Can a super-quango solve the puzzles of Scotland’s high skills and low productivity?

By Ray Perman, Director

I joined the board of Scottish Enterprise in 2005 not long after Careers Scotland, itself the product of the amalgamation of numerous local careers bodies, was merged into SE. The public justification was that you could not properly encourage economic development without influence over skills, but the real reason was that government was holding a ‘bonfire of the quangos.’

These conflagrations occur once every second political cycle when the government of the day, irrespective of its political colour, decides there are too many unelected bodies and declares there must be fewer. There follows a programme of forced mergers – very rarely are NDPBs (non-departmental public bodies) or other government agencies actually abolished – which it is claimed will lead to greater efficiency and cost savings.

Over the next ten years new organisations spring up as ministers come up with bright ideas and want new bodies to put them into practise. There are also some demergers. In 2008, while I was still on the SE board, the careers and skills staff, who had not many years previously been brought in, were pushed out again and merged with a few other similar organisations to form Skills Development Scotland.

The proliferation of new quangos carries on until the wheel comes full circle and it is decided there are too many, when the process of mergers begins again.

We are reaching the peak of the cycle now with the announcement of an ‘over-arching board’ to bring together not only Skills Development Scotland and SE, but also Highlands & Islands Enterprise and the Scottish Funding Council – itself the product of a merger of two previous organisations in 2005.

The effective merging of Scotland’s economic development agencies, skills body and higher education funder, has started. The new board will eventually replace the individual boards and although the legal identities of the component companies will remain (presumably to avoid the need for legislation and therefore having to get parliament to agree) the intention is to ‘simplify.’

So far there is no detail on what this will mean in practise. Part 1 of the Enterprise & Skills Review, published in October, is full of generalisations and platitudes, but short on practical detail. We have to wait for Part II for that. Nor does it offer any justification for bringing the bodies together. Quite the reverse, it goes out of its way to praise the work of the individual agencies, particularly HIE.

Despite a claim that the conclusions are ‘driven by the evidence’ the evidence assembled by the review does not point to an amalgamation as a route to more efficiency and effectiveness. A commissioned consultant’s report on the enterprise and economic landscape in other small countries (peppered with examples of management-speak such as ‘key stylised facts’ and ‘firm-level creative destruction’) does not come to that conclusion.

Some countries it looked at, like New Zealand and Ireland, have one, or a few number of agencies, others such as Singapore, Denmark and the Netherlands, have many. Neither system seems to be markedly more effective than the other.

A second report by Professor Alan McGregor, of the University of Glasgow, on support structures for education and training in ten small OECD countries does not reach a clear view either. It says:

“An overarching conclusion is that there is virtually no current and systematic evaluation evidence on the effectiveness of education and skills systems in the ten countries selected for study, and indeed this is also the case for Scotland. This means it is difficult to say that a particular configuration of agencies dealing with education and skills issues is more effective than alternatives. Also we are unable to say whether greater control through government departments is inferior or superior in relation to governments devolving management authority to freestanding agencies.”

After reading the Enterprise & Skills report and the supporting studies it is not only difficult to see the evidence for what is proposed, but also what the creation of this new board is designed to achieve. The four agencies concerned already work together through the Strategic Forum (which also includes VisitScotland, although that, puzzlingly, is not to come under the new board).

There is no discussion in the document of cost savings and given the record of previous national amalgamations – the police and fire services – it is unlikely there will be any.

Scotland’s problem, however, is clearly stated in Professor McGregor’s study (although not in the Enterprise & Skills report, which confines itself to lists of unconnected facts of Scotland’s achievements.) There is a marked disconnect between Scotland’s highly qualified workforce and our economic performance. This has been true for a long time and does not seem to have been recognised, let along addressed by policy.

If we think of the countries which are members of OECD as being part of a four-division league, then in 2004 Scotland was around the bottom of Division 2 for GDP per capita and productivity, but well established in Division 1 on skills indicators, mainly qualifications based. By 2016 these positions had not changed.

Professor McGregor’s conclusions deserve attention, yet do not get it in the Enterprise & Skills report:

“There seems to be a significant gap in comparative performance between where Scotland stands on skills and qualifications versus growth in productivity, and also earnings and equality.

“There seems to have been little change over time in this pattern, although the earlier analysis did not consider earnings inequality.

“An understanding of the factors behind the apparent contradiction between these international rankings would help to educate the Review process. Additionally, why is it that Scotland’s significant growth in investment in education and training over the last decade or so and its rise up the international qualifications hierarchy has not led to an improvement at least in international rankings on growth and productivity?

  • Are we providing skills (qualifications) to too many people relative to demand, leading to extensive graduate under-employment, for example?
  • Are we providing the wrong types of skills in terms of level and specificity?
  • Or what else is going on?