Philip Riddle: Perfect example of how public and private can work together

One case for such cutting back might be in public sector support for tourism. Peter Lederer, the ex-chairman of VisitScotland, recently suggested that public sector tourism and leisure bodies could be privatised. Why not?

Few people would disagree that tourism is a vitally-important industry for Scotland and has the potential to lead economic growth in the country. But does the strong public sector involvement now hamper or hinder growth?

As the former chief executive of VisitScotland, I know that, over the past ten years, the organisation has received excellent support from government. At the same time, it has become much more commercially focused and has developed a sophisticated marketing operation. For example, the 2010 Winter White campaign produced a return on investment of 311 for every 1 spent.

VisitScoltand's budget has fallen from just under 70 million in 2008-9 to about 50m. However, with ever-more focused marketing, returns are going up. Based on the Winter White campaign, if the current budget was spent entirely on promotion then the return to Scotland would be more than 15.5 billion. This is much higher than the currently-estimated total value of tourism, 11bn, deriving from the efforts of all in the industry.

Currently, of the 11bn, it is estimated VisitScotland activity leads directly to sales of 400 million or 3.6 per cent. Why don't we just put all our money into campaigns like Winter White and get a 40-fold increase in the return from VisitScotland and more than double the total value of tourism to the country?

There are a great many reasons why this proposition is not as straightforward as it might look. Much of VisitScotland's 50m goes into salaries and support costs that are not counted in the promotional costs. Neither can we assume all marketing campaigns will be this successful. Furthermore, VisitScotland supports other activities besides marketing and, anyway, we probably don't have the facilities to cope with that much new business. There is still an incredibly big gap between the 400m estimated today and the theoretical 15.5bn however.

The next stage in the evolution of VisitScotland must be for it to bring tourism marketing and sales together at the industry level and this cannot be done in a public sector organisation. This must be done through a private sector approach - for regulatory reasons if no other - where, perhaps through a co-operative arrangement, businesses commit to sell through one national channel, a channel that the same businesses own and run. Sales and marketing are joined together and the large numbers that are bandied around about the economic impact of tourism can become very real.This is not to say that VisitScotland's other activities should be dropped completely. Visitor information and quality improvement, for example, could continue to be funded by national or local government on the basis that they provide a more general benefit under contract with the private sector enterprise. At a time when tourism in Scotland is declining in both volume and value, this presents a win-win position.

This is not just about saving money. In fact, an orderly transition would probably mean immediate savings would be limited. It's about longer term efficiency.

In a sound, mixed economy, it is essential to have strong and equal public and private sectors. A public sector that delivers health, education, public order, infrastructure and an enabling environment - with its checks and balances - to allow a private sector to flourish in producing and selling goods and services. Tourism could lead the charge in restating the balance in this relationship.

• Philip Riddle is a former chief executive of VisitScotland and is now an honorary professor at Queen Margaret University Edinburgh.