Economy, Jobs and Fair Work Committee

Meeting date: Tuesday, November 1, 2016

Official Report 584KB pdf

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Enterprise Agencies

Having welcomed our witnesses, we will start our questions to them. I say to the witnesses that there is no need to switch microphones on, as the broadcasting staff will deal with that.

I have a question on regional economic strategy, but first, the deputy convener, John Mason, has a question about overall structures. Over to you, John.

I am interested in where we are going with all this. I realise that none of you makes the decisions about that, but you are all part of the overall equation and I am interested in your views on where we might be going.

The word “simpler” appears at various points in “Enterprise and Skills Review: Report on Phase 1”. Keith Brown notes in his opening comments that we want

“coherence and ... a simpler, more flexible and cost-effective system”.

At the same time, I see the idea of a new statutory board and something for the south of Scotland. That does not seem simpler; it seems like more organisations. What are your thoughts on where we are going? Is being simpler important? Does the system need to be more joined up than it has been?

I am happy to pick up the point, and I have no doubt that colleagues will want to come in as well.

Having seen feedback from users as part of the review process, we appreciate that there is a strong message that people want the process to be easier for users to navigate. A key point is how we deliver services more simply.

In relation to the strategic board, we welcome the opportunity to have strategic oversight across our agencies that are working together. You are right that the detail is not there yet. Our assumption at this stage is that there will be a strategic board, but we have yet to see exactly what that will mean for the boards of individual agencies.

Yesterday in Inverness, we had the convention of the Highlands and Islands, at which Mr Brown was present. He responded to questions from local authorities, which are—not surprisingly—keen to ensure that there continues to be a strong Highlands and Islands voice on the strategic board.

It is really important to us that we work together through the implementation of phase 2 of the enterprise and skills review to ensure that whatever the changes bring—we welcome the opportunities—the things that we can point to as having made the most difference to the success of HIE and the Highlands and Islands over the past 50 years continue into the new structures, so that the legacy continues.

That is helpful. The radical option would be to have one organisation with five branches. I am not sure whether anyone is suggesting that or whether it would be a good idea. Does anyone else want to come in?

We were clear in our submission to the enterprise and skills review, which built on the Audit Scotland work, that although there is a clear economic strategy for the country, it is at a high level, so there is an opportunity to have a clear plan that binds everyone together and puts the outcomes that we want for the economy at the centre of what we all do.

Rather than having one organisation, we should be clear about how we all work together. That does not mean just agencies, because our economy’s growth also depends on many other organisations and how they all work together. To support that, we need to be clear about putting the economy at the heart of what we do, about the things that make the difference and about ensuring that we are all going in the same direction.

Do you feel that, in the past, the five organisations have not gone in the same direction as much as they could have?

We continue to have separate agencies. In a number of areas, Scottish Enterprise and HIE are doing similar things to support businesses, but HIE exists for a particular set of reasons. We work with a different business community, we have a community development remit and we work within the geographic and social challenges of the Highlands and Islands. That means that we do different things in a different way. While at an overarching strategic level we are doing the same things and performing to Scotland’s economic strategy, the delivery—how we do things—is different.

I echo that. The five agencies do different things and sometimes do them in very different ways. There is a significant overlap and a synergy even when we do things that do not overlap.

The point is common to all the discussions that we have had as part of phase 1 of the review. Finding a way of linking the Government’s economic strategy to what we do through some board or other mechanism that brings the agencies together is something that we have seen as important. That could simplify things—that will depend on what happens with other levels of governance and so on—but we do not quite see the approach in the way that Mr Mason suggests, as one agency with five branches. The agencies are different from each other, but there is a synergy from which we must extract the maximum benefit.

How does Mr Duff see things? From the local government point of view, should the system not be too centralised or would it be better if it was more centralised?

The business gateway is part of local government services and we certainly welcome any opportunity to simplify and make more seamless the services that we offer. As part of the inputs from the Convention of Scottish Local Authorities and the Scottish local authorities economic development group, which is the national body for economic development officers, we have welcomed any moves that can be made to simplify the arrangements and make them more straightforward. Importantly, we have been blending services locally, but we try to maintain consistency across the country, and we work closely with the national agencies to achieve that. We see the review as part of a direction of travel to simplify arrangements, but it is important that we maintain scope for local flexibility as well as a nationally consistent picture.

To follow on from that, I hear the message that you are all separate but together in some way. Do you see scope for collaboration on back-office services, which might allow you to save money to reinvest in what you do and in reaching out to small businesses?

We have a live example of that, which is that our information technology support is shared across SDS, Scottish Enterprise and HIE through our enterprise information systems team. We can do that kind of thing, and I guess that we have the opportunity to see what more we could do.

Similarly, we share some human resources services with the Scottish Qualifications Authority. That kind of thing is going on in the agencies that are part of the review and more widely.

Does local government have the same mindset?

A common customer relationship management system has been developed jointly between Scottish Enterprise and the business gateway. That is a means of maintaining a close understanding of the business growth pattern of companies and all the interventions that are made in relation to them. Strenuous effort has been put into building that system and making sure that it meets the needs of business.

We have those things in place and we already collaborate well on such issues, although there is an opportunity to go further. In our submission, we talked about the opportunity to share our approaches to continuing professional development with colleagues who have similar roles across the agencies that are involved in the review and more widely. For example, we could share our approaches on business advice and project management. We have done that for many years in relation to the business gateway and we work together with HIE on that, but we could go further to share best practice.

The review recommends looking at how we can share data and intelligence much more. We already do that a lot informally, but there is an opportunity to go further and ensure that that approach underpins the new strategic board and informs the services. As we move more to digital-enabled service delivery models in the public and private sectors, there will be even more enrichment of such insights. We are all keen on sharing that, to ensure that we continue to provide what customers are looking for and so that we get a sense that that is making a difference on the ground.

You have second-guessed my next question, which is probably my last one. It is common that small businesses do not know where to go or that they get confused. In some regards, that is because there are too many doors. I am thinking of one or two-person businesses that are interested only in running their business and perhaps do not have time to find help, whereas bigger companies have more staff to find their way to that door. Through the changes, can we make it much easier to provide signposts and make the position more distinct, so that the process is easier for the customer, who you have talked about?

09:45  

The review’s recommendation of the no-wrong-door approach is really powerful, particularly as it provides the opportunity to have a simple and straightforward digital portal that all businesses can use to get through to the right part of the Government or the agency that can help them with their need. I am sure that we would all say that, over time, we have tried to make such access as simple as possible, but we recognise the feedback in the review report that we can do more.

As I have said, we all support the no-wrong-door principle, and we need to make all this as simple and transparent as possible for business. I absolutely agree with your point; given that businesses have no time to negotiate their way through something, we should make arrangements as simple and as straightforward as we can.

I welcome Gordon McGuinness, who has now joined us.

My apologies, convener. Someone took ill on the train in front of us at Edinburgh Park.

I am sorry to hear that. Thank you for coming today. We will let you get a bit settled before someone throws a question at you but, to fill you in, I should say that we have just been discussing the overall structure of the enterprise agencies.

I hand over to Jackie Baillie, who has another question on the subject.

I, too, apologise for being late, which was for exactly the same reason that Gordon McGuinness mentioned.

The review recommends that a strategic board should be put in place, but I understand that there already is a strategic forum in which all of you sit around the table with Government officials and ministers. What difference will statutory underpinning make?

The difference is that the body needs to be much more than a board; it needs to genuinely consider and focus on what the plan will be, how all this will work together and what outcomes it is seeking to drive. The strategic forum has been much more of a collaborative forum; although it works well, the proposed board provides an opportunity to have a much clearer line of sight to links with outcomes in the national performance framework, with the key drivers of productivity in the economy, which are important, and with the different roles and responsibilities.

As we have said, we bring different forms of expertise to Scotland’s economy and the current landscape. The board will be all about joining those things up and—increasingly—bringing the private sector to the table. The strategic forum very much involves the various partners, but the board will bring the private sector to the table as well. The proposal provides an opportunity to have an even stronger focus on the economy and the actions that need to be taken and then, over time, to be agile and flexible about the actions that need to be taken to ensure that all that flows through to what is happening with customers on the ground.

I should say to Gordon McGuinness that, if he wishes to speak, he should simply indicate that by raising his hand, and I will seek to bring him in at an appropriate point.

I would like to hear other views on my question, and then I will come back.

I caveat my remark by saying that it is just an assumption rather than based on knowledge, given that we have yet to see how things will be implemented, but I think that having a strategic board that is underpinned by statute will send an outward message, as well as the internal message about how we as agencies will work together differently across the strategic forum and the strategic board. Perhaps that comes back to the message that we have had from service users on the need to understand the position. Having one board that is giving overarching strategic direction, ensuring collaboration and providing challenge to agencies will send a powerful outward message.

I very much agree with what my colleagues have said. There was always more than one way of proceeding, but having a statutory board will shift the balance of responsibility in a different direction from that of the strategic forum, which is a collaboration between bodies whose boards are tasked with different things. A statutory board will bring things together in a way that a non-statutory board does not, but a lot of the detail—such as how the board will operate and interact with the five agencies—still has to be worked out in phase 2 of the review.

I was not clear that there was any clamour for such a board from any of the agencies or a suggestion that you all thought that it would be a really good thing. I am genuinely surprised that a strategic forum with John Swinney, the Deputy First Minister, in charge does not seem to have achieved much, but you are saying that it is not fit for purpose and that you need something else. I am slightly confused about that.

I do not think that that is what we said.

I do not think that we said that the forum was not fit for purpose. However, there is an opportunity for us to send a powerful message about how we are working together under a new strategic board.

Is that not something that happened under the forum?

I would not say that the forum had not been fit for purpose.

Perhaps we could move on to something slightly different. We have looked at the overall structure so far, but I want to ask about the regional economic strategies.

The Scottish Enterprise submission to the Scottish Government’s enterprise and skills review—it is on page 10 in the committee papers; it might have a different page number in the original submission—talks about the work that Scottish Enterprise is doing with the three Ayrshire councils to develop a shared regional economic strategy. I am interested in that, because we have agencies looking at the national Scottish picture, but Scotland is an economically diverse country and from region to region the workforces and local economies can have extremely varied focuses. The area that is covered by the three Ayrshire councils is an example of that. How can the agencies be best organised to localise their approaches and get away from the idea of simply having national strategies, which, although they might be necessary, can encounter difficulties in relation to the detail at the local level?

For some time, we have recognised that a one-size-fits-all approach does not suit the needs of all the colleges and universities that we fund. Therefore, for the past few years, we have been funding colleges through regional outcome agreements and funding universities through outcome agreements that are regional to various extents. That recognises that, as you say, some regions have different economic needs from others, and that the skills needs will vary from region to region. We fund a college or a university based on a document that we agree with the college or university based on a regional skills assessment from Gordon McGuinness’s organisation, SDS, and discussions that our regional outcome managers have with the institution and other local stakeholders about what the needs are. We hope that, through that mechanism, we can recognise that there are different needs in different regions of Scotland. There are some things that are needed in most regions, but there are some things that are very specific.

As a representative of a regional organisation, I come to this debate with a regional as well as a national perspective. After 50 years of the Highlands and Islands Development Board and Highlands and Islands Enterprise, we feel that there is a strong role for what we have done in terms of regional and community development, while working to ensure that what we do in the region contributes to the national picture. It is really important that we ensure that our strategy joins up. We work with SDS on a regional skills plan, which was discussed in some detail at the convention of the Highlands and Islands yesterday. There is a real opportunity to explore at a regional level how national partners and agencies can contribute to the on-going development of a region.

In the Highlands and Islands, we also have a number of area offices so that we can respond directly to the needs of rural and island communities and our small towns. There is even a level below that level, where we can see local economies operating. That is important because the needs of and opportunities for those local economies can be quite different.

I wonder whether Gordon McGuinness wants to contribute at this point on that specific question.

In our work we have recognised the differences across regions in terms of economic performance, where some of the challenges are and where the opportunities lie.

We committed to developing regional skill assessments and we have done so, in conjunction with other agencies. We look at where the economic opportunities are, what the supply side is, what the colleges and universities are delivering, and the demographics within those areas.

We have also committed to working with local authority partners on things such as the Glasgow city deal. On that, we are working to produce a regional skills investment plan. We are also working with the college structures in Glasgow around curriculum planning and development, and in Aberdeen and the north-east on a regional skills investment plan there.

Charlotte Wright mentioned our work across the Highlands and Islands. We have an umbrella plan that was published in October 2014 and that identified the key issues around matters such as depopulation, the demographic profile of issues and some of the skill challenges that are being faced by particular sectors. Yesterday, we updated the Convention of the Highlands and Islands on progress against the plan.

There is a lot of joint development work there. In recent years, we have seen the emergence of city deals. You referred to Ayrshire: we have been working along with Scottish Enterprise and the three local authorities on matters around their growth deal and how that has developed in building on their strengths around manufacturing and particularly around aerospace.

There are ways in which we can develop the system. Sometimes, the funding sources need to be a bit more agile in order to meet local needs more effectively, but that is something that we hope we will be able to discuss through the review process.

Structurally speaking, is there any need for enterprise agencies at a more local level, or can you work with local authorities? What is your view?

From a skills perspective, and speaking for a skills agency, I would say that we have a good blend of national approaches for the apprenticeship programme and also local responsiveness. In our work at local authority level we have, with every head teacher in our schools, service level agreements that define how we will deliver the service internally. We are also involved in community planning at a local level.

As I said, we have seen the emergence of work such as that done in Ayrshire on the growth deal. There, potentially different approaches are being offered and taken. That is something that we are open to working on.

Regarding the enterprise agencies, we have worked with SE for about 19 years, so when the local enterprise companies changed then perhaps the local authorities felt that they were missing something as regards that regional dimension. I do not think that either we or SE will be found lacking in terms of the work that we have done and how responsive we have been to that.

I would add that the work that we have been doing in Ayrshire has looked at what the region needs to do across the three different local authorities. I have worked in Ayrshire for many years—I was based in the local enterprise company in Ayrshire for a long time—and the three areas have quite different needs and geographies. They also have different assets that mean different things for the local economy and the contribution that it makes to Scotland.

We have a blend. We are able to look across the agencies and—working particularly with SDS around Ayrshire—really think about the national assets that are in the region. When we think of the life sciences opportunity that is based around Irvine, we can look at what Scotland can compete on globally, based around the work that we are doing with GlaxoSmithKline and others. As Gordon McGuinness said, we can also look at aerospace and the spaceport potential around Prestwick. On broader manufacturing, we have been taking the work that we are doing around the manufacturing action plan and supporting that plan around Ayrshire.

That work with local authorities is on the basis of what Ayrshire needs. The work that we have done has also been around together building a team approach—for example, team Ayrshire and team north Ayrshire. It is also about building the capability around the business advisers who are working with companies—whether that is through SE, the local authority or the business gateway. We have worked very actively on making that seamless. As a result of that, in North Ayrshire, we are working with more companies through the gateway growth pipeline, the services that we deliver directly and the account managed portfolio. That work is beginning to bear fruit in terms of how we connect to some of the bigger opportunities at a national level and how that plays out on the international stage.

10:00  

Will the same considerations apply to a certain extent to the larger cities such as Glasgow and Edinburgh, or is that a different kettle of fish?

Absolutely. Our approach involves location directors who work across local authority areas, so there is a key member of staff working in each area. We also have a regional approach. For example, I work closely with partners on the Tay cities deal on what the deal will look like; what the best opportunities are for Tayside; and how ambitious we as partners are in that respect. That also applies in Glasgow, Edinburgh and Aberdeen.

Gordon MacDonald wants to ask a question that might fit in at this point, unless Andy Wightman has a specific point to raise.

Yes, I do—thank you, convener.

The report of the phase 1 review highlights the distinctiveness of the Highlands and Islands and the need for an agency that is

“locally based, managed and directed”.

It also refers to the creation of a new agency for the south of Scotland.

What about the rest of Scotland? It seems that the review does not recognise the distinctive challenges in Tayside or in the west or north-east of Scotland.

Is the review not an opportunity to embed the local approach more universally? Will Scottish Enterprise change its name to become central and north-east Scotland enterprise? How will that fit into a structure in which, as the review identifies, there are only two distinctive regional approaches?

Those are all matters to be looked at in phase 2 of the review. Scottish Enterprise believes that there is still a need to focus on the economy at a national level. Being able to look at the national, regional and local perspectives is important, and we believe that, in the other areas that you highlight, there are already mechanisms in place—such as the Tay cities deal, which I mentioned—to enable us to do that.

We are keen to focus on what needs to be done in the economy. We need to work with our partners to ensure that we deliver on those priorities and that we deliver on the ground by working with our customers and partners. The Tay cities deal is the place for us to have those conversations in that particular area, and we need to ensure that we join that work up with the private sector.

Localisation has very much been the message since the business gateway service was transferred to local authorities, which was done with the intention of localising better. We have been able to achieve that by embedding business gateway services alongside the variety of services that councils offer, and attuning those services to local economic priorities so that they fit in with the direction of community planning and local economic strategies.

More recently, since 2008, those priorities have been aggregated up to a regional level, and we have seen a number of city deals, growth accelerators and so on. Throughout this round of the review, people have petitioned for a more seamless structure for setting regional and local priorities across the country so that there is a clearer pattern for dealing with them.

In working towards that, we must ensure that we achieve a proper blend of being attuned to local circumstances—there is already expertise at a local level in councils—and drawing in the national economic priorities, which focus on the significant areas for growth. Again, it is about marshalling the efforts of partners to achieve those things.

Douglas Duff must have read my mind with regard to aggregation and national priorities. It is important that we are able to respond regionally and locally, but Scotland is a small and open economy, and we are competing hard on the world stage for international inward investment and for the talent that we want to come to Scotland.

We have real capability, and there are opportunities to maintain that in some of our key sectors. However, there are also opportunities to build capability in emerging sectors such as data and subsea, and in the developments that are emerging in the oil and gas industry and other areas. We need a blend of being able to compete nationally in an ever-challenging world economy while ensuring that the opportunities in that regard are spread across the country and that we support local economies too.

It is important for our national perspective on the economy that we keep a focus on where our economy is going in future, how we will drive productivity and how we ensure that that flows through at a regional and local level to where companies and people are based and assets are being built. It is about both of those.

My question relates to the local and national agencies working together. In some of the evidence that we have had from companies, there have been comments about a lack of clarity and a lack of partnership working. That is their perception, but I am interested in Scottish Enterprise’s submission, which recommends

“a reduction in the number of economic development groups and forums across Scotland”.

Will you expand on that? Why do you recommend that and who are you particularly aiming at?

One of the reasons that we shared that in our submission was that there is a need to think much more practically about action-oriented approaches. Over time, there has been a growth of lots of bodies and groups. We reflected on the challenge that the private sector has to support the number of bodies that exist—I hear about that because I sit on the Tayside regional advisory board—and made a recommendation to pull back on some of that and do some of it quite differently.

Rather than having fixed bodies or groups that are put in place and remain forever, we could do something more agile. We could have a focus on a particular issue, we could bring people together to address it and then that group could come apart. We wondered whether that would provide some different benefits. It was merely a recommendation. We see benefits in other things that happen like that and we wondered whether it might be of benefit.

Part of the clutter that businesses sometimes see concerns the fact that there are many groups. They grow from the bottom up locally for good reasons but that can cause the perception of clutter. We wondered whether there was a way to think through that and genuinely focus on the outcomes.

Do any countries of a similar size to Scotland—New Zealand and Ireland, for instance—provide support to businesses through a structure similar to ours? Is it less cluttered in other countries or do they have the same number of agencies across the piece?

The Skilling report, which was produced as part of the enterprise review, undertook some of those international comparisons. It gives us a mixed picture in that we could probably learn from elements of some of those other countries but, in other cases, what we have in Scotland looks better. The international comparisons are helpful to enable us to benchmark ourselves and determine whether there are opportunities to improve how we do things but, in some cases, they give us the opportunity to reflect that we start from quite a good structure in Scotland.

I hope that members have had a chance to look at that report, because it makes some useful comparisons.

I thank our guests for coming along. My question relates to core elements of the Government’s economic strategy: innovation and productivity. Based on international comparisons, the Scottish economy remains in the third quartile of productivity performance, behind the rest of the United Kingdom, Ireland and countries such as Denmark. The Scottish Enterprise submission indicates that that productivity mismatch comes at significant cost. It is estimated that if we reach the target of being in the first quartile, the Scottish economy would be boosted by £45 billion. What causes that productivity gap and what specific measures can we take to address it? It is a structural issue that has faced the Scottish economy for a long time.

A related question concerns innovation. We have world-class universities with world-class research and innovation, but commercialisation of that innovation is not coming through to the economy. Is there something wrong with the transition mechanism?

Linda Hanna will go first before I pick up on innovation.

Thank you very much.

Dean Lockhart is absolutely right. How to improve our productivity is at the heart of the matter, for our economy. We know that that is the puzzle to get right. Scotland is not alone; the same applies across the UK and in other parts of the world. The issue goes absolutely to the heart of how we drive our economy and how we drive benefit for all the communities, people and businesses that we have talked about.

On what is contributing to that, we know that our exporting performance is below what is needed for us to be in the top quartile for productivity. One estimate is that we—the UK would be the region, as opposed to the Organisation for Economic Co-operation and Development—would need another 5,000 or 6,000 exporting businesses for us to reach that. We know, in the context of innovation, that about another 1,500 businesses would be needed.

We are making progress on some of those things, but we know that the scale of that challenge is quite considerable in our economy. We also know that the challenge is quite considerable in terms of businesses per head of population: we would need another 120,000 registered businesses in Scotland. Therefore, we know that there are productivity challenges.

The structure and size of the business base in Scotland has been a persistent issue over a long period. Getting more businesses to start and getting them to grow and keep on growing has been a mantra for quite a long time in our work with business gateway colleagues—it certainly was when I was involved with the business gateway. That is challenging. There are more self-employment businesses, but they are not growing to a size to start to innovate, export and create contributions to productivity that SE would then want to look at.

It is about how we get more innovation and exporting and more companies to invest in research and development, and—overall—about how we get much more investment into the economy. We are working on those things, but we need to do much more.

Dean Lockhart is absolutely right: we have excellent academic expertise in our universities. The challenge is to get businesses to invest much more in R and D and take new products to market—especially export markets.

We need to concentrate on those things, and we would very much welcome their being at the heart of the actions that we need to take.

I think that all our guests—or at least the majority of them—want to come in. We will start with Charlotte Wright.

I want to add something about productivity before John Kemp talks about innovation.

I certainly endorse the remarks about the structural difficulty that we have in terms of the size of our business base. That is even more the case for the Highlands and Islands. The tourism and food and drink sectors dominate the sectoral mix and traditionally do not pay employees as much as other sectors do.

I also want to introduce to the discussion a point about the productivity of our human capital. Underemployment is an aspect of how we perform in the Highlands and Islands that we have looked at often. It is challenging to deal with and makes it more difficult for our population to be productive. Development of the University of the Highlands and Islands and delivery on being productive are therefore critical to us.

Maybe it would be helpful if the committee looked at productivity in the round. As well as the traditional way of looking at it in terms of outputs and inputs, there is the wider view of its impact on communities, people and populations. Underemployment is a key challenge.

Before I bring in Douglas Duff, Gordon MacDonald wants to come back in to nuance his question slightly, or ask a follow-up question.

I want to ask about productivity. David Skilling’s report says:

“The OECD note that productivity across the developed world has been in secular decline over the past 15-20 years.”

With that background, I notice from HIE’s submission that the Highlands and Islands ranked in 1997 32 out of 40 UK regions for productivity and that, by 2014, it had risen to 18th—the largest change in ranking of any region in the UK. Can the other agencies learn from HIE’s remit what should be reflected by them in order to gain that level of increase in productivity?

10:15  

We welcome the opportunity to examine that as part of phase 2. One thing that has made a difference to the figures is that the starting place for the Highlands and Islands was a lot lower than that for the rest of Scotland. That increase is a fantastic achievement for the Highlands and Islands and, I hope, for the work of HIE. It reflects a growth in gross value added—although GVA still lags behind the rest of Scotland and the rest of the UK. Therefore, we still have a journey to go on, but we bring something to the debate, especially about what a south of Scotland agency might look like. We can offer support from our 50 years of knowledge and experience.

I have a brief point to add on the work of business gateway to boost innovation and productivity. Our growth pipeline is intended to help companies to move along a growth path by accessing specialist advice and support so that they can be more innovative and productive, access international markets and broaden their scope to employ. That is all designed to achieve growth. Work has been done recently to augment business gateway services with European funding to provide more dedicated support, to offer more expert help and assistance to companies in examining possibilities, and to lead them to the specialist support that Scottish Enterprise and others offer.

Dean Lockhart asked about productivity; I will follow up on a couple of things that were mentioned. It was said that there is a deficit in respect of the number of businesses that are needed to be set up for us to reach our full potential. For the record, I am a convener of the women’s enterprise cross-party group. We heard from Laura Galloway from Herriot-Watt University that she has seen a lot of female graduates in science, technology, engineering and mathematics subjects end up in businesses that operate outwith their skill sets—for example, setting up a bed and breakfast or going into creative industries. There is a criticism that we are missing a trick with our graduates; we could be more involved in universities and colleges at the point at which people graduate in order to encourage them and give them support to consider enterprise as an option, rather than employment. Could I have some feedback on that?

We fund a variety of organisations that work with universities and colleges to support that kind of encouragement for graduates. The core organisation is the Scottish Institute for Enterprise, which works on exactly that with pretty much every university in Scotland and about 6,000 students a year, whom it encourages to see enterprise as a potential route after university. It runs competitions and boot camps and fits in with things such as the converge challenge, alongside the enterprise agencies. That is aimed at students across a range of disciplines.

Often what turns people on to business is not exactly what they are studying at university; it is not as simple as someone going to university, studying a course, then setting up a business. People who leave university might set up businesses very quickly or years later. Such people have studied a range of subjects; some competition winners lately have been medical students and so on—people whom we would not anticipate having an entrepreneurial bent. That is something that we need to support.

I come back to the point about innovation that I politely led Linda Hanna into and then moved on. There is a huge imbalance between the research that is done in universities in Scotland and how strong it is, compared with the amount that is done in businesses. There is an issue about how the research in universities translates into economic development in Scotland.

In the past few years, we have funded a set of innovation centres that sit between universities and business in order to bridge the gap. A recent evaluation of that programme was positive, but it is early days and we need to do more of that. In the enterprise review, the phrase “cluttered landscape” has occurred more than most because it can be confusing for businesses to know how to interact not just with universities but with the wide range of bodies including universities, enterprise agencies and other agencies. Therefore, better signposting and a degree of rationalisation might be the way forward in that policy area. It is a live issue that the innovation centres are trying to address.

On Gillian Martin’s question, one of the most powerful things that we can do is give strong role models and case studies of women in business and enterprise. We need to work with organisations such as Women’s Enterprise Scotland and the companies that we account manage to demonstrate that business and enterprise are a really good career track for women. We also need to find more role models, share case studies and do more to ensure that people can see them and see that there is an exciting career prospect in business for women.

Women are not the only demographic in which there is perhaps not so much a productivity gap but an enterprise gap. Are there other demographics in which you have identified such a gap? In which sections of society might there be wins from encouraging people into business?

The Scottish Institute for Enterprise, which I mentioned, deals not just with women—it covers men and women. We have also recently expanded its work to cover colleges as well as universities because people who study in colleges often leave to set up their own businesses. They are more likely to do that than university students are because of the kinds of subjects that they study. We consider that demographic—if we can call college students a demographic; they are a different group from university students—to be important.

We have also worked with HIE on some specific measures in the Highlands for supporting students into different types of enterprise as they leave university. We are open to doing more of that with other regions and demographics when need is identified.

You might know that I am a former college lecturer. At the point when students graduate, there is not much in the curriculum—I know that I am jumping into the Education and Culture Committee’s remit—to develop their awareness of how to set up a business. Is that an action point?

Yes. You were a lecturer, and I have not lectured for a long time. In speaking to colleges and universities, we have found that building support such as you mention into the mainstream curriculum of a subject does not work as well it being semi-extracurricular in, for example, the Scottish Institute for Enterprise because not everyone in a class might be turned on to setting up a business. Not everyone leaves college or university and immediately set up a business. Sometimes, we encourage it and it happens a few years later, so we need the full spectrum of support. Sometimes, the support is built into the curriculum, sometimes it sits alongside the curriculum of a course in which it might not appeal to most students, and sometimes it is for people once they have left education. The last of those is probably less a matter for us, but we work with the enterprise agencies on it.

On the full spectrum of support, I spent some time yesterday at Entrepreneurial Spark Ltd and spoke to a number of small companies that had benefited from the different stages of support and were complimentary about the support that was available. The one gap that they identified was in support for getting the first win—the first contract or external validation of their product or service—under their belt. I ask the witnesses to talk a bit about that because it has not been touched on in any of the papers that I have seen; there has not been anything about getting companies across the final hurdle to get their first win.

We have a slightly different pilot model of E-Spark working in the Highlands and Islands to see how it works in a more rural region: it is a virtual accelerator. However, Dean Lockhart has raised a really important point. For businesses that are going through the experience, the issue is how they get the follow-on so that they can build on the experience and the passion and commitment that they have going through the accelerator process, which is usually a lot. It is about either business gateway or the enterprise agency plugging into the graduates of an accelerator process so that they can move on to the next stage. I agree that we need to make sure that accelerators have a clear place within a business growth strategy.

You are probably aware that Audit Scotland gave evidence to us last week. I would like to pick up on a point that it raised. Its report “Supporting Scotland’s economic growth” said that the development agencies in general are performing very well against their own agreed performance measures, but that it is not possible to measure their specific contributions to the national performance framework. Is that a fair assessment?

We got back to Audit Scotland on that particular point. We thought that its report was really excellent and we appreciate its recommendations, but we pointed out to Audit Scotland that in our operating plan we have mapped Highlands and Islands Enterprise’s performance measures to the NPF so that we can demonstrate exactly that contribution. We have a different set of measures that we have tracked over time. They are different because we do some things differently to our colleagues in Scottish Enterprise. We need to be able to demonstrate that those things are successful. The key point is that there is a mapping across of our outcome measures to the performance framework.

Like HIE, we have shared with Audit Scotland what we could call a line of sight between the NPF, our business plan, the published measures that we set out in that business plan and the broader measurement framework that we have in SE around what we track and monitor. We believe that that direct line of sight makes a contribution.

Through the work of SLAED—the Scottish local authorities economic development group—which is the national economic development body, we have been working with the Improvement Service to aggregate a set of performance indicators for economic development services at local level, which can be aggregated to national level.

Business gateway is an important component, but it respects the other economic development services that councils provide. We would certainly be happy to look at the relationship between our indicators and the national ones.

The Audit Scotland report suggests that

“Northern Ireland’s approach to ... monitoring progress against its economic strategy”

is “good practice”.

The report mentions that the approach includes

“Publishing details of how its strategy was developed”,

annual action plans, regularly reviewing progress with annual monitoring, and so on. Would that be worth while? Would it add anything?

We recognise, both from the Audit Scotland report and the first-phase recommendations from the enterprise and skills review, that a critical outcome is that we get a much better and clearer join-up between the national strategy and outcomes and the actions that we as an agency, or others, undertake to deliver on them. I absolutely think that that join-up needs to be made much more clearly.

Would any other panel member like to comment on that?

The question was specifically about the enterprise agencies and the Audit Scotland report. However, on annual publishing of data and performance, we publish a summary of the outcome agreement data for the colleges and universities, which is a strong proxy for the performance of our organisation. We publish the data annually at aggregate level and at individual-college level. There are ways of doing it.

I will add to what Charlotte Wright said. Such measures will be looked at in phase 2. We must ensure that what that looks like in relation to the action plan and the measures is thought through. There should be the simplicity that we talked about earlier and the direct line of sight nationally, regionally and locally. That is very important.

For me, the other thing in all this is always what we can learn. There was a question earlier about what works and how we learn from it. We were very pleased that the Audit Scotland report drew out the work that we and other agencies have done on our evaluation. The work to examine the plan and the measures is also helping us to understand where the investments that we make are making a difference. It is about knowing how we can do more of that and how we respond to how our economy is changing.

The work on the action plan and on the targets and measures helps us to hone what works for us. On productivity, we see that what is working for us is the join-up around leadership support, workplace innovation, internationalisation and innovation. It is not about doing those things separately, but about working with a business on its ambitions to do all those things. When we blend those, exciting things happen in companies—it is about how the elements work together. The more we can blend them, the more confidence we have about how we can progress aspects of the economy.

10:30  

Does Jackie Baillie have a follow-up question?

My question is at a slight tangent, convener. The Government has made clear its commitment to encouraging women into business because of the increased economic contribution that that would make to GVA—the assessment was something like £13 billion. I am curious to pursue the second recommendation from the review, which was about the data gap, specifically in gender-disaggregated statistics. We have been told that there is a paucity of statistics overall. Within that, there is definitely a paucity of gender-disaggregated statistics.

I ask that in the light of Scottish Enterprise’s contribution in its annual report, which said that, of the high-growth companies, 3 per cent were led by women. While I welcome the transparency, I am shocked at the small number. I do not know the number for HIE. Perhaps that is different. Would gender-disaggregated statistics help in addressing some of those problems?

I will take that question first. I agree that we need data that helps us to pinpoint what is happening, where it is working and what else we could be doing. I am not sure where the 3 per cent figure came from.

It is in your annual report.

I will pick up that point when I go back to the office. The challenge of different ownership models means that it is sometimes quite hard to know the level of female ownership, what that looks like and how we gather the information. That is something that we will look at.

We have looked at equality monitoring for companies that approach us and access services for the first time, not just in account management but in everything that we do. We collect that data and, in cases where that answer is available, the proportion of companies that were female owned a couple of years ago was around 46 per cent, so we know that the figure is much higher.

We also know from the examples of companies that we are working with on the ground that we are working with companies that are female owned. I agree that being able to pull out those statistics would give a sense of the data to focus on.

How many of the high-growth companies that HIE works with are led by women?

I do not have that figure to hand, but I will certainly look it out for you.

We undertake equality monitoring of all the programmes that we run to ensure that there is nothing built into the way that we address a programme that could be a barrier to women or any other group. That is a key part of the way in which we would look at introducing any new programme of enterprise support. I will certainly look out the figure: I guess that it will not be as high as we would like it to be.

What data collection is going on at business gateway? There are anecdotal stories that suggest that it is not consistent and that people are not necessarily looking at gender as an issue.

As with my colleagues, I am happy to get more statistics on that. We use a common CRM system, as I said. There is an initial data capture of the profile of participants in our programmes and we can gather that information and produce some analysis for you.

Certainly, the work of women into enterprise and programmes around that are vital in business gateway and our advisers support and promote those events. In recent years, I think that there has been significant growth in the number of women moving into business. They seem to be very keen networkers, and that is seen as an important part of building a business community locally. That adds to the scope for growth. We find that among women in business there is a huge appetite for working together to get the best quality service and for working closely with gateway advisers to make progress and enable growth to take place. I am happy to get the stats.

That is helpful. Do account managers and gateway advisers have specific training on gender? I see that two people are nodding.

Yes.

Yes. As part of the continuous professional development work that we do, we provide training for account managers, which includes gender issues. As Charlotte Wright said, we check that the issue is baked into all our services, so that nothing will get in the way. We also think about how training needs to change on the back of the feedback that we get from companies that are female led about what might have made a difference in that regard.

Okay.

We have talked a lot about women, which is great. I think that Gillian Martin mentioned other groups, such as disabled people and people from ethnic minorities. We have seen figures that suggest that although people from ethnic minorities are doing more higher education and coming out with better qualifications they are not doing so well with employment.

Another group is unemployed Scottish white males from disadvantaged areas.

I am not sure to whom the question was addressed, but if members are asking how many people are in account management or receive our products and services, we do not have such information to hand and some of it might be difficult to obtain. Some EU programmes require certain questions to be asked, but the information would be anonymised and would be at programme level.

From a skills perspective, we face slightly different challenges, particularly in relation to occupational segregation. We have spent a good amount of time working with partners from specialist groups to develop our modern apprenticeship action plan. In that context, we looked at gender; we also looked at black and ethnic minority participation, as well as participation among people with disabilities and care leavers, who are disadvantaged in the labour market. Our four-year plan has fixed milestones, and we are working hard with partners on its delivery.

A big part of our focus on inclusive growth is to do with workplaces and what happens in the companies that we work with. That involves thinking about how jobs are designed and organised and what that means in the context of different structures, and it involves encouraging employers to think about the workplace practices that might enable them to access the mix of talent that will be best for their business. That might be about part-time working and disabled workers. It might be about using digital mechanisms or flexible working.

It might also involve busting myths. We have heard anecdotally that females, in particular, might think that they cannot do a job in a manufacturing environment because they will have to work full time, but that is not the case. We encourage employers to go to their communities and talk about such things. They can be engaged with schools and colleges in bringing forward the different models of work that I talked about, which I hope brings opportunities. When we have worked with employers in that way, they see a big difference—sometimes it is about youth, sometimes it is about disabled workers and sometimes it is about different parts of the community.

In talking to the Scottish Government we have increasingly been thinking about not just the asset dimension of regional economic development but the social inclusion dimension—the inclusive growth diagnostic. We are thinking about what might be stopping a talent pool coming through for employers and how we can match our work with companies with the work that is going on in colleges and elsewhere, to ensure that there is a skills flow that meets employers’ demands.

There is a bigger piece of work to do in that regard. We have been doing a bit of work and we need to do much more, which I think will start to bring through some of the data and intelligence that will tell us where we need to focus.

We recently published our gender action plan. The plan was asked for in the report of the commission for developing Scotland’s young workforce, and we expanded its scope to include universities. It seeks to address some of the issues that we have talked about today.

We recognise that there is quite a complex issue in the fact that, although about 50 per cent of students in colleges are from each gender, there is huge segregation in the courses that they study. Some courses are almost entirely male; some are almost entirely female. There is a separate issue in higher education, where, as well as there being gendered courses, the level of female participation is higher than the level of male participation. That is similar to the point that the convener made about young white males in some ways not doing as well out of the education system.

We are trying to work with employers and others, as well as through our outcome agreements, to achieve a gender balance. Gender is the issue that we have prioritised this year, but there are other groups and there has been quite a lot of activity recently around care leavers. Over recent years, we have been building widening access for care leavers into our outcome agreements, which the commission on widening access work will address.

Thank you. Richard Leonard has a question on budgeting and forward planning.

My question is principally for Charlotte Wright and Linda Hanna, but I would welcome comments and observations from the other witnesses.

In the weeks that lie ahead, one of the committee’s tasks will be to consider the Scottish Government’s budget, especially as it affects enterprise, skills and economic development. The Audit Scotland report on which we received evidence last week spoke about the 16 per cent real-terms cut in the Scottish Enterprise budget between 2008 and 2015 and the 22 per cent cut in the operational budget of Highlands and Islands Enterprise over the same period. In his foreword to the review that was published last week, the cabinet secretary used one of his favourite expressions in saying that any change would need to be cost effective.

In the light of that, will you help us to understand how we are resourcing the creation of the board of trade, the dispatching of trade envoys across Europe and the doubling—I think—of Scottish Development International staff? I would like Linda Hanna to reflect on the submission that we have received from Scottish Enterprise, which ambitiously recommends that the number of companies that Scottish Enterprise helps should grow from between 2,000 and 3,000 to between 10,000 and 15,000, which is a 500 per cent increase. Are you receiving additional resources for the work that you are now being asked to undertake on internationalisation in the face of Brexit, and do you expect to get a significantly enhanced budget in the round that is coming up?

I will give some context to the Audit Scotland report and provide a bit more information. Audit Scotland focused on the grant-in-aid element of our budget, which is the bit that we get directly from the Government, but we augment that budget. Although our budget for 2015-16 was £66 million, we delivered a spend of £111 million because we brought in money from Europe and realised income from our own assets. We also got additional funds for specific programmes such as the community land fund, community broadband Scotland and wave energy Scotland, which added considerably to that total. That is the context to the figures in the report.

Having said that, I think that we are realistic about what the future will look like budget-wise, and part of the review is about ensuring that we are all as efficient and effective as we can be. I would love to hope that more budget will come our way, but our expectation is that we will need to be as effective as we can be in our delivery. A great way into that is in looking at how we can use digital technology better to give our clients a better reach. We also need to be quicker in turning over our interaction with clients, and becoming sharper and more focused in those engagements so that we can reach a wider population of the business base.

10:45  

As Charlotte Wright says, our team is focused on maximising our income beyond the grant in aid that we get from the Scottish Government. Some of that money comes from our property disposals, our investment income and our EU income. In any given year, we seek to do everything that we can to ensure that we make investments that match what the Scottish economy needs and that we focus our resources in the right places with regard to what needs to be done. Over the past number of years, that is exactly what we have done.

In the past couple of years, we have shifted resources around what has happened in the oil and gas industry in the north-east. Even within the model that we currently have, we have ensured that, where there are needs in the economy, we have responded to them, and we have also ensured that we are effective in relation to the other things that we have sought to do. We have made a lot of savings over the past number of years that have helped us to do that.

Like Charlotte Wright, I would love to think that we will get even more money, but I think that we are all realistic about where we are right now in relation to the public purse. Therefore, what is important is that we use the funding and resources that we have wisely and that we make the right investment decisions. We were pleased that the Audit Scotland report talked about the risks that we take and the fact that we are careful about the decisions that we make in an attempt to get the best return for the economy. That is exactly the approach that we need to continue to take.

Clearly, unless there are going to be lots more resources, there will need to be trade-offs. In phase 2, we need to think through how we make those decisions together. It will be increasingly important to work out the areas in which we can collaborate and work together in order to do even more, if we can, with the resources that we have. Certainly, with regard to what we have said about the need to work with many more companies, we are ambitious about using digital mechanisms to do that.

When I was involved in the business gateway 10 years ago, we really wanted to have a blend of digitally enabled services, but the market was not ready for that. However, the world has now moved on quite considerably, and I think that businesses are now much more ready for and interested in having services digitally delivered. We think that that gives us opportunities to provide many more businesses with services in a way that can be augmented in order to provide even more value for the public purse. We are investing heavily in that kind of digital. It involves not simply taking the existing services and putting them online but designing services for a digital world. We think that that will enable us to reach many more companies.

Richard Leonard may ask a very brief follow-up question.

So the answer to the question about how you are going to reach five times as many companies is digitalisation. Is that right? Alternatively, do you envisage employing account managers?

On the doubling of SDI staff, does that involve new people coming into the organisation or is it a redeployment of existing staff members?

On your last question, we and our colleagues in SDI are still in discussion with the Scottish Government about what the four-point plan that was announced will look like, so I do not have an answer for you on that.

On the issue of reaching more customers, a portion of that will be around digital. We have still to work through what is needed in order to supplement that approach, particularly with regard to whether that will involve account management, specialist services or collaborative working across partners. We have set out our ambitions in our submission, but we still have to work through the detail of what that will look like.

I am afraid that we have run out of time, so I thank all our guests for coming today and suspend the meeting for a comfort break. We will reconvene at 11 o'clock.

10:48 Meeting suspended.  

11:02 On resuming—