Those of a cynical disposition—and there may be one or two in our midst—might think that this debate is unlikely to set the heather alight. We have certainly had plenty of opportunities in this chamber to discuss our departure from the European Union. Somehow, however, I sense that there could be some more sparks this afternoon.
Last September, I asked a related question of the First Minister and she countered that it was akin to an arsonist phoning the fire brigade. How outrageous! As Mr Taylor pointed out at the time, in his “Blether with Brian” column, there is no such offence in Scots law—north of Gretna, we do not do arson; it would be wilful fire-raising. So, one might say that I have previous—my bad. Today, however, I shall be leaving the alleged pyromania to others. My role is to speak as convener of the Economy, Jobs and Fair Work Committee and to outline the findings of our report on the economic impact of leaving the EU.
The report is, of course, the outcome of a collective committee endeavour.
“I’ve searched all the parks in all the cities and found no statues of committees.”
It was G K Chesterton who said that, and who could disagree? We spent a good portion of November, a slice of December and a chunk of January on the inquiry. We received 17 written submissions and took evidence from 35 witnesses over the course of some nine meetings. We also visited and took soundings from 18 companies and organisations in various sectors around the country. We wanted to hear, to understand and to convey the views of employers and employees. We were looking for possible impacts and how to mitigate them, as well as for opportunities.
We focused on three broad areas: exports; investing in Scotland; and labour-market issues. I will offer a flavour of what we found under each of those headings. Other members of the committee, including the deputy convener when he closes the debate, will complement what I have to say—for the purposes of the Official Report, that is complement with an “e”, not an “i”. Colleagues may wish to cover the aspects that I cannot fit into these 15 minutes of European fame.
Evidently, the United Kingdom’s exit from the European Union is a developing process and the committee’s report can provide only a snapshot of the pre-triggering-of-article-50 period. Therefore, the unfolding economics of Brexit is something to which the committee may want to return.
For now, let us start with exports. Should Scotland aim for the rest of the world, rather than for the rest of the EU? Helpfully, Dr Zuleeg of the European Policy Centre answered his own question. He said:
“It is about both, rather than either.”—[Official Report, Economy, Jobs and Fair Work Committee, 1 November 2016; c 43.]
Other witnesses told us that much of our trade is invariably with our most immediate neighbours, in the rest of the UK, due to what is known as the proximity effect. Generally, that is true for food and drink, oil and gas, and steel; yet the fastest-growing economies today are those of China and India, where our sales remain low and where the growth potential for our exports could be greatest.
Should we be pessimistic about the outlook post-Brexit? James Withers of Scotland Food and Drink saw global opportunities. He described the potential in premium markets and in tapping into consumers’ desires for quality, authenticity and provenance. Companies that are represented by the China-Britain Business Council were just as sanguine; they were hopeful of a free-trade deal of some kind.
We must strive to encourage a more international mentality. Jane Gotts reminded us that 50 per cent of Scotland’s exports are still generated by just 50 companies. The challenge is to promote international thinking and to help our small and medium-sized companies to develop. We know that SMEs are central to the success of our economy, so what can the Scottish Government and its agencies do better, do differently or do more of?
The work of Scottish Development International in securing new markets was praised by Scotland Food and Drink. SDI itself spoke of mobilising partnerships, building the narrative and supporting ambition. The Scotch Whisky Association wanted policy expertise, capacity, a long-term approach and the tackling of trade barriers. Glasgow Chamber of Commerce was highlighted for its international certification services, the uptake of which had risen 50 per cent in just three months. KPMG underlined the importance of planning for change for businesses that have exposure to Europe.
Last March, the Scottish Government published its trade and investment strategy and, more recently, it published a four-point plan for boosting exports that covers a new board of trade, trade envoys, a hub in Berlin and a doubling of SDI staff across Europe. The four-point plan focuses on Europe but, in a post-Brexit world in which powers to negotiate trade deals come back to the UK, the wider international context needs to be considered. The cabinet secretary told us that more needed to be done to expand the export base and that that was part of the rationale for the review of the enterprise agencies.
Such was the evidence that we heard. I look forward to what the cabinet secretary has to say about those matters and, specifically, about greater backing for SMEs, the focus on emerging markets and support for trade with our nearest neighbours.
This is a critical time for our exporting businesses. The committee will keep the Scottish Government’s four-point plan under review. We also want ministers to listen to concerns about the quality of accreditation, licensing and certification with countries around the world after Brexit. The last thing that a seafood company in Peterhead needs is a bureaucratic impasse in St Petersburg and cargo left rotting in the crate on a boat at the Russian port because the paperwork is not correct.
Stephen Boyle of the Bank of Scotland spoke about the exchange rate and import inflation and said that the biggest cost increases were in energy, food and clothing. Those three areas constitute a higher proportion of spending for older and poorer households. Scotland’s chief economist, Gary Gillespie, said that inflation was expected to impact further on consumption and affordability. We want the Scottish Government to assess any potential impacts on our most vulnerable citizens and to report its findings back to the committee.
Inward investment was the second strand of our inquiry. We learned that Scotland has had its successes. Certain figures point to the fact that, in four of the past five years, we have been the top UK location outside London for securing foreign direct investment. The international public policy institute told us that such projects are exceptionally important and that, for high-productivity, high-skill, export-oriented businesses, they matter as much as domestic investment. However, much of that came from repeat investment.
The Scottish Council for Development and Industry said that we had been less successful in attracting money from new sources. In the Scottish Government’s own assessment, awareness among investors in Asia was relatively low, and China did not even feature in Scotland’s top 10 sources of investment. We support proposals to strengthen Scottish Development International and to better co-ordinate international activity, but the right balance between foreign direct investment and supporting home-grown businesses must be struck.
We welcome the commitment to do more to offer core support to more Scottish businesses. Our SMEs need backing now more than ever. The committee will investigate what support is available to companies beyond the start-up stage.
“The priorities within the Government’s Economic Strategy”
may well
“have been turned on their head”
by Brexit, and it is crucial to “revisit” those priorities. Those are not my words but those of the director of the Fraser of Allander institute, who was formerly the architect of the said strategy when he was head of the office of the chief economic adviser. Professor Roy saw new challenges and opportunities, and he asked about what levers we can use differently to have an impact on certain sectors.
It is clear that the economic landscape is shifting. With those points in mind, the committee recommends that the Scottish Government review its economic strategy. The relationship with our overseas trading partners is going to change. I could not decide whether to end that sentence with the word “significantly” or the word “irrevocably”, but I suspect that we can all agree on the basic premise. Whether or not we like that is, of course, quite another question, which I shall leave to other members in this debate.
Might there be merit in the Scottish Government also reviewing its trade and investment strategy? I can observe the cabinet secretary’s body language, but we await his words.
The third strand of our inquiry was the labour market, the details of which I shall leave for my committee colleagues. I hear no howls of protest at that, at least at this stage.
I want to touch on the distinct needs of the Scottish economy. Some sectors—the pelagic fish and soft fruits sectors, for example—rely on EU labour from outside the UK for both skilled and unskilled labour. We also have an ageing population, and labour growth is relatively slower in Scotland than it is in the rest of the UK. Such challenges should be highlighted to the UK Government.
Another matter is what an RBS witness termed
“a form of internal migration”.—[Official Report, Economy, Jobs and Fair Work Committee, 1 November 2016; c 36.]
He was referring to people of working age who are already in Scotland but remain outwith the job market. We were told that location and specific skills can act as barriers for them. Is that something that the strategic labour market group could address? Perhaps the cabinet secretary would be so good as to enlighten us on that.
One further point, beyond my list of three, concerns engagement with the business community. If saying “engagement” was not bad enough, I am going to have to force myself to say “stakeholders”—that most slippery of terms. However, there is a serious point to be made. Time will always be a precious commodity in the private sector, but most people from whom we heard during our inquiry wanted to have their say on the economics of leaving the EU and we would welcome an indication from the cabinet secretary of how he intends to engage with stakeholders—it is a wonder that I can live with myself after saying that.
I have reached my final furlong. I am grateful to the committee for the collaborative way in which we undertook the inquiry. For the record, I have no time for Milton Berle’s claim that
“A committee is a group that keeps minutes and takes hours”,
although we certainly spent hours on the subject of the EU and I am not sure how many minutes we took.
I thank my colleagues for their pragmatism, forbearance and occasional good humour. I realise that this will result in incredulity, but we did not agree on every detail: this report of ours—to abuse a line from “Yes Minister”—was a triumph of the collective will over the political won’t.
Whether or not we agree with the result of the referendum in June last year, I have heard nobody disagree that European neighbours remain close friends and allies, or that those relationships will outlast the ending of our membership of the European Union. Scotland has always been outward looking and global in perspective. Historically, we have punched far above our weight when it comes to international influence.
Scots invented, discovered or manufactured much of what made the modern world modern. Members know the list, of course: television, the telephone, wave power, the electric light, ATMs, the Bank of England, overdrafts, the stock market, universal standard time and the US navy—and on it goes. We have made major contributions to science, design, communications, culture, commerce, medicine, industry, technology, transport and beyond. However, did members know that we also gave the world paraffin and the theory of combustion? Let the sparks fly, Presiding Officer.
I move,
That the Parliament notes the conclusions and recommendations contained in the Economy, Jobs and Fair Work Committee’s 2nd Report, 2017 (Session 5), Report on the Economic Impact of Leaving the European Union (SP Paper 80).
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