How the cuts will affect Scotland

[Scottish Business Owner]

Not sure how many of you will have seen the article linked to below from the Herald Scotland website. We'll all be very much aware of the media coverage over the past few weeks regarding the spending review. The article below really helps to focus on how the Scottish parliament needs to deal with these cuts and a little of the history behind how we find ourselves where we are.

Holyrood: more money than sense - Herald Scotland | Business | Analysis

Quite a thought provoking article and I think a good foundation for some further discussion on the forums. It talks a bit about having more financial autonomy for the Scottish government, it also talks about whether the items of expenditure that are currently protected actually deserve to be so.

Really hoping to hear other views on where we are at present and what needs to be the focus to enable us to move forward

 

[Scottish Business Owner]

Just continuing with the above and also hoping I can bump this thread a little to try and get some comments. Linked to an article below from the Caledonian Mercury which is a piece by Colin Borland of the FSB. Interesting piece and it looks like we'll know how the cuts will affect small businesses and the wider community in the next few weeks.

Opinion: Time to end cuts uncertainty | Caledonian Mercury - Business and Technology

 

[Adventurelife]

Although the detail is not out we all know and have known for some time that severe cuts were coming so I hope any small business worth their salt and who rely on revenue from councils and central government will have made and and put into action a plan.

Waiting for the detail is not a good plan. It is going to be hard but is essential that the Scottish economy is rebalanced. We might get it totally wrong and it might be a disaster but try we must.

Unfortunately with an election coming up instead of all those who have political clout working together to ensure the best job possible is done for the economy they will all be like cats in a sack try to save their own skin.

Peter

 

[Edward]

The absolutely critical thing for Scotland is going to be the extent to which the various sectors, private, public and third sectors, all work together for the great (more efficient) good.

Idealogues (like that abrasive and self-absorbed Scottish Hedge Manager of the recent BBC Question Time) are just what we cannot afford. The dismissive and arrogant attitude from the pompous Richard Dimbelby towards Nicola Sturgeon whenever she tried to air a ‘Scottish’ view on that programme was instructive. The dismissal was another wake-up call for the Scottish social, political and business community to re-find and replenish its collective voice within a UK that is increasingly dominated by metro-London elites (and that’s meant to be, necessarily, a call to Scottish Nationalsim).

A few other thoughts;

1. Many Third Sector not-for-profit organisations are already finding their public grant funding vanishing. There own revenue-raising business activities are insufficient to meet the shortfall. They are short of the commercial and business skills needed to pilot through recession. Meantime, many businesses, including SME’s, find it difficult to access public sector procurement markets where the Third Sector already has a presence. In addition many businesses, including SME’s are having to let go of skilled staff they will badly miss when recovery comes. Are there maybe ways these two entities of not-for-profits and SMEs can come together to mutual benefit?

2. All members need to start pressing their intermediary/membership/professional/whatever bodies to work much harder in the common interest. In recent times I found that many of these organisations, in many business professional and civic fields have become somewhat complacent while the good times lasted and the membership fees just rolled in. Jolly conferencing and cosying-up between various interests at the top are all very well; but we need a bit more competitive scrutiny and more robust productive partnership working between the practitioners and do-ers, and the policy-makers.

3. Some sort of regional-level campaign of monitoring bank lending to businesses across Scotland would be helpful. The banks, no matter what they claim, are just not lending to businesses, especially SMEs (for evidence just look through some of the threads on this board). They will have to be forced in more responsible lending policies – exposure of their performances at discreet regional level would be one weapon for this.

4. Public procurement has to be reformed urgently and appropriately for facing the recession and its legacy. The current system is a centralised, top-down one that’s about avoiding risk or blame. We need a supplier/customer partnership that allows innovation, prototyping and or piloting and – heavens above – failure. Politicians and civil servants will need to let go more, and work with other parts of government, with suppliers and with citizens to deliver and develop better services and new solutions that work and are cost-effective.

5. Our Scottish media – can we ever somehow get them off the tawdry boring game of spot- the-scandal or spot-the-failure and glory in it? One major Scottish Sunday recently made almost a page of an article about how a national Scottish public training agency actually spent money (a reasonable sum per head) to bring all its staff together for a blue-sky thinking event. If that’s what we see as a scandal, what hope is there for us? It certainly means you cannot blame those at the top for the top-down, blame-avoiding model I have just criticised.

6. There needs to be exposure and criticism of asocial and irresponsible employers who refuse to play their part in training and re-skilling the Scottish workforce for what is now in front of us. I have in mind the cheapskate employer who pays the lowest possible wage and provides the poorest working conditions and refuses to facilitate, still less invest in, training and development of employees or associates. Such employers live off the back of the workforce that the rest of the Scottish economy produces – and they impose the costs of their own selfishness on the rest of the economy and society. As the old business saying goes; ‘bad money drives out good’. We can least afford these employers at a time of recession.

7. And… well that’s enough for now, my tea-break is over…

 

[DickW]

We won't rebalance the Scottish economy unless there is a seed change in the attitude of the banks and the financial services sector generally. You can't do this without real investment and we don't do investment.

 

[Employment Law Services]

The ones likely to be impacted most by the spending cuts are civil servants and quite rightly too!!

Lets be honest....if any business trading in the private sector budgeted as poorly, spent as recklessly and operated as inefficently as the government does (national, regional and local),it wouldn't last 5 minutes.

The old saying 'what the mind can conceive the body will achieve' is true and when the media constantly spew negativity, this stifles recovery and growth because many buy into it their hype and then reflect this in their own behaviour and actions which does nothing to bring about a positive shift or drive recovery and growth.

Yes cuts are coming but guess what.....there's SFA the majority of us can do about it so instead of buying into the media's doom and gloom, and spending all our time and energy worrying about the impact, why not focus on what we can control?

Its clear that the banks and the government are doing virtually nothing to support the private sector, especially SMEs, so the private sector needs to continue to take ownership of their own destiny and in doing so will lead the charge in driving recovery and growth.

 

[Edward]

I think this is relevant to this thread. I’m participating in a invited-only forum this coming week on issues, and responses to, recession, public expenditure constraints. Part of my intended comments are:

a) We need to seek out what we can do about widening and deepening the links or collaborations between the Third Sector (i.e not-for-profit) and the SMEs sector in Scotland.

b) Much hope is being put on the SME sector creating sufficient numbers of new jobs to offset the losses. There has also been growing understanding of the potentially larger role of the Third Sector in the Scottish economy

c) Organisations in both sectors are suffering disproportionately in the current situation. They ought to be natural allies and partners in adversity.

d) But they have to overcome significant barriers arsing from misconceptions and misunderstandings.. It’s hardly news that many organisations in the Third Sector are, at best, unenthusiastic about private enterprise.

e) But it’s also true that SMEs, typically, lack experience or tacit knowledge in matters of public policy or social concerns, even where they are motivated to ‘do more’ for the community. They also lack the resources to research such possibilities and they often not well-served by their larger representative or lobbying organisations in these matters

f) Scotland needs to find ways and means to develop even more of a readiness and a capacity for SMEs and Third Sector organisations to create partnerships and collaboration in the face of adversity, and to innovate our way through and out of recession.

Any comments would be appreciated.

 

[Scottish Business Owner]

Came across the article below on the Herald Scotland site today which extends a bit on the comments made here so far.

Scots recovery to trail UK as welfare cuts hit growth - Herald Scotland | Business | Markets & Economy

I think I agree that the third sector and the private sector need to do more in terms of trying to collaborate but as has been alluded to that will be difficult.

I'd like to see a much better approach towards supporting small businesses to get them past that seedling stage. My big fear is that the cuts that are about to happen will erode the current support even further. I think it's up to the private sector to try and come up with ways of trying to support and nurture new businesses. Give them the skills they need to develop and that ultimately leads to them being bigger businesses and taking on more people.

 

[Scottish Business Owner]

Here's another angle to this whole debate which I picked up from Business7 today. The key message being that high growth firms can play a big part in Scotland's economic recovery.

High growth firms key to Scotland's economic success says Scottish Enterprise - Business 7

What would be your view of the above article? Does it make any sense to focus alot more on these high growth businesses? This strikes me as a bit strange and maybe a bit like protectionism. Surely it's better to have lots of small successful businesses than say a thousand successful but much bigger businesses?

 

[Edward]

Well, I gotta say my first reaction is, hold the front page - shock discovery!:

“High growth companies make positive 'disproportionate contribution' to Scottish economy”

Well I'd never, who'd have thought that!

But seriously, doesn’t it say a lot that it takes “New research” commissioned by Scottish Enterprise to discover (ok, then, highlight) this?

My biggest doubt over the drift of this article is the echoes of central and local state intervention to pick and back private sector winners. In my experience private sector adventurists are no slouches at beguiling the public sector to hand over the dosh to help get new wonder concepts ‘off the ground’. I’ve known of such adventurists who intentionally start from the wrong end of the telescope. In other words, they mine the glossy outputs of the central and local government ‘enterprise' depts and officers. Then they produce concepts larded in the jargon and bureaucratic-speak so as to appeal to the public sector – and critically not focused on appealing to any private sector venture capital funders, business lenders or even actual markets. A little hospitality extended to a supportive local councillor or MP does not go amiss in 'proving' the 'merits' of the proposal.

I also have personal experience, and know of several other people who have has the same experience, of taking new ideas to potential public funders, only to find that the (never-handled-a-real-business-in-their-career) public sector officer advises you that, no matter how good your idea is they can’t even consider it because, “it does not fit into any of our programmed priorities”

And are we really saying that public sector incumbents using other peoples' money are superior to private sector investors and entrepreneurs in spotting winners that merit committing their own funds in? In which case, why has the private venture capital sector not become extinct a long time ago?

Post WW2 economic history in Scotland is literally littered with episodes of huge sums of public money wasted, utterly, of ‘winners’ that turned out to be duds – except for the original punters of the ‘winner’ who walked off with substantial sums of money. And, incidentally, the careers of quite a few public sector incumbents have received a good bump up in salary and status at the time of their having spotted such ‘winners’. Of course, once the winners turn onto duds, there is never any question of reversing or rescinding the status and financial benefits accruing to the public sector incumbents.

There are important roles for the central and local state in economic policy and practice. But it is certainly not picking and investing (other peoples’ money) in private sector ‘winners’.

 

[Employment Law Services]

There are important roles for the central and local state in economic policy and practice. But it is certainly not picking and investing (other peoples’ money) in private sector ‘winners’.

Spot on Edward!!

 

[Edward]

It is surely deeply, deeply, worrying news that the Purchasing Managers Index from Bank of Scotland, for November, shows that the private sector in Scotland has declined for the third straight month. Manufacturing is reported as having outperformed, but this was offset by a continued decline in the services sector.

I find this worrying because there is something of a consensus that Scotland’s economy is over-dependent already on the public sector (even supporters of an efficient and effective public service like me accept there is a problem of imbalance).

I will of course resist making any acidic comments about the lending policies of the likes of the Bank of Scotland being one of the causes of under-performance of the private sector – Doh! I’ve gone and given into temptation there.

 

[Edward]

Have to say that this report from the Edinburgh Evening News on the local Chamber of Commerce's views irritated me. It’s part of a self-serving attitude of, ‘yes we need the cuts but just as long as it doesn’t affect my sector’.

Any CoC commentator who thinks we can have major public sector 'reform' in the midst of a recession without also hitting the private sector hard, needs to find some other interest to take up their time.

I thought we were all supposed to ‘be in it together’ rather than point scoring against other sectors?

 

[DickW]

I think most CoCs are inevitably fairly parochial but they're not as bad as organisations such as the CBI which in Scotland certainly seems to have few if any suggestions of any real benefit to Scottish economic development. All they seem to say is that the public sector is too large but have nothing to offer about how to actually increase the size of and broaden the private sector.

 

[Edward]

Grim news yesterday of huge cuts in Scottish Enterprise funding to Urban Regeneration Companies Clyde Gateway in Glasgow/South Lanarkshire and Clydebank Rebuilt.

The creation of these private-public partnership companies was a welcome recognition of the extent of the infrastructure regeneration needs in old industrial areas of Scotland. Presumably these cuts reflect a Scottish Government stance of turning its back on these areas (perhaps a political decision on the part of the SNP?).

It’s also a worrying possible indicator of Government withdrawal from the cross-sector regeneration approach. This would herald a return to the bad old ways of silo-thinking, piecemeal public investment and decision-making on an ad-hoc and ‘who shouts loudest’ basis – and just at the very point in the economic cycle when we have to squeeze every bit of extra value from any public expenditure and do so in ways that engage and support the private sector..

 

[DickW]

I also read about these Scottish Enterprise cuts to the urban regen companies.

This is just another consequence of the overall reduction in the amounts of cash available following the profligacy of the last UK Govt. Nothing political about it. It's just that these areas are the most in need and therefore the most vulnerable when it comes to cuts.

I doubt very much this this indicates a withdrawal from the cross sector regeneration approach and a return to the "bad old ways" because there isn't enough money around to fund that either.

Perhaps people should be looking a little deeper and asking how these areas got in such a mess in the first place instead of assuming it must be down to the SNP.

 

[Edward]

DickW I will tightly hold onto your optimism :001_smile:

I, however, have just attended another meeting this morning with further substantially bad news on the local authority funding front and the comment was made by a senior official that ‘well our department don’t do regeneration now’.

On your comment that "It's just that these areas are the most in need and therefore the most vulnerable when it comes to cuts." That's true and it’s also what is wrong with so much UK public investment decisions - just go for the easy meat (where, of course, the biggest 'bangs for bucks' for public investment could instead be achieved). The logic of that process is that the areas that least need help will continue to get it?

It does seem axiomatic that the areas in question got into ‘the state they are in’ because of their spatial and economic place in history. That reality has always applied to all industries, locations and places across the globe and across history. The pertinent issue is what do we do now - and walking away from these areas is no answer for them or for Scotland (except for folks who like playing wee kailyard point-scoring about the dreary past - an unfortunate Scottish preoccupation IMO).

On the politics, I learned a long time ago like most sensible people in the UK to be strictly apolitical - don't expect anything special of any politicians or party, and assume that they will always serve their own interests best. In that context I was not making any anti-SNP comments; I think it reasonable to assume that they are now hedging their bets as any political party would do.