Supporting economic growth: A complex picture

A strong, sustainable economy is important for a successful Scotland, and the performance of our economy has been subject to a great deal of debate and scrutiny in recent months.

In July, Audit Scotland published a review of the roles of Scottish Enterprise (SE) and Highlands and Islands Enterprise (HIE), which spend around £398 million a year delivering the Scottish Government’s economic priorities, as outlined in Scotland’s Economic Strategy.

This strategy was the starting point of our audit work, as this determines SE and HIE’s plans and activities. Although it sets out the Scottish Government’s high level priorities and overall approach to supporting economic growth, we found that the detail on how specific policies and initiatives would be implemented is missing.

The strategy states that the Scottish Government’s National Performance Framework (NPF) will measure progress, but this cannot be used to measure the contributions of policies and initiatives to delivering outcomes. We’ve therefore recommended that the Scottish Government strengthens its approach to developing, delivering and monitoring the economic strategy. This is particularly important due to the complex nature of supporting economic growth and the uncertainty surrounding public finances for the foreseeable future, as a result of new financial powers flowing from the Scotland Acts 2012 and 2016, and the outcome of the recent EU referendum.

report_cover_595pxTurning to the economic development agencies, SE and HIE provide a range of financial and non-financial support to businesses and other customers and we found that overall, they are performing well. Often their investments in projects will be significant and high risk. Our audit sought to raise awareness of how much is spent and where, and what’s achieved as a result. To help inform our conclusions we pulled together case studies which looked at specific types of support, such as SE’s work to help rejuvenate the Dundee Waterfront and HIE’s investment in the Harris Tweed industry.

Both agencies regularly meet or exceed their individual performance measures, despite a 12 per cent reduction in their spending since 2008/09, and they undertake a range of evaluation work to help demonstrate the impact their support has. There are also good examples of partnership working to achieve positive outcomes, such as creating jobs and increasing business turnover.

Where things could improve is in the way that SE and HIE often offer similar support, which means that there’s scope to deliver some activities more efficiently. We recommended agreeing common performance measures, aligned to the NPF, to allow the agencies’ contribution to Scottish Government outcomes to be identified and clearly tracked.

The Scottish Government announced a comprehensive review of enterprise and skills services in May this year, which should offer the opportunity to address our findings and we’ll consider the outcomes of this review and what it may mean for any future audit work in this area.

The responses to the report have been very interesting; we’ve discussed our key messages with a number of stakeholders, including the Scottish Parliament’s Economy, Jobs and Fair Work, and Rural Economy and Connectivity, Committees, and tomorrow (Thursday, 29 September) we present our findings to Holyrood’s Public Audit Committee.

And there’s more to come, as we’re exhibiting the report and other information about our work in this area at the Scottish Business Exhibition in Novemberforward to meeting business people face-to-face to chat through our findings. If you’re there on the day, please say hello!

About the author

mm6a5992Mark Pentland is a performance auditor and joined Audit Scotland in 2013. Since then, he’s worked on a number of different audits, most recently contributing to Supporting Scotland’s economic growth: The role of the Scottish Government and its economic development agencies.

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