Economy, Energy and Tourism Committee

Meeting date: Tuesday, June 29, 2010

Official Report 310KB pdf

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Enterprise Network Inquiry

I welcome everyone to the 22nd meeting in 2010 of the Economy, Energy and Tourism Committee, which is our last meeting before the summer recess.

Before we begin, I just want to say that this is Gail Grant’s last meeting with us, because she is moving on to the Equal Opportunities Committee after the summer recess. On behalf of the committee, I express our grateful appreciation for all the work that she has done for us over the past three years. She will be greatly missed. Thanks very much, Gail.

Members: Hear, hear.

Agenda item 1 is consideration of an approach paper for our proposed inquiry on the enterprise network. Are there any comments on the paper?

I have one or two. Clearly, the topic is important. I particularly want to consider the inquiry’s remit.

One of the most striking points in the paper is in the fourth paragraph of the background information, which is in annex A. That points out that the cut to the Highlands and Islands Enterprise budget was much greater and deeper than the cut to the Scottish Enterprise budget—43 per cent compared with 16 per cent, which is more than two and a half times greater. The committee will want to consider specific questions about the impact of that on HIE, which has a distinct role. I am keen that we should examine that issue properly.

That takes me to question 10 in the key questions, which appears to imply that because HIE’s budget has been more savagely cut than Scottish Enterprise’s budget, HIE’s very existence is open to question. The interesting question in comparing HIE with Scottish Enterprise is about HIE’s distinctive social remit and obligation, so rather than ask,

“Does the need still exist to have both SE and HIE operating within Scotland?”,

which implies an answer, a much more positive approach would be to ask what distinctive contribution HIE’s social remit has made to the Highlands and Islands economy and what contribution it can make in future. Following on from that, we should ask whether the obligation to strengthen communities, which applies to HIE but not to Scottish Enterprise, could usefully be applied to the work of Scottish Enterprise in some or all of the area for which it is responsible.

I do not know about Highlands and Islands Enterprise, but Scottish Enterprise is considering reducing the number of its directors. Anecdotal evidence says that that will hit its work in the regions. I would like to examine the current restructuring and its impact on the city regions and the city region staff. I have gone on about that issue in the committee. If the aim is to reduce staffing in the regions further, I would like to examine that and the balance between the central and the regional.

The intention is that we will pick up some of those issues under key question 6, but there might be a means to widen it slightly.

I have a question regarding Lewis Macdonald’s comments. It does not surprise me that we want to ask why Scottish Enterprise does not have the social remit. It would be useful to know whether that has been raised at any point in the Parliament and whether any conclusions have been drawn. The issue seems to me to be obvious. This is the first time that I have discussed it in the Parliament, but I am sure that it will have been mentioned before. It would help us in framing the question to know whether any recommendations have been made on the issue. It would be valuable to explore that.

That is a fair point. To an extent, Scottish Enterprise’s regeneration work was its social remit, but that aspect was removed.

I have three points. First, I assume that there will be a call for evidence and that we will seek written submissions during the summer recess. Given that the business gateway element has been transferred to local authorities, it is important that we strongly encourage all local authorities in Scotland to complete answers to the questions and give us their thoughts. If half a dozen local authorities respond it will be mildly useful, but to get a complete picture of what has happened on the ground we will need all 32 authorities to give us their feedback.

Secondly, question 5 refers to “local versus national regeneration”. It would be useful to ask those who respond whether they know of any projects that have fallen by the wayside as a consequence of the shift in the enterprise network, rather than because of the downturn. Initially, various organisations made representations about projects that had fallen by the wayside. It would be useful to know whether people still think that in some cases projects have fallen by the wayside because of the changes.

My third point is a question for the Scottish Parliament information centre, although it might also be answered by people giving evidence: what has happened to the business start-up rate and VAT registrations in Scotland over two or three years? The change to the enterprise networks will clearly not be the only factor that has affected those figures—many things affect them—but it is important to have the baseline data.

I have several suggestions. We need to start with an historical overview. The SPICe paper is useful, but its longest time horizon is three years. HIE is now 40 years old and Scottish Enterprise is 30 years old, so we should begin the inquiry simply by setting the scene and examining the changes in their purpose and role over that time.

We should consider the purpose and function of regional development agencies and what difference they can make. The Financial Times has confirmed that all RDAs in England are to be abolished, so the policy area is highly contested. In work that was recently done for Northern Ireland on how that area stimulates its growth rate, McKinsey gave an interesting presentation on the role and purpose of RDAs in small regions and nations. Although McKinsey is never cheap, it might be prevailed upon to give us such a presentation, whether open or closed.

We should begin by hearing an outside perspective on how the role and functions of HIE and Scottish Enterprise have changed over 40 and 30 years respectively. Secondly, we should consider what RDAs around the world seek to do. McKinsey is the premier consultancy on that.

It will not surprise anyone to hear me say that an expert adviser would help us to sift what we hear. We will start from a base of relatively little knowledge and, to be frank, it is difficult to reach a judgment about an inherently soft, malleable issue even in four times four hours. It is not like scrutinising a bill; it is about whether we think that the boards are going in the right direction or whether we think that we can outthink them based on 16 hours’ evidence. If we are going to outthink them on that basis, having alongside us at least one person who is completely steeped in the stuff would be a valuable addition to the resources at our disposal.

I am always in favour of doing more on the analytics. If we are to get up to speed with the role, purpose and function of the agencies in 16 hours, the challenge will be to keep the evidence analytical rather than anecdotal.

I am somewhat nervous about getting deeply involved in too many private briefings, as they are called. Such briefings do not lessen the time that committee members have to put in; they simply displace it to slots other than the committee’s scheduled one on Wednesday morning. We are moving into the final term of this parliamentary session. Initial private briefings do not reduce the work; they simply force members to work harder over a shorter period. Given the pressures on members in the final term of the session, we need to avoid too much scope creep.

I do not suggest that we should rethink the agencies’ whole role and function, but the questions start from the specific one about whether the rationalisation has been effective and go down to asking what the agencies’ bigger role is. I would start with the bigger role and filter down.

Question 3 in the proposed key questions suggests that we ask for the experience of companies that are not account managed by Scottish Enterprise or HIE, but it might be worth while asking whether the companies that are account managed have noticed a difference in that management.

14:45

As I said, I am particularly concerned that question 10 should start differently, but I have a couple of suggestions on other questions. The answer to the proposed questions is often yes, but we want to explore a bit beyond that. Question 1 asks whether the rationalisation of the network has affected the quality or effectiveness of services. The answer is bound to be yes, so the question should be, how has it affected quality and effectiveness?

The phrase

“rationalisation of the Enterprise Network”

is not one that immediately explains itself to the casual reader; it would be far more useful to ask whether the abolition of the local enterprise companies and local economic forums affected the quality and effectiveness of the services delivered.

The second question is a good one:

“Has the transfer of activities away from the local enterprise companies, such as the Business Gateway service, to local authorities improved the delivery of services to local businesses?”

However, I would drop the phrase

“away from the local enterprise companies”.

The LECs were abolished at the same time as the transfer, and had the business gateway not been transferred it would have stayed with Scottish Enterprise, because the LECs had ceased to exist.

Question 5 is about local and national regeneration, which is significant, but regional regeneration is also significant, and responsibility for that appears to fall into a grey area in the current arrangements between Scottish Enterprise and local authorities. We should add a question after the first one that simply asks, what has been the impact on regional regeneration projects? I have in mind, for example, the Ravenscraig redevelopment and energetica in the north-east, but I am sure that there are other projects.

Question 6 is whether the regional advisory boards have provided

“a link between local, regional and national delivery”.

Of course they have, but the question should be, what links have they provided? I would split the question into two, end the first one after the words “engaged with local business” and then ask what links the boards have provided between

“local, regional and national delivery”.

If those changes are made, question 7 probably becomes redundant, because it refers to local regeneration, which is covered by question 5.

I will come back to that in a second.

I have been finding it more and more difficult to square the sort of centralisation and general cross-Scotland organisation that we require, particularly in onshore developments for renewable energy, given the existence of two separate bodies. I am not saying that the situation causes me to demand the abolition of the bodies, but we need to look at ways in which the two bodies can collaborate under the general umbrella of providing, for example, facilities and infrastructure for renewable onshore developments. Paradoxically, most of the substantial activity will take place in HIE’s area, yet much of the construction work will have to be done in areas within Scottish Enterprise’s domain. We should examine whether collaboration can be built into the organisations for the foreseeable future to enable them to provide a one-stop shop for renewables, because currently we do not offer that. With the closure of the Redcar steelworks in the north of England there will be tremendous pressure on and from north-eastern England to construct a lot of the onshore facilities.

Are there any other comments?

Only to say to Chris Harvie that a structure is in place at the moment—the national renewables infrastructure plan—and that the Government involved HIE and Scottish Enterprise in developing it. We are working together.

With respect, I think that we have to move further and faster in the direction of something like a renewables version of Statoil. Others will move in that direction if we do not.

I hear the points that Chris Harvie and others have made, but I suggest that we have limited time in which to hold the inquiry, so we need to ensure that it is focused. The focus primarily is on the impact of the structural changes rather than some of the wider issues, although we will have to touch on them. It would be useful to have the kind of historical background briefing to which Wendy Alexander referred to put things in context. It would be of benefit if SPICe provided that to us after the summer recess. I see a helpful nod from the SPICe direction.

Are members content with Lewis Macdonald’s proposed changes to the questions?

On removing some of the wording from question 2, if you transfer activities—as per the question—you must transfer them from somewhere to somewhere else. The question actually makes a bit more sense, compared with—

Could we say “away from the enterprise networks”?

Or the local enterprise companies, which were clearly affected by the changes. Other than that, are members content to make the proposed changes?

Members indicated agreement.

There is a lot of information in the background briefing that has been provided for us today. It would be helpful at the beginning to have SPICe present the main findings. I think that it is without precedent for us to be looking at organisations that have had a 43 per cent reduction in their budget in the past three years. A presentation by SPICe early on, I hope in PowerPoint form, would set out to members what has been happening. Perhaps that could be shared with everyone from whom we are requesting evidence, so that they have a common baseline with us. My instinct is that we should deal with that in the order budget, staff then property, rather than staff, property then budget. That ordering would be helpful when we discuss the information as a committee and when we share it with those organisations that we want to comment.

It is certainly important that we have a shared understanding of the baseline figures with SPICe, the two enterprise agencies and the Government. In some of our recent budget discussions, we have not had such a shared position, which has not helped. It would be helpful if some work was done over the summer on reaching agreement with all parties about the baseline figures.

We are content with the remit as presented, subject to the changes that have been proposed. The next question is whether we wish to appoint an adviser. If anyone has any suggestions, they can make them. Do we feel that we require an adviser or do we feel that the resources provided by our clerking team and SPICe would be sufficient to provide advice to the committee?

I have not given any thought to who the adviser should be, but the principle of having one is good. We ought to have one.

The principle of economics applies: can we afford one?

I think that there is money for advisers in the committees budget this year. I suspect that we will be able to afford one this year. Whether we will be able to afford one in future years is another matter. I would be surprised if there was not sufficient funding in this year’s budget for an adviser.

We would need to have someone whose experience is not just in one part of Scotland. We cannot make an instant judgment on this. Could the clerks make some suggestions if members do not have anyone specific in mind today?

If anyone has ideas, it would be helpful if they fed them back to the clerking team. Obviously, we have to get agreement from the parliamentary authorities to appoint an adviser and then agree a shortlist of people to appoint. In any event, we will not be able to agree on an adviser until we come back after the summer. If the committee agrees that we should appoint an adviser, we can set the wheels in motion. Is that agreed?

Members indicated agreement.

Do members wish to receive any initial informal or private briefings? Wendy Alexander suggested that we should have one on the budgetary issues. Would members find it useful to have one or two briefings before we start the formal inquiry?

I recommend that we have just one, rather than two.

If members have issues that they want to be covered in that briefing, in addition to the budget stuff, please feed them in. We will have one initial session. We do not have to make a final decision on this now, but members might wish to suggest that we make visits. They could think about that over the summer and feed back suggestions. We ought to have at least one evidence session outwith Edinburgh. I am thinking particularly of the Highlands and Islands area in that regard, because it is important that we have a separate evidence session on that area. We will have to decide exactly where we should have that session.

Given our visit this morning, I think that Arnish has a bit of a claim in that regard, but there may be other claims from around the Highlands and Islands.

There are two other items. The traditional position is that we agree that dealing with any witness expenses claims be delegated to me and the clerks. Is that agreed?

Members indicated agreement.

We can also decide now that consideration of the draft inquiry report be taken in private. Is that agreed?

Members indicated agreement.