Memorandum submitted by Highlands &
Islands Enterprise
INTRODUCTION
The Highlands & Islands Enterprise (HIE)
Network, comprising the core based in Inverness, Dingwall and
Linicleat and nine Local Enterprise Companies (LECs), is the Scottish
Executive's economic and community development agency for the
north-west of Scotland, delivering also Careers Scotland services.
The HIE area covers just over half of the landmass of Scotland,
yet includes only 9% of the population.
HIE welcomes the opportunity to submit evidence
to the Scottish Affairs Committee's inquiry into Poverty in Scotland
since the development challenges facing the Highlands and Islands
very much include those stemming from a traditionally low-earning
economy set in a sparsely-populated region on the edge of Europe.
A detailed analysis of the consequences of low earnings combined
with geographical disadvantage is set out in the submission to
the Committee from the Highland Council and we would in particular
underline two key issues:
— the spatially-dispersed nature of
deprivation in the Highlands and Islands; and
— the need to improve the measurement
of multiple deprivation to take full account of the different
nature of deprivation in sparsely-populated areas.
This submission therefore seeks to complement
the Highland Council's submission by summarising the economic
development challenges facing the area and the long-term aspirations
for progress.
THE STRATEGIC
CONTEXT
Our strategy, A Smart, Successful Highlands
& Islands, sets out how the national priorities for enterprise
development are tackled in the HIE area with its distinctive geography.
The aim of the strategy is to enable people living in the
Highlands & Islands to realise their full potential on a long-term
sustainable basis. This aim is being pursued through four
strategic objectives:
— Strengthening Communities.
— Making Global Connections.
The inter-relationship between these objectives
and our integrated approach to achieving them is shown overleaf.
In seeking to interpret the national priorities
and drawing out what is required in a Highlands and Islands context,
we believe there are five crucial contributors to success:
On Population, it is clear that more
people living, working and studying in the Highlands and Islands
are essential to sustaining our long-term progress. These newcomers
will embrace different groups of people coming to the area for
different reasons: entrepreneurs seeking to develop their businesses;
students coming to learn, study and research; former residents
returning to settle, change career, etc. A determined drive to
attract new residents must include stimulating the provision of
affordable housing, including developing flexible planning policies
towards housing in the countryside. The attraction of people also
requires an open-arms approach to newcomers, recognising that
the scale of population increase needed will not come from return
migrants alone. That means aspiring to build a modern, progressive
society that appeals to people from faraway places as well as
those closer to home.
In practice, this means the continued growth
of the city of Inverness, as well as bigger, busier towns and
villages, offering wider housing, retail, services and facilities
choices. But it also means increased rural population in the smallest
of our communities, where their very viability will rely on attracting
more residents to create demand for, and sustain, local service
provision. The implications for housing and infrastructure investment
are potentially large, but without creation of the required capacity,
even modest population growth may prove difficult.
The importance of Place is becoming widely
recognised as a key factor in both regional and national success.
This is a very positive finding for the Highlands and Islands
since we have one of the most attractive natural environments
in the world and our research into recent in-migration bears this
out. But we have to do more to enhance and capitalise on these
assets, especially in terms of our built environment.
First, we have to build the role of Inverness
and our main towns such as Elgin as international-standard gateways.
The aspiration has to be set that high, because what needs to
be done is to capture the heart of everyone who steps off the
train, plane or ferry that this is the quality place they envisaged.
International-standard gateways start with quality built environments,
which civic leaders, planners, developers and, above all, the
people who live there have worked consistently to turn into something
both highly attractive and highly distinctive. Upgrading the built
environment works more easily when development (and development
cash) lubricates the process.
A Smart, Successful Scotland underlines
the Productivity challenge facing the nation as a whole.
The challenge is generally more acute for businesses in the Highlands
and Islands where higher input costs can combine with lower volumes
of output to keep overall unit costs high. These realities face
the small hotel operator just as much as the maker of manufactured
goods or the producer of livestock. Thus, we must aspire to create
more businesses of scale, as well as exploiting those sectors
where these realities are more able to be combated through internet-based
working, etc.
The focus of business development efforts needs
to be on raising productivity in all of our economic sectors.
That will require ambitious leadership, supported by capital investment,
allied with investment in skills, harnessing of research, creativity
and innovation and greater effectiveness of management in driving
improvements forward. Equally, the excellent work which has taken
place on upgrading the area's physical infrastructure must clearly
continue, with special emphasis on transport, as well as electronic
communications, educational and community facilities.
Linked to the productivity issue is that of
Pay. To be clear, absolute earnings levels in the Highlands
and Islands have risen hugely over the last 25 years, as a result
of the general growth and diversification of the economy. In relative
terms, however, our position has worsened slightly over the last
few years, measured against the national and EU averages. Recent
research has indicated that the main causes include: the rundown
in oil-related employment; a low share of national employment
in higher-paying sectors; a lack of private-sector head offices;
employment growth in lower-paid sectors; and out-migration of
young people for higher education.
There is no single or easy answer to the low
earnings challenge facing the Highlands and Islands. Long-term
improvement requires a steady expansion of employment in higher-paying
economic activities, for example, through building the knowledge
economy and establishing the University of the Highlands &
Islands.
Finally, we need people to believe in the area's
Prospects for success. For alongside simple positiveness
about the future helping to make a difference, one of the exciting
aspects of the economic development process is that several of
the projects, which might make the greatest difference, are presently
unknown to us today.
In addition to the gateways, it is important
to underline the need for a wide range of investment throughout
the more sparsely-populated parts. This long-term investment must
be aimed at improving the overall attractiveness of the area and
underlining in residents' eyes that their communities' prospects
are very positive. The area boasts a wonderful natural environment
and correspondingly many natural heritage designations. These
assets underpin many of our key sectors (such as tourism and aquaculture),
though they need to be better interpreted and further invested
in. We also need to invest more in our cultural assets and sport,
if we are to achieve continuing acclaim for what the area has
to offer.
THE LOW-EARNINGS
CHALLENGE IN
THE HIGHLANDS
AND ISLANDS
As summarised under the section on Pay, there
are a number of contributory reasons for the area remaining characterised
by low earnings, despite the substantial turnround in its economic
fortunes over the last generation. There are of course compensating
factors to be considered: some elements of the cost of living
in the Highlands and Islands are lower than elsewhere, notably
congestion and commuting costs, the price of some personal services
and, indeed, housing prices, despite recent increases. Residents
of the area also benefit from, for example, access to an outstanding
natural environment, strong local support networks (especially
in smaller communities) and generally lower levels of crime.
Notwithstanding these compensations, poverty
in the Highlands and Islands is a significant and pervasive concern.
The different forms which poverty can take are summarised in the
Highland Council submission and in endorsing that analysis, we
would like to stress the spatially-dispersed nature of both our
rural population and the incidence of poverty in the small communities
which house that population. It is also worth making the point
that for island residents—numbering around 90,000 across
the HIE area—the conditions leading to rural poverty are
compounded by the impact of water crossings. This physical barrier
exerts itself in every facet of island life from higher consumer
prices for goods and services to the reality of arranging visits
to the mainland around the timing and cost of transport (which
is in turn susceptible to disruption by weather throughout the
year).
An understanding of the different characteristics
of poverty in sparsely-populated, remote areas is essential to
achieving an appropriate measurement framework and, consequently,
the necessary policy responses. The Scottish Index of Multiple
Deprivation (SIMD) is often criticised in rural areas, not just
for an apparent in-built bias towards populous areas, but more
so because it fails to incorporate several of the distinctive
characteristics of rural poverty. Based on the use of nationally-comparative
statistics, any index is open to such criticism. While the solution
to this may lie partly in the improved collection and use of small
area statistics, the fundamental point, in our view, is that the
challenge of addressing rural poverty needs to be based on a clearer
conception of the issues facing those who have to endure it.
CONCLUDING THOUGHTS
A Smart, Successful Highlands & Islands
sets out a number of aspirations for the area over the next 20
years:
— A growing population (overall total
approaching half a million, ie up around 15% on the 2005 figure)
in every part of the area.
— A more diverse employment base (around
20,000 new full-time equivalent jobs, ie up around 10%), embracing
the knowledge economy, science and technology, renewable energy,
creative industries and higher education, as well as longer-established
activities such as tourism and food & drink.
— Higher personal and household incomes
(10-15% above 2005 levels in real terms).
— World-rated attractiveness of both
natural and built environments, fully embracing sustainable development
principles.
— A modern, progressive society, steadily
building a sustainable future for the next generations.
— An open-arms approach to attracting
people, with the Highlands and Islands an international shop window
for Scotland.
The progress of the Highlands and Islands towards
these aspirations will be the measure of the area's success. Together,
these aspirations imply a desire that all residents in all communities
across the area should share in the benefits of greater prosperity.
The challenge of tackling rural poverty must therefore lie at
the heart of economic and community development efforts.
December 2006
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