I am delighted to be here.

At a lunchtime speech one usually dispenses with the jokes that are de rigueur for their after dinner equivalent as if to prove that lunch is not for wimps which is a pity since KPMG has offered some fertile territory in the last year on tax law suits – far enough away to be entertaining – but when I opened my newspapers yesterday I rather thought the last laugh was yours since UK income is up an average of 20%. 

And if there are some clients who feel they are paying generously for KPMG advice – let me assure you it is not going on lunch time speaker’s fees! 

I want to invite you for the next 15 minutes to free yourself from whatever business challenge, or office problem you have just escaped from and focus instead on Scotland:

Where stands the nation?

And I want to talk on three aspects of life in Scotland. 

• Firstly, the balance sheet of devolution
• Secondly, the challenges ahead
• And thirdly, what it means for your business

The Balance Sheet of Devolution 

To the devolution sceptics I have just one message:? “you may be disappointed if you fail, but you are doomed if you don’t try”. 

Scotland in its global context is part of a world wide trend towards decentralisation.

In fact, Scotland is rather a “Johnnie come lately” to federalism - because devolving powers within big nations to regional tiers of government is something that is now seen in France, Germany, Italy, Spain indeed all the other major countries in the EU as well as Australia and the United States.

If Scotland had not changed we would have been quite simply out of step with all major nations across to globe.  

From history’s perspective Scotland’s Parliament is still in its infancy – a mere toddler.

For 100 years before that, Scotland’s government was the provenance of one man, (and it was always a man), the Secretary of State for Scotland, who was in charge of Scotland.

Constrained only to be able to spend Monday in Edinburgh follow by Tuesday, Wednesday, and Thursday in London and Friday in his constituency. 20^th Century Scotland was more “administered” more than “governed”. 

In those terms – Scottish government in the hands of one man and at the margins in terms of Westminster time – Devolution has been a success.  

Devolution has provided the necessary basis for updating Scots law so bills passed including 

• The abolition of feudalism
• The abolition of warrant sales
• The tackling of inefficiencies in the justice system
• The most rapid updating of Scots law for 3 centuries

In lots of way the system was just hugely “dated”. 

And it was also true in other areas of policy – like economics.

So just 10 years ago we were throwing money at a Taiwanese company, Chungwa, in Bellshill – who not only offered an outdated technology, in the wrong place at the wrong price – but we were willing to extend £50m of tax payer’s money to them for the privilege.  

There was a real sense of Scotland at the end of the 20^th Century that it was time for a fresh start, for fresh thinking.

A key point to make is that we have got rid of the Scottish cringe – we no longer blame the English.

But we still have the Scottish whinge – we moan, it’s rather ingrained although this time we have repatriated it, we moan about each other now more so than about our southern neighbours.  

But in truth we should be excited by the challenge of the times in which we live.

Times which give us more chance to shape the nation’s future than perhaps a century or more.  

The truth is there is disappointment. 

Again, it is worth looking outward rather than inward across the globe.

Elsewhere the upside of federal and devolved government is that it brings decision-making closer to people. 

But across the globe there is also a downside, and that downside is about insufficient capability at the regional level.   

Other regional governments face comparable challenges. 

The choice is the extent to which we rise to the challenge of building our capabilities.  

So how are we doing?  

It is tempting to say “What have the Romans ever done for us?” and talk about  

• Unemployment at its lowest level for a generation, below London, and growth to be above the UK this year and above Eurozone. Highest employment of 23 of 25 EU nations.
• Population decline – more immigrants coming to Scotland than emigrants leaving.
• The biggest school building programme – record investment in our colleges and universities
• Nursery education for all 3 and 4 year olds
• Transport investment – airport rail links and tram system for this city
• More public private sector partnerships

When you look back the fears before devolution that just having a Parliament would bring about the penal tax rate, it is rather encouraging that all this has been achieved with using the tax-varying powers. 

Consider the advances in the last year on planning reform and rates reform.

On rates, albeit perhaps belated, a competitive advantage with RUK.

On planning a promise to speed up the system and no third party right of appeal.  

In Scotland sometimes we fail to “notice what has been done, we can only see what remains to be done”.   

So on that note of what remains to be done, let me turn now to the challenges ahead. 

The Challenges that lie ahead 

As some of may know I was also involved in the co-ordinating the Allander Series to bring some of the world’s best economists to Scotland to challenge conventional thinking about Scotland’s future.   

We live in a world were people are the most important resource.  We are in a “war of talent”. 

In the old days, business success was about strategy, today it’s more often about people. 

And on the economy itself future success depends on one thing only – closing our productivity gap.

We need to get better at making products and services happen rather than just talking about it. 

The series and subsequent book were clear - those small economies that are slow to introduce structural reform to promote economic growth will pay the price through sluggish growth in living standards. 

The book highlighted several key issues at the heart of Scottish economic policy-making and debate.

These include: 

• Tackling population decline
• Investing in the early years: skills policies which start with the young
• Accelerating and improving business innovation
• Recognising city-regions as the future drivers of growth
• Promoting radical public service improvement and reform.

And here I come to what we can do about building a better country.

It will never be done by politicians or civil servants alone. In the walk along the corridor later this afternoon or the taxi back to the office ponder that dilemma.

Here are three ideas. 

Amongst our 4,000 strong civil service cohort there were until recently only 14 from the private sector, one private sector secondee in Finance and one in Enterprise, neither at a senior level – what might your company contribute and learn. 

Yesterday KPMG decided to target public sector work.

Not one of the Big 4 in Scotland has been bold enough to do the analysis about whether we are attempting a smaller level of efficiency savings than has been attempted in the rest of the UK – perhaps it is too risky for future revenue flows to get into such territory – but better policy should concern us all.  

We need new wisdom and that often comes when public and private work effectively together.

We have some great examples of partnership. eg - Entrepreneurs getting involved in supporting leadership academies for head teachers.  

In Scotland all of us have a role to play.  

No-one can make us feel inferior without our consent.

I want to dwell on that – nobody can make you feel inferior without your consent.   

Scotland needs to think longer and harder about her future.  

The small country advantage is that we all have a role to play and something to tell our grandchildren – about how, when the power came north, we grasped the thistle in our own comer – whatever that might be.

Because lighting candles of hope is a much more compelling legacy than fuelling fatalism.
 

NOTES

 

1. Tackling population decline:

If Scotland is to effectively stem population decline, she should be willing to learn from countries like Canada which is seeking to attract an additional one per cent of its current population from international migration each year.  

Women in Scotland are choosing to have fewer children than in the rest of the UK and comparable northern European countries.

Scotland should consider policy initiatives, which support women to have children.

Evidence suggests policies to improve compatibility of employment and motherhood include: employment practices, hours of work, parental leave, childcare and opening hours of public services.

 

2. Investing in the early years: skills policies which start with the young:

The earliest years matter most as this in when the returns to educational investment are highest.

It is the quality of family life that is the key to early skills formation; so the best policy must recognise the role of the family in producing skills and motivation.  

Those children, who start with “early deficits” in terms of skills development, will accumulate further deficits as they reach adulthood.

In simple terms if you win the lottery when your child is just six months old, you can transform their life chances, but if you win it when they are 16 you have little prospect of changing their life chances.

 

3. Accelerating and improving business innovation:

Scotland needs to think harder about how to attract and retain value mobile investment embodying the latest technology and ideas.

Today the single most important ingredient in keeping firms in a region, and attracting new ones, is the availability of plenty of skilled workers.  

Scotland must send strong signals by providing an improved climate for entrepreneurship and the implementation of structural reforms that enable innovation and competition.

Incentives to raise the level of entrepreneurial activity, including minimising the stigma of failure, overcoming inefficient regulation, as well as increasing innovation, R&D and technology transfer.

 

4. Recognising city-regions as the future drivers of growth:

Successful modern cities drive national economic growth by providing the conditions for the attraction of skilled workers and businesses. Scotland’s “urban core”, has the potential to become one Europe’s most attractive city regions.

But unless both cities Glasgow and Edinburgh agree to double up and “hunt as a pack” – imitating the efforts of Malmo/Copenhagen, Milan/Turin and Liverpool/Manchester they will be by-passed by their most go-ahead competitors.  

Recognising the Glasgow-Edinburgh corridor as Scotland’s growth pole of the future implies profound changes in order to achieve coherent planning, housing and transport infrastructure and connectivity. 

5. Promoting radical public service improvement and reform:

 

Scotland’s public sector often relies upon top-down, monopolistic delivery mechanisms.

In these circumstances, of a high level of central control and the reliance on centrally set targets, the absence of appropriate published measures of Scottish public sector productivity is a problem.  

Too often better services are held back by a combination of unclear objectives, weak incentives, a lack of competition and poor information and monitoring  Increasingly public services should repeatedly held to account by those who use and fund them. 

Future excellence requires producer interests taking a back seat.

In the future incentives must be designed to put the interests of the users first.  

Performance targets and facilitating competition among potential providers are two alternative ways of addressing these issues. Scotland is giving great weight to the former – 150+ targets in its last budget and over 100 targets for each health board, 1500 for Scotland as a whole.

The neglect of the competition over targets is an act of faith rather than evidence-based policy.

Web link : KPMG I am delighted to be here.At a lunchtime speech one usually dispenses with the jokes that are de rigueur for their after dinner equivalent as if to prove that lunch is not for wimps which is a pity since KPMG has offered some fertile territory in the last year on tax law suits - far enough away to be entertaining - but when I opened my newspapers yesterday I rather thought the last laugh was yours since UK income is up an average of 20%. And if there are some clients who feel they are paying generously for KPMG advice - let me assure you it is not going on lunch time speaker’s fees! 

I want to invite you for the next 15 minutes to free yourself from whatever business challenge, or office problem you have just escaped from and focus instead on Scotland:

Where stands the nation?

And I want to talk on three aspects of life in Scotland. 

• Firstly, the balance sheet of devolution
• Secondly, the challenges ahead
• And thirdly, what it means for your business

The Balance Sheet of Devolution 

To the devolution sceptics I have just one message:? “you may be disappointed if you fail, but you are doomed if you don’t try”. 

Scotland in its global context is part of a world wide trend towards decentralisation.

In fact, Scotland is rather a “Johnnie come lately” to federalism - because devolving powers within big nations to regional tiers of government is something that is now seen in France, Germany, Italy, Spain indeed all the other major countries in the EU as well as Australia and the United States.

If Scotland had not changed we would have been quite simply out of step with all major nations across to globe.  

From history’s perspective Scotland’s Parliament is still in its infancy - a mere toddler.

For 100 years before that, Scotland’s government was the provenance of one man, (and it was always a man), the Secretary of State for Scotland, who was in charge of Scotland.

Constrained only to be able to spend Monday in Edinburgh follow by Tuesday, Wednesday, and Thursday in London and Friday in his constituency. 20^th Century Scotland was more “administered” more than “governed”. 

In those terms - Scottish government in the hands of one man and at the margins in terms of Westminster time - Devolution has been a success.  

Devolution has provided the necessary basis for updating Scots law so bills passed including 

• The abolition of feudalism
• The abolition of warrant sales
• The tackling of inefficiencies in the justice system
• The most rapid updating of Scots law for 3 centuries

In lots of way the system was just hugely “dated”. 

And it was also true in other areas of policy - like economics.

So just 10 years ago we were throwing money at a Taiwanese company, Chungwa, in Bellshill - who not only offered an outdated technology, in the wrong place at the wrong price - but we were willing to extend £50m of tax payer’s money to them for the privilege.  

There was a real sense of Scotland at the end of the 20^th Century that it was time for a fresh start, for fresh thinking.

A key point to make is that we have got rid of the Scottish cringe - we no longer blame the English.

But we still have the Scottish whinge - we moan, it’s rather ingrained although this time we have repatriated it, we moan about each other now more so than about our southern neighbours.  

But in truth we should be excited by the challenge of the times in which we live.

Times which give us more chance to shape the nation’s future than perhaps a century or more.  

The truth is there is disappointment. 

Again, it is worth looking outward rather than inward across the globe.

Elsewhere the upside of federal and devolved government is that it brings decision-making closer to people. 

But across the globe there is also a downside, and that downside is about insufficient capability at the regional level.   

Other regional governments face comparable challenges. 

The choice is the extent to which we rise to the challenge of building our capabilities.  

So how are we doing?  

It is tempting to say “What have the Romans ever done for us?” and talk about  

• Unemployment at its lowest level for a generation, below London, and growth to be above the UK this year and above Eurozone. Highest employment of 23 of 25 EU nations.
• Population decline - more immigrants coming to Scotland than emigrants leaving.
• The biggest school building programme - record investment in our colleges and universities
• Nursery education for all 3 and 4 year olds
• Transport investment - airport rail links and tram system for this city
• More public private sector partnerships

When you look back the fears before devolution that just having a Parliament would bring about the penal tax rate, it is rather encouraging that all this has been achieved with using the tax-varying powers. 

Consider the advances in the last year on planning reform and rates reform.

On rates, albeit perhaps belated, a competitive advantage with RUK.

On planning a promise to speed up the system and no third party right of appeal.  

In Scotland sometimes we fail to “notice what has been done, we can only see what remains to be done”.   

So on that note of what remains to be done, let me turn now to the challenges ahead. 

The Challenges that lie ahead 

As some of may know I was also involved in the co-ordinating the Allander Series to bring some of the world’s best economists to Scotland to challenge conventional thinking about Scotland’s future.   

We live in a world were people are the most important resource.  We are in a “war of talent”. 

In the old days, business success was about strategy, today it’s more often about people. 

And on the economy itself future success depends on one thing only - closing our productivity gap.

We need to get better at making products and services happen rather than just talking about it. 

The series and subsequent book were clear - those small economies that are slow to introduce structural reform to promote economic growth will pay the price through sluggish growth in living standards. 

The book highlighted several key issues at the heart of Scottish economic policy-making and debate.

These include: 

• Tackling population decline
• Investing in the early years: skills policies which start with the young
• Accelerating and improving business innovation
• Recognising city-regions as the future drivers of growth
• Promoting radical public service improvement and reform.

And here I come to what we can do about building a better country.

It will never be done by politicians or civil servants alone. In the walk along the corridor later this afternoon or the taxi back to the office ponder that dilemma.

Here are three ideas. 

Amongst our 4,000 strong civil service cohort there were until recently only 14 from the private sector, one private sector secondee in Finance and one in Enterprise, neither at a senior level - what might your company contribute and learn. 

Yesterday KPMG decided to target public sector work.

Not one of the Big 4 in Scotland has been bold enough to do the analysis about whether we are attempting a smaller level of efficiency savings than has been attempted in the rest of the UK - perhaps it is too risky for future revenue flows to get into such territory - but better policy should concern us all.  

We need new wisdom and that often comes when public and private work effectively together.

We have some great examples of partnership. eg - Entrepreneurs getting involved in supporting leadership academies for head teachers.  

In Scotland all of us have a role to play.  

No-one can make us feel inferior without our consent.

I want to dwell on that - nobody can make you feel inferior without your consent.   

Scotland needs to think longer and harder about her future.  

The small country advantage is that we all have a role to play and something to tell our grandchildren - about how, when the power came north, we grasped the thistle in our own comer - whatever that might be.

Because lighting candles of hope is a much more compelling legacy than fuelling fatalism.
 

NOTES

1. Tackling population decline:

If Scotland is to effectively stem population decline, she should be willing to learn from countries like Canada which is seeking to attract an additional one per cent of its current population from international migration each year.  

Women in Scotland are choosing to have fewer children than in the rest of the UK and comparable northern European countries.

Scotland should consider policy initiatives, which support women to have children.

Evidence suggests policies to improve compatibility of employment and motherhood include: employment practices, hours of work, parental leave, childcare and opening hours of public services.

2. Investing in the early years: skills policies which start with the young:

The earliest years matter most as this in when the returns to educational investment are highest.

It is the quality of family life that is the key to early skills formation; so the best policy must recognise the role of the family in producing skills and motivation.  

Those children, who start with “early deficits” in terms of skills development, will accumulate further deficits as they reach adulthood.

In simple terms if you win the lottery when your child is just six months old, you can transform their life chances, but if you win it when they are 16 you have little prospect of changing their life chances.

3. Accelerating and improving business innovation:

Scotland needs to think harder about how to attract and retain value mobile investment embodying the latest technology and ideas.

Today the single most important ingredient in keeping firms in a region, and attracting new ones, is the availability of plenty of skilled workers.  

Scotland must send strong signals by providing an improved climate for entrepreneurship and the implementation of structural reforms that enable innovation and competition.

Incentives to raise the level of entrepreneurial activity, including minimising the stigma of failure, overcoming inefficient regulation, as well as increasing innovation, R&D and technology transfer.

4. Recognising city-regions as the future drivers of growth:

Successful modern cities drive national economic growth by providing the conditions for the attraction of skilled workers and businesses. Scotland’s “urban core”, has the potential to become one Europe’s most attractive city regions.

But unless both cities Glasgow and Edinburgh agree to double up and “hunt as a pack” - imitating the efforts of Malmo/Copenhagen, Milan/Turin and Liverpool/Manchester they will be by-passed by their most go-ahead competitors.  

Recognising the Glasgow-Edinburgh corridor as Scotland’s growth pole of the future implies profound changes in order to achieve coherent planning, housing and transport infrastructure and connectivity. 

5. Promoting radical public service improvement and reform:

Scotland’s public sector often relies upon top-down, monopolistic delivery mechanisms.

In these circumstances, of a high level of central control and the reliance on centrally set targets, the absence of appropriate published measures of Scottish public sector productivity is a problem.  

Too often better services are held back by a combination of unclear objectives, weak incentives, a lack of competition and poor information and monitoring  Increasingly public services should repeatedly held to account by those who use and fund them. 

Future excellence requires producer interests taking a back seat.

In the future incentives must be designed to put the interests of the users first.  

Performance targets and facilitating competition among potential providers are two alternative ways of addressing these issues. Scotland is giving great weight to the former - 150+ targets in its last budget and over 100 targets for each health board, 1500 for Scotland as a whole.

The neglect of the competition over targets is an act of faith rather than evidence-based policy.

Web link : KPMG