SCVO Gathering 2015
Deputy First Minister and Finance Secretary John Swinney
Thursday 26 February, 2015
A lot has happened since last years’ event! And it is worth reflecting on the period journey that Scotland has experienced.
As we are all aware September’s independence referendum stimulated an unprecedented level of political engagement in Scotland.
And the contribution of the third sector in informing both the referendum debate and the subsequent work of the Smith Commission has been hugely important.
I’ll touch on Smith again later but I think it is important to start by acknowledging the impact that September’s referendum process has had in Scotland.
This was a truly inspiring period that led to a level of political engagement that few would have predicted and that can only be positive for Scotland going forward.
The main thing that struck me and my colleagues during this process was the commonly expressed desire - across both sides of the debate - to create a country that is not only more prosperous, but one that is fairer, for current and future generations.
That desire to create a country characterised by fairness as well as prosperity is really what I want to talk to you today in the context of our forthcoming economic strategy.
Firstly, I want to highlight the impact that the UK austerity programme has had and continues to have on individuals and on families.
I then want to talk about the alternative that exist for the UK before discussing how we can build on the sense of shared endeavour that the referendum ignited to promote the vision for a wealthier and more equal society.
It is an ambitious, long term vision and is not one that can be achieved by Government alone.
We recognise the vital role the Third Sector plays in addressing issues of inequality and the needs of disadvantaged communities, and the contribution that the sector makes to Scotland’s economy.
There are estimated to be 45,000 third sector organisations in Scotland, around half of which are charities. And it is estimated that approximately 28% of adults devote time to charity or working with local groups.
The contribution of such organisations and individuals is vitally important and The Government hugely values the work that all of you do.
And I am delighted that Third Sector Forum has recently been established to provide a platform to consider how the sector can help in addressing some of the key issues facing us in the coming period.
To achieve our ambitions we need the whole public sector in Scotland, the third sector, trade unions and businesses to be on board.
We want to build on the partnerships that already exist in Scotland to further our policy agenda.
The policy agenda in the Scottish Parliament is largely a progressive one - we have maintained free higher education, mitigated the worst of Westminster’s austerity agenda, while managing to extend the provision of child care and school meals.
This is in contrast with the agenda and the approach adopted in Westminster, where an obsession with the deficit and with cutting budgets has led to people’s living standards becoming squeezed – with some of the harshest impacts being felt by the most vulnerable in society.
It is my belief that the UK economic strategy – with its focus on the deficit to the detriment of all else - has been fundamentally flawed.
The deficit is important but it’s a symptom of economic difficulty not just one of the causes.
It is just one of the many challenges that needs addressed.
While some headline macroeconomic statistics are improving, there are underlying challenges, in our economy.
Underemployment remains a concern, while working hours, levels of full-time employment and real wages all remain below pre-recession norms, as does productivity.
These problems limit the competitiveness of our economy and they also create high social costs.
This has been highlighted by the IFS who have shown that the UK austerity agenda has affected the poorest 10% of households more than any other section of the population.
Welfare reform, benefit delays, benefit sanctions and falling incomes are all having a detrimental impact on the people of Scotland.
Low wages are causing particular problems.
One of the most alarming facts that I’ve seen in recent months is that more than half of working age adults who live in poverty, are part of a household where someone is in work.
And in 2012, almost 60% of children in poverty, were living in a working household.
And, this audience needs no lessons on the human cost of austerity. The examples of third sector involvement in mitigating the effect of austerity are numerous.
It’s something that many in the room will be familiar with and will see every day.
One of the more obvious, but nonetheless salient examples is Foodbanks.
Over 51,000 people visited Trussell Trust foodbanks in Scotland between April and September 2014.
Over 15,000 of these were children. Although these stories have become depressingly familiar, that they take place a developed country such as ours should continue to shock each of us.
Disabled people are also losing out.
In Scotland, it is estimated that more than half of those who claim Disability Living Allowance will see their benefits cut by at least £1,100 a year.
So the evidence shows that these cuts are affecting the most vulnerable in our society.
It would not appear, as the Chancellor famously said in 2010 that we are “in it together”.
The suggestion then that what the UK needs now is more austerity simply does not stack up from a human or an economic point of view,
But that is what we will get under the Current Government or under Labour.
Current UK Government plans, will see further real terms cuts in every year until at least 2019-20.
The Office for Budget Responsibility estimate that these cuts will result in UK day-to-day spending on public services as a proportion of national income falling to its lowest level since the 1930’s.
Under Labour the cuts required over the first two years of the next parliament are likely to be in the region of £30bn.
That’s why the Scottish Government has set out an alternative approach – one based on limiting real terms growth in departmental spending to 0.5% a year.
It’s a policy which would reduce the budget deficit as a proportion of national income in every year from 2016-17; but it would also free up an additional £180 billion across the UK, which could be used to invest in infrastructure and protect the public services we all depend on.
That relates to a more sustainable approach to future public spending.
In relation to current cuts, we have done what we can in terms of mitigation;
- protecting 500,000 households from the UK government’s 10% cut to council tax benefit.
- committing additional funding to tackle child poverty.
- allocated £35 million to ensure that nobody will face eviction as a result of the bedroom tax.
- maintaining our funding for the third sector at £24.5million.
We will continue to do all we can, but mitigation is not enough.
We need more control over our social security system so that we can move beyond mitigation and create something more suited to Scottish needs.
We remain of course disappointed that the Smith Commission did not go as far as we or the majority of civic Scotland – including the majority of third sector organisations - had wanted in handing control for welfare to Scotland.
The SCVO took a key role in the process of further devolution, coordinating a Third Sector contribution to the work of the Commission.
A number of third sector organisations also responded individually or via other umbrella organisations.
In its submission, the SCVO argued for the full devolution of welfare (excluding pensions) due to the interrelated nature of welfare with employability and other public services such as care.
This argument had much in common with ours, and like the SCVO we were disappointed by the proposals put forward by the Smith Commission, particularly for Welfare.
We see it as a real missed opportunity - especially the failure to fully devolve welfare - to create an enduring devolution settlement, and a platform for fundamental change that would deliver the greater social justice people in Scotland want to see.
We continue to believe that complete integration of welfare with devolved systems of health and education is the best way to provide individual support
And we will continue our consultation on Smith proposals with all stakeholders - we are determined that our approach will be informed by those who need support and provide support;
However, we welcome all additional powers and we will do all that we can to ensure that they benefit the people of Scotland.
In contrast with Westminster we will be continue to use the powers at our disposal in order to boost competitiveness and reduce inequalities
We believe – in common with many think tanks, economists and academics across the world – that equality and cohesion are good for growth, as well as good for individuals.
This result was demonstrated in a recent OECD working paper which estimated that rising inequality in the UK knocked more than 9 percentage points off total GDP per capita growth between 1990 and 2010.
Analysis by the IMF – examining 173 countries over 50 years - has also found that more unequal countries tend to have lower and less durable economic growth.
This analysis has clear implications in the UK and in Scotland.
Of the 34 OECD countries, the UK ranked 29th in terms of income inequality – in other words, the 6th worst. These are not new trends. In the, UK income inequality has widened over the past 35 years
Whist inequality in Scotland is closer to the OECD average, Scotland would rank 20th if compared to OECD countries – still more unequal than many of our peers.
These studies by respected international agencies are part of a body of emerging literature that suggest a significant departure from economic orthodoxy.
They highlight the effects that high levels of inequality can have in terms of reducing the productive capacity of the economy, decreasing the sustainability of periods of growth and lowering the resilience of the economy to external shocks.
International experience also demonstrates that it is possible to perform better on measures of equality and well-being whilst also having a strong economic performance.
The performance of countries such as Norway, the Netherlands and Sweden provides evidence that a stronger focus on social cohesion does not have to come at the expense of economic success.
Reductions in inequality can therefore support economic growth and there are many policies which can improve performance against both objectives
The OECD analysis highlighted the importance of increasing access to public services such as high quality education, training and healthcare as long-term social investment which creates greater equality of opportunities in the long-run.
In particular fostering skills development through improving participation, job related training and education for the those with lower skill levels over the whole of their working lives can help address inequality whilst at the same time promoting economic growth.
That is why we are committed to measures such as free higher education, the availability of training and modern apprenticeships, the Scottish Business Pledge, support for the living wage, and enhanced provision of childcare in order to increase education skills and opportunity and ensure sustainable growth.
Policies such as these will characterise our approach.
We will also ask our Council of Economic Advisers to take forward a programme of work examining the ways in which the Scottish government can create a fairer society using the powers that we have at our disposal.
Our response to the economic and social challenges we currently face must go further than simply aspiring to a return to the pre-recession model of growth.
Our challenge is therefore to formulate an approach that is built on the principle that equality and cohesion are good for the economy and society as a whole, as well as being good for individuals.
We will focus on boosting competitiveness and reducing inequality through our four priorities for sustainable growth –
- investing in our people and in our infrastructure,
- fostering a culture of innovation
- promoting an international outlook, being outward looking open to trade, migration and new ideas.
- And ensuring inclusive growth creates opportunity through a fair and inclusive jobs market and regional cohesion
This is a shared vision.
We are fully aware that our objectives are not ones that government should aspire to achieve singlehandedly.
We are therefore fortunate in that there is already a strong sense of partnership that we can harness to achieve our shared economic and social ambitions.
In implementing Scotland’s Economic Strategy we will build on these partnerships.
We will also continue the successful action we have already taken. We will continue to support our business through the small business bonus.
We will build on the work of the Scottish Investment Bank, with the establishment of a Business Development Bank to work directly with small and medium enterprises and the financial markets, including banks, to build and grow businesses with high growth potential in Scotland.
We’ll maintain investment in infrastructure and our public services in order to ensure that the productive capacity of our economic assets are enhanced.
Building on key projects like the Queensferry crossing, The Aberdeen Western Peripheral Route, the dualling of the A9, and rail improvements including the Borders railway.
We will encourage improvements in productivity by developing our world class base of innovation and research activity.
Last year’s Research Excellence Framework (REF) found that each of Scotland’s 18 higher education institutions undertakes research of “world-leading” quality.
But we can to more to more closely link this research with business.
We want to improve investment and interaction between the public and private sector through projects such as Interface - connecting businesses across Scotland, and internationally.
We have also invested £124 million to fund a network of 8 Innovation Centres. These will be instrumental in placing Scotland ahead of our international competitors –building partnerships between business and academia to apply knowledge and innovation from the academic research base into business.
A prime example of our joint approach is our response to the challenge of in work poverty.
Those working in the Scottish Government and the NHS are being paid the living wage and we will continue our engagement to promote the living wage more widely.
Evidence shows that paying the living wage isn’t simply good for individuals it is also good for companies, helping to increase staff retention, reduce absenteeism and enhance businesses reputation.
So, I am delighted that over 140 companies across Scotland are now Accredited Living Wage Employers, benefitting more than 100,000 individuals.
We aim to expand this number even further to at least 150 by the end of the year.
That is why we have announced an additional £200,000 [£80k to £280k] of funding for the Poverty Alliance so that they can continue to raise the profile of the Living Wage and increase the number of accredited employers across Scotland.
We will also establish a Fair Work Convention.
One of the key priorities of the Convention will be the Living Wage, but its remit will be wider, joining up business, trade unions, the third sector and local government -recognising the social dimension to sustainable growth.
And an appointment process for an independent adviser on poverty and inequality is now underway.
Gender equality is another example of our approach to encouraging business to contribute to promoting a fairer society.
The SG led by example on that – we are one of only three governments in the world to have a 50:50 gender split, and we are also launching 50:50 by 2020 a major drive to encourage gender equality in public, private and third sector boardrooms.
The Scottish Business Pledge is in many ways representative of the wider collaborative approach that we want to make with businesses across the country - we will support our businesses and in return we will look for their support in progressing our objectives.
We’ll be looking for companies to commit to good business and employment practices, including:
- Paying the Living Wage
- Not using zero hours contracts
- Making progress on gender balance
- Supporting workforce engagement and development, and other progressive workplace policies
This consensual approach mirrors good practice in Germany and many other successful European countries – and builds on the steps already taken here in Scotland.
We will also take forward work to consider how to further support our regional economies and communities.
We are undertaking work with partners including the STUC to consider the role of the key services and sectors that underpin all local economies, such as retail, utilities, and public services, and the opportunities for strengthening these core – and often high employment – sectors, alongside actions to supporting the development of Scotland’s growth sectors.
This week we reconvened the Islands Area Working Group and we are consulting on measures that might be included in an Islands Act.
The new Empowering Communities Fund, which will encompass our existing People and Communities Fund, will have an additional £10m of funding being made directly available to communities this year – bring the total for the new budget to £19.5m.
It will increase the opportunities for communities to make a difference on their own terms, by creating new rights for community bodies, placing new duties on public authorities, making it easier for communities to take on public sector land and buildings, and extending the community right to buy to the whole of Scotland.
From this increased funding, we have announced an increase of £5.6 million in grants available directly to community groups.
And yesterday the First Minister announced that the Scottish Government is to invest an additional £6.1m to create at least 1,000 jobs for young unemployed people in charities and third sector organisations this year – enabling them to make a contribution to the economy at the same time as learning valuable new skills.
The paid jobs lasting 6-18 months and will be created as part of Community Jobs Scotland, run by SCVO, which has already created more than 5,500 jobs for young unemployed people.
The key conclusion that studies of the link between inequality and growth repeatedly arrive at is the importance of education.
Scottish education is improving, that’s apparent across all of the indicators, with;
- records in exam performance
- records in the number of school leavers in work, education or training;
- and a recent improvement in the PISA international standings.
And education will remain at the top of our agenda.
We will maintain our commitment to free higher education, the reintroduction of which remains one of our proudest achievements - ensuring that an individual’s access to our nation’s universities depends upon their ability to learn not on their ability to pay.
Even under these circumstances prospects for individuals from poorer backgrounds can be constrained by their ability to access and take advantage of educational opportunities afforded to others.
That is why, our approach continues to focus on our young people and on investment in skills and education.
We are determined to ensure equality of opportunity in education.
We will target educational outcomes in the most disadvantaged areas of Scotland through programmes such as “raising attainment for all”.
Education Scotland will appoint an attainment adviser in every local authority - supporting local action to raise attainment.
We will do more to encourage those from disadvantaged backgrounds by doubling the funding for the Impact for Access fund and establish a long term target to eradicate inequality in access to higher education.
These actions are also part of our overall approach to lifelong learning, including our ambitious programme of reform to our college sector to best prepare them for the challenges of the global economy.
At the end of last year we published Scotland’s Youth Employment Strategy – “Developing the Young Workforce” which outlined the range of actions that will be taken forward in conjunction with local government, Skills Development Scotland and a range of delivery partners to implement the strategy.
Modern Apprenticeships were one aspect of the Strategy.
The importance we attach to apprenticeships is demonstrated by our target of providing 30,000 new Modern Apprenticeship opportunities every year by 2020 up from 17,000 available in 2007.
Educational attainment does not just begin in school or university, but in early years.
That’s why we are committed to improving and increasing high quality, flexible and accessible early learning and childcare.
Our priorities are to:
- improve outcomes for children, especially those who are more vulnerable or disadvantaged
- support parents to work, train or study; and, provide opportunities for employment and family support.
The cost and availability of childcare for parents is often a barrier to female participation, a contributing factor to the pay gap and could result in an erosion of human capital.
Recent analysis by the CBI made this point clearly - promoting the expansion of childcare was one of the key recommendations in their report “a Better Off Britain”.
We have an ambition to go even further to transform Scotland’s system of early learning and childcare so it matches the best in Europe.
We have outlined plans to deliver an increase in provision, from 16 hours a week to 30 hours a week, by the end of the next parliament.
The great capital investment project of this parliament is the Queensferry Crossing.
The next parliament’s great investment project will be less visible, but potentially transformational.
It will be the investment in care and learning facilities needed to ensure our early years provision matches our primary school provision, enabling a better future for children and families across the country.
Partnership has been a key theme across much of the approach that I have outlined today.
Scotland’s Economic Strategy will set out the framework and priorities providing a shared direction for the Scottish Government and its partners towards the long term goal of boosting competitiveness and tackling inequality.
In the spirit of our One Scotland approach, we will continue to work with our delivery partners, businesses, and communities.
We see this as the starting point for continuous engagement and further development and will continue to take a partnership approach to developing and implementing the policies and objectives set out in this report.