European Union Economic Issues
Item 2 is evidence on EU economic issues with the Cabinet Secretary for Finance, Employment and Sustainable Growth. I welcome the cabinet secretary on his first visit to the committee in this session. He is accompanied by Government officials. They are Shane Rankin, who is the deputy director of European structural funds and defence review response, and Elspeth MacDonald, who is the head of the constitution and parliamentary secretariat.
Cabinet secretary, do you have an opening statement?
The Cabinet Secretary for Finance, Employment and Sustainable Growth (John Swinney)
Yes. If you will forgive me, I have quite a text to get through, but it might help the committee if I set out where the Government has reached.
I welcome the opportunity to update the committee on the Scottish Government’s engagement on the EU multi-annual financial framework. The EU budget has significant economic importance for Scotland; annual receipts from the EU are worth in the region of £800 million, which is about 2.8 per cent of our annual budget.
The Commission published on 29 June its proposals for the 2014-20 multi-annual financial framework. The proposed budget has been designed to underpin and deliver the Europe 2020 strategy, which aims to promote smart, sustainable and inclusive growth—goals that are closely aligned with the Government’s economic strategy. Smart growth aligns with Scotland’s aim to position ourselves as a leader in research and creativity, and sustainable growth offers potentially huge opportunities for Scotland in terms of climate and energy. In inclusive growth, the Commission’s proposals to streamline and converge existing programmes and funds may provide opportunities for Scotland to improve performance and demonstrate leadership.
As well as an overall emphasis on achieving added value within the European dimension, other themes that the Government has noted include a greater focus on results, increased conditionality in programmes, simplification of funding rules and merging of some budget headings, and an attempt to lever in from the private sector greater investment in EU financial instruments.
The Commission has proposed significant changes to the way in which the EU budget is financed, changes to the system of corrections and rebates, and two new EU taxes: a financial transactions tax and an additional VAT levy. Last month, the Cabinet discussed the opportunities that are presented by the new multi-annual financial framework. We considered the potential impact of proposals on individual portfolios and the scope for the Scottish Government to influence outcomes. I will highlight a few of the opportunities to benefit from the improvements and streamlining of existing funds.
A single plan that covers all sources of EU funding should allow better targeting of funds, streamlined mechanisms and savings on administration across the funds. There might be, through the €40 billion connecting Europe facility, scope to access new funds to support energy, transport, and information and communication technology infrastructure. The common strategic framework for research and innovation—horizon 2020—will have an €80 billion budget allocation, which is a 50 per cent increase on the existing three separate funding streams.
The fact that the North Sea is a designated priority corridor in the EU energy infrastructure represents a key opportunity for Scotland to grow our renewables generation market. Although the proposed common agricultural policy budget will be lower in real terms than it is currently, a redistribution of pillar 1 and pillar 2 funding could, depending on how it is calculated, result in a fairer and better deal for the agriculture industry in Scotland. The European marine and fisheries fund, which will replace the current financial instruments, will increase the funds by more than 50 per cent and could provide the opportunity to restructure the fishing fleet, to support further development of the aquaculture sector and to provide crucial support for the wider rural communities that are dependent on fisheries.
At a time of severe pressure on public finances, we must ensure that the outcomes from the negotiations provide a budget that offers added value and is focused on the areas that provide sustained economic growth in Scotland and across the European Union. When I appeared before the European and External Relations Committee in the previous session to discuss the multi-annual financial framework, I stated that the Government’s overall objectives were to retain Scotland’s participation in structural funds post-2013, to obtain a better deal on the size and allocation of the CAP budget and to ensure that outcomes are clearly linked to the Europe 2020 objectives on energy and research. Those remain the Government’s objectives today.
To help to meet those objectives, we are focusing our engagement and resources on the following priorities: ensuring that EU expenditure is in areas that are important to Scotland, such as encouraging the development of marine technologies; influencing the individual policy reviews and expenditure budget headings that are of greatest importance to Scotland, especially the cohesion and CAP budgets; and prioritising the Scottish Government’s EU action plan areas of activity and key areas in which Scotland has a strong record of engagement and delivery—in particular research, marine energy, low-carbon and climate-change issues, justice, the CAP and cohesion.
The Government is utilising all available opportunities to maximise its influence on the formulation of the European budget, through dialogue with the United Kingdom Government and direct dialogue with the European Commission. The Scottish Parliament is an important partner in achieving Scottish objectives in Europe. It will continue to be crucial that we work closely together in determining favourable outcomes for Scotland in the multi-annual financial framework negotiations. We know that common positions carry added weight in the European Union. I look forward to working with the committee and with Parliament to secure common ground on many issues.
I share the concerns of many people in Scotland about the proposed real-terms cuts to, and changes in, the CAP and cohesion budgets. Whatever the size of the budgets, we must ensure that the allocation between member states and the sub-allocation within member states avoids a disproportionate impact, notably on rural areas of Scotland. It is essential that thorough and meaningful discussions take place between the UK Government and the devolved Administrations before the UK position is finalised in the coming months. Scotland has a great deal to offer that will help to strengthen the UK position and positively influence outcomes in Brussels, for example those in the low-carbon sector or those that support digital infrastructure or connectivity.
That positive contribution and the value that we can add will be the key message that the Scottish ministers will bring to the table in discussions with our UK counterparts in the months ahead. We must be an active partner in order to secure outcomes that match Scottish as well as UK priorities. Although the expected date for agreeing the next multi-annual financial framework is not until the end of 2012, and it could even be later, engagement in the next six months will be particularly important as the legislative proposals emerge.
I am happy to work closely with the committee and to encourage my Cabinet colleagues to do likewise with the subject committees so that we can continue to provide information on Scottish engagement and activity around the multi-annual financial framework. I will be delighted to answer the committee’s questions today.
Thank you, cabinet secretary. We are dealing with a complicated area. We welcome the Scottish Government’s positive approach in working alongside the UK Government to try to get the best deal for Scotland, which is what the committee and the Parliament want.
We will move straight to questions from committee members, who are interested in different areas. The first question is from Annabelle Ewing and is on the multi-annual framework.
Good afternoon, cabinet secretary. I have a few questions on specifics. The first concerns the Scottish Government’s position on an issue that has arisen in the multi-annual financial framework discussions, which is the possibility of the introduction of—as the Commission wishes—a financial transaction tax. What is the Scottish Government’s position on that? What would be the likely impact of that tax on the Scottish financial services sector?
The cabinet secretary mentioned the CAP reforms. What is the Scottish Government’s current thinking on pillar 1 funding? Does the Government wish for it to continue, or for it to be significantly reduced, which is the UK Government’s position?
A financial transaction tax would have significant implications for institutions that operate out of Scotland. Much attention has focused on the impact of the tax on the City of London; it would have a similar effect on the operations of the financial institutions in Scotland. The Government would be very concerned about a financial transaction tax, because it would run the risk of undermining the sector’s competitiveness.
We must ensure that there is, around financial institutions, an appropriate and, more importantly, an effective financial regulatory environment—a financial transaction tax would run a risk of undermining that—which would not have a damaging effect on the Scottish economy and the financial services sector. The intensity of the current discussions on the Basel III process indicates that there is no lack of willingness to pursue such a regulatory environment.
Despite all the pressure, the understandable concern about banks’ performance and the need to address and to remedy that concern, we should not lose sight of the fact that many financial institutions that are active in the market in Scotland have been entirely unaffected by the financial crisis; they have continued to deliver excellent stewardship of resources and have not been part of the climate that has led to the difficulties in the banking sector. A financial transaction tax would bring the risk of affecting many of those organisations.
On Annabelle Ewing’s second point, the Government believes that pillar 1 CAP funding should continue, because it is an essential part of supporting the effective maintenance of agricultural activity in rural Scotland. It is no secret that our view in that regard differs from the UK Government’s position. Our position is similar to that of the other devolved Administrations in the United Kingdom. We will therefore continue to argue that case because we believe that pillar 1 funding is an important part of the architecture for supporting agriculture in Scotland.
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On the latter issue, in the light of the divergence between the approaches of the Scottish Government and the UK Government, and of the fact that the UK Government takes the lead in the Brussels negotiations, how does the cabinet secretary see the CAP reform discussions progressing?
CAP reform is an issue that highlights the benefits of being able to communicate directly with the European Union as a member state. The United Kingdom Government’s position—as I understand it—being enacted would have a seriously dramatic impact on agriculture in Scotland, which illustrates the Scottish Government’s point about the importance of direct representation in the EU as a member state.
We will continue to argue with the United Kingdom Government, and will be assisted in our arguments by the common position that we occupy with the Welsh Assembly Government and the Northern Ireland Executive, in the hope that we can change the UK Government position. We will also pursue direct dialogue with the European Commission on this and all other questions and points that I have raised today.
The European Commission is more than happy and more than interested in having direct dialogue with the Scottish Government on many questions. Pretty much all members of the Cabinet have been involved at some stage in direct discussions with the Commission on different questions. I have had discussions on climate change, Mr Neil was over there recently talking about regeneration and digital activity, and Mr Russell has had discussions around the skills and employability agenda. There is willingness to engage in direct dialogue and we will pursue that to ensure that our interests are satisfied.
On CAP funding, you said that Scotland has a lot to offer. I agree. The question of peat being used for trading certificates for low-carbon emissions was raised recently. I understand that Scotland has a very high percentage of Europe’s peatlands. Is that being taken into consideration and followed up in terms of the value of Scottish land in attracting subsidy as a carbon sink?
I am very familiar with the arguments around peat’s contribution to the low-carbon economy. It was certainly an integral part of the discussion that Parliament had when it passed the Climate Change (Scotland) Act 2009. I cannot today give Mr McGrigor a definitive answer about the position of peat in the carbon trading environment. However, if it would be helpful, convener, I will ensure that the relevant ministers consider the point that has been raised and that we give an appropriate response.
Good afternoon, cabinet secretary. I spoke at a conference two weeks ago for the Industrial Communities Alliance, which was formerly the Coalfield Communities Campaign and which now embraces the former steel industry communities as well. The conference heard a presentation from a Brussels directorate-general on the process and the approvals that must be gone through before the framework is finally signed off. One of the concerns that was raised there—I am sure that it would be a serious concern for you, cabinet secretary, and for everyone in the Parliament—was the suggestion that money will go from the poorer areas to the richer areas under the framework. Can you expand on how that could be and what your position is on it? I am fairly confident that you support the position that I support, which is that we do not want such a move. Scotland has been a huge beneficiary of objective 1 funding and I believe that the Highlands and Islands still enjoy it. Will you comment on that, please?
To address the issue in principle, as I said in my earlier comments, the Government believes implicitly that there is still a substantial role for European funding in relation to many of the policy issues that the Government addresses. In some respects, the debate is about an element of what Mrs Eadie mentioned, but it is also about ensuring that Scotland is in as strong a position as possible in relation to the new and emerging funds. All things being equal on the latter point, I believe that Scotland is well positioned, because of the direction of the Scottish Government’s economic strategy, which although it might not be signed off to every extent by all parties, broadly commands confidence in the Parliament. That strategy is very much reflected in the EU’s agenda on investment in innovation, research and new low-carbon energy developments. We are well positioned to make the most of the opportunities that are arising in European funding.
Some of the other points that Mrs Eadie raises are about the more traditional forms of funding that we have received. In recent years we have had less access to some of those funds because of the emergence of the new member states. As I said to Annabelle Ewing, the Government will ensure that we work to try to protect existing interests in European funding. Where we face challenges to the resources that are available to us from the European Union, we will do everything that we can to marshal an argument that will protect our interests.
There will be some areas of change. For example, there will be funding for the new transition category of regions, and as a consequence there will be lower levels of funding available for what are called competitiveness regions, which in Scotland are areas outwith the Highlands and Islands. There are clearly some challenges, but the Government will do all that it can to try to maintain the degree of support that we have experienced in the past.
Transport forms part of the new connecting Europe facility. I was concerned to read in the committee papers that, although the UK Government recognises the important role that transport plays in delivering the economy and in helping to address climate change, it believes that the EU budget should not increase by more than inflation. I do not believe that we can square that circle. If we have aspirations to make significant improvements in transport infrastructure across Europe, how can the UK Government possibly say that the budget must not increase by more than inflation? We need much more than that. Will you go back to the UK Government and make that concern known?
We have already lost our passenger connection from Rosyth to Zeebrugge and we now hear reports that we might lose the freight transport connection. We are just tinkering or playing with the issue of supporting transport connections across Europe. We all know that shipping by sea is one of the most efficient ways of reducing the carbon impact. There are many issues that need to be addressed. As someone who regularly drives across Europe, I believe that much higher spending is required on transport infrastructure, and certainly more than the UK Government proposes.
There has to be a strategic debate about the balance between the financial programmes that are available. Mrs Eadie’s question is on transport funds, which come under the umbrella of smarter, inclusive growth and represent about 48 per cent of the proposed EU budget. Within that category, there is a €40 billion budget over six years for the connecting Europe facility.
Within that, commitments are being made to substantial resources of about half the budget for growth. If that were to be enhanced, the whole budget might have to be expanded. Given the commentary on the debate in the current context, such expansion would be a challenging objective to achieve at strategic level.
The question then is whether all the priorities are given the right emphasis. Mrs Eadie is absolutely correct to say not only that enhanced transport connections can contribute substantially to economic growth but that moving to more sustainable transport can make a significant impact on the carbon-reduction targets to which all European countries have signed up. It is one of the classic debates: within a substantial sum of public money, and in a climate in which expenditure is under real pressure, is sufficient priority being given to transport issues? Obviously, there is a trade-off with other questions about whether adequate resources are being deployed.
I would ask you to take that issue on board as a serious concern. I do not know the extent to which it is resolvable, but there are real concerns about it and I hope that you will consider what can be done.
Forgive me—I should have said that I will be happy to reflect to the United Kingdom Government concerns that the committee raises with me today. We are about to make representations to the UK Government on the multi-annual financial framework. We will be able to provide that input—which we are finalising—at a forthcoming meeting of the joint ministerial committee on Europe, which will bring together the relevant ministers from throughout the UK and the devolved Administrations. My discussions with the committee today are rather timely because I will be able to convey to the Economic Secretary to the Treasury the points that we have discussed.
EU structural funding remains an integral concern of the committee, but the future EU policy agenda is really now about research, innovation and education—the so-called knowledge triangle. We have already seen its importance in the EU budget, with €80 billion proposed by the European Commission.
With Scotland’s universities’ research institutes leading the world in research areas such as renewable energy, marine science, biotech and nanotechnology, Scotland is well placed to take advantage of EU initiatives in that area and we can help the EU to deliver a European research area by 2014. In that regard, do you think that the collective effort of the Scottish Government and Scotland as a country should be focused on the EU’s new growth and innovation agenda, as captured in the forthcoming horizon 2020 framework programme 8 proposals? Should Scotland be looking to that end of the funding stream? How are we preparing for our engagement in that?
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My first point—I suppose that it goes back to what I said to Helen Eadie—is that there will always be an element of wanting to hold on to what we have got and ensure that we are well positioned for future opportunities. Dr McLeod is absolutely correct with regard to the forthcoming opportunities, which are significant in relation to the emphasis on research and development. The horizon 2020 programme is a particularly exciting prospect.
There are two crucial points or requirements. One is the extent to which the Scottish Government’s policy agenda and interventions are aligned with the aspirations of the European Union, and the horizon 2020 programme in particular. I believe that, in that respect and with regard to the policy agenda, we are perfectly positioned, given the strategic leadership that the Government has given over the past four years to the renewable and low-carbon economy sector. Whatever people think about that, they cannot say that the Government has been equivocal in its approach. We have been unequivocal in our approach to the development of those sectors and, as I said, in that policy agenda, Scotland is perfectly positioned.
The second key requirement concerns how we align ourselves and prepare ourselves as a country. I will certainly not sit in front of the committee and say that everything is perfect and that there is nothing that could be done better. We are striving to ensure that Scotland is as well connected and focused as it can be and that there is the greatest possible collaboration between various organisations in order to bring that about. In the various messages that came out of the spending review, I was trying to convey the fact that the Government is making a significant effort to ensure that that type of alignment is realised, whether it involves the alignment of the Government’s national policy agenda with the focus of Scottish Enterprise and Highlands and Islands Enterprise on the renewables theme, or the connection through the Scottish Further and Higher Education Funding Council to our universities. Along with other players, our universities are doing fabulous research on the technological opportunities that exist and are linking that with some of the specialist research companies in the private sector that are making progress in this area. That represents a pretty cohesive approach, which will position Scotland to make the most of the opportunities.
I give the committee an assurance that the Government will continue to enforce vigorously that process of alignment. One of the strongest features that has emerged from the way in which we have managed a number of challenges in the past few years is that cohesion and alignment across public bodies have been vital to success. There are huge opportunities within the horizon 2020 programme, which is worth €80 billion over a six-year period—a 50 per cent increase on the comparable programmes in the current period. In the field of renewables and low-carbon activity, we could not be better positioned.
Are there any possibilities of engaging with the new research that has been talked about? How does Scotland benefit from that? Our fishing industry has been devastated in the past decade or so as a result of European Union legislation. We have lost valuable and skilled people in that industry. Is there scope to have an apprenticeship scheme that ensures that our historical fishing industry survives and is able to draw on fine and trained people and, more important, that it is part and parcel of the new research that will be pursued? Can Scotland benefit from that research, as other countries have done, and ensure that the EU and the UK Government allow us to champion that cause, as we are, historically, much better than other countries in that regard?
A theme that is running through my responses to members of the committee is how the Government is trying to place Scotland in the best possible position in relation to the European agenda.
A major element of the European maritime and fisheries fund, which will be part of the multi-annual financial framework and for which the available resources will be increased to €6.7 billion, will support the transition to a sustainable fishery.
The fishing industry in Scotland has an admirable and commendable record of adapting to the requirement to support a sustainable fishery. A frustration in the industry in Scotland is that over many years it has reconfigured its activities, taken difficult decisions and changed its approach, all to support the conservation of fish stocks, only to be on the receiving end of some pretty absurd decisions about quotas from the EU. I can well understand that the fishing industry feels pretty frustrated by that experience.
Our challenge must be to try to secure for the Scottish industry access to the sustainable fishery investment to which it is entitled, because it has dealt so effectively with some of the challenges in that regard. Of course, the issue is always how we communicate and articulate that message to the EU.
The platform is there. I cannot give you a guarantee today that it can be utilised, because that is subject to a range of decisions that will be taken in the EU—as we have found from some of our experiences in the past, there is not always the best decision making. Greater cohesion in the funding streams that are available—instead of having a multiplicity of funding streams—should help us to make progress in aligning Scottish interests with the focus of the funds, to the advantage of the industry in Scotland.
Thank you for your response. I am encouraged by it, because I feel that the Government is on board in its wish to secure the industry, which is important. The point that I want to make is that somehow we want to get the message across that we in this part of the world want to be the lead in the industry. We have paid a heavy price, historically, in allowing legislation to kick in and reduce our fishing industry to its current size, and perhaps as a reward for doing that we should be given the opportunity to take forward the new industry, with the new thinking that is around. We need support to do that.
I entirely agree with you. The industry has faced pretty absurd decisions, which have caused great hardship to it. There has been a great deal of rationalisation. The industry has not only worked its way through those challenges but has innovated; as a consequence, it has ensured that our fish stocks were able to recover and has put us in a better position regarding a sustainable fishery. That is the success of innovation in the fishing industry in Scotland. It would be unfair if, after doing all that, the industry did not get access to opportunities to continue to innovate.
Mr Malik makes a fair point about leadership. The fishing industry in Scotland has exercised very clear leadership in this regard. As a consequence, it should be well positioned to make the most of the opportunities.
Thank you very much. A number of members want to ask questions, but I am conscious that the cabinet secretary needs to be out of here just before 3 o’clock. On that note, I remind colleagues that we are on the clock now. I will allow Bill Kidd in first, then it will be Jamie McGrigor; they will be followed by Annabelle Ewing, who will pick up the issue of cohesion funding.
Thanks very much. The cabinet secretary will have been pleased to hear the convener’s announcement that we are going to say things quickly just before I was due to speak. There you go—it is just one of those things.
An issue that has been brought to the committee’s attention in the past fortnight is the publication of the “Roadmap to a Resource Efficient Europe”, which speaks of a full range of resources, such as water, air, land, ecosystems, marine, waste and so on. Is Scotland geared up to contribute on that basis? If we are, are we contributing as part of the UK or do we have a unique role?
It is important to consider the question of resource utilisation in the context of the wider agenda that the Government and, increasingly, EU countries must follow in work on carbon emissions reductions and how to utilise resources as part of that effort. The Government’s domestic programmes—for example, in relation to water use or consumption, or the shift in energy generation towards more renewable and sustainable sources of production—are all designed to support a direction of travel that is likely to assist us to participate in the resource-efficient agenda.
The general question is at what pace and in what fashion we must move to ensure that Scotland can contribute effectively to a European agenda in that regard and that we can demonstrate to the European Union that we have particular elements of leadership that will assist us in taking forward that agenda.
As I said a moment ago, there is a strong alignment between the Government’s agenda and the European agenda; I hope that that should position us strongly to be able to benefit from a number of the opportunities that exist for the application of different programmes. However, detailed engagement with the European Union is required to ensure that that can be brought about.
The Scottish Government has been at the forefront in announcing plans for the expansion of green renewables industries. Are we receiving support from the EU to help develop such plans?
The short answer is yes. I am increasingly confident that, because of the leadership that we have deployed—I made this point in response to Dr McLeod—and because the Government was consistently clear during the four years of our first Administration and will be crystal clear for the five years of this Administration that we will be a significant player in the low-carbon agenda, we are sending a signal to a variety of players that Scotland is a place in which to do effective work in the renewables sector. It may be a signal to the private investment community that we need to invest in renewables to make it successful, or a signal to the European Union to encourage investment in strategic research projects—the target audience is immaterial, as long as our message communicates a clear proposition to all the different parties that will attract investment. I am fairly confident that that message will be a strong asset for Scotland in the period going forward.
Thank you very much.
Just to add to that, there must be commitment from the Scottish Government in that respect. My commitment in the spending review two weeks ago to more than £200 million of expenditure in renewables—which is much increased, despite the financial pressures that our Administration faces—is designed to say to the private sector, the EU and to research institutes that the Scottish Government has put its money where its mouth is.
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That is good to know.
I think that we all welcome that.
My question relates to Helen Eadie’s point about structural funding. She said that we still had objective 1 status. I thought—you can correct me if I am wrong—that if we had not lost objective 1 status, we had at least had it reduced. Its value was in the building of structural causeways to islands such as Berneray and Eriskay, and the Scalpay bridge, which rejuvenated a great many outlying parts of Scotland. Since then, it has been very difficult to get money for such projects. Is there any chance of getting money for such projects again in the near future?
That is covered by the convergence programme, which is the successor to the objective 1 programmes—I could wander off for half an hour on that question. It is still accessible in the Highlands and Islands area, so the answer to Mr McGrigor’s question is yes: there is still access to something akin to objective 1 in parts of Scotland.
I am familiar with many of the developments to which Mr McGrigor refers. I have driven across most of them—the causeways to Vatersay and Berneray, and the Scalpay bridge—on my sojourns, and he is right to say that they have had a huge transformational effect on connectivity in the Highlands and Islands.
The key point on the issue that Mrs Eadie raised, which I suspect underpins Mr McGrigor’s question, is that we must try to maintain those resources as effectively as we can while the dynamics of economic decision making in Europe are changing with regard to where relative need exists. As we have seen over the years, the assessment of relative need in the EU changes, sometimes in our favour and sometimes against us.
Have we got to get poor in order to get rich again?
There is a wee bit of truth in that in relation to some EU programmes. However, I am trying to stress today that the European funding programmes that will be available in the next six years will overall be of a different character to the type of programmes that are available in the current six-year period. For example, the opportunities that exist for Scotland in the horizon 2020 programmes are enormous, if we play our cards right. We will gain access to different types of opportunities than those that were available under the objective 1 programme. We might not be building causeways, but we could build research and development programmes for renewable energy. A causeway project and a renewable energy programme would both have a good economic effect on the Western Isles—they are just different in character.
To be fair, the cabinet secretary has answered our questions about structural funds and where we are going with those.
I want to pick up on the exciting prospect of a North Sea energy corridor, which the cabinet secretary mentioned in his opening remarks. That ambitious proposal feeds into much of our discussion today on Scotland’s renewable energy potential; perhaps the cabinet secretary can provide us with some information on where it currently stands.
When the Government started talking about a North Sea electricity connection, there was a good amount of scepticism kicking around as to whether it would ever happen or how tangible the proposition was. We have continued to make progress on a number of elements, particularly with the support that we have had from the EU for the Irish-Scottish links on energy study—ISLES—project. That is a joint venture with the Irish Government, but much of the thinking that goes into it will be of use in the North Sea grid connection project.
The opportunity to take the work forward essentially arises from two things. The first is what happens with the connecting Europe funds. At present we have a headline but not an awful lot of detail beneath it. We will try to influence the detail, and we believe the North Sea grid project is a strong candidate for the funding. The second element is that the dynamics of the debate have been fundamentally changed by the German Government’s decision to withdraw from the nuclear industry. I do not think that the debate has caught up with the opportunity for renewables that that decision brings. There is a huge opportunity for Scotland to use a North Sea grid to deploy power into northern continental Europe. It is early days for the project, but I regard it as a significant part of what the Scottish Government argues should emerge from the connecting Europe funding stream.
That is an exciting prospect for Scotland. We had a similar discussion a few weeks ago when we had a visit from the Polish ambassador. Poland has issues with energy security and sustainability in that the gas tap sometimes gets switched off, so it is keen to consider whether it could look to Scotland to meet some of its energy needs.
The final area that the committee wants to discuss is Europe 2020. The Scottish Government has a lot of input to that. Will you give us a quick analysis of your input to the UK reform programme and tell us how you propose to capitalise on the funding opportunities that come with Europe 2020?
I am happy to do that, convener. The first point to make is that the Government’s economic strategy and the heart of the Europe 2020 programme are closely aligned. That is a powerful advantage for us. In 2007, the Administration made a virtue of setting out a clear line of approach on the economy. In the debate that we had in Parliament about three weeks ago on the revised version of the strategy, I made it plain that the Government believes that it is important to build on the strategy—not to design a new one just for the sake of there having been an election, but to make a virtue of the fact that we are continuing the policy framework that we started in 2007. One consequence is that we are closely aligned with the substance of the Europe 2020 programme.
The European Commission responded to the UK national reform programme in June and the emphasis was on research, innovation and infrastructure investment. Going back to the spending review announcement the week before last, I remind the committee that one of my objectives in the spending review was to ensure that the Government’s economic strategy and, by extension, themes such as research, innovation and infrastructure investment would be reinforced by the Government’s decisions on its spending priorities. There is a strong alignment.
There is continuing dialogue between the European Commission and the UK Government on the contents of the national reform programme, and we are close to that. We certainly believe that a great deal of the clearly articulated direction that we are taking in the development of the Scottish Government’s economic strategy is compatible with the contents of Europe 2020.
That brings us to the end of our questions, right on time. We look forward to seeing you again, cabinet secretary, and thank you for your comprehensive input.