A New Economy: what are we for?

The austerity programme being enforced by the Conservative Government at Westminster and implemented by the SNP at Holyrood is depriving Scotland’s economy of resources and investment not only in our public services but also private sector industries.

However, people are entitled to ask what kind of economy are we ‘for’ rather than defining what we are against. Those of us on the political Left must clearly, concisely and confidently argue for a new type of economy. It should be summed up in a few short words: full and rewarding employment. The question is how Scotland can deliver a vision of quality jobs, full employment and stronger economic growth over the medium to long-term. It’s not an easy objective but one we must wrestle with in order to chart a different course for our country — and to prepare the workforce for the growing challenge of automation.

Where does this process begin ? Manufacturing and the sector’s erosion over the last 30 years has blighted Scottish communities. The recent Office for National Statistics figures show that UK manufacturing output is down 1.7% on a year ago and down 7.5% on the pre-crisis peak. These figures highlight the failure to develop a strategic industrial agenda for the sector focused on investment, skills, infrastructure and innovation while many areas of the sector become susceptible to automation yet spill-over industries may be created.

In Scotland manufacturing employment in June 1999 stood at 320,000 while the statistics in September 2015 show it totalled 200,000. In this context it should be pointed out to the UK Chancellor that in his 2011 Budget speech setting out an aspiration for “a Britain carried aloft by the march of the makers” has failed. Yet it cannot be a case of simply blaming Westminster because the Scottish Parliament has had the opportunity to be strategic about supporting manufacturing over the last twelve years — and has fallen short.

The SNP’s recent £70 million investment for the sector while welcome doesn’t go far enough and offers minimal detail on a number of key challenges such as supply-chains, investment and skills. Manufacturing is central to economic growth. There are success stories such as the hybrid technology bus-build by Alexander Dennis in Falkirk but such successes are seen to be the rarity rather than the norm because not enough support is given to businesses, SMEs in particular. Support is often given in the circumstances when companies enter into financial difficulty or grants are allocated to large multinationals to relocate and remain in Scotland.

It is right to sustain and create employment but we must also ask whether the proliferation of low quality and low paid jobs is the type of economy we want for our country. A report by Oxford University Research in 2015 confirmed the trend over the 1996–2008 period highlighting for every 10 middle-skilled jobs that disappeared in the UK about 4.5 of the replacement jobs were high-skilled and 5.5 were low-skilled. In Ireland, the balance was about eight high-skilled to two low-skilled, while in France and Germany it was about seven to three. Last year the TUC also reported between 2008–13 the acceleration jobs in the two lowest paying industries — food and beverage services and services to building and landscaping activities — grew by around a quarter. Directly linked to this dynamic is the number of people working on contracts without a minimum number of hours which climbed to 744,000 from 624,000 in 2014 — a rise of 19%. The results are clear in a TUC study which showed that average weekly earnings for zero-hours workers were £188, compared with £479 for permanent workers.

Scotland has an opportunity to address these challenges as the UK Government proposes to introduce an apprenticeship levy which will go towards funding three million apprenticeships by 2020. The resource Scotland receives is of paramount importance because according to the UK Commission for Employment and Skills in May 2014 there is larger proportion of employers facing skills gaps in Scotland than anywhere else in the UK. While an apprenticeship levy should be supported in principle the more pertinent issue is how we use these monies. There is a strong case for arguing that Scotland should be able to use these monies as it sees fit by proportionally increasing funds to strategic areas of the economy for the long-term such as construction, engineering, manufacturing, oil and gas — and whereby reskilling will be essential as industry changes.

Proactive measures are required if building 60,000 new homes over the course of the next parliament which would support almost 50,000 jobs a year is to be delivered. Construction employment in Scotland is expected to fall over 2016 to 2020 despite the sector needing more than 21,000 new workers over the coming five years as people retire. An October report by the Royal Institution of Chartered Surveyors said about 30% of respondents to its monthly construction market survey reported an increase in workloads but almost two-thirds said difficulty in sourcing labour was an obstacle to growth. The Institution of Engineering and Technology also reported demand for engineers is at an all-time high concluding that Scotland will need an additional 147,300 engineers from 2012–2022.

So how can we create an economy focused on strategic growth, boosting exports and equipping our young people with the skills necessary for domestic and international markets? First we must fundamentally re-orientate our nation’s skills strategy accompanied with supportive agencies to fund apprenticeship academies — working with private and public sector employers and trade unions in a coordinated fashion. The introduction of strategic sectoral forums can provide the institutional framework for addressing supply chain, investment, productivity, skills levels and procurement issues while providing a basis for negotiating wages. Sector forums would assist our ambition of addressing inequality and assist in improving workers’ purchasing power in contrast with fragile consumer confidence — particularly into the private sector.

A central pillar of this strategy should be striving towards abolishing youth unemployment. Hope must be given to our young people by reserving posts in projects by training them on the job rather than abandoning them to life on benefits or zero-hours contracts. Measures should be brought forward with an ambitious target for all school leavers from deprived areas not in education or training having achieved secure employment or training. This should be progressively increased over time through a sectoral approach. We must embrace those young people who at the outset don’t have the necessary grades or certificates to get an apprenticeship place as there is still a lot to be said for on the job training.

Greater support for SMEs must key component of the strategy. In 2014–2015 Eurofound research across the EU28 provided some details about why some SMEs are more dynamic in creating jobs than others. The main findings were that job creation in SMEs is influenced by a combination of factors both internal and external to the company. Proactive measures must be brought forward a to stimulate a number of these external factors in conjunction with supportive sector forums. There are a number of steps we can take:

· Development of a favourable entrepreneurship image;

· Early-phase, start-up and on-going operational support;

· Stronger innovation and internationalisation support to help export Scottish products; and

· Support for strategic Apprenticeship Academies inclusive of matching SMEs’ skills needs with the labour market supply.

Delivering on these challenges is critical if Scotland is to achieve a balanced and integrated economy delivered by a highly–skilled and well paid workforce. This is a growing structural challenge as automation threatens many low-paid and low-skills jobs — and even so-called middle class jobs such as in the medical professions. Government must provide an enabling institutional framework to ensure that companies and workers are properly supported and not thrown to the mercy of globalisation and automation. In this era greater support for SMEs and entrepreneurs will be vital to our creative industries.

A different type of economy must be fashioned and charted — one which does not simply submit to neo-liberalism and the misguided supply-side policies which have underpinned this model. It must be a strategy predicated on celebrating the successes of tomorrow rather than ghosts of our industrial past.

Update: The Committee of Scottish Bankers recorded 11,669 start ups in 2015, down 0.9 per cent on the 11,772 recorded in the previous year. There were 14,737 start ups in 2011, around 20 per cent more than last year.