Enterprise and Culture Committee,

Meeting date: Tuesday, May 2, 2006

Official Report 339KB pdf

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Scottish Enterprise

Item 1 is evidence on Scottish Enterprise. I welcome the Deputy First Minister and Minister for Enterprise and Lifelong Learning to the meeting. I will leave him to introduce his civil service team. I hope that you will be able to give us an update on Scottish Enterprise's financial problems.

Thank you, convener. I am happy to introduce Jane Morgan, the head of the division responsible for Scottish Enterprise, and Philip Rycroft, the new head of the Enterprise, Transport and Lifelong Learning Department. I am sure that this is the first of many fun experiences in front of the committee for him. To his left is David Reid, from the Finance and Central Services Department.

I will start by giving the committee an update and making a few points, but I realise that the committee will want to get into questions as quickly as possible.

The future role of local enterprise companies has been discussed in the context of the committee's concern that the LECs should be able to respond to local opportunities and needs. Clearly, Scottish Enterprise needs to be able to address issues of national strategic significance. The move to the metropolitan region planning approach with metropolitan region boards is an important shift in Scottish Enterprise's strategy. However, the agency must also be able to consider how best to build the strength of the LECs to encourage economic development at the local level. As Jack Perry made clear at last week's meeting, that does not mean investing only in our cities or focusing resources purely on our urban areas. I agree with that approach and, as I made clear in my statement to Parliament, we need the LECs to respond to local opportunities and needs and we need local businesspeople to be involved in decision making in the LECs. We need LECs to deliver locally, to continue to prioritise locally and to propose projects of both local and national significance. Many large projects have their roots in, and begin at, the local level.

Scottish Enterprise is working with the LEC chairs to establish how metropolitan region planning and the LEC boards will work with each other. I agree that that needs to be sorted quickly and I am pleased that Sir John Ward indicated, when I met him and Jack Perry earlier today, that progress is being made on the issue. I know that the committee is particularly concerned about LECs' ability to respond to local opportunities during the 2006-07 financial year, which will be difficult because of the circumstances facing Scottish Enterprise's budget, so I will move on to that issue.

I will look briefly, if I may, at the origin of Scottish Enterprise's problems, then consider the 2006-07 budget position. There has been questioning about what the Executive knew and when it knew it. Those are key points and the committee will no doubt wish to look into the issues in greater detail. However, in October, Scottish Enterprise returns showed a potential overspend of, it seems, around £100 million. Scottish Enterprise indicated that it would take action to bring that to a balanced budget position. Board reports imply that in Scottish Enterprise's view, matters were under control at that stage.

On 13 and 16 January, Scottish Enterprise staff inquired about an increased budget from the Scottish Executive. They were told, as the finance team within Scottish Enterprise already knew, that that was not possible. Scottish Enterprise did not reveal the then anticipated scale of its overspend. The figure of £77 million is one that KPMG extracted from internal reports; it was not then available to the Scottish Executive. On 19 January, following press reports on the issue, Jack Perry told Executive officials that Scottish Enterprise would manage its budget. However, given the press reports, a meeting was requested between the Executive and Scottish Enterprise officials in order fully to understand the situation. That meeting took place on 24 January. I was informed of the likelihood of an overspend the day after that meeting, on 25 January, when Eddie Frizzell, as head of department, wrote formally to Jack Perry to express his concerns following the information discovered at that meeting.

The important issue is the adequacy of Scottish Enterprise's financial systems. KPMG was asked to check the accuracy of the overspend estimate and to make any recommendations on financial practice and reporting. The KPMG report points to some serious failures, which Scottish Enterprise needs to address. I have written formally today to Sir John Ward requiring implementation of the recommendations of the KPMG report. Scottish Enterprise intends to implement the detailed recommendations of its own internal audit process. The Enterprise, Transport and Lifelong Learning Department will liaise with Scottish Enterprise on the implementation of the KPMG recommendations, but I intend to ensure that there is an external check on progress.

Scottish Enterprise has admitted that it should have taken much stronger action in November and December, once the estimated scale of the overspend was known, and that the lack of such action is the key cause of the overspend. It also accepts KPMG's recommendations, which are in line with its internal work. Most important, there must be clear responsibility for delegated budgets. The resource allocation system introduced last year was clearly not properly managed or implemented. Reporting to the board must be in resource accounting terms and must be more timely. Appropriate balance sheets must be prepared throughout the financial year. There is no reason why non-cash items cannot be tracked rather than just left to the end of the financial year.

Those facts do not in any way diminish the important task that Scottish Enterprise must perform. I support Scottish Enterprise and the important projects that it is introducing. What we need now is for Scottish Enterprise to ensure that it can deliver those within budget to the benefit of the Scottish economy. I am confident that Scottish Enterprise can do that.

I turn to the impact of last year's overspend and the pipeline of Scottish Enterprise's current projects. Many have expectations of Scottish Enterprise that will be hard to meet, but Scottish Enterprise has to prioritise in the same way as other organisations. I acknowledge that the original estimate of non-cash items was too low and that that would otherwise lead to reduced cash spend for Scottish Enterprise; in other words, to make allowance for the non-cash items, the grant in aid made available to Scottish Enterprise would have to be split between projects and making available resource cover.

I have therefore been discussing with Scottish Enterprise the allocation of additional resource cover to tackle the difficulty caused by non-cash items this year and last year. That will allow Scottish Enterprise to meet its non-cash requirements in 2006-07 and allow access to Scottish Enterprise's reserves, as it has requested.

I will write to Scottish Enterprise, requiring that additional resources are, in due course, allocated by the organisation in line with ministers' priorities. I am not going to allocate the budget—that is for the board to propose and the Executive to agree—but I will make absolutely sure that spending is in line with strategic priorities on growing business, skills and learning, regeneration and global connections.

The Scottish Enterprise board will meet on 12 May to finalise the budget proposals. It is obviously important, therefore, that these discussions are completed prior to that date, so that announcements can be made to all of Scottish Enterprise, including its business units and the local enterprise companies, and more widely, as soon as possible after 12 May.

I should make it clear that I have no evidence that Scottish Enterprise has underspent its resource budget in recent years. I can clarify that if you wish.

I thank you for your statement, which will have raised a number of questions in the minds of members. I will ask a couple of questions first, in the interests of clarification.

Are you saying that ministers were not told by Scottish Enterprise of the potential overspend until the last week in January?

From October, officials were aware of a projected overspend from Scottish Enterprise. As was explained to the Scottish Enterprise board, we were informed that Scottish Enterprise was taking steps to manage that overspend, which was not a particularly unusual occurrence, and that, in previous years, a significant amount of Scottish Enterprise's budget had been spent in the final few weeks of the financial year. Based on previous years' projections, Scottish Enterprise expected the overspend figure to come down in a manageable way.

In early to mid-January, approaches were made by planning officials—not the finance officials—in Scottish Enterprise. Jane Morgan could give you more detail about that. We did not realise that the reason for that approach was to do with the continuing financial problems. We read press reports about the continuing financial problems and Jane Morgan approached Jack Perry. It might be better if she explained that part but, following the press reports, there was contact and an assurance was given that Scottish Enterprise was continuing to take steps to ensure that the budget came in at or under the level allocated. Only when a meeting was held on 24 January did it become clear that the level of overspend was at the £77 million figure that KPMG had identified. At that point, it was clear that it was unlikely that the budget would come in under the figure required by the end of March.

At that stage, Eddie Frizzell, the head of department, sent a formal letter to Jack Perry. Eddie Frizzell notified me and other ministers of the potential overspend in Scottish Enterprise.

We had an indication that there was an overspend but, until the latter part of January, we were given the impression that the overspend would be managed and would be under control by the end of the financial year. It became clear on 24 January that that was not the case and, the following day, I was informed.

Perhaps Jane Morgan would like to give a little more detail about that exchange.

You have outlined the gist of the matter, which is enough for now.

On 19 January, the First Minister responded to a question that I asked in the chamber:

"I expect Scottish Enterprise to meet its budget targets."—[Official Report, 19 January 2006; c 22555.]

Would it be fair to say that, five days later, it was clear to ministers that Scottish Enterprise would not do so by a substantial amount?

That became clear on 24 January. Ministers were told about it on 25 January.

Why was it another two months before the chamber was informed that there would be a substantial overspend? It appears that on 19 January, the First Minster unintentionally—I am making no accusation against him—informed the chamber in response to a question that I asked that there would, basically, be no overspend. Five days later, ministers knew that there would be a substantial overspend. Why did no minister come back to the chamber and correct the misconception that had been created by the inadvertently misleading answer that was given?

In January, although the scale of the overspend was significantly greater than had previously been indicated to officials, we still required Scottish Enterprise to take steps to come within its budget. Therefore, there was still an expectation, which turned out to be a hope, which turned out to be unfulfilled, that the budget would come within the figure that the Executive had allocated.

Scottish Enterprise was given a clear message about what was expected of it in managing its budget through to the end of the financial year. I do not know whether Jane Morgan would like to comment on the point at which it became absolutely clear that the budget would not be contained within the allocated amount. It is clear that, by the end of March, the projected figure of £77 million came down so that the likely end-year figure—we still do not have the final audited figure—that is now being assessed is £34 million.

I do not have much to add to what has been said. I gather that the figure was £77 million at the beginning of January. Even by the meetings on 24 January, Scottish Enterprise thought that the figure might go down to £40 million, or possibly lower. Its expectation in February was £30 million. We would have to look back at precisely what the First Minister and the minister said in the following weeks.

There was certainly no indication of any overspend.

When it gave evidence last week, Scottish Enterprise said that one reason it ignored the warnings was that it believed that the door was still ajar—it believed that the Scottish Executive would still make additional funding available to cover at least some of the overspend. You are saying that the door was firmly shut and was not ajar at all.

I have looked into all the papers and spoken to officials. I certainly never suggested that the door was open for additional spend. The end-year position for the department was tight. Eventually, we agreed to bring forward spend from the 2006-07 financial year to provide Scottish Enterprise with financial cover for the £34 million. We tried to be as helpful as we could be in difficult circumstances. If you are suggesting that some indication was given at an earlier point in the process, before the agreement on the pull forward of funding from 2006-07, that there would be flexibility or that there could be additional resources, my response is that I am not aware that anybody gave such an indication to Scottish Enterprise.

Why do you think the chairman and the chief executive of Scottish Enterprise believed that the door was ajar?

I do not know. Before I could offer an explanation for their evidence, I would need to know what discussions the chairman and the chief executive believe took place and whether such discussions involved those individuals directly or senior management at a lower level.

For clarification, how much of Scottish Enterprise's cash and non-cash allocation has been taken out of this year's budget to make up for last year? How much extra do you need to give Scottish Enterprise this year to make up the cash and non-cash budget as originally agreed by ministers? What deficit is being carried forward this year?

Jane Morgan or David Reid might comment. The simple answer is that Scottish Enterprise has overspent by around £34 million, of which some £25 million is a resource issue and £9 million to £10 million is a cash issue. We allowed the agency to cover the £34 million overspend by drawing forward funding from this year's budget. It seems clear that Scottish Enterprise has an on-going resource budget shortfall of around £25 million per year. As you know, Scottish Enterprise reported to its board on the likely outcome of its budget in cash terms rather than in resource terms until January this year. Scottish Enterprise has a resource shortfall of about £25 million for this year and last year and a £9 million cash overspend. The figures give an indication of the financial difficulty with which the agency must wrestle.

Is it fair to say that Scottish Enterprise is starting this year roughly £60 million down?

That is broadly correct, if we add the shortfalls of £25 million for this year and last year and the £9 million cash overspend.

The crisis this year amounts to £60 million.

That is why I have had discussions with Scottish Enterprise to ensure that the agency has appropriate resource cover for this year. The figure reflects the scale of the difficulty the organisation faces.

The shortfall is not the drop in the ocean about which some people have said we should not be concerned.

I have never suggested that—

I did not mean that you had said that.

The issue is serious. It is important that the national enterprise agency should have a sound budget and be able to deliver on the important projects and initiatives for which it is responsible. That is why I have worked extremely hard on the issue and had regular meetings with Jack Perry and John Ward. It is vital that the issues are resolved as soon as possible. I would have liked the issues to have been fully resolved by today, but the process will take until 12 May, partly because of the scale of the problem.

Do you require the involvement of the Treasury if you want a change to the resource allocation?

No. We do not require Treasury approval for such matters. There is no suggestion that we need to await Treasury involvement; responsibility rests with the Scottish ministers. Any agreement that will help Scottish Enterprise has potentially difficult consequences for other parts of the enterprise and lifelong learning budget. The balance is difficult to get right, but I am determined to make progress on the matter quickly. Many people might suggest that we simply accept that an overspend occurred and that Scottish Enterprise and its board should be responsible for managing the way forward in relation to the £60 million.

I believe that some support will be required. If support is not given, the consequences for many projects in which local businesspeople and local young people are involved—including training programmes such as skillseekers and modern apprenticeships—would be unacceptable. In those circumstances, as Minister for Enterprise and Lifelong Learning, I have a responsibility to ensure that appropriate action is taken.

Good afternoon, minister and officials. I have several questions, but I must first seek clarification on one thing. The minister mentioned that a shortfall of more than £70 million was first mooted, but Scottish Enterprise dealt with that by moving whatever could be moved from last financial year into this financial year. To what extent have projects that were originally scheduled for last year been moved into this year?

Jane Morgan might want to answer that. The £77 million I mentioned was the size of the overspend that was projected in January. As I understand it, the figure had been higher in October, when it was about £100 million, but it came down towards £70 million. With the benefit of hindsight, more could have been done—I think that Scottish Enterprise accepts this—if stronger action to reduce the figure had been taken in October, November and December. By January, the projected overspend was about £77 million. By the year end, that figure had come down to £34 million, which is the current estimated overspend. To ensure that Scottish Enterprise was covered for the financial year 2005-06, we allowed the organisation in effect to borrow from the current financial year to cover the financial year 2005-06. That is the current position.

I understand that, but I am trying to get to the bottom of the extent to which that overspend was fixed by moving projects from financial year 2005-06 to financial year 2006-07.

I do not have a precise figure for that. It was for Scottish Enterprise to decide to what extent the reduction in the overspend—which was initially £100 million and then £77 million—would be achieved by deferring projects into following years and to what extent it would be done by deciding not to pursue projects to which it was not fully committed. Decisions on whether to defer or not to pursue projects were for Scottish Enterprise.

Is it reasonable to suppose that at least some of the reduction in the overspend was achieved by deferring projects?

Yes.

But that could be said to exacerbate the budget problem for this year, given that Scottish Enterprise will now have less available to it than it would have had.

Under a standstill budget, that will be the case.

I share Christine May's concern. Scottish Enterprise has made it clear to me that it is in a position to meet all its legal obligations for the projects to which it is legally committed. Even though some projects have been deferred into the current financial year, the full analysis of the financial position that has been carried out for Scottish Enterprise has confirmed that the organisation should still be in a position to allow the local enterprise companies some delegated budget for this financial year. Therefore, businesspeople who are involved in the boards of local enterprise companies will continue to be able to take genuine and meaningful decisions and their role will still be substantial. In addition, the business gateway will still be protected and the general level of activity within Scottish Enterprise will remain solid.

However, that is based on Scottish Enterprise receiving support for the resource accounting difficulty and support that will allow it to access its cash reserves. The details and amounts of that support have still to be finalised. Even if those issues are fairly and appropriately addressed, Scottish Enterprise will still face difficult issues partly because of the reasons Christine May identified.

Although I hear what you are saying, I suggest that the definition of "legal commitment"—as I think that we found out last week—is something for which there are formal signatures on bits of paper. A point that I raised last week was that there were a significant number of matters that had not quite got to that stage or for which, as in the case of the training and skills development contracts, which tend to be annual and recurring, there was a reasonable expectation among providers out in the regions that they would continue.

I have two questions. First, you spoke about the future role of the LECs. If there is relatively little or almost no discretionary income, what meaningful role is there likely to be for folk? Secondly, what will happen to programmes—especially in skills and training—other than those that are in the guaranteed group? Serious concerns have been raised that, for example, programmes for the long-term adult unemployed, in which there has been quite innovative use of modern apprenticeships for older people, may not happen because they are not legally necessary.

If the 2006-07 budget had to be contained within the current allocation to Scottish Enterprise, with insufficient resource cover and Scottish Enterprise expected to pay back the £34 million overspend from last year, some serious consequences could result. That is why there has been a lot of speculation among local enterprise companies, business units and contractors about the potential consequences. The most immediate and obvious consequence was that the business gateway would be significantly cut back. That is why, in my statement to Parliament, I reassured those involved in the business gateway and the many small companies and businesses that rely on the business gateway that the business gateway service will continue at the same level as last year. In other areas, my aim is to ensure that the worst consequences of the budget difficulties are tackled, addressed and removed, but I cannot pretend that, even with additional support, there will not be difficulties for Scottish Enterprise over the next few weeks. That is why getting the budget right for 12 May is important.

I put it to you that people have not been speculating: they are worried sick about the consequences of this. What consideration, if any, have you given to making a change in the allocation of responsibilities in the structural review that Scottish Enterprise is carrying out? For example, have you considered leaving the Scottish Enterprise national board with the responsibility for the big, strategic stuff and making other arrangements for the delivery of the local enterprise functions?

The position on changes of responsibilities and financial allocations is as I explained it in the statement to Parliament at the end of March. Scottish Enterprise is proceeding with its focus on the six key industry sectors, the formation of the metropolitan region planning approach and the metropolitan region boards. All 12 local enterprise companies will be retained and will have a key role in decision making on local projects and the identification and support of significant national projects.

We want to ensure that the Scottish Enterprise national board is fully supported in its new focus on the key industry sectors and projects of national and international significance. However, we recognise the fact that not all economic development happens at the strategic or national level and that many businesspeople give a great deal of time and invest a huge amount of effort and professionalism in the work that they do at local enterprise company level.

We want to ensure that the 12 local enterprise companies, which Scottish Enterprise asked me to retain, operate effectively. It has been suggested that Scottish Enterprise wants to reduce the number of LECs, but it should be remembered that it was the Scottish Enterprise board that made the request to me, as the Minister for Enterprise and Lifelong Learning, for all 12 LECs to be retained. I consider it important that we retain 12 strong and effective LECs. Again, given the financial pressures and the difficult decisions that remain for Scottish Enterprise, it will be difficult to achieve that—even if additional support is provided by the Executive.

Good afternoon, minister. I will pick up on Christine May's last question on the impact of the overspend on forward programmes. You mentioned the modern apprenticeship scheme, which most people agree is a success story in terms of the expansion in numbers. I was concerned therefore to receive a communication at the end of last week from a constituent who runs a training company in Fife. He told me that he had heard via the Scottish Training Federation that Scottish Enterprise plans to cut the number of modern apprenticeships from 30,000 to just 9,000. Is that the case?

That is not the case. As part of the discussions that have been taking place with Scottish Enterprise, it has been made clear that ministerial priorities and partnership agreement commitments are crucial and that reducing the number of modern apprenticeships from 30,000 would not be acceptable. We are seeking from Scottish Enterprise the sort of reassurances that committee members seek today on the business gateway, modern apprenticeships and a variety of other issues. However, it is simply too soon to give the committee all the detail on all the issues. We are working very hard to resolve the situation in order that a fair and appropriate budget can be put to the Scottish Enterprise board on 12 May.

So your intention is that no cut should be made in the number of modern apprenticeships.

Perhaps Jane Morgan will give some of the detail of the discussions.

I do not know precisely how many modern apprenticeships there are at the moment—it may be a little over 30,000—but the intention is very clearly that the figure for Scotland as a whole should stay at 30,000. The working assumption is that Scottish Enterprise contributes about 27,000 and Highlands and Islands Enterprise contributes about 3,000. That remains our intention.

My next question is on the role and involvement of the minister in all of this. Peter Hughes, who is the chief executive of Scottish Engineering, was quoted in The Scotsman on Friday as saying:

"The Scottish Enterprise board has lacked political support all along … My impression is that they are an unhappy bunch because the minister has lacked the balls to support them. As they were appointed by politicians, I firmly believe that politicians should get behind them. The fence-sitting and failure to support has been appalling."

Have you lacked the balls, minister?

I am not sure whether I should rule that out on the ground of unparliamentary language. As it was in a quote, I will allow it.

I have given very strong support to Scottish Enterprise. Indeed, Scottish Enterprise and its board do very good work for Scotland and for the economy of Scotland. I have signalled today not only my firm support but financial support for Scottish Enterprise. In my statement to the Parliament, I could not have been clearer in giving support to Scottish Enterprise and endorsing the chairman, chief executive and board members. I contrast that approach with that taken in the chamber by members of other political parties on the day of my statement.

Nevertheless, it must be embarrassing for you that a senior business figure such as Peter Hughes makes such a comment about you as enterprise minister. He described your approach as "appalling". What is your response?

That is why I welcome committee sessions such as this one, which allows me to put on record my support for Scottish Enterprise and to scotch the myths about a lack of support on the part of the Executive and Scottish ministers for Scottish Enterprise and its board. I assure everyone on the committee that my ministerial colleagues and I strongly support Scottish Enterprise.

Among many members, I see two main responses that are difficult to reconcile. The first is that they are critical of Scottish Enterprise for failing to keep within its budget and avoid an overspend in the past financial year. They suggest that no additional resources or support should be made available to Scottish Enterprise. However, those same MSPs are often quick to criticise if there is any threat to projects in their area or to national projects such as the modern apprenticeship scheme—on which Murdo Fraser just challenged me—or the business gateway. I can think of a list of other projects that are seen as important to Scotland's future economic success and the development of skills and training among young people.

It is difficult to reconcile those two approaches, although I understand the reason for the criticisms. However, as ministers, we must ensure that the worthwhile economic development projects that Scottish Enterprise develops and supports continue, while ensuring that there is sound financial management and that Scottish Enterprise's failure to keep within its budget last year was a one-off. We must get Scottish Enterprise back on track and ensure that it has a sound approach to budgeting and funding from now on.

Do you believe that you are a hands-on enterprise minister? Peter Hughes's comments suggest that he does not think that you are.

It is important that I am hands-on in giving strong support to Scottish Enterprise and to its chairman and its chief executive. I do not believe that economic development in Scotland would be improved if Scottish Enterprise's functions were taken away from the business leaders who give a great deal of time and expertise to the work of Scottish Enterprise and its local enterprise companies and centralised in the hands of one person, namely the enterprise minister. I come from a business background and I have a significant level of business experience, but it would be wrong if we did away with Scottish Enterprise and Highlands and Islands Enterprise, through which some of the most experienced, capable and professional individuals from Scottish industry are involved in the delivery of Scottish economic development policy.

That is why it is important that we assist Scottish Enterprise to get through its current difficulties and look to the future. Scottish Enterprise has a strong future. It has a strong reputation not just in the United Kingdom but internationally for the quality of its economic development work.

I want to lead on from what you have just said. You rightly said that we should not underestimate the difficulties that Scottish Enterprise faces, but I want to turn to the future. It is fair to say that Scottish Enterprise's image has been damaged and that some people who possibly do not have the organisation's best interests at heart have leaped on that. I imagine that development agencies in other parts of Europe are rubbing their hands with glee. Assuming that, as we all hope, the rescue works, what can the Scottish Executive do to untarnish Scottish Enterprise's image and to get Scottish Enterprise out there again and being seen to deliver, despite the damage that has been done by some people?

I understand the question and I agree with the concern. Scottish Enterprise has a strong reputation that has built on the reputation of the Scottish Development Agency in the 1980s. Nations throughout the world know about Scottish Enterprise; it has recently won international awards. That is not a new development: Scottish Enterprise, Locate in Scotland and Scottish Development International have, in the past, won a series of awards for the quality of their work. We must retain that reputation and maintain the quality of Scottish Enterprise's work, which is why we must get through the current difficulty.

It is clear to me now after reading the KPMG report that there was a significant problem which, as I said to the convener, I never sought to downplay. In October last year, the level of spend and number of projects that were being supported, if unchecked, would have led to an overspend of £100 million. That is a serious issue. Work has already been done to contain that overspend and, at the end of the financial year, the final figure was £34 million.

I want to ensure that the legacy of that serious problem does not damage the organisation in future and that, throughout 2006-07 and future spending years, Scottish Enterprise is able to get back on track and focus on the key issues, which must be its support for the development of the Scottish economy, its work on improving skills and training for young people and adults in Scotland and seizing on and making the most of global opportunities for Scotland, such as the new opportunities that exist in India and China, life sciences, the energy sector and financial services.

There are huge opportunities for the Scottish economy, but other nations will rub their hands in glee if the current difficulties handicap Scottish Enterprise's ability to seize on those opportunities. Therefore, we must get through those difficulties and work hard to try to reach consensus. It is fair to say that, in other nations, there is often a cross-party consensus on such economic development issues. Individuals from the different political parties work together to ensure that their nation's reputation is enhanced and improved. That should not mean that we avoid close and detailed scrutiny when we experience problems of the kind that have arisen with Scottish Enterprise but, equally, there should be a joint will to get through those difficulties and work positively for the future.

In your opening remarks, you said that you were unaware of Scottish Enterprise's underspend in previous years. Did I hear you correctly?

In the past two to three years, there has not been an underspend in Scottish Enterprise's outturn, which is measured in resource terms, rather than purely in cash terms.

The evidence that we took indicated that an important part of the position in which Scottish Enterprise now finds itself was the fact that, in ensuring that it did not underspend as happened in previous years, it overspent last year. As I suggested last week, there might be more cause to be critical of Scottish Enterprise if it underspent—in other words, if it did not provide the investment for the economy that it should have provided, which is worse than overspending.

In past years, a lot of Scottish Enterprise's expenditure has come in a rush—there has been a sharp increase in expenditure towards the end of the financial year in an attempt to ensure that the budget is fully spent. I am sure that the Finance and Central Services Department would confirm that, but Audit Scotland could certainly confirm the situation.

Since the introduction of resource-based accounting, we have had the issue of resources to cover depreciation and capital charges as well as cash to spend on projects. There has perhaps been an underspend in the cash operating plan, but there has not been an underspend in the overall budget on which we require to report to the committee and the Parliament. There has been evidence of that public sector increase in spend to ensure that the budget is used before the end of the financial year.

Do you think that you need to provide more flexibility in the budget process? You said that you would consider giving access to the cash reserves. Is there any merit in investigating the possibility of three-year funding arrangements rather than having this annual budgeting problem? Giving Scottish Enterprise more flexibility might be beneficial in the long run. I believe that Scottish Enterprise had concerns about the fact that it had earned income that it was not allowed to access. That suggests that the Scottish Executive needs to consider introducing a more flexible budgeting system.

In short, I agree with your comments and suggestions. I have already signalled that we are considering the issue of resource-based accounting and the resource cover for Scottish Enterprise and that we are considering ways in which Scottish Enterprise could access its cash reserves. Today, I discussed with Jack Perry and John Ward the possibility of moving to the system of three-year budgets that local authorities have. That in itself would not necessarily overcome the resource-based accounting problem, because as a result of the shift from cash to resource-based accounting, there is still the issue of containing spend within a given financial year. Rolling spend forward from one year to the next would still be an issue.

I would like to investigate having an approach that would provide more flexibility once we get through the next few days and weeks and ensure that we have a clear and appropriate budget for 2006-07. I know that the Finance and Central Services Department will work closely with Scottish Enterprise to ensure that, if possible, we improve the current system. I do not know whether David Reid wants to comment at this stage.

I reinforce what the minister said about having a three-year settlement. That is possible, but there is still a year-on-year management issue. The challenge would be to define the scale of flexibility and manage that between one year and the next.

I turn to the findings of the KPMG report. First, am I correct in saying that of Scottish Enterprise's £34 million overspend in the past financial year, approximately £25 million is made up of the non-cash budget element?

That is correct.

From the evidence that we have received from Scottish Enterprise and the KPMG report, it appears that there has been a persistent problem with the non-cash budget element. In 2003-04, Scottish Enterprise had an overspend in its non-cash budget of £27 million and in 2004-05, it had an overspend of £26 million, both of which were highlighted in the KPMG report.

In April last year, Scottish Executive officials agreed a cash budget of £431 million and a non-cash budget of £9.6 million for Scottish Enterprise, but I understand that discussions continued to consider how they could address the undervaluation of the non-cash budget and that those discussions continued after the overall budget had been agreed. Will you give us a flavour of exactly what was being discussed with Scottish Enterprise over what could be done to address that issue of a deficit in its non-cash budget?

I may bring in officials to give some of the detail from that time. There is clearly a difficulty here. In relation to its resource cover, Highlands and Islands Enterprise has a non-cash element of about £14 million a year, although it has a budget of less than £100 million a year, which is significantly less than Scottish Enterprise's budget. When the resource-based accounting approach was established, Scottish Enterprise ended up with a figure of just over £9 million a year. That figure was not enough, which is why I am today indicating a willingness to do something to address that and to assist Scottish Enterprise, not with the cash element of its budget but with its resource-based budgeting—the non-cash element of its annual budget.

There have been discussions about assistance in previous years, since resource-based accounting was introduced in 2003-04. The issue was a problem for Scottish Enterprise in the two years prior to the overspend year of 2005-06: 2003-04 and 2004-05. There were discussions with the Executive—perhaps Jane Morgan would explain what occurred.

Although the figures that KPMG reports are accurate—they are the returns that were given in August after those financial years—at the end of 2004-05, we were still not clear about what the non-cash requirement was because the returns made to us had been quite variable. The operating plan was set without adjustment for non-cash items. In May, as soon as we had a clearer figure on non-cash, we suggested to Scottish Enterprise that it needed to adjust its cash spend. The operating plan was not redrawn and devolved budgets were not adjusted because last year Scottish Enterprise was not operating under a system of devolved budgets and the centre, if you like, decided to manage the need to underspend the cash budget by £25 million.

In May 2005, we made clear the need to underspend the cash. We had made it clear in March 2005 that Scottish Enterprise would not be able to access one aspect of its reserves that it had inquired about—what is called a voted loan surplus—and that the argument put forward on that would have equal application to other reserves. We do not really have any trace of discussions carrying on through the year on that. As far as we were concerned, we had made clear our position in May and in a letter to Jack Perry a month or two later. In November, we had a meeting to consider the forward use of reserves and we confirmed that those reserves could not be accessed. Scottish Enterprise had acknowledged that only a few days before the meeting. It is a little difficult to say that discussions were continuing. While discussions were continuing, we made it clear that we did not think that any resolution on reserves was possible.

Does David Reid want to add anything?

Jane Morgan has described the process and she was the person who led it.

I want to be clear about the timeline. From May 2005, when Scottish Enterprise's non-cash budget returns from the previous year were audited, it was clear to the organisation that it would have to find £25 million to cover its non-cash elements for the coming financial year.

Yes, and I think that Scottish Enterprise has acknowledged that. The difference in interpretation relates to the likelihood of the organisation being able to access reserves without that impacting on the resource budget. We feel that we made it clear that any access to reserves would need to be counted as part of resource spend, whereas Scottish Enterprise feels that that was not completely clear.

In your view, when was it made clear to Scottish Enterprise that it would not be able to access the cash reserves to which it was looking to gain access?

As far as I am aware—although I was not involved in all the discussions—we did not discuss that issue specifically in the first part of 2005-06. We discussed voted loans, which are one element of reserves, between about January and March 2005. It is clear in minutes from March 2005 that our view was that there could be no access to the voted loans surplus without that impacting on the resource budget.

Is it the Executive's position that, after May, when it was made clear to Scottish Enterprise that it would have to find the £25 million from its cash reserves, there is no record of dialogue about the possibility of Scottish Enterprise accessing other reserves that it holds?

There was such dialogue again in November. There is obviously a difference of understanding, but as far as we were concerned we were simply repeating what the previous understanding was. I guess that there are occasions on which different people take different things from the same conversation.

Right, but between May and November there were no discussions about Scottish Enterprise gaining access to other reserves.

We have not come across any record of such discussions.

I invite the minister to explain to us why Scottish Enterprise has not been able to access some of the stranded reserves to which it would like to gain access, when—from what he has said this afternoon—he is now considering allowing the organisation to access them in the future. What has prevented that in the past?

The reserves could have been spent, but that would have counted as part of the in-year spend. For example, if £5 million of the reserves had been spent on projects last year, it would simply have increased the overspend from £34 million to £39 million. The reserves are available for use in any given year, but although their use would reduce the amount of funding or grant in aid that the Executive provided, it would still be classed as project spend. In other words, the problem of a projected overspend would remain.

The difficulty is the nature of the expenditure. What balances that out and suggests to me that the Executive should take action is the fact that the level of resource cover that Scottish Enterprise negotiated with the Executive is so different from that which is available to Highlands and Islands Enterprise. I say that the levels are different but, in fact, the amounts are similar, even though Scottish Enterprise is about five times the size of HIE. It is clear that the amount that is available to HIE is about right and that the amount that is available to Scottish Enterprise is continuing to cause significant difficulty.

When an organisation has built up cash reserves and a request is made to use them—especially when the organisation in question, Scottish Enterprise, will continue to face tough financial management decisions over the next few weeks and when the cash surpluses that it holds are quite significant—it is appropriate to try to allow them to be accessed, if at all possible.

General guidance for all non-departmental public bodies was produced when we changed to the new full resource accounting and budgeting system in 2003. The guidance set out the limitations on the use of reserves among all the other factors that were introduced at the time. All of that was generally known.

I understand that the discussions that took place with Scottish Enterprise were more about the process governing the relationship between the use of reserves and the extent to which that might substitute for grant in aid. Although the KPMG report refers to the inability to use stranded reserves, there is a mechanism for releasing them. However, as the minister said, such resources would always count as part of the body's total resource expenditure.

It comes back to the fact that, under the current accounting rules, we must report to Parliament on resource expenditure. That means that all spending, including spending from reserves, must be reported and must be in line with the budget that was allocated to the NDPB.

Historically, the problem started when the non-cash element of Scottish Enterprise's budget was set at just over £9 million. Clearly, that was an underestimate. By contrast, the budget for Highlands and Islands Enterprise includes a substantially larger non-cash element, despite the fact that it is a much smaller organisation. Given that, for the two financial years prior to the most recent financial year, Scottish Enterprise had an overspend against the non-cash element of its budget, is it not reasonable to say that the department should have taken action at an earlier stage to address the problem rather than allow it to linger on until it resulted in the current crisis?

Both the KPMG report and Scottish Enterprise's internal audit report make it clear that the problem with last year's overspend was related not to the resource accounting issue directly, but to a new system of financial management and a new approach to devolving budgets to local enterprise companies. That led to a far greater level of spend by October of last financial year than had been expected. As Jack Perry and Sir John Ward explained, the increase in the pipeline of projects created a potential spend of £650 million within the financial year 2005-06. That was what created the difficulty.

The KPMG report makes it clear that the Scottish Enterprise board should have been in receipt of financial management information in resource accounting terms, but that it received management accounts and financial reports only in cash terms. That has now been changed. Scottish Enterprise has accepted that things should have been done differently and it has taken that different approach from January of this year.

The underlying question is, should Scottish Enterprise have had a more accurate and sensible level of resource accounting from when resource-based accounting was introduced? The simple answer is yes. Highlands and Islands Enterprise requested an amount that turned out to be more or less right. Scottish Enterprise was hampered by its request for a lesser amount. However, that predates my involvement with Scottish Enterprise as well as the involvement of Sir John Ward and Jack Perry.

I understand that there is not as great a trail of e-mails, correspondence and exchanges on these issues as I would like. However, it seems pretty clear that the initial problem resulted from a request by Scottish Enterprise for resource cover of about the amount—indeed, potentially less than the amount—that it was eventually allocated. That seems to be why the resource-based accounting problem arose. However, that should not necessarily have led to the overspend problems that were experienced last year. The problems are related, but distinct.

There is a wide range of views around the country about the seriousness of Scottish Enterprise's financial situation. Some people think that the issue is a storm in a teacup and others take the view that the agency faces a major financial crisis and heads should roll. None of us disputes that the situation has generated a damaging debate—as Jamie Stone said—and much controversy, which has eroded confidence not just in Scottish Enterprise but in the Executive's handling of aspects of economic policy. It is in no one's interests that the current, frenzied debate and the claims and counter-claims that go with it be allowed to continue.

How much responsibility do you take for the presentation and perception problems that have emerged? With the benefit of hindsight, which we know gives 20:20 vision, can you identify action that you should have taken to avoid our ending up in such a situation? I take as read the fact that you continue to address points of substance, but what can you and ministerial colleagues do to turn around perception? What role does the Parliament have in that regard?

On the responsibilities of ministers, it is important that we have well managed agencies and non-departmental bodies such as Scottish Enterprise and that we trust the quality and professionalism of the senior management and boards of such organisations. It is also important that our relationship with such bodies involves checks, for example through regular meetings between leaders of organisations and Scottish Executive civil servants and ministers. That was our approach to Scottish Enterprise, which was aware of a potential overspend last October, but it expected—as did we—that the overspend would be brought under control by the end of the financial year, so that there would be a balanced budget and no £34 million overspend. When it became clear that the problem was continuing, ministers took action and a full investigation into the circumstances of the budget problem was undertaken. We are ensuring and will continue to ensure that the recommendations of the detailed KPMG report are properly implemented.

It is vital that ministers play a detailed role in ensuring that organisations are brought back on track and that budget problems are solved as quickly as possible. We must reach a stage at which we can again trust such organisations, by ensuring that a system is in place and by ensuring that the quality and professionalism of the people who lead such organisations are such that they develop and deliver effectively. I am confident that Scottish Enterprise can be in such a position early in the 2006-07 financial year, so that Jack Perry and Sir John Ward can get on with their number 1 responsibility, which is to grow the Scottish economy and deliver new jobs and economic opportunities for Scotland.

A balance will always need to be struck between the level of ministerial intervention and the degree to which we entrust the leadership of organisations with the delivery of key policies as set for them by the Executive. Over the past few months there has been far more ministerial involvement than normal, because there have been difficulties.

It is vital—as I said earlier—that, on economic development and other issues facing the Scottish economy, we find a way for politicians, ministers, the public sector and the private sector to work together to maximise opportunities for Scotland. We have some great opportunities. This morning, I announced an investment of £17 million by Invitrogen to secure its European headquarters in Inchinnan, and the Wyeth deal was announced recently. There have been lots of positive announcements for the Scottish economy in relation to life sciences and financial services.

Let us find a way of building our reputation and building the opportunities for Scotland's future. That will require a different approach from the Enterprise and Culture Committee, from the Parliament and from me, as the minister who works with Scottish Enterprise. We must try to set aside party differences and ensure that we all work together in Scotland's best interests. As the Minister for Enterprise and Lifelong Learning, I would like to play a key role in securing that.

At the weekend, a leading business figure in Scotland criticised the Executive, saying that ministers had not approached him to involve him in business or in other initiatives. Let us get beyond that. A good example is the business in the Parliament conference. Where there are criticisms, let us bring businesspeople and politicians from other parties in and try to achieve a more consensual approach. We must ensure that, if business leaders feel excluded or feel that it is difficult for them to get involved, either through Scottish Enterprise or through me and the Enterprise, Transport and Lifelong Learning Department, we make them feel welcome and use their skills and experience to develop Scotland's economy.

Thank you, minister. I am grateful for your reply. In reminding us of some of the major opportunities and challenges that we face, you have reinforced my concern that many of the big, strategic issues have been masked by the claims and counter-claims in the noisy debate that is taking place around Scottish Enterprise. I am interested to know a little more about how you are going to create the climate to which—judging by your earlier answer—you aspire, which will move us on from here.

Let us be honest about it: there are echoes of the past. This is not the first time that there have been debates about goings-on in Scottish Enterprise and that questions have been asked about the extent to which ministers are supportive and so on. If we are serious about having an enterprise agency that is bold, strategic, decisive, innovative and not risk averse, surely the climate must change fundamentally? I am waiting to hear a little more about how you are going to make that happen.

Let me make it clear that I want Scottish Enterprise to be bold and decisive, to be able to take appropriate risks and to do great things for Scotland's economy. Underpinning that must be an organisation that is efficient and professional and that keeps within its budget. It would be a wrong signal for a minister to give if I signalled to Scottish Enterprise, or to any other agency or organisation for which I am responsible, that sound budgeting is not important.

I want to get the organisation back on track and ensure that the recommendations of the KPMG report are implemented as quickly as possible. I am sure that Sir John Ward and Jack Perry want exactly the same thing. They have considerable experience in the private sector, and they know as well as anyone around this table that the best way for the organisation to deliver effectively in the future is to have the best and strongest financial management and to deliver within budget in 2006-07. That is the best way to ensure that the energies of the senior management in the organisation are released, so that they can deliver in a dynamic and effective way on major projects for Scotland's future.

I was with Jack Perry this morning, at the Invitrogen announcement. That is the kind of place where I would like to meet him over the next few months and years, not in discussions about the financial and budgeting difficulties that have been experienced within his organisation.

I have a final question on a separate matter—the future structural and decision-making arrangements within Scottish Enterprise, which you touched on in your opening remarks. The direction of travel at national level—within the Scottish Executive and Scottish Enterprise—has for some time been towards the idea of metropolitan regions. In your recent statement to Parliament you endorsed and embraced that. However, as you have said, in addition to its metropolitan region decision-making tier, Scottish Enterprise will still have the local enterprise company decision-making tier. How will you avoid duplication and slowing down the process?

I continue to believe firmly that we should retain the opportunities that come from the creation of new businesses and new business opportunities; from the network of board members with business experience at local enterprise company level; and from developments at local enterprise company level. There are 12 local enterprise companies in Scotland and some of Scottish Enterprise's best work takes place at local level.

If we focused solely on strategic, national or international projects, we would lose the emphasis on stimulating an entrepreneurial culture and encouraging small businesses. We would suffer as a result, which is why I have always supported the enterprise trusts. Before local enterprise companies were established, enterprise trusts were created, usually by business people. I do not know whether committee members recall those days, but Scottish Business in the Community was central in developing enterprise trusts. Many senior businesspeople gave a great deal of time to the core enterprise trust network. They encouraged a lot of young people to come into business and helped a lot of new business start-ups.

I would like all those elements to be retained. That is not in any way inconsistent with metropolitan regions or projects of national significance. To have a successful economy, we need all those elements. In the United States, in areas such as Boston, the San Francisco silicon valley area and Seattle, we see huge organisations of global significance—some of the biggest companies in the world—but we also see strong support for small start-up businesses, for risk takers and for entrepreneurs. Some of those entrepreneurs will turn into the Microsofts or the Ciscos of tomorrow.

Scotland has to be ambitious, so we have to attract the big projects such as Wyeth or Invitrogen, but we also have to create the small, growing, successful companies—the Prostrackans, the Wolfsons, the Ardanas, the Axis-Shields, the Cyclacels and the Optoses of today and tomorrow. That is an important challenge, not only for Scottish Enterprise but for all 12 of the local enterprise companies.

I doubt whether anybody would question the need for effective involvement of businesspeople at a local level, but the jury is still out on whether we need the proliferation of tiers of decision making that we will have. Unfortunately, we do not have time to discuss that in detail today.

I understand that, and there is a continuing debate. Earlier, I was asked whether I was giving strong support to Sir John Ward and Jack Perry, and my answer was yes. Part of that strong support is the endorsement of their proposal to retain the 12 local enterprise companies as well as establish the metropolitan regions. I was pleased to give strong support for that.

You have pre-empted the very question of clarification that I wanted to ask. You have just repeated what you said earlier: you endorse Scottish Enterprise's proposal to retain decision making at LEC level. In your statement to Parliament you said:

"I have therefore asked Scottish Enterprise to retain local decision making in Scotland's local enterprise companies." —[Official Report, 30 March 2006; c 24610.]

Can you clarify who asked whom what?

And can you do it in two minutes?

I can do that very succinctly. Scottish Enterprise asked me to retain the 12 local enterprise companies. The board of Scottish Enterprise endorsed that approach.

I feared that, given the current budget problems, the level of spend and discretionary budget approval given to local enterprise companies could be reduced to virtually nothing or could disappear altogether. Local enterprise company board members would find that difficult, particularly during the current financial year, and might withdraw their support or lose their enthusiasm for serving on LEC boards. I am still concerned about that. The next few weeks are going to be difficult for Scottish Enterprise.

I want to signal clearly that local enterprise companies should continue to exist and that there should continue to be a level of devolved budget to the business leaders. Not only do I strongly support Scottish Enterprise at the national board level, I support the dozens of business leaders who so freely give of their time and expertise to the local enterprise companies. I want them to be dynamic, motivated and involved in the enterprise network.

I have two questions about local schemes. First, I appreciate your answer to Murdo Fraser about the Executive maintaining its targets for the number of modern apprenticeships. However, I have had a letter from four local companies in Grampian, which says that their skillseekers and modern apprenticeships training provider has said that the funding for those programmes

"is being severely restricted with immediate effect."

That follows a similar letter about the get ready for work programmes. There are clearly many local concerns about the issues. Once Scottish Enterprise finalises its budget, will there be sufficient funding to ensure that those local schemes continue into the future?

Unfortunately, I cannot go through every budget head and scheme today and give you the sort of guarantee that you are looking for. All I can do is signal that where the Executive provides flexibility or support to Scottish Enterprise, a significantly better outcome will be achieved, particularly if the £60 million in savings through budget reduction that the convener identified earlier is achieved. Discussions will be completed in time for the Scottish Enterprise board to fix an appropriate budget by 12 May.

I want to ensure that a range of priorities, including the skills and training programmes, will be protected, in the same way that I have just assured you that the business gateway and modern apprenticeships will be protected. However, at the moment I cannot go through the full budget and give you all the assurances that you want, because the budget has not been finalised.

I appreciate your answer. Those schemes are a particular priority.

Because of the issues with Scottish Enterprise's budget, the employability framework, which several organisations have been eagerly expecting, has been delayed. Is it your hope that we will be able to build on the success of schemes such as that?

Clearly, the employability framework is important, as is the support given to those who are not in education, employment or training. You know the Scottish Executive's priorities, because they are contained in our policy documents and the partnership agreement.

The committee is part way through an important investigation into Scottish Enterprise and its budget, and if it wished to express or pass on particular concerns—either the concerns in the correspondence that members have in front of them, particular concerns of individual MSPs or the committee's collective concerns—it would be appropriate for it to do so, but it would require to act quickly, because we will reach decisions on all the issues in the timescale that I described.

I appreciate that offer from the minister and I hope that the committee can take it up. One thing that the committee can do is impress on those involved the importance of making speedy progress on the employability framework, because it has been a priority for some time and those who are involved in training and getting people ready for work have been expecting it for a long time. I hope that the committee can do that.

I just want to clarify a couple of things before you go, minister. First, you say that the Scottish Enterprise board will be able to take its decision on 12 May. Obviously, you will have to have told the board before then how much of the £60 million you can make up either in cash or in non-cash items. When do you hope to announce that decision?

I hope that it can be discussed and agreed with Scottish Enterprise over the next few days and in good time for the board to take a decision on 12 May. Essentially, that means that it will have to be agreed before the middle to end part of next week.

Will you make a statement to Parliament once the decision is taken?

No decision has been taken, but I realise the importance that the committee may attach to any decision. I would be prepared to have discussions with you and others about the most appropriate way for the decisions to be made public.

Just to get some kind of handle on this, you mentioned earlier that you had been given an assurance that Scottish Enterprise can meet all its legal financial commitments. Scottish Enterprise starts this financial year £60 million down, so once it has met all its legal financial commitments, how much money is left in the kitty?

Clearly, there are areas that could have been reduced legally, but doing so would have had significant policy consequences. We discussed some of those during the meeting when we talked about modern apprenticeships and other training provision. There would also have been consequences for a range of international projects, which I think are extremely important to Scotland's economic future. Further, major opportunities may come up within the financial year that we would not want to miss out on.

I am sorry, but I just want to know how much is left in the kitty. As things stand, with Scottish Enterprise being £60 million down, how much is left for discretionary spend, which is what you are referring to? Once Scottish Enterprise has met its legal requirements, how much is left?

I understand. That is a slightly different question, but I think that it is a more helpful way to look at the matter. Given the level of cuts that you talked about—the £60 million—there was not very much for discretionary spend. It would be wrong of me to put a figure on that until we have agreed the budget that Scottish Enterprise is negotiating with us. I would prefer not to be drawn further on that.

Surely, as things stand, you must know how much is available for discretionary spend.

That would imply that a £60 million reduction in budget would be implemented. As I said, I believe that it would simply reinforce the concerns and fears that have been talked about around the table if I was to start to shade in the impact of that level of budget reduction. We hope to avoid that and to have a sound Scottish Enterprise budget for 2006-07. However, that will not be done without difficulty; the organisation will still have to take difficult decisions.

It sounds as though there are still a number of unanswered questions.

Some appropriate discussions still need to take place, but I fully appreciate that they need to happen quickly. That is why all the work must be done in time for the board meeting on 12 May. To be frank, I am not sure that a full ministerial statement on the issue would be justified. What I would be able to announce next week would be purely the financial settlement. The detail of the budget proposals would require to go to the board, first and foremost. It seems to me that it would be inappropriate for me to announce to the Parliament first what the board will discuss at its meeting on 12 May. However, it is entirely appropriate for the Parliament to know as soon as possible that I have agreed a budget with Scottish Enterprise to present to its board on 12 May. As I have said, I hope that we can have further discussions about the most appropriate way of bringing that into the public domain and making it known to members of the committee.

Okay. I think that we have covered all the points that we wanted to raise with the minister today. We may invite him back at a future date to discuss matters further but, in the meantime, I thank him and his officials.

We had pencilled in 9 May as the date on which Scottish Enterprise would come back to speak to us, but it is clear from what the minister has said that that is far too early. Will members leave it to me and the clerk to rearrange a date?

The minister suggested that the committee could write to him to outline its concerns, which have been well expressed today. Perhaps a letter that highlights the need for a proper balance between skills and training and support for small and medium-sized enterprises and major national strategic projects, for example, could be sent on behalf of the committee.

Christine May, the clerk and I could prepare a draft, which we will circulate to committee members before it is finalised and sent to the minister. A copy could be sent to Scottish Enterprise. Are members happy with that proposal?

Members indicated agreement.

Do members want to suspend the meeting for five minutes for a comfort break?

Members indicated agreement.

Okay.

Meeting suspended.

On resuming—