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Enterprise agencies' spending 'down 12% over six years'

Published 14/07/2016

Caroline Gardner said the Scottish Government needs to target public sector activity and funding 'where they will have the biggest impact on achieving its economic strategy' (Scottish Parliament/PA Wire)
Caroline Gardner said the Scottish Government needs to target public sector activity and funding 'where they will have the biggest impact on achieving its economic strategy' (Scottish Parliament/PA Wire)

Spending by Scotland's two enterprise agencies has fallen by 12% in real terms in the last six years, with a new report warning resources may be spread too thinly to represent an efficient use of cash.

Audit Scotland said that despite Scottish Enterprise and Highlands and Islands Enterprise (HIE) having had their budgets cut since 2008-09, there had been "little change" in the work the Scottish Government expects them to do.

As a result, the public spending watchdog said: " This creates a risk that the enterprise bodies' resources are being spread over too broad a range of activities and this might not be the most efficient use of their funding and expertise."

Scottish Enterprise and HIE spent £398 million between them on their work to support economic growth in 2014-15.

But between 2008-09 and 2014-15, Scottish Enterprise spending fell by 16%, Audit Scotland said.

While HIE spending rose by 3% over the period, the report said this was due to extra Scottish Government cash for extending high-speed broadband in the Highlands and islands. When this money is excluded, spending was down by 22% in real terms.

And although Audit Scotland said the two bodies had " performed well against their agreed performance measures", the report added it was " not possible" to measure their combined performance.

It said: "Despite undertaking similar activities, there is little commonality between Scottish Enterprise's and HIE's publicly reported performance measures.

"For example, both have a performance measure related to 'internationalisation'. Scottish Enterprise measures the number of businesses achieving significant turnover growth from exporting, whereas HIE measures the increase in international sales by supported businesses."

It added: " Having different performance measures in place and different ways of calculating them means it is difficult to compare the performance of the two bodies.

"It also means that it is not possible for the Scottish Government to assess the collective performance of its economic development agencies."

While Scottish Enterprise and HIE review performance targets annually, Audit Scotland said these had "mostly been exceeded" for the last five years.

But it added that the Scottish Government has "not challenged the enterprise bodies to increase their annual targets", saying it is "important that the enterprise bodies test that they are setting the most challenging targets possible".

The spending watchdog also argued that there is scope to "simplify arrangements" for providing support to businesses, and "clarify roles and responsibilities".

It has now recommended that the Scottish Government should strengthen its approach to developing and monitoring economic policy, including setting clear targets and timescales for action, and making clear the different responsibilities of different public sector bodies.

Auditor General for Scotland Caroline Gardner said: "New powers, continuing pressure on public finances, and uncertainty following the recent EU referendum mean that the Scottish Government needs to target public sector activity and funding where they will have the biggest impact on achieving its economic strategy. It also needs to be able to measure progress so its plans remain on track."

A Scottish Government spokeswoman said: "We welcome this contribution to the debate on Scotland's economy and will consider the recommendations as part of our Enterprise and Skills Review which looks to build on the success of our agencies.

"Despite significant challenges Scotland's economic performance has improved since 2007 - the productivity gap with the UK has narrowed, and the labour market has remained resilient."

Tory economy spokesman Dean Lockhart said: "This Audit Scotland report recognises that economic growth is complex but the gap between UK and Scottish unemployment rates continue to grow and small businesses need all the support they can get.

"The SNP have let the economy brief slip as they continue to obsess about independence and this report clearly highlights that more needs to be done on achieving sustainable economic growth in Scotland."

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