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10/12/14 11:00

First Minister - National Economic Forum

First Minister, Nicola Sturgeon MSP
The Sheraton Hotel, Edinburgh
10 December, 2014

Introduction

Thank you, Fergus.

And thanks to all of you for attending. I’m delighted to see such a large turnout.

I’m actually one of nine Scottish Government Ministers who are here today.

That gives a good indication of how much we value the opportunity this forum gives us, to engage with organisations and individuals from across Scotland. We want to ensure in future that an even wider range of people get a chance to participate, which is why I can announce today that several future forums will take place outside Edinburgh – the next one will be held in Dundee.

We want to use this morning to continue and broaden a dialogue which I began last week, when I spoke with business leaders at the SSE headquarters in Glasgow. It’s a dialogue about how all of us – business, government, the third sector, trade unions, the wider public sector – work together to create a more prosperous economy and a fairer society.

Competitiveness and fairness

It’s maybe worth saying that this task has been made more difficult by the Chancellor’s Autumn statement of last week. Over the next five years, the Scottish Government’s share of the cumulative real-terms cuts to come, is estimated to be approximately £15 billion. That figure excludes cuts planned for welfare services across the UK.

The Office of Budgetary Responsibility has shown that the further cuts planned by the UK government, will reduce government spending as a proportion of income, to its lowest level since the 1930s. Real terms cuts in spending on services such as education, justice and social care - over the 10 years to the end of the decade - will total almost £1,800 per person. The lowest earning households in Scotland have been among the hardest hit so far.

That’s despite the fact that low growth - over a period of years -and low earnings growth have caused the UK Government to miss its targets for reducing the deficit. Badly-targeted austerity is already failing as a policy, and causing harm to our economy and communities. It’s one reason why we sought much greater wealth and job-creating powers of our own from the Smith Commission.

However our focus, this morning and for this parliament, must be on using the powers that we do have - including new powers that come to Scotland following the Smith Commission- to make Scotland a wealthier and fairer nation.

Our Programme for Government, which we published two weeks ago set out how we will do that over the coming year. It placed a heavy emphasis on supporting business. It is our intention to continue to invest wisely and well in infrastructure; we’ll support innovation, improve skills and maintain the most competitive business rate system across the UK. We’ll do everything we can to promote Scottish businesses and products across the globe.

The Programme for Government also set out our desire to create a fairer nation – not just because equality is a desirable outcome in itself, although it is. But because it is essential for the long term health of our economy.

Just yesterday the OECD published analysis highlighting that the long-term increase in income inequality, across most developed countries, has significantly reduced economic growth. Their evidence substantiates findings from experts such as Professor Joseph Stiglitz, and from the IMF – who looked at 173 countries over a period of 50 years. Countries with more equal societies enjoy stronger and more sustainable growth over the long run.

The Programme for Government therefore set out measures to mitigate the consequences of Westminster welfare cuts, and, more importantly in terms of lifting people out of poverty, to tackle in-work poverty.

We will take action to close the attainment gap in schools; and ensure that people from the most deprived parts of Scotland, have the same chance of going to university everyone else. We want to shatter the glass ceiling, ensuring that all women have a fair chance to contribute to the economy. We want to create a society which genuinely offers opportunities for all.

In all of this, we will lead by example. I was delighted two weeks ago to be able to appoint a gender-balanced Cabinet two weeks ago. The United Nations hailed the step as an example that others should emulate. We will also continue to pay a living wage to everyone we directly employ, and use our procurement process- as far as we legally can – to encourage others to do so.

And last week I strengthened the remit of the Council for Economic Advisers, in order to sharpen our policy focus on these two interdependent goals – a more competitive economy and a more equal society. I’m delighted that Sir Harry Burns has joined the council; that Crawford Beveridge will remain as chair, and that we will continue to benefit from the world-leading expertise of Professor Joseph Stiglitz. I will announce the full membership of the refreshed Council very soon.

Working with business

However, important though the role of Government is, we know that Government can’t achieve our economic and social ambitions on our own. We need buy-in and support from the wider public sector, the third sector, from trade unions and from business.

We’re fortunate in Scotland and it is a solid foundation to build on that there’s already a strong sense of partnership which we can harness in tackling major challenges. People genuinely operate as team Scotland. This forum is a good example of that.

We’re also fortunate that a very large number of companies already recognise that progressive employment and social policies will enhance their long-term profitability.

We’ll be hearing from several of them this morning. We hope that their example will inspire others who want to do more, but who maybe need some additional help or support.

For example, Craig Hume from Utopia Computers will talk about their commitment to the living wage.

Advancing the living wage is an issue which is critical to tackling in-work poverty. More than half of working age adults who live in poverty, are part of a household where someone is in work. In 2012, almost 60% of children in poverty, were living in a working household. Low wages are creating high social costs.

We work with the Poverty Alliance to promote accreditation of companies which pay the living wage. 70 have already signed up – we hope to more than double that, to 150, by the end of 2015.

The living wage is one of these policies that virtually everyone accepts as being desirable in principle. However, I recognise that some businesses face genuine difficulties in moving to a living wage, that they need support to do so, and perhaps need to phase it over a period of time.

So what we’re trying to do – in addition to leading by example - is promote and share some of the experiences of companies which now pay the living wage. Jenny Stewart from KPMG is here this morning. They introduced the living wage as a minimum for all of their employees in 2006. Since then, they’ve found that extra wage costs have been more than met, by lower absenteeism and higher staff retention. Turnover among their contracted cleaning staff has more than halved in the last 8 years.

And Utopia demonstrate that these benefits also apply for smaller employers. In September, they became the first Scottish computer manufacturer to commit to the living wage. They’ve decided that the living wage isn’t just good for the economy as a whole; it’s also good for their business’s reputation.

Female equality in the workplace is another example where businesses can learn from each other. It’s first and foremost an overwhelming moral principle – all women, like all men, should have a fair opportunity to fulfil their potential.

But as with the living wage, there is a fundamental economic point. The fact that talented, skilled and committed employees face barriers to their participation in the labour market, is holding back our entire economy.

That’s why a major increase in childcare is at the centre of this Government’s plans for this parliament and the next one. That policy is something which the CBI called for last month when it published proposals for a better-off Britain. They recognised that it’s a policy which will benefit individual businesses across the country.

At the moment, women are over-represented in lower-paid professions. 57% of women in work are in lower-paid professions, as opposed to 37% of men. But they are under-represented in the workplace generally, and especially in boardrooms and in senior positions in companies.

In addition, rates of female business ownership in Scotland are persistently lower than in other developed countries. It’s one reason why the Scottish Government has established an action framework for women in enterprise – the only one of its kind in the European Union. If as many businesses in Scotland were owned by women, as are currently owned by men, it could boost our GDP by as much as 5%.

Achieving gender equality in the workplace is one of the most important ways, in which we can increase economic growth in this country. It’s an objective of Government – but it should also be a business priority for every company in the country.

And so I’m delighted that Margaret Gibson from Women’s Enterprise Scotland will talk about their work to tackle the gender gap in employment and enterprise.

Finally, NVT will talk about their role in taking on modern apprentices, and supporting more than 300 volunteers, while helping to establish and look after the IT infrastructure needed for the Commonwealth Games. The efforts of companies such as NVT ensured that the games didn’t just leave a physical legacy of new stadiums and transport infrastructure; they created a human legacy. They provided jobs, training and volunteering opportunities for young people across the country.

Fair Work Convention

Ladies and gentlemen, these are just some of the companies and organisations from around Scotland which are matching progressive employment practices with business success. There are many others in the audience today, and across the country.

So we want to discuss with you how we can embed these approaches further.

There are two initiatives which we set out in the Programme for Government, which we believe can help to achieve this.

The Fair Work Convention, and the Scottish Business Pledge encourage and embody the sense of shared endeavour that we want to create, in building a fairer and more prosperous Scotland.

And so we want all of you to shape these initiatives, as well as sign up to them.

The Fair Work convention was a key recommendation of the Working Together Review, led by Jim Mather, which reported in August. The Review Group included representatives from National Express and Tulis Russell, together with trade union and third sector members.

The report focussed on opportunities for improving productivity. And it recognised that many countries which currently outperform Scotland for productivity, involve and engage their employees at every opportunity.

So the report recommended a further shift towards a model of industrial relations based on partnership – with unions, employers and Government recognising their interdependence. And perhaps its most important proposal was the establishment of a new body to promote that shift.

We will consult closely with business, trade unions and others on the composition and remit of the Fair work Convention. Roseanna Cunningham had a useful meeting last week with the Scottish Chambers of Commerce and CBI Scotland. We expect to make more detailed announcements early in the new year.

Our current thinking is that the Fair Work Convention will encourage dialogue between employers, unions and government at a national level. It will highlight good examples of progressive workplace policies, and promote those examples across the country. As part of that, it will acknowledge the difficulties and challenges which businesses can face as they adapt to new approaches; as well as setting out how those difficulties can be overcome.

And one of its key roles will be to promote the living wage. It will have a strong focus on providing information and raising awareness so that companies of all sizes, in all parts of the country, can recognise that the living wage benefits businesses, as well as employees.

In all of this, it will be a powerful advocate for the partnership approach which typifies many of the most successful European countries, and which already characterises industrial relations in Scotland at their best.

Scottish Business Pledge

In order to develop that partnership approach still further, we intend to introduce a Scottish Business pledge during the next financial year.

Last year, our enterprise agencies helped a total of 12,000 businesses across Scotland. Around 2,500 of these received intensive support.

Now, those businesses already benefit Scotland – creating employment and boosting our balance of trade. A high proportion do that by adopting progressive workplace policies. And we know that there are others who would like to do more, but would benefit from help and advice.

So we want to establish a Scottish Business Pledge. Companies will be asked to commit themselves to good business practices, such as innovation and internationalisation, and to good employment practices such as a living wage, gender equality and supporting workforce engagement. In return these companies will get more intensive support from the Scottish Government and enterprise agencies.

The principle of the pledge is straightforward. It enshrines the idea that just as Government will work with business to create a prosperous and strong economy, so business will play a part in delivering a flourishing and fair society

Today marks the start of a discussion about how best to develop and implement the pledge. We need to consider how broad its scope should be. We need to consider whether making conditions too restrictive would deny support to responsible, progressive job-creating businesses. But we also need to ensure that the pledge makes a difference – that it creates a meaningful incentive for business.

And the pledge has to be about what Government can do for employers, as well as what employers can do for society. So we will consider what more we can do to help you innovate, export and expand. For all of these reasons, the pledge isn’t something that can be imposed by Government; instead, it will be developed in close partnership with employers.

Conclusion

That’s the entire purpose of this morning’s event – it gives us a chance to meet, discuss and consider how we can create a more competitive economy and a society that is getting fairer.

What I’m looking to establish is in effect an agreement , a partnership, a compact. The Government will support a strong and competitive economy, so that Government and employers together are able to support a fairer, more prosperous Scotland.

The referendum campaign demonstrated just how strong an appetite there is – from people on both sides of the debate – to create a better country. We disagreed on whether independence was the best way to achieve it – but we agreed on much more. And so in the coming months, I want to work with you to build on that common ground.

I want to use the participation, energy and enthusiasm we saw in the referendum – and harness it to tackle the day to day challenges we face in our economy and our society.

Gatherings such as the National Economic forum are a fundamental part of how we do that. That’s why I’m delighted to welcome you all today, and why I’m sure you will all contribute, to a very successful morning.