Enterprise and Skills Review

Environment and Economy Board Item 5

Policy Development To discuss implementation of the Enterprise and Skills Review, the creation of the Strategic Board and the development of regional partnerships.

Summary and Recommendations This paper invites the Board to discuss the implementation of the Enterprise and Skills Review. This review began in summer 2016 and culminated in the publication of the phase two report on 22 June 2017. Work since the publication of phase two report has focused on the establishment of the new Strategic Board, which is due to meet for the first time in October. This paper highlights the challenges facing the Strategic Board and the internal and external relationships which will need to be established for it to be a success. The paper also provides some initial discussion points on regional partnerships.

The Board is invited to: i. Discuss the creation of the Strategic Board and how we want to see it develop a relationship with Local Government; ii. Discuss the development of regional partnerships and how they relate to existing regional collaboration; iii. Note the update from the 30 August meeting of the Implementation Board; iv. Agree the Environment and Economy Spokesperson should write to the Cabinet Secretary on the Strategic Board and its relationship to Local Government, and v. Note the meeting with Cabinet Secretary which has been arranged for 4 October 2017.

References Previous reports on the Enterprise and Skills Review:  COSLA Leaders August 2016 - Enterprise and Skills Review  COSLA Leaders September 2016 - Enterprise and Skills Review  COSLA Leaders November 2017- Enterprise and Skills Review  COSLA Leaders February 2017- Enterprise and Skills Review  Executive Group February 2017- Enterprise and Skills Review  Special COSLA Leaders June 2017 - Enterprise and Skills Review

Robert Nicol Gillian Fyfe Chief Officer Policy Manager 0131 474 9241 0131 474 9247 [email protected] [email protected]

September 2017

of 9 Enterprise and Skills Review

Policy Development 1. Scottish Government announced its intention to carry out an end to end review of the Enterprise and Skills system in May 2016 to ensure that all public agencies are delivering the joined-up support needed for businesses and skills users.

2. The Review has been led by the Cabinet Secretary for Economy, Jobs and Fair Work Keith Brown. The Cabinet Secretary was supported by a Ministerial Review Group, on which COSLA was represented by the then Spokesperson Cllr Stephen Hagan. There was an initial call for evidence during summer 2016 which received 329 submissions with Leaders agreeing the COSLA response in August 2016.

3. A phase one report was published in October 2016 outlining a series of recommendations to ensure a simpler and more coherent system of national and local support. Phase two commenced in November 2016 with the establishment of nine workstreams to take forward the phase one recommendations. A significant element of the work as part of phase two has been ongoing engagement with key stakeholders.

4. The phase two report was published on 22 June 2017 and is accessible on the Scottish Government’s website: http://www.gov.scot/Publications/2017/06/4042. Since the phase two report was published, work has focused on establishing the new Strategic Board. This work has been tasked to the Implementation Board, which by the time of the Environment and Economy Board on 4 September, will have met three times. The work of the Implementation Board and the setup of the Strategic Board, is the focus of this paper.

Current COSLA Position 5. COSLA has been supportive of the need for the Review and its aim to improve the experience for users of skills and business support from the public sector.

6. As we reported to Special Leaders in June, the phase two report still leaves unanswered questions. It remains to be seen whether the new arrangements will deliver better alignment between agencies, less clutter and more focused delivery. The one thing we can say with certainty is that while the publication of this report marks the end of phase two – and indeed is likely to formally mark the end of the Review – considerable work still needs to take place as we move into an implementation phase if we are to deliver the step-change in economic outcomes originally envisaged and hoped for.

7. This report does not seek to change COSLA’s position and primarily focuses on the work which has taken place over the summer on the initial implementation of the Review and the creation of the new Strategic Board, and its implications for Local Government. The next section focuses on the Strategic Board and the three short term projects which have been launched by the Implementation Board to lay the ground work for the Strategic Board. These projects are:

 Development of a draft Plan for the Strategic Board

of 9  Development of a new analytical unit to support the Board and how the Board’s performance is measured  Development of a draft proposal for how advice will be presented to the Board and how its Sub-Committee may be structured

The Strategic Board 8. Perhaps the central recommendation to the Review, the creation of a new Strategic Board to coordinate the work of the exiting agencies, Scottish Enterprise, Skills Development Scotland, Scottish Funding Council, Highlands and Islands Enterprise, along with the proposed South of Scotland Enterprise Agency, has been a topic of much debate, indeed controversy, since it was first proposed during Phase One of the Review. Rather than attempt to summarise this debate and Scottish Government’s vision for the Strategic Board, this report includes as Annex A the text from the Enterprise and Skills Review: Report on Phase Two, relating to the Strategic Board. This is the most complete description available of the Board and how it should work.

9. COSLA has been generally supportive of the intent behind the creation of the Strategic Board, but as we move into an implementation phase there remains a critical question over whether the Board, as its been envisioned, will be able to deliver the ‘step-change’ in economic outcomes desired by the Review?

10. This is the ‘big’ question, which can also be phrased another way: what difference will the Board make? This question will only be fully answered as a result of time and experience, and while we want the Board to be successful a degree of scepticism is unavoidable at this point. Much depends on whether the Board is able to deliver a national system that is more than the ‘sum of its parts’. The coordination of the work of agencies in pursuit of a larger economic goal is termed by Scottish Government ‘hard alignment’ but it is what lies behind this phrase which requires more consideration.

11. There is recognition that a transformative shift in economic outcomes (and therefore Scotland moving up the OCED rankings as desired by Scottish Ministers) cannot come from better coordination of existing agency activity alone. Just doing more of the same, but more efficiently, will not take us to the goals set out in the Review. ‘Hard alignment’ must therefore mean more than an alignment of existing activity which has already been agreed by agencies. However, there is question over whether the Strategic Board will have the authority to reshape the collective work of all the agencies in a way which is more fit for delivering a substantial and positive improvement in outcomes.

12. The Phase two report is clear that agency Boards will remain and will retain responsibility over delivery. Portfolio Ministers will retain accountability for the operation of the agencies of which they have responsibility and Scottish Government as a whole will take funding decisions affecting agencies. In part this is a response to concerns raised about the loss of local influence over the work of Highlands and Islands Enterprise, something we understand well, but the consequence of this decision is that the Strategic Board will have to find to find a way of working alongside agency Boards and Ministers. If it’s not allowed to do this properly, or is unable to reshape the most critical activity, and if changes are not matched by resultant shift in funding, then the Board will have, at best, only limited success.

13. We will get early insight to how these potential tensions may be resolved from the development of the first strategic plan for the Board. This work, which is being led by Scottish Enterprise under the auspices of the Implementation Board, is to be completed by the end of September, with a draft readied for the third Implementation Board meeting on 30 August. We should, therefore, be in a good position to advise the Environment

of 9 and Economy Board on the state of the plan and what this may mean for the work of the Strategic Board going forward.

14. One of the potential strengths of the Strategic Board will be that it will have its own, and independent source of economic advice and analysis. The proposal for a new analytical unit to support the Board is potentially one of the most powerful recommendations from the Review. The unit will be critical not only to providing quality economic advice, but also to evaluating performance of the economy and impact of the Strategic Board and, by extension, the four (in future five) agencies.

15. As with the Strategic Board, the success of the unit will depend on how it operates alongside other analytical functions retained by both Scottish Government and the individual agencies, and how free it is to present impartial advice on the state of the economy and the impact made by the work of the agencies. The development of the analytical unit, and the performance management framework for the Board, is the second key task assigned to the Implementation Board.

16. The success of the Strategic Board will also depend on how it is supported in its work by other groups and stakeholders. The third short term project is looking at this and at the committee structure, which will sit underneath the Board. This is being led by Skills Development Scotland and is also critical to the overall success of the Strategic Board.

17. To be effective, and remain strategic, the Strategic Board will have to delegate some work to committees. However, just as the Strategic Board will have to establish its relationship to existing agency Boards and Ministers, it will have to do the same with its own committees. How this is achieved in practice will go a long way to determining whether the Board is a success or not. If this relationship is not got right then the Board will be ill- equipped to scrutinise the work of committees for which it has responsibility. This could lead to poor decision making or an entrenchment of the status quo. This is not a result which we want, but it is a risk which we must acknowledge and work to avoid.

18. Similarly, we have concerns that the proposed committees themselves could become an impediment to the change by becoming another layer in an already cluttered system. If, as has been suggested at earlier meetings of the Implementation Board , there could be up to eight committees, each with 8-10 representatives and each needing its own support from Scottish Government and the agencies, then it is easy to see how the system could quickly become unmanageable. A report on advice to the Board and how Committees could be structured will be made to the Implementation Board in August. We can brief members at the meeting on whether the concerns which we have outlined are being acted upon.

Relationship with Local Government 19. The focus of the Implementation Board has been on setting up its successor, the Strategic Board. The Implementation Board won’t define the Strategic Boards relationship to outside partners, including Local Government, but it will influence the Strategic Board’s thinking. It will also have a direct impact on local government on one specific issue, the early work in setting up a South of Scotland Enterprise Agency. Like the three other short term projects which have previously been discussed, the initial work to establish the South of Scotland Enterprise Agency falls to the Implementation Board. Specifically, the Implementation Board will have a say in the interim arrangements, which will be put in place before the agency is established by legislation (A new Bill is due in 2018). The creation of the interim arrangements for the South of Scotland, and whether it matches the needs of both Dumfries and Galloway and Scottish Borders Councils and prepares

of 9 the ground for the new agency, will be an early test of the Implementation Board/Strategic Board relationship with Local Government.

20. In the longer term, it will be necessary to establish a constructive and mutually supporting relationship between the Strategic Board and Local Government more generally, including those councils who choose to create regional partnerships. It should not be forgotten that all the decisions taken by the Strategic Board will ‘land’ in some way at the local level so it cannot operate in isolation from Local Government. This is especially relevant for business support, and the future of Business Gateway, which is included in a separate work stream as part of the Review. The Board will face the challenge of keeping a razor-sharp focus on progress against national economic outcomes, while encouraging agencies to vary delivery based on local and in future, regional, needs of local government and the business community.

Regional Partnerships 21. The development of regional economic partnerships has been a key strand of the Review. The phase two report on regional partnerships is available on the Scottish Government’s website: http://www.gov.scot/Publications/2017/06/1584

22. COSLA has been supportive of the concept of regional partnerships, but as we move beyond the Review itself into implementation, the thinking around regional partnerships needs to be further developed. The Scottish Government is content that regional partnerships grow organically from existing activity at the local level, but they are also looking to local government to take a lead and establish partnerships across the country. Moreover, it is worth noting that the Phase two report makes clear that the ambition of Government is that all local authorities belong to a regional partnership.

23. The nature of regional partnerships, what they are and what they may evolve into, will be a key focus of the work of this Board. Indeed, we anticipate using one of the Board’s future meetings to discuss regional partnerships more fully. As we have already mentioned, there remain questions over how regional partnerships will relate to the new Strategic Board and how much the work of national agencies will be tailored to the needs of local and regional areas. Beyond these questions, however, are a further set of discussion points which members will have an opportunity to debate fully over the next few months. These are:

 How do local authorities view the concept of regional partnerships alongside existing and developing city and equivalent deals (such as the potential islands and Ayrshire growth deal)?  What added value do regional partnership deliver?  How to we avoid losing a local focus in a drive to establish partnerships?  What are the best ways of engaging with businesses and other partners?  How do regional economic partnerships relate to the reform of regional transport governance and spatial planning?  What should the link be between regional partnerships and community planning if inclusive growth is to be a priority?  What should happen to those local authorities that are currently not part of an existing or developing city, growth or island deal?  How much of a role do local authorities want COSLA to play given current work on regional collaboration has been driven from the local level?

of 9 24. These are an initial set of discussion points and we expect members will have their own questions to add to this list. We welcome members’ initial comments on these points and we will return to this debate at a future meeting.

Next Steps 25. As set out above, the Strategic Board must establish a series of critical relationships, both internally and externally, if it is going to be a success. Some of this will only become clear in time, but there are steps which we can take to maximise the chance of success:

 The August meeting on the Implementation Board will help us gauge whether the work to set up the Strategic Board is going in the right direction;  If there are remaining issues, it is for Environment and Economy Board to decide what it wants to happen. This report recommends that we write to the Cabinet Secretary before the final meeting of the Implementation Board in September.  We will meet the Cabinet Secretary on 4 October to discuss the implementation of the Review. This will provide an opportunity to deal with any remaining issues face to face with Ministers.  Finally, Local Government will have representation on the Strategic Board and we will need to consider how the wider local government family, including professional associations such as SLAED and SOLACE, and partners such as the Improvement Service, work to support the individual attending, which is likely to be the COSLA Environment and Economy Spokesperson.  A further debate on regional partnerships will be arranged for a future meeting of the Board. We are keen to involve councils that have already been involved in city deals or equivalent and the format of the debate can be tailored to the needs for members.

Summary and Recommendations 26. This paper invites the Board to discuss the implementation of the Enterprise and Skills Review. This review began in summer 2016 and culminated in the publication of the phase two report on 22 June 2017. Work since the publication of phase two report has focused on the establishment of the new Strategic Board, which is due to meet for the first time in October. This paper highlights the challenges facing the Strategic Board the internal and external relationships which will need to be established for it to be a success.

The Board is invited to: i. Discuss the creation of the Strategic Board and how we want to see it develop a relationship with Local Government; ii. Discuss the development of regional partnerships and how they relate to existing regional collaboration; iii. Note the update from the 30 August meeting of the Implementation Board; iv. Agree the Environment and Economy Spokesperson should write to the Cabinet Secretary on the Strategic Board and its relationship to Local Government, and v. Note the meeting with Cabinet Secretary which has been arranged for 4 October 2017.

September 2017

of 9 Annex A - Enterprise and Skills Review: Report on Phase Two

The following text is taken from the Enterprise and Skills Review: Report on Phase two, published by Scottish Government on 22 June.

Strategic Board aims, function and membership

As set out in Phase one of the review, we will deliver in autumn this year a new Strategic Board that will provide the high-level governance for enhancing economic performance. In establishing the Strategic Board we will build on the work of Professor Lorne Crerar in his report 'Proposals on Governance and the creation of a Strategic Board' to enhance the collective delivery of the agencies. We have published our response to Professor Crerar's proposals alongside this Phase two report, providing additional detail on the future governance arrangements.

We have expanded the four Strategic Board aims which Professor Crerar identified to include a fifth aim which recognises the need for a step-change in the collaborative culture not just across our agencies but also with partners in the broader enterprise and skills system. The Strategic Board aims will be to:

 Improve the overall performance of the economy by ensuring that the whole Enterprise and Skills System delivers Scotland's Economic Strategy and supporting strategies, in all parts of Scotland.  Through collective responsibility ensure hard alignment between agencies to drive improvement in Scottish productivity and better support business and users of the skills system.  Hold agencies to account for performance against agreed measures.  To actively engage with other agencies and bodies who support the economy with a view to increasing alignment and challenging others where collaboration is not happening.  To deliver wider collective leadership, based on common culture and values, and which inspires and empowers delivery.

The immediate priority for the Strategic Board will be the development of a Strategic Plan and a measurement and performance framework which will underpin that plan.

The work of the Strategic Board will be supported by a new analytical unit which will provide robust evidence across the entire enterprise and skills system to inform the Strategic Board's priorities and decisions. The unit will also develop the comprehensive set of performance measures and shared outcomes that will help to focus the agencies on the areas with the most positive impact.

In support of the aims of the Strategic Board, Strategic Committees will be established to drive forward key priorities, bringing together the agencies with wider interests to promote collaborative delivery. To maximise efficiency, where appropriate we will look to utilise existing or re-purposed fora to act as Strategic Committees in preference to developing new groupings. For example, we will seek to utilise the existing Joint Skills Committee as a new, repurposed Strategic Skills Committee.

It is vital that the Strategic Board not only has a clear understanding of national economic performance but also a clear regional focus, working directly with stakeholders and regional

of 9 partnerships to help shape and contribute to delivering regional strategies that support the delivery of their national priorities and improve local economic outcomes.

Figure 1 sets out the current working assumption for the structure for the Strategic Board and the broader governance arrangements.

Figure 1 - Structure of Strategic Board and Broader Governance

How will the Strategic Board Work?

The Strategic Board will have an independent chair appointed by Scottish Ministers and a membership drawn from the Chairs of each of the agencies as well as non-executive members drawn from business, local government, skills and research and trade union communities. In addition to their current statutory responsibilities, Scottish Ministers will assign each agency chair with a new, explicit responsibility to support the shared aims of the Strategic Board.

of 9 To deliver meaningful change, the Chairs of the agencies, as part of the Strategic Board, will be instrumental in the development of the Strategic Plan, and the common performance and measurement framework that will support it.

The Strategic Plan - which will be agreed with Scottish Ministers - will lay down the agreed areas of collective focus for the agencies and their roadmap for boosting growth and productivity.

The Strategic Board will not have responsibility for the allocation of budgets; this function will remain with Ministers, although they may choose to seek the advice of the Strategic Board when making funding decisions. Each Agency Board will retain existing autonomy and accountability for funding decisions.

We expect that the Strategic Board will meet every two months and across the country to ensure a clear understanding of regional needs, economics, activity and services.

Implementation Board

To maintain pace and momentum, an Implementation Board, to be chaired by Professor Lorne Crerar will lay the groundwork for the Strategic Board immediately following the conclusion of Phase two. It will meet monthly until the Strategic Board is established in the autumn. All the Agencies will be represented on the Board alongside selected members of the Ministerial Review Group, and others to reflect business and the wider Scottish economy.

Specifically, this Implementation Board will look to:

 Develop an outline for the Strategic Plan and performance framework to be considered once the Strategic Board is established.  Establish the cross-cutting priorities that will need to be an early focus for the Strategic Board and, where helpful, establish the Strategic Committees to rapidly deliver these priorities.  Oversee progress on the delivery of the wider E&S Review workstream actions and recommendations that will fall within the scope of the Strategic Board.  Set out the structure, accountability and reporting arrangements for the governance supporting the Strategic Board, including guidance on how the agencies will work together, and on their roles and responsibilities.