On November 7, Chancellor of the Exchequer Alistair Darling spoke at the University of Stirling in Scotland about Scottish education and the future of Scotland.
In his speech, Darling said: "Education is in fact one of our most successful exports. Education in Scotland and the rest of the UK is sought all over the world. And our ability to innovate and invent will be essential to secure our future in a fast changing world. Stirling is showing what we can do competing with the best in the world."
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It is a pleasure to deliver the 24th Andrew Williamson Memorial Lecture.
I would like to start by saying how pleased I am that Andrew's mother, Joyce, is here this evening.
And I would like to thank Stanley Kleinberg and the other members of the Trust for their work, helping promote debate with these lectures as well as helping support politics students from Stirling University with a scholarship to travel overseas. A very fitting tribute to Andrew Williamson's memory.
It is also a pleasure to give this lecture at Stirling University in the year you celebrate your 40th anniversary as what was then Scotland's first new university for almost 400 years.
We are rightly proud of Scottish Universities, as you say in your mission, "to inspire, challenge and support motivated individuals who want to shape their world."
I know from previous visits here that research and teaching are in some of the most important educational areas: from the creative industries and sports, to economics of an aging population and the environment, with a new course this year on International Conflict and Cooperation and from next year in Environmental Finance and Global Governance.
You are building links with universities across the world: one in every seven Stirling students come from outside Britain, from 80 different countries in total. The university now has partnerships with universities in many countries including Singapore and Shanghai. Your retail marketing experts helping improve skills and expand the tertiary education market in Singapore and South Africa.
And through the university's Innovation Park, you are translating your academic research into commercial opportunities and jobs for Stirling and Scotland. For example, the "MATCH" partnership with leading companies on the development and application of assistive technology to help those with disabilities cope with everyday life and your pioneering collaboration with a Scottish software company on forecasting for firms.
Education is in fact one of our most successful exports. Education in Scotland and the rest of the UK is sought all over the world. And our ability to innovate and invent will be essential to secure our future in a fast changing world. Stirling is showing what we can do competing with the best in the world.
Tonight I want to talk about how we meet the challenges of rapid economic change around the world.
We have it in our hands, in Scotland and the rest of the United Kingdom, to compete with the best provided we make the right choices - and that we do so now.
We must ensure that we equip every individual with the skills and confidence to do the best they can for themselves for their future.
A united country that competes with the best in the world on innovation and invention, investing in science and the education and skills we need for the future.
And we must now with other countries work together to confront and deal with the big challenges of making poverty history, tackling climate change and a more secure and prosperous world.
So I want to focus on the economic challenges themselves and how we respond and rise to them.
And I will make four propositions. We do so by being,a stable economy,crucially an economy where we make the long-term investments we need to for future, an open economy, and a flexible economy so we can adapt quickly to the changes the future brings.
And I believe that Scotland faces a stark choice today. Is Scotland's priority constitutional change, or the urgent task of addressing the challenges and opportunities posed by globalization as we try to secure a sustainable, prosperous future for Scotland and for Britain?
I believe that it would be a profound mistake to spend the next four years in constitutional conflict north and south of the border when we need to meet the economic challenges we face. Go to India and China - these economies are growing every year.
There are some who argue that Scotland's biggest challenge is constitutional - our relationship with England. They are wrong. As I shall argue I believe that Scotland and England are far better off together than apart - especially at a time when all over the world new opportunities are arising and which we can seize if we have the will to do so.
On one level globalization is nothing new. Goods, services, investment and people have crossed national boundaries for centuries. And Scotland has been at the heart of this.
What is new though, is the scale and speed of economic change.
Over the past three years, the world economy has grown at its fastest rate for 30 years.
That growth is being driven from the emergence of Asia, in particular China and India. Last year's Williamson scholar visited China as part of his scholarship and saw its development for himself.
Thirty years ago India and emerging Asia accounted for just one-eighth of the world economy 10 years ago one-fifth, now it is almost a third.
We are seeing Asia now outproducing Europe: China today producing half the world's computers, half the world's clothes, and more than half the world's digital electronics; and India home to 80% of the world's outsourced services.
And China and India and other developing countries are no longer just low-cost, low-skill producers, but also have highly educated workers. And a growing middle class, by 2020 larger than the total population of America and Europe. And that is a massive opportunity for us too.
They are developing their own domestic markets and raising their own skills. And their exports have helped increase choice and lower prices for consumers here.
So while some people say these changes are things we must fear, I believe these changes present a massive opportunity for Scotland, provided we make the right choices.
Scotland has always been a country that has looked out to the world and its economic opportunities.
A recent survey by the Institute of Chartered Accountants shows Scottish companies, along with those in London, were most positive about the impact of globalization, with nine out of 10 firms reporting global links.
It was J M Barrie, the Scottish novelist most famous for writing Peter Pan, who nearly a century ago said "there are few more impressive sights in the world than a Scotsman on the make."
It was Scottish thinkers such as Adam Smith and David Hume and their ideas which gave rise to the world's first global economic revolution, and which Scotland was at the heart.
Scotland's inventors and innovators have produced products that have changed the entire world and put Scotland at the forefront of economic opportunity.
In the 17th and 18th and 19th Century, James Watt, the steam engine; Kirkpatrick Macmillan, the bicycle; and Robert Dunlop, the tire.
In the last century, John Logie Baird, the television; Sir Alexander Fleming, pencillin; Robert Watson-Watt, radar; and more recently a university spinout company in my own constituency in Edinburgh designed the chips used in iPods.
So we start with a history at the forefront of global change.
And as we face today's wave of global change, we must do so with an honest assessment of where we are strong, but also where we must be stronger.
What Are We Good At; Where Do We Need to be Better?
Today after 10 years of economic growth in the United Kingdom, Scotland has the highest income per head in the United Kingdom outside London and the South and East of England.
Over the past 10 years Scotland's unemployment rate has fallen from above to below the British average - a fall of almost 50%, because of our strong economy.
And today, Scotland has some of Britain's most successful, global companies: two of Europe's top 10 insurance firms, and two of the world's top 10 banks.
This strength, rightly, gives us confidence as we face an ever more global and competitive future.
But it should not make us complacent. Like all parts of Britain, and indeed all advanced economies, the international competitive challenge is becoming ever fiercer, and the need to address our national challenges ever more important.
- Scotland's productivity is below the UK average. We need to do better.
- Unemployment has fallen faster here than most other parts of Britain, but our economic inactivity rate is still comparatively high. The percentage of 15-19 year olds not in employment, education and training is higher than the UK average and one of the highest in the OECD.
- Business start-ups remain lower in Scotland than on average across Britain: new VAT registrations are below the British average. Business R & D investment as a percentage of GDP is below the UK average.
To tackle these challenges, we need to constantly improve our competitiveness, raise our skills and enterprise; and increase our investment and innovation.
In a rapidly changing world people rightly look to the government they elect to stand with them and help them meet their aspirations for themselves and their country.
How do we do this?
First, by being a stable economy.
The past 10 years have demonstrated that being part of a larger UK economy, with our economic framework, has allowed Scotland to enjoy sustained growth and stable inflation and interest rates.
The recent turbulence in the international markets reminds us what happens when an event in one part of the world can touch us all in just a few weeks. There was a time when a small bank in America got in trouble it was bad news for that town, or state, but nowhere else. But today, when a Florida householder defaults on his mortgage, the effects are felt, not just in America but across the world, in France, Germany, the rest of Europe and here in Britain.
So we cannot take our stability for granted.
And Scotland has shared in Britain's stability because there is a single monetary policy and single currency for the whole of the United Kingdom.
An independent Scotland could look to have a separate currency.
An independent Scotland could look to keep the pound: but that would mean interest rates set for Scotland but only on what is right for England, Wales and Northern Ireland. I have never seen the sense in that.
Or an independent Scotland could look to join the euro, but that assumes the conditions were right to do so.
All that would lead to the very instability we must avoid.
We will do all we can to ensure a strong and stable economy for every part of the UK.
The overall fiscal impact of the Pre-Budget Report aims to support sustained growth.
We will support the Bank of England in meeting the inflation target.
To maintain stability in the financial system, the queen's Speech on Tuesday confirmed we will legislate in this session for a new regime for dealing with banks that get into difficulties.
While stability in itself is a good thing, its benefits are far wider.
Let me give you one example. In the global economy, investment flows to the most stable economies.
Over the past 10 years, inward investment has risen by over 200% - twice the rate of the previous decade.
And Scotland has benefited from this too: last year more jobs were created through foreign direct investment in Scotland than in Ireland.
There is a benefit for public as well as private investment.
Our strong economy has enabled us to matched sustained growth with the longest period sustained period of rising public investment for 40 years.
Our fiscal rules for the public finances have enabled us to turn round decades of underinvestment in infrastructure under all governments and increase capital investment threefold.
And these things together have also enabled us to cut spending on debt interest and unemployment, freeing money to spend instead on investing in our future.
This has enabled us to double devolved spending in Scotland over the past 10 years. And in the most recent spending review, Scotland again received its full entitlement under the Barnett formula - over an extra £3 billion ($6 billion) a year in three years time. And of course, Scotland benefits too from spending, which is not devolved. Take defense, over 20,000 MoD civilians and service personnel are based in Scotland. And Scottish members of the armed forces have and continue to play a vital role serving Britain around the world.
And this takes me on to the second element for success, an investing economy.
The overall investment priorities for Scotland and indeed Britain as a whole are clear:
- investing in ensuring we have an efficient and effective infrastructure;
- investing in ensuring we harness people's ideas and innovations and transform them into economic opportunities; and
- above all investing in ensuring people have the skills they and the economy needs to benefit from global change.
All of these are areas where devolution gives Scotland the power to shape our own invetsment. And in three years time Scotland will have around £30 billion ($60 billion) a year to spend as it wishes - over twice that Donald Dewar had in 1999. The money is there to invest in Scotland's future, and the powers to use that money to drive a prosperous future lie with Scotland. That must be Scotland's focus now, or we will be left behind.
Scotland can be rightly proud of our educational heritage. There are a higher percentage of university graduates in the Scottish workforce than the UK average. Scottish universities win a larger share than our population of British excellence-based research funding and in turn produce a larger share of spinoffs and patents. And for every £100 million ($200 million) spent on research, Scottish universities produce five times as many spin outs and 50% more licenses as universities in America. And at the younger end of the scale over 90% of 3 and 4 year olds are now in pre-school in Scotland - in 1995 this was just 30%. That's some achievment over the last 10 years.
But we must build from this, not rest on it.
Other countries already competing on ever higher skills, even the emerging markets. While every year Britain adds 75,000 engineers and computer scientists, India and China add half a million; and while annually Britain turns out quarter of a million graduates, India and China now graduate 4 million. That is more than all of Europe and America.
And we in the UK will ourselves need ever higher skills. Today the economy has 9 million highly skilled jobs. By 2020 it will need 14 million. And of 3.4 million unskilled jobs today, we will need only 600,000.
That is why investing in skills whether in Scotland or for all of the UK is our best response to globalisation. No young person should leave school without the basic skills they need.
In England on leaving school they should have a choice of routes to gain higher skills from school or college-based academic qualifications to workplace-based apprenticeship-type qualifications, and - through the new diploma - a combination of both.
And all people should have the chance to acquire new skills throughout their lives.
Those who think we can build an economy on the value of a commodity such as oil are simply failing to face the challenges of the 21st century, especially when it is a very finite resource, perhaps 30 years left. The only commodity which ensures continuing economic prosperity into the future is the skills of our people.
The third element for success is by being an open economy, reducing, not increasing, barriers to trade.
Globalization is defined more than anything else by its openness. What happens in one part of the world can and does go on to affect the rest. We cannot shelter ourselves from change. Nor should we, provided we equip ourselves and our country for change.
Take the most global part of the world economy: the capital markets. Over the past 10 years global financial flows have doubled to $5 trillion; a quarter of global assets are now internationally owned. And the turbulence in the financial markets over the past few months, which started in one part of the American mortgage market but which has affected ever major economy, including of course the UK, has proved if there was any doubt quite how interconnected we are.
This increasingly applies to the global economy as a whole. Over the past 10 years the world economy has grown by 50%; but world trade has grown at 100%, twice that rate.
It is trade, connections and interdependence - the very things identified by Adam Smith 200 years ago - that is driving today's global change.
In the next few decades we will see more and more people and countries working together realising their interdependence. They'll want to be closer together not further apart.
The best example of the benefits of an open economy is here in the UK, home of the oldest single market. Three hundred years ago at the time of the Union, the most powerful argument was about access to trade and to markets with the potential for economic growth.
The same arguments were reflected in the construction of the United States of America, over 200 years ago.
And this remains a modern argument recognizable worldwide today. The European Union, the development of the ASEAN group of countries in Asia and NAFTA in the Americas.
Indeed, today Scotland's trade within the worlds' oldest and most established single market - with England - is twice as large as it is with the rest of the world. In 10 out of the 11 main industry sectors, Scotland's trade with England is larger than for the rest of the world put together. The scale of this trade is a demonstration of the benefits of an open, single economy built up over hundreds of years. We need to think long and hard before putting that at risk.
Let me give one example: financial services, and a modern Scottish success story which accounts for half our top 10 companies and employs over 100,000 people. Most of its business is with England: almost £8 billion ($16 billion) of the £9.5 billion ($19 billion) it generates every year is exported and over 90% of these exports go to England.
The European single market is rather younger. But already trade with the European Union accounts for more than half of Britain's exports. Of Britain's financial services exports, over a third goes to elsewhere in the EU. Overall the single market has created an additional 2.75 million jobs across the EU in the 15 years since it was established - and increased GDP by 2.2% a year, or 225 billion euros ($328.5 billion).
Previous world trade rounds have benefited all countries - lifting millions out of poverty and securing billions of dollars in extra growth.
Since 1950 and over eight successive trade rounds, average industrial tariffs of developed countries have fallen from nearly 40% to less than 5%, and there has been a 27-fold rise in world exports which has contributed to an eight-fold rise in world income.
The benefits of openness and trade are clear.
We will do all we can to increase British trade with all parts of the world.
In Europe, we will do all we can to ensure that markets are open and free, with the economic benefits that brings. As I have said before, across the world, investment and access needs to be a two-way process. So just as we welcome investment here, there needs to be a level playing field for British investment overseas.
While worldwide, we will do all we can to help conclude the trade negotiations, starting next weekend at the G20 meeting of Finance Ministers in South Africa.
Successful open economies are those which are also flexible and able to adapt quickly.
Flexibility is not about competing on low wages. Far from it. It is about our ability to react quickly to a rapidly changing world.
And Britain is one of the most flexible advanced economies and best places in the world to do business. But we must and will do more: strengthening our independent competition regime; legislating for a new planning system; and simplifying our business tax system to ensure it remains simple, fair and competitive.
Let me give two further examples where Scotland has benefited from the UK's flexibility.
First, on employment. Our labor market laws combined with the New Deal to help people into work, and the minimum wage and tax credits to make work pay have helped create over 250,000 jobs in Scotland over the past 10 years and 2.5 million in Britain as a whole.
In Scotland alone, the New Deal has helped over 200,000 into work. Over 100,000 benefit from the minimum wage. Tax credits benefit around 500,000 families in Scotland. And Scotland will benefit from the rolling out of Pathways to Work.
Second on regulation. In financial services the establishment of a single regulator in the FSA with its principle-based and proportionate approach has helped make Britain, and in particular London and Edinburgh, financial capitals in the world. And as we face the current international financial uncertainty, Scotland benefits not only from Britain's regulatory regime but from Britain's ability to act on the wider stage to address the underlying causes.
I said that we must act with other countries to tackle some of the big issues we face. Scotland in Britain can play a positive role in helping meet the global economic challenges facing all countries.
Working internationally to maintain global economic stability, the UK has led the G7 in modernising the international financial institutions in recent years including in Washington last month with proposals for an early warning system on risks to financial stability.
And we are committed to securing a bigger role for the dynamic emerging economies and low-income countries in the international financial institutions.
Working internationally to tackle climate change and ensure environmentally sustainable future for the planet.
In the spending review I confirmed Britain will allocate £800 million ($1.6 billion) year to support the poorest countries - those who could be hit most by climate change, but who can afford to adapt least.
More broadly, all countries now recognise we need goals to reduce global emissions and a framework to achieve them. The hard work of agreeing them now begins.
But above all working internationally to tackle global poverty.
Over two years ago world leaders gathered just up the road from here in Gleneagles and made what I believe are some of the most important international commitments made in recent decades: to cut debt, increase aid and ensure fair trade for the poorest countries to tackle poverty and help ensure globalisation can benefit all.
I am proud of Britain's role in securing debt relief for the poorest countries. But we now need to extend multilateral debt relief to other poor countries.
I believe that all of the poorest countries that can use the savings from debt relief for poverty reduction should be eligible for 100% multilateral debt relief.
The UK will continue to pay its share of the debt service owed to the World Bank and African Development Bank by low-income countries that meet this criterion and we will continue to urge other countries to join us in this effort.
And I am pleased that last month I was able to put Britain on course to meet the European target of 0.56% of national income on development aid by 2010 and then by 2013 the international goal of 0.7%.
And at next weekend's G20 meeting, I will call on the richest countries to meet their obligations to help the poorest countries reduce poverty and build stronger economies. And - with US Treasury Secretary Paulson - I will visit Ghana. A country that with the right policies backed by debt relief and aid, is making progress and set to achieve the first Millennium Development Goal - reducing poverty by half - this year.
Globalization of course does bring challenges.
But I believe Scotland, within the UK, is well placed to respond and rise to them both to meet the competitive challenges we face ourselves, but also to help meet the collective challenges the world as a whole faces.
Let me conclude with a straightforward proposition. Throughout my political life much of Scotland's politics has been dominated by debate on constitutional change - an all too familiar comfort zone for some.
And evidence says most people in Scotland want to remain part of the UK. And I believe that the people I represent in South West Edinburgh want to see us, whether in Westminster or Holyrood, together in cooperation, preparing and equipping Scotland for the changes it faces.
The rest of the world is doing just that. So must we by meeting the challenges and seeking the opportunities that come from globalisation.
We've got a choice: four years of constitutional wrangling, blaming someone else; or making sure we act now and seize the opportunities for Scotland's future.
I cannot emphasize enough the urgency of the task we face, equipping our country for change for change so that we can meet the aspirations of all our people. Everything else is a distraction from that essential task.
Notes to editors :
1 GBP = 2 USD as of NOvember 8, 2020
1 Euro = 1.46 USD as of NOvember 8, 2020