Economy, Energy and Fair Work Committee

Meeting date: Tuesday, January 8, 2019

Official Report 798KB pdf

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Budget Scrutiny 2019-20

Agenda item 2 is scrutiny of the 2019-20 budget. I welcome the two ministers who are with us this morning: Derek Mackay, the Cabinet Secretary for Finance, Economy and Fair Work, and Jamie Hepburn, the Minister for Business, Fair Work and Skills. They are joined by Oonagh Gill, deputy director for enterprise and cities, and Gavin Gray, deputy director for employability, from the Scottish Government.

I invite Derek Mackay and then Jamie Hepburn to make brief opening statements before we move to questions from committee members.

Good morning, convener. The budget is in the context of continuing United Kingdom austerity, which has reduced our resource block grant by £2 billion in real terms over the past decade. It is also against the backdrop of a UK Government that is careering towards any Brexit, regardless of the cost. Therefore, the budget aims to provide as much certainty as possible for business and the economy by providing stability and stimulus and by making strategic long-term investments to strengthen and prepare the economy for the future.

In terms of economic indicators, the latest gross domestic product statistics, which were published on 19 December, show that the Scottish economy continues to have stable growth for the fifth consecutive quarter. I welcome the statistics that show that business, enterprise, research and development expenditure in Scotland was £1.2 billion in 2017, which was the highest level since 2001 and was up by 13.9 per cent from 2016.

We published an economic action plan in October that set out the range of positive actions that the Government is taking to deliver inclusive growth. The employment rate in Scotland remains among the highest on record, and the unemployment rate is at a record low.

The Scottish budget will invest £5 billion to grow and modernise Scotland’s infrastructure. That will include creating a £50 million town centre fund to safeguard and support the future of our high streets; investing £8.3 million to further progress the new national manufacturing institute for Scotland; targeting up to £18 million in European funding to establish an advance manufacturing fund; providing initial funding of £130 million to support the establishment of the Scottish national investment bank; committing more than £187 million of capital investment in city region and growth deals; and investing £20 million over the next three years to enhance and intensify support to businesses that are wishing to export, including £5 million in 2019-20.

In terms of a competitive tax regime, the budget maintains the most generous small business bonus scheme in the UK, which lifts about 100,000 properties out of rates altogether and extends the transitional relief for the hospitality sector and for offices in Aberdeen and Aberdeenshire. The increase in the poundage for the property tax in Scotland is capped below inflation, giving a poundage of 49p. That ensures that more than 90 per cent of properties in Scotland pay a lower poundage than they would if they were in other parts of the UK.

The budget offers the most generous package of reliefs anywhere in the UK, which is worth more than £750 million. It continues to invest about £2.4 billion in our enterprise and skills bodies to provide the vital support that is required to realise Scotland’s economic vision.

In 2019-20, Skills Development Scotland will receive an additional £22 million, taking its total budget to £214.7 million. That will further expand the work-based learning opportunities that are available through foundation, modern and graduate apprenticeships. We will publish the future skills action plan in early 2019 to ensure that we have the right skills in place to support individuals, employers and our economy.

Thank you. Mr Hepburn, do you have anything to add?

I do not propose to add anything to the cabinet secretary’s opening remarks.

We will start with a question from me, then. The Scottish Government appears to agree with Scottish Enterprise’s claims that Scottish Enterprise contributes positively to the Scottish economy. Against that background, why does the Government continue to reduce Scottish Enterprise’s grant allocation? If the Government accepts that Scottish Enterprise is successful, should money not follow success?

There are a few issues there. First, Scottish Enterprise, unlike some other parts of Government or other agencies, can generate some of its own income. There is of course a recognition of how important the economy is, and Scottish Enterprise is key in that. The Government has to make choices, given the backdrop of an overall real-terms reduction over a 10-year period, but we believe that Scottish Enterprise can deliver the outputs that we have asked it to deliver while delivering efficiencies. It believes that it can do that without impacting on performance, through head count, assets and property and the ability to generate income.

We should be mindful of the range of actions that we are taking to support the economy, although Scottish Enterprise and Highlands and Islands Enterprise are key players in that regard. If we include the city deals and growth deals and so on and the funding for the manufacturing institute, we see that the totality of investment to support the economy is impressive. Scottish Enterprise believes that it can execute its function while making those efficiencies through the areas that I mentioned.

Not everyone would necessarily agree with the point about Scottish Enterprise’s performance, and some might think that you are cutting the budget because you share that view, in spite of what you have said about the position.

No. I am clearly setting out that I expect Scottish Enterprise to carry out the functions that we have asked it to and that Scottish Enterprise believes that it can do that while making efficiencies, given that it is able to generate and realise income. The situation is not a reflection on the organisation; the reality is that the Government has to make budget choices, and that is one of the choices that we have made. We believe that we can get the same outcomes. I have discussed the issue with the chief executive of Scottish Enterprise, Steve Dunlop, and he believes that he can deliver on those asks while delivering the efficiencies.

I have a question for Mr Hepburn, and I think that other members will ask about the same issue. He will be aware of the situation with Kaiam in Livingston and of similar situations involving companies that have received funding support through Scottish Enterprise. Does there need to be more general consideration of how such funds are used, what companies they are used to support and whether they could be used more efficiently to support greater sustainability of workers’ jobs?

Clearly, the situation at Kaiam is very disappointing, and I understand that the circumstances there will beget such questions. Our expectation is that, where Scottish Enterprise seeks to provide any form of regional selective assistance, it should go through a process of due diligence. That will have been done with Kaiam, just as happens with any company or organisation that Scottish Enterprise determines should be provided with funding. The process includes consideration of a number of factors, such as finances, market conditions and the company’s business plan, and that will have happened in the circumstances at Kaiam.

Of course, where such funding is provided, it does not guarantee that a company will be successful in the long run. Clearly, when Scottish Enterprise makes funding available, it does so on the basis that due diligence has been undertaken and it hopes that the funding will lead to on-going success. With any form of investment, we are never guaranteed that it will result in a company being able to sustain itself for the long term but, where there is investment, there is an expectation that there will be a return. Sadly, that has not been the case at Kaiam, and my primary concern now is to support the workforce there. We are doing that through our agencies, through Scottish Enterprise and through Skills Development Scotland working with partnership action for continuing employment—or PACE—of which it is a member. My primary focus is on ensuring that the workforce can be supported.

As I have said, that has been happening already. There has been a quick response in the form of the supporting events that have been arranged in West Lothian, and there will be another jobs fair later this month to support the workforce. After that, Scottish Enterprise will look at how it can recoup any investment that it has made in the company.

You will be aware of the calls for a general review of the background and approach to assigning such assistance—you mention that in your letter. Do you agree that there should be such a review?

We have made a number of commitments in, for example, our fair work first policy to ensuring that fair work is embedded in any public investment that we make in any organisation or private enterprise. That work is under way, and we are looking actively at our wider expectations for the return that we get on public investment. I am also aware that the committee has undertaken a review of business support, and we will, of course, respond to its report in due course.

I am sure that other committee members will come back to the specifics of the Kaiam situation, but at this point I will bring in Andy Wightman.

Cabinet secretary, you mentioned that you had met Steve Dunlop to talk about running-cost efficiencies. Can you give us more of an idea of what exactly those efficiencies are?

No, it would be more for Scottish Enterprise to give you the detail on that. As I have said, I sought reassurance about its ability to deliver its functions while making those efficiencies and with the income that it is able to generate. If you require more information from Scottish Enterprise, I encourage you to get that through Steve Dunlop, who I am sure will be forthcoming about how he envisages running his operational budget based on the budget that I am proposing to Parliament. It is in the territory that I have described to the committee, but I am sure that Steve Dunlop will be happy to go through it in detail.

One point of reassurance that I am sure the committee will appreciate relates to the Government’s approach of having no compulsory redundancies, and anything to do with head count will not compromise that policy. I also note that the organisation has an estates strategy. Given my responsibility for asset management in the Government, I know that there is a range of areas such as workplace planning and asset management that can be explored for further efficiencies. I am sure that Steve Dunlop will be happy to engage with the committee, but I was satisfied with the assurance that I was given with regard to the 3 per cent budget reduction and the maintenance of the totality of investments to support the economy which, as far as enterprise and skills are concerned, comes to £2.4 billion. This is an efficiency within the organisation.

Are you seeking a 3 per cent saving through efficiencies right across the public sector?

It is a benchmark figure. There is an annual expectation that efficiencies will be made, whether in productivity, in procurement or just in general. Indeed, we have an agreement with local government for efficiencies to be made annually and reported to the Scottish Government, and that happens every year. However, I am not saying that that is consistent for every part of Government or every department or that there is an equivalent level in the budget allocation. That allocation is determined by a range of factors, but that is the consistent figure for Scottish Enterprise and Highlands and Islands Enterprise.

You said that local government reports those efficiencies to Government on an annual basis. Do any other public sector bodies outside this portfolio do the same or account for how they have achieved efficiencies to ensure that lessons can be learned?

Sure. It depends on the nature of the public body or agency and their accounts or accountability arrangements with ministers, but organisations will report on how they have conducted themselves.

I realise that, but I am talking about crystallising the actual efficiency savings. When the level 4 figures in the budget say that this saving will be achieved through running-cost efficiencies, it would be useful to know on an on-going basis, year to year, not just in Scottish Enterprise but across the public sector, the nature of those efficiencies, how they have been achieved, and any lessons that can be applied in future. Would that not be generally useful?

10:00  

It would. The leaders and chief executives of Scotland’s public bodies and Government departments meet through the Scottish leaders forum and there is sharing of good practice on efficiencies. Some of it might be straightforward, but I am not so sure that there should be an additional requirement to produce a report or a document. There is sharing of good practice, of what good savings look like and what works in procurement and other areas. I can certainly give the matter further thought, but a lot of sharing of information about efficiencies can be found in the public sector.

On another small point, you mentioned £750 million of reliefs on non-domestic rates. What evidence is there that the small business bonus scheme provides any economic benefits?

This is a regular discussion that Mr Wightman and I have at various fora, and I am delighted to bring it to the Economy, Energy and Fair Work Committee as well. As Mr Wightman knows, the Government has conducted an exercise and organisations such as the Federation of Small Businesses have produced survey evidence of what they believe the small business bonus has done to support the economy for small to medium-sized businesses. I am happy to supply that survey output to the committee. Mr Wightman will also know that the Government has committed to reviewing the small business bonus. The details of that can also be shared.

Everyone will agree that we are facing a tough economic context, particularly with the uncertainty of Brexit. It was therefore no surprise that the Scottish growth scheme, which was announced in the programme for government in 2017, was widely welcomed. Imagine, therefore, our disappointment at only £0.5 million of the £10 million having been spent. Do you consider that Scottish Enterprise has taken its eye off the ball?

To be fair, I note that there is a range of issues within that question. That fund is part of the £500 million Scottish growth scheme, of which more than £100 million has been invested. However, I accept that an element of the European scheme has not landed as we wanted it to. We can all accept that that is disappointing, but there are several ingredients to consider—there being a willing investor and a proposition, and the Government element of the scheme that then comes into play. Staffing of that element will be improved by dedicated staff. I hope that that makes a difference and that we can invest the money as was envisaged.

This is not specifically related to that matter, but I have been advised by companies that some investment is drying up because of the current Brexit uncertainty. Some investment plans are not being realised or are being put on hold because of the calamitous position that we are in, which is that we do not know what will happen on 29 March because of the ineptitude of the UK Government. That uncertainty is right now having an impact on interest in investing throughout the UK.

That said, my answer to the question is that dedicated staff are supporting the Scottish European growth co-investment programme fund, but the ingredients of its success include there being an investment proposition and ready investors before Government and European funding can come into play. I hope that that is achieved. This is one part of the overall £500 million scheme.

On the wider question, I want to make sure that the £500 million is invested over the period. I know that I committed to providing the committee with an update by April. I shall do that. It will set out where we are with all the schemes, and what we are proposing for the year ahead.

I hear what the cabinet secretary says, but it does not explain what has happened in the past 12 months. Some people wanted to invest in preparation for Brexit.

I accept that in the next three months the situation will be very difficult and challenging, but I cannot help but wonder whether it is a missed opportunity. There are additional staff, but you have described how there will be issues in relation to investors. How will you otherwise use the money? Will you divert it elsewhere in order to ensure that it is used?

If, for whatever reason, financial transactions funds cannot be used for the purpose for which they have been dedicated, they can be used across Government. I have ensured that that is done—we either, by way of a budget revision or otherwise, carry money forward or reinvest it elsewhere, with the support and approval of Parliament. For example, the financial transactions that we have used to provide support to farmers can, if they are realised, be reinvested in the economy. I give a reassurance that financial transactions are not lost to us, and that ability to spend them is maximised either through budget exchange or through another good cause. Financial transactions across Government—the help-to-buy scheme, support for farmers, and investment companies—can be fluid. I welcome the fact that they can be used in that fashion and then carried over. If I could not spend a particular quantum and had to hand it back to the Treasury, that would be an unacceptable situation, so I would engage with the Treasury. I assure Jackie Baillie that the financial transactions are spent.

In relation to the £10 million Scottish European growth co-investment fund, part of the issue is the scale of equity investment. There are other investments around, and there is a hierarchy of financial support that can be provided to companies, irrespective of Brexit uncertainty. Companies can choose which support they wish. Some prefer grants—which is maybe no surprise. What would an investor choose? They could take the money, with conditions, or they could take the equity or a loan. Companies have sought guarantees for different reasons. There is a menu of financial support for companies in Scotland, some of which is delivered by Scottish Enterprise. There is separate Brexit support as well, including the Brexit readiness programme, which supports companies in preparing for Brexit, whatever it transpires to be. However, extra effort is going into the Scottish European growth co-investment fund.

On the timescale, I understand and appreciate the disappointment, which I share, that more schemes have not come through successfully. That is partly down to the time that it takes for an investment proposition to go through the necessary process. We hope that more will come through the pipeline. Investors have made contact, but I understand that Brexit uncertainty is casting doubt on their investment propositions. We all know that investment has been put on hold because of Brexit, but the Scottish European growth co-investment scheme’s dedicated fund managers—I think that that term is correct, but I can come back with the detail—will try to be proactive in ensuring that the funding is used. I hope that my comprehensive answer gives reassurance that the resource is not lost to us. We are trying to take advantage of the existing resource.

The draft budget allocates £130 million of initial funding to the Scottish national investment bank. How much of that money is coming from financial transactions funding that is derived from the UK Government?

£120 million is coming from the financial transactions and I have allocated a £10 million base operating cost.

The vast majority of funding for the Scottish national investment bank and £70 million of the Scottish Enterprise budget is derived from financial transactions funding. When the UK Government announced the funding, the cabinet secretary described it as a “con” and said that it is not real money. Do you still think that financial transactions funding is a con?

I think that Dean Lockhart is mixing up what I said. Just as I said about the resources that businesses would choose, any Government would choose the financial flexibility of resource funding. Why would it not? I have described how—Dean Lockhart helps me to make my point—the Scottish Government and Parliament are being asked to choose reductions in front-line services because our resource block grant is going down in real terms, which has an impact on services in Scotland. In relation to capital investment, I have said that in the case of traditional capital departmental expenditure limits, it can be invested directly in housing, for example. That is capital investment. Financial transactions funds are welcome for such purposes.

I welcome investment of such funding in the national investment bank, and I welcome its use to support co-investment in companies or for equity funding. What I do not welcome is a reduction in the front-line budgets, a reduction in the capital departmental expenditure limits grant and a reduction in the financial flexibility that we have to invest in a very tightly defined area. Any finance secretary would want as much flexibility as possible, so that we can invest money in the fashion that we would like.

I welcome financial transactions as far as they go, but, given the wider context, surely the committee understands that I would also welcome an increase in resource spending, so that we can invest more in the national health service, education, local government and so forth.

What I described as a “con” is some Conservative members’ having described the £2 billion as totally unconditional funding for the Scottish Government when, in fact, a large amount of it is financial transactions—

But cash is fungible—

Dean Lockhart might not like it, but that is the explanation: the £2 billion has strings attached.

No. The reality is that cash is fungible. The increased financial transactions funding means that you can use, in other areas, cash that would otherwise be going to the enterprise agencies. That is just a simple case of financial management.

Thank you for clarifying that FT funding is not a cost.

I certainly cannot fund the national health service, education or local government through financial transactions funding. My point was that it is a con to describe it as unconditional money, so I am glad to have been given the opportunity to clarify that.

Good. I am glad that it is real money.

I will move on to a more general question about the budget. The amount of income tax that is under the control of the Scottish Government that will be collected is forecast to decline by half a billion pounds over the next financial year. That is almost 10 times the amount that the Government will raise as a result of not increasing tax thresholds. What are the reasons for that half a billion pounds decline?

Income tax is forecast to increase. Shall we go to the tax chapter?

I am talking about income tax.

Yes—so am I.

What page are you on?

You are questioning me, so you tell me what you wish to probe.

I am looking at table 1.02 on page 8. The line on Scottish income tax shows a decrease from £12.1 billion in 2018-19 to £11.6 billion in 2019-20.

What do you wish to challenge?

I refer to the figures in the last two columns, which show Scottish income tax going down from £12.1 billion to £11.6 billion.

The member will know that we are moving from forecast figures to outturn figures. The closer we get to each fiscal event, the closer we get to outturn. There is an 18-months to two-year delay for income tax figures being reconciled.

As I said, we are moving from forecast to actual outturn. The policy decisions that we have made will increase the Scottish income tax take.

That is not what the table says.

We are moving from a period of forecast to actual outturn. The more data we have, the more accurate the picture.

Right—but is the table accurate in showing a £500 million decline in income tax receipts?

Mr Lockhart, you are a member of the Finance and Constitution Committee, are you not?

I used to be.

You will therefore be very familiar with the issue of moving from forecast to outturn figures. It recalibrates the numbers. As each year passes, we have an updated number.

Of course, we would all like to get as close to the outturn figure as possible. That figure will give us the actual number rather than what has been forecast.

I can give a more expansive answer, of course, because we have published the medium-term financial report, which gives us the latest numbers. As I said, when we have the outturn figures, that will tell you exactly how much has been raised. We rely—we have in the past, we do so now and we will in the future—on forecasts that are provided by the Scottish Fiscal Commission. The Fiscal Commission, in its very detailed report, has been going through its estimates of Scottish income tax. It will move from its baseline, which was an estimate, to the actual outturn. That has no detrimental consequences for the Scottish Government’s budget and the resources that we have. We previously faced that methodology issue. The commission has revised its Scottish income tax figures. The explanation for the difference in the figures is that we are moving from forecast to more accurate outturn figures.

Okay—but we will still see a decline in the cash that comes in through income tax.

I will move on. The estimated number of top-rate taxpayers has reduced from 18,000 to about 12,000. The 18,000 figure is from your tax document last year. What steps is the Scottish Government taking to increase the number of top-rate taxpayers, who provide a significant percentage of income tax receipts? Do you think that increasing the tax gap between those taxpayers and the rest of the UK will help to increase income tax revenue from those taxpayers?

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First, I have not seen any evidence that a divergence in tax policy is deterring people from coming to live, work and invest in Scotland. There are two sides to the coin—tax and spend. On spend, we are stimulating the economy. We are providing the stability that is required and—importantly—sustainability in our public services, and we are maintaining the social contract. That provides benefits that do not exist south of the border—free education, no prescription charges, the extension of free personal care and the kind of society and country that we are trying to build, for example.

This is about raising the necessary revenues to invest in our public services. Our doing so presents Scotland as a more attractive country. There has been no evidence that tax divergence thus far has impacted negatively on Scotland’s economy. Indeed, it can be argued that the two quarters in the current financial year in which Scotland outperformed the gross domestic product growth of the rest of the United Kingdom show that the economy is strong and that there is no deterrence. That said, as I said in my budget speech, we must be mindful of divergence, so I have asked the Council of Economic Advisers to continue to advise us on the issues.

The question that Mr Lockhart asked was specifically on the top rate of tax. We have taken an evidence-based approach. It is interesting that I do not see any Labour members on the committee—

No. I do see a Labour member in Jackie Baillie. [Laughter.]

The cabinet secretary should apologise.

I do apologise. The Labour Party should apologise for its treatment of Jackie Baillie, but that is a separate matter. [Laughter.]

I was going to make the point that, if we had pushed the top rate of tax to the point at which it deterred people from living in Scotland, less resource would be raised. We would not be willing to do that, if the advice that we were given was that such a rate would have a detrimental effect.

Maintaining the top rate at the current level raises extra revenue and meets the tests that we have set for income tax. Our discussion paper on income tax sets out the four tests: to have a more progressive system, to support lower-income earners, to protect the economy, which is key, and to raise revenues for our public services. The top rate meets those tests.

How we attract more top-rate taxpayers to Scotland is about the kind of country that we want to build. We want a country that is investing in infrastructure, education, society and business, and which is a fairer and more progressive society. We have a successful economy that will continue to attract people. I continue to believe that my proposed tax rates will not be a deterrent to investment or to taxpayers living in Scotland.

My final question is to ask whether you have a specific target for increasing the number of top-rate taxpayers in Scotland?

I do not have a specific target for top-rate taxpayers.

If you do not have a target, how can you manage that?

I would like to hear the rationale for attracting only top-rate taxpayers to Scotland. I value the carer, the nurse and others: I do not judge people just by their tax band—

Neither do I, cabinet secretary. I am talking about your tax policy—

I value people by their contribution to society and perhaps even the size of their heart, which is something that Deal Lockhart would be interested in.

I have set no targets to attract particular bands of taxpayer. Do I want to attract people to come to live in Scotland? Of course I do. Does the UK Government wish to do that? No, it wishes to send people away and to create a hostile environment for migrants working in Scotland and the rest of the UK. There being here is something that would make a difference to our economy.

We have no one from the UK Government here to respond to or rebut that comment.

We will move on from finance, tax and apologies to questions from Angela Constance, which might be for Mr Hepburn to address.

Before I ask Mr Hepburn some detailed questions about Kaiam and RSA, I want to ask the cabinet secretary about a financial transactions funding issue. He outlined the range of activities that financial transactions funding could be used for. Would he be interested in what the Welsh Government has done to enable credit unions to access financial transactions funding, and would he explore that actively if I wrote to him with the detail?

I would be happy to look at that issue. Mr Hepburn has some responsibilities regarding credit unions.

That is good, thank you.

I have spent much of the past two weeks in regular contact with ministers regarding the devastating news that more than 300 workers at Kaiam in Livingston received, just before Christmas, about being made redundant, without due notice or pay. I accept that we know more about this company now than we did in 2014, when £850,000 of taxpayers’ money was invested, but will Mr Hepburn or the cabinet secretary say more about due diligence, given that the company was persistently late in laying its accounts—it took me two minutes to find that out on the Companies House website—and had not seen an annual profit since 2012?

Right now, my clear priority—like that of Ms Constance—is to support the workforce. I refer back to the point that I made in my earlier answer: the clear expectation is that Scottish Enterprise will undertake full due diligence for any award that it makes. That should have happened with Kaiam. Scottish Enterprise will be able to give a fuller answer on the specifics of the process that was undertaken. The investment was made in 2014 on the basis of seeking to secure 103 jobs at the site, and the funding conditions involved those jobs and the assets that were secured remaining in place until 2021. Clearly and sadly, that has not been achieved, and on that basis, Scottish Enterprise will seek to recoup its investment.

I would be interested to know whether the due diligence that was undertaken in 2014 by Scottish Enterprise will be made publicly available, particularly given that we know, as Mr Hepburn has outlined, that the purpose of that £850,000 was to create 103 new jobs and safeguard 65 existing jobs. Yet, by Christmas 2014, the company had paid off 20 permanent and 40 temporary members of staff. Despite being given £850,000 of public money with a view to expanding the business, the company did the absolute opposite before the year was even out.

You will need to raise the specifics of what was undertaken at the time with Scottish Enterprise. I undertake to do that and to see what information we can provide to the committee. The committee may want to engage with Scottish Enterprise directly. My clear expectation is that when any form of public funding is provided by one of our agencies, full due diligence should be undertaken. Scottish Enterprise has direct responsibility for that, so it will be able to provide the additional information.

When public money is given for a specific purpose and it transpires that the reverse happens, what do Scottish Enterprise and ministers do to follow that up?

Clearly, there will be an on-going relationship between any company that has been invested in and the agency that made the investment, which in this case was Scottish Enterprise. When the outcome is not as expected, the issue of clawback arises. As I mentioned earlier, Scottish Enterprise would seek to reclaim any investment if its purposes have not been achieved. Ordinarily, that would be through the company, but in this circumstance that will not be possible, so it will be done through the administrator.

We are now looking at the issue of clawback—via the administrator—because of events leading up to Christmas 2018. Was there any suggestion of clawback at the point of Christmas 2014? I put it to you again: in 2014, a substantial amount of public money was given to the company for the purpose of expansion and the creation and safeguarding of jobs, but, by the Christmas of the same year, it had paid staff off. Why was Scottish Enterprise—under the guidance of ministers—not looking at clawback in 2014?

The committee would have to take that matter up directly with Scottish Enterprise. I am happy for us to take it up with Scottish Enterprise and ask it to update the committee accordingly.

I will take that up with Scottish Enterprise. However, I suspect that my dialogue with ministers on the matter has not ceased.

I would be surprised if it had, Ms Constance.

You know me well.

My final question is: how can conditions on RSA and grant funding be used to reduce the risk to the public purse and be used in a way that aids early intervention to support companies, so that we are on top of situations at the first indications of things going wrong?

That is something that we can look at. I go back to the point that I made earlier: there should be that on-going relationship between the body that has made the award and the recipient of that award. I have been clear that I cannot answer in relation to what happened in 2014, but we will look at that.

On the additionality that we can leverage out of our public investment, the fair work first principles that we have set out are under way. They set a wider expectation that any organisation that is a beneficiary of public funding will commit to adhering to the fair work principles. Maintaining dialogue with the workforce about what is happening should be part of those principles.

There is evidence, looking at the history of Kaiam, that fair work principles have not been applied, given that the company was given public money in 2014 to create jobs and expand its business, but did the exact opposite of that.

We must seek to learn from this experience. Clearly, the manner in which the company moved into administration and the timing of that was unfortunate, to say the least. I do not underestimate the impact on the individuals who were employed there. I have referred to the fact that Scottish Enterprise will seek to claw back any public investment, but I do not expect that to be its immediate priority. Its immediate priority should be to work with other agencies to support the workforce and to work with the administrator to see whether a new buyer can be sought for the site, so that we can continue to see economic activity in West Lothian.

The Labour member of the committee would like to ask a follow-up question.

I have a couple of questions. In November 2017, £100,000 of RSA was given to the company. What was that for, and will that be part of the clawback that Scottish Enterprise will eventually look at?

If it is related to the present circumstances, the expectation would be that there should be some form of clawback, but I would need to look at the specifics.

You do not know what it was for.

To be candid, I do not have the specifics.

It would be helpful if you could write to the committee with those details.

I will certainly write to the committee.

I understand that, because Kaiam is an account managed company, Scottish Enterprise was told on 16 November. The Scottish Government was told on 22 November. When did the minister or the cabinet secretary know and what did they do about it?

I found out when ministers were informed on 22 November.

One of the difficulties that we have had, which has not been widely understood or covered—understandably, the coverage has focused on the impact on the workforce—is that although our first contact with the company indicated that it was in financial difficulty, there was no indication that it was moving into administration. At that point, it talked about seeking a buyer. That then changed, and the company was looking to secure new sources of finance, before changing back to seeking a buyer, and back again to looking for additional sources of finance. Indeed, I was informed just two days before the company announced that it was going into administration that it was looking to secure new sources of finance in order to keep going. It was a fluid and rapidly changing set of circumstances.

Throughout the entire process, Scottish Enterprise and Scottish Government officials were engaged with the company and offered it any assistance that we could to help it to find a new buyer, if that was what was being sought. As we got closer to the eventual outcome, we started to gear up to offer the workforce the support of PACE. The process of engagement was there throughout the entire period.

10:30  

You have expressed regret that staff were not paid and that they were told on Christmas eve that they were being laid off. Given the fluid situation, did you seek specific assurances from the company that it would protect staff and their right to a decent wage?

Everything that we did in our engagement with the company was to try to secure the rights and position of the staff. We were advised that limited funds were available to meet the payroll on 21 December, but there was no suggestion that the payroll would not be met. We were told a few days later that salaries would not be paid on 21 December, as had been planned, but that they would be paid on 27 December. The next day we were told that they would not be paid at all. That indicates the kind of situation that we were in. It is important to place on record that, ultimately, the staff were paid.

Absolutely, although what happened should have sent up red flags about what was going on in the company. When did you know for certain that the staff would not be paid?

I think that we were told that the day before the company went into administration. That is the kind of timescale that we were working to.

You will forgive me for doing this, but I cannot help but contrast seeing both of you sitting here with the time that the cabinet secretary got on a plane to Paris to try to resolve the situation at Michelin Dundee. I feel as if the Scottish Government has been sleepwalking, and trusting Kaiam, which has resulted in workers going without pay on Christmas eve.

The two situations are rather different.

I suspect that it does not feel that way to the workforce at Kaiam.

Of course it does not feel any different to the workforce; I would not suggest otherwise. I make it clear that the commitment right now is to support the people who have been directly affected.

The cabinet secretary can say more about this, but in Michelin we had a company that had willingly sought to engage. It had indicated, very early and up front, the position in respect of the future of the site, and it had said that it was willing to stay involved in the city of Dundee.

It was not the same with Kaiam, although there was on-going engagement with the company. We now know that Kaiam’s chief executive did not remain in Scotland to tell the workforce directly what the outcome was. However, he was in Scotland at various stages and was engaging directly.

Have you had any direct discussions with the chief executive?

I have not. He is no longer the chief executive of the company, so I am now seeking to engage with KPMG, which is the administrator.

I am disappointed that you did not engage directly with him while he was chief executive, and when all of these problems were being experienced. I would have expected that from the minister and from the Scottish Government.

There was direct engagement between the Government and the company—

Who was involved? Was it you as minister? Was it the cabinet secretary?

No—I have said that very clearly. It was Scottish Government officials.

I suppose that the point that I am making is that the situation changed very drastically over the period. It was only at the end of the period that it was clear how drastic it was. That is not to suggest that the company had not indicated that there were problems with its financial situation. We sought to engage with the company and to try to do what we could to assist, but it was only at the very end, when the company moved into administration and said that the staff would not be paid, that the ultimate situation was clear.

You suggested to me earlier that you found out literally a day before the company went into administration—I forget the precise timing of it. You were briefed that it was going into administration on 14 December—is that not correct? Do you want to correct your earlier response so that you do not mislead the committee?

Sorry, but I am not misleading the committee. That is the point. Kaiam suggested that it might move into administration but it then changed its position—as far as we were aware—to pursue investment options to try to keep the company going. However, in the end, it went into administration—

On 14 December, you knew that going into administration was a live possibility, but nothing was done.

No—at no stage have I suggested that nothing was done. We continued with that engagement.

You were reassured when Kaiam said that it was going to find other investors—that was enough.

No, I am not suggesting that at all. Companies engage with us regularly. Sadly, more often than not, the unfortunate reality is that people only hear about that engagement when it is not successful. Companies often seek to engage with us on a confidential basis because if they are looking for a buyer, for example, and we say that the company is in specific financial trouble, it may make it more difficult to find a buyer. Every process of engagement is designed to try to secure a successful outcome. Sometimes that is achieved; sometimes, regrettably, it is not.

I think that people would expect those at the highest level—ministers and cabinet secretaries—to roll up their sleeves and get on with things. I cannot help but contrast the approach to the Kaiam situation with the more proactive approach taken by the cabinet secretary.

Ms Baillie has strayed somewhat into the area that I was going to ask about. I would like an update on the Michelin plant in Dundee.

I am happy to provide that update. It is important to say, though—as Mr Hepburn has said—that a number of issues can lead to companies getting into difficulty and to Scottish Enterprise getting involved. Scottish Enterprise will not always be involved, but, where we have an account manager, there is an expectation that we will be informed of events and the timelines that have been set out for companies.

I will give you a snapshot. Companies can get into difficulty and there is sometimes an opportunity for ministers to get involved. In Michelin’s case, there was clear opportunity for ministerial involvement. In that instance, through our involvement we were able to effect change because of what we were able to present and because the company is quite an ethical company in its general approach, its purpose, its mission and its desire to do its best by Dundee and its staff, which gave us the opportunity to engage with it. Ultimately, that involvement has led to the signing of a memorandum of understanding with Michelin through what we are describing as the Michelin-Scotland alliance, whereby the company, the council, the Scottish Government and our agencies have come together to make the best of the situation.

As the committee will know, we set out to save the plant as it was and we did not give up on that mission, but it was clear that a repurposing of the plant was the more likely outcome of our discussions. Having met the company and other stakeholders, including the council leader and the chief executive, we were able to arrive at a proposition relating to the circular economy and the low-carbon economy that involved retraining and reskilling, which would be based in Dundee.

Because of our engagement and the showcasing of what we want to do as a country, the company was willing to engage with us. Even though it has confirmed its plans to withdraw tyre manufacturing—of course, there will be a reduced head count as that happens—there will be full redundancy payments, which has been welcomed by the trade unions.

As well as retaining staff, we want to recruit and attract as many people as possible to the new ventures, and Michelin has appointed a senior executive to take forward that work. We also have the memorandum of understanding, and we will have discussions with the company about how that work will be resourced. We are bringing our key partners together to make sure that that happens.

All of that was welcomed by the local community, the trade unions and the local authority as the best possible outcome in the circumstances, other than retaining the plant. In essence, Michelin is here to stay in terms of on-going investment and partnership. We must bear in mind that Michelin is an international company and that, as Scottish Enterprise has said, if it was not already in Scotland, we would be trying to attract it here. We did not want Michelin to go, so we put together a package to encourage it to stay.

That work will be led by the chief executive of Scottish Enterprise. The number of jobs involved was over 800, and the scale of the industrial manufacturing meant that 8 per cent of manufacturing in Dundee was done at the Michelin plant. The plant has had a strong record as an environmentally friendly plant in that it was heading for carbon neutrality because of the renewables on site. There is a lot of potential at the site, and a lot of good work remains to be done to retain as many jobs as possible and, more important, to invest in jobs and manufacturing there for the future. The plant will, therefore, be repurposed as we have set out.

I have listened carefully to the committee’s questions about grant assistance, and I can tell the committee that, if the Scottish Parliament had demanded on day 1 of the Michelin announcement that the Scottish Government go for clawback, we would have lost Michelin completely. The company is staying only because we have engaged with it. I am not suggesting that members said that we should go for clawback, but immediately asking for that when there was something far more positive to be secured from the predicament that we found ourselves in would have been a bad idea. The positive partnership working and engagement with the company and its willingness to listen to us and the proposition that we put to it have led to a far more positive outcome than would otherwise have been the case.

Nevertheless, if conditions in the most recent grant around conditionality and head count are not fulfilled, we can claw back any resource that has been drawn down. From memory, I believe that Michelin received a £4.5 million grant for environmental purposes and that £1.5 million was drawn down. If the conditions are not met, we will claw that money back. However, we will have separate discussions on what we have set out with regard to Michelin in Dundee.

I am sure that Mr Mason will find that answer helpful.

It was a full answer.

You did ask.

I did, and I got a good answer, which I appreciate and thank you for. However, there seems to be a contrast between the two situations that we have just mentioned. I note that you used the word “ethical” about Michelin. I am not involved in either case, but it seems to me, as an outsider, that Michelin has been quite proactive and willing to engage, which we can call ethical behaviour or whatever. Does Scottish Enterprise take such factors into account when assessing different companies? I know that Scottish Enterprise could not be 100 per cent sure about this, but does it ask whether it can trust a company or whether it has reservations about it?

I do not want to make specific comparisons, but, on the general issues, there is a difference if we trust the individual whom we are engaging with. We go through due diligence with every company. Some companies are up for support and help, and some are far more resistant to an open-book approach. Some companies will share their accounts and tell us up front and honestly about the predicament that they are in and their investment plans, but some companies are more guarded. We have to base investment decisions on the information that we have before us, but there must also be an element of trust.

How much the Government and our agencies can do to support a company depends on there being a willingness and honesty on the part of the company to get the best possible outcome, which is what we had with Michelin.

I presume that all of that overlaps with the fair work agenda whereby we want companies to treat their workers well, ensure that women employees get an opportunity and so on. I presume that a company that treats its employees well will also be open with the Government. If a company is not open with the Government, perhaps that should raise questions about whether it is treating its employees well and so on.

10:45  

It does. I do not want to pick on any individual company when I say the following, but some companies are not well managed. Some companies are not forthcoming with everything that they should tell the Scottish Government, Scottish Enterprise or HIE about—they might not talk about the nature of the problem that they face because they might not want the extent of the difficulties to be shared. That is why, sometimes, there are discussions in confidence. We could do more harm to a company and its employees if we did not treat commercial confidentiality seriously. Failing to do that could put some companies at a serious disadvantage. There are issues of trust, honesty, transparency and accountability—everything that you would expect in due diligence. At a company level, there are also issues about quality of management, the respect that is shown to the workforce and how open the company is with the Government.

The relationship is dynamic. Our agencies can only do their best when they engage with companies. They can only ask for the right information and expect due diligence to be performed. Ultimately, of course, if we are not satisfied, we do not have to give people public money, but we always bear in mind the interests of the employees—those people whose livelihoods are dependent on the success of the company. That was important in the Michelin case. If my number 1 mission had been financial clawback, there would have been a far less positive outcome.

I am certainly not suggesting—

I know that you are not. However, for the avoidance of doubt, I am making the point that, when the Government’s mission is to support a company for the right reasons, that is what we do. Nevertheless, we expect conditions to be fulfilled and we expect companies to interact with us in an up-front, honest and transparent manner.

In the past, we have had reservations about the extent to which Scottish Enterprise, and, to some extent, Highlands and Islands Enterprise, have taken on the Government’s fair work agenda and various other issues such as bringing in disabled people, women, people from ethnic minorities and so on. I hope that the message that you are sending today, which is that those issues are absolutely central, will filter through to Scottish Enterprise. I am sure that we will raise that issue with it in due course.

I would not expect the committee simply to hope that that happens. We are making the fair work agenda a matter of conditionality for regional selective assistance, and we have committed to working through all funding streams to ensure that it is mainstreamed. Clearly, we will have to work on the big grants first, but, if there is any resistance to it, we will make it absolutely clear that Government agencies are expected to deliver the Government’s policies. The First Minister has made it clear that that there is conditionality around fair work. Fair work comes first—that is the policy agenda that we are embarking on.

It will take time to make sure that every funding stream is touched on by the policy, but we are working our way through that. That is the commitment. If you hear about any resistance from Scottish Enterprise or any other enterprise agency, you should bear in mind that that is what we are working towards. I cannot make it any clearer than that. I am not asking members to hope; we will hold the agencies to account in that regard.

I have a general question about enterprise agency targets. Scottish Enterprise successfully delivered all of its business plan measures for 2017-18, and Highlands and Islands Enterprise met or exceeded all of its targets for the same year. At the end of the 2015 to 2018 business plan period, Scottish Enterprise met all but one of the full three-year targets. Who sets the targets for the enterprise agencies? What input does the Scottish Government have into the setting of those targets? Are you satisfied that the targets are challenging enough to maximise the opportunities for the Scottish economy?

Of course, the situation is changing. Currently, the targets are set through the annual plan that ministers see and ultimately approve. However, the issue is that there is no consistency among the enterprise agencies. There is an element of developing targets and then satisfactorily meeting them. Is Scotland, as a nation, meeting its economic targets? No. We publish the Scotland performs documents and we set out our own targets. Of course, in terms of targets, there have been impacts on the wider issues in the economy due to Brexit uncertainty and so on.

It is helpful that the enterprise and skills strategic board is considering setting consistent targets for the enterprise agencies—I think that you are taking evidence on that as part of your work on the strategic board. That will give the board a level of independence. In a sense, the board will be independent of Government, because it is the strategic board, led by Nora Senior, that will take that work forward.

You mentioned the national performance targets. I was going to mention that they have not been met. How is it that the enterprise agencies’ targets can be met yet the Scottish Government’s national performance targets are not met? Are they not sufficiently aligned?

It would be an interesting—if unfair—challenge to hold enterprise agencies accountable for the entire Scottish economy. The enterprise agencies have been asked to grow companies, to help exports and to deliver start-ups and scale-ups. If they achieve all of that, that will count as success.

I touched on the wider issues relating to the Scottish economy. Although there are many positive elements, I am well aware of the long-term targets that we have set for Scotland. It is surely to be welcomed that we have had five consecutive quarters of GDP growth and that, for some of those quarters, we were outperforming the United Kingdom. Unemployment is at a record low, at 3.7 per cent. Foreign direct investment is behind only London and the south-east of England. Export rates are high, and we have made progress on productivity under devolution. Surely all of that is to be welcomed, notwithstanding the fact that we want to meet the national targets that have not been met.

The forecasts for economic growth—if we want to define that as GDP—are subdued. However, the Scottish Fiscal Commission has said that they are subdued largely because of Brexit and the population challenge that Scotland faces. If we recognise the population challenge that Scotland faces as an issue, we cannot say that that is a matter just for Scottish Enterprise, Highlands and Islands Enterprise and the south of Scotland enterprise agency to fix in isolation. That might be why there is the disconnect between the two sets of targets. However, we want to ensure that the enterprise agencies’ targets are challenging, and the role of the strategic board in that regard will be very helpful.

I want to look at the fair start Scotland programme and will touch on one or two of the points that Andy Wightman raised. Why is the fair start Scotland budget falling by £3.3 million between 2018-19 and 2019-20?

I am happy to refer questions on fair start employability to the relevant minister, which is Mr Hepburn, but I am sure that the answer is along the lines that schemes are coming to an end. I will cover budget questions, but I think that it is more appropriate for the minister to answer that question, because he knows his brief.

It is because schemes are coming to an end. [Laughter.]

Last year, we funded the innovation and integration fund from that budget line. We spent £1.7 million to road test the pilot, and there was a variety of approaches on how we could better align employability provision. There was also funding for our transition one-year programmes, because there was still follow-on from the previous year—people had started and were going through the process of being supported even though they had been referred in the previous financial year. Such programmes have now come to an end—that, in a nutshell, is the reason why that budget is falling.

Of course, that budget line does not affect the front-line service at all. The funding that we have provided through the £96 million contracts remains in place. The contracts are signed, and my expectation is that what we have put in place through the contracts will be delivered. We will report on that. The first report, which covered the first two quarters, was published in November and showed that nearly 5,000 people have started in the service.

Given that there will be a reduction for the reason that you have stated, are there likely to be more reductions in years to come because of other programmes coming to an end?

There will probably not be reductions through that budget line.

Never say never.

There will be an increase in expenditure in other lines of employability provision in order that we can take forward a number of projects. However, the budget line that has been mentioned is for the contracts that are in place and will fund our contractual obligations.

Does the level 4 explanation of the running costs of efficiencies link to the drop in funding, or is the drop entirely due to programmes coming to an end?

There are associated savings that would be described as efficiencies. There were up-front costs such as those for development, which we do not need to pay as much for now that the programme is up and running.

Why are those savings not being used to fund the individual placement support pilot, as was specifically recommended in the committee’s report of 31 October 2018 and, of course, on page 3 of the Scottish Government’s response?

We are already funding individual placement support—it is an integral part of fair start Scotland. If, in assessing any participant, the providers determine that such support is appropriate, they are contractually obliged to provide it. I am loth to double fund something that is already available through our mainstream employability programme.

Okay. The programme for government set out information on the fair work action plan, the living wage nation and programmes for women returners. Given their importance to the Government’s inclusive growth agenda, why is the combined budget for those policies, at £7 million in 2019-20, so small?

You might argue that the budget is small, but I might offer the riposte that there is a 55 per cent increase in the fair work budget line and that there has actually been an uplift in funding.

I might also observe that the funding that we have provided for living wage accreditation, which is being maintained, has had significant success. We now have more than 1,300 accredited living wage employers, and, over the past three years, 25,000 people have benefited from an increase in their income as a result of living wage accreditation. We are offering the same form of funding and are seeking similar outcomes through that initiative. For what might seem, on the face of it, quite a modest investment, we can make quite a significant difference. As I have said, 25,000 people have experienced an uplift in their income as a result of living wage accreditation.

The other, more fundamental and wide-ranging, point is that not every element of the fair work approach that we are seeking to embed will necessitate new forms of funding. As we have pointed out a number of times, there are elements of conditionality in the public investment that we might make in specific companies through the fair work first model. That will necessitate not a different budget line, but a different approach, and much of what we are doing on fair work is predicated on that kind of culture change.

On the issue of women returners, we are investing a quite significant resource of £5 million over three years to support up to 2,000 women to return to the world of work after a career break. Nevertheless, I have made it very clear that, if meeting that challenge is left entirely to the Scottish Government, we will fail. We need wider buy-in, and we will have to work with employers through our agencies and engage directly with employer representative bodies and employers in order to embed that culture change.

I hear what you are saying, and I think that it makes sense. However, given the ambitions that lie behind the programmes, I do not think that £7 million seems that much.

I emphasise what Mr Hepburn just said about not looking at such figures in isolation. That funding might be for projects, certain budget lines or staffing, but the question is whether we are using the £42.5 billion of total expenditure to deliver a fair work nation. That will include work on procurement, employment policies, conditionality and the leadership role that we play with the rest of society, including private business. We must ensure that such principles are being rolled out as a matter of policy, not just in individual projects.

The last time that I appeared before the committee, members rightly asked me why so few women were getting enterprise support, for example. Addressing that issue does not necessarily require a separate budget; instead, we need to understand the reasons behind the situation and work things through. This is as much about the policy to achieve our fair work ambitions as it is about financing. If we get the policies right, we will have transformational system change. Of course, we will also need to work with other stakeholders to ensure that the approach applies to the private sector, too, and that best practice is encouraged. That is why I am arguing that judgments should be based not on individual budget lines but on the implementation of the policy.

11:00  

I have a follow-up question for Mr Hepburn. The target number of participants is 38,000 over three years but, so far, the quarterly statistics show that the figure has not exceeded 2,815.

I am sorry—I did not follow that point.

So far, in the quarterly statistics that we have for starts, the highest figure has been 2,815. That suggests that the number of starts will not reach the target of 38,000 if that rate of progress continues over the three years. Either there will need to be a large increase or the target will have to be reduced. Do you expect the number of starts to increase over the next three years?

We have set ourselves a three-year target rather than individual year-on-year targets. The target is 38,000 over a three-year referral period and a five-year delivery period.

I make the observation that we are in quite an early phase of the programme, which involves a new approach. We are working with a variety of bodies to make sure that they are well acquainted with what is a new programme. We still rely primarily on Jobcentre Plus as the referral mechanism, but because we do not have direct responsibility for Jobcentre Plus, we have an agreement with the UK Government on how that relationship can be managed. We are working with it to maximise the number of referrals. In addition, we are working to ensure that there are new referral pathways. That work is under way. We have set out a target of 38,000, and we will do everything that we can to meet that target.

So you are confident that the target of 38,000 participants over three years will be hit.

We have set that target and I want to hit it.

There are no figures for job outcomes and early leavers at this stage, although I appreciate that it is early days. When do you expect to get those figures?

We are still working our way through the process of determining at what stage it would be sensible to start reporting that information. It would not be meaningful to report it at this early stage. That information will be available in due course. The first set of statistical information, which was published in November, covered the first two quarters. Thereafter, we will publish information on a quarterly basis. We will continue to think about what additional information should be proactively published as part of those statistical releases.

I have a very quick question for Mr Hepburn. Fair start Scotland gets three-year contracts, whereas employability fund contracts are for one year, which means that organisations are involved in an annual procurement exercise that is time consuming—it might divert their attention for two to three months. The committee recommended that there should be three-year contracts for the employability fund, but the Scottish Government’s response was—it is being kind to describe it in this way—non-committal.

I am always keen to give the minister a chance to say yes. Will he now just say yes to having three-year employability fund contracts, because that is the right thing to do?

No.

Aw—how disappointing!

I will expand on what, at face value, might not seem a very helpful answer. “Non-committal” can be viewed as a somewhat pejorative term, but I accept that, in our response, we have not committed definitively to doing what the committee said, so I accept that Jackie Baillie used the term in good faith.

We are looking at the issue. I understand the practical difficulties that can be caused for organisations, but we should always bear in mind the fact that the fair start Scotland programme and the employability fund are very different beasts. The employability fund is designed to be a much shorter and sharper intervention than fair start Scotland, which operates on the basis of the specific individual who comes forward. Fair start Scotland might provide a fairly short, sharp intervention, but a person can be supported for up to 30 months so, by necessity, those contracts have to be of a significant length. The delivery requirement is not necessarily the same for the employability fund.

We are moving into a new world. On 5 December, we published the first steps in our review of employability provision. We have signed an agreement with local government to work on a more aligned and closer basis in the delivery of employability services. The employability fund provision, or that type of provision, is very much part of the review. I can say clearly that we have set out that we will explore how we

“could commit to multi-year funding to bring added stability”,

so that issue is in the mix in our consideration.

The other thing that I can say to add certainty for employability fund providers is that, for this financial year, we have agreed with SDS that it will roll over the contracts with existing providers to try to maintain stability of support, given that we are moving into the further review. I hope that that satisfies Ms Baillie somewhat.

It is a maybe—the jury is out on that one.

Before we move too far into this new world in which a Scottish National Party minister says no instead of yes and a Labour member says maybe, that is probably a good point to conclude the session. I thank both the ministers for coming.

I suspend the meeting briefly to allow for a changeover of witnesses.

11:05 Meeting suspended.  

11:08 On resuming—