Enterprise agencies face merger test

MSPs are to launch an investigation into a potential merger of Scotland's two major enterprise agencies.

• Lena Wilson: SE chief defended big salary as costs were cut

The inquiry, to be carried out by the Scottish Parliament's economy, energy and tourism committee, will investigate whether there is a need for both Scottish Enterprise and Highlands and Islands Enterprise (HIE) to continue to exist as separate tax payer-funded entities.

The committee, which is due to hold a preliminary meeting of the inquiry team in Holyrood on Tuesday, will begin quizzing senior representatives of Scotland's business community from September in a bid to determine whether an alternative structure could better serve Scotland's companies.

Recommendations for reform of the under-fire agencies will be submitted to ministers by the end of the year.

"Our scrutiny last autumn of the Scottish Government's draft budget for 2010-11 raised a number of fundamental questions about the purpose of Scotland's enterprise network," said MSP Ian Smith, convener of the committee.

"The review we're now embarking on will examine what enterprise agencies are achieving and assess recent structural reforms, including the transfer of responsibilities to Skills Development Scotland and local authorities."

Scottish Enterprise, which also manages overseas development agency Scottish Development International (SDI), earlier this year had to defend the 200,000 salary of its new chief executive Lena Wilson, despite the size of the agency having being reduced by half over the past three years.

Papers issued to politicians ahead of Tuesday's meeting show the committee will consider the "very purpose" of the agencies – as well as assessing the success of the reforms implemented following the Enterprise Networks Review in 2007.

Committee members and witnesses to the inquiry will be asked to consider questions including: "Does the need still exist to have both SE and HIE operating within Scotland?" and "Could services be delivered as effectively, with greater efficiency, by a single agency or some other structure with increased shared services?"

The committee will also be encouraged to look to business organisations overseas for inspiration for an entirely different enterprise structure.

Smith added: "We expect to address a number of key questions which will measure the value of the work of the country's enterprise network.

"It is vital in the current economic climate that the network is focusing its resources on helping business across Scotland recover from the turmoil of recent years and make the most of growth in domestic and export markets."

Over the past three years, Scottish Enterprise and HIE have both embarked on a swingeing programme of cost cutting, designed to reduce the burden of quangos on the public purse.

The 115 quasi-autonomous non-governmental organisations in Scotland account for 43 per cent of government spending.

Over the past five years, Scottish Enterprise has shed around 350 staff, with an estimated saving of 18m.

Earlier this year, HIE also unveiled plans to slash its head count, proposing up to 45 job cuts out of a workforce of 318.

In 2007, a number of agency-controlled activities – including the Business Gateway service – were transferred away from the remit of the enterprise organisations and into the hands of local councils.

A spokesman for HIE said: "Highlands and Islands Enterprise will follow the committee's upcoming review with great interest and we look forward to presenting evidence and answering questions in due course.

"We have always been committed to delivering high-quality services to our clients and the wider community in our region, and achieving best value for the public purse."

He added: "The 2007 review preserved HIE's unique blend of community and economic development powers, which continues to be a core strength of our organisation.

"Those powers result from a recognition, held by successive governments, that the challenges of such a large, yet relatively sparsely populated region such as the Highlands and Islands, are distinct from those faced in other parts of the country."

A spokesman for Scottish Enterprise said the organisation had worked with 9,000 Scottish companies over the past year. He added: "We're looking forward to demonstrating to the committee how we are making a real difference to the companies we work with and the wider business environment in Scotland."