6. Final Remarks

6.1 Study Scope and Limitations

6.1.1 This study has applied a modern econometric tool (the Social Accounting Matrix, or SAM) to the analysis of the Western Isles economy in 1997. The work has been based on a variety of data sources including extensive primary survey work amongst the businesses and households of the Isles, as well as a variety of secondary sources. The SAM approach has enabled a wide-ranging analysis to be pursued within a comprehensive and internally consistent economic framework, but its limitations should be recognised. In particular, since the observed patterns of recent incomes and expenditures have been used, new technologies, new products and market pressures, and new behaviours by Western Isles enterprises and people have not been explored in detail; a number of more narrowly focussed investigations would be required in these respects. Nevertheless, the method offers opportunities for a number of further analyses similar to those in Chapter 5 to be carried out relatively easily.

6.1.2 The traditional problems of the Western Isles economy have long been recognised, and include:

· remoteness, reflected in high transport costs and thus some associated business and living costs

· dependence on a relatively few basic economic sectors, several showing marked seasonality and/or vulnerability to economic cycles and shocks

· loss of economically active population, particularly the educated young

· dependence on the public sector for employment, transfer payments such as social security and state pensions, and capital grants.

6.1.3 Over the years, a large number of private and policy initiatives have been set up to tackle these problems, several with success, though others have failed, at least after some time. This study has not attempted to analyse these initiatives, or the enterprises and institutions that have pursued them, except in the sense of analysing the pattern of the Western Isles economy, and thus the aggregate outcome of these efforts. Nor has the geographical dispersal of economic activity within the Western Isles been analysed, e.g. between Lewis, Harris and the Uists

6.2 The Future

6.2.1 For the future, a number of potentially positive developments can be identified, and deserve further analysis and initiative. These include increased consumer concern for products and services involving:

· traditional skills

· a clean productive environment, and

· a recognised "local identity"

In addition, physical and telecommunications are continuously improving. In all these respects, the Western Isles can hope to make maintain and increase its competitive advantage, whether in terms of products exported to the rest of the United Kingdom and overseas, or in terms of its attraction for tourists and indeed incomer residents.

6.2.2 However, these possibilities must be explored in full recognition of changes in the British and global economic environment. These changes include:

· greater environmental (and other, e.g. food) regulation, which requires advanced monitoring and inspection skills

· more careful exploitation of natural resources, both old and "new", e.g. the Atlantic oil fields

· "globalisation" of basic commodity and manufacturing production, leading to fierce competition in markets for undifferentiated and low value added products.

6.2.3 Locally, the changing political environment in Scotland is likely to affect the Western Isles in a number of ways, most obviously in the drive for increased community involvement in land development, sometimes amounting to community and crofter ownership of land and water rights themselves. In addition, pressure for further devolution of political and public-sector activity may be expected to intensify, leading to new regional initiatives.

6.2.4 The transport cost issue will remain of special importance to the Western Isles. Given their unique location, the case for special treatment in terms of air and sea taxes and subsidies remains an obvious one. Such costs are of course dependent on both fuel (basically, oil) prices and on fuel taxation, and developments in either component deserve careful monitoring.

6.2.5 Given their high environmental and cultural significance, the Western Isles will remain an attractive location as a place for some to live and for many to visit by the higher-income citizens of Britain, Europe and further afield. However, the economic characteristics of Western Isles consumers - permanent or temporary - in terms of buying power and productive interests (if any) almost inevitably lead to high imports of goods and services not produced in the Isles themselves, and hence to a continued trade deficit. Moreover, they, and local demographic patterns, suggest high demand for local public services which will require maintained expenditure from central government.

6.2.6 Overall, the economic future of the Western Isles depends on a combination of (a) the commercial competitiveness of their enterprises in the wider national and international economy, and (b) the policy dependence of their citizens in relation to decision-makers in Inverness, Edinburgh, London and Brussels. In both respects, pro-active engagement and innovation will be required.