Local Economic Development (Executive Action)
We have a fairly full agenda this morning, so let us proceed with the first item on the local economic development inquiry—complementary actions by the Executive. This morning, our witnesses are Andrew Goudie, the chief economic adviser at the Scottish Executive, and Ian Howie, the head of the Scottish Executive business growth unit. At our previous meeting, we considered it important to appreciate fully the context in which the Government is considering economic development policy in Scotland and to hear from these two civil servants who are involved in the Government's consultation process.
Before I ask each of the witnesses to make introductory remarks, I apologise for the glaring sunlight to which our witnesses, members of the public and the press are being subjected. For once, we had prayed for a rainy day in Edinburgh—sadly, the weather has defeated us again. I hope that it is not too inconvenient.
For the record, I declare a potential interest—I am a member of the Federation of Small Businesses, the Forum of Private Business and the Scottish Council Development and Industry.
Thank you.
Andrew Goudie (Scottish Executive Chief Economic Adviser):
It may be helpful if I explain that the prime purpose of the framework for economic development is to provide a framework for the thinking of the Scottish Executive on economic development matters. There are two sides to that work. First, we will consider the primary determinants of economic development, the full range of those determinants and their importance and priorities. Secondly, we will consider the objectives of economic development, looking beyond the income and employment functions of economic development to some of the Executive's broader objectives on social justice, sustainability and so on.
The ultimate objective is to provide a framework and guidance for the more detailed work that will be carried out at what I call the lower levels. Of necessity, our work is fairly high level. It sets an overall framework, or umbrella, for the detailed work at a lower level. It will not go into the minutiae of individual policies, whether they are to do with enterprise development, birth-rate strategies or skill strategies and so on: I would consider that would be more specific work. I hope that it will provide overall guidelines within which those individual pieces of work will sit.
I will make a few general observations about our work and our intentions. First, we intend that the framework should encompass all of Scotland—the central belt, rural areas and the Highlands and Islands. Secondly, it is important that it should be seen in the context of an evolving economy—not the economy of 20 years ago, but an economy that is moving rapidly. Thirdly, the work should pick up all the sectoral interests and concerns within Scotland. Therefore, it is a national strategy.
Members will not be surprised to learn that a great deal of work exists at the lower level—the more specific pieces of work—and the intention of the framework is to build on the work that has been undertaken, not necessarily to maintain the status quo, but to provide a framework within which thinking can evolve in future. As further rounds of strategic, more detailed thinking at those lower levels take place, this work will provide a framework for that evolution of thinking.
If members would like, I can say more about our consultation process and about the timing of the work that we are conducting.
Please do so. We will then have questions.
One of the key principles behind the framework was to be as open and as wide as possible in consulting all the interested groups in Scotland. I will pick up four different strands of the consultation process.
First, we have a small reference group that is guiding the process, with which we discuss how we go about the consultation. Unlike with other strategic work, we do not have an expert group; the work on the knowledge economy, for example, is guided by an expert group.
Secondly, since early December, we have been conducting fairly intensive face-to-face conversations in, I hope, a fairly methodical way, with some of the key groups in Scotland that are involved in business, academia and so on. Those were one-to-one meetings or small group meetings that usually lasted for a couple of hours or so. We tried to give people the opportunity to talk as frankly and as openly as possible.
Thirdly, there was a desire to have a seminar of some sort at which different interest groups could interact with one another and with the Minister for Enterprise and Lifelong Learning. We have organised such a seminar for next week at which internal and external interested groups will get together with the minister to discuss the key elements of the framework.
The fourth element—of which members might be more aware—is the consultation document that we put on the Scottish Executive's website. The document was designed to give all those we could not meet face to face a chance to contribute to the process. We publicised our work as much as possible so that people were aware of what was going on and of the website.
Members will be aware that some of the speeches made by ministers in Parliament have drawn attention to the work that is going on. Ministers have also made speeches elsewhere on the subject—for example, at a conference held by the Royal Bank of Scotland in December. I should, for the sake of neutrality, mention the fact that the First Minister made a speech at a dinner given by the Bank of Scotland. The review has also been publicised in the recently published "Scottish Economic Report". The report contains a section that highlights what we are doing and invites consultation and contributions.
We started face-to-face consultations in early December and the website has been on line from 7 January. The website invited submissions, for which a deadline of 6 March was set. We will use the submissions and the knowledge that we have gleaned from other parts of the consultation process to draft a submission in March and April. We will present the submission to ministers in the middle of April. After that, it will be for ministers to take the process forward, but I understand that ministers would like the framework to be in the public domain in June or July.
We will ask questions on your submission and we will then hear from Ian Howie.
I would like to ask about the likely output of the exercise. Some of the issues were touched on yesterday's meeting of the Finance Committee, which a number of us attended. If I understand you correctly, you will be painting an analytical picture of Scotland and its economic base and of some of the challenges that the economy will face. That picture will allow ministers and Parliament to have a more informed and structured debate about the types of economic strategies and policies that might be pursued. Is that a fair summary of what you are working towards?
Yes. We will try to identify the main challenges. The work might go further than you suggest, in that ministers will want to articulate the vision of what the Scottish Executive wants to achieve in economic development. The work will also spell out some priorities in terms of the key intermediate steps that must be taken to realise that vision.
The report that will be produced is intended to stimulate debate. It is hoped that the consultation will encourage consensus and that people will agree with the findings in the report.
Are you satisfied that the existing information base will enable a comprehensive economic framework for Scotland to be produced? Or is the exercise on which you are working likely to throw up aspects of information that would have to be gathered in addition to the information that was published—in a more user-friendly format, I must say—in the economic bulletin in January?
The consultation process has thrown up the fact—which we were aware of, to some extent, before we embarked on the work—that there are areas in which more detailed work that would allow us to understand the mechanisms and key linkages in the economy would certainly be very valuable. Some common understanding exists throughout the academic and business communities, as well as in the Executive, that it would be good for more work to be done in certain important areas.
The framework will build on existing, available knowledge but, as we have often made clear, we are trying to develop the statistical basis for what is going on and to relate the strategic and policy thinking much more closely to the better evidence that, I agree, is required. The Scottish economic statistics that are coming out next month, for example, will draw attention to the fact that that is what we are trying to do.
I apologise for being late.
Is the framework a sort of seven-year plan, in the way that the Soviets used to do things? Is it about the number of jobs that you are thinking of creating at the end of a given number of years? Or is it about deciding that a particular sector or market could grow by x per cent? What are the targets?
One of the key principles in the framework is that—if the global context is changing rapidly, and the products that are successful and competitive in the global economy today are not necessarily the same products that will be competitive in a few years time—one of the thrusts of our strategy should be to create a Scottish economy that has an advanced capacity to respond to those circumstances.
From that point of view, we will certainly not articulate a structure that we think will be appropriate in five or 10 years' time. We may note the fact that certain strengths exist and should perhaps be built on, but the document will certainly not aim to predict or guess what might be a good structure in five or so years' time. Incidentally, the framework is designed to consider a five to 10-year period; we are not looking just at the next year to 18 months.
That makes it all the more important that we do not try to define a particular structure. When we consider aspects such as management skills and innovation skills, the way in which commercialisation might take place and the creation and nurturing of companies, we do so in a much more general sense. Ministers are quite clear that the prime dynamic in the economy will be the private sector. What is important is to facilitate that sector's actions and provide it with the confidence to progress in ways that we may not be aware of at this time.
I presume that we are aiming for an overall economic strategy rather than trying to redo some of the work that has been done through the cluster networks and so on. I am interested in how that will interface with all the other work that is going on at the moment. You are obviously taking a lot of evidence from people in Scotland. Will you be looking at models of economic delivery outwith Scotland to find out how applicable they might be to our circumstances?
We are doing a little bit of that. We have been looking at what has been happening in Ireland. We are also talking to people who have an interest in, but are resident outside, Scotland, in particular in London. Otherwise, it is true that most of our effort has been concentrated on people in Scotland; I accept that point.
To follow on from Margo MacDonald's question, I understand fully what you are talking about—at least, I think that I do—but I am not quite clear what the future of this document is. It seems to me that it could lie on a library shelf and just be the Executive's aide-mémoire for when it wants to make an announcement about the economy. In Scotland, commerce seems to be moving faster than any of us can quite appreciate. What input have you had from the business community? If the document is to have any credibility, it is important that the business community does not just regard it as another bit of Government bumf.
I agree that it is important that this document is not left on the shelf, and I think that ministers are aware of that. Although this is a high-level document, which must not get into the minutiae of individual initiatives—other documents may do that—a challenge over the next couple of months will be to find clear ways in which the document can be followed up and taken forward over the next few years.
On the role of the business community, in the consultation that we have undertaken I have met representatives of most of the major umbrella business groupings and some individual enterprises, and plan to meet others in the next month or so. Some groups will be fairly obvious to members, such as the Confederation of British Industry, the Federation of Small Businesses, the Scottish chambers of commerce, and Scottish Financial Enterprise. I have been surprised by the enthusiasm of the business community for this work. I believe that it wants to be involved and appreciates the fact that we have consulted it. Once we have drafted a document with which ministers are content, it will be important to involve the business community in the process of taking forward that strategy. We must consider carefully how we continue liaison with business and other groupings.
Yesterday, Graham Leicester talked to the Finance Committee about the measurement of outputs of policy in Scotland. First, can the effects of policy on the Scottish economy be analysed? Secondly—this overarches my first question—can the performance of the Scottish economy be measured separately from that of the UK economy? Are there enough statistics to allow that to be done, or is the Scottish economy so integrated with that of the rest of the UK that it would be difficult to establish the effect of policy decisions on the Scottish economy?
We can say a reasonable amount about what is happening in the Scottish economy, although I do not pretend that the statistics that we have on that are perfect. A key chapter of the report on Scottish economic statistics that will be published in the next month articulates a development strategy for economic statistics. To ensure that the process of evolving statistics in Scotland is open, we will call together an external group of interested people, many of whom you know.
In fairness to my colleagues, I must say that many of the statistics that are produced are surprisingly good. Before May 1999, they were very good in comparison to those in other regions of the UK. We accept that the position since May 1999 has been different, which is why we are undertaking this programme of development. In the "Scottish Economic Report", which came out about a week ago, we presented much of the information that we have about the Scottish economy, and put some text around the numbers to show our interpretation of what was going on. The document on Scottish economic statistics will provide raw data. We have a reasonable volume of data, which—this is a key point—is of reasonable quality. That allows us to identify trends in output, employment, productivity and so on.
On your first point, I think that you asked how well we understood the effect of policy on different economic indicators. One of the prime conceptual problems is attributing any particular outcome to any particular policy. There is not a simple one-to-one relationship, which would make that analysis easy. However, in many areas we have some understanding of the relationship, although it is not exact.
Margo MacDonald asked about specific targets. Ministers have not made a decision on that yet, but one of the considerations will be how well we understand the linkage from policy to outcome and whether we can set a meaningful numerical target. It is important that we do not pretend to know more than we do about the nature of that linkage—we have some understanding of it, but I would not exaggerate the preciseness of that understanding.
On a more general point, are comparable processes used in other Government communities whereby the ability to assess the linkage from policy to output is stronger than is the case in this country?
I hesitate to generalise, but my impression is that the attribution problem is a difficult one in every country. One can adopt a simplistic approach and ascribe any change to the policy in which one is interested, but the reality is that most policy objectives are the outcome of a range of different variables. It would be a mistake to exaggerate the extent to which we can assess the link with any precision—we are not alone in that.
You did not address the point about the separateness of the Scottish economy from the UK.
I am not sure that it is a problem that the Scottish economy is highly integrated with the UK economy and with the European Union and global economies.
This is a question about whether statistics can measure the nature of progress within Scotland. There are many examples around the world of economies that are as open and integrated as the Scottish economy. Most economies are becoming increasingly integrated with other economies; that is a natural process.
The degree to which we can describe and measure progress within the Scottish economy is to some extent independent of our integration with other economies. However, we could consider a specific statistic, such as gross national product. I do not know whether members have this in mind. Although we may be relatively confident about gross domestic product, there are aspects of integration with the UK that make the measurement of GNP especially problematic. Whether we can do more about measuring GNP is under review. There are some variables—such as GNP—where the degree of openness makes it difficult to measure flows of particular incomes, or whatever. Many other variables are not especially dependent on this type of problem.
The question has been raised of how the framework should incorporate the lessons of past successes and failures for the purposes of future economic development.
I have two questions. The first is on the business birth rate and the widely accepted view that in west central Scotland a cultural change is required, which should arguably be instigated in schools. How will the framework and the people running the framework—the small group that you refer to—link with, for instance, the Minister for Children and Education in relation to issues of joined-up government? I am thinking of legislation that will be needed to bring about the cultural change that will be necessary to boost entrepreneurial skills in schools and beyond. We will discuss that when we talk about the Standards in Scotland's Schools etc Bill.
My second question concerns the way in which the framework links to on-going work. This committee has undertaken an inquiry into the effectiveness of the delivery of local economic services. The framework is designed to develop a strategy, but below that strategy it is crucial to have the right models in place to deliver the aims and objectives that are ultimately determined by the strategy. How do the framework and the inquiry correlate?
I mentioned earlier that we are inclined to consider the full range of determinants of economic development. We should not narrow the report down to a simple interpretation of what drives economic development, but should try to embrace the full range when we think about what is important and about what the contribution of the Executive should be. From that point of view, the joined-upness, if you like, of what we are doing will be considerable.
If ministers feel that the educational aspect of the framework is important, I imagine that they will give it the priority that it deserves. I cannot speak for ministers, but my understanding is that they would want to represent the full range of determinants irrespective of where responsibility may lie within the Executive. A related issue is the fact that there are many specific aspects of work that go on in the departments of the Executive to which there is an economic development dimension. At the moment, that may not be as fully taken into account as it could be—perhaps it is. A better understanding of this is something that will flow from this work, where we will develop these linkages more clearly. The framework will filter into the Executive's thinking.
Your point about on-going work is very important indeed. It relates to a question from your colleague a moment earlier. One of the intentions is that, by providing this overall piece of work with a vision and an objective, it should drive the thinking through the system. Obviously, it provides the broad parameters, not the detail. The thinking is—and the minister will comment on this when he meets you—that the framework should provide the context in which the discussions on implementation take place.
When we are talking about the mechanisms whereby economic development is implemented, the objectives of that process are fundamental to that discussion. It is my understanding that the framework will feed into that thinking. The timing is pretty similar, and within the Executive officials are talking about getting this process into sync. We are conscious of the fact that this piece of work needs to inform that piece of work.
Andrew Wilson will be the last questioner in this part of the debate. In the next section, I will give priority to those who have missed out in this section. I apologise to those members.
I want to tease out a couple of the points that you have made, and to get an indication from you of what you think will be shifted and changed in the process that you are undertaking.
The issue of economic statistics was raised by a couple of members. What is different about the evolution process, which you have signalled that you will undertake, from what was going on already? When do you think that will come to fruition? This debate has been running for many years, not only from the advent of the Parliament.
Elaine Murray made an interesting point. You mentioned, quite rightly, that you do not see much opportunity for the Executive's strategy to pick sectors in such a rapidly evolving global market. How do things rest with the cluster strategy that has been undertaken during the last couple of years? How do you see the two strategies evolving together? Most interestingly, from my perspective, how wide is your scope? How much are you able to do within Treasury guidelines on investment appraisal and the levering in of public funding? Do the guidelines enter into your thinking? Are you working within the constraints of what you have at your disposal?
In one sense, there is no end point to the development of economic statistics, and therefore no point of fruition. It is a continuing process. You may be aware that a document on the Scottish economic statistics programme was made public 18 months ago, and it set out a strategic approach to the development of statistics. The first chapter of the Scottish economics statistics report, which comes out on 21 February, will set out an updated version of that strategic approach.
This year, the approach has been modified, in that we have deliberately tried to extend coverage to a broader range of economic statistics across departments. We intend to convene the first, more formal group of external advisers on the evolution of economic statistics in the early summer. The intention, as things evolve, is for us to meet them every six months.
Your second point was about the interaction between the cluster policy and the general approach here of not determining any specific structure through central planning. There has been quite a lot of discussion about clusters. It is not for me to address the policy in detail, but I will say that, at any particular moment in time, there are various strengths within the Scottish economy. Members will be aware that there is a degree of consensus on what those strengths are.
The Executive does not seek to take on the role of the private sector in determining where the economy might go in five or 10 years, but it can, as part of the general framework, set out the context and facilitate the process of achieving a dynamic economy. Encouraging the strengths in an economy is a natural thing for any Executive to want to do.
Your third point was about Treasury and investment appraisal guidelines. You will be aware that the Government economic service works to derive a set of guidelines, which are captured in the green book. You will be aware also that the Treasury is leading a review of the content of the green book, which is a process that takes place every four or five years. We are participating in the review, which will be completed in the early summer.
Thank you, Dr Goudie. I want to draw this section of the evidence session to a close, but I would be grateful if you would stay, in case there are any more general points once we have heard from Mr Howie.
I welcome Mr Howie, the head of the business growth unit at the Scottish Executive, and invite him to comment on the Government's work with small businesses. We will then move to questions.
Ian Howie (Scottish Executive Business Growth Unit):
Good morning. My interests are more narrowly focused than Andrew's. He has painted the bigger picture, of which the small business policy and development is, of course, a part. It might be helpful if I say a brief word about what the unit does, and then say more about what we have been doing to develop small business policy in Scotland.
The committee has before it the letter that the minister sent to me on 18 January regarding the small business service in Scotland. I say that so that you are aware that the letter is the only paper that we have in front of us on this subject. Please carry on.
Thank you, convener. The business growth unit was set up to take responsibility for small firms policy within the department. As Mr McLeish said in the letter that you referred to, the aim is to give focus and drive to the handling of small business issues throughout the Executive. I hope that we are working towards achieving that.
Clearly, as a policy unit we have to work closely with the enterprise network on the delivery of business support to the small business community. We have worked closely with Scottish Enterprise, Highlands and Islands Enterprise, the enterprise trust network and others to take forward those aims. We have also worked hard to build close links with the business community itself through contacts with a number of organisations, including those mentioned earlier by Mr Ewing.
In terms of what we have been doing, the minister's letter sets out succinctly a range of policy initiatives that we have achieved or have planned. However, I wish to focus on two elements in the statement that is attached to the minister's letter, since they are particularly relevant to your wider local economic support review.
The first issue is the work that we have been doing with Scottish Enterprise to try to improve access to business support services throughout the enterprise network, and to improve the consistency and quality of that support throughout Scotland. Mr McLeish's statement refers to a number of new developments that are close to fruition. The minister will make an announcement with more details on that matter in the immediate future.
The second issue that I wish to draw your attention to as a backdrop to the work that we have been doing, and the work that you have been doing, is the Department of Trade and Industry's proposal to establish a small business service in the UK. Clearly, we have had to have close regard to that development in taking forward our policies in Scotland, and I am happy to take questions on what the SBS might or might not do when it is set up and how it will relate to the Scottish scene. Indeed, I am happy to address any other points that arise from the minister's letter.
I am grateful to you for being so brief, as it will allow members more time to pursue their lines of questioning.
I refer you to the draft article that was attached to the minister's letter, on which I have one or two questions.
First, I have a wider question, and it is one that I would like to put to Dr Goudie as well. How far has the Executive been consulted on the framework and on the small business unit? I am thinking in particular about the Minister for Children and Education and other ministers who have an interest in small business, beginning, for example, with the children who will be the future employees of small businesses.
Secondly, can you give us a little more detail on the £12 million that is available for small businesses, and to which the minister referred? Already, £2 million has been committed. Can you tell us what criteria have been placed on giving that money to business, and how the money is being delivered?
On the first point, a large part of the role of my unit is to make sure that all policy developments that impact on small businesses are co-ordinated properly within the Executive. We have been working hard to ensure that within Government, that area of policy is fully joined up. Clearly, my unit is not directly responsible for a number of those issues, but we are hoping that the role of the unit increasingly will involve drawing strands together more tightly within the department.
The business growth fund is run by Scottish Enterprise and Highlands and Islands Enterprise and is accessible through the normal local enterprise company structure for small businesses. It provides loan funding of between £20,000 and £100,000 to businesses that have viable proposals but, for one reason or another, are unable to access sufficient funding from established sources.
A new business might have difficulty in obtaining bank funding because it lacks a track record or is unable to provide adequate security. The fund provides a mechanism to fill that gap in the funding market and works with other funding partners to help firms bring together a funding package.
I should perhaps have added an interest as I am a partner in a small business.
Mr McLeish's papers focus on economic determinant factors and on the need to ensure that Scotland continues to be competitive. I am sure that we all agree with that. I have been made aware of representations to the Executive by the chairman of the Scottish Council Development and Industry with regard to a factor that he argues will put Scotland at a competitive disadvantage for the next five years: the decision that Mr McConnell announced on 8 December to set a business rate for Scotland that is 10.1 per cent higher than England's. It is 45.8p in Scotland and 41.6p in England.
That is not my argument, although I agree with it, but that of the Scottish Council Development and Industry and also of the Confederation of British Industry, the Institute of Directors, Scottish Financial Enterprise and the Forum of Private Business. I believe that the Federation of Small Businesses is neutral on the matter. How will the concerns of those organisations be addressed, given that the higher the tax, the less money there is to invest in Scotland?
Mr Howie, I am not sure how much of that you will be able to comment on.
The question does not deal with matters that are within my remit, although I am aware of concerns that have been expressed by parts of the small business community. The rationale behind the decision is to ensure that the overall take from the business community remains constant over time. The result of that, as Mr Ewing will know, has been a divergence of the rate poundage figure. I am not able to say more than that, as the other issues are beyond my bailiwick.
I would like to ask Mr Goudie, who has a wider responsibility—
No.
Mr Howie, I would like to examine what your department is doing to ensure that delivery of and access to business support is uniform across Scotland. The committee has become aware of differences in delivery strands that are designed to be more locally effective. That is fair enough. While you are developing your plans for the small business service, have you given any thought as to how you would like the situation to pan out?
We identified some time ago the fact that this issue would require some degree of review. We set up a joint group with Scottish Enterprise to examine the role of the Scottish Enterprise network. The results of that are set out in the paper before us today. We were trying to make the structure more consistent and co-ordinated. We did not consider the bigger picture that the committee is looking at.
The work that we are doing with Scottish Enterprise will provide small businesses with a clearer indication of how they can get access to business support services and to some kind of minimum level of support that might be available across Scotland, while allowing local enterprise companies to tailor support to the needs of their areas.
We are trying to strike a balance between establishing a degree of consistency across the country and ensuring enough flexibility to deal with local needs and conditions. Our work is predicated on that approach, although we are working with the grain of the current system. We will consider carefully the committee's conclusions on the structure and whether it needs to be remodelled to meet the overall objectives.
Is it the case that you have made no pre-judgments about those structures, before the committee arrives at its conclusions, which might challenge those conclusions?
Far from it.
You pinched my supplementary question, convener.
My apologies, David, I could not restrain myself.
Will you expand on the role of the small business service? I am not clear whether it will provide additional services or pull together services that are already being provided by several different agencies. How does it fit into the current provision and what exactly will it do?
The small business service that the DTI proposes to establish from April has only partial relevance to Scotland. That is because one of the main roles of the small business service will be to co-ordinate local service delivery in England. It will have no direct remit in relation to local business support because of the enterprise network and the devolved nature of local business support in Scotland.
The small business service will impact on Scotland because of its other responsibility, which will be to act as a voice in UK Government for small business. The SBS remit will cover reserved issues that impact on small businesses, such as employment law, tax and so on. It will also provide a mechanism to ensure that the needs of small businesses are fully taken into account when the UK Government is legislating on issues that may impact on them. The SBS will have no direct role in relation to devolved matters. There are some grey areas of overlap, but that is the basic picture.
I want to follow on from David Davidson's comments. In our investigations we have heard evidence that the structures may be less important than the quality of information and support that businesses receive. What can you tell us about the introduction of quality standards across the network? How and when will that be established?
I cannot say very much more than is set out in the statement, because we are working on those issues at the moment. We have some agreement that it is important to have consistent quality standards of business advice across the network. At its simplest, that means consistency in the qualifications of business advisers. If and when we move towards a system that sets out minimal standards for business advisers, we must ensure that it is introduced gradually. We will not move to a new structure from day one. We are currently working on the details and they will form part of the minister's more detailed statement on the matter.
At what level does that work? Is there an audit of current work? Are we establishing any baselines? How quickly do you expect to implement such standards?
Some qualifications already exist and we might use those as the minimum or base standards for business advisers and business information officers, although they may have to vary according to the different roles that those individuals play. When we have decided on the appropriate qualifications, we would expect to implement the standards fairly quickly, perhaps from April. However, given that many individuals with varying qualifications are working in the system at the moment, it will take time to move to a slightly different system.
I am trying to tease out some factual information. Like Fergus Ewing, I should also declare an interest. I am a partner in a small business.
There are references to various groups. What about your business growth unit? What is it and who is in it?
It is a standard division of the enterprise and lifelong learning department and is staffed by civil servants in the usual way. I head a small team of seven people, which deals with small business policy.
Is there going to be a small firms consultative group?
One of the minister's proposals is to set up a small firms consultative group that will bring together either representative bodies or small business experts to advise and discuss small business policy issues with the department. At the moment, we interrelate with a wide range of representative organisations throughout Scotland. The proposed group would be a mechanism for bringing that together into a single form, not to replace those bilateral contacts, but to complement the existing framework.
How is the composition of that group getting along?
We are working on the remit of the group and its membership and appointment arrangements. We hope that the minister will soon announce some details of that.
What will business mentoring Scotland be?
The intention behind that proposal is to provide small businesses, as they will be defined in the scheme in due course, with access to experienced entrepreneurs—people who have been there and done it—who are prepared to give small businesses their time to assist them in starting up or through a growth phase. We hope to have a large pool of mentors in place by 1 April so that, from that date, small firms that qualify for support will be able to access a mentor who is suited to their needs. The matching process will be crucial.
Will business mentoring Scotland operate under Scottish Enterprise or under your direction?
It will probably be delivered through the Scottish Enterprise network and Highlands and Islands Enterprise. We want to ensure that it is properly integrated with more general business support, rather than being an add-on, stand-alone mechanism.
This must be your final question.
I am sure that small business will be immensely cheered by the huge amount of attention that I have been paying to it. I just hope that there is not such a rammie in the playground that a fight breaks out.
My final question concerns regulation. What is the improving regulation in Scotland unit, who is in it and how will it link directly with what is happening in business? I know that an audit assessment will be done on every proposed legislative change, but how will that work?
It is a new unit, separate from mine, that has been set up in the department to focus on the needs of business in relation to regulation so that, throughout the Executive, any policy developments or changes in legislation or regulations will take into account the needs of small business.
How do you assess those needs? Who do you speak to?
The unit is in contact with the small business community, which can make representations as to the changes that it wants in relation to existing or proposed regulations. For example, I understand that the Federation of Small Businesses is putting together a submission to the unit, setting out how the department might improve the picture in regard to red tape.
Thank you very much.
My question is on the same theme as those of Elaine Murray and Nick Johnston. Our mission in life is to simplify and rationalise business support services. I am concerned that there is some confusion and overlap.
South of the border, the pre-budget statement introduced an enterprise fund and the small business service was set up. Are the enterprise fund moneys dispersed through the new small business service? Is the Scottish business growth fund the son of the enterprise fund, or is it completely separate? Will we revisit the business growth fund in the light of developments in the enterprise fund south of the border, and if not, why not?
The DTI enterprise fund will be transferred to and delivered by the small business service when it is up and running in April. The enterprise fund is actually a collection of different funds that have different purposes. Some UK-based funds such as the small firms loan guarantee scheme, which has been operating for a few years, will transfer to the SBS as part of that package. Obviously, we have no direct interest in the funds that are England-only. We have a residual interest in the areas of the enterprise fund that have a UK application and we keep in contact with the DTI about the delivery of those funds in Scotland, but the business growth fund is a separate Scotland-only enterprise operated on this side of the border.
And it is additional to UK-based funds that are dispersed in Scotland through the enterprise fund?
Indeed.
I, too, am interested in the money because I have heard ugly rumours that the development agencies currently being set up in England think that a tremendous amount of money is spent on business and economic development in Scotland and—to put it bluntly—they want some of it. I would also be interested to read the breakdown that Allan mentioned to find out whether the Scottish business growth fund will receive proportionately the same amount next year as it did three or four years ago.
My next question is on a completely different issue. Can you explain the individual learning accounts to us? When we visited Fife recently, there was some confusion about how the accounts operate.
The business growth fund, which was set up less than a year ago, will be allocated £12 million this year and the next two years. Beyond that, it remains to be seen how efficient the fund will be in addressing the funding gap. I would need to go away and compare the funding in Scotland with funding available through the enterprise fund in England.
Could you write to the clerk with that comparative information?
I am quite happy to do that.
As for the individual learning accounts, I cannot really answer that question because it does not fall within my remit in the department. My training and skills colleagues are much better placed to answer your detailed questions on that issue.
It is just that, in his article, Henry McLeish says that the accounts have particular relevance to small businesses.
This is an example of the disparate interests that we are trying to pull together in the department. However, individual policy responsibilities reside with other parts of the department. I cannot give you information on that issue.
Who can? Which unit?
There are some constraints to joined-up government, Margo.
I have a number of questions. Is the business growth fund targeted at new business start-ups or established businesses that want to grow? How much risk will be allowed to determine which firms qualify for support? Will the fund be targeted at particular growth areas or is the fund general to all?
Finally, I would like some clarification on the issue of business rates, which was mentioned by Fergus Ewing. The poundage rate is higher in Scotland than south of the border to compensate for the different valuations that have been put in place. The net effect is zero; in other words, we will pay exactly the same in Scotland as in England.
That is my understanding of the impact of the change in the rate. The business growth fund is not targeted at specific sectors; it is available to start-up companies or established businesses that meet the general criteria for the scheme. The standard conditions of additionality, displacement and so on, which generally apply in Government funding schemes, will apply to the business growth fund. There are, therefore, a number of hoops that companies will need to go through before they can demonstrate a need for the funding.
The fund does not necessarily exist to take on riskier projects, but simply those which, for one reason or another, cannot obtain sufficient funding from established sources. There is a question about whether it is an issue of risk.
I would like to mention the role of the small business service in lobbying on reserved matters on behalf of the small business community. Given that the SBS will be directly responsible to a department that looks after only one part of the UK, what will be the relationship—apart from officials keeping in close touch—that will allow the various concerns of the small business sector here to have a direct impact? The lobbying that would happen would clearly be quite different.
The funds to which Ian Howie refers are filling gaps in the market. Most folk welcome that, but I would like to know how he thinks that will develop and correct market failure. In five years' time, will we be left with the same gap as currently exists? What is the link between putting the fund into the gap and encouraging the financial sector to fill the gap itself?
As far as the small business service and matters reserved to Westminster are concerned, there is a role for the Scotland Office in representing Scottish interests in Whitehall. We will want to work closely with the small business service at an official level to ensure that the interface between reserved and devolved issues is properly catered for. We are also keen to try to get a Scot or someone with a knowledge of the Scottish scene on to the enterprise council that will advise the SBS. The council is an advisory group that will help to ensure that the work is properly joined up at the UK level.
I agree with Andrew Wilson about the business growth fund and addressing the perceived gap in the market, and that the objective is to demonstrate that it is viable for established funding institutions to fund such projects. It is to be hoped that that gap may disappear in time, although it is difficult to say over what time. The success of the fund will demonstrate that those established funding institutions are viable and should be supported in the normal way, so that the market failure is corrected over time.
Some of the committee's work has been on congestion in the market place and how small businesses can access support. The Scottish Executive's submission discusses the establishment of a single branch in the Scottish Enterprise network to help clarify the system and simplify access through a single gateway. Can you expand on that? How will that link with the committee's work and its findings?
I cannot say much more than was set out in Mr McLeish's letter. We are examining that issue and the minister will make an announcement fairly soon, with Scottish Enterprise, on the details of the branding issue.
I do not think that that would necessarily cut across any wider, general recommendations that the committee may make in due course on local economic services as opposed to small businesses, which we are focusing on in our work.
I want to draw this part of the meeting to a close, but before I do so I will make one comment for the Official Report and for Mr Howie to reflect on. It has become clear—if I may refer to our interim report—that the objective of this committee is to simplify, clarify and slim down the debate that goes on in the small business mind on how to access services. However, I feel that more congestion is emerging from some of the issues that we have chewed over this morning. I encourage Mr Howie and his colleagues in the Executive to reflect on the line of thinking that is emerging from the evidence that this committee is taking and to observe very closely the conclusions that we reach in our inquiry over the next couple of months. I hope that those can be integrated into the overall policy work of Dr Goudie and of Mr Howie's unit. I thank them both for their attendance. We now move to the next part of this evidence-taking session.