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Beveridge Report failed in its duty to Scotland, say top economists

Two of Scotland’s foremost economists have launched a damning attack on Crawford Beveridge’s Independent Budget Review for failing in its duty to consider Scottish economic development.

 

Jim and Margaret Cuthbert dubbed the omission “disappointing and damaging”, while calling for reforms to public procurement that they believe would put the country in a better position to weather the cutbacks in public spending.

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They said: “Public monies are not being spent optimally in the economy. There is plenty of scope to boost growth by improving capital investment and public procurement ... Overall, the failure of the Beveridge Report to adequately address the economic development aspects of its remit is both disappointing and damaging.”

Writing in today’s Sunday Herald, they also rejected the logic of the four-year-old McClelland Report, the proposals of which have helped to concentrate Scottish public procurement into larger single contracts.

“The drive of the McClelland Report, which recommended centralisation, could make many general procurement contracts too large to be handled by Scottish firms.”

Using the example of Scottish Water, most of whose £500 million capital investment programme is contracted to English or foreign multinationals, they called for such procurement to be broken down into more manageable allocations -- a move they believe would be impossible if the Government were to accept Beveridge’s proposal to transfer the ownership of the water provider into a not-for-profit company.

They also argued that large contracts had made areas of procurement such as PFI less competitive, consequently driving up the costs.

“Where existing PFI contracts are unduly restrictive or excessive profits are being made, the contracts should be reopened,” they said. “There is actually more scope for doing this than is generally realised, since the companies involved will continue to depend on the public sector for future contracts.”

Geoff Mawdsley, director of think-tank Reform Scotland, broadly agrees with the Cuthberts’ views that local services and facilities would be better served by more dedicated contractors.

“We would like to see the devolution of power to local authorities so that they can decide how they manage their services more generally. Procurement is part of that. We want to see things driven from the bottom up rather than trying to force centralised procurement or efficiency savings from the top down.

“I don’t think that procurement should be restricted to Scottish companies, but this would likely be a natural by-product of a more local focus because you would end up with more competition.

“We have tried to force a one-size-fits-all mentality, assuming there’s one right way to do things. We have gone for a uniform approach where we should be looking for diversity.”

David Watt, director of the Institute of Directors Scotland, has some sympathy with the Cuthberts’ arguments but said there is a danger of oversimplifying the complexity of achieving optimum procurement for the good of the country.

He believes that the McClelland Report “very sensibly” suggested that the country would get better value for money by centralising procurement, but agreed that this tends to disqualify Scottish companies because they don’t have the scale to cope with the size of the contracts.

“We certainly need to be a bit cleverer so that we favour local supply where possible,” he said. “We probably play by the European procurement rules too much and I don’t think we are always smart enough in the way we draft the tender notices. But to be fair, the former Scottish coalition administration, latterly, and particularly the SNP government have been very active in trying to resolve the problem of getting Scottish companies more involved in procurement.”

He praised the cross-industry working group that has been working with Finance Secretary John Swinney to address these difficulties, but said it might be time to commission a sequel to McClelland to re-examine the issues now that a few years have passed.

He said: “The question is, are we as individuals and as businesses prepared to accept some poorer value for money in order to promote economic development in the longer term? I don’t know the answer to that question. The Cuthberts are arguing there’s a case for doing that, but the media would crucify the Scottish Government if it went down that road.”

Beveridge, former chief executive of Scottish Enterprise and vice-president of Sun Microsystems, chaired the panel commissioned by the Scottish Government to produce proposals for handling the coming public cutbacks. Together with former Deloitte partner Robert Wilson and former senior civil servant Sir Neil McIntosh, his 166-page report, published last month, said that policies such as free care for the elderly, the Council Tax freeze and free university tuition fees are unsustainable. Along with the Scottish Water proposals, it also called on the government to consider reducing the public sector headcount by 10%, or 60,000, over the next five years.

 

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