EU/S3/10/12/A

EUROPEAN AND EXTERNAL RELATIONS COMMITTEE

AGENDA

12th Meeting, 2010 (Session 3)

Tuesday 5 October 2010 The Committee will meet at 10.30 am in Committee Room 3. 1. Declaration of interests: Bill Wilson will be invited to declare any relevant

interests. 2. Decision on taking business in private: The Committee will decide whether

to take item 6 and future updates on the European strategy in private. 3. International Engagement inquiry: The Committee will consider a further

report on international activity by the Scottish Government and its agencies, commissioned from the Scottish Parliament Financial Scrutiny Unit.

4. Brussels Bulletin: The Committee will consider the latest edition of the

Brussels Bulletin. 5. International Engagement inquiry (in private): The Committee will consider

the key points arising from the earlier session with the Scottish Parliament Financial Scrutiny Unit.

6. Scottish Parliament European strategy: The Committee will consider an

update report.

Lynn Tullis / Simon Watkins Clerks to the European and External Relations Committee

Room TG.01 The Scottish Parliament

Edinburgh Tel: 0131 348 5234

Email: lynn.tullis@scottish.parliament.uk; simon.watkins@scottish.parliament.uk

EU/S3/10/12/A

The papers for this meeting are as follows— Agenda item 3

Paper from the Clerk

EU/S3/10/12/1

Agenda item 4

Brussels Bulletin

EU/S3/10/12/2

Agenda item 6

Paper from the Clerk (PRIVATE PAPER)

EU/S3/10/12/3 (P)

European and External Relations Committee

12th Meeting, 2010 (Session 3), Tuesday, 5 October 2010

International Engagement inquiry FSU study on international expenditure

1. In March 2010, the Committee commissioned the Parliament’s Financial Scrutiny Unit (FSU) to undertake a research study on the international expenditure of the Scottish Government and its agencies.

2. The Committee considered the study at its meeting on 15 June 2010. At the meeting, the Committee agreed to seek further information from the FSU on a number of issues. Primarily, the Committee invited the FSU to undertake an analysis of the benefits to Scotland derived from the international expenditure, including exports, inward investment, tourism and international development. This information is included in the FSU briefing at Annexe A.

3. In addition, the FSU has provided supplementary information in response to specific questions raised by Committee members at the meeting in June. This supplementary information is included at Annexe B. 4. For completeness, the FSU briefing, which was considered by the Committee on 15 June, is included at Annexe C. Committee Clerk October 2010

EU/S3/10/12/1

The Scottish Parliament and Scottish Parliament Infor mation C entre l ogos .

Financial Scrutiny Unit Briefing Impact of International Expenditure

1 October 2010

Nicola Hudson, Scherie Nicol and Simon Wakefield

As part of the European and External Relations Committee‟s inquiry into international engagement the Financial Scrutiny Unit presented an analysis of international spend by the Scottish Government and associated bodies at its meeting on 14 June 2010. The aim of this briefing is to follow up on that report by providing an analysis of the impact of the international activities of the Scottish Government and other public sector organisations.

Source: iStock © fotoVoyager

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CONTENTS

EXECUTIVE SUMMARY .............................................................................................................................................. 3

BACKGROUND............................................................................................................................................................ 5

SCOPE OF THE ANALYSIS ........................................................................................................................................ 5

APPROACH TO ANALYSIS ........................................................................................................................................ 5

DEFINING IMPACT .................................................................................................................................................. 5 CHALLENGES IN MEASURING IMPACTS ............................................................................................................. 6

Differing approaches to measuring impacts ........................................................................................................ 6 Frequency and quality of evaluation .................................................................................................................... 6 Apportioning impacts to „overseas‟ expenditure .................................................................................................. 6 Estimating impact of spend through third parties ................................................................................................. 7 Exogenous factors influencing impact ................................................................................................................. 7

ANALYSIS BY ORGANISATION ................................................................................................................................. 8

SCOTTISH DEVELOPMENT INTERNATIONAL (SDI) ............................................................................................ 8 Summary of international expenditure ................................................................................................................. 8 Strategy and objectives of international spend .................................................................................................... 8 Impact of activities ................................................................................................................................................ 9 Benchmarking .................................................................................................................................................... 12

SCOTTISH GOVERNMENT DIRECT SPENDING ................................................................................................ 14 Summary of international expenditure ............................................................................................................... 14 Strategy and objectives of international spend .................................................................................................. 14 Impact of activities – international relations ....................................................................................................... 16 Activities and impacts – international development ........................................................................................... 18 Benchmarking – international development ....................................................................................................... 20

VISITSCOTLAND ................................................................................................................................................... 21 Summary of international expenditure ............................................................................................................... 21 Strategy and objectives of international spend .................................................................................................. 22 Activities and impacts ......................................................................................................................................... 22 Benchmarking .................................................................................................................................................... 25

SCOTTISH QUALIFICATIONS AUTHORITY (SQA) ............................................................................................. 27 Summary of international expenditure ............................................................................................................... 27 Strategy and objectives of international spend .................................................................................................. 27 Activities and impacts ......................................................................................................................................... 28 Benchmarking .................................................................................................................................................... 31

SOURCES .................................................................................................................................................................. 32

RELATED BRIEFINGS .............................................................................................................................................. 38

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EXECUTIVE SUMMARY The Scottish public sector funds a wide variety of activities overseas. Some of these activities focus on generating direct economic benefits for Scotland, such as attracting inward investment, attracting inbound tourism or generating income from foreign students. Others may have less tangible intended benefits, such as raising the profile and reputation of Scotland in a global marketplace.

The wide range of activities with a mix of economic, social, environmental and cultural objectives makes it impossible to capture the overall impact of these activities in a single figure. The evaluation of international activities is not always routine and the quantity and quality of evaluation evidence varies. Even where impacts can be quantified, different methodologies, time frames, definitions and coverage mean that results cannot be simply aggregated.

Reflecting these complexities, this report separately reviews the impact of the four organisations with the highest level of international spending in 2009-10: Scottish Development International (SDI), the Scottish Government, VisitScotland and the Scottish Qualifications Authority (SQA). Together, these four organisations accounted for 93% of all international spending in 2009-10.

Measuring the impact of Scotland‟s international activities is complex and as such it is difficult to make meaningful comparisons between organisations. However, the key findings for each major area of spend are:

SDI – SDI is targeting its support on a smaller number of projects and businesses and is meeting its own internal targets. In terms of the standard of care and delivery of services, SDI was recently assessed as one of the best investment promotion intermediaries in the world. However, SDI‟s „gross value added to cost‟ ratio and cost per job are slightly less favourable than those of the English Regional Development Agencies (RDAs). SDI assistance is one of a multitude of factors which influences overall levels of inward investment and exports, and Scotland‟s international trade performance is likely to be largely driven by exogenous factors such as tax rates, economic conditions and exchange rates.

Scottish Government – the International Development Fund is the main area of

international spend for the Scottish Government and within that the Malawi programme accounts for over half the spend. An evaluation of the Malawi programme indicated that 80% of the projects were relevant, efficient and effective and a review of end of project reports is underway to assess the impact of subsequent IDF projects. Other Scottish Government activities, such as the running of overseas offices, are difficult to evaluate in quantitative terms, being largely focused on „softer‟ objectives, such as building relationships and trust, profile raising, reputation building, sharing knowledge and changing attitudes.

VisitScotland – VisitScotland‟s own figures indicate that the “return on investment” from

international marketing campaigns and the „advertising equivalent value‟ of their PR work are substantial and, broadly speaking, both have increased in recent years. At a wider level, data from the International Passenger Survey shows Scotland‟s tourism sector performing above the UK average on international visitor numbers between 2005 and 2009, but slightly below on international visitor spend. It is difficult to ascertain the influence of VisitScotland‟s activities on these trends as distinct from exogenous factors, such as exchange rates.

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Scottish Qualifications Authority (SQA) – international awarding and consultancy activity

has increased significantly since 2005-06. These activities form part of an international strategy which recognises the need to generate income to support core activities at a time of constrained public sector funding and projected falling income from SQA activities within Scotland. The majority of international activities generate a surplus, and in 2009-10, international awarding and consultancy income exceeded the associated costs by £0.2m.

The evidence available suggests that the international activities of the Scottish Government and its agencies are having a positive impact. However, these impacts reflect the scale of the inputs and should be seen in the context of wider economic trends (e.g. the economic performance of countries Scotland exports to, trends in international tourism, and the full extent of poverty in countries like Malawi). This implies there should be realism in setting targets and measuring impacts.

This report focuses mainly on the economic impact of Scotland‟s overseas activities. However, the impact of Scotland‟s international work goes far beyond its immediate monetary value. It builds relationships and trust, raises profile and awareness, increases knowledge and changes attitudes – factors which cannot be captured in purely financial terms, but may nonetheless represent valid objectives for international activities.

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BACKGROUND The Scottish public sector funds a wide variety of activities overseas, including trade missions, cultural events, international tourism marketing and international aid projects. The Scottish Parliament‟s European and External Relations Committee is undertaking an inquiry into International Engagement, focusing on the following core questions:

Is there a clear, coherent, co-ordinated and well-resourced strategy for international relations within the Scottish Government and its agencies?

What successes have there been so far? What can we learn from the successes of other regions and their initiatives?

How do the international offices operate and what do they achieve? As part of this inquiry, the spending associated with the Scottish public sector‟s international activities was reviewed in an earlier report on International Expenditure, by the Scottish Parliament‟s Financial Scrutiny Unit (FSU 2010). This follow-up report considers the economic and wider impacts of this international spending.

SCOPE OF THE ANALYSIS This report focuses on the four organisations with the highest level of international expenditure in 2009-10. These are:

Scottish Development International (SDI)

The Scottish Government

VisitScotland

The Scottish Qualifications Authority (SQA)

In total, these organisations accounted for 93% of international spending in 2009-10 (£27.7m).

APPROACH TO ANALYSIS

DEFINING IMPACT

An impact assessment measures returns on a specific investment. Returns can be measured in different ways, including economic, social, environmental and cultural. The organisations included in this study are for the most part undertaking activities with the primary objective of increasing economic growth in Scotland - in line with the Government‟s Purpose. Accordingly, this report focuses on the economic impacts resulting from international spend – such as an increase in exports, additional business generated, additional tourism spend generated and additional income from students overseas studying for Scottish qualifications. This allows a high level assessment of economic output generated from spend. However, in some areas of spend there are wider objectives and the returns may be non-financial.

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CHALLENGES IN MEASURING IMPACTS

Measuring impact is not a straightforward exercise, even for a single organisation. The challenges are much greater when looking at a range of different organisations with differing remits and very different activities. Some of the main challenges are described below.

Differing approaches to measuring impacts

Within organisations

Even within a single organisation, impact measurement practices vary. This can be as a result of changing objectives (for example SDI changed from providing support to all businesses to focussing on supporting high-growth businesses), different approaches applied to different assessments. In addition, the range of different international activities can make measurement of overall impact a complex question. As such, this report considers individual activities within individual organisations and makes no attempt to add these together to provide an overall impact figure for each organisation.

Across organisations

A further issue relates to differing methodologies and terminology between organisations. Even the term „return on investment‟ can have different interpretations in different organisations. For example, in assessing the return on their marketing expenditure, VisitScotland captures all spending by tourists who have been influenced by VisitScotland materials whilst SDI defines „return‟ more narrowly as the proportion of additional value of sales and employment that can be attributed to their investment. These different approaches mean that the return on investment figures quoted by the two organisations cannot be directly compared.

Frequency and quality of evaluation

Ideally, evaluation should be a part of every programme, with the resources put into it reflecting the size and scale of the programme. However, rigorous and comprehensive evaluation can be an expensive exercise. Limited resources do not always allow for evaluation to become a routine part of all Government programmes. This makes it difficult to assess the performance of different programmes as there is not always sufficient evaluation evidence to allow the assessment of impact for individual activities, or the benchmarking of impacts with other activities. For example, SDI undertook an evaluation of its activities in 2010, but, as this is the first time this type of evaluation has been undertaken, performance cannot be compared over time. Furthermore, where evaluation studies have been undertaken, these do not always allow for separate identification of expenditure incurred overseas.

Apportioning impacts to ‘overseas’ expenditure

The previous FSU report defined international expenditure as "all spend relating to international activities that is incurred overseas (including salaries for staff located overseas even if paid in the UK)". Ideally, the assessment of impact would relate to the same definition of international spend, but in practice this has not been possible to achieve. For example, the assessment of VisitScotland‟s impact relates to all spending in relation to international activities – including both the spend incurred overseas as well as spend within Scotland on developing marketing activities. It would be unrealistic (and not very meaningful) to try and assess the impact of

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overseas spending separately from domestic spending in this area. As a result of such factors, the impacts described in this report will relate to a different definition of international spending than was covered by the previous FSU report.

Estimating impact of spend through third parties

For a number of organisations, a significant proportion of their international spending is incurred via third parties through grants to support international activity. This includes SCDI, who are part-funded by SDI to undertake trade missions and NGOs who receive international development funding from the Scottish Government. This adds a layer of complexity to the analysis.

Exogenous factors influencing impact

The impact of international spend can vary considerably from year to year. However, observed changes may not reflect overall trends but may simply reflect particular circumstances in the specific years. For example, with SDI and VisitScotland, broader economic trends and exchange rates are key factors influencing the impact of international spending, but are outwith their control.

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ANALYSIS BY ORGANISATION

SCOTTISH DEVELOPMENT INTERNATIONAL (SDI)

(a joint venture between Scottish Enterprise, Highlands & Islands Enterprise & the Scottish Government)

Key points

SDI spending overseas increased by 47% over the period 2004-05 to 2009-10. This has been driven by an increased staff presence overseas.

SDI has met or exceeded its internal targets for inward investment and internationalisation over the period studied.

SDI has narrowed its strategic focus over the time period to actively targeting strategically important inward investments (e.g. high value jobs) and those projects with the most growth potential.

The Ernst and Young Investment Monitor shows that the number of inward investment projects in Scotland has reduced by 24% over the period (although the number of R&D projects has increased). However, the Global Connections Survey shows that Scottish exports have increased by 19.5%. SDI assistance is one of a multitude of factors which influences overall levels of inward investment and exports. Overall Scottish performance is likely to be largely driven by exogenous factors such as tax rates, global economic conditions and exchange rates.

When benchmarking performance against competitors SDI achieves higher GVA returns on spend than the RDAs on internationalisation, but lower returns relative to the RDAs on inward investment. Across both areas the cost per job is higher for SDI than it is within the RDAs.

Summary of international expenditure

SDI spends more public money overseas than any other organisation in Scotland. In 2009-10, spending overseas totalled £12.85m, up 47% on the international spending recorded in 2004-05. SDI has 22 international offices and these (along with associated overheads) accounted for almost three quarters of international spend in 2009-10.

Strategy and objectives of international spend

Scottish Enterprise‟s 2010-13 Business Plan (Scottish Enterprise, 2010a) explains that SDI‟s focus is on helping Scottish companies to grow overseas and attracting new investment and jobs to Scotland through: Its programme of trade missions and learning journeys. Support for international strategy development, sales and marketing skills and in-market

intelligence. Partnership working across the private and public sector to expand the range of support

available and deliver training to businesses. This includes the roll out of the Intelligent Exporter initiative in partnership with Scottish Chambers and SCDI as well as a range of projects with UKTI and Enterprise Europe Network1.

Developing propositions based on Scotland‟s competitive advantages in its key sectors to attract new investment that will create high value employment.

1Note that since the business plan was published the Intelligent Exporter initiative has been launched and is now called Smart Exporter. Although still supportive of it, SCDI is no longer a formal partner in this initiative.

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Impact of activities

SDI undertakes separate measurement for its two main streams of work – internationalisation (helping companies in Scotland to trade overseas) and inward investment (attracting foreign companies to locate in Scotland).

Performance against internal targets

SDI performance targets for both inward investment and internationalisation are set internally on an annual basis by SDI and agreed with Scottish Government Ministers. Inward investment performance is measured by SDI through recording the number of high value jobs (paying 20% or more above the average wage and/or involved in R&D) attracted to Scotland. Upper and lower targets are set. The target range has widened in recent years, partly in recognition of the variability of performance that can be caused by exogenous economic conditions. Figure 1 – Inward investment performance against targets 2004-05 to 2009-2010

Source: Scottish Enterprise Annual Reports 2004-05 to 2009-10

Figure 1 shows that SDI has always performed either within the target range or above it, thus delivering outputs in line with internal aspirations. The variable nature of performance against targets is often driven by a small number of large projects in certain years. E.g. in 2007-08 three large investments accounted for over a third of jobs. Over the period 2004-2005 to 2009-10 there has been a 14% increase in high value jobs supported. In 2009-10, 2,100 high value jobs were supported. Scotland has around 2.3 million people in employment (Scottish Government, 2010a), so this represents almost 0.1% of jobs in Scotland. Although SDI attracts a very small number of jobs to Scotland, relative to the size of the workforce, the recent SDI Policy Evaluation (SQW Consulting, 2010) highlighted that SDI assisted businesses have higher wages and above average labour productivity. SDI also try and focus their support toward key companies that they recognise as important in the strategic development of a sector, unlocking wider supply chain opportunities and helping to develop clusters. However SDI assisted inward investments had lower than average “Total Factor Productivity” (productivity related to inputs other than labour) – which may be driven by interventions to safeguard jobs within foreign-owned companies in Scotland which are also

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counted as inward investment projects because, if the support was not given, the jobs would be lost from Scotland. Internationalisation performance is measured by recording the number of organisations helped to do business internationally Figure 2 – Internationalisation performance against targets 2004-05 to 2009-2010

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Source: Scottish Enterprise Annual Reports (Scottish Enterprise, 2004-05 to 2009-10) and SDI correspondence

Data on the actual number of businesses assisted is measured and shown in Figure 2. Performance has exceeded the target range set by SDI in every year shown, with little evidence of the difficult economic climate in recent years having had a negative impact on the demand for exporting assistance – perhaps helped by the favourable exchange rate which has prevailed. While on first glance it appears that over the period shown there has been a decrease in businesses assisted to export, the 2004-05 figures include all companies assisted, whereas the performance figures for subsequent years only include account managed (high growth) companies reflecting the move towards more focussed interventions. SDI provided 2009-10 figures which include all businesses assisted to allow a like-for-like comparison with 2004-05. It showed that a total of 1,100 businesses were assisted in 2009-10 – an increase of 11% from 2004-05. Looking at high growth businesses only, there has been a 26% increase in the number assisted to export over the period 2005-06 to 2009-10. As with the jobs supported through inward investment, SDI is working with just a small proportion of total businesses in Scotland (0.35%). However, SDI estimate that there are around 5,500 exporters in Scotland which would mean that in 2009-10 SDI were assisting around 20% of exporters. When it comes to internationalisation, the recent SDI Policy Evaluation (SAW Consulting, 2010) highlighted that “the principal difference that SDI support has made is in helping to speed up and increase the scale and quality of firms‟ international plans rather than through making non-international firms international”. It may be of interest that the Economy, Energy & Tourism Committee, in their recent report (Scottish Parliament, 2010a) on the public sector's support for exporters, international trade and the attraction of inward investment, recommended that “SDI and the enterprise network support all firms interested in exports, not just their account-managed firms”. Performance in an external context – inward investment

Although SDI international spend has increased (driven in particular by an increased staff presence overseas) and the number of high value jobs supported by SDI has increased, the

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Ernst & Young European Investment Monitor shows the number of overall inward investments has reduced by 24% since 2004/05 as shown in the final column of Table 1 below. This compares to growth in the number of inward investment projects in Wales, Northern Ireland and England over the same period. SDI urges caution when drawing conclusions from these figures given that they do not allow comparison of the quality of inward investment projects. For example, the number of R&D inward investments actually increased over the period. In addition, SDI reports that 2004-05 was an exceptional year for inward investments in Scotland – and thus is not an ideal baseline. It should be noted that SDI‟s assistance is one of a multitude of factors which would influence inward investment decisions in Scotland. Other factors could be exchange rates, corporation tax rates in competitor countries, labour productivity and tax reliefs for specific sectors. Table 1 – Inward investment: tracking inputs to outcomes

Area of spend

Change in spend 04-05 to 09-10

(real terms) Change in input 04-05 to 09-10

Change in impact 04-05 to 09-10

£ % Staff Offices

Output –overall SDI inward

investment job assists

Outcome – overall number of

Scottish inward investment

projects

International offices & other overheads (including staff)

4,392,600 89.5% 57.8% 10.0% Internal context: 14% increase in

inward investment jobs supported by

SDI

External context: -24% change in overall Scottish

inward investment1

(although an increase in R&D

inward investment)

Marketing, trade missions and events

-299,400 -7.8 n/a

Ernst & Young European Investment Monitor: 2004/05 to 2008/09 (Ernst and Young, 2010) Performance in an external context – internationalisation

Against the backdrop of increased investment by SDI, the number of high growth businesses assisted by SDI for internationalisation has increased by 26%. The overall value of Scottish exports has also increased as shown in the second last column of Table 2. While SDI was estimated to have assisted 20% of exporters in 2009-10, and that support will have helped boost export performance, it is likely that overall export performance has largely been driven by external economic factors such as worldwide demand and exchange rates. Table 2 – Internationalisation: tracking inputs to outcomes

Area of spend

Change in spend 04-05 to 09-10

(real terms)

Change in input 04-05 to 09-10

Change in impact 04-05 to 09-10

£ % Staff Offices

Output –number of businesses assisted by

SDI

Outcome – export value

All Manufac-tured

International offices & other overheads (including staff)

4,392,600 89.5% 57.8% 10.0% 26% increase in number of businesses assisted1

25% increase in exhibitions

19.5%2 -1.5%3 Marketing, trade missions and events

-299,400 -7.8% n/a

Trade missions only 561,000 18.5% Sources: Scottish Government Global Connections Survey: 2005 to 2008 (SG, 2010b), Scottish Government Index of Manufactured Exports: Q1 2005 to Q1 2010 (SG, 2010c)

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Benchmarking

Two studies which allow top level analysis of the impact of SDI activities relative to similar organisations are highlighted below.

Benchmarking against England‟s Regional Development Agencies (RDAs)

Price Waterhouse Coopers (PWC) was appointed by the Department for Business, Enterprise and Regulatory Reform (BERR) to provide an independent assessment of the impact of the different spending streams within the RDA network as a whole. The results relating to their inward investment and internationalisation activities are compared with those from the recent SDI Policy Evaluation in Table 3 below. A recent impact assessment of overall Scottish Enterprise activities is also provided. Care should be taken in making direct comparisons as each of the agencies have calculated returns on investment using different methodologies and refer to different time periods, as highlighted in the table.

Table 3: GVA and cost per job across different agencies Details RDAs SDI Scottish

Enterprise2

Internationalisation Cost per job £8,600 £11,000

GVA:cost ratio £9:1

GVA:cost ratio £5:11 £7:1

Inward investment Cost per job £11,500 £14,000

GVA:cost ratio £14:1 £11:1

Time period over which impact is achieved 5 years

Internationalisation: 4.25 years

Inward investment: 7 years

10 years

1 Figure estimated by Scottish Enterprise using information from, & methodology consistent with, the original study 2 SDI activities are included in the overall assessment of Scottish Enterprise‟s activities Sources: SDI evaluation (SQW Consulting 2010), BERR 2009 and Scottish Enterprise 2010b Table 3 shows that when benchmarking performance against competitors SDI‟s GVA to cost ratio for internationalisation is higher over a shorter time period. However, with regard to inward investment SDI‟s GVA to cost ratio is slightly lower over a longer time period. This indicates that SDI achieves higher GVA returns on spend than the RDAs on internationalisation, but lower returns relative to the RDAs on inward investment. Across both areas the cost per job is higher for SDI than it is within the RDAs. Benchmarking against other investment promotion intermediaries (IPIs) The UK‟s sub national IPIs have existed for longer than sub national IPIs in many other countries, many having been created as long ago as the mid-1980s (Locate in Scotland, SDI‟s predecessor, was established in 1981). A recent study by the World Bank measures the overall effectiveness of IPIs in terms of the usefulness of their web sites and their ability to manage and respond to investment inquiries (see Figure 3 below).

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Figure 3 – World Bank study: top 25 national and sub national IPIs: overall performance

Source: World Bank, 2010 While this does not measure the impact of SDI‟s activities, it is a positive insight into the quality of service delivery.

Figure 3 taken from the report shows that UK IPIs are now some of the best-performing in the world with SDI the highest performing in the United Kingdom and MIDAS (Manchester) coming a close second out of over 210 IPIs assessed. SDI performed particularly well in the area of customer care and follow-up. The study reported that “The strongest area of United Kingdom subnational performance was in the quality of the information itself and the tailoring of responses to meet investor' needs, a significantly different position from many IPIs, where quality of information is typically the weak component” (2010).

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SCOTTISH GOVERNMENT DIRECT SPENDING

Key points

Over two thirds of the Scottish Government‟s direct spending overseas is allocated towards

the International Development Fund. Most of the remaining funding is spent in promoting Scotland and international relations and specifically the running the Scottish Government offices in Brussels, Washington and Beijing.

Analysis of performance relating to work in countries where the Scottish Government has offices indicates that monitoring and evaluation frameworks are in place through the European, USA and China plans. However, due to the nature of their work it can be difficult to assess the specific impact of these offices.

Over half of the Government‟s International Development Fund (IDF) has been allocated to Malawi. A review of the Malawi programme commissioned by the Scottish Government indicated that over 80% of projects were relevant, efficient and effective, and that the Malawi programme overall was making a contribution to achievement of the Millennium Development Goals.

Whilst the Scottish Government requires six monthly project monitoring reports for all grants concluding with a more detailed 'end of project report‟ it is not yet possible to provide an overview of programme level-impacts for the Sub Saharan Africa (block grants) and South Asia programmes. A review is however underway of „end of project reports‟ for projects that have completed since the Malawi review.

Summary of international expenditure

Scottish Government international expenditure is focussed on a variety of activities including the IDF, overseas offices, marketing, events and support to the national performing companies. This analysis focuses on the two main areas of spend – the IDF and overseas offices. Annexe 1 considers the impact of spend relating to Scotland Week. The Scottish Government directly spent £7.6m overseas in 2009-10, making it the second highest public spending body in terms of international expenditure. Over two-thirds of this, some £5.3m, was through the IDF. The other main item of spend relates to running overseas offices in Brussels, Washington and Beijing (approximately £2.2m). Other activities include the running of Scotland Week (previously Tartan Week) and awards from the International Touring Fund to the national performing companies.

Strategy and objectives of international spend

The Scottish Government has both an international engagement framework (Scottish Government, 2008a) (to help focus international relations activities) and an international development policy (Scottish Government, 2008b) (to help focus aid to some of the worlds poorest countries). International relations The objectives of the international engagement framework (2008) are: “Creating the conditions for talented people to live, learn, visit, work and remain in Scotland -

so that Scottish population growth matches EU average;

Bringing a sharp economic growth focus to the promotion of Scotland abroad - so that the Scottish GDP growth rate matches the UK's by 2011; and

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Managing Scotland's reputation as a distinctive global identity, an independent minded and responsible nation at home and abroad and confident of its place in the world.”

The international engagement framework is currently underpinned by specific plans for Europe, the USA, China, India and Pakistan. These outline areas of focus for Scottish Government engagement – such as educational links, promotion of Scotland‟s image and culture and economic linkages. A summary is provided below of the plans being delivered by the Scottish Government and its partners utilising office and other networks in Europe, the USA and China. European plan The Action Plan on European Engagement (Scottish Government, 2010d) identifies three main areas of focus for the Scottish Government: Tracking EU legislation and developments. Strategic engagement on key issues, such as energy and climate change. Raising Scotland‟s profile. USA plan In 2006 the previous administration published a USA Strategy entitled Scotland‟s Strategy for stronger engagement with the USA (Scottish Government, 2006). The current Scottish Government published an updated USA Plan in 2010 (Scottish Government, 2010e). Strategic objectives of the plan are broadly listed under the headings of the international engagement framework: To bring a sharper focus on economic growth, e.g. promoting key sectors, attracting

Foreign Direct Investment and increasing the value of tourism. To create the conditions to live, learn, visit, work and invest in Scotland, e.g. increasing

educational links, encouraging the diaspora to maintain links. To manage Scotland’s reputation as a distinctive global identity, e.g. promoting

Scotland as a nation in the USA, promoting Scotland‟s cultural heritage, building Government links and exchanging best practice.

China plan Actions identified under the refreshed Plan for Engagement with China (Scottish Government 2008c) include the promotion of learning about China, including language skills, in Scotland, collaboration between universities and on R&D projects and programmes, promotion of tourism, internationalisation of Scottish companies in China and increased business connections, and promoting Scottish national identity and cultural awareness. The China Plan contains a monitoring and evaluation matrix which sets out the aims and objectives of actions being taken and supported by Scottish Government. International development The broad aims of the International Development Policy (Scottish Government, 2008b) were refreshed in 2008 with a movement towards more focussed activities in Africa and Asia. The policy comprises the six elements set out in Figure 5 below. The Scottish Government (Scottish Government, 2008d) summarised the new approach as follows:

“The new policy strengthens the Scottish Government's commitment to Malawi and recognises the importance of this relationship, cemented by a Co-operation Agreement between our two countries.

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The policy sets out the framework for our engagement with some of the poorest countries in Sub-Saharan Africa which have historical, and in some cases, contemporary relationships with Scotland. These countries will be supported through block grants delivered by the Government's partners in development. The policy also recognises the Indian Subcontinent's strong links with Scotland, and the programme will build on strong, fair and inclusive national identity and express solidarity with communities represented in Scottish society. This programme will be developed with key stakeholders.”

Impact of activities – international relations

A key component of the delivery of Scotland‟s international engagement plan is the operation of offices overseas. In general terms, the objectives of maintaining a physical, permanent presence is the development of a profile, building relationships with key stakeholders, providing a conduit for high quality, timely information and intelligence, and co-ordinating the collective efforts of Scotland‟s public and private sectors. Details of overseas office costs in 2009-10 are outlined in Figure 4. Figure 4 – Cost of Scottish Government overseas offices 2009-10

Performance against internal targets – international relations

Due to the nature of their work, it is very difficult to identify the specific impact of the overseas offices. However, the Scottish Government has established varying degrees of measurement frameworks within individual country plans to gauge performance. Details of internal targets and performance in relation to them are provided for each plan in the section below. European Plan Specific targets are not set within this plan, although the Annual Report 2010 (Scottish Government, 2010f) summarises activities undertaken relating to the three work streams and provides results from a survey of stakeholders on their views of progress relating to these work streams. The results show a general satisfaction with work streams, while highlighting specific action points under each work stream. The Government has committed to a full evaluation in the long term.

EU Office, £1,152,000

N America, £694,560

China, £350,339 The EU office (Scotland House in

Brussels shared with SDI) accounted for over half of overseas office costs in 2009-10, amounting to £1.1m. The North America Office in Washington accounts for a further £0.7m and the China office in Beijing accounts for £0.35m. These costs for the most part relate to staff costs and office overheads.

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USA Plan The USA plan has a specific monitoring and evaluation matrix with measures of success linked to each work stream and the objectives of the international engagement framework. Targets relate to measures such as inward investments, visitor numbers, the number of US students studying in Scotland, etc. The Scottish Government states that it will report annually on progress towards meeting targets. However, as the refreshed plan was only published in July 2010 performance data is not yet available for the first year. No evaluation of the first USA plan, published in 2006, has been carried out by the Scottish Government. China Plan Like the USA plan, the China plan has a specific monitoring and evaluation matrix with measures of success linked to each work stream and the objectives of the international engagement framework. Targets generally run to 2011 and relate to measures such as increasing the number of students studying Chinese language in Scottish schools by 2011, expanding the awarding of Scottish qualifications in China, and raising the share of Scotland's exports to China by 2011 in relation to the European OECD average. The Government indicates that assessment of performance can only be taken retrospectively and after sufficient time has elapsed to realise their intended results. Performance in an external context – international relations Part of the Scottish Government's National Performance Framework (Scottish Government, 2008e) looks to assess efforts to "improve people's perceptions, attitudes and awareness of Scotland's reputation" and the international offices have a role to play in supporting this objective. The Scottish Government uses the Anholt- GFK Roper Nation Brands Index SM (Scottish Government, 2010g) to assess and monitor how Scotland's reputation is perceived around the world in comparison to 49 other nations. Table 4 – Nation brands index, rank out of 50 in 2009

As Table 4 indicates Scotland‟s overall „brand‟ is ranked 14th out of 50 nations, and is ranked marginally ahead of comparator countries such as New Zealand, Denmark, Finland and Ireland. Scotland‟s position has changed little since 2008 (the first year that Scotland was included within the index). The Anholt GFK-Roper‟s Nation Brands Index is based on interviews with 20,000 adults across 20 countries (mostly high and middle income countries) examining six „dimensions of national competence in terms of favourability and familiarity, The six dimensions are; exports, governance, culture, people, tourism and immigration & investment.

The Anholt GFK-Roper’s Nation Brands Index

1 United States

2 France

3 Germany

4 United Kingdom

5 Japan

6 Italy

7 Canada

8 Switzerland

9 Australia

10 = Spain, Sweden

14 Scotland

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Activities and impacts – international development

Figure 5 - Breakdown of IDF spend: 2010-11

Source: Scottish Government correspondence 2010 The IDF is administered through the provision of grants to NGOs with a presence in Scotland to deliver a variety of projects with their partners overseas. A breakdown of IDF spend by programme in 2010-11 is provided in Figure 5. Over half the IDF was allocated towards Malawi (£5m of £9.1m). Other areas of spend in the current year include the Sub-Saharan Africa and South Asia development programmes, networking support, the Fair Trade Forum and humanitarian crises. Table 6 below summarises funding and numbers of projects for the IDF since 2005. Over the period nearly £36m has been allocated to over 250 development projects. Table 5 - IDF: Summary of Programmes

FUNDING ROUND START/END DATE TOTAL

FUNDING TOTAL

PROJECTS International Development Fund - Round 1 - Malawi April 2005-March 2008 £3,408,708 29 International Development Fund - Round 1 - Non-Malawi April 2005-March 2008 £1,498,841 15 International Development Fund - Round 2 - Malawi April 2006-March 2009 £2,542,157 28 International Development Fund - Round 2 - Non-Malawi April 2006-March 2009 £879,994 7 Small Grant Scheme - Malawi April 2006-March 2008 £341,392 17 Small Grant Scheme - Non Malawi April 2007-March 2008 £85,061 5 Humanitarian Health Fund - Round 1 April 2006-March 2007 £35,172 10

Humanitarian Health Fund - Round 2 February 2007-March 2007 £49,888 13

Humanitarian Health Fund - Round 3 April 2007-March 2008 £174,972 14 Malawi Development Programme 2008-11 April 2008-March 2011 £6,988,081 29 Malawi Development Programme - One April 2009-March 2010 £1,084,036 9

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FUNDING ROUND START/END DATE TOTAL

FUNDING TOTAL

PROJECTS Year - 2009-10 Malawi Development Programme 2010-13 April 2010-March 2013 £7,206,775 22 South Asia Development Programme 2010-13

October 2010 - March 2013 £5,540,027 19

Sub Saharan Africa Development Programme April 2008-March 2011 £4,000,000 4 Humanitarian Crises - Gaza 2008-2009 £427,996 8 Humanitarian Crises - DRC 2008-2009 £200,000 3 Humanitarian Crises - Haiti 2009-2010 £687,627 11 Humanitarian Crises - Pakistan 2010-2011 £807,243 15 TOTAL £35,957,970 258

(Source: Scottish Government correspondence) Activities within the International Development Fund Within the different programmes highlighted in Table 6 the type and scale of projects varies substantially. Examples of projects in Malawi include:

Edinburgh and St Andrews University working with Malawi College of Medicine to support the development of training for medical professionals.

Concern Worldwide working with the Malawi Department of Health to combat child malnutrition, with results showing an early reduction in child mortality.

Mary‟s Meals working with the Department of Education in Malawi, and feeding 10% of the school children in Malawi.

Performance in an internal context – international development Detailed information is provided through a review of Scottish Government projects focused on Malawi (Scottish Government, 2008f). The review concluded that 32 of the 39 Malawi projects selected were considered “relevant, had been efficiently delivered, were effective in meeting their planned outcomes, had secured impact and were reasonably sustainable” (using standard OECD evaluation criteria). The remaining projects were considered partially successful. Some of the common themes relating to these projects were an insufficient initial problem consideration or needs analysis, or that the planning process was not fully considered.

Overall, the review found that projects relating to Malawi had been able to deliver real benefits on the ground when planned and targeted effectively. However, 74% of grantees sampled stated that there was scope for additional project monitoring. Local grantee partners stated that they would appreciate the opportunity for feeding back and sharing lessons and best practice generated through monitoring and evaluation. It was felt that this could improve further project quality, build social capital amongst the grantee community and motivate improved monitoring (Scottish Government 2008f). Following this review the monitoring procedures were updated by the Scottish Government. Data is routinely collected on policy objectives through the end of project reports, and this is currently being collated for those where data exists. Additionally, progress on all Malawi projects are reviewed with the Government of Malawi on an annual basis. The Government also indicates it has a commitment to evaluate all programmes and will do so as end of project reports are received. The varied nature of the projects funded mean that it would not be meaningful to produce an overall „impact‟ figure.

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Performance in an external context – international development The impact of international development aid can be measured as a whole through assessing the contribution of different programmes to the Millennium Development Goals (MDGs). Again, detailed information is provided through the Scottish Government‟s review of the Malawi programme (Scottish Government, 2008g) including a specific assessment of performance against MDGs in Africa. This was largely a qualitative assessment, linking case studies to individual MDGs. The review reported that:

“The Scottish Government‟s International Development Fund (IDF) is making real contributions to the achievement of the Millennium Development Goals (MDGs) in Malawi. Through productive partnerships between organisations in Scotland and Malawi, together with effective advocacy and policy linkages, the opportunities for impact and sustainability are considerable” (Scottish Government 2009).

Benchmarking – international development

The Malawi review concluded that “in comparison to other programmes of this nature, the IDF projects performed well and this is a commendable achievement”.

Scotland‟s support to Malawi (of £5m in 2010-11) compares to £80m of support to Malawi from the UK‟s Department for International Development (DFID). DFID itself accounted for approximately one fifth of all aid to Malawi between 2003-04 and 2006-07. As a much bigger programme, DFID‟s Malawi programme has been subject to detailed evaluation. The National Audit Office report on DFID‟s aid to Malawi (National Audit Office, 2009) found that:

“DFID has made well-informed investment choices in Malawi, drawing on internationally recognised good practice … DFID‟s programme has clearly contributed to poverty reduction in Malawi, although it is not possible to attribute accurately a share of that progress to DFID actions” (National Audit Office 2009).

DFID acknowledges that full evaluations are expensive and are appropriate only for the larger and most strategic (or innovative) programmes and a review is carried out on all investments over £1m annually and at project completions stage. This is part of DFID‟s new evaluation policy (DFID, 2009) which sets out what it sees as good practice for the evaluation of international development projects, including for much smaller programmes. In addition to the DFID guidance, a range of international bodies provide guidance on evaluation in relation to development, including the OECD, NONIE (the combined networks of evaluation associations in developing countries, DAC member states, UN and multilateral banks) and the World Bank.

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VISITSCOTLAND

Key points

In 2009-10, VisitScotland‟s international spend was £5.4m. Almost all international spend relates to marketing and promotional activity. The 2009-10 spend was 23% lower than in 2004-05, but this partly reflects additional marketing funds available in 2004-05 due to a range of factors.

Specific target measures have changed over time, but on the whole the data suggest that VisitScotland has either met or exceeded internal measures of performance relating to international marketing campaigns.

When comparing tourism performance in Scotland with other regions in the UK over the period 2005 to 2009 it appears that while Scotland is performing favourably when it comes to the change in the volume of tourists, there is weaker performance relating to the change in spend by international tourists.

More positively, between 2008 and 2009, the volume of visitors to Scotland increased 2.1% relative to a 6.3% decline for the UK as a whole. Tourism spending in Scotland increased 10.3% compared to a 1.8% increase across the UK as a whole.

Summary of international expenditure

VisitScotland spent £5.4m in 2009-10. This was 23% lower than international spending in 2004-05, although this largely reflects the fact that VisitScotland benefited from additional marketing funding in 2004-05 due to a range of factors. Almost all of VisitScotland‟s spend relates to marketing and promotional activity – in particular the international marketing of leisure tourism. This includes spend on marketing campaigns such as Homecoming, the North American Spring campaign (incorporating Scotland Week) and the European Touring Campaign. The decrease in spend has been attributed to a range of factors including:

Having taken on responsibility for Scotland‟s 14 Area Tourist Boards on 1st

April 2005 forcing a squeeze on VisitScotland‟s funding for other activities.

Exceptional increases to grant-in-aid for marketing between 2004 and 2006 when the new VisitScotland network came into being and in response to the foot and mouth crisis. This was part of an investment package aimed at increasing tourism revenue by 50 per cent over ten years (Scottish Government, 2004).

Figure 6 - International expenditure 2004-05 to 2009-10 (£m in 2009-10 prices)

Source: VisitScotland correspondence 2010

Figure 6 details how overseas spend by VisitScotland has varied over the time period studied. It shows that spending was highest in 2004-05, at £7m and lowest in 2007-08 at £4.1m. Recent increases will have partly been driven by spend on the overseas marketing of Homecoming.

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Strategy and objectives of international spend

Overarching strategy In March 2006 the Scottish Executive published Scottish Tourism: The Next Decade - a Framework for Change (Scottish Government, 2006a). This was, and still is, the over-arching tourism strategy for Scotland which sets out what is needed to meet the shared ambition of growing tourism revenue by 50% by 2015. It was stated at the time “It is an ambitious - but achievable - target which will only be met if we all work together” (Scottish Government, 2006b). An Implementation Group monitors progress. The target most relevant to international expenditure is: Target 12: Tourism businesses, culture and heritage organisations, local authorities, VisitScotland and visitscotland.com will use effective marketing techniques to increase the number of visitors who come to Scotland. VisitScotland‟s measure of progress in relation to this target is its „Return on Investment‟, discussed further below.

Activities and impacts

VisitScotland runs a programme of international marketing campaigns and a variety of public relations activities. It regularly works with partners (including airlines such as Ryanair, EasyJet, Continental, Jet2 and Lufthansa), uses a variety of media (including online marketing), and develops contacts and partnerships with the travel trade through sales missions, attendance at key events and running workshop events in Scotland and overseas. Performance in an internal context - targets Key performance indicators are set each year by VisitScotland, and agreed with Scottish Government Ministers. In terms of international expenditure, the focus is on the additional tourism spending generated by international campaigns. Due to the costs involved, VisitScotland do not measure the impact of all international campaigns on an annual basis. The campaigns are evaluated in rotation, with two campaigns forming the focus for evaluation in any given year. For example, in 2009, the USA and Spain were the focus for evaluation. VisitScotland measure the “return on investment” (ROI) relative to expenditure on a specific campaign. This is expressed either as the value of additional tourism spending resulting from a specific campaign, or as a ratio of this additional tourism spending relative to the cost of the campaign. Additional tourism spending resulting from a campaign is calculated using survey evidence. Those responding to a campaign or receiving campaign material are subsequently asked whether they visited Scotland and, if so, whether the VisitScotland marketing materials influenced their visit. Those who respond that VisitScotland marketing materials (including the website, DM communication etc) influenced them a lot or a little are considered to be the “additional” visitors and their spending is counted as additional visitor spend. This analysis allows some insight into the relative performance of different marketing campaigns. Data from international campaigns over the period being analysed is shown in Tables 7 and 8. Table 7 shows figures for the ratio of additional tourism spend to campaign costs while Table 8 shows the additional tourism spending in monetary terms. Over the period 2004-2007, the former measure was used as the target, but the monetary value is now used as the target.

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Table 6 – Return on investment for international campaigns 2004-2009 (ratio of additional tourism spend to campaign costs)

Year

Target

Geographic domain of campaign

USA Spain France Germany Netherlands 2004 15:1 38:1 18:1 2005 33:1 (USA)

15:1 (Europe) 33:1 44:1 19:1

2006 23:1 35:1 20:1 2007 30:1 86:1 211:1 151:1 2008 .. 162:1 189:1 2009 .. 69:1 131:1

Note: methodologies changed in 2007, so results for earlier years are not directly comparable with later years Source: VisitScotland correspondence 2010 Table 7 – Return on investment for international campaigns 2004-2009 (additional tourism spend resulting from campaigns)

Year

Target

Geographic domain of campaign

USA Spain France Germany Netherlands 2004 .. £14.2m £14.6m 2005 .. £17.1m £6.0m £4.1m 2006 .. £9.3m £11.8m 2007 .. £23.7m £32.9m £14.3m 2008 £27.6m £15.8m £33.9m 2009 £60m £44.6m £21.9m

Note: methodologies changed in 2007, so results for earlier years are not directly comparable with later years Source: VisitScotland correspondence 2010 Changes in survey methodology and exogenous factors such as exchange rates make time-series comparisons difficult and so the data is more reliably used to provide an insight into the relative in-year returns across different geographical areas. In particular, methodologies changed in 2007, so results for earlier years are not directly comparable with later years. In general, looking at performance in individual years, the data show that, since 2004, VisitScotland has either met or exceeded their internal targets relating to these measures. The information suggests that European markets provide a higher ROI relative to long-haul/USA markets. This could imply that the European markets are more susceptible to influence than long-haul/USA markets. VisitScotland uses this information to develop and inform its campaigns and marketing activities. It should be emphasised that VisitScotland‟s methodology for calculating its ROI is very different from methodologies used by other public sector organisations, such as SDI who report much lower figures. As a result, although VisitScotland‟s return on investment figures are useful for making internal comparisons of the returns from different markets, they cannot be directly compared with return on investment figures from other organisations. Performance in an internal context – other measures VisitScotland also undertake performance monitoring at project level to ascertain the effectiveness of different categories of spend. Some examples are shown below.

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Public Relations (PR) activity PR activity includes identifying and targeting writers and broadcasters (including TV or radio programmes, newspaper or magazine titles, online columns and bloggers) to generate indirect advertising for VisitScotland. To do this the PR team sends out e- newsletters, news releases and features, runs events, hosts media and conducts interviews. One measure VisitScotland use to monitor the success of this work is to monitor PR coverage as a result of these activities across print, radio and television. This is used to estimate the cost which would have been incurred if the space had had to be purchased for advertising. Data collated over the period being analysed are shown in Figure 7. Figure 7 - Estimated advertising equivalent value of international PR activity (£m 2010-11 prices)

Source: VisitScotland correspondence 2010 Performance in an external context Headline indicators used to gauge performance of the tourism sector as a whole include the total number of visits and total spend by tourists. Data for both of these indicators is provided in figures 8 and 9 below. It should be noted that this information is estimated using the International Passenger Survey. The sample sizes in Scotland are estimated by ONS (Visit Britain) to have a margin of error of +/- 5%, and this should be borne in mind before drawing conclusions from small changes in performance. Figure 8 - Total international visits to Scotland 2005-2009

Source: VisitBritain 2010

The advertising equivalent value of the PR was at its highest in 2008-09, driven by the marketing leading up to Homecoming 2009. Although the advertising equivalent value for 2009-10 was lower, VisitScotland report that this was a result of more „tactical‟ and focused PR activity related to specific Homecoming events. It should be noted that the value of PR activity is not always proportional to the „reach‟.

Between 2005 and 2009 there has been a 6% increase in visitor numbers to Scotland. However, visitor number in 2008 and 2009 are lower than they were in 2006 and 2007. This is likely to have been strongly influenced by the economic downturn experienced in key markets. However, it is worth bearing in mind that the more favourable exchange rate which has prevailed over this period may have prevented tourism figures from falling even further.

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Figure 9 – Total international visitor spend in Scotland (£m 2009-10 prices)

Source: VisitBritain 2010 Scottish Tourism: The Next Decade - a Framework for Change (Scottish Government, 2006b) was published in 2006, with the aspiration of growing tourism revenue by 50% by 2015. In 2009-10 prices overall tourism revenue (domestic and international) has gone from £4,550m at the 2006 baseline to £4,150m in 2009 – a real terms decrease of 8.5%. In a recent appearance at the Economy, Energy & Tourism Committee, Richard Arnott of the Scottish Government stated

“It is clear that we are not on a trajectory towards achieving a 50 per cent growth in the decade up to 2015….That is probably widely accepted to be because there have been significant changes in world economics and several other events that affected tourism in the period. One never knows what would have happened if we had not done what we have done. That is one of the things that it is always difficult to analyse” (Scottish Parliament, 2010b).

Benchmarking

Commonly used measures to benchmark tourism performance across countries include return on overall marketing activity investment and changes in the volume and value of tourism. Owing to variation in methodologies to calculate return on investment (even between VisitScotland and VisitBritain) this analysis considers how the overall volume and value of tourism in Scotland has change over the period 2005 to 2009 relative to other comparator countries. Figure 10 – Change in international visits 2005 to 2009 in comparator countries

21.8

6.3

1.80.3

-0.3-2.6-5

0

5

10

15

20

25

Northern Ireland

Scotland Wales England UK England (excl.

London)

Ch

ange

in t

ota

l in

tern

atio

nal

vis

its

20

05

to

20

09

Source: VisitBritain 2010

Trends in visitor spend are also influenced by economic conditions and exchange rates. Between 2005 and 2009 there has been a 13% increase in visitor spend.

Figure 10 illustrates that Scotland has performed relatively well when compared to other UK regions, with a 6.3% increase in international visits, relative to 1.8% in Wales, 0.3% in England and an overall decrease across the UK. While Northern Ireland experienced the highest increase at 21.8%, particularly small sample sizes in this region give rise to a larger margin of error.

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Figure 11 – Change in international tourist spend 2005 to 2009 in comparator countries 46.8

17.3 16.813.7 13.4

6.7

0

5

10

15

20

25

30

35

40

45

50

Northern Ireland

England UK England (excl.

London)

Scotland Wales

Ch

ange

in in

tern

atio

nal

to

uri

st s

pe

nd

20

05

to

20

09

(Source: VisitBritain 2010)

Despite a mixed picture over the period 2005-2009, the figures for Scotland in 2009 show a stronger relative performance. Between 2008 and 2009, the volume of visitors to Scotland increased 2.1% relative to a 6.3% decline for the UK as a whole. Tourism spending in Scotland increased 10.3% compared to a 1.8% increase across the UK as a whole.

Figure 11 illustrates that Scotland did not perform so well relative to other UK regions when it comes to the change in international tourist spend over the period 2005 to 2009. Although spend increased 13.4%, spend across the UK as a whole increased 16.8%. Only Wales experienced a smaller increase than Scotland. However, the +/- 5% margin of error given sample sizes in Scotland should be borne in mind.

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SCOTTISH QUALIFICATIONS AUTHORITY (SQA)

Key points

SQA‟s international activities aim to support the Scottish Government‟s international strategy;

to promote Scotland and Scottish education; and to establish and maintain SQA‟s reputation

overseas

SQA‟s international activities are also an important and growing area of work which provide valuable income streams

The majority of international activities aim to generate surplus income which is reinvested in SQA‟s core activities and role in Scotland.

In 2009-10, international income exceeded expenditure on international expenditure by £0.2m

A number of measures are used to monitor international activities, focusing on levels of activities and outputs

Benchmarking is complex due to the differing remits and status of other awarding bodies

Summary of international expenditure

SQA‟s international awarding and consultancy activities generated income of £2.46m in 2009-10. The costs associated with delivering these activities totalled £2.25m in the same period, giving a surplus of £0.2m. This includes both costs incurred in Scotland as well as those incurred overseas.

Strategy and objectives of international spend

SQA and its predecessor bodies have been actively engaged in international activities for over 20 years. Over this period, the scale of international activities has grown considerably and international income now accounts for around 5% of all income generated by SQA. Income from both international awarding activities and international consultancy has grown over the period, although consultancy income has shown a less steady growth pattern, reflecting the nature of contracts won. Income from the two main areas of international activity – awarding activities in China and international consultancy income is shown in Figure 12. These two areas of activity accounted for 93% of all international income in 2009-10.

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Figure 12: SQA international income

(Note: due to the way in which SQA was structured in previous years, it has not been possible to isolate financial information for all international activities. However, the data above would account for the majority of international income) SQA has a business team within the organisation dedicated to implementation of its international strategy. The current international team was established in October 2008 and currently has 10 staff whose focus in on international activities. SQA‟s International Strategy is aligned to the strategies and objectives for international engagement laid out in the Scottish Government International Framework and in its plans for specific countries. SQA‟s International Strategy sets out five reasons for its international work: To support Scottish Government engagement plans and to inform and influence Government

policy; To promote Scotland, Scottish ideas, qualifications and related services globally; To maintain and further develop SQA‟s position as a respected international awarding and

accreditation body; To benchmark SQA‟s qualifications, policies and practices against other similar organisations

worldwide, to help ensure that SQA products and services continue to be seen as leading-edge and innovative;

To provide new income streams which are re-invested to support SQA‟s core activities in Scotland.

The provision of new income streams is an imperative for SQA, in the context of declining government funding and projections of lower domestic income due to demographic factors. In this context, achieving its objective of “maintaining a high quality portfolio and services which meets the needs of learners, businesses, the economy and people of Scotland” relies on the generation of significant levels of income. International activities are seen to make an important contribution in this respect.

Activities and impacts

Within the international strategy, there are four specific strands of work aimed at supporting the objectives of the strategy, namely: International awarding and associated services: enabling overseas students to obtain

SQA qualifications, including through approved awarding centres in China and India.

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International consultancy through winning and delivering contracts: SQA staff use their expertise to provide support and advice to overseas countries in relation to awarding and assessment systems, especially in developing and transition countries

Training services commissioned by clients: SQA staff deliver training to overseas clients in the delivery and development of qualifications and assessment frameworks

Supporting activities such as study visits: this includes hosting visitors from other countries as well as supporting the visit programmes and international activities of other Scottish public bodies.

Financial surplus is realised to varying degrees in all four of these areas, taking into account the wider aims of SQA‟s international engagement. Certain consultancy and training activities may be undertaken on a cost recovery basis where these activities support other wider Government priorities such as the Scottish Government‟s objectives in developing countries. Income and costs for the two main areas of international activities – awarding and consultancy are shown in Table 9. Table 8: Financial information for SQA international activities, 2009-10

Area of activity Income from activity (£m)

Costs associated with activity (£m)

Financial surplus (£m)

International awarding 0.78 0.70 0.07 International consultancy/other 1.69 1.54 0.15 Total 2.46 2.25 0.22

Performance in an internal context SQA measures the impact of its international activities using a range of indicators reflecting the different nature of the various strands of international work. Key measures are summarised below. The performance measures are primarily activity and output measures rather than measures of impact and are monitored and reported regularly to SQA‟s International and Commercial Committee and to SQA‟s Board of Management. The measures can be seen to link with the stated objectives of the international strategy, although this link is not explicitly made. SQA‟s international strategy is formally reviewed on an annual basis. It should also be noted that where expenditure relates to the delivery of contracts, then these contracts will be evaluated against criteria stipulated by those awarding the contracts, rather than against the wider aims and objectives of SQA.

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Table 9: SQA Performance Measures

Area(s) of activity Performance measure Assessment of performance

International awarding International consultancy Training services

Income generated

For all SQA‟s international activities, costs are covered and, where appropriate, a surplus is generated

Income generated from international activities has quadrupled since 2005-06 (in real terms)

Overall, in 2009-10, income from international activities exceeded expenditure by £0.2m

Profit generated is ploughed back into development and maintenance of core products and services for learners in Scotland

International awarding Number of overseas students studying for SQA qualifications

In China, the number of candidates registering for SQA HNDs has risen from 645 being certificated in 2006 to around 17,000 having completed or being in the process of completing an HND in 2009-10

International awarding Number of countries offering SQA qualifications

Awarding activities now extend to 10 countries

International awarding Number of institutions accepting SQA qualifications

Over 200 universities across 12 countries have accepted students from China holding SQA qualifications

International consultancy Training services

Success rate in winning consultancy contracts

1 in 2.5 success rate over period July 2009-July 2010 (relative to 1:6 – 1:8 norm)

International consultancy Training services

Range of countries where SQA has won consultancy contracts

23 countries

Supporting activities Number of inward study visits and delegations 14 study visits involving 136 visitors (2009-10)

Performance in an external context SQA‟s international activities are largely aimed at generating income to support its activities within Scotland. As such, it is not seeking to influence wider „external‟ economic indicators in the same way as the other organisations covered by this report. In addition to the aim of generating income to support other strands of work, SQA‟s international activities aim to support wider reputation-building objectives (both for SQA and Scotland more generally). Qualitative measures of impact are cited by SQA in relation to these broader objectives. For example: Engagement with other countries‟ ministries and governments e.g. partnership with the

Chinese Service Centre for Scholarly Exchange; Involvement in high level strategic international events, conferences and workshops,

including ministerial visits; Engagement with government departments and agencies to co-ordinate international

activities, share information and identify synergies e.g. Learning and Teaching Scotland, Scotland‟s Colleges International

As with other activities with „reputation-building‟ objectives, it is difficult to make an objective, quantitative assessment of impact.

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Benchmarking

Although there are a number of other UK bodies with functions similar to SQA, their remits and responsibilities all differ, which makes benchmarking complex. For example, Edexcel, a UK-based awarding body, has extensive international activities and competes directly with SQA in international markets. However, as a private sector organisation, its strategic focus and organisational objectives will be very different from SQA‟s. Furthermore, as all of the bodies have commercial activities, the information that would be required for a benchmarking exercise is not in the public domain. As a result of these difficulties, SQA does not formally benchmark its international activities against other similar bodies.

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SOURCES Department for Business, Enterprise and Regulatory Reform (2009). Impact of RDA spending, national report. Available at: http://www.berr.gov.uk/files/file50735.pdf Department for International Development (2005). Guidance on evaluation and review for DFID staff. Available at: http://www.dfid.gov.uk/Documents/publications1/evaluation/guidance-evaluation.pdf Department for International Development (2009). Building the Evidence to reduce Poverty. Available at: http://www.dfid.gov.uk/Documents/publications1/evaluation/evaluation-policy.pdf Ernst and Young (2010) European Investment Monitor. Available: http://www.eyeim.com/ National Audit Office (2009). Department for International Development: Aid to Malawi. Available at: http://www.nao.org.uk/publications/0809/aid_to_malawi.aspx SPICe (2010) International Expenditure. Edinburgh: Scottish Parliament Information Centre. Available at: http://www.scottish.parliament.uk/business/research/briefings-10/SB10-37.pdf Scottish Enterprise (2010a) Business Plan 2010-13. Glasgow. Available at: http://www.scottish-enterprise.com/about-us/se-whatwedo/se-operating-plans-current.aspx Scottish Enterprise (2010b) Scottish Enterprise forecasts strong economic return from its investment (news release). Available at: http://www.scottish-enterprise.presscentre.com/Press-releases/Scottish-Enterprise-forecasts-strong-economic-return-from-its-investment-213.aspx Scottish Enterprise (2004-10) Annual Reports. Available at: http://www.scottish-enterprise.com/about-us/research-publications/reports-accounts.aspx Scottish Government (2010a). Quarterly Employee Jobs. Available at: http://www.scottish-enterprise.com/about-us/research-publications/reports-accounts.aspx Scottish Government (2010b). Global Connections Survey (accessed 30 Sept 2010). Available at: http://www.scotland.gov.uk/Topics/Statistics/export-statistics/gcs-introduction Scottish Government (2010c). Index of Manufactured Exports (accessed 30 Sept). Available at: http://www.scotland.gov.uk/Topics/Statistics/export-statistics/ime-introduction Scottish Government (2010d), Action Plan on European Engagement. Available at: http://www.scotland.gov.uk/Topics/Government/International-Relations/Europe/EuropeanStrategy/ActionPlan Scottish Government (2010e), USA Plan. Available at: http://www.scotland.gov.uk/Topics/Government/International-Relations/north-america/usaplan/usa-plan Scottish Government (2010f), Action Plan on European Engagement - Annual Report 2010. Available at: http://www.scotland.gov.uk/Topics/Government/International-Relations/Europe/EuropeanStrategy/Annual-Report-2010 Scottish Government (2010g), The Anholt GFK-Roper‟s Nation Brands Index: Summary Report for Scotland 2009. Available at: http://www.scotland.gov.uk/Publications/2010/03/26104609/0

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Scottish Government (2009) Scotland Week 2008 Evaluation Report by the Scottish Government. Available at: http://www.scotland.gov.uk/Topics/Government/International-Relations/north-america/scotland-week/scotlandweek2008eval Scottish Government (2008a). International Framework. Available at: http://www.scotland.gov.uk/Publications/2008/04/23150847/0 Scottish Government (2008b), International Development Policy. Available at: http://www.scotland.gov.uk/Topics/Government/International-Relations/internationaldevelopment/internationaldevelopmentp Scottish Government (2008c), Plan for Engagement with China. Available at: http://www.scotland.gov.uk/Publications/2008/05/07115514/0 Scottish Government (2008d), Fresh focus for international development (news release). Available at: http://www.scotland.gov.uk/News/Releases/2008/05/07154212 Scottish Government (2008e), National Performance Framework. Available at: http://www.scotland.gov.uk/About/scotPerforms/outcomes Scottish Government (2008f), Independent Review of Scottish Government International Development Fund Projects focused on Malawi. Available at: http://www.scotland.gov.uk/Resource/Doc/257273/0076387.pdf Scottish Government (2008g), Achieving the Millennium Development Goals: The success of the Scottish Government‟s International Development Policy. Available at: http://www.scotland.gov.uk/Resource/Doc/919/0078367.doc Scottish Government (2008h), Evaluation of the Scottish Executive-led Programme During Tartan Week 2007 Appendix: Report on Survey of Attendees. Available at: http://www.scotland.gov.uk/Publications/2007/10/01140729/0 Scottish Government (2006), Scotland‟s Strategy for stronger engagement with the USA. Available at: http://www.scotland.gov.uk/Publications/2006/10/16134953/0 Scottish Government (2006a). Scottish Tourism: The Next Decade - a Framework for Change. Available at: http://www.scotland.gov.uk/Publications/2006/03/03145848/0 Scottish Government (2006b).Tourism framework for change. Available at: http://www.tourismframeworkforchange.info/ Scottish Government (2006c). International Research Evaluation of the “Tartan Week 2006” Programme. Available at: http://www.scotland.gov.uk/Publications/2006/12/18112833/0 Scottish Government (2004). Tourism shake-up across Scotland (new release). Available at: http://www.scotland.gov.uk/News/Releases/2004/03/5198 Scottish Parliament (2010a). 8th Report 2010: Report on the public sector‟s support for exporters, international trade and the attraction of inward investment. Economy, Energy and Tourism Committee. Available at: http://www.scottish.parliament.uk/s3/committees/eet/reports-10/eer10-08-vol01.htm Scottish Parliament (2010b), Economy, Energy and Tourism Committee. Official Report.

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Available at: http://www.scottish.parliament.uk/s3/committees/eet/or-10/ee10-2302.htm SQW Consulting (2010). SDI Policy Evaluation. Available at: http://www.evaluationsonline.org.uk/evaluations/Documents.do?action=download&id=428&ui=basic Visit Britain, Q&A on the International Passenger Survey. Available at: http://www.visitbritain.org/Images/Q%2526A%2520for%2520external%2520IPS%2520users_tcm12-37885_tcm139-168078.pdf Visit Britain (2010). Detailed trend data for each nation and region. Available at: http://www.scottish.parliament.uk/s3/committees/eet/or-10/ee10-2302.htm World Bank (2009). Global investment promotion benchmarking 2009: summary report. Available at: http://www.ifc.org/ifcext/fias.nsf/AttachmentsByTitle/GIPB2009/$FILE/GIPB2009.SummaryReport.pdf

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ANNEXE 1 - Case study: TARTAN WEEK/Scotland WEEK

Key points

Funding levels for Scotland Week remain less than half what they were for Tartan Week. This reflects the sharper economic focus of the Scotland Week programme.

Tartan week and Scotland Week host a wide variety of events and some of these are described below

Table A1 provides details of expenditure on Tartan Week and Scotland Week from 2005 to 2010. Table A1 – Tartan Week/Scotland Week expenditure 2005-2010 Funding source

Tartan Week Scotland Week

2005 2006 2007 2008 2009 2010

Scottish Government

£480,101 £658,500 £483,000 £185,970 £160,775 £229,095

VisitScotland £380,000 £384,300 £273,000 £86,000 £83,000 £62,670

SDI £35,230 £37,230 £9,230 £62,755 £93,475 £77,954

TOTAL £895,331 £1,080,030 £765,230 £334,725 £337,250 £369,719

The objectives of Scotland Week/Tartan Week have been adapted each year since 2005. Table A2 sets out the objectives for 2005 and 2010. The focus has shifted from wide ranging objectives, including the promotion of aspects of Scottish culture to a tighter range of economic objectives. Table A2: Stated objectives of Tartan Week and Scotland Week

2005 Tartan week

2010 Scotland Week

To showcase Scotland and celebrate Scottish culture.

To communicate 21st

Century Scotland. To create opportunities for Americans

to invest in Scotland/participate in Scottish events.

To establish links and collaborations between the US and Scotland.

To increase awareness of devolution and Scotland‟s new governance arrangements.

To demonstrate confidence in the Scottish economy and promoting Scotland as an internationally competitive business location in two of our most important overseas markets; and,

To promote Scotland as a great place to live, learn, visit, work and invest.

Activities and Outcomes By its nature Tartan Week and Scotland Week have delivered a wide range of events and activities. Some events are one-offs, whilst others have been repeated annually. The outcomes from many of these activities are difficult to measure. Some examples of events that are part of, or associated with, the week are given below:

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Examples of Activity Description and identified benefits ‘Scotland Village’ in Grand Central Station

The Scotland Village ran in Grand Central Station in 2005, 2006 and 2007. In 2008 Vanderbilt Hall in Grand Central Station was closed for refurbishment during Scotland Week and this necessitated a change of direction. Subsequently the Scotland Week tactics changed with a primary focus on Business to Business activity representing a different approach from the predominantly consumer facing one with the Scotland Village. Some 60,000 visitors had „engaged‟ with the village in 2006, rising to 71,000 in 2007.

Dressed to Kilt (DTK) First took place in 2003, organised by the Friends of Scotland, an American non-profit organisation dedicated to advancing contemporary Scottish interests in the United States. From 2009 the Scottish Government, SDI and VisitScotland together negotiated a single sponsorship agreement (£37,000 in 2009 and £50,000 in 2010). The Government reports that in 2009 the sponsorship fee bought significant promotional profile for the Year of Homecoming Scotland and for Scottish textiles companies participating. In 2010, as well as providing a high profile platform for the Scottish textiles industry, the sponsorship agreement included access to a 'pop-up' store in Manhattan as a vehicle for displaying and promoting Scottish textile products in the run up to and immediately after DTK. For 2009, Friends of Scotland estimated that the media coverage of DTK was equivalent to $5 million in advertising spend and additional TV coverage worth £2 million. Similar results were claimed in 2010.

Tartan day Parade Not a Scottish Government event and no funding provided. Estimates of around 2,000 participants each year

Scotland 10k Run The Scotland Run is a Scottish Government sponsored event, in association with the New York Road Runners Club. Sponsorship costs have been: 2008: £32,584, 2009: £32,776, and in 2010 £39,381 – the latter increase reflecting exchange rate movements. The numbers participating in the Scotland 10k (a qualifying event for the New York Marathon) has risen from around 3,000 in 2005 to over 8,000 in 2010. Interviews with participants provided some evidence of more favourable attitudes to Scotland as a result of their participation.

Harry Benson photographic exhibition (2010)

A one off exhibition that ran for 16 days, was viewed by 3,000 visitors who gave an „overwhelmingly positive response‟. The exhibition space was also used to host three other Scotland Week events. The cost to the Scottish Government was just under £23,500

Ministerial Programme A ministerial programme has been a core aspect of every Tartan Week and Scotland Week (except 2007 due to the election). In 2010 three ministers attended 80 engagements across 10 cities. Impact is by its nature very difficult to measure.

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RELATED BRIEFINGS

SB 10-37 International Expenditure (686KB pdf) - 15 June 2010

Scottish Parliament Information Centre (SPICe) Briefings are compiled for the benefit of the Members of the Parliament and their personal staff. Authors are available to discuss the contents of these papers with MSPs and their staff who should contact Simon Wakefield on extension 85372 or email simon.wakefield@scottish.parliament.uk. Members of the public or external organisations may comment on this briefing by emailing us at spice@scottish.parliament.uk. However, researchers are unable to enter into personal discussion in relation to SPICe Briefing Papers. If you have any general questions about the work of the Parliament you can email the Parliament‟s Public Information Service at sp.info@scottish.parliament.uk. Every effort is made to ensure that the information contained in SPICe briefings is correct at the time of publication. Readers should be aware however that briefings are not necessarily updated or otherwise amended to reflect subsequent changes. www.scottish.parliament.uk

ANNEXE A

ADDITIONAL INFORMATION REQUESTED The following information has been provided in response to a number of requests for further information made by committee Members at the meeting of 14 June 2010.

Ministerial travel budget

Figures on the cost of Ministerial Travel Overseas are provided on the Scottish Government website and are reproduced below. Figures have not been published for 2009-10. Comparison with Previous Years

Year No of Visits Cash Terms Real Terms Based on UK

GDP Deflator Average Cost per Visit (Real Terms)

1999-2000 44 £64,787.64 £80,982.53 £1,841 2000-2001 55 £117,288.29 £144,705.67 £2,631 2001-2002 64 £107,340.92 £129,540.23 £2,024 2002-2003 56 £71,035.92 £83,047.98 £1,483 2003-2004 51 £66,659.03 £75,794.55 £1,486 2004-2005 62 £100,524.89 £111,209.94 £1,794 2005-2006 41 £73, 894.66 £80,251.37 £1,957 2006-2007 51 £98,818.64 £104,235.77 £2,044 2007-2008 42 £75,535.33 £77,441.16 £1,844 2008-2009 59 £92,138.70 £92,138.70 £1,562 http://www.scotland.gov.uk/About/14944/PQS The Scottish Government has also published a list of Ministerial visits overseas for 2009 providing locations and dates of the visits. The table runs over six pages so is not reproduced here, but can be found at the following link: http://www.scotland.gov.uk/About/FOI/Disclosures/2010/05/MinisterialOverseasTravel/MinisterialOverseasTravel

Annual breakdown of international development fund budget

The following figures are also provided in the SPICe briefing 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

£1.9m £3.9m £4.5m £6.0m £5.3m £9.0m

Expenditure on consultants related to International Development Fund

The Scottish Government reports it has issued one contract for the independent assessment of grant applications for its main funding rounds. In 2008/09 the Government paid £42,000, £38,000 in 2009/10 and £51,000 anticipated in 2010/11.

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The proportion of international development budget spent overseas

The Government has stated that funding through IDF “represent(s) grant funding to Scottish organisations working with partners overseas and include administration costs within those projects. We do not place a ceiling limit on the level of administration costs for each project but we make clear that while administration costs will be considered, they should be kept to a minimum.”

Costs of overseas offices run by the Welsh Assembly Government and Northern Ireland Executive

The Scottish Government has offices in Brussels, Washington and Beijing. Information has been requested from Welsh Assembly Government and the Northern Ireland Executive of the costs of running equivalent offices and the results are reproduced below. It should be noted that direct like for like comparisons cannot be made due to differences in coverage and definitions. The figures do however provide a broad indication of resource levels provided by the other devolved administrations.

Brussels

The Scottish Government, Welsh Assembly Government and Northern Ireland Executive all have offices in Brussels. Summary details for these offices are given in Table A. Table A: Office costs – Brussels

Scottish Government

Welsh Assembly

Government

Northern Ireland

Executive Number of staff 11 10 7

Staff costs (£'000)

885

669

450

Office costs (£'000)

214

254

387

Programme costs (£'000)

53 -

20

Total (£'000)

1,152

923

857 Notes

Data for the Northern Ireland Executive office are for 2010-11; all other data are for 2009-10 Staff numbers are on a headcount basis and may include some part-time staff Costs may not always be allocated in the same way by different organisations e.g. travel

and subsistence may be classified as a staff cost by some and as an office cost by others Programme costs are recorded against the international office budget by the Scottish

Government and Northern Ireland Executive, but are met by the relevant domestic department in the Welsh Assembly Government

The Scottish Government advises that the N Ireland staff costs do not include a member of staff paid for by the central department in Belfast

The Scottish Government advises that Welsh figures include all staff, including those not paid from the European Office budget. The Welsh figures do not include the total cost of all events as these are sometimes pad for by the wider budget held by Cardiff

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Washington, USA

The Scottish Government has an office in Washington, as does the Northern Ireland Executive, although the Northern Ireland Executive also has one member of staff based in the British Consulate in New York. The Welsh Assembly Government has an office in New York (information not provided). Summary details for the Scottish Government and Northern Ireland Executive offices are given in Table B. Table B: Office costs – Washington DC, USA

Scottish Government

Northern Ireland Executive

Number of staff 4 6

Staff costs (£'000)

305 311 Office costs (£'000) 26 267

Programme costs (£'000)

222 110

Total (£'000)

553 688 Notes

Data for the Northern Ireland Executive office are for 2010-11; Scottish Government data are for 2009-10

Staff numbers are on a headcount basis and may include some part-time staff; the Northern Ireland Executive staff includes one person based in the British Consulate in New York and all associated costs for this member of staff are included

Northern Ireland Executive staff costs do not include overseas allowances for UK civil servants (2 staff). Scottish Government advises that at least an additional 35% should be added to the NI UK civil servants staff costs to reflect the overseas allowances (which are reflected in the SG salary costs)

Costs may not always be allocated in the same way by different organisations e.g. travel and subsistence may be classified as a staff cost by some and as an office cost by others

Scottish Government has provided revised figures (included in the above table) to improve the degree of comparability. Staff costs figure have been adjusted upwards to include the salary and benefits of 2 locally engaged staff and to include the unavoidable costs associated with posting staff overseas. Office costs figures have been reduced to reflect only office rental charges, including the provision of FCO corporate services and IT/ telephony. The programme costs figure has been similarly reduced because locally engaged staff costs are now attributed to the staff costs figure

China

The Scottish Government has an office in Beijing. The Welsh Assembly Government has an office in Chongqing while the Northern Ireland Executive does not have an office in China. Summary details for these offices are given in Table C.

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Table C: Office costs – China

Scottish Government

(Beijing)

Welsh Assembly Government (Chongqing)

Number of staff 2 2

Staff costs (£'000)

104 ..

Office costs (£'000)

129 ..

Programme costs (£'000)

117 ..

Total (£'000)

350 44 .. not available Notes:

Staff numbers are on a headcount basis and may include some part-time staff Costs may not always be allocated in the same way by different organisations e.g. travel

and subsistence may be classified as a staff cost by some and as an office cost by others No breakdown of costs was available from the Welsh Assembly Government The significant difference in costs will in part reflect the different nature of the two offices.

The Scottish Government office in Beijing includes one senior civil servant and one British Embassy Chinese national, while the Welsh Assembly Government office comprises two locally engaged staff working within the British Consulate offices. The difference in costs is also likely to reflect relative office and employment costs between the two cities, with Beijing a more expensive location.

Has Audit Scotland previously looked at SDI?

Audit Scotland has not undertaken any value for money audit relating purely to SDI. In March 2006, Audit Scotland published a study entitled „Performance Management in Scottish Enterprise‟ which reviewed the performance of Scottish Enterprise as a whole, including the activities of SDI, but this was a much wider review that did not have a particular focus on SDI.

Actual spend figures for Tartan Week

Figures originally provided were estimates of spend. The following are the actual spend figures: TARTAN WEEK SPEND 2005 2006 2007 Scottish Executive £480,101 £658,500 £483,000

VisitScotland £380,000 £384,300 £273,000 Scottish Development International £35,230 £37,230 £9,230 TOTAL £895,331 £1,080,030 £765,230

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Harry Benson Photographic exhibition spend

The Scottish Government has provided the following information which includes figures on exhibition expenditure: Background Harry Benson, CBE, is one of Scotland‟s most successful cultural exports in the field of photography. His iconic images have provided the window through which millions of people throughout the world, but particularly in the USA, have viewed the history of the past 60 years. He has photographed every US President since Dwight D. Eisenhower, chronicled the life and times of the British Royal Family, and captured the essence of celebrity, including some of the most famous photographs ever taken of The Beatles. Scotland Week 2010 provided an opportunity to showcase a rare retrospective exhibition of photographs chosen by Harry Benson himself from over 60 years of his work. The purpose of the exhibition was both to celebrate Harry‟s phenomenal success as a photographer and to provide an appropriate focal point for our public activities in New York during Scotland Week 2010. Results The exhibition was open to the public for a total of 16 days from 26 March 2010 to 10 April 2010. During this period, the exhibition was viewed by over 3,000 visitors not just from New York but from around the world, and the response was overwhelmingly positive. A selection of comments from the visitors‟ book includes the following:

- “I [heart] Scotland” - “What an unexpected treat! Great exhibition.” - “Great, a privilege to see.” - “Thanks for making we Scots look fabulous!” - “This is something every person must see!” - “Very educating, great shots! As a New Yorker living in Soho, it‟s very refreshing to

have such an exhibition. Thanks!”

As well as providing a valuable public diplomacy tool for Scotland, the exhibition also helped raise the profile of Scotland Week in the US press. In addition to the media coverage provided by the Scottish Government, the exhibition attracted favourable coverage from outlets from New York to Miami that had not previously covered Scotland Week events, including the widely read New York Social Diary. In addition to the public viewing hours, the exhibition space played host to three evening events. Scottish Government Minister for Culture and External Affairs Fiona Hyslop hosted a private Scotland Week reception with Harry Benson for the Scottish Government‟s key cultural and business contacts in New York. The Scottish Government also partnered with the Saint Andrew‟s Society of New York and Glasgow‟s Riverside Museum Appeal to execute private events in the exhibition space. These events provided engagement with Scottish Diaspora in New York and an opportunity to support the Museum‟s American activity, respectively. Costs The exhibition was conceived and staged by the Scottish Government, in collaboration with Harry Benson, in less than four weeks. The total cost, including unavoidable costs such as City of New York permitting and on-site security (etc.), amounted to £23,468.15 (at the April 2010 exchange rate). The Scottish Government attracted in-kind support as follows:

Donation, free, of a prime Soho retail space on Greene Street;

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Free installation of quality track lighting;

Free contractor work to bring exhibition space up to city code standards; and,

Free use of Harry Benson‟s name and copyrighted image to promote the exhibition.

The exhibition would have represented good value for money at any time of the year but by staging it during Scotland Week, it maximised both cross-promotion of the exhibition and the wider promotion of Scotland Week. The use of the exhibition space for evening events not only saved the Scottish Government money, but also bought goodwill with key Diaspora stakeholders. Harry Benson personally attended several events and viewing days throughout the exhibition.

Reasons for Visit Scotland international expenditure declining between 2004-05 and 2009-10

As background to this, the Scottish Executive had provided additional funding for VisitScotland between 2003-04 and 2005-06, thus providing a higher baseline in 2004-05. The Ministerial statement and press release below provide further details: Ministerial Statement (11/3/04) “We must all get behind the work that is being done on the establishment of VisitScotland. We must try to ensure that Scotland is marketed effectively so, in order to build on what has already been achieved, I am delighted to announce that the Executive will increase VisitScotland's marketing budget. We have added £5 million to this year's marketing budget of £20 million, £5 million will be added to next year's budget, and £7 million will be found for 2005-06. That is a 28 per cent increase in VisitScotland's marketing budget. Most of the new money will be focused on marketing Scotland in other parts of the United Kingdom where there are substantial marketing opportunities, and in the overseas tourism markets that have yet to be fully exploited. This is a response to a challenge that was made to the ministerial group, and to the questions that have been asked in the chamber on numerous occasions. We hope that it will be recognised that we are making a substantial long-term commitment to marketing investment in VisitScotland” .http://www.scottish.parliament.uk/business/officialReports/meetingsParliament/or-04/sor0311-02.htm#Col6600 Press release (extract): 11/03/2004 “Extra investment in marketing and re-organisation of the Area Tourist Board network are among a package of measures designed to provide the basis for an even more vibrant tourism industry, MSPs were told today. The Parliament heard that the Executive has responded to the demands of the industry by putting together a £20 million investment package aimed at increasing tourism revenue by 50 per cent over ten years, ensuring that Scottish tourism is in the best possible shape to grow in the 21 st century. Tourism Minister Frank McAveety promised more marketing activity, with a strong brand identity, consistently high quality in every aspect of tourism, and integrated support for tourism.” http://www.scotland.gov.uk/News/Releases/2004/03/5198 VisitScotland reported that The Grant in aid letter specified that the additional grant in aid was “to build on existing marketing activity.”

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VisitScotland and SDI spend on marketing/trade missions, offices and overheads

VisitScotland states it has never employed staff or operated offices overseas. In 2009-10 VisitScotland spent £5.311m on marketing, trade missions and events (Table 6 in SPICe briefing 10/37). SDI spend on offices and overheads provided in the briefing (Table 4 in SPICe briefing 10/37). For 2009-10 £9.3m spent on offices and other overheads, plus £3.55m on marketing trade missions and events.

ANNEXE B

The Scottish Parliament and Scottish Parliament Information Centre logos.

Financial Scrutiny Unit Briefing International Expenditure

15 June 2010

10/37

Nicola Hudson and Scherie Nicol

At its meeting on 23 February 2010 the European and External Relations Committee agreed its outline remit for the international engagement inquiry. The aim of this briefing is to support this inquiry through providing a picture of Scottish block grant expenditure which is spent on international activity.

Images: Scottish Development International and The Scottish Parliament

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CONTENTS

EXECUTIVE SUMMARY..............................................................................................................................................3

BACKGROUND............................................................................................................................................................4

APPROACH .................................................................................................................................................................4 DEFINITION OF INTERNATIONAL EXPENDITURE ..............................................................................................4 ORGANISATIONS TARGETED...............................................................................................................................5

First tier organisations..........................................................................................................................................5 Second tier organisations.....................................................................................................................................6

DATA ISSUES..............................................................................................................................................................6

DATA ANALYSIS.........................................................................................................................................................8 OVERVIEW ..............................................................................................................................................................8 ANALYSIS BY ORGANISATION .............................................................................................................................9

Scottish Development International (SDI)..........................................................................................................12 Scottish Government Direct Spending...............................................................................................................14 VisitScotland (including EventScotland) ............................................................................................................15 Scottish Qualifications Authority (SQA) .............................................................................................................16 Scottish Arts Council (SAC) ...............................................................................................................................17 Royal Scottish National Orchestra (RSNO) .......................................................................................................17 Highlands and Islands Enterprise (HIE).............................................................................................................17 Learning and Teaching Scotland (LTS) .............................................................................................................17 Scottish Ballet ....................................................................................................................................................18 Scottish Chamber Orchestra (SCO) ..................................................................................................................18 National Theatre.................................................................................................................................................18 Scottish Council for Development and Industry (SCDI).....................................................................................18 Scottish Funding Council (SFC).........................................................................................................................18

ANALYSIS BY REGION.........................................................................................................................................19 ANALYSIS BY TYPE OF SPEND ..........................................................................................................................20

Grant spending...................................................................................................................................................21 Impact of the International Development Fund..................................................................................................21 Domestic Spend on International Activities........................................................................................................21

SUMMARY OF INCREASES AND DECREASES.....................................................................................................23

ANNEX 1 - CASE STUDY: TARTAN WEEK/SCOTLAND WEEK............................................................................24

ANNEXE C

EXECUTIVE SUMMARY

International spending by the Scottish Government and key agencies/non-departmental public bodies totalled £29.8m in 2009-10 and increased by 54% in real terms (£10.4m) between 2004-05 and 2009-10. This is a much faster increase than overall public sector spending in Scotland, which increased by 20% in real terms over the same period. The vast majority of this increase can be accounted for by two specific policy decisions taken in this period:

1. Creation of the Scottish Government International Development fund in 2005-06, valued at £5.3m in 2009-10.

2. A strategic decision taken by Scottish Development International (SDI) in 2005 to increase overseas market presence by 60%, which has contributed to a £4.4m rise in overhead costs between 2004-05 and 2009-10.

SDI spent more public money overseas than any other organisation, accounting for 43% of the total spend (£12.85m) in 2009-10. The majority of spend is related to their 22 international offices and overheads from which 80.5 staff target strategic inward investment opportunities and undertake specific work for individual trade and investment customers. The top four spenders – which, along with SDI, also include the Scottish Government, VisitScotland and the Scottish Qualifications Authority (SQA) – accounted for 93% of international spending in 2009-10. Scottish Government international spend largely relates to grants given to third parties to undertake international engagement activities (such as Non-Governmental Organisations working in Malawi). On the other hand, VisitScotland spend is mostly on marketing activities, such as that related to Homecoming and Scotland Week. The SQA spend is mostly on staff and consultancy fees, but it is worth noting that for the SQA international activity is a significant source of income In 2009-10, over a third of all international spend was in the European Union. North America and the Rest of the World both accounted for around a quarter; Asia for the remaining 14%. This pattern of expenditure has changed quite markedly from 2004-05. The most significant change was in relation to spending in the ‘Rest of the World’ which increased by £6.5m in real terms over the period. This was largely attributable to the introduction of the Scottish Government’s International Development Fund and associated spending, largely in Africa. Information presented in this briefing relates to amounts spent overseas by the organisations consulted. It covers the Scottish Government and 12 agencies/non-departmental public bodies, but does not cover local authority or NHS spending overseas. It does not include spending within Scotland related to international activities.

3

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4

BACKGROUND The core questions that the Committee’s International Engagement inquiry will seek to answer are:

Is there a clear, coherent, co-ordinated and well-resourced strategy for international relations within the Scottish Government and its agencies?

What successes have there been so far? What can we learn from the successes of other regions and their initiatives?

How do the international offices operate and what do they achieve?

The European and External Affairs Committee has asked the Financial Scrutiny Unit to undertake an analysis of the international activities budgets of the Scottish Government and associated bodies. This analysis is to include figures for the most recent year available and for 2004-05 as a benchmark year around the time of the previous ‘Promotion of Scotland’ Inquiry (2005). The aim is to provide a picture of expenditure through the Scottish block grant on international activity.

APPROACH

DEFINITION OF INTERNATIONAL EXPENDITURE

There is no single agreed definition of what constitutes international expenditure and spending on these activities is spread across many different budget lines and organisations. This presented a number of challenges in defining international expenditure for the purposes of this analysis.

To ensure that the information received from the various organisations was comparable, a clear and precise definition of international expenditure was important. In order to achieve this, the following definition was adopted:

"all spend relating to international activities that is incurred overseas (including salaries for staff located overseas even if paid in the UK)"

In adopting this definition, any domestic spend on international activities was excluded. This was in order to define the scope more precisely and also due to the difficulties that some organisations would face in determining the proportion of time spent on international activities by staff based in Scotland. In many organisations, staff will not be working exclusively on international activities and the share of their time spent on such activities might vary considerably through the year, making it difficult to determine the staff costs relating to international activities. By focusing on spend incurred overseas, the definition was more precise. Some examples of the types of activities that would be included and excluded in this definition are outlined in the table overleaf. This is not intended as an exhaustive list of all elements included/excluded, but is intended to provide some indicative examples.

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Table 1: Scope of definition of international expenditure

In scope (examples) Out of scope (examples)

Grants to support international volunteering

Spending on Scotland Week

EU – intelligence gathering in Brussels

Trade missions

Marketing Scotland as a tourism destination overseas

Events held overseas to showcase Scottish culture and talent

Teacher training and other best practice visits overseas

Scottish Government staff based in Scotland, supporting international development, and for example European policy

Scottish Enterprise and HIE staff based in Scotland supporting export development and inward investment

VisitScotland spend in Scotland

Performers from overseas attending events in Scotland

Education on international issues carried out in Scotland

Even with this agreed definition, providing international expenditure information was not a straightforward exercise for many of the organisations contacted. This is due to the way in which information is held within the organisations, which does not always allow for ready identification of expenditure incurred overseas. A number of particular challenges with collating the data and ensuring comparability are highlighted later in this paper.

ORGANISATIONS TARGETED

The study aimed to incorporate all the key areas of international activity. To ascertain which organisations needed to be approached, the key areas of international activity were outlined and matched to relevant organisations, as shown in Table 2 overleaf.

First tier organisations

Those organisations engaged in key areas of international activity were identified as:

• The Scottish Government

• The Enterprise Agencies, Scottish Development International (SDI) and Scottish Council for Development and Industry (SCDI)

• VisitScotland

• Scottish Arts Council and the National Performing Companies

• National educational bodies including the Scottish Qualifications Authority (SQA), the Scottish Funding Council and Learning and Teaching Scotland (LTS)

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Second tier organisations

It became evident that there were organisations whose involvement in international activity was more limited to areas of spend such as study visits and where the effort of gathering the information would not justify the reward in obtaining the information. This included Local authorities and NHS Boards. These bodies were not approached as part of this study.

Table 2: Key areas of international activity and relevant organisations

Activity Strands Example work streams Organisations

Key areas of spend occurring overseas

International relations

Malawi, International volunteering, Fairtrade Scottish Government Grant funding International

Development Other Scotland Week,

Engagement with China Scottish Government Marketing

European Union

European Union

EU related work, EU funding

Scottish Government, Highlands & Islands Enterprise

Overheads - salary, accommodation and expenses

International Trade

Exports, Inward investment

SDI, Scottish Enterprise, Highlands & Islands Enterprise, SCDI

Overheads, Marketing, Trade Missions

Tourism Tourism VisitScotland, EventScotland Marketing

Promoting Scotland

Other Fresh Talent, Global Friends of Scotland Scottish Government Marketing

Cultural Showcase events, Cultural exchange, Study visits, Tours

Scottish Arts Council/Creative Scotland, National Performing Companies

Cost of overseas events and visits

Exchange

Business Fellowship placements Scottish Government

Cost of overseas placements - flights, accommodation, salaries

Education Education Teacher training, Student recruitment, Study visits

Scottish Funding Council, Learning Teaching Scotland, SQA

Overheads for office space, Cost of overseas events and visits

Other Study visits Best practice study visits

Scottish Government, NDPBs, Local Authorities, NHS, etc.

Cost of overseas visits

DATA ISSUES Challenges relating to this approach were identified at the outset with a view to minimising their impact on the quality of the data. These challenges included:

• Estimating patterns of spend through third parties – for a number of organisations, a significant proportion of their international spending is incurred via third parties through grants to support international activity. This includes SCDI, who are part-funded by SDI to undertake trade missions, NGOs who receive international development funding from the Scottish Government and arts organisations who receive funding for international

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activities through the Scottish Arts Council. Where this was the case, the grant-making organisation was not always able to provide details on the proportion of this grant expenditure that would be incurred overseas. As a result, an assessment was made on a case-by-case basis of how to treat such expenditure, based on discussion with the organisations involved.

• Ensuring consistency in definition – in gathering information from a wide range of

organisations (and individuals within organisations), it is likely that some organisations have included some elements of spend that others have not, for example study visits throughout the organisation or certain travel costs. Every effort has been made to ensure consistency, but inevitably some differences in the treatment of expenditure may exist.

• Ensuring no double-counting – in some instances spend can go through several

bodies before it reaches its target. For example spend on trade missions can go from the Scottish Government via Scottish Enterprise and SDI before reaching SCDI. Instances where it is known that funds go through several organisations have been investigated to ensure this has not occurred.

• Analysis by activity and region – data was requested to be broken down by type of

activity and geographic region to enable areas of focus to be identified. In some cases, and for various reasons, either this detailed analysis was not available or the categories were not consistent with those by which the organisation split their financial information. Every effort has been made to make reasonable assumptions in these scenarios.

• International spend wrapped up into other budgets – in some instances international

spend is not captured as it is part of a budget out with those obviously defined as international activities. For example SDI trade missions can be delivered via “products” to companies as part of Scottish Enterprise’s sectoral investment activities.

• Variability in international spend not linked to policy changes – for some

organisations, international spending can vary considerably from year to year. As such, observed changes between 2004-05 and 2009-10 may not reflect overall trends, but may simply reflect circumstances particular to the selected years. This particularly applies to the National Performing Companies, where international spending is directly proportional to the number of international tours undertaken in the selected years. If the number of tours is higher or lower in the selected years, this will boost or reduce international expenditure in those years, but should not necessarily be interpreted as an active change in policy or approach by those organisations. By contrast, it merely reflects variability in the international spending patterns of these organisations.

It should also be noted that the figures presented in this analysis relate to gross expenditure and do not take account of income generated through international activities. For some organisations, international income can be substantial and may exceed the international expenditure recorded. For example, in 2009-10, international income generated by the SQA totalled £2.35m, which exceeded the international expenditure of £1.88m.

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DATA ANALYSIS

OVERVIEW

The following organisations provided data on international spend in 2004-05 and 2009-101:

1 Scottish Opera was also contacted, but reported no international spend in either of the years for which data were requested. 2 Scottish Total Managed Expenditure (http://www.scotland.gov.uk/Publications/2009/09/17093831/12) adjusted using HM Treasury’s GDP deflator.

• Highlands and Islands Enterprise (HIE)

• Learning and Teaching Scotland (LTS)

• National Theatre

• Royal Scottish National Orchestra (RSNO)

• Scottish Arts Council (SAC)

• Scottish Ballet

• Scottish Chamber Orchestra (SCO)

• Scottish Council for Development and Industry (SCDI)

• Scottish Development International (SDI)

• Scottish Funding Council (SFC)

• Scottish Government

• Scottish Qualifications Authority (SQA)

• VisitScotland

In total, these organisations spent £29.8m on international activities in 2009-10. As highlighted earlier in this report, this figure relates only to that element of international spend incurred overseas. It does not include any money spent within the UK on international activities.

Figure 1: International Spend (at 2009-10 prices)

19.3

29.8

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35

2004-05 2009-10

£m

The equivalent figure for 2004-05 for the same organisations was £17.2m. When this figure is adjusted to 2009-10 prices, to strip out the effect of inflation, it is £19.3m. As such, in real terms, international expenditure by these organisations has increased by £10.4m over the five-year period 2004-05 to 2009-10. This represents a 54% increase in real terms. Over the same period, the total Scottish budget has increased by 20% in real terms2. Despite the rapid growth

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in international expenditure, international spending represents less than 0.1% of the total Scottish budget in both years. The main factors underlying the increased international spend are discussed in further detail overleaf.

ANALYSIS BY ORGANISATION

Figure 2 shows an analysis of the total international spend in 2009-10 by organisation. SDI accounts for the largest share of international spending (43% of the total international spend reported). The Scottish Government accounts for just over a quarter of reported spend, followed by VisitScotland (18%) and SQA (6%). The remaining organisations together account for only 7% of reported spend.

Figure 2: International spend by organisation, 2009-10

SDI43%

Scottish Government26%

VisitScotland18%

SQA6%

Others7%

A more detailed analysis of the total spend in 2004-05 and 2009-10 is given in Table 3. The figures for 2004-05 have been adjusted to 2009-10 prices to allow for a more meaningful comparison.

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Table 3 – International spend by organisation

Total international spending at 2009-10 prices

Real terms change in international spending 2004-05 to

2009-10 Organisation

2004-05 2009-10 £ % SDI 8,757,000 12,850,000 4,093,000 47% Scottish Government 1,930,000 7,626,000 5,697,000 295% VisitScotland 7,013,000 5,370,000 -1,643,000 -23% SQA 250,000 1,884,000 1,634,000 654% Scottish Arts Council 911,000 813,000 -98,000 -11% RSNO 141,000 445,000 304,000 216% HIE 82,000 372,000 290,000 353% LTS 23,000 223,000 201,000 891% Scottish Ballet - 142,000 142,000 - Scottish Chamber Orchestra 229,000 46,000 -182,000 -80% National Theatre - 13,000 13,000 - SCDI 8,000 5,000 -3,000 -40% Scottish Funding Council 1,000 1,000 0 - Total 19,343,000 29,791,000 10,447,000 54%Note: totals may not equal sum of parts due to rounding

Figure 3 shows the real terms changes in international spending, ranked from highest to lowest.

Figure 3: Change in international spending, 2004-05 to 2009-10 (real terms)

-4,000,000 -2,000,000 0 2,000,000 4,000,000 6,000,000 8,000,000

Scottish GovernmentSDI

SQARSNO

HIELTS

Scottish BalletNational Theatre

Scottish Funding CouncilSCDI

Scottish Arts CouncilScottish Chamber Orchestra

Visit Scotland

£

In value terms, the largest increase in international spend was reported by the Scottish Government, where international spending has increased by over £5.7m over the period. This is primarily due to the introduction of the International Development Fund, which is discussed further below. There was also a significant increase in international spending by SDI, where international spending increased by over £4m (47%) over the period shown. The SQA also showed a significant increase in international spending, which increased more than sevenfold

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over the period, from £0.25m in 2004-05 to £1.88m in 2009-10. The international spending reported by Learning and Teaching Scotland was almost ten times higher in 2009-10 than in 2004-05. Four organisations recorded a real terms decline in international spending – VisitScotland (-23%), the Scottish Chamber Orchestra (-80%), the Scottish Arts Council (-11%) and the SCDI (-40%). A short description of the key aspects of international spending by each organisation is given overleaf. This highlights some of the reasons behind these changes.

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Scottish Development International (SDI) (a joint venture between Scottish Enterprise, HIE & the Scottish Government)

Key points

• SDI spends more public money overseas than any other organisation: £12.85m in 2009-10.

• Spend incurred overseas increased 47% between 2004-05 and 2009-10.

• Almost three quarters of spend in 2009-10 related to offices and other overheads. SDI has 22 international offices.

A breakdown of SDI international spend is shown in Table 4. Table 4 – SDI international spend over time and by type of activity

Spend (£, 2009-10 prices) Area of spend

2004-05 2009-10

Change (£)

Change (%)

Offices and other overheads (including staff) 4,907,400 9,300,000 4,392,600 89.5 Marketing, trade missions and events 3,849,400 3,550,000 -299,400 -7.8 Grants to and funding of other organisations and individuals 0 0 0 -

Other costs 0 0 0 - Total 8,756,800 12,850,000 4,093,200 47.0

Of the £12.85m spent overseas in 2009-10 the majority (72%, £9.3m) related to offices and other overheads. Spending in this area has almost doubled over the period and is as a result of a strategic decision taken by SDI in 2005 to increase overseas market presence by 60%. While the number of international offices has just increased from 20 in 2004-05 to 22 in 2009-10, the number of staff has increased from 51 to 80.5 – representing a 58% increase. From these an overseas sales force targets strategic inward investment opportunities and staff undertake specific work for individual trade and investment customers.

Figure 4 – SDI international offices

Image: SDI/Google Maps

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Each office covers a region, which in most cases covers more than one country. For example the office in Düsseldorf covers Central Europe including: Albania, Austria, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Germany, Hungary, Kosovo, Liechtenstein, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia and Switzerland.

Figure 5 – International offices and overheads: spend over time and by region

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Offices and other overheads

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Note: figures for the EU include spending by SDI in their Moscow and Dubai offices, as well as spending through their London office as these all fall within their Europe, Middle East and Africa region. In 2009-10 over 40% of SDI’s spend related to overseas offices is incurred in the EU – or more accurately within the Europe, Middle East and Africa region (EMEA). SDI now has 30.5 staff operating in EMEA, compared to just 16 in 2004-05. This represents a shift from 2004-05 when the largest percentage (41%) was spent in North America. There are now 29 staff in North America. Spend related to overseas offices in Asia has increased 83% over the period, with the number of staff increasing from 13 in 2004-05 to 21 in 2009-10. However, this scale of increase is still not as large as it was in the EMEA region.

In addition to monies spent on overseas offices and other overheads, SDI also spent £3.6m on marketing, trade missions and events in 2009-10. This is a reduction from that spent in 2004-05 (-8% in real terms). Spend includes activities relating to marketing and selling Scotland’s strengths, demand stimulation to support sector marketing strategies and the attraction of talent through TalentScotland. SDI explains that this reduction has come about as a result of increased efficiencies and a move from print to online media, which has reduced costs.

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Scottish Government Direct Spending

Key points

• The Scottish Government directly spends the second highest amount of public money overseas: £7.6m in 2009-10.

• Overseas spending increased by 295% between 2004-05 and 2009-10, largely as a result of the International Development Fund being set up in 2005-06.

• Over two-thirds of international spend in 2009-10 related to the International Development Fund.

A breakdown of Scottish Government direct international spend is shown in Table 5. Table 5 – Scottish Government international spend over time and by type of activity

Spend (£, 2009-10 prices) Area of spend

2004-05 2009-10

Change (£)

Change (%)

Offices and other overheads (including staff) 1,262,000 1,758,900 496,800 39

Marketing, trade missions and events 540,300 472,100 -68,200 -13 Grants to and funding of other organisations and individuals 127,300 5,389,6001 5,262,300 4,135

Other costs 0 5,600 5,600 -

Total 1,929,600 7,626,100 5,696,500 295 1 It is assumed that the £5,300,000 International Development Fund is all spent overseas as a more detailed breakdown could not be provided. Of the £7.6m international spend in 2009-10 the majority (71%, £5.4m) related to grants and funding to other organisations in 2009-10. Almost all of this (£5.3m) relates to the International Development Fund set up in 2005-06. A large proportion of these monies are given to Non-Governmental Organisations (NGOs) based in Scotland to undertake international development work in Sub-Saharan Africa – however some is also used for other purposes such as emergency funding to Haiti. Due to the nature in which this fund operates, it is not known what proportion of this funding is spent overseas, relative to how much is spent in Scotland.

Figure 6 – International Development Fund: allocation since inception

In 2009-10 prices, the initial allocation to the International Development Fund was £3.3m in 2005-06. This has risen to £6.0m in 2009-10 and is due to rise to £8.8m in 2010-11.

Current programmes include the Sub-Saharan Africa Development Programme, the Malawi Development Programme, the Fair Trade Scotland Programme, Indian Subcontinent Development and response to international humanitarian crises.

0

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es) International Development

Fund

Note – allocations may not reflect spend, e.g., some years there may be an underspend

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In addition to grants and funding to other organisations, The Scottish Government also spent £1.4m on offices, other overheads and staff in 2009-10 - £1.1m of which relates to their Brussels office (Scotland House shared with SDI), £0.2m to their Washington office and £0.1m to their China team. A further £0.3m of this relates to staff (two in Washington and one in China). This represents a 39% increase on spend compared with 2004-05. A further £0.5m was spent on marketing, trade missions and events (such as Scotland Week and other marketing Scotland events).

VisitScotland (including EventScotland)

Key points

• VisitScotland spends the third highest amount of public money overseas: £5.4m in 2009-10.

• Spend incurred overseas decreased 23% between 2004-05 and 2009-10.

• Almost all of their spend relates to marketing and promotional activity – in particular the international marketing of leisure tourism.

A breakdown of VisitScotland (including EventScotland) international spend is shown in Table 6. Table 6 – VisitScotland international spend over time and by type of activity

Spend (£, 2009-10 prices) Area of spend

2004-05 2009-10

Change (£)

Change (%)

Offices and other overheads 0 0 0 - Staff 0 0 0 - Marketing, trade missions and events 6,985,200 5,311,000 -1,674,200 -24 Grants to and funding of other organisations and individuals 0 0 0 - Other costs 25,000 59,000 34,000 136 Total 7,010,200 5,370,000 -1,640,200 -23

Of the £5.4m spent overseas in 2009-10 almost all of it is related to marketing activities in 2009-10 (99%, £5.3m). One of the main funding streams is international marketing of leisure tourism, which accounted for 87% of marketing spend in 2004-05 and 81% in 2009-10. This funding stream incorporated spending on both Homecoming and Scotland Week.

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Figure 7 – International marketing of leisure tourism: spend over time and by region

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European Union North America Asia Rest of world

International marketing of leisure tourism

Spen

d (£

, 200

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pric

es)

2004-05

2009-10

In 2009-10 two-thirds of spend related to the international marketing of leisure tourism is incurred within the EU – a similar proportion to that in 2004-05. VisitScotland explain that in value terms the European market continues to expand.

While North America accounted for one-third of the spend related to the international marketing of leisure tourism in 2004-05, this reduced to 24% in 2009-10, with Asia and the rest of the world obtaining a larger share.

Spending on the international marketing of leisure tourism has decreased in real terms between 2004-05 and 2009-10 from £6.1m to £4.3m. VisitScotland explain that this is largely as a result of having taken on responsibility for Scotland’s 14 Area Tourist Boards on 1st April 2005. Some activities relating to the Area Tourist Boards have historically been funded by Local Authorities, but this funding has reduced in recent years – forcing a squeeze on VisitScotland’s funding for other activities such as international marketing. The reduction in VisitScotland’s funding for Scotland Week, compared with that for Tartan Week has also contributed to the reduction.

Scottish Qualifications Authority (SQA)

Key points

• The SQA is the fourth highest in terms of international spending, spending a total of £1.9m overseas in 2009-10 and accounting for 6% of total international spending.

• Spending increased more than sevenfold in real terms between 2004-05 and 2009-10

• Over the same period, international income has also risen substantially and in 2009-10, international income generated exceeded expenditure by £0.5m

The SQA had the fourth highest level of international expenditure reported, at £1.9m in 2009-10. International spend data were not available for 2004-05, so the figures were estimated on the basis of the international income recorded in that year. The ratio of international income to expenditure was assumed to be the same as was recorded in 2009-10. As such, the significant increase in international spending recorded over the period is a reflection of an increase in international income and international activity more generally. For the SQA, international activity is a significant source of income and in 2009-10, international income outstripped expenditure by around £0.5m. The SQA has a business area – SQA International – which is entirely focused on supporting and developing education and training overseas through a variety of services and activities. The largest element of international spend by the SQA was staff (consultancy fees and associated expenses). Expenditure on these areas accounted for over 70% of total spend in 2009-10. Over half of the SQA’s international spending was outside the EU, Asia and North America. SQA International also operates in Africa, the Caribbean, Central and South America, Russia and Turkey.

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Scottish Arts Council (SAC)

International spending by the SAC was estimated at £0.8m in 2009-10. In real terms, this represented an 11% decline in international spending. The main area of international spend for the SAC relates to grants to other organisations or individuals to support international activities. Such grants accounted for 84% of all international expenditure in 2009-10. Most of this involves grants to support individuals in attending events overseas or networking opportunities, but there are also grants for translation services and for developing materials for overseas exhibitions.

Some of this grant expenditure is likely to have been spent in the UK, rather than overseas. However, the grant recipients are not required to provide this level of detailed information to the SAC, so it is not possible to identify the proportion that is incurred overseas. In the absence of more detailed information, the full value of grants to support international activity has been included.

Of the international grants awarded in 2009-10, more than half (57%) was to support projects/activities in the European Union. A further third (31%) was for projects/activities in North America, while the remaining 12% was split equally between Asia and the Rest of the World.

Royal Scottish National Orchestra (RSNO)

International spend reported by the RSNO trebled in real terms between 2004-05 and 2009-10. This was due to increased spending on international tours. In 2004-05, there was only one tour (to Sweden); in 2009-10, there were a number of tours to European countries. Both figures include travel costs.

Highlands and Islands Enterprise (HIE)

HIE is another organisation whose overseas real terms spend has increased substantially in magnitude – from £82,200 in 2004-05 to £372,000 in 2009-10. This has largely been driven by a £280,000 spend by HIE on their North America Strategic Partnership with the Massachusetts Institute of Technology in 2009-10. This Partnership began in 2005-06 and includes entrepreneurial workshops in the Highlands & Islands and Boston as well as mentoring and MIT student internships for businesses in the Highlands & Islands. Other international spend by HIE relates to their office in Brussels (where there is 1.5 staff jointly funded by HIE, the University of the Highlands & Islands and Local Authorities in the Highlands & Islands co-located with the Scottish Government and SDI at Scotland House) and subscriptions to the Euromontana and European Association of Development Agencies membership organisations in Europe.

Learning and Teaching Scotland (LTS)

LTS spent £223,000 overseas in 2009-10. Of the organisations contacted, they showed the fastest increase in international spend over the period (891% increase in real terms). LTS has no staff or offices overseas and does not award grants in relation to international activity. Overseas expenditure figures for 2004-05 are an estimate relating to sundry staff study visits abroad in that year. The main factor underlying the increased international expenditure is the introduction of Scottish Continuing International Professional Development (SCIPD) study visits for Scottish teachers. In 2009-10, these visits accounted for spending of £160,900 (72% of the overall international spend in that year). The remaining expenditure is primarily accounted for by visits to China as part of LTS’s involvement with the Chinese Hanban Association/ Confucius Hubs.

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Scottish Ballet

Scottish Ballet did not incur any international expenditure in 2004-05. In 2009-10, the spend of £142,000 was primarily costs relating to a tour to China. There were also minor costs relating to galas in France, Estonia and Spain.

Scottish Chamber Orchestra (SCO)

International spending by the SCO was lower in 2009-10 than in 2004-05 (in real terms). However, this largely reflects the particular years chosen for analysis, rather than any active change in approach by the SCO. The volume and scale of international touring, and hence spending, can vary considerably from year to year. In 2004-05, there were tours to the Netherlands, Germany and Spain, while in 2009-10, following the cancellation of a planned Australasian visit due to external economic conditions, there was only one tour (to Italy). By contrast, in the preceding financial year (2008-09), spending relating to international tours exceeded £0.5m. All expenditure shown is directly related to undertaking international tours (orchestra, conductor and soloist fees; travel and accommodation; music hire etc.). In all cases, the SCO would receive fees from a local promoter which would partly offset this expenditure.

National Theatre

The National Theatre was not operational in 2004-05, so there is no international spend to report. In 2009-10, the recorded international spend of £13,000 related to a production in Portugal, workshop and production development work in Portugal and the US and other international research trips.

Scottish Council for Development and Industry (SCDI)

SCDI receive funding from both UK Trade & Industry and SDI to organise overseas trade missions. In 2009-10 prices, funding from SDI which was then spent overseas is estimated at around £4,500 in 2004-05 and £4,700 in 2009-10. In 2009-10, this contributed towards four trade missions to India, South Africa, the United Arab Emirates and China which are estimated by participants to have achieved £3.2m in immediate and prospective business.

Scottish Funding Council (SFC)

The SFC has very limited direct expenditure overseas. Expenditure on international conferences was estimated at £1,000 in both years. The SFC also provides grants to education-related bodies that promote or support some aspects of international activity in colleges and universities. In 2009-10, these grants amounted to around £0.5m, but it is not possible to ascertain what proportion of this grant expenditure would ultimately get spent overseas as the SFC would not monitor the expenditure of the grant recipients to this level of detail. The SFC considers that the majority of spend through these grants would be incurred within the UK and, as a result, the SFC grant expenditure has not been included in the overseas spending totals.

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ANALYSIS BY REGION

The increased international spending had an impact on all of the regions covered by this analysis (see Figure 8). The most significant change was in relation to spending in the ‘Rest of the World’ which increased by £6.5m in real terms over the period. This was largely attributable to the introduction of the Scottish Government’s International Development Fund and associated spending, largely in Africa. All of the International Development Fund spending is assumed to be in the “Rest of the World”, even though some will be directed to Asia. The ‘Rest of the World’ region also includes Eastern Europe, South America and Australasia. It was not possible for some organisations to allocate all of their 2004-05 international spending to specific regions, so this is shown as ‘not specified’ in the chart below.

Figure 8: International spend by region, 2009-10 prices

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Note - figures for the EU include a small amount of spending by SDI in their Moscow and Dubai offices, as well as spending through their London office.

In 2009-10, 39% of all international spend was in the European Union. North America and the Rest of the World each accounted for around a quarter of spending; Asia for the remaining 14%. This pattern of expenditure is illustrated in Figure 9.

Compared to 2004-05, although there has been an increase in spend, there has been a reduction in the share of international spending accounted for by the EU (which in 2004-05 accounted for half of all international spending). By contrast, the Rest of the World accounted for less than 1% of all international spending in 2004-05, but accounted for almost a quarter of all international spending in 2009-10, largely due to the introduction of the Scottish Government’s International Development Fund. The share of international spending accounted for by North America fell between 2004-05 and 2009-10 (from 36% in 2004-05 to 25% in 2009-10). Spending in Asia as a share of the total remained relatively stable.

The data show that international spending is becoming slightly more dispersed. In 2004-05, only two organisations recorded expenditure in the ‘Rest of World’ (SAC and VisitScotland). In 2009-10, seven organisations recorded expenditure in the ‘Rest of the World’ (LTS, National Theatre, SCDI, SAC, Scottish Government, SQA and VisitScotland). For the Scottish Government and the SQA, expenditure in the ‘Rest of the World’ accounted for over half of all international spend.

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Figure 9: Share of international spend by region, 2009-10

ANALYSIS BY TYPE OF SPEND

Figure 10 shows spend in 2009-10 by type, as recorded by the organisations responding to the information request.

Figure 10: International spend by type, 2009-10

Marketing and Events34%

Office/Overheads/Staff43%

Grants21%

Other 2%

Spend associated with office, overhead costs and staff accounted for 43% of all international spend reported in 2009-10. Marketing, trade missions and events accounted for the next largest percentage (34%), followed by grants (21%).

However, this varied considerably between organisations. For example, over two-thirds of international spend was accounted for by grants to other organisations in HIE, SAC and the Scottish Government. For SDI, a high proportion of international spend was accounted for by international offices and associated overheads (72% of spend). For the SQA, 71% of costs 20

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were recorded as staff costs (consultancy fees). Meanwhile, the majority (93%) of Scottish Ballet’s international spend in 2009-10 was recorded as staff costs. It should be noted that his latter example is likely to reflect different recording practices as other performing companies have recorded total touring costs under ‘marketing and events’, even though these will include an element of performers’ salaries.

Grant spending

As highlighted above, a significant proportion of international spending is accounted for by grants made by Scottish public sector organisations to other parties (either organisations or individuals). More than a fifth of all recorded international spending, or just over £6m in 2009-10, is awarded in grants to other organisations/individuals. The main bodies awarding these grants are:

• Scottish Government – £5.4m – most of which is awarded through the International Development Fund (some of which may be spent within the UK)

• Scottish Arts Council – £0.7m – which may involve some spending in the UK

• Highlands and Islands Enterprise – £0.3m – relating to their Strategic Partnership with the Massachusetts Institute of Technology

It is not possible for the grant-awarding organisations to identify exactly how much of these grant monies has been spent overseas, so for this analysis, it has been assumed that all grant monies are spent overseas, which is likely to be an over-estimate. By contrast, the SFC also makes awards to other bodies in relation to international activities (£0.5m in 2009-10). As these grants are most likely to support domestic expenditure, they have not been included in the totals for this analysis. This is likely to result in a small under-estimate of the SFC’s international expenditure.

Impact of the International Development Fund

The introduction of the Scottish Government’s International Development Fund in 2005-06 has a significant effect on the overall analysis and findings presented in this report. If this Fund is excluded from the analysis, the data show a much more modest increase in international spending over the period 2004-05 to 2009-10 (a real terms increase of 27% compared with 54% when the International Development Fund is included).

The International Development Fund also has a significant effect on the analysis of spend by region. Without its introduction, the distribution of international spending would have shown much more limited change over the period of analysis with the “Rest of the World” accounting for 5% of spend in 2009-10 instead of the 22% it accounts for with its inclusion. Finally, the spending associated with the International Development Fund affects the analysis of spending by type – with its inclusion, grant expenditure accounts for 21% of all international spending; without its inclusion, such expenditure accounts for only 4% of all international spending in 2009-10.

Domestic Spend on International Activities

The definition adopted for this research excluded domestic spend on international activities in order to provide a more precise basis for estimating expenditure. In adopting this approach, the expenditure figures discussed will underestimate the total spending on international activities. Taking the example of the Scottish Government, the estimated overseas spending of £7.6m is

21

ANNEXE C

lower than the total International Relations budget of £12.0m in 2009-10. The latter figure will include costs incurred within Scotland on international activities.

Similar considerations will also apply to some of the other organisations contributing to this research. They will also have staff undertaking work in Scotland relating to international activities, but it is harder to separate out these aspects of their overall costs and so difficult to make comparisons of this nature. As such, the definition adopted (spending incurred overseas) provided for a more comparable set of figures from the various organisations, even though it will understate the full extent of expenditure on international activities.

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SUMMARY OF INCREASES AND DECREASES International spending by the Scottish public sector increased by 54% in real terms between 2004-05 and 2009-10.

Much of the increase represents strategic or policy decisions by the organisations involved, for example

• The Scottish Government’s decision to set up an International Development Fund in 2005-06.

• A strategic decision taken by SDI in 2005 to increase overseas market presence by 60%.

• The SQA’s international strategy which has resulted in growth in international expenditure, but has been matched by increased international income sufficient to offset these additional costs.

There are also a number of new activities/programmes/organisations involving international expenditure that did not exist in 2004-05, such as:

• The Scottish Government’s Fresh Talent Programme.

• Learning and Teaching Scotland’s ‘Scottish Continuing International Professional Development’ Scheme.

• Highland and Island Enterprise’s strategic partnership with the Massachusetts Institute of Technology.

• The National Theatre Some of the increase also reflects the particular year selected for analysis, and the variability of underlying spend patterns, rather than a more general increase in the level of international activity, for example:

• The RSNO undertook three tours in 2009-10, compared with just one in 2004-05

• Scottish Ballet toured in 2009-10, but not in 2004-05 However, the overall increase masks reductions in spend in some areas, for example:

• Scotland Week, which replaced Tartan Week in 2008, where spend has more than halved (-£0.65m) as a result of a more focussed programme. More information is provided in Annex 1.

• The VisitScotland budget for international marketing of leisure tourism (which incorporates spend for both Homecoming and Scotland Week) fell by £1.8m (29%) as a result of VisitScotland having taken on responsibility for Area Tourist Boards on 1st April 2005 which, given reduced funding being provided for these over the years, has forced an increasing squeeze on their overall budget, including that for marketing.

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ANNEX 1 - CASE STUDY: TARTAN WEEK/SCOTLAND WEEK A case study is provided to allow a closer look at spend related to Scotland Week – of particular interest to the Committee.

Key points

• Funding levels for Scotland Week remain less than half what they were for Tartan Week. This reflects the sharper economic focus of the Scotland Week programme.

• Subsequent to the 58% drop in funding between 2007 and 2008, funding has since shown a real terms increase year on year.

• While the Scottish Government and VisitScotland show reduced levels of funding for Scotland Week relative to Tartan Week, SDI has increased its funding for the Scotland Week programme.

Scotland Week began in 2008 and is a collaboration between the Scottish Government, VisitScotland and SDI. It is an events programme in North America which aims to develop strategic relationships and international trade opportunities for Scotland. Scotland Week replaced previous Tartan Week events. Funding levels for both Scotland Week, and its predecessor Tartan Week, are shown in Table 7.

Table 7 – Funding levels for Tartan Week/Scotland Week 2005-2010 in 2009-10 prices

Tartan Week1 Scotland Week2Funding source 2005 2006 2007 2008 2009 2010

TOTAL £989,200 £1,160,700 £815,900 £340,600 £337,300 £361,600 1 The then Scottish Executive figures for 2005, 2006 & 2007 are figures for Tartan Week budget. The Scottish Government has been unable to confirm the actual spend figures. 2 Scotland Week figures since 2008 is actual spend – including spend in North America and Scotland. It can be seen that funding levels reduced significantly when Tartan Week was replaced by Scotland Week in 2008. This reflected the sharper focus of Scotland Week activities, which were geared towards the Government’s new overarching Purpose of increasing sustainable economic growth.

Figure 11 – Funding levels for Tartan Week/Scotland Week by source in 2009-10 prices

£0

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rices Scottish GovernmentVisitScotlandSDI

Figure 11 shows that the Scottish Government was the largest funder of Tartan Week and remains the main funder of Scotland Week. The chart also illustrates that while the Scottish Government and VisitScotland show reduced levels of spend for Scotland Week relative to Tartan Week, SDI has increased funding.

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ANNEXE C

It is worth noting that since 2008 the total Scotland Week budget has been set at £400,000 and is controlled by the Scottish Government. Prior to that the Scottish Executive, VisitScotland and SDI were each responsible for their own budget.

Since Scotland Week began in 2008, the programme has ranged from events such as live Scottish music and the Scotland Run, to business and travel trade receptions supporting the activities of SDI and VisitScotland. Spend by key spending category, based on the relevant strategic objectives in the Government’s Economic Strategy and the International Framework, is shown in Table 8. Table 8 – Scotland Week spend by type of activity in 2009-10 prices

Spending category Example activities 2008 2009 2010

Promoting economic growth

Business events, dinners and receptions. £117,897 £107,349 £119,005

Marketing & communications

Fees to North American PR companies, marketing material.

£110,813 £98,981 £95,943

Managing Scotland’s reputation as a distinctive global identity

Sponsorship of Scotland Run, activity around climate change and renewable energy.

£81,855 £87,162 £75,337

Promoting Scotland’s unique and culture and heritage

Entertainment and cultural exhibitions. £29,160 £24,758 £59,782

Miscellaneous Storage, delivery, security, etc. £11,200 £19,300 £20,495

Total1 £350,925 £337,550 £370,562 1 Total spend does not necessarily correspond with total funding in Table 7 as final spend can vary from that originally budgeted. In line with the focus of Scotland Week, the largest proportion of spend in 2010 (32%) relates to spend to promote economic growth, such as business events, dinners and receptions. Although marketing and communications accounted for a further third of spend in 2008, this reduced to a quarter in 2010, while spend to promote Scotland’s unique and culture and heritage doubled over the period. This increased spend relates to more cultural events taking place in 2010 – principally a photographic exhibition of Scottish photographer, Harry Benson, in New York which ran for almost three weeks. Miscellaneous spend has also almost doubled over the period shown.

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ANNEXE C

Figure 12 – Scotland Week spend by spending category in 2009-10 prices

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Promoting economic growth

Marketing & communications

Promoting Scotland’s unique and culture and heritage

Miscellaneous

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Scottish Parliament Information Centre (SPICe) Briefings are compiled for the benefit of the Members of the Parliament and their personal staff. Authors are available to discuss the contents of these papers with MSPs and their staff who should contact Scherie Nicol on extension 85380 or email scherie.nicol@scottish.parliament.uk. Members of the public or external organisations may comment on this briefing by emailing us at spice@scottish.parliament.uk. However, researchers are unable to enter into personal discussion in relation to SPICe Briefing Papers. If you have any general questions about the work of the Parliament you can email the Parliament’s Public Information Service at sp.info@scottish.parliament.uk.

Every effort is made to ensure that the information contained in SPICe briefings is correct at the time of publication. Readers should be aware however that briefings are not necessarily updated or otherwise amended to reflect subsequent changes.

www.scottish.parliament.uk

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European and External Relations Committee

12th Meeting, 2010 (Session 3), Tuesday, 5 October 2010

Brussels Bulletin Background

1. The Committee has agreed to include the Brussels Bulletin on its regular committee meeting agendas. The latest Brussels Bulletin – Issue 48 is attached as Annexe A.

Purpose of the Brussels Bulletin

2. As Members will be aware, the Brussels Bulletin is produced by the Parliament’s European Officer and is based on the key themes identified by the Committee as a result of its consultation on the Commission’s Legislative and Work Programme for 2010. At its meeting on 15 June 2010, the Committee agreed that the European Officer should focus on the following key themes over the coming year—

Europe 2020 Cohesion Policy The Stockholm (Justice) Programme Energy & Climate Change Agriculture Fisheries

3. The European Officer provides early intelligence on expected developments, actions of the key players and detail of debate on these key themes, primarily through the Brussels Bulletin. This is circulated to relevant parliamentary committees and is published on the website. More detailed briefing can also be commissioned by a committee on any specific issue.

Correspondence from the Scottish Government

4. At its meeting on 7 September 2010, the Committee agreed to write to the Scottish Government on a number of issues that were noted in Issue 46 of the Brussels Bulletin. The following Ministerial responses have now been received and are attached at Annexe B—

Cabinet Secretary for Finance and Sustainability, on EU funding for research and innovation;

Minister for Public Health and Sport, on a tender to assess the macro-economic impact of sport across the EU; and

Minister for Enterprise, Energy and Tourism, on the EU regulation on

the European Energy Programme for Recovery.

EU/S3/10/12/2

1

Recommendation

5. The Committee is invited to consider the latest issue of the Brussels Bulletin and the correspondence from the Scottish Government and to agree to forward this to relevant committees for their consideration.

Committee Clerk October 2010

EU/S3/10/12/2

2

NEWS IN BRIEF Future EU Presidencies Representatives of Hungary and Poland, the next two holders of the rotating Presidency of the Council of the EU, provided details of their likely priorities for office. Hungary. The key priorities are: (i) the implementation of the 'Europe 2020' agenda; (ii) economic governance and measures leading to more discipline on national budgets; and (iii) the Stability and Growth Pact. Poland. The key priorities are: (i) the internal market; (ii) the Eastern Partnership; (iii) energy security and developing an external energy policy; (iv) the Common Foreign and Security Policy; (v) intellectual property; and (vi) the EU's 'financial perspectives'. EU Gender Equality Strategy The Commission has published its new five-year strategy for gender equality (21 September 2010). The strategy is based around five priorities: (i) getting more women into the labour market; (ii) equality in senior positions (iii) promoting female entrepreneurship (iv) equal pay; and (v) tackling gender violence. Multi-Annual Financial Framework (MAFF) In considering the current MAFF, the European Parliament’s Budgets Committee made a number of recommendations with

implications for the determination of the future MAFF, including implementation in full of the requirements of the Treaty of Lisbon, recognition of the economic climate and the need to eliminate ‘special measures’ used when monies must be found urgently. Climate Change 2030, 2050 Climate Change Commissioner Connie Hedegaard has announced that the commission is currently working on a roadmap to develop a low carbon economy by 2050. The key discussions centre on emissions targets for 2030. The roadmap is expected to emerge in November 2010.

IN THIS ISSUE:

News Future EU Presidencies (Hungary, Poland) EU Gender Equality Strategy Multi-Annual Financial Framework Climate Change 2030, 2050

Upcoming meetings & events

Contact details

ISSUE 48 OCTOBER 2010 2007

EU/S3/10/12/2 Annexe A

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FUTURE EU PRESIDENCIES Current status The next two holders of the rotating Presidency of the Council of the EU, Hungary (Jan – Jun 2011) and Poland (Jul – Dec 2011) have outlined the priorities for their respective presidencies (14 September 2010). What’s happening? Representatives of Hungary and Poland, attending the 20th Economic Forum (8 September 2010) in Krynica, Poland, outlined their common priorities for their respective presidencies.

Hungary. Balint Odor, Hungarian deputy state secretary for European affairs, stated that the basic principle of their approach will be to promote the EU interest above all else and address ongoing issues, ‘by playing the role of honest broker’. He continued, ‘We want to see a strong Union, not a two-speed Europe, by strengthening cohesion and co-operation in Central Europe.’

Odor stated that more than eighty issues feature in his country’s presidency priorities, and there will be a particular focus on: (i) the implementation of the 'Europe 2020' agenda; (ii) economic governance and measures leading to more discipline on national budgets; and (iii) the Stability and Growth Pact.

Oder also noted that Hungary will take over the Presidency on 1st January 2011, when coincidentally, the 'European semester', a cycle of economic policy co-ordination, is set to be launched. As such, Hungary will play a particularly important role in the negotiations on the next EU Multi-Annual Financial Framework. He stressed that ‘solidarity and cohesion should be maintained,’ and that a common methodology for reaching a compromise be created so that future

presidencies have a foundation upon which to build.

Poland. Janusz Sznajder, advisor to the Polish minister of foreign affairs, stressed that 85% of the work of previous rotating EU presidencies had been on ongoing EU issues, with only 10% on crisis management and 5% on priorities set by the mandate holder.

Sznajdar identified six general priority areas which will be promoted during the Polish Presidency: (i) the internal market; (ii) the Eastern Partnership; (iii) energy security and developing an external energy policy; (iv) the Common Foreign and Security Policy; (v) intellectual property; and (vi) the EU's 'financial perspectives'.

Sznajder also stated that Poland intended to act as a moderator in resolving disputes, saying that the country, ‘wants to show its ability to work for the Community’.

EU GENDER EQUALITY STRATEGY Current status The Commission has published a new five-year strategy for gender equality (21 September 2010). What’s happening? The EU is currently in the final year of the ‘Roadmap for equality between women and men (2006 – 2010)’, which defines existing areas and proposes new areas of action, namely: equal economic independence for women and men, reconciliation of private and professional life, equal representation in decision-making, eradication of all forms of gender-based violence, elimination of gender stereotypes and promotion of gender equality in external and development policies.

The new strategy (2010 – 2015) aims to translate the principles of the Commission’s

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Women's Charter (March 2010) into specific measures to boost female potential and contribute to the EU's wider economic and social goals. The strategy is based around five priorities: (i) getting more women into the labour market (so helping to reach the Europe 2020 target employment rate of 75% overall for women and men); (ii) equality in senior positions and decision making roles; (iii) promoting female entrepreneurship (iv) equal pay (since women earn around 18% less than men across the EU on average), including the establishment of an annual European Equal Pay Day to raise awareness; and (v) tackling gender violence, particularly eradicating female genital mutilation in Europe and beyond.

The Commission will also set up a yearly top-level Gender Equality Dialogue involving the Parliament, the Council presidencies, European social partners and civil society to assess progress in implementing the strategy.

Justice Commissioner Viviane Reding is also considering the establishment of gender quotas on company boards as part of the strategy. The commissioner will decide on the issue after meeting European business leaders in 2011. At the press conference launching the strategy the Commissioner stated: ‘'I have not been an advocate of quotas for women in senior business posts in the past, but given the lack of progress in this area, we might in the future have to consider taking initiatives at the European level’.

MULTI-ANNUAL FINANCIAL FRAMEWORK

Current status

The European Parliament Budgets Committee adopted an interim report drafted by Reimer Böge on the proposal for a Council regulation assessing the multi-annual financial framework for the years 2007-2013 (13 September 2010).

What’s happening?

While endorsing the Commission figure for the remainder of the current financial framework, the Committee made a number of recommendations that will be relevant to the determination of the successor framework (2014-2020). According to the Committee, the Commission and Council must:

Work with Parliament to allow swift adoption of the new instruments needed to implement the budgetary provisions of the Treaty of Lisbon.

Facilitate the adoption of the financial framework and provide the Union with the means necessary to attain its objectives and carry out its policies, taking into account the new areas of action given by the Treaty of Lisbon, including in the fields of external action, sport, space, climate change, energy, tourism and civil protection.

Recognise that even before the addition of the new Lisbon-related needs, over the last four years of the current MFF, the annual budgets could only be agreed either through using up the existing margins or through recourse to the special instruments [Committee emphasis] to finance EU priorities such as Galileo, the food facility or the European Recovery Plan.

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Acknowledge that the current economic climate might lead the budgetary authority to make some efforts towards reprioritisation within the budget.

Understand that a purely technical approach to the implementation of the Treaty of Lisbon in the budgetary field is insufficient and that, for the Parliament to be able to give its consent, entering without delay a real, political negotiation at an appropriately high, and if necessary at the highest, level, is a must.

CLIMATE CHANGE 2030, 2050

Current status

Following adoption of measures to address climate change by 2020, the Commission in its work programme for 2010 announced that it would undertake some longer term thinking on climate change, envisaging a strategy to move the EU to 2030 and to 2050.

What’s happening?

The 'Copenhagen Accord', which resulted from the UN climate change talks of December 2009, confirmed a global ambition to reduce emissions of green house gases, without providing a strategy for delivering against the ambition. The next UN negotiations are scheduled to take place in Cancún, Mexico (9 November – 10 December 2010) with adaptation, mitigation, financing, deforestation issues, and monitoring, reporting and verification (MRV) all on the agenda.

Climate Change Commissioner Connie Hedegaard, addressing a meeting of the European Policy Centre (14 September 2010), outlined the ongoing preparation to

finalise the EU’s positions ahead of the Mexican conference. She stated the key work was on trying to define climate targets for 2030. These targets would form the core of the 2050 roadmap for a low carbon economy, which the Commission intends to publish in spring 2011. Hedegaard stated that targets would be in Europe's own interest as they have been proven to bring results that give the EU a ‘head-start on the global clean technology market’. However, she stated that the EU would not offer unilateral commitments, and would not sign up to a second commitment period under the existing Kyoto Protocol, without global endorsement. With this in mind, she conceded that achieving progress in Cancún, ‘looks very difficult’. Hedegaard continued, in reference to the Copenhagen talks, ‘Nothing new came out of Washington. Nothing new has come out of Beijing.’ She stated that the fact China sent an under-secretary from the local embassy to represent the country in the Geneva climate finance meeting earlier this month (5 September 2010), ‘was not a good sign.’ OTHER NEWS

Derivatives. The Commission published its plans to provide greater oversight of the derivatives market (15 September 2010). The proposal is part of a global response to the financial crisis. The Commission proposal would see derivatives traded via stock exchanges and processed by clearing houses or central counterparties (CCPs), which would have to comply with stricter governance rules. In addition, trade repositories – or databases - would be required to be set up to collect data on the status of derivative contracts to

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ensure regulators are aware of the risks involved in particular deals.

Radioactive waste. The Commission has published the results of its consultation into the disposal of nuclear waste (which closed on 31 May 2010). The majority of stakeholders, including industry representatives and public authorities, would support binding EU legislation on nuclear waste. Consequently President Barroso has announced that he will bring forward legislation on the treatment of nuclear waste by the end of 2010.

Climate change and land use. The Commission has announced a public consultation on the role of EU agriculture and forestry in achieving the EU’s climate change commitments (10 September 2010, with a closing date of 5 November 2010). The objectives of the consultation are to collect views on how land use activities could contribute to climate change mitigation and whether changes in agriculture and forestry should count towards the EU’s greenhouse gas reduction commitments.

Biodiversity. The European Parliament has adopted a resolution on biodiversity which broadly endorses the earlier Council position (which called for a halt to biodiversity loss by 2020 and restoration of biodiversity ‘wherever feasible’). The Parliamentary resolution goes further than the Council position by stating that the halting of the loss of species is an ‘absolute minimum level of ambition’ for 2020. The resolution calls on the Commission to mainstream biodiversity protection in all EU policy areas. MEPs also want the Commission to focus on

implementing policies that will encourage investment in conserving biodiversity in both the public and private sectors.

On a related matter the Belgian Presidency of the EU held a conference with the title ‘Biodiversity in a Changing World’ (8 - 9 September 2010). Environment Commissioner Janez Potočnik addressing the meeting spoke of the urgency of addressing biodiversity issues and the need for world governments to commit to a common goal at the next conference on the issue (October 2010). He stressed the need for immediate action to combat the worldwide loss of biodiversity. In particular, he mentioned the need to invest more in natural capital or ‘green infrastructure’, as well as secure a better understanding of the spatial planning factors needed for conservation.

Energy Efficiency. Energy Commissioner, Günther Oettinger, has announced that buildings will be the focus of the upcoming Energy Efficiency Action Plan, which is expected to be published in November 2010. The Commission has also stated that the EU leaders’ summit of February 2011 will be devoted to energy.

Energy labelling of TVs. The Commission has published proposals to introduce energy labels for televisions and update the existing labels for refrigerators, dishwashers and washing machines (28 September 2010). This follows previous attempts by the Commission which ran into difficulties in the Parliament, with MEPs stating that the proposal was too complex and

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confusing (6 May 2009). The labels now being proposed will have to be approved by EU member states and the European Parliament.

Energy in Africa. The EU has launched a new Africa-EU Renewable Energy Cooperation Programme with €5m set aside for the initial three year start-up phase. The programme will cover a ten year period with the aim of contributing to the EU-Africa energy partnership goals of increasing energy access, energy security and energy efficiency.

Stockholm Programme. The civil law, commercial law, family law and private international law aspects of the Action Plan implementing the Stockholm Programme will be debated in full plenary session in the Parliament on 22 November 2010.

UPCOMING EVENTS & MEETINGS

October November 1 – 2 First EU international

conference on animal welfare 5 Closing date

Consultation on climate change and land use

4 Closing date Tender for study into macro-economic importance of sport

9 – 10.12 UN Climate Change Conference, Mexico

6 Publication of EU Single Market ‘Act’

8 -9 Justice & Home Affairs Council

6 Parliament plenary discussion on European Energy Programme for Recovery

10 -11 European Parliament mini plenary

6 – 7 Committee of the Regions Plenary session

17 ECOFIN (Finance) Council

7 Parliament mini plenary 18 – 19 Education, Youth & Culture Council

7 – 8 Justice & Home Affairs Council

22 – 25 European Parliament plenary session Discussion on Stockholm

Programme 7 – 8 Informal Culture Council 25 – 26 Competitiveness Council 11 Competitiveness Council 29 – 30 Agriculture & Fisheries

Council 14 Environment Council 9 – 10.12 UN Climate Change

Conference, Mexico 15 Transport,

Telecommunications & Energy Council

8 -9 Justice & Home Affairs Council

18 – 21 Parliament plenary session 19 ECOFIN (Finance) Council 21 Informal meeting of EU

Sports Ministers

21 Employment, Social Policy, Health & Consumer Affairs Council

22 Closing date Future biodiversity strategy

25 – 26 Agriculture & Fisheries Council

28 – 29 European Council

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CONTACT DETAILS Dr Ian Duncan Rond Point Schuman 6 B – 1040 Bruxelles Tel: 0032 2282 8377 Fax: 0032 2282 8379 Email: ian.duncan@scottish.parliament.uk

CabinetSecretaryfor FinanceandSustainableGrowthJohn Swinney MSP

T:0845 7741741E: scottish.ministers@scotland.gsi.gov.uk

Irene Oldfather MSPConvenerEuropean and External Relations CommitteeRoom TG.01The Scottish ParliamentEdinburghEH99 1SP

·tt September 2010

L \~,

~The ScottishGovernment

In your letter of 13 September, you requested information on what action the ScottishGovernment is taking to promote the €6.4 billion fund for investment in research anddevelopment (R&D) announced by Research and Innovation Commissioner MaireGeoghegan-Quinn on 19 July 2010. This announcement relates to the latest round offunding under Europe's Framework Programmes (FP), currently FP7.

The Scottish Government recognises the benefits of being actively engaged in EuropeanR&D activity - it provides access to European networks, increases scientific and business I

reputation, improves ability to attract and retain world class researchers, and providesaccess to new markets and funding. '

Recent data (May 2010) suggests that Scotland is performing well in FP7, particularly in thehealth and ICT sectors. Scotland has attracted nearly £175 million in funding from FP7 todate, which is 9.5% of the total UK funding. However, with tight budgets across the publicsector, making the most of EU opportunities like the latest €6.4 billion call, is now moreimportant than ever. '

We are working with our agencies to undertake a wide range of activities to encourage andstimulate engagement of the science base and industry with the European agenda. ScotlandEuropa, whose membership base includes a range of University, business and public sectororganisations, are already actively engaged, both at home and in Europe. They routinely I

promote and offer support to their members on EU opportunities, including the recent €6.4 'billion call. For example, they have developed their services to include focused support to 'business on EU R&D opportunities, delivered in collaboration with Scottish Enterprise and'Scottish Development International. This wider support including seminars, tailored capacitybuilding sessions and one-to-one project development sessions for companies, has seen an 'additional €1.7 million of projects coming through from Scottish companies since 2008.

St Andrew's House, Regent Road, Edinburgh EH1 3DGwww.scotland.gov.uk

INVESTOR IN PEOPLE

I

Enterprise Europe Network Scotland, which is hosted by Scottish Enterprise, works acrossScotland to raise awareness within the business community of innovation and technologytransfer opportunities at the EU level, including FP7.

Funding is also available to assist with the costs of developing quality collaborativeproposals for the framework programmes. Scottish Enterprise deliver support to SMEs(previously known as SPAF - Scottish Proposal Assistance Fund) and Universities havereceived funding from the Scottish Government through the Scottish Funding Council'sPACER initiative (Proposal Assistance for Co-ordination of European Research).

However, the Scottish Government wants to have more productive and strategiqengagement with Europe on R&D policy. We believe that Scotland has the best chance ofmaximising the opportunities if the key players work together to develop a strategic 'TeamlScotland' approach. That is why we are leading and co-ordinating a multi-agency joined uP

j

steering group to consult with stakeholders and engage the UK Government early ensuring aistrong voice for Scotland in Europe. '

Our overarching objective is to strengthen our performance, particularly the participation oflour business community whilst maintaining and improving our academic engagement. ThiSIwill help to ensure a long term positive impact on Scotland's sustainable economic growth.

I hope this response addresses the points you raised.

t{ J';"~I

JILJOHN S~y

St Andrew's House, Regent Road, Edinburgh EHl 3DGwww.scotland.gov.uk

INVESTOR IN PEOPLE

Minister for Publ ic Health and SportShona Robison MSP

T:0845 7741741E: scottish.ministers@scotland.gsi.gov.uk

Irene Oldfather MSPConvenerEuropean and External Relations CommitteeRoom TG.01The Scottish ParliamentEdinburghEH99 1SP

1U; September 1 ()

C0 ~.~"-Q-

~~1The ScottishGovernment

Thank you for your letter of 13 September 2010 where you raised a number of questions onbehalf of the European and External Relations Committee.

On 1 December 2009 the Lisbon Treaty entered into force and as a result sport became anew competence aimed at developing the European dimension in sport. Although sport is adevolved responsibility we are working with the UK Government, and the other devolvedadministrations, to help shape the UK position on sport. We are also working closely withsportscotland, the national agency for the development of sport and physical recreation inScotland, to ensure that we are fully engaged in this new competence and identify anyopportunities that would benefit Scottish sport. I have responded to the queries raised in yourletter below.

Whether the Scottish Government has promoted the tender to prospectiveresearchers?This tender has been advertised in the Official Journal of the European Union so theresearch community of Scotland will be fully aware of this work and I understand the closingdate for applications is 4 October. There are a number of organisations in Scotland, in theacademic and private sectors, who may be interested, either as a sole contractor or as partof a consortium and we would welcome their involvement in this.

Whether the Scottish Government has already assessed the macro-economic value ofScotland's sporting industries and communitiesThe Scottish Government is aware of the potential economic benefit of sporting industriesand communities and of major sporting events. A study by sportscotland provided anestimate of the overall contribution to the Scottish economy in 2004. This showed that sportrelated spend made up 2.7% of total consumer expenditure (£1.6bn in 2004). Employment insport was 45,500 (1.8% of total employment) and value added to the Scottish economy£31.5bn, or 1.9% of gross value added. This study suggested that the relative economicimpact of sport in Scotland was slightly higher than in the UK as a whole. (ref: The Economic

St Andrew's House, Regent Road, Edinburgh EH1 3DGwww.scotland.gov.uk

Importance of Sport in Scotland 2004 (2007) sportscotland). These figures do not includeestimates for the valuation of improved quality of life that sports participation generates, nordoes it include the economic contribution of sports events and sports tourism. EventScotlandinvests in supporting both national and international sporting events which generateconsiderable economic benefits for Scotland.

How the Scottish Government intends to engage with the study.We will work with sportscotland and others to respond to approaches, as appropriate, toprovide data for the successful contractor to enable them to carry out their research. As partof this process we will explore the possibilities of identifying findings specific to Scotland.

I hope this letter is useful. },:~* LA_r:>~\....-,~-)/

(

SHONA ROBISON

St Andrew's House, Regent Road, Edinburgh EHl 3DGwww.scotland.gov.uk

Minister for Enterprise, Energy and TourismJim Mather MSP

T:0845 7741741E:scottish.ministers@scotland.gsi.gov.uk

Irene Oldfather MSPEuropean and External Relations CommitteeRoom TG.01The Scottish ParliamentEdinburghEH99 1SP

;t1' September 2010

RE: EUROPEAN ENERGY PROGRAMME FOR RECOVERY

~The ScottishGovernment

Thank you for your letter of 13 September highlighting the European Parliament Energy(ITRE) Committee's adoption of the report on amending the Regulation on the EuropeanEnergy Programme for Recovery. This is an issue of which I am fully aware. The ScottishGovernment has already made representations to the UK on this subject and indeed we areworking very closely with the UK in demonstrating our support.

The Scottish Government has achieved success under the European Energy Programme forRecovery. We have worked with the Scottish European Green Energy Centre to securemore than 100 million Euro under the Programme for two Scottish projects - the ShetlandNorth Sea Grid node and the Aberdeen offshore wind farm test centre.

We appreciate that negotiations on how to allocate the unspent funds are now reaching aconclusion. The Scottish Government position is aligned with the UK on this initiative. Webroadly support the amendment which would allow unspent funds to be reallocated to energyefficiency and renewable energy projects. However, we want to be clear that the reallocatedfunds should be spent in a way that adds value at an EU level to efforts at member state andregional levels.

We also welcome in broad terms the proposal for a new financial instrument and we agreewith the UK that if the EU and Member States are to achieve their energy and climatechange objectives, we need to find innovative financing solutions which leverage privatesector investment. We agree that the fund has the potential to benefit UK public authoritiesand is broadly aimed at the right kind of projects. The Scottish Government would want towork closely with the UK on establishing the criteria for selection and eligibility, should sucha Fund be ultimately created.

ScottishParliament,T4.07,Edinburgh EH991SPwww.scotland.gov.uk

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We would also want to ensure that this worked as a mechanism alongside existing marketmechanisms and maximised the contribution of private sector funds.

We will continue to keep the Committee informed on further developments when thenegotiations conclude.

Scottish Parliament, T4.07, Edinburgh EH99 lSPwww.scotland.gov.uk

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