Scotland’s future economy should be driven more by the application of technology in existing industries than ‘pure tech unicorns’, a leading Labour Party politician has said.

Daniel Johnson, Scottish Labour’s spokesman on the economy, business and fair work, says creating more tech startups, whilst laudable and necessary, is not the panacea for sluggish productivity and growth.

Johnson, who helped the party launch its recent ‘technology consultation‘, said policymakers need to consider ways of spreading more of the benefits of technology in the wider economy.

“There’s a bit of a tendency to be chasing pure tech unicorns,” he said. “And actually, where we’re going to get the most growth is the £100 million applied technology firms, rather than pure technology or software startups.

“And if you look at a lot of the economic data, 90 to 98 per cent of firms in Scotland just don’t grow, and poor levels of technology adoption are at the heart of that.”

For the uninitiated, ‘applied technology’ in this context relates to the kind of companies that are not inherently digital businesses, but benefit through its application. For example, healthcare is currently an industry being disrupted by robotics, AI and smart devices, which will not only improve patient outcomes but also alleviate the resource constraints and productivity problems in the NHS.

Similarly, the automotive industry has been disrupted by Tesla, which has taken advancements in electric battery innovation, as well as AI and software, and applied them to vehicle manufacturing in ways that have led to it becoming the largest car company – by market capitalisation – in the world.

Johnson cites his own example of a high-performing business applying technology in Scotland.

“I visited a fish processing plant which is using AI to pick the bones out of fish,” he says. “We’re going to have to do a lot more stuff like that if we are going to remain competitive but the reality is it’s probably only the biggest firms making those sorts of investments, so we need to look at ways of ensuring that smaller firms can benefit.”

Johnson, who is eyeing making more of an impact on technology as part of the party’s positioning ahead of the Holyrood elections next year, does not suggest a radical rethink on the Scottish Government’s flagship Techscaler programme, set up in the wake of Mark Logan’s Scottish Technology Ecosystem Review (STER), published in 2020.

He congratulates the programme for the successes outlined in its recent annual report but also advocates for something more crowd-pleasing for the business community, like the Digital Boost scheme set up during the pandemic to offer tech grants to small to medium-sized businesses grants, on a 50/50 investment basis, worth between £2,500 and £20,000.

The scheme, since mothballed, ensured that businesses could access vital funds during a national crisis so they had access to the technology and skills needed to survive online, as well as to increase their competitiveness, productivity and resilience.

“It’s about how we deepen the technology pipeline that STER set out, so it actually better focuses on applied technology and how those benefits are spread,” says Johnson. “But also, we did this one-off thing with Digital Boost, and we actually need to mainstream the ways that we provide support to SMEs.”

Digital skills and inclusion

Improving tech education is another focus.

“This won’t really work if you’ve just got a kind of a narrow elite within the economy who are benefiting from this. So this is why the digital inclusion and the education pieces are so important,” says Johnson.

Unlike the STER report, which recommended that computing science should be formally taught from first year at secondary school, Johnson is cautious about making anything compulsory and defers to his education colleagues, but concedes there is a case to be made.

“I’m not sure necessarily that I’d want to say that everyone at school should have to do pure computer science,” he says. “But stepping through this, first of all we need to address the issue around the number of computer science teachers. I think that’s that’s actually a real matter of urgency. I think we definitely need more young people taking computing science qualifications to higher level and beyond.”

He adds: “What is more important to me than people taking computer science and making that mandatory is that we actually understand the underlying skills and actually mainstream them, especially in primary education.

“I think at the moment, we still have a tendency to think about technology in schools as being about using devices.” On digital inclusion, Johnson also suggests that devices have been too central to the thinking about solving that problem, which he sees comes back to skills.

In his view, teaching the requisite skills is about approaches to problem-solving, from primary school through to secondary and beyond.

“I think we need our young people to be learning with a level of comfort and inquisitiveness about technology, and systems thinking which is not necessarily about coding, not necessarily about formal computer science.”

Transforming public services

Over the past decade, the core staff employed by the Scottish Government has nearly doubled, increasing by over 80 per cent from 5,120 in 2015 to 9,222 in 2024. Between 2017 and 2024, public sector employment in Scotland grew by 56,000 (11%), raising its share of the workforce from 19.6% to 22.1%, according to independent analysis by the IFS, which also showed public sector pay in Scotland rose by 5% above inflation from 2019 to 2024, contrasting with stagnation in the rest of the UK.

Despite these increases in staffing and remuneration, there is no clear evidence of improved staff retention or productivity. The NHS in Scotland, even after receiving a £1.5 billion funding boost, has struggled to reduce waiting times or offer more appointments, indicating challenges in translating increased resources into enhanced service delivery, again according to the IFS.

Johnson says: “We need to look at government head counts and where they’ve been going over the last 10 years, and the balance of those between administrative and frontline [roles].

“We are still in a situation where, in the public sector, we throw people at problems. But actually technology needs to be seen as core business. Much like the banks or financial services have to go digital or go out of business, we need to be embracing that level of disruption in public administration.”

He adds: “Public administration is in the the business of information management, analysis and implementation, and we should be much more digitally-led than we have been.”

In that sense he would like to see a wider and deeper focus on digital technology within government.

“You only have to read Audit Scotland reports to see there is a deep level of dysfunction with the way that the directorates work,” says Johnson. “And just having a digital directorate, it doesn’t mean that everyone in the Civil Service is working in a technology and digitally literate way.”

So is he suggesting a sweeping public service reform agenda if elected next year as the party of government?

“We need to have a very clear-eyed look about how the Scottish Government is organised, how it manages itself, and how it seeks to deliver,” says Johnson, who was a management consultant before going into politics. “Digital is part of that but I think there are more profound questions to be posing and answering, but we need public administration to be more efficient.

“I think digital is absolutely at the core of that, but adopting modern, efficient practices as well as better management structures within organisations is also very important.”

Whilst he wants AI to support delivering some of those efficiencies, he insists that Scotland should not ‘reinvent the wheel’ every time it comes to public sector technology. Of course there are different organisations, with different structures and ways of working north of the border, but when public finances are increasingly under pressure, Johnson would like to see more of a collaborative approach with the rest of the UK, where required.

“I mean, it’s like our health app [Digital Front Door], we have decided to have a separate approach to that, but I don’t have a good answer why that should be the case,” he explains. “If there are things that we can use that have been developed by the UK Government, we should use them.”

But the point is broader than that. The Department for Science, Innovation & Technology (DSIT) has recently made a slew of announcements on technology and AI, including the launch of the much-vaunted AI Opportunities Action Plan, authored by the tech entrepreneur Matt Clifford, which proposes greater use of the technology in public services.

Recent plans include the launch of an AI assistant for Civil Servants called Humphrey, named after the famed 80s sitcom ‘Yes, Minister’, and a proposal to create a National Data Library, which would harness the power of AI to train on government datasets to use within high impact sectors of the economy.

Johnson would like to see more data compatibility between Scotland and the rest of the UK.

“I’d be interested in exploring the underlying technology, data architectures and strategies, because in order for this stuff to work, and to not be constantly reinventing the wheel, you need quite strong underlying architectures,” he says. “And I’m not clear that the Scottish Government has that. I’m not clear that the UK Government has that, but I think they’re slightly further on,” he adds.

He says: “It’s about how we organise and plan these technologies, so even if we do decide to design our own apps, they can sit on top of underlying data architectures and systems that are compatible with wider UK approaches.”

He adds: “There’s a lot of situations where the Scottish Government has pursued an approach of creating separate entities, approaches and whatever else, just in order to put their logo at the top of a web page. I think Gordon Brown has made this point regarding social security, for example, and the approach we’ve taken there.”

But Johnson also wants to look further afield. In his party’s technology consultation paper, it makes clear that some of the answers lie with the way technology is being used by governments around the world. He name checks Finland and Estonia – albeit at the risk of sounding clichéd – as places which have really embraced technology to improve public administration.

“I know that Estonia, in particular, was able to start from scratch,” says Johnson. “But it’s the way that they have really mainstreamed technology and the way they deliver services digitally that should be of interest to us. And that’s the point of the consultation exercise, really. If there are examples of successful implementation of e-governance systems around the world, we shouldn’t be afraid to want to replicate them.”

Read the Technology Consultation paper here: https://scottishlabour.org.uk/wp content/uploads/2025/02/TechnologyConsultation.pdf