Brian Wilson: Nuts and bolts path to stable growth

Visits to the Far East, and Tokyo in particular, once attracted huge inward investment to Scotland. Picture: AFP/Getty Images
Visits to the Far East, and Tokyo in particular, once attracted huge inward investment to Scotland. Picture: AFP/Getty Images
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LEAVING development to chance is not an option. A co-ordinated investment strategy is key, writes Brian Wilson

I’ve been in Japan this week, doing my bit for Scottish exporting. One headline which followed me advised that Scottish unemployment is up again and stands at 166,000 which ­scarcely tells the whole story of under-employment.

Equally concerning is that the statistics in Scotland seem headed in a different direction to the UK as a whole. The oil industry’s woes are an obvious explanation though this is qualified by most of the additional jobless figure being made up of women.

Tokyo brings back a lot of memories for me. Some of them derive from my first overseas trip as a ­government minister which took me to Tokyo and Taipei. It was not long after the election of 1997 and as Scottish industry minister, I trod a well-worn path.

Every hour, it seemed, I was on the top floor of a Japanese corporate headquarters meeting the president of some great conglomerate with operations in Scotland. This was the golden age of inward investment and the electronics industry in particular.

In Taipei, it was the same. At that time, 90 per cent of Taiwanese investment into Europe was coming to the UK and 90 per cent of that came to Scotland. Most of it had a limited shelf-life but it was of great value while it lasted.

As I did these rounds, I confessed to a twinge of hypocrisy. My hosts had not changed their message just because the UK had changed its government. They were in Scotland for two reasons – first, of course, because the UK was in the European Union but second, because of the “flexible labour market” which made us an attractive destination compared to other (pre-enlargement) EU countries.

In other words, inward investment boomed because it was easier and cheaper to sack people in the UK than elsewhere; a distinction I had spent the previous 18 years abhorring. In the longer term, most of them upped sticks when there were “more flexible” places to go. But in the short term, there had been a plan for bringing in jobs and it worked.

If you go back another couple of decades in Scottish economic history, there was another plan called Regional Policy, coupled with a degree of government intervention now impossible. Much of the economy was in state hands and forked out subsidy as required to protect staples like coal and steel. New industries, in centres such as Linwood and Bathgate, were established through direction, rather than choice.

That formula served industrial Scotland well through the 1960s and 70s but it too had an expiry date. European rules plus the Thatcher government pretty much obliterated these forms of intervention. It is now accepted that no state can permanently support loss-making industries and even if it tries, it isn’t allowed. But again, it was a job creator while it lasted.

These two contrasting but, in the short term, effective approaches have covered most of our adult lifetimes. They were characterised by two different political ideologies though ­neither was rigid – pre-Thatcher Tories embraced Regional Policy and Labour governments of which I was a member were very glad of large-scale inward investment, as long as it lasted. Anything under 300 jobs scarcely merited a press release; now they do laps of honour for 30.

My question, prompted by this week’s ­unemployment figures is whether there is now any “big idea” for the Scottish economy, comparable in scale to these two examples. It is difficult to discern one. I suppose our Nationalist friends would say that independence is their silver bullet but that is a political aspiration rather than an economic strategy. The two should not be confused.

Occasional attempts to define a new “big idea” have owed more to publicity than reality. Most notably, Alex Salmond predicted that renewable energy would herald “a second industrial revolution”. Due to the complete failure to exercise leverage over the energy companies, we provided instead an exporting opportunity for Denmark and Germany, with precious few Scottish jobs resulting.

Pronouncements on the Scottish Government’s economic strategy seem remarkably threadbare. I don’t claim there is any easy answer but there is certainly a need for creative thinking. If we can stop talking about the constitution long enough, we might focus on the question of what new jobs Scotland is capable of creating, because we are going to need them in the years ahead.

I found a speech by finance secretary John Swinney in which he envisaged a successful Scottish economy built on “our own resources, enterprise and skills”. That’s fine – if indigenous entrepreneurship is to be the big idea for the next decade, then I am right behind it. But it needs to be pulled together into something more deliverable than a series of warm words.

There are plenty random initiatives. For example, a recent announcement by our universities that they will foster student enterprise under the name “Making It Happen” sounds commendable. However, it scarcely matches the deeply serious challenge of turning far more of the high-level research within Scotland’s universities into commercial, Scottish-based businesses for the future.

On another front, the recent announcement that local authorities will be allowed to reduce business rates is a nod in the direction of conceding that Edinburgh does not necessarily know best about everything. But it should be only the start of a process which gives local authorities a leading role in fostering enterprise within their own areas.

Or what about the banks? Could the power of government not be used to persuade Scotland’s tarnished financial institutions of their responsibility to become partners in support of a Scottish business and innovation strategy? It is the regional banking system which has driven the German economy. Could none of that be replicated here?

Scotland urgently needs an ambitious and coherent strategy for business growth and job creation, with all the key potential players signed up to it. At present, we rely too much on piecemeal successes, inflated rhetoric and setting up task forces after the horse has bolted.

None of that adds up to a big idea – but by all means, let’s look for one right here on our own doorstep.