thoughts on “An industrial strategy for Scotland

  1. This my opinion only the Investment Bank I think the only difference on it between Labour and the SNP is the amount in the bank .Its both parties policy and something I hope we could cooperate on.
    With Brexit now upon us all the levers needed must be devolved to Holyrood ASAP and Whatever powers are needed by local authorities after speaking to Cosla to find out whats needed devolve powers to local authorities .
    Housing for the first time in years I see houses being built in my area

    1. David that’s bang on the money l agree that Labour and SNP are in favour of an investment bank and l think that Jeremy Corbyn and especially John McDonnell could if there’s a pact at the general election to get rid of Theresa May then do business and devolve all the power’s to the Scottish Government. I have noticed recently that Emily Thornberry who is prone to attacking SNP as bad has kept schtum and l think that she had been briefed to do so a good a move by Labour, sorry to say she is not diplomatic and is a liability to any future deals between Labour and the SNP at the next general election.

  2. One word that I did not see in John’s piece was Co-operative, yet the co-operative sector, including credit unions, worker owned enterprises and agricultural co-operatives have a record second to none in surviving and growing. They also put much more back into the economy by sharing the surplus among their employees. The Scottish Government pays little more than lip service to this sector and the Westminster government dos not even do that. I believe that the co-operative economy must be a real strand in any industrial or business strategy. Further, in the rural economy (much of Scotland) agriculture is the prime industry, yet we have seen much of the land removed from production and handed over to other uses. this also needs to be addressed. These are just two of the strands that any industrial (business) strategy must have,

  3. I find it sad that John Ruddy’s piece has only had three comments. This is among the most important issues facing Scotland, whether as a part of the Union, as part of a federal system, or independent. It would have been interesting to see what others saw as the way forward.

  4. Could I also say we could here in Scotland ask our best and brightest in our Universities and business to come together think the unthinkable and develop an industrial practicle strategy for Scotland report to be published within say 1 year taking Brexit into account .as far as possible we could do practical things like we need the oil fund other countries have set it up at UK level but with a set amount agreed by Holyrood coming to Scotland where we would set up our own fund same for Wales and Northern Ireland .In Scotland we could manage it through the proposed Investment bank .Even have an Oil Minister ..
    Transport farming agriculture fishing Industry all of it looked at whats their problems how can Government help
    I am not intelligent enough to work this out but some of the problems they will tell us about might be simple to fix but we might find political dogma going out the window .
    And we in Scotland seriously need to consider how we are going to protect workers rights the benefits system and health and safety laws in short everything that was covered by the European Court post Brexit and start planning now.

  5. We also need to work out post Brexit how we are going to stop private companies taking over our NHS .
    And any other private mob

  6. With the announcement rail fares are going up we have to sit down and come up with a Transport strategy for the UK and Scotland in particular nothing ruled out.

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