Launch of the Scottish Business Pledge
Tynecastle Stadium, Edinburgh
Tuesday 26 May 2015
Thank you, Ann.
Ann and her team have done a fantastic job since taking over here at Hearts last year. The club has developed a sound business model, delivered results on the pitch, and demonstrated its commitment to the community. As part of all of that, it has paid the living wage; encouraged youth training and created a healthy gender balance across the workforce. It’s a great example of a company which is now doing well by adopting progressive and sustainable employment practices.
That’s obviously relevant to what I want to talk about this morning. And it is good to see so many people here.
When I became First Minister last year I said I intended to be the most accessible First Minister ever. Regular dialogue with businesses across the country is an essential part of that – hearing your concerns, understanding your priorities and helping to address the challenges you face.
So I’m delighted to see you all, and I look forward to answering your questions later.
Now, the specific reason that we’re here is to launch the Scottish Business Pledge, and I’ll speak about that in a moment or two, but since it’s now almost three weeks since the election – and a day before the Queen’s Speech - I thought you might also want to hear something about the wider political and economic context.
The result of the general election provides an opportunity and a challenge for the Scottish Government. There is clearly an opportunity to ensure that Scotland’s priorities are better understood. But there is also a significant challenge in working with a majority Government at Westminster - many of whose policies we disagree with.
That won’t always be easy, but it’s a challenge we intend to approach in a positive and constructive way. The meeting I had with David Cameron just over a week ago was a very useful start.
And I want to highlight three areas in particular where we will seek to achieve outcomes at a UK level which would benefit the economy here in Scotland.
First, we will continue to oppose spending reductions of the scale and speed that the UK government has suggested. These would slow economic recovery and make deficit reduction more difficult – something shown by the impact of the cuts imposed after 2010. So we’ll point out that that the Charter for Budget Responsibility allows the UK Government flexibility to increase spending over its current plans, while still reducing the deficit and debt. And if the UK Government sticks to its current proposals, we will argue for ways in which the impact on Scotland can be lessened.
Secondly, I don’t think that it is desirable to hold an in-out referendum on membership of the EU. But since a referendum is now inevitable, we will work to protect Scotland’s interests. We will propose a “double-lock”, meaning that exit is only possible if all four nations of the UK agree to it – something which would prevent Scotland from being forced out of the EU against our will. And during the run up to the referendum, the Scottish Government will of course make a strong and positive case for staying in the EU. That’s something I intend to say more about next week, when I make a speech in Brussels.
Thirdly and finally, we will seek greater powers for Scotland. We want to ensure that the recommendations of the Smith Commission are met in full.
We are also seeking additional responsibilities - beyond the ones which the Smith Commission identified. In particular, greater power over business taxes, employment law, the minimum wage and welfare would enable us to create jobs, grow the economy, and lift people out of poverty.
And as we seek, and hopefully gain, greater powers, we will work closely with business to implement them. We will consult with companies and consider your needs and interests.
That recognition of business needs – together with a consultative approach to developing our economic policy - has been a feature of this Government’s activities so far. When we were first elected in 2007, one of our first steps was to create the most competitive business rates taxation system anywhere in the UK.
In March we launched our revised economic strategy, after close consultation with businesses and business organisations.
The strategy recognises both the strengths and weaknesses of our current economic position. Last year, Scotland recorded its strongest economic growth since 2007. Employment growth has also been strong. We have seen especially encouraging figures recently for female employment and youth employment – although there is absolutely no room for complacency.
But we also face significant challenges. Among other things, we need to improve productivity, increase exports, diversify our business base and tackle deep-seated inequalities.
It’s maybe worth looking at productivity in more detail. When Mark Carney, the Governor of the Bank of England, launched the quarterly inflation report three weeks ago, he pointed out, rightly, that “productivity growth…is the key determinant of income growth. Our shared prosperity depends on it.”
But the Bank of England’s report also highlighted the extent to which the United Kingdom as a whole has a productivity problem.
It’s output per hour worked is still below pre-recession levels. It is 13% below Sweden and 20% below Germany.
Scotland has actually fared relatively well in recent years. In 2007 our productivity was 6% below the UK’s – now, the gap has closed significantly. But that still places us well below many European competitors.
And we know that increasing Scotland's total factor productivity by just 0.1% per year could boost GDP by 1.3%. In turn, that could boost employment by 11,000 and tax revenue by £400m a year after ten years.
With better productivity, living standards would be higher and the budget deficit would be lower.
The Economic Strategy sets out how we intend to achieve that. It is based around the 4 “i”s –innovation, internationalisation, investment in infrastructure and skills; and promoting inclusive growth.
All of them will help to boost productivity, and all are already significant priorities. For example we have created 8 innovation centres in the last two years – bringing our universities and businesses together to develop new technologies in areas from construction to stratified medicine.
Scotland’s international exports have increased by 20% in the last three years. But since more than 80% of businesses in Scotland don’t export at all, there’s still much more we could do.
And in terms of investment, we are spending £11 billion on infrastructure in the three years up to this one – including in crucial projects such as broadband roll-out and the Queensferry Crossing.
We have also made it clear that promoting a more equal and inclusive society is an important part of building a stronger economy.
That approach is in line with a growing international consensus – supported by the IMF, the OECD and many others.
The OECD, for example, found that rising inequality in the UK reduced economic growth by 9 percentage points between 1990 and 2010. It published a further report last Thursday which emphasised that point.
That’s why we are mitigating the consequences of welfare reform, promoting gender equality, investing in early years education and care, and setting targets to ensure that everyone, regardless of their background, has a fair chance to get to university. We know that our economy will do better if everyone has a fair chance to contribute their efforts, their ideas and their skills.
Essentially, our economic strategy sets out a vision of an economy based on innovation rather than insecurity; high skills, not low wages; enhanced productivity instead of reduced job security. We want to climb the global competitiveness rankings on quality, rather than racing to the bottom on costs.
Of course, none of this can be achieved by Government on its own. It requires concerted action across all areas of our economy and indeed our society. And that’s why we want to build a partnership for productivity with businesses, the third sector, the wider public sector and the trade unions.
We’re fortunate that in Scotland we already have strong partnerships with business.
To give you just one example, last week was Modern Apprentices week. I visited Arnold Clark. I met some of the apprentice engineers there, and announced funding to support a further 500 apprenticeship places. John Swinney visited SSE and met some of the apprentices there; in fact, virtually every Cabinet Minister undertook a visit of some kind. It was easy to do that, because there are so many companies in Scotland which employ modern apprentices. They have responded superbly to the “Make young people your business campaign”.
That’s a good example of the fact that people and businesses are generally keen to do the right thing – to provide opportunities for young people, to pay good wages, to help their local communities. After all, businesses don’t stand apart from wider society, they’re part of it. But sometimes, businesses might need a bit of support, advice or encouragement – or, crucially, some hard evidence about the business benefits.
That’s why the Scottish Government has established three initiatives in the last year to promote Fair Work, the living wage and the Scottish Business Pledge.
The Fair Work Convention will meet for the second time later this week. It brings together trade unions, the private sector and the wider public sector. It aims to encourage workforce policies which encourage innovation, higher productivity, and better workforce engagement.
One of its aims is to promote the living wage – and in particular, to show that for many individual firms, higher wage costs are covered by increased productivity, lower absenteeism and higher staff retention.
The Scottish government is publishing research about those benefits tomorrow. It’s a message which already seems to be meeting a receptive audience in Scotland. The number of Scottish-based Living Wage accredited employers has grown from 30 this time last year to more than 200. Scotland now has approximately 13% of the accredited employers in the UK – significantly more than our population share.
I am confident that the growth we’ve seen this year in living wage accreditation will continue. And I believe that it will also be reflected in take-up of the Scottish Business Pledge which we’re launching today.
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 too will business play a part in delivering a flourishing and fair society
Since we announced the idea of the pledge in the autumn, we have consulted closely with businesses and business organisations across the country. Your views have shaped the pledge.
It sets out 9 principles – innovation, internationalisation, prompt payment of suppliers; payment of the living wage; gender equality; opportunities for young people; workforce engagement; community involvement; and standards on zero hours contracts.
It is deliberately very easy to sign up – there is very little bureaucracy. You simply need to state that you pay the living wage, that you already meet at least two of the other principles, and that you are committed to achieving the others over time.
And – as a consequence of the consultation process - the pledge is framed in a way which recognises the real needs and circumstances of businesses.
In other words, the pledge is ambitious but also achievable. It encourages companies to take further steps which will benefit their employees, their local communities and their own bottom line.
I congratulate the companies which have already committed to the pledge – Agenor; GSK; Heart of Midlothian; Hymans Robertson; Logicnow; Strata Cleaning and Virgin Money. I hope that many more of you will sign up over time
And the final point I’d make is that the business pledge isn’t just a commitment from companies. It’s a commitment from the Scottish government and our Enterprise agencies. We know that Government can only ask businesses to support the pledge, if Government is doing everything we can to support business.
We will provide advice and assistance for companies which want to meet the terms of the pledge. The pledge website, which goes live today, will help companies to do that. And beyond that, we will continue to do everything we can to help businesses to invest, innovate, export and expand. We know that your success underpins the prosperity and wellbeing of every community in the country.
So we will work with you to spur productivity, and make our economy even more competitive.
And we will also help to ensure that the economic growth which results, brings benefits to individuals and communities across the whole of the country.
The Fair Work Convention, Living Wage Accreditation, and the Scottish Business Pledge are essential features of what is becoming a distinctive Scottish approach to growth. That’s why today’s launch is so significant. I hope that many more companies will sign up to the pledge, in the months and years ahead.
Thank you again for attending today and I now look forward to your questions.