Meeting of the Parliament (Hybrid)

Meeting date: Wednesday, March 2, 2022

Official Report 1177KB pdf

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National Strategy for Economic Transformation

The next scheduled item of business was to be a statement by Kate Forbes on the national strategy for economic transformation. Given that the cabinet secretary answered a Government-initiated question on the matter yesterday and relevant material is already in the public domain, we will move straight to questions from members. I intend to allow around 30 minutes for questions, after which we will move on to the next item of business.

I am grateful for your decision to move straight to questions, Presiding Officer, given the fact that the statement about the economic strategy was made yesterday.

Presiding Officer,

“not … market tested nor pragmatic”

was Sir Tom Hunter’s assessment of the economic strategy. The Scottish Trades Union Congress in effect disowned the strategy, despite having been key to the consultations. Other bodies, including the Confederation of British Industry and Scottish Chambers of Commerce, were a little bit more encouraging about the lofty ambitions, but said that there is a real lack of clarity about the detail, so it was hardly a ringing endorsement of the Cabinet Secretary for Finance and the Economy’s new economic strategy.

I will ask the cabinet secretary three questions. First, she says in her Scotsman column this morning that Scotland must become

“more welcoming … for innovators and entrepreneurs”.

I completely agree with that, but how does that fit with the Scottish National Party’s priority for a second independence referendum, which virtually all leading businessmen and businesswomen tell us would create a lot of renewed uncertainty and additional cost when the exact opposite is required to attract the new investment that we desperately need?

Secondly, Chris van der Kuyl of 4J Studios has said that none of the cabinet secretary’s ambitions will be achieved unless there are serious efforts to improve education and skills across Scotland. Does she agree that publication of the recent report by the Organisation for Economic Co-operation and Development on school education is essential if we are to fully understand and address the weaknesses in our education system?

Thirdly, I ask again when the Scottish Government will provide the full details of the current situation at the Scottish National Investment Bank, given its key role in supporting future investment.

Thank you, Presiding Officer, for the opportunity to answer questions.

Liz Smith was invited, as were all Opposition spokespeople, to the virtual launch yesterday. Opposition parties regularly point out the challenges that face the Scottish economy, and we have had exchanges on a number of occasions in the chamber pointing out those challenges. We have not shied away from them in the strategy; we have addressed them head-on.

My question to Liz Smith and others is this: what would they remove from the strategy that they think will not deliver, and what would they add, if they think that we are missing policies?

I will answer Liz Smith’s specific questions. First, Tom Hunter was invited to comment on the draft strategy on a number of occasions. He asked us to focus on business and that is what we have done in order to focus on ensuring that there is a growth strategy.

Secondly, Liz Smith mentioned Chris van der Kuyl in relation to investment in education. She will see that one of the five pillars is very much focused on skills. She has made a point about the importance of skills a number of times, so I hope that she welcomes that focus.

She asked what will be different about the strategy. It will focus on unlocking our potential and unlocking new markets, particularly as part of the transition to net zero, so there is a lot of substance in the strategy. However, as with any strategy, ultimately it is the outcomes that will be measured. Some of those outcomes are short term—they are on how we will recover over the next few months. Many of them, however, will be delivered only over the longer term.

My invitation to all members in the chamber and beyond is to work with us to deliver the strategy. I do not think that there is anything in the strategy that Liz Smith ultimately disagrees with.

Thank you, Presiding Officer, for arranging this opportunity to ask questions in Parliament about the strategy. Indeed, perhaps the best way of summing it up is “Better late than never.”

On the cabinet secretary’s comments about the so-called invitation to the launch, let us be clear—that invitation came at 4 o’clock on Monday and was for a time when we were in a Finance and Public Administration Committee meeting. It was not at all a credible invitation.

More important is that the cabinet secretary asked what we would remove from the strategy. I genuinely would not remove anything, but I think that there are things missing. First, it is a report that is broad in terms of its objectives; there is insufficient analysis of the deep structural problems and there is no real analysis of what would change in terms of delivery. For a strategy to be worth its name, it needs to have those things.

On the specific questions, there is a key focus on entrepreneurialism, but given that 99 per cent of firms in Scotland have seen zero productivity growth over the past decade or more, do not we need more focus on scaling up—or, rather, skilling up—existing firms rather than focusing on starting new firms, although that is also important?

I welcome the comments on reskilling but, again, what is going to change? Labour market participation is a key problem in the Scottish economy, so how will that be delivered? Will it be through existing structures and mechanisms or new ones? How will flexibility be incorporated?

In terms of the cluttered landscape, we seem to be adding new bodies—two, I think—which means that we have gone from three to seven boards and bodies, if we start from the beginning of the last parliamentary session. Audit Scotland, among others, has identified that as a key issue. How will that be resolved?

Finally, in the future, when major plans and strategies are launched, can the cabinet secretary please bring them to Parliament first, rather than bringing them first to private invitees to a private event elsewhere, so that we can ask questions here first?

On Daniel Johnson’s point about entrepreneurialism, he mentioned the importance of scaling up versus new start-ups. That policy is backed up by the analytical paper, which I strongly recommend that he reads, if he has not already done so. The strategy that has been published is the tip of the iceberg. Underpinning it is a comprehensive structural analysis of the Scottish economy, which provides answers in relation to a number of exchanges that we have had in the past.

One of the points in the strategy is very much about scaling up. At the moment, if we look at the longevity of most new businesses in Scotland, there is about a 42 per cent survival rate beyond five years, so he is right that scaling up is really important and can deliver significant benefits to the Scottish economy, because scale-ups are the growth businesses that are creating jobs and contributing significantly to gross value added.

Daniel Johnson talked about flexibility: if there is one word to describe our proposals on skills, it is “flexibility”. That is about ensuring that people have access to the right skilling opportunities wherever they are. There are proposals in the strategy on provision of qualifications throughout a person’s life and on being able to access that through a digital academy. There is comment on how we will work with business to provide an upskilling and retraining offer that is easier for businesses to access on behalf of their employees. “Flexibility” is probably the watchword of our skills proposals.

I disagree with the member’s last point about there being a cluttered landscape, because one of the key points of the strategy is not to add new layers but to either repurpose what is already there or to remove it. Removing things never goes down well, and politically it is a difficult thing to do. However, with regard to there being a cluttered landscape, the strategy does not create new bodies, but repurposes bodies. For example, the enterprise and skills strategic board will become the national strategy for economic transformation delivery board, so that it can monitor delivery. I will co-chair the board with an individual from the private sector. Therefore, I caution against the suggestion that the strategy clutters the landscape; it declutters it and refocuses on the vision that the NSET provides.

I am afraid that there is not much new in the strategy. After 15 years in charge, this Government is looking very, very tired. The report does not cover or properly reflect the Government’s failed industrial intervention policies at places such as Lochaber and Burntisland Fabrications, where thousands of jobs were promised, but have not materialised. If we cannot even find enough workers to build the eight jackets for the Neart na Gaoithe—NnG—wind farm in the Firth of Forth, how on earth will Scotland exploit the jobs potential of offshore wind?

In answer to Willie Rennie’s first point about how much is new in the strategy, I say again that if he thinks that we are missing something major or that we should remove something from the strategy, I invite him to tell me because, otherwise, that is just rhetoric.

With regard to the position on Lochaber, as the constituency MSP I know for a fact that we saved jobs that would not have been saved had we not intervened.

However, Willie Rennie did ask a really important question. I refer him to the second programme of action in relation to new markets. He is right that with ScotWind comes the opportunity of up to £1 billion being invested in every gigawatt of energy that is produced. The strategy very specifically and methodically looks at how we might reap the benefits of that beyond what has been done to date, and at how we might develop the supply chain.

I point Willie Rennie to three areas; the first is private sector funding. We have a world-renowned financial services sector that we need to align with the private sector funding that is required. In order to do that, the First Minister is chairing an investor panel.

The second point to make is about developing the supply chain. The commitment is there from the developers that have won the bids to develop the supply chain, so we need to make sure that we support businesses to be there.

My last point is about ultimately delivering on all that is required to make sure that the investment and the supply chain are joined up. Again, in the strategy, members will see a very joined up approach, so that we ultimately reap the benefit of the significant investment in the world’s largest commercial offshore floating wind farms.

Many members wish to ask questions, so I would be grateful for short and succinct questions and answers.

Can the cabinet secretary provide further information about the underpinning methodology and the analysis that was undertaken to inform the strategy and which, ultimately, led to the key themes that have been identified in order to deliver improvements?

Michelle Thomson asked about the evidence. We started with a 133-page analytical evidence paper, which has been published and is available for anybody to read. The five new policy programmes of action were carefully chosen, based on that evidence. They are not based on rhetoric, ideology or political desire, but on the evidence of where the big challenges—long-term structural or short-term challenges—are and where the greatest opportunities are to position Scotland in order to maximise the greatest opportunities of the next 10 years. A robust evidence base underpins each of the programmes and is available for anybody to look at.

The cabinet secretary announced a new talent attraction programme to bring people of working age from other parts of the United Kingdom to live in Scotland. It is an important initiative, because the working-age population has not been growing as fast here as it has in many other parts of the United Kingdom. Why does the cabinet secretary think that, for the past 15 years, people from the rest of the UK have not been coming to Scotland?

On the contrary, the evidence does not back that up, which is why I refer Murdo Fraser to the analytics paper.

We are now seeing the challenges of visa requirements that face people from outwith the UK who want to relocate to Scotland. In the strategy, we set out first to retarget the skills that we need. For example, the tech industry, which was forecast to be the second-fastest growing sector in Scotland over the next five years, regularly says that it struggles to recruit particular skills, so we want to target those skills in the rest of the UK.

People are moving to Scotland—they are attracted by the work-life balance and the, on average, lower living costs here—but we need to do more to ensure that we align the skills need with those who are moving here.

The transition to net zero is a huge imperative, so I welcome section 3 of the strategy, which is headed “New Market Opportunities”. Will the cabinet secretary say more about how we can benefit from those new markets and industries?

It is one of the biggest opportunities that is facing Scotland, which is why the second programme focuses on strengthening Scotland’s position in new markets and industries.

We are already well regarded as a pioneer in the net zero space, and a number of independent analysts have suggested that Scotland has the greatest potential to create green jobs. However, success is not inevitable—it needs to be delivered, and that is why the plan sets out how, alongside the just transition, we will secure the required private investment through the investor panel, as well as develop the supply chain.

The strategy describes Scotland’s desire to be

“a magnet for ... global private capital”

and foreign direct investment. On the face of it, that sounds impressive, but we know that there needs to be more critical analysis. There are two types of foreign direct investment: developmental and dependent. In Scotland’s economy, so often, we have seen companies flourish under Scottish ownership but then be able to achieve growth only through foreign takeover, which often means that capabilities are stripped out of the Scottish economy. The strategy does not offer any critical analysis of how we deal with that. There are examples from around the world of how we could tackle the issue—for example, the Scottish National Investment Bank could take anti-takeover shares in strategic firms to protect them from predatory takeovers. That is happening in the UK already; for example, with Oxford Nanopore Technologies. Could the cabinet secretary consider that as a way to improve the strategy?

The member raises a good point. For the past six years, outside London, Scotland has been the top destination in the UK for FDI. Edinburgh, Glasgow and Aberdeen appeared in the top 10 UK cities in 2020. We are good at securing FDI, but the point that the member makes is important. I do not want to be celebrating the creation of jobs that are outside Scotland; I want to be celebrating the creation of jobs that are here in Scotland. The supply chain is an example of somewhere where we want Scottish businesses to qualify for work in Scotland as part of the development of ScotWind; therefore, we need to work constructively and intentionally with the businesses that have the greatest potential to participate in the supply chain, and ensure that we retain and create the jobs here.

In order to deliver economic growth in Scotland, it is vital that we encourage new start-ups and support existing businesses. Will the cabinet secretary provide any further information about how the economic strategy will support existing businesses to grow?

The strategy is certainly not only about new industries and markets. It is about backing our existing industries and supporting them to improve and grow, be more productive and creative, and transition to net zero and reap the benefits.

The five policy programmes in the strategy are intentional about supporting new and existing businesses to prosper. For example, although the small and medium-sized enterprise sector is the backbone of the Scottish economy, we are conscious that a number of large businesses in, for example, the energy sector, are creating a number of jobs and have great potential to drive productivity. We will work with any business, including any SME or large business, that wants to be more productive and internationally competitive and wants to scale and grow.

Although we are pleased to have secured commitments to fair pay in public contracts, support for co-operatives, social enterprises and public ownership models, and a focus on green jobs, the cabinet secretary will know that the Scottish Greens believe that prioritising growth as a measure of economic success drives increasing inequalities, more precarious work and unsustainable resource extraction and exploitation. How will the cabinet secretary ensure that equalities and human rights are embedded in all economic development activities, and over what timescale will she do that? How will she engage with communities so that Scotland’s economy works for them and supports a wellbeing and a vibrant economy?

The member hits the nail on the head in suggesting that growth and economic performance should be for a purpose. The strategy is clear that its purpose is to raise living standards across Scotland, ensuring that no region, community, household or individual is left behind when it comes to participating in and enjoying the benefits of success.

At the launch yesterday, there was at least one representative of Unite the union who said that they were heartened to hear multiple mentions of trade unions in the strategy and to hear that two of its foundation stones refer to better-paid work and are based on fair work principles. We want to embed that conditionality directly with Government support; we also want to ensure that there are workers’ voices throughout the sectors that we want to see grow and develop.

The strategy includes a welcome focus on improving wages and conditions in sectors where low pay and precarious work are most prevalent through the sectoral fair work agreements. Will the cabinet secretary provide further details as to how the Government will work with trade unions and industry to deliver high fair work standards?

As I said, the purpose of the strategy is ultimately to raise standards, deliver good jobs, address structural inequalities, such as the underrepresentation of women in parts of our economy, and reduce poverty. The strategy needs to play a part in reducing child poverty, and we will require payment of the real living wage and a channel for effective workers’ voices in all Government support by this summer. We are not waiting 10 years but are moving quickly. We will work with employers and trade unions, particularly in sectors where low pay and precarious work are prevalent, including the leisure, hospital, and early learning and child care sectors.

The strategy gives absolutely no support to the oil and gas industry, even though tens of thousands of jobs across Scotland depend on that industry. While we still have a demand for oil and gas, it is better for our economy and the environment that we produce it ourselves. The last thing that we want is to be reliant on Putin or his likes for energy supply. When will the Government stop turning its back on the oil and gas industry and the north-east, and encourage investment in the sector? At present, this Government is driving investment away.

Considering that representatives from the energy sector from the north-east were on the advisory council, and considering that Aberdeen & Grampian Chamber of Commerce welcomed the strategy yesterday, the member might want to reflect on whether it is strictly accurate to say that there is no reference to oil and gas or to energy in the strategy. Indeed, one of the programmes of activity around new markets is very much about helping and working with the energy sector to transition.

I think that I have referenced the energy sector in most of my answers this afternoon such is its importance, which is not just about ensuring that households across Scotland have access to secure energy sources. It would perhaps also help if the UK Government could regulate energy to ensure that people living in areas where energy is being produced are not paying more than elsewhere in the UK.

I very much welcome this ambitious strategy, especially its focus on entrepreneurship. However, it is vital that the benefits of the strategy are felt across Scotland, including in our rural communities. Will the cabinet secretary provide any further information as to how the strategy will ensure a transformation across Scotland?

As the member will know, as a representative of rural Scotland, that is first and foremost in my mind when it comes to a strategy such as this one.

The part of the strategy that I am perhaps most enthused by is the notion that, if every community and region is able to perform well and is given the right support, our national economy will prosper. If we leave any part of our economy behind, ultimately, we will undermine that national performance.

We have spoken to businesses, workers and stakeholders from across Scotland. I want to ensure that we work with rural representatives to embed the strategy. That is partly why I am going to the Western Isles tomorrow, when I will discuss that further.

During the pandemic there was much talk of building back better. The Scottish Trades Union Congress has described the strategy as a “missed opportunity” and

“more of a strategy for economic status quo than economic transformation”.

Detailed actions plans will be crucial if that analysis is to change. Why were the action plans not included in the strategy? How will progress on the action plans be measured?

I did not quite hear Claire Baker’s last comment, but I put on record how much I appreciated the STUC’s input. Roz Foyer, in particular, was very helpful. I fully recognise that all stakeholders want us to go as far as possible.

Right at the heart of the strategy, and perhaps running through every single programme of action, is a commitment to fair work. Two of the five programmes are specifically about wellbeing and raising standards of living, embedding workers’ voices and ensuring that fair pay runs throughout our economy. Fair work is embedded.

The action plan will be published, to ensure that we have a means of delivering that is effective; we will also ensure that there are metrics alongside that. Again, I refer the member to the analytics paper, which outlines what some of the metrics might be.

I will give Ms Baker the opportunity to repeat the end of her question.

Thank you, Presiding Officer. I asked about how progress would be measured on action plans. I think that the cabinet secretary has covered that.

Okay. I call Christine Grahame, to be followed by Jamie Halcro Johnston.

The strategy focuses

“on five key priorities, within Scotland’s current powers”,

but in the previous debate today we found out how those powers are already being undermined by the Tories. With energy, migration and tax—including corporation tax, VAT and national insurance—all being reserved, does the cabinet secretary agree that we could do so much better for the prosperity of Scotland and the just distribution of its wealth with independence?

Christine Grahame is right that, when it comes to economic prosperity, a number of the key levers that we would normally expect to see being deployed in an economic strategy are reserved. Migration powers, employment law, energy powers, taxation and regulation are all reserved. Therefore, in the strategy we have committed to push the current levers as far and as hard as we possibly can, because we are serious and ambitious about delivering a strategy that ultimately improves Scotland’s economic performance.

Having waited so long to see it, I find the report to be underwhelming. In response to its publication, Professor Ronald MacDonald said:

“The kind of substantive issues we need to discuss are simply not there”,

and

“on solutions, it is simply a rehash of all the failed scripts we have seen since 2007”.

Will the cabinet secretary accept that, after 15 years of SNP economic mismanagement, this delayed and underwhelming report of rehashed ideas fails to address the long-term issues in Scotland’s economy and is simply not good enough?

I accept that I have not heard a single policy proposal from the Conservatives this afternoon or, indeed, in any of the debates that we have had. The member talks about the need for new and bold ideas—let us hear them. I have been waiting a long time to hear anything from the Conservatives.

The strategy that we have set out today, backed up by 133 pages of structural analysis on the substantive issues, outlines the areas where we think that we can make the greatest difference. If the member thinks that we should take anything out or add anything back in, I am all ears. [Interruption.]

Before I go ahead, can I just say that I do not expect to hear members shouting across the chamber at each other. I would like to make sure that we can hear questions and responses.

I call Martin Whitfield, to be followed by Stuart McMillan.

I am grateful, Presiding Officer.

Back in 2014, Scotland was the most highly educated country in Europe and among the most well educated in the world, in terms of tertiary education. Yesterday in a speech, the cabinet secretary pointed out that we are now just one of the highest.

The document states that the Government recognises that

“Significant inequalities persist in educational attainment”

and that 10 per cent of Scotland’s workforce have “low or no qualifications”. The answer to that is to implement

“a lifetime upskilling and retraining”

programme for both individuals and businesses. After 15 years in power, and success in upskilling maybe not seen for up to 10 years, is that it?

The member is right to say that we have one of the most educated populations anywhere in Europe. I think that that is to be welcomed and celebrated, because it demonstrates that we have a strong foundation to build on.

The key now—on which we are all well versed, if we have spoken to any organisation that is trying to recruit—is to ensure that our businesses and organisations have not only the skills that they need right now but the skills that they are going to need in 10 years’ time. The pace of change in technology and in the transition to net zero will require us to up our game and ensure that we have a flexible skills system to respond to not just today’s needs but needs over the next 10 years.

Yesterday, Scottish Chambers of Commerce said:

“Scotland’s businesses will applaud the scale and ambition set out in the strategy, which has the potential to live up to its name and truly revolutionise the Scottish economic landscape over the next decade.”

Can the cabinet secretary provide any further information about the engagement work that has been undertaken with stakeholders to ensure that the strategy delivers for all of Scotland’s economy and, in particular, deals with the regional imbalances?

The engagement to date has been extensive and in depth. I cannot count the number of meetings and submissions that I have been party to. Economic transformation has to be a national endeavour. In other words, although we can set the vision, which we have done in the document, and renew our focus on delivery, which we have done in the document and will do in the future, ultimately, all of us have a stake in Scotland’s success. Every member in this room has a stake in Scotland’s success and in ensuring that they contribute and that they represent the businesses that want to contribute. I look forward to working collaboratively with trade unions, the private sector and the third sector to deliver what will be an immensely successful strategy.

The cabinet secretary missed an important question from Liz Smith earlier, so I am sure that she will welcome this opportunity to answer it. Given the Scottish National Investment Bank’s key role in supporting future investments, when will the Scottish Government provide full details about the current situation at the bank?

Any questions about the matter that the member is referring to are for the former chief executive and the board of the bank. I said yesterday that I recognise the appetite for answers but, on this issue, it is important that the board is given its place. Those questions are for the board.

That concludes questions on the national—

On a point of order, Presiding Officer. I am very grateful to you for allowing me to make this point of order. A number of members are still waiting to ask questions. Given the great discourtesy that I believe the Government has shown to the Parliament by not making a statement before now, I propose a motion without notice to extend this session under rule 8.14.3, so that we can hear the questions from those who wish to ask them.

There are other matters to attend to in this afternoon’s business. The business was agreed by the Parliamentary Bureau, and I have already taken extra questions, so we will move on at this point. Of course, it is for the Parliamentary Bureau to decide whether we come back to the subject and allot further time to it in due course.

That concludes questions on the national strategy for economic transformation, and we will move on to the next item of business.