Economy, Energy and Tourism Committee

Meeting date: Wednesday, September 29, 2010

Official Report 458KB pdf

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Enterprise Network Inquiry

I welcome Alasdair Northrop, who will be joined shortly by Bill Jamieson. Alasdair is the editor in chief of Business7 and Scottish Business Insider. I invite Alasdair to make some opening remarks if he wishes, then we will take questions. Bill Jamieson from The Scotsman will join us in due course.

I am delighted to give evidence today for this important inquiry. As you can tell by my accent, I am English by birth, but I have plenty of Scottish blood coursing through my veins. My mother was Scottish, and she would be proud to see her son here today.

Before coming to Scotland 10 years ago, I was business editor of the Manchester Evening News, and before that I was editor of the Western Daily Press in Bristol. As a journalist in England in the 1980s and 1990s, I was well aware of the work of Scottish Enterprise and its tremendous success in attracting many inward investors and creating thousands of jobs. Scottish Enterprise and its predecessor, the Scottish Development Agency, were seen as role models for how to do economic development properly. I was also aware of the good work being done by Highlands and Islands Enterprise and its predecessor, the Highlands and Islands Development Board.

Scotland is blessed with great people, great entrepreneurs and great businesses. They are our assets and, no matter what happens in an economic downturn or a fast-changing world, good entrepreneurs will change, adapt and thrive. Over the past decade, I have written about many of them, and I have reported stories about the development of the financial services district in Glasgow, the growth of the life sciences sector in Dundee, the further growth of the oil and gas industry in Aberdeen and many other things that are easy to forget at times like these.

Today, Scotland’s unemployment level is above the United Kingdom average. With deep public sector cuts having started, we have some real challenges on our hands. Today, I will argue that it is more important than ever to have agencies such as Scottish Enterprise and Highlands and Islands Enterprise and services such as business gateway to provide support to indigenous businesses, high-growth businesses and start-ups, so that they can create more jobs. None of the agencies is entirely perfect—they have made mistakes in the past, which undoubtedly we need to learn from—but they fill a gap that cannot be filled by the private sector.

Many businesses believe that the public sector has grown too big and needs to be pared back. Inevitably, Scottish Enterprise, Highlands and Islands Enterprise and business gateway will all face cuts in their budgets, like everyone else. The Scottish Government must be careful about where the cuts are made to organisations that are essential instruments for future economic growth.

I am very pleased that Bill Jamieson, the executive editor of The Scotsman, has now made it. I invite you to make some opening remarks if you wish—if you have had time to catch your breath. You might prefer just to take questions.

I am happy to take questions.

I will start with a general one. The focus of our inquiry is primarily on the effectiveness of the changes that have been made to the enterprise networks since 2007, particularly the reversion of business gateway to local authorities and the more focused sectoral approach of Scottish Enterprise and Highlands and Islands Enterprise. Does either of the panellists wish to comment on whether they think that those changes have settled down in a way that ensures that Scottish businesses are getting the support that they need, or have you identified any problems with the network that is now in place?

I can talk to you about business gateway first. I have spoken to people in a number of councils where there has been an increase in the number of companies that have been helped by business gateway, and they have taken on their new responsibilities enthusiastically. Figures that I have obtained confirm increases in the numbers of start-ups that were helped in 19 areas. In one area the figure was unchanged, and in only one area was there a decrease.

I would like more information about the performance of business gateways—which were originally brought together under the Scottish Enterprise umbrella to tackle inconsistencies across the network—to be publicly available. There is now a risk that services across Scotland could again be inconsistent. Some of them are run by local authorities, some by chambers of commerce and others by third-party suppliers. My concern is over future funding for business gateways. Will it be ring fenced or is it vulnerable to local authority cost cutting? Where will it come among the various priorities? I have spoken to some people in chambers of commerce who feel that it would be more appropriate for them, rather than local authorities, to run business gateways, as they have more relevant expertise.

Turning to account-managed businesses, each year we do an issue of Scottish Business Insider in which we profile about 40 rising stars in business in Scotland. We send them a questionnaire asking them their views about what should be done to help the economy. We found that 59 per cent of this year’s rising stars received help from Scottish Enterprise in its new format, and 14 per cent got help from other organisations such as the Prince’s Scottish Youth Business Trust and business gateways. A total of 27 per cent received no help from any publicly funded organisation. The rising stars were mostly complimentary—albeit not totally—about Scottish Enterprise and other agencies. They argued, however, that there was not enough publicity about the services that they provided and that it was not easy to find information about what was available to entrepreneurs.

One person who was account managed was Fergus Clark of the Inveralmond Brewery. He said that he had a good working relationship; that his account manager had great empathy with his business, aims and objectives and often asked questions that he would not have thought to ask himself; that the assistance to the company from Scottish Enterprise had ranged from project management to rebranding programmes; and that the account manager had encouraged the company to apply for support in many facets of its business.

I have other examples, if you want me to talk about them, but I have also given you all copies of the magazine in which we covered that issue and talked to the various entrepreneurs involved so that you can get a feel for the sort of areas in which Scottish Enterprise is helping. Generally, the account management approach appears to be working.

There has been some controversy about whether non-account-managed companies are looked after properly. There are 2,000 account-managed companies, but Scottish Enterprise tells me that it has helped far more than that—something like 7,000 or 8,000 companies that have come to it for help. The question is whether companies are aware that they can go to Scottish Enterprise or whether they feel that it will not be possible to get help. That needs to be explored further.

I will make two points on the business gateway. There is no doubt that Scottish Enterprise is much changed from the organisation that the committee examined in 2007. It has targeted what it calls businesses of scale—that is, businesses with a turnover of £500,000 or more, of which there are about 2,000. Its detractors say that that is cherry picking from the business gateway universe, but there is a strong argument for doing that.

Scottish Enterprise wrestled in its early years with the lack of business formation in Scotland, which has remained a big problem for us, but another problem that was at least as important was identified: the very thin number of middle-sized businesses. That is where the problem is. We have a big base of small businesses and sole traders, a very small stem of companies in the middle and then big public limited companies at the top. Identifying and targeting the 2,000 companies that are scalable—that can be helped to develop—and concentrating resources on building them is the right strategy.

On the business gateway, there is a problem with the monitoring and assessment of the quality of service that small firms get from a range of local authorities. It is difficult to understand how the governance of the business gateway is followed through. In other words, are we sure that models of good practice by one local authority are picked up by other local authorities, and what sanctions are applied to local authorities whose work on the business gateway is almost nominal? I am not sure that we have got that right. We need to have more independent and objective feedback on how the business gateway system is doing. We have happy customers’ glowing testimonials from Scottish Enterprise, but we are looking for something a bit more independent and objective.

One concern that has been expressed is that a number of companies are missing out. They do not fit into the business gateway group because they are already established or are slightly too large for it, but they are not high-growth, account-managed companies. They may be going through a temporary problem because of the economy and in need of some temporary help. Have you heard any evidence of concern that the enterprise networks might be failing a number of companies because they do not fit into the current criteria?

I have heard that anecdotally, not in quite the systemic way that has been outlined. There has been some good assessment of the scale of the problem.

A number of companies may feel that their problems lie elsewhere. In other words, particularly in the current climate, their problem is how to access more funding from their banks and how to deal with the severe increase in charges and fees that they are suffering from their banks. On a scale of one to 100, the complaints that I receive by e-mail and telephone from businesses about their treatment at the hands of their banks probably registers about 90, whereas the number of complaints that Scottish Enterprise does not reach out to them is less than five.

12:00

Companies have not come to me to say that they are not getting help from Scottish Enterprise, but I have spoken to chambers of commerce, business gateway people and councils, which are working to resolve problems when they arise. The business gateway has been approached for help by companies that have said that they were not getting any help from Scottish Enterprise, and a solution has been found, so there is some joined-up thinking going on. I cannot say that that is happening everywhere, because I have not been everywhere, but I have travelled around many regions in Scotland this year doing a series of regional surveys, so I have quite a good feel for things.

I would like to explore two areas with you, the first of which is local economic development/regeneration. I represent a Fife constituency, which is probably quite a good example of the extent to which things are working—or rather, failing to work. It is clear what is happening with the business gateway and it is clear what is happening with account-managed companies but, as the convener said, there is less clarity about the bit in the middle.

When Scottish Enterprise Fife existed, Scottish Enterprise had a presence in Fife and people felt that they could get help and expertise. There was budget flexibility—I think that the local managing director had flexibility of £1.5 million—and the organisation was seen to have a presence around the constituency. Now in Fife, everything has moved to the council, and there is some evidence that the funding might not have followed. There are issues to do with what happened to that expertise and that funding. I know that some councils are doing economic development extremely well—Fife Council is—but there is a gap that I am concerned about. I think that it was Bill Jamieson who said that it was hard to get a handle on how that landscape was panning out. How are you finding it, now that you have a little more experience?

There has been another restructuring recently, as you know. In areas such as the one that I represent, there is a feeling that Scottish Enterprise is becoming even more Glasgow-centric. For example, the east of Scotland has lost its business growth director. There is a feeling that everything now has to go through Glasgow. I know that it is a big question, but what are your feelings on that?

There is a board or committee that oversees the work of the business gateways across Scotland and which links in with the local authorities. The Scottish Government is represented on it, as is Scottish Enterprise. The issue that you raise certainly ought to be taken up at that level.

Having said that, my sense is that regeneration has fallen off the list of five or six priorities that Scottish Enterprise addresses. My sense is that it is better for the organisation to be focused on a few things than it is for it to be focused on so many things that we forget what the first points on the list were by the time we get to the final points on it, as was the case previously. Scottish Enterprise seems to be focused much more on providing assistance to companies than on taking a wider view of what it is doing for specific areas or counties, but I would certainly raise the issue with that board.

There seems to be quite a lot of inconsistency across the country and people are having to adapt. I was in Ayrshire recently. Scottish Enterprise Ayrshire, the Ayrshire economic forum and the Ayrshire tourism partnership were removed, which left a void. The local chamber of commerce has put together an open space event and is bringing together people to discuss issues such as tourism, economic development for Ayrshire and marketing Ayrshire, but there is some disjointed working. For example, in east Ayrshire, there is the Kilmarnock campaign. As a result of the loss of Scottish Enterprise Ayrshire, there is no overall strategy that is working for Ayrshire.

One thing that has not happened everywhere is the visible formation of the regional advisory boards that are supposed to work with Scottish Enterprise. That is working extremely well in the Aberdeen area. The regional board in Aberdeen city and shire is extremely active and is involved in the city centre development to form a new city square, among other projects. It has a highly sophisticated set-up. However, I cannot find anything on the internet about the boards for the west and the east of Scotland that were supposed to be formed. However, councils are working with Scottish Enterprise in local areas. For example, the economic forum in Lanarkshire has continued.

Development is extremely piecemeal—there is no consistency across the piece. Nevertheless, things are happening. Regeneration projects are taking place. Only yesterday, the competition results for the design of the new Victoria and Albert museum were announced in Dundee. Interesting projects are being developed, but Scottish Enterprise is not at the back of them, and there is a different format in every area.

I know that some of my colleagues want to come in on that issue, but I would like to ask about a different one. Skills are crucial. I chair the cross-party group in the Scottish Parliament on construction. Skills and not looking across Scotland are the issues at every meeting of that group. We have had huge examples relating to stonemasonry, funding to planners being cut and so on, and it looks as if policies are not joined up. The new Skills Development Scotland was meant to bring together all the policy areas. Has there been an improvement in skills development and planning in Scotland since Skills Development Scotland’s inception?

From my point of view, Skills Development Scotland has not been very visible. I do not know whether it has had problems getting itself together, but I have not seen much from it. Nevertheless, from talking to various people, I know that there are signs that things are starting to improve. Tomorrow, we will have a round-table debate about skills, so I hope that I will be able to give members more information about that; I will pass on to the committee the relevant magazine when it is published.

Skills are undoubtedly critical to Scotland’s future, and trying to get a properly joined-up approach is vital. I hope that the new structure will work, but it is inevitable that restructuring will cause initial problems. I suspect that the restructuring at Skills Development Scotland is taking its time. It certainly seems to be doing so from a visibility point of view, although I might not be aware of things that are happening.

Where there are problems with Skills Development Scotland, they reside within that organisation. I am not convinced that there should be a reintermeshing with Scottish Enterprise. Around 10 or 12 years ago, there seemed to be a compelling case on paper for bringing together in one organisation the premier economic development agency and skills development work. The case looked fantastic on paper, but in practical terms we are talking about quite separate areas of expertise. I used to hear many people in Scottish Enterprise say that they were not up on skills and that there was not much that they could add to skills, which is a specialist area. Therefore, I am a bit sceptical about reintegrating Skills Development Scotland with the enterprise agency. Equally, there seems to be a case for having a good look at what Skills Development Scotland is doing and what its problems are.

Finally, a criticism that I hear in my constituency and in my work with the construction industry is that there are too many players and that the funding for some modern apprenticeships, for example, goes through so many layers that by the time it gets to the right people it has been top-sliced. Do you hear such things? Is that your view? How can we consider that issue?

I have heard that from some people in industry, but I cannot speak authoritatively about the matter until we have had our discussion tomorrow. In Scotland, there is often a problem with too many organisations working on the same thing. Streamlining is needed. That is the idea behind Skills Development Scotland, but there are other organisations. It will be interesting to see what evidence the committee receives in its inquiry. I will be watching the inquiry very carefully.

I want to change our focus and think about an all-Scotland perspective. Inevitably, we have received evidence that the cities are the drivers of the Scottish economy. We heard that from Edinburgh Chamber of Commerce last week.

I represent, in the Highlands and Islands, an area where the city, Inverness, is doing quite well. That is the easy bit, but the success of development in the Highlands has been judged, by HIDB and everyone since, according to how well the economy of remote areas and islands has been transformed. That could also be applied to other parts of Scotland. Does Scottish Enterprise face up to that issue, if so how, and which aspects of HIDB—sorry, HIE, as it is now—need to be altered to make more of the resources in smaller communities?

I will make two points. First, connectivity is essential to economic development in the Highlands, whether it is transport connectivity—roads, rail or whatever—or broadband and information connectivity, which is increasingly important for a renaissance in the Highlands. I am surprised that that has not come round more quickly.

Secondly, I think that I am right in saying that Scottish Enterprise supports a number of businesses in the Highlands and Islands. Inevitably, that poses the question, why have two agencies working on economic development when one might be better and might put in more resources? You will know that the two organisations are constitutionally separate and that there are marked differences between their constitutions.

I think that I am right in saying that HIE has a social remit for community development. If you put that point to people at Scottish Enterprise, they readily admit that it is neither willing nor able to take on such a remit. Therefore, to the extent that there could be any bringing together of the two agencies, first, it would have to be partial; secondly, it would have to be limited specifically to what is done for companies, firms and developing that area; and, of course, thirdly, you would have to ensure that any bringing together would save money.

I will pick up in particular on the willingness aspect of your argument. I quote from a press release from HIE this morning, which is entitled “Ambitious communities get HIE support”. It states:

“We looked at the best strategies for engaging with local communities as well as how to develop an action plan. The project’s main aim is to bring the whole community together to take advantage of assets or projects they have which if developed could have an impact on income levels, population retention and growth, enhanced infrastructure, better local services and new income streams.”

I contend that many parts of the Scottish Enterprise area require such an approach. It is about creating businesses, but it is also about finding ways in which you can find the impetus to create businesses rather than relying on an individual with an idea coming to Scottish Enterprise.

That is very well put, if I may say so. I struggle to see how Scottish Enterprise could be credible in that area of competence. Does it have the competence to do what HIE is doing? What is it that Scottish Enterprise—or an enlarged Scottish Enterprise—could do that is better than or different from what HIE is doing?

The way that I am leaning on the issue is to look for ways to pool common costs and resources behind the two organisations—quite a lot could be done by way of back-office rationalisation—but Scottish Enterprise could not credibly undertake the community development remit.

We could explore that issue a little further. We should bear it in mind that the evidence from the chambers of commerce last week was that Glasgow, Edinburgh, Aberdeen and so on drive the economy, but Aberdeen started to do that only when oil was discovered. It was certainly a regional centre. The resources that are driving the economy are not necessarily to be found in the large population areas. They can be found in small communities, but they require efforts from the Government and companies. Is Scottish Enterprise more able to deal with such developments? I have had my own criticisms of HIE, which was slow to catch up with renewables at the start, but it is very committed now.

12:15

I would pause on that, because if you open up Scottish Enterprise’s annual report, which is my starting point, the first thing that you see on page 1 is a list of its five or six strategic priorities. Now, that is a slimmed-down list. You can imagine what it was like before. I would hesitate before adding yet another dimension for Scottish Enterprise to take on. The whole thrust of its approach in the past three or four years has been to slim down, to focus, to get out of areas where it has less confidence and less credibility, and to focus on what it reckons it can do best.

Highlands and Islands Enterprise has its own way of working and it works extremely well. As you say, it has had its faults, but unemployment levels in the Highlands and Islands in the summer were lower than the UK average and the Scottish average. That is pretty good going and it shows the strength of parts of the region, although I know that there are areas where the position is not so brilliant.

Scottish Enterprise can learn from what HIE is doing and adapt it for isolated rural areas in Scotland such as the Borders and perhaps Dumfries and Galloway. Many people have argued that it should do that. I hope that you will consider that point. HIE has a good case for remaining independent. It works closely with Scottish Enterprise, but it works in a very different environment.

I have to put this point about the way in which the fàs aig an oir—growth at the edge—approach is going. HIE states:

“The agency plans to spend almost £1.5 million over the next three years on this aspect of its strengthening communities remit. HIE’s contribution is being matched by an additional one million pounds from the European Union’s LEADER programme and local authority sources.”

That is very much the mix that happens in the Scottish Enterprise area too, but where is the evidence that Scottish Enterprise can actually do that for the south-west, the Borders and other rural parts of its area?

That opens up a whole new configuration. In other words, we are saying that we need perhaps not two separate bodies but two approaches, one for the central belt—Strathclyde, Glasgow, Edinburgh, Dundee—and another for the Highlands and Islands plus the Borders and Dumfries and Galloway. That kicks off a profound debate about where we think Scotland strategically is going to go in the next 20 or 30 years. I am not convinced that we should treat rural areas as separate zones.

I will be going to southern Scotland for my next regional survey, so I will be able to give you more on that, but I cannot speak with authority on the subject today. Of course, the problem will be budgets. There is just not going to be any more money to develop things at the moment.

The very small sums of money that I mentioned in the HIE area illustrate that, but there must be an issue to address, because an all-Scotland policy must recognise that there are resources in many of these areas that may become more important in the next 30 years. Thank you.

We have heard from witnesses about regeneration. I think that Bill Jamieson said that it might be no bad thing if regeneration was no longer a focus for the enterprise agencies. Given that our remit covers the whole range of areas for which the enterprise agencies have been responsible, that raises an obvious question: if enterprise agencies are not doing regeneration, who is? If nobody is doing it, what are the consequences? I would be interested in the views of both witnesses on that.

From what I have seen, it seems that the councils are taking on more of that responsibility, but they are working with other local partners such as chambers of commerce and Scottish Enterprise representatives.

The other point is about the assessment of big infrastructure projects, whether in transport, housing or whatever. Such projects have hugely significant wider impacts on their economies. You are absolutely right to spot the weakness that Scottish Enterprise has no remit in respect of infrastructure projects, yet such projects can be great economic generators. Decisions about them probably lie with the Scottish Government rather than Scottish Enterprise.

We asked this question of witnesses at our meeting last week: are there examples of local regeneration projects that have gone from the enterprise networks to local authorities and which have been carried through successfully? Alasdair Northrop’s initial answer about local councils was right in that it is to them that responsibility should be allocated formally. I am not terribly sure that we have many good examples of how that works in practice. Are there examples of either success or failure where local authorities have taken on that responsibility?

I do not have any deep knowledge on that one, I am afraid. I cannot think of any examples off the top of my head, but I will think about it.

I know of certain local authority areas that are struggling. A few moments ago, Alasdair Northrop mentioned Ayrshire, where I know that there has been a real problem, particularly in east Ayrshire, in trying to kick-start sustainable development in some of the areas that used to have coal mining, engineering and lace manufacturing—all those industries have gone. How do we set about regeneration there? My sense is that local authorities need outside help to get critical mass.

Again in an earlier answer, Alasdair Northrop referred to Aberdeen, which is the area that I represent, and the active role of its regional advisory board. That begged another question about the transparency and accountability of those boards. The Aberdeen project that was referred to does not command much general support from the public and I am not even sure how much business support it commands. Has the shift away from clear, coherent and consistent structures throughout Scotland created a problem for who makes decisions about regeneration and who implements and drives them?

The project in Aberdeen is an interesting development—certain business figures are pushing it and the council has given them obvious support. Despite the poll that the council took, which showed that people do not want the development, the council is pressing ahead with it. As a question of local democracy, that is a crucial example. However, some people could argue that the scheme is so important that to abandon it because of the results of one poll would not be great, particularly as somebody is willing to put up £50 million towards improving the city centre, which undoubtedly needs improving. The question is a political one to which I cannot give an answer.

Because of the difficult times that we are in and which are set to get more difficult, we might see more collaboration and interagency approaches to regeneration. In many cases, necessity is the mother of invention. I notice that in Edinburgh over the past year different and disparate organisations have been reaching out to a far greater degree to see how they can combat the effects of job losses in the financial sector. People cannot just rely on the council, the chambers of commerce or small organisations; people working together can have a much bigger effect. Over the next two years, I think that there will be a far greater predisposition towards exploring those options and putting them into effect than there has been over the past five to seven years.

In the public sector, there is a theoretical division between, on the one hand, regeneration projects of national or regional significance and, on the other hand, local regeneration projects. In theory, Scottish Enterprise retains an active interest in national and regional regeneration. In your experience, is that theoretical construct reflected in practice? In other words, there was mention of major infrastructure projects not being Scottish Enterprise’s direct responsibility; however, the redevelopment of Ravenscraig has clear Scottish Enterprise input. Does the separation of local projects from regional and national projects work? Do the public agencies, in partnership or otherwise, know what their responsibilities are?

It works when people know what the boundaries are between local regeneration projects and big infrastructure projects. I have no idea where the boundaries are. You have raised an extremely interesting issue.

I do not feel qualified to answer that one, I am afraid.

On the regeneration theme again, I know that the urban regeneration companies are extremely lean anyway, but is there a greater role in the URCs for the likes of Scottish Enterprise?

It already plays quite a role working alongside them. I spoke to Irvine Valley Regeneration Partnership when I was doing my Ayrshire feature. It is doing some really good work to prepare the ground for future investment in the area and to improve the environment.

Scottish Enterprise needs to have an input because it is about future economic development, attracting people to particular areas and knowing what infrastructure will be there to attract particular industries. One of the areas that Irvine is going for is the life sciences, so it is important for that URC to work with Scottish Enterprise on the issues that a life science company would consider if it were relocating or being set up there.

On the extent to which Scottish Enterprise makes the most of its business and economic intelligence, the agency is extremely well placed to suss out what is going on in certain areas of Scotland. It has access to or looks after some 2,000 companies and it also has quite a range of account-managed companies. Interestingly, it does a regular survey of those companies’ sales, turnover, profit experience, problems with the banks and expansion plans. That is a rich source of information and perhaps it could do more with it, for example by using it to inform the Government—I get it from time to time, when I ask politely. The information might be interesting to a company that is thinking about coming in to a particular area and wants to know what the pie chart—if you like—is of existing companies and whether they are making progress. A lot of the information that we get from the Scottish Government is rather tardy; this information is quite fresh. Maybe we should ask Scottish Enterprise whether it can develop its business intelligence to be more effective than it is.

12:30

I know that Scottish Enterprise works well with the URCs and will be working closely with the local authorities and other agencies in those areas as a result of that.

If the information that you are talking about were to be made more widely available, would that have a major effect on the URCs’ proposals for the areas that they cover? Would they have to change the plans that they have already put in place?

Possibly. However, the depth of the economic information would be on a different scale. Currently, they supply small-scale survey work from their account-managed businesses. However, I would have thought that there is sufficient brainbox power and enough people with connections within Scottish Enterprise to scale up that operation so that it becomes a useful tool for not only local authorities but incoming businesses.

I have a question on regeneration that follows on from Rob Gibson’s question about the city focus, which was raised in the committee last week.

For many years, many of the economic drivers in Scotland have been focused on the cities. I am aware of the issues that Rob Gibson raised about Highland communities and more rural communities in general, but I am concerned about the peripheral areas that surround the cities, which I do not think have had enough attention over the years. I am not for one minute suggesting that there should not be a high degree of focus on the cities, but I feel that the local authority areas around Edinburgh, Glasgow and Aberdeen have not had enough focus. As a regional MSP for the West of Scotland, I am thinking in particular about Inverclyde. I know that there is a URC there at the moment, but I am thinking about the decline of the core industries that we used to have and the fact that IBM, which used to employ more than 5,500 people, now employs just under 2,000. I feel that there is a massive disconnect between what has happened in the peripheral areas and what has happened in the cities and rural areas.

I agree. We should concentrate more on the needs of small communities that used to have huge employers but no longer have them. It is a huge issue, and one that is not easy to tackle. There is no doubt that some of those places feel neglected and unloved and there must be more of a focus on them.

One thing that particularly concerns me is the out-of-town developments that are erected without any concentration on what is happening to town centres. The planning regime should be examined closely in that regard. Businesses always complain about planning decisions being too slow and so on, but we must have a planning system that works and helps local communities.

Some interesting things are going on in Dumbarton at the moment, with the local chamber of commerce working with the council to make the town centre look better, by putting new frontages on shops to make them look as if they are open and so on. Things are happening in that town, but such efforts need to be spread out across Scotland, where, currently, nothing like that is happening.

More work needs to be done by Scottish Enterprise and chambers of commerce to improve local communities.

I agree.

Either since the pre-2007 period or in the period from 2007 to now, has there been a change, with people trying to take a wider approach to regeneration rather than focusing only on city centres?

I am not aware of it. That said, I cannot be everywhere at once. I assume that members of the Convention of Scottish Local Authorities will look at the issues and try to work together. Somehow or another, we need a national focus on regional development. I am not sure whether there is a national regeneration conference in Scotland. If there is not one, there should be one.

Over the past four years, the greater concentration on reshaping and recalibrating Scottish Enterprise to achieve efficiency savings and enable it to focus on a shorter list of objectives means that one area—regeneration—has been left to one side; it is not getting the attention that it ought to be getting. The question has to be asked: if Scottish Enterprise is not doing regeneration, who is? Who is co-ordinating that effort? As far as I understand the situation, Scottish Enterprise sees its main remit as being to encourage three things: company formation and growth, employment growth and companies from overseas locating in Scotland. Unless those things happen, we will not get very much regeneration.

I am keen to explore the effectiveness of the changes to business gateway that were implemented two years ago. Both of you have touched on the issue. I find it difficult to judge the effectiveness of the change, partly because of the enormous downturn, which we must factor in, but also because we have found it extremely difficult to get data and figures from the various sources. We put out a call for evidence to which, I think, only six councils out of 32 responded, and we have not yet received a submission from COSLA. If I took down correctly what you said, Alasdair, 19 out of 21 areas have seen an increase, one has stayed the same and one has seen a decrease. I am not sure whether those are local authorities or areas on your Highlands and Islands trip. What is your sense of the effectiveness of business gateway on the ground?

I agree that it is very difficult to get information, but I managed to get some figures yesterday from the public relations agency that looks after business gateway. I am not sure where the figures came from, but I now have them. They show that, for example, in Aberdeen city and shire, new start-ups have gone up from 903 to 1,001. There are figures out there for all areas except the Highlands and Islands, where different comparators apply. The information I have is brief; I would like to see much more.

Bill Jamieson spoke of quality assessment. As I said, there are problems when different people are involved and in trying to ensure that we know what is going on. I do not have figures on how many companies business gateway has helped or whether the figures are up or down. I also do not know what size the companies are and what their needs are. That sort of information would be extremely useful. As far as I am aware, COSLA has responsibility for gathering the information. The committee and all of us would find the information of use.

Who did you get the figures from?

I got them from the PR agency that looks after business gateway. I can pass the figures to the committee.

I, too, would like more information—you would not expect a journalist to say anything other than that. Indeed, it would be good discipline for the governance of business gateway for it to have to provide such information in, for example, shortform interim reports or annual reports of progress.

It would be very useful to have the information, and we all would feel more confident if a separate or independent body and not a PR firm were to bring together the figures.

To be fair to the public relations firm, I am sure that it did not collate the figures; it simply handed them over. I just happened to get the figures from the agency.

The committee will push for the figures.

I have a question for each of you: what is your gut saying to you about the effectiveness of giving the business gateway to local authorities as opposed to running it centrally through SE? Is your gut feeling that it has worked, it has not worked, it is too early to say or the picture is mixed?

My gut feeling is that it has worked. Local authorities have taken control of things, have taken an interest and have realised that they have to do something because the economy is the most important thing to stimulate at the moment. I get the feeling that they are taking the situation seriously, are watching it and are making changes to and improving the service. I spoke to Glasgow City Council, which is trying to improve its business gateway. The City of Edinburgh Council is doing the same.

Overall, I get the feeling that things have got better. However, the big problem is that we do not have evidence to show that.

The picture is mixed.

In the evidence that we have heard so far from business organisations, anxiety was expressed about the vulnerability of Scottish Enterprise and Highlands and Islands Enterprise in the forthcoming budget if we are to find £1.7 billion of cuts in the coming year alone. There has already been a 30 per cent like-for-like, real-terms cut in HIE and a 14 per cent cut in Scottish Enterprise in the past three years.

There is a sense that that vulnerability is driven by those organisations somehow becoming marginal to Government strategy—a kind of benign neglect. Scottish Development International has not had a chief executive for a year and Scottish Enterprise paid its outgoing one not to be there for six months. VisitScotland did not have a chief executive for six months; the Minister for Enterprise, Energy and Tourism makes an annual visit, if that; the board has become entirely operational, rather than strategic; and the international advisory board has been disbanded with no public comment. That leaves those organisations vulnerable in the context of a budget cut of such magnitude in a few weeks’ time.

Do the witnesses share that anxiety about the organisations’ budget vulnerability and whether they have become rather marginal to Government strategy, such that three can be without a chief executive in the same year when we are trying to turn round from recession?

You may be surprised to hear that I share that concern. I may not have articulated it seven or eight years ago, but I certainly do now because we are in something close to a national economic emergency. What are we going to do to create the new jobs that will work like a sponge to soak up the redundancies and cutbacks in the public sector? We really have to do that, so when I look at the figure for the Scottish Enterprise budget—which is £282 million, I think—as a percentage of overall Scottish Government spending and compare that with the figures from seven or eight years ago, I get the impression, which I am sure is unintended, that the Scottish Government does not care much about economic development or growth. That is not at all the case; of course it cares.

The problem is that, for the past four years, the focus at Scottish Enterprise has been to try to make the agency more efficient and to cut out the surplus people that it had. There is no doubt that there was fat to be trimmed from it and the multiplicity of functions had to be addressed. Now, Scottish Enterprise has slimmed down to a core area and I reckon that any further cut would bring about an almost existential threat to it. It can be cut so far to the point at which we have to ask what the point would be of keeping it on and why we should not do away with the whole thing.

We should not do away with the whole thing. That is not to say that we should not be vigilant about how Scottish Enterprise spends its money. There is certainly a case for examining how effectively it uses its resources. I am not clear why it has to keep about £100 million in cash, including keeping £30 million aside for the Scottish Investment Bank. We might want to get into that in a moment.

I am not sure what the new Scottish Investment Bank will do, who the board of directors are or whether it is a bank in the sense that the Financial Services Authority understands. A bank has to be legally constituted. You will understand my apprehension about the word “bank” after what has happened in the past two years. What is that organisation doing within Scottish Enterprise? What is its governance? Who is running it? What will it do differently from or better than other agencies? It might have a fantastic case to exist and a lot to do, but we need to bring out that hidden flower in Scottish Enterprise and have a little more information on it; a little more light is needed to help it to grow. Keeping it as almost a two-line thing in the annual report is utterly inadequate.

12:45

You might have lit Wendy Alexander’s blue touchpaper.

It is tempting, convener, but I am alert to the time.

I will offer another titbit on the neutering of the enterprise agencies. It is probably unarguable that the greatest success of Scottish Enterprise was its joint venture in the 1980s on Scottish Development International, which was then called Locate in Scotland. In a focused way, it decided to go after the market gap that it saw in electronics, and it did so hugely successfully.

Just this morning, we received information from John Swinney that, in a year’s search for a new chief executive of SDI, the appointment panel of four, which did not even include anyone from Highlands and Islands Enterprise—one of the three partners—and which had one person from Scottish Enterprise, has been unsuccessful.

The Government now wants to look for a leader who

“could meet the representational requirements”.

There is to be

“greater emphasis on the ambassadorial role of the Chief Executive position”.

The person is to

“work with embassy-based Scottish Government colleagues”

in the US and China, and their role will include

“contributing to the Scottish Government’s International Framework.”

I spent this morning at the low carbon investment conference at which, overwhelmingly, the issue was how we meet the market opportunity in renewables. Everybody was clear that it is a policy-driven market and that the country in Europe that puts together investment-grade packages first will win out. On the supply chain, the evidence is that four turbine manufacturing companies are coming to Britain, but none yet to Scotland. Last week in England, Stephen Green was appointed. That is a wonderful appointment if you want to put together investment-grade packages. However, a chief executive whose role is

“contributing to the Scottish Government’s International Framework”

is not likely to be somebody who has shown leadership in the oil and gas community in the past 20 years in Aberdeen, or who is the head of energy at the Royal Bank of Scotland, and who might exploit the opportunity in renewables in the same way as we exploited a market gap 30 years ago.

That is one little bit of evidence that came to light this morning about the neutering of the organisation in a way that means that we risk missing the big opportunity on the horizon.

The delay in appointing a new chief executive has been unfortunate, but SDI has still been doing an awful lot of work on the international side. We are involved in helping on that and writing about it. Every month, we do a piece in the magazine on countries to which Scottish companies should be exporting. That is one of the driving forces of the magazine. It would distort things to say that everything has stopped and that SDI has been neutered, because it is still working actively. I do not know the ins and outs of the search for a new chief executive, although I agree that it has taken a ridiculously long time. The process is still going on.

On renewables, the process is a long one and every part of Scotland wants a piece of the action. Again, it is taking too long, but things are happening and I hope that conclusions will come through soon. It is essential that Scottish Enterprise can do the things that it already does with companies. The company that is on the front cover of the current issue of the magazine, which is one of the fastest-growing companies in Scotland, was helped by Scottish Enterprise. If Scottish Enterprise had not helped it with overseas trade visits, it would not have the clients that it now has and which have made it a company that has enjoyed growth in turnover of about 800 per cent in the past three years.

One of the corrosive effects of Scottish Enterprise over the past three or four years has been its senior people’s reluctance to assert themselves as leaders. They have been so focused on slimming down, getting their budgets right and so on that I suspect that it has lost an awful lot of its confidence and the leadership function that it had 10 or 12 years ago. There were people in Scottish Enterprise—or the SDA, as it was—who were seriously big hitters and represented the voice of business and enterprise to Government. Given what lies in front of us over the next three years, such a role is important because we will need the strongest leadership in this area.

If Bill Jamieson is able to recant his comments on the lack of policy leadership, I might be able to recant my comments on how close skills issues are to Scottish Enterprise. One consequence of the constant churn and change in the organisation over the past 10 years has been to teach the leadership that if it is timid in its support to 2,000 companies it will never be on the front page of The Scotsman for taking risks, and one of the original purposes of the development agency was to take risks. Of course, some risks do not pay off; for example, I do not think that anyone 10 years ago could have second-guessed the extent to which Scottish Enterprise tried to support the life sciences industry and, although that has not come to fruition in quite the way one would have wished, the call was not necessarily wrong.

Let me leave you with some of the choices facing the committee as we formulate our advice on what Scottish Enterprise should do with a future reduced budget. Going back to AOL broadband, which Bill Jamieson mentioned, I point to outstanding reports that Reform Scotland and the Royal Society of Edinburgh have recently published on what Scotland needs to do to provide connectivity. Understandably, I detect little appetite in Scottish Enterprise to take on an incredibly difficult policy challenge, because it does not hold the regulatory levers. However, as I say, we have generated a climate of policy timidity.

Finally—and more important—on energy, Scottish Enterprise published an outstanding report on 12 possible sites for port infrastructure in Scotland, but what it did not do two years ago was to place a bet on one of those options. The National Renewable Energy Centre received the investment instead. The UK Government made a £60 million commitment, which of course might not now go ahead, and four turbine manufacturers are now going to England and Wales. The courageous thing for Scottish Enterprise to do, instead of producing a report setting out 12 possibilities for port infrastructure sites, would have been to place a bet on one of them. If it had done that, it might have been in a better position today. All of us—politicians, the Parliament and the media—have to take some collective responsibility for inducing that lack of policy leadership, but the loser is the nation’s economic development.

When I recently interviewed BT’s chief executive, Ian Livingston—who is a Scot—he said on the subject of superfast broadband that he was waiting to hear whether the Scottish Government was going to give his company money to enable it to provide 100 per cent coverage. I know that times are hard but that money must be found. After all, the internet has taken over our lives, and it is essential that we have the best service, particularly in the rural areas that we have been talking about, where some amazing businesses have emerged. For example, I know of one business that has its offices in Bridge of Don and San Francisco. That is how the world is changing.

But what part of Government do you charge with that responsibility? In a number of areas, we have de facto moved towards the Welsh solution of ensuring that such responsibilities reside inside Government rather than with an arm’s-length and more market-facing agency. I do not regard that to be a happy position and it is a dilemma that confronts us all in the period ahead.

I totally agree. When I was in Wales, I put together a benchmark feature on the Welsh economy and was told by the Confederation of British Industry that the way things had been done in Wales was just not working. It is essential to have an arm’s-length agency.

I agree.

Almost exactly a month ago, I visited Voith in Heidenheim, where some of my students are working in managerial roles. Voith is the world’s largest supplier of marine and hydroelectric turbines; for example, each of its turbines for the three gorges dam generates about the same amount of current as Longannet power station, which gives you an idea about the scale of its operation. It is very keen to operate in Scotland, because Germany has no seawater that it can effectively use for power generation. As Dr Weilepp, who is in charge of the programme, made explicit to me, the Baltic is tideless and the Wattenmeer on the North Sea is mud most of the time, so Voith is looking to Scotland for linkages, sites and construction facilities. Such is the pressure that the more rapidly Scottish Enterprise, or what we want to keep of it, is converted to something like Statoil—let us call it Statewave or something—to act as an orienting and planning body for such companies, the better.

Let me tell you what Voith says. It comes from a statement, but I should point out that I got it when I went to talk to the people in question. Interestingly, the text is in German throughout, which might be a comment on George Mathewson’s allegation that everyone in European finance and business speaks English all the time; in fact, when I asked about it, I was told—bluntly, but to the point—that the people at Voith speak English very little because technology no longer comes from the UK.

Voith is very impressed by the possibilities of using Scotland in a way that I had not thought of before: as a pump storage system. Its pump storage operation is now 90 per cent efficient—I had been led to believe that the figure was 57 per cent—which means that the possibility of using hydro or certain Scottish Water reservoirs as a huge battery for regular currents from wind and wave power has increased enormously.

I feel that I can ask this question because I will be leaving Parliament in six months, but has the time not come to rejig Scottish Enterprise and move it away from a regional structure towards a very purposive renewables-oriented structure with Statoil as an analogue for its organisation? What points can be made against such a move at this time?

Two thousand fast-growth companies, for a start.

For me the Scottish low carbon investment conference has been a real eye-opener with regard to the potential and the sheer huge scale of these operations. On Monday, Andrew McLaughlin from the Royal Bank of Scotland gave an interesting speech in which he put on the table some mind-boggling figures about potential. It was all very interesting and I hope that it will give some power and momentum to the efforts of the Scottish Government, Scottish Enterprise, Scottish Development International and Scottish Chambers of Commerce to attract the Government’s proposed new green investment bank to Scotland. I think that this country would be a very good location for it.

You are absolutely right about the potential in all this activity, Mr Harvie, but sometimes pennies are very slow to drop in people’s consciousness. We in Scotland are only just waking up not just to the potential of renewables technology, but to the opportunity that the hardware itself presents to Scottish manufacturing. The one tiny bright spark that I see in the Government’s gross domestic product figures is an uplift in manufacturing led by exports. One always wishes that, to help us along, the pound will fall a bit further but I would not write off the contribution that Scotland can make and its potential in this area.

As the low carbon investment conference has proved, things are accelerating. Scottish Enterprise’s focus on renewables is unquestionable—after all, it has a team that looks after the issue—and I think that Scotland is well aware of the potential. It just has to happen; in fact, as we can see with our own eyes, it is already happening.

But what about institutional structures, which seem to me to be of prime importance? For example, when we visited Aberdeen and talked to the people in oil and those who supply oil-maintenance industries—case-hardened capitalists, every one of them—what they all wanted was one central state organisation that they could go through instead of the current diffusion of authorities. Simplicity and approachability are what we need—and quickly—and it does not matter whether they come from the state or from some hybrid organisation.

13:00

The Government should certainly be thinking about structures. However, I have to say that, with all the focus on Scottish Enterprise and the Scottish Government, the single gateway seems to be there. We simply need to concentrate on the forthcoming big decisions such as where renewables will be concentrated.

I agree.

I have a couple of final brief questions to which brief answers would be helpful. Earlier, it was suggested that Scottish Enterprise’s regional advisory boards seem in some areas to be fairly invisible. Has the loss of the local enterprise companies led to a loss of the business voice in the enterprise network?

It is difficult to judge, because it is not clear what is going on. We need clarity in that respect. In Aberdeen, businesses are very much involved with the local authority, Scottish Enterprise and so on, but we cannot say the same about the whole country. I hope that after this inquiry people will realise that they need to show what is going on in various areas.

We have focused on the restructuring of Scottish Enterprise and Highlands and Islands Enterprise but, as Wendy Alexander in particular has pointed out, budgets have been falling dramatically in real terms. Have the enterprise agencies sufficient resources to fulfil their responsibilities in delivering economic growth?

You could say that they never have enough resources. I am not sure that the Government’s overall budget priorities are right, but then I have been saying that for years. As I said earlier, the enterprise sector receives only a very small proportion of the budget, particularly in view of the challenges that we face. In many respects, though, it has done Scottish Enterprise no harm to live within a reduced budget.

It is pretty essential that Scottish Enterprise’s budget is kept as high as possible—after all, it is doing many of the right things—but, being realistic, I think that it will be cut. I am not the one who will make the decisions about what should or should not be cut, but some real thought needs to be given to the issue.

On that note, I thank Bill Jamieson and Alasdair Northrop for their very interesting evidence, which will no doubt provide food for thought for the rest of our inquiry. Next week we will take evidence from the Cabinet Secretary for Justice on the Protection of Workers (Scotland) Bill and will continue to take evidence, particularly in relation to business gateway, for our review of the enterprise agencies. I remind members that, after that, we have an informal meeting with the Financial Services Consumers Panel and that, on Thursday afternoon, we will meet informally with the Secretary of State for Business, Innovation and Skills.

I thank members for their attendance and close the meeting.

Meeting closed at 13:03.