RN New Economy Update

Research Note RN 01/81 5 September 2001 NEW ECONOMY UPDATE This note is produced prior to the Parliament’s debate on the Enterprise and Lifelong Learning Committee’s Report into the impact of the New Economy, due for 6th September 2001. This note highlights some of the developments at the time and since the publication of the report on 19th June 2001. The text of the motion (S1M-2133) for debate is “S1M-2133 Alex Neil on behalf of the Enterprise and Lifelong Learning Committee: Impact of the New Economy Inquiry—That the Parliament notes the 6th Report, 2001 of the Enterprise and Lifelong Learning Committee on the impact of the new economy (SP Paper 355).” The Enterprise and Lifelong Learning (ELL) Committee’s report into the impact of the new economy was published on June 19th 2001 following an extensive inquiry which took its first oral evidence in September 2000. Summarising the findings of the report in an accompanying press release Convener Alex Neil MSP stated “our committee recommends that the Scottish Executive must develop a full, overarching e-strategy for the nation. To ensure proper responsibility for this strategy, we are calling for the Enterprise & Lifelong Learning Minister to appoint an e-advocate to take charge of delivery on these vital issues. This eproviding research and information services to the Scottish Parliament 1 strategy should be published by March 2002. Its aim must be to promote Scotland into the leading group of IT nations within five years.” The Committee’s report set out the following elements it wished to see in an “estrategy” • • • • • • • • • • “A target date to establish broadband communication links to all businesses and homes in Scotland The construction of a direct Scottish link ('inter-connector') to the global cable network, for which there is already a viable commercial case Selective public investment in telecommunications infrastructure, where this would not otherwise be provided by the private sector Initiatives to address the potential shortfall of suitably qualified new graduates The creation of a universally IT-literate population The creation of an industry-Executive electronics sector group, on the model of the successful PILOT initiative for oil and gas The Scottish Executive offering itself as an exemplar through e-government Training for all Scottish Executive members and staff in the implications of the new technology An examination of whether new technology allows the dispersal of more Scottish Executive jobs An extension of the remit of the Scottish Executive's Improving Regulations in Scotland (IRIS) unit to assess the impact of proposed new legislation on ebusiness.” At the same time as the Committee produced its report, SNP Enterprise and Lifelong Learning spokespeople (and ELL Committee members) Kenny MacAskill and Duncan Hamilton published a report “Impact of the new economy; Alternative summary and conclusions presented by the Scottish National Party”. The alternative report commented on the ELL Committee report that, The summary of findings understates the problems facing Scotland, and overstates Government action to date. Consequently the urgency for action is lost, and complacency is fostered As well as calling for a separate Scottish telecoms regulator the report concluded that “as a matter of urgency” Scotland requires to: • “Identify the provision of broadband services in Scotland, and the areas where there is a lack of provision • Undertake a strategy to equip 90 per cent of homes and businesses with a targeted 8Mbps by 2005 • Establish a strategic interconnector linking Scotland to the global communications network • Provide Scotland with the skills to capitalise on the technologies emerging through the new economy.” providing research and information services to the Scottish Parliament 2 Responses to the ELL Committee report in the media at the time of its publication included the following: “The deadlines set by the Committee are very good news. Speed is of the essence in terms of broadband provision – we can’t afford to have it any later than 2003.” June Deasy, Scottish Parliamentary Officer, Federation of Small Businesses (Scotsman 20/6/01) “ScotlandIS broadly supports the Committee’s findings but we are conscious that a number of European countries are further advanced. The Scottish Executive needs to prioritise setting the timetable and leading the investment in infrastructure and skills to ensure Scotland is not left behind.” Polly Purvis, General Manager ScotlandIS (Business AM 20/6/01) “In the not too distant future, the broadband network will become as important to Scotland as the road and rail infrastructure is now. The executive is happy to spend many tens of millions of pounds on new highways. It is now time to apply that same attitude to the new economy” Business AM editorial 20/6/01 Bill Allen, chief executive of telecoms company Thus criticised one of the reports, which in turn fed into the ELL Committee’s report – a report by the Soja Consultancy for Scottish Enterprise. The Soja report had concluded that Scottish companies are paying more for broadband connections than some English companies and that more competition is needed. However Mr Allen argued that it would be demand for broadband services that would stimulate broadband rollout “not sub-sea cables”. Mr Allen said of the Soja report, “In my view, the consultant’s report deals with the old world and not the new data services world that can stimulate growth in Scotland. International connectivity for Scotland is already available. It is now for Scotland to create the demand and services to use it.” Sunday Times 24/6/01 Subsequent to the inquiry Members of the Enterprise and Lifelong Learning Committee also attended a seminar on 4th September to listen to the views of representatives from Scottish finance and business sectors. According to media reports some business people were critical of the speed of the Executive’s progress: "We need broadband desperately. Companies like ours will be using it to push the boundaries of where technology is going, not where it is today. If we are going to do it, we should do it full-heartedly, not half- heartedly … The rest of the world is doing it and if we do not we are going to be left behind. What is the point of discussing it? Why don't we just do it?" (Mike Hambly, Chief Executive, Digital Animations - Business AM website 5/9/01) providing research and information services to the Scottish Parliament 3 The Scottish Executive response to the ELL Committee report was published on 1st September 2001. The “key points” were as follows; “Strategy: • Clear allocation of Ministerial and official responsibilities already exists. • Cabinet and Ministerial Committees oversee policy development and achievement of objectives. • Strategies developed. Infrastructure – Broadband • The Executive’s aim is to ensure that affordable and pervasive broadband connections are available to citizens and businesses across Scotland. • Infrastructure investment is likely to be most efficiently provided by the private sector in this complex and dynamic market. However, services may not be provided in some, and particularly rural, areas. • The Executive will promote procurement of broadband connections for public services in a way that stimulates providers to offer a wide range of services to businesses and consumers. • The public sector will consider joint public-private provision in remote areas which might not receive sufficient provision on a commercial basis. The Digital Divide • The previous section sets out action being taken to avoid a geographical divide in access to broadband connectivity. • The Scottish Executive is committed to achieving universal access to the web by 2005. • A wide range of actions to improve online access, skills, and content are already being undertaken by the Executive. • A Digital Inclusion strategy to be published in Autumn 2001 – more actions will follow. Infrastructure – Competitiveness: an Inter-connector • The Executive recognises that Scotland needs world class products and pricing for international connectivity. • The Scottish Executive and Scottish Enterprise (SEn) believe that the key failure to be remedied is the lack of wholesale pricing. Skills Issues • The Executive agrees with the ELL Committee on the importance of skills to success in the New economy. • The Executive is actively working to ensure that Scotland has the right skills. Business Support • The Executive is committed to ensuring that the Scottish economy becomes a digital economy, with businesses in all sectors and of all sizes taking full advantage of modern technologies. • Action is taken to ensure e-business support programmes meet business needs. Culture • Action being taken to promote cultural change. • Development of an information and publicity strategy for the knowledge economy. E- Government • Modernising Government is about improving services.” providing research and information services to the Scottish Parliament 4 The Executive also published Connecting Scotland; our broadband future on 1st September 2001, outlining the Executive’s plans to extend the availability of “broadband” telecommunication services in Scotland. The approach involves “aggregating the demand” for telecommunications services from different parts of the public sector (local government services generally and libraries and schools in particular, along with the health service). This approach is being tested in two “pathfinder areas, where according to the document “the market is unlikely to meet demand under current procurement practices” (p19). The two pathfinder areas are: • • “South of Scotland: covering the geographical areas of Dumfries and Galloway and Scottish Borders Councils. Highlands and Islands: comprising the geographical areas of The Highland Council, the Islands Councils, Moray Council and Argyll and Bute Council.” A recent Scottish Executive response to a feasibility report on developing the National Grid for Learning concluded1: “By Summer 2002 we hope to have completed the first version of the detailed specification for the schools Intranet, agreed a procurement strategy and be in a position to start the procurement process. Our aim is to develop a network that will bring the benefits of broadband communications to all Scottish schools in a way that builds effectively on existing developments and that takes account of the wider needs of the public sector.” Some additional information on policy to develop “broadband” is available at • The Scottish Executive “extra” on broadband http://www.scotland.gov.uk/pages/news/extras/00002000.aspx • The Scottish Executive Digital Scotland website gives an overview of Scottish policy http://www.scotland.gov.uk/digitalscotland/ Measuring progress on the new economy A previous SPICe research note (RN 00-53, August 2000) and indeed the ELL Committee report itself highlighted some comparators of progress towards the information economy. The Office for National Statistics now published a regular statistical report on Internet access across the UK. This includes a country/region breakdown. The 1 Feasibility Study Into Integrated Broadband Communications For Scottish Schools Scottish Executive rd Response To The Pricewaterhousecoopers Report 3 September 2001 providing research and information services to the Scottish Parliament 5 data illustrates the variation in internet access for households across regions, as well as the speed of change. Figure1; % Households with access to the Internet UK N Ireland Scotland Wales England South west South East London East Midlands West midlands East Midlands Yorkshire and Humberside North West North East 0 5 10 14 15 20 15 18 20 19 22 11 14 15 20 19 24 25 19 33 20 24 22 00/01 34 37 38 40 34 33 31 29 32 25 25 30 35 40 45 99/00 (Source Office for National Statistics, June 2001) The Executive has recently issued a consultation paper on measuring the progress of the “Smart Successful Scotland” strategy Under the global connections heading (p12) some of these proposed measures include: “Cost and geographic coverage of broadband Support: • Share of population on-line • Share of population in SIPs and other fragile areas with internet access” Modernising Government Fund As the membership of the Digital Scotland Ministerial Committee indicates the information society is very much a cross cutting issue. This therefore makes it particularly difficult to identify budget allocations to support digital or information initiatives. One (relatively small) “level one” budget heading which does include a large number of digital projects is the Modernising Government Fund “A Modernising Government Fund was launched in Parliament on 23 February 2000 to help take forward the objectives of 21st Century Government for Scotland. The fund will provide some £25 million over the next 2 years to innovative public sector projects which are aimed at improving the quality, effectiveness and efficiency of public services in Scotland. providing research and information services to the Scottish Parliament 6 Projects making beneficial and innovative use of information and communications technologies will be encouraged.” 2 The Finance and Local Government Minister Angus Mackay announced in June 2001: “funding for free personal care and increased spending on major priorities such as health and education”3 As part of £200 million of “new money” and a “realignment of a further £289 million to finance Scottish Executive priorities”, the Modernising Government Fund saw a projected fall from £16 million (cash terms) earmarked for 2003-04 to £1 million under the “new” budget as Table 1 below indicates. Table 1 - Allocations to the Modernising Government Fund CASH £m "Original position" (DEL) "New position" (DEL) 2001-02 14.3 14.3 2002-03 16.1 16.1 2003-04 16.0 1.0 (source, Finance Ministers Statement on Budget Allocations 28/6/01) A Written Answer (31st July) to a Parliamentary Question from Brian Adam MSP provided some further information; Brian Adam (North-East Scotland) (SNP): To ask the Scottish Executive where in the 21st Century Government level 3 budget the savings of £15 million planned for 2002-03 and 2003-04 will be made and what effect these savings will have on programmes funded by this budget. (S1W-16766) Angus MacKay: This money was unallocated. The savings will have no effect on other programmes. Ministers may still choose to fund future initiatives on 21st Century Government from other sources, such as Capital Modernisation Fund consequentials. Research Notes are compiled for the benefit of Members of Parliament and their personal staff. Authors are available to discuss the contents of these papers with Members and their staff but cannot advise members of the general public. 2 3 Source Scottish Executive Digital Scotland website. Scottish Executive news release SE1569/2001 “Mackay Balances The Budget - Funding For Free Personal Care And Increased Spending On Health And Education”, 28/06/01 providing research and information services to the Scottish Parliament 7