Entrepreneurial Opportunities
I should point out for the record that Rhona Brankin has sent us her apologies—she is off sick.
Continuing the theme of enterprise, I introduce a fairly distinguished panel. Tom Hunter and Chris van der Kuyl are well known to everyone; and Stephen Rattray and Graeme Semple are two successful entrepreneurs who started up their businesses with support from the Prince's Scottish Youth Business Trust. Annabel Goldie is on the trust's board and I was its first director, so we should perhaps declare that interest right at the beginning.
The purpose of these evidence-taking sessions is to guide us in making recommendations for our successor committee and to highlight key areas where the Scottish Parliament and the Scottish Executive can further help to promote enterprise in Scotland. There is a broad consensus about the need to improve our economic performance, the business start-up rate and so on.
We want a freewheeling discussion on this matter. Members can ask whatever questions they want to ask and witnesses can say whatever they want to say. We want the witnesses to put all their cards on the table, and they are more than welcome to be critical of the Parliament. We want to hear about the role that we can play in improving the level of entrepreneurship in Scotland, which still has a fair way to go.
I ask all the witnesses to make a few introductory comments. Then I will kick off the question-and-answer session.
The kids in the previous evidence session said everything. A few years ago, when I thought about how we could stimulate more entrepreneurial activity in Scotland, I decided that there were no quick fixes. Indeed, if there had been any, we would have put them in place long ago. I decided that we had to start right at the beginning.
Unfortunately, such activity is not natural to Scots, which I suppose goes back to our history of dependency on coal mining, shipbuilding and steel making. People would leave school, and—certainly where I came from—get a job for life down the pit. However, people have had a tough wake-up call; they now realise that no one else is going to take care of them or give them jobs for life and that they might have to do all that for themselves. Coming to that conclusion has been a tortuous journey for the past two generations.
Then I came across the schools enterprise programme. I thought that it was a crime that the programme was for only a select few; I felt that every primary school pupil in Scotland should be in it. I am glad to say that we are well on our way towards that target, having trained more than 5,000 teachers.
As I said, the kids that the committee heard from today said it all for me. However, it is important that we get things right and do not miss the point of enterprise education. We are not trying to produce a classroom of Richard Bransons—that would be quite bad. The point of starting to lay the foundations of entrepreneurial activity at primary school level is to build self-confidence, self-belief and a can-do attitude in each kid, no matter what they go on to do. We should not get fixated on building entrepreneurs. That will come on its own.
Now that the programme is under way, it just will not stop. Someone said that the programme will end in 2004 but, to be quite frank, that will happen over my dead body. After all, it is one of the answers to the current situation. Indeed, the great thing that the committee should take away from today's evidence-taking sessions is that Scotland has found an answer and that it is a world first. People in the country should feel very proud of that. We receive inquiries about the schools enterprise programme from throughout the world.
When I spoke to the Executive about the programme, I said that there was no point in introducing it in primary schools and lifting kids' self-confidence and horizons only to drop them like a tonne of bricks when they get to secondary school. As a result, I am delighted to say that we have introduced something that will act as another foundation in secondary schools to ensure that we have a continuum and some joined-up thinking on the matter. That is a fantastic step forward.
In my opinion, the Scottish Parliament should be praised because if the powers were still with Westminster, we would still be wading about in the treacle. One of Scotland's great strengths is that it is small enough to act quickly. If Scotland was a business, it would be a small business, but that would be great, because small businesses have a lot of advantages. They are nimble, quick and flexible and that is how Scotland has to be.
I have been greatly encouraged by the speed with which the Scottish Executive has taken those ideas on board and made them happen. [Interruption.] Annabel Goldie is laughing because she does not often hear me praise the Scottish Executive.
I am just telling Mr Neil not to get too excited by your blandishments.
As we all know, there have been improvements, and we must give praise where it is due. The document "Determined to succeed—A Review of Enterprise in Education", which we launched this morning with Jack McConnell and Jim Wallace, is another part of the foundations.
In Scotland, we should be proud of such programmes. It is going to take a lifetime to change but we must start somewhere. The good news is that we have started—it is happening. You can see that in the kids who spoke today. How many kids would be confident enough to come to the Scottish Parliament and take all those hard questions? That was fantastic.
I gave the committee a paper and I take it that you have all read it.
Yes.
I have spent a lot of time thinking about this and Ewan Hunter, who heads up my family's charitable foundation, is dedicating himself to finding best practice around the world and bringing it back to Scotland.
I am happy to answer any questions.
I will allow questions after everyone has given their introduction. I thank all four of the witnesses in advance for their submissions.
Chris van der Kuyl (VIS Entertainment):
I wanted to bring out three key themes in my paper. The first is to do with lifelong learning. I remember my first day as a first-year student at the University of Edinburgh. I had been cosseted through school and spoon-fed through all my exams and all of a sudden, I walked into a lecture theatre with 200 to 300 other guys—they were all guys because I was studying computer science, which was the geek course. We were told that everything that we were about to be taught in our first year at university would be obsolete by the time we left university, because of the speed of technology. We were all aghast at that, but the professor then said that we were really there to be taught how to think and learn. That experience was my first real understanding of lifelong learning. We were not there to absorb facts and regurgitate them; we were there to put a structure around how we think.
That is not to underestimate the value of core skills. None of the kids who were at the committee today would be able to perform their enterprise without very solid core skills in maths and communications. However, the whole experience that wraps round those core skills will give them an idea of how connected education is and that it is not just about getting to the next stage of the exams. That is incredibly important.
Tom Hunter's theme was about what enterprise means. It is not all about starting businesses; it is about a new way of thinking and learning for those kids. A lot of people have the confidence and ability—some might have them naturally—but we are talking about a way of encouraging everyone of all academic abilities to feel included and that they can make a difference.
My second point is about aspiration and ambition, which are two key criteria for any society. We want an aspirational and ambitious society, otherwise we will never get anywhere.
I take a slightly different tack from Tom Hunter. I might even say that he is wrong about Scotland having a dependency culture. Although he is right that there was a dependency culture for about 100 years, before and during the 19th century, we had the most entrepreneurial society that the world has ever seen. We all know the famous role models all the way through history up to people such as Andrew Carnegie who did incredible work in enterprise and as entrepreneurs. We misplaced that for a while. Through two world wars and all that those entailed, we built a culture that was far too dependent on the industries that Tom Hunter mentioned.
For me, it began 17 years ago. I was in my fifth year at school, and I was one of the first kids in Scotland to go through young enterprise. All this time later, I now chair Young Enterprise Scotland. That organisation, along with the schools enterprise programme and the others that we have heard about, are starting to make a difference. Young Enterprise Scotland delivered a quarter of a million training hours to kids in enterprise education, and that is only one organisation.
I agree with Tom Hunter that the programme will not be a fix for a year or two—it will take a generation for changes to happen. We have to start somewhere, pull together and focus. The document "Determined to succeed" is a fantastic beginning. It almost feels as if Young Enterprise Scotland and all the things that we have done until now have been like small islands in a sea in which there was none of this thinking. Now, everything is starting to join up and we are starting to see how we can proceed.
A partnership will be necessary to follow the process through. That will not be up to the education department, the enterprise and lifelong learning department or the Scottish Executive; it is up to the whole nation. I think that I can speak for Tom Hunter when I say that we want to tell the committee that it is not alone. We are prepared to work and put in the effort and time to find ways to make the idea permeate through every alleyway and area of our society that it possibly can. We will see dramatic changes over the next 10 or 20 years. Start-ups will begin to come through more often but, more important, we will see a more ambitious and aspirational Scotland. That is what we all truly want to see.
Stephen Rattray (mmpg.net):
It was interesting to hear the kids say that they got £10 and £20 sponsorship from their parents. That is similar to my situation. I had to leave work to start my business, because there was no support whatever. I gave up any right to unemployment benefit because I had to leave work. I spent three months developing a business plan. It was not definite that the business would start, let alone work. If I had not started it, I would have put myself in financial dire straits again. There is no support for those of us who start businesses, and we need support in the first instance.
As you can see, my last name is Rattray and not Hunter, so my family could offer me only accommodation; they could not offer me any financial support. For the first two years of my business, I had to live at home. I am now just over two and a half years into the business and I still have to live in a house that my parents now own. I still cannot pay myself a weekly wage because ultimately I have to put so much into starting the business.
I hope that the committee has had a look at my business's basic core. In the first three years of its existence, I have to sell advertising, but no one will pay for advertising unless a set standard is developed. Therefore, I am living on the back of my parents, basically with no income. I have not one, but two degrees and, at the age of 27, I am earning less than the majority of people aged 16 or 17 who leave school and work in call centres.
There is a severe lack of support from banks, and one has to have a business bank account. There is also a lack of support from the likes of British Telecom—one also has to have a business account with companies such as that. Those accounts and services are no different from ordinary bank accounts or telephone systems, but they cost more. There are no benefits in going it alone in a business over being an individual without a business, yet we have to go through that.
There is no incubator system. If I wanted to expand, it would cost me too much. Moray, Badenoch and Strathspey Enterprise—MBSE—has free office space, which is being vandalised. Six or seven businesses could be employed there or given rent-free office space if there was an incubator system. It would cost me money to go there, yet the space is just sitting there, costing MBSE money to replace windows that have been knocked out. The situation is frustrating. I am struggling to speak, which I do not normally do, but I am angry.
Enterprise companies in my area often say in the newspapers, "We have just given £5 million to build an office that will employ 200 people." That is great, but two or three years down the line, the company, which might have come from France to set up a call centre and which will pay people £6,000 to £7,000 a year, leaves because the money was a two or three-year deal. The office will have been completely misused while other companies are struggling.
Baxters and Walkers, which are only about 10 miles away from where I am based, have been built up from family firms into international businesses, but there is no definite support for small businesses in the area. Rather than £3 million to £5 million, £50,000 would be enough to set up small family firms for two or three years. Such firms might go on to employ thousands of people during the following 100 years, rather than 200 or 300 people for two to three years.
Tom Hunter mentioned that there is no point in short-term fixes, but that seems to be what the enterprise companies do. They say, "There you go—there is £3 million to £5 million. Wow—we have created 300 or 400 jobs." That is great, but what happens two years down the line? It is about time the enterprise companies started to consider the potential of smaller companies.
The PSYBT is superb—it took the time to send three or four people to listen to us. The PSYBT does not say, "If you can tick this box and that box, you can send us something." I do not have the time to do that—I work on my own, seven days a week, so I cannot fill in the boxes and produce a standard report. If the enterprise companies took the time to sit down with me for an hour, they would understand my business and its potential.
Support from banks is non-existent and the technological support in my area is non-existent. I have no chance of getting broadband because even if everyone in the exchange wanted it, there would not be enough people to make it viable for BT. We also need incubator systems, which I have mentioned. The enterprise companies want to look good and to say in newspapers, "We are giving this much to create this many jobs", but they do not focus on the needs of the community.
Graeme Semple (Scottish Paintball Centre):
I will give a wee introduction about how I came to be in business. My two partners and I have been in business since October 2000, when we set up the Scottish Paintball Centre. Although the company is only two and a half years old, the business plan was written by one of my partners in 1993, when we were at college. I am only 28 and I left school in 1992, which is not a lifetime ago, but I agree with Chris van der Kuyl that when I left school we were dealing with old certainties. If people got decent results at school and a degree, they would get a job for life, or at least a job for longer than we could be guaranteed a job today. There is a lot less certainty now about conventional employment.
Unlike Chris van der Kuyl, when I was in fifth or sixth year at school, I did not have any real idea that I would start a business. A combination of my circumstances and my partners' circumstances and my desire not to do the job that I was in four or five years ago drove us to start the business. In the year leading up to us starting trading, my partners and I were on jobseekers allowance, which created problems. We had to pay direct debits for car insurance and adverts from our £54 a week. The business would not have been created unless we had girlfriends, families and personal credit to pick up the slack.
Two themes have become familiar to the three of us in the couple of years since our business started—our experiences with Scottish Enterprise and the PSYBT, one of which was broadly negative; the other of which was definitely positive. The situation with Scottish Enterprise in the nine months before we started trading was very much a chicken and egg one. We were confronted with a bureaucratic system that involved a lot of duplication. For example, before we started trading, the three of us lived at separate addresses and stayed with friends—one of my partners lived in Sighthill. When we fed that information and information about the proposed site for our business into the Scottish Enterprise network, it could not cope, because it is governed by exact postcode boundaries. That was frustrating because we needed only minimal support—I am talking not about handouts, but about support that was not based on geographical lines.
On the other hand, the support that we had from the PSYBT was characterised by its seamlessness. We produced a business plan when we had the idea—we came up with it many years before. Our original business plan was funded through a £5,000 low-interest loan from the PSYBT and £3,000 came from the mother of one of my partners. In the absence of help from Scottish Enterprise, we turned to the PSYBT for support. Another characteristic of the PSYBT is that the guy who picked up the phone when we initially called is still with us two or three years down the line. With each passing year, he learns more about our business and the relationship and support have been strengthened.
Stephen Rattray talked about banks. They are very risk averse and I do not suppose that what we say today will turn that situation around. We have had two business bank accounts in the past three years and we have come up against a lot of scepticism. Given the level at which my company trades and given that I get paid for only seven or eight months of the year, it is difficult not to be cynical when banks post profits in excess of £1 billion. The turnover of our business, which is between £100,000 to £150,000 a year, is a drop in the ocean in the great scheme of things. That is frustrating. Our experience of the initial charges that banks apply has not been good. It would be nice to try to turn round those issues.
To try to put a more positive angle on things, our experience is that the continuity in PSYBT is a model. I back up Stephen Rattray's point about the PSYBT's approach, which seems to be more about taking a chance and meeting the people who are involved. Those features have been repeated in all the contacts that we have had. Tom Hunter helped to create the growth fund. Until last year, the maximum amount of cheap money that the PSYBT would lend to back a business was £5,000. We were fortunate enough to be the third or fourth business that was approved for receipt of money from the growth fund—we received a £25,000 low-interest loan.
I will close on a note that is positive and negative at the same time. That loan has moved our business forward a lot. We have introduced a new service that is a first in Scotland and which would not have happened without the money. The culture among banks and perhaps in the enterprise network community seems to be one of believing that the growth fund and all that it represents are not necessary and that businesses of the scale of my business and Stephen Rattray's business do not need such support. I back up the point that the growth fund support was well appreciated. I hope that we will continue to use it.
I open the meeting to members' questions. As we have four witnesses, it would help if they could keep their answers reasonably sharp, as I am sure that members will keep their questions sharp.
That was a salutary warning.
Good afternoon to the witnesses—it is nice to see you. I declare an interest as a member of the board of the Prince's Scottish Youth Business Trust. I was struck by the submissions and by what you have said. Tom Hunter's paper refers to money from friends and family and to a possible funding gap. It says that
"research into … micro-credit should also be conducted."
Will you expand on that? Who would provide micro-credit and which businesses would receive it?
In America, businesses get off the ground through what are called the three Fs—friends, families and fools. In Scotland, that is not natural. In America, business is talked about round the family table and in pubs or bars. That is not natural in Scotland, so we need to provide a kick start.
We have heard from Stephen Rattray and Graeme Semple about the level of support. I know that banks are criticised, but lending money at such levels is not what banks are about. I started with £5,000 from my dad and an enterprise allowance for unemployed people. That legitimised doing the brooing, because plenty of people signed on while they were trying to earn. Chris van der Kuyl received that allowance, too. The number of people I have met who received it is amazing. The allowance provided broo money in somebody's first year of business. When I received it—that was a few years ago—it was £40 a week.
Like Annabel Goldie, I am a director of the PSYBT. We have tried to address funding at the level that we are discussing. When Graeme Semple wants to go to the next stage, banks will not consider his proposal. We should not criticise the banks for that; we must sort out the situation in another way. The PSYBT—Mark Strudwick, its chief executive, is here—started the accelerator fund, which has been a real boost for such businesses, and there are plenty of government funds around.
What we are discussing is risk money, which those involved must be prepared to lose. The hope is that, with businesses such as Graeme Semple's, more will be won than lost, but until that gets into the system and the idea of friends, families and fools becomes part of our society, we need to provide an artificial kick start.
I suppose that it is risk money in a sense, but if it follows a proven record of survival for two or three years, it might be argued that the risk is at least quantifiable and that what the capital will be used for can be properly assessed.
The Scottish co-investment fund has missed a trick. The sums of money involved are relatively small, but committee members—apart from Annabel Goldie—have no idea how much these guys fight for the money. The amount of work that guys such as Stephen Rattray put in astounds me. They work for little for long and try to juggle their credit cards and take credit wherever they can. We have to reward that somehow, and to make things a little bit easier for them. We are not talking about huge sums of money, but it would make a huge difference to them.
That is very helpful. That has answered the main thrust of my questioning. I am very struck by what Tom Hunter has said.
I have great empathy for people who go from one job to another and find that banks that would not lend them anything or give them a break on their mortgage one year want to give them an overdraft of a hundred grand the next. That seems to indicate something about the nature of banking in Scotland.
I welcome the steps that have been taken to augment the funding for enterprise education. I am sure that the committee shares that appreciation. We have reached a kind of Carnegie moment, in that we are seeing that education is the right route to go down and are attempting to establish how best we can augment what is going on in education.
One issue is how better to support inspirational teachers—this applies particularly to head teachers. We saw an inspirational teacher here today and, when I go round schools in my constituency, I know who the inspirational teachers are—I meet them. I am delighted to hear what you say about culture change and about digging in for the medium to long term. There is no silver bullet; it is about a series of deliberate decisions, which can be expanded upon.
Earlier on, Ken Macintosh picked up on a point that I found worrying. I think that Scotland is a great place for children to grow up until the age of about 12, then something happens that kicks the life out of people. It might just be the transition into secondary school, and I am only saying this from anecdotal evidence, but I think that something goes wrong around that age.
Perhaps we are seeing some seeds of change in that regard, given what the children were saying to us earlier, but I would warmly welcome the witnesses' views on that. The question is partly about how to expand business involvement, taking on board what staff and today's witnesses have said. They view involvement in business not as something discrete that might last just a week, or as something that they might do for a couple of periods of personal and social education a week; rather, it is built in.
Finally, I apologise on behalf of the committee for the bizarre arrangements today. The fact that we bring you along here and do this daft Perry Mason routine shows how institutionally incapable we are of bridging the gap between government and enterprise. It strikes me that we have to find a better way of doing this. I welcome any views you may have.
I will not tell you which one of us is Della Street, by the way.
On the gap between primary school and secondary school, it is obvious that, when kids become young adults or teenagers, they desperately want to fit in. Kids run a risk of being ostracised for anything that is seen as out of the ordinary or a bit weird. They want to be wearing the same clothes as the others and so on. If children do something that is not seen as obvious, or is not something that everyone does or thinks about doing, then it becomes akin to a minority sport and can drift off into oblivion. That is a key reason for what Brian Fitzpatrick was referring to. We can change that only by encouraging every child to think that entrepreneurial behaviour is a natural thing.
On Brian Fitzpatrick's second point, education is the centre of the universe when it comes to making the change. Tom Hunter put that point well in his paper—education is the beginning and the end of it. Brian was correct in his comments about key teachers or star teachers. It is not the case that there are no fantastic schools; there are. We were at Trinity Academy in Edinburgh this morning. Enterprise is imbued in the culture of that school, and permeates down from the level of the rector to all staff. We have to find a way to take those centres of excellence and best practice and spread the word.
Education is a huge area. There are the recently started education awards, for example, which at least pay lip service in some ways. The idea of streaming teachers and awarding them for greatly improved performance is key. As Tom Hunter's paper says, it is critical that we lift teachers to the heights of the medical profession or the legal profession and even past that. Teachers are the only people who will turn this nation into the one to which we all aspire and which we all want. If we truly hold that ambition, the quality of teachers must increase commensurately.
Brian Fitzpatrick talked about 12 being an important age. That fits in with when pupils choose their standard grades. The day that pupils choose their standard grades, we lose about two thirds of the people in school. They realise that they will have to sit through classes for two more years and that they will come out with nothing better than 4s, 5s, 6s or 7s—if those are still the levels for standard grades—and you have lost them. They will leave at 16 and that is it. The next few years are of no interest to them.
Perhaps we should consider the old system of giving them woodwork and stuff like that. I mentioned plumbing. In Glasgow, they have started to introduce plumbing in schools because there is a shortage of plumbers. The idea behind that is not as bad as it seems. Apprenticeships have been taking a bit of a beating, but if we could keep the two thirds of pupils who will leave with virtually no qualifications at school until they are 18, and have them leave with a time-served apprenticeship, in addition to two highers and having learned about enterprise throughout those years, they might come out not as plumbers, but with an idea of the business of plumbers, joiners and carpenters. They will know about the scheme of things out there. They would not just leave to be picked up at half-past 7 by some guy who says, "Right. We'll meet you at half past seven; get oot here," go along to hammer a few nails, read The Sun and go home. When pupils go into a job at 17 or 18 they should know what the boss is doing, why the boss is doing things and what the opportunities are for them to make progress in the future. They should know about what they can learn over the next two to three years.
Our education system is outdated. Computers changed the world during the time that I was at school. When my dad went to school, he took a slate and a slate pencil. That is ridiculous to me. To my children, it will seem ridiculous that I took a jotter and a pen to school, because everybody will take computers. We must consider that and start opening up schools and universities.
Universities still trade in the old standard curriculum. The university of the Highlands and Islands has started up out our way. I have no idea who is making the decisions behind that, because they are not asking young people what the future is when they put the money in. They are not looking at the likes of the Massachusetts Institute of Technology in Boston, which is making money through the university system and going into expanding businesses. They are just looking to have a central base so that they can say, "Oh, look—we've developed a university of the Highlands and Islands. Haven't we done a lot?"
The four of us who are giving evidence to the committee have been given half an hour, but if committee members took the time to sit with us for a day—and paid us; I know that you boys are getting paid for this, but I will not get paid a day's wages for this—and listened to what a few of us have to say, you might have a better idea of where you could take things.
I will address the latter point. The committee has evidence sessions such as this and we meet people such as Tom Hunter, Chris van der Kuyl and others all the time, but there is no way of feeding the policy in generally to the Parliament. We have been talking to Jack McConnell, as the First Minister, David Steel, who represents the Parliament, and other parties, because we hope to get a Holyrood business summit off the ground. That would involve front-line business people—not what I call the private sector bureaucrats, but front-line business people—coming to say it as it is and helping to set the agenda. It is based on the model of the White House business conference in America, which meets every four years. We hope to do the first one in the new Parliament building next May. The idea is deliberately designed to tackle the particular problem that you mentioned. That is an aside, but it is an important development, which would create a conduit between the business community and the parliamentarians who set the legislative agenda.
It is important to think about the next steps. We already have a standing invitation from Columba 1400, and it strikes me that the recess will give us an ideal opportunity to consider whether we can get a commitment to working together. There could be quite a happy marriage with what is going on with Columba 1400 on entrepreneurial leadership. Those of us who are elected to serve again could explore that avenue.
We appreciate the six-hour round trip that Stephen Rattray has made. The evidence from all four witnesses has been first class, and picking through what we do with it is the big challenge. Tom Hunter and Chris van der Kuyl opened with the big question that has exercised me for many years: what is at the root of all this? I do not think that they disagree at all. They are both correct, as something did happen in the 20th century that removed entrepreneurialism. The growth of a number of different policies, all of which were correct in their own time, has left us with what we have now inherited.
I believe that Stephen Rattray is from Elgin. Is that right?
I am from a small village just outside Elgin.
My question is for Tom Hunter. If you are right, Tom—and I think that you are—that would suggest that rural areas such as Elgin have a little more entrepreneurialism about them. They will have a higher small business formation rate and more people moving into small businesses or into employment with smaller outfits than is the case in urban areas, yet, ironically, a lot of the institutional or communication network support is worse in the areas where we have the biggest potential. I say that as a central belt MSP; it is just an observation. What do you think of that? Is it a problem across Scotland or is it pocketed? Do we need different approaches in different parts of the country?
My second question is for Chris van der Kuyl. I am a former bank economist—Stephen Boyle, who will be joining us in a wee while, used to be my boss. You are right to express your frustration, but knowing about the history of Scottish banking should prompt us to ask whether the banks are behaving rationally. They are making big profits, so they must be doing something right. From their shareholders' perspective, they must be balancing their spread of risk and return pretty well. In the 19th century, the banks were funding the people to whom Chris van der Kuyl referred with really risky bank loans. There must be something more in the mix that we are missing, and maybe there is a role for public sector intervention at that point.
My final question is about the public sector. Is it too big or too small in Scotland? Is it getting in the way or not?
Perhaps I can do an MSP trick and respond to your question by giving the answer that I want to give even if it has nothing to do with the question.
I will come to your question, but everything begins with inspirational teachers. We can all remember a teacher at school for whom we wanted to do well, and we all remember the one who was just a nightmare. Ewan Hunter undertakes research with the Carnegie Corporation of New York, which has tracked that over a 50-year period. It does not take 50 years to tell you this, but the teacher is everything. That is why we put investment into getting the teachers on side in primary schools. The kids get it in a heartbeat, but the teachers take a wee bit longer. In secondary schools, we have a bigger challenge with the teachers because, frankly, their views are more ingrained. That is why we are taking a leadership course of teachers up to Columba 1400 to try to inspire them and get them thinking right.
You asked whether some pockets of Scotland are any worse or better than others are. That happens of necessity. As there were no coal mines in Inverness, there was no dependency there, so people had to take care of themselves. We see that through the PSYBT. The Highlands and Islands have a higher start-up rate because they need to.
Our core problem is a cultural one, and it is endemic throughout Scotland. We can put sticking plasters on it with help from Scottish Enterprise, but it is wasteful to put money into shoring up something that people do not really believe in in the first place. That is why we have to start at the beginning.
The question about the extent of involvement of the public sector is irrelevant.
I hope that I have answered your questions.
I will take the banking question first. I had an experience similar to Stephen Rattray's. I started out with a Prince's Scottish Youth Business Trust loan of £5,000 and I got my mum and dad to guarantee a £10,000 overdraft—although I did not quite tell them at the time—which was my start-up capital for the business. Then I hit the wall. Mine was a software business and, unlike many other entrepreneurial activities, the investment period in that sector is generally a lot longer before we really start to see returns. During that period, I needed £25,000 to £30,000 in order for me to go to the next stage, but there was no chance that any bank would touch me.
The only solution that I could find then—I think it was in 1994—was to sell the business, or at least a big chunk of it, to bring in external investment and to become managing director, with someone else as the larger shareholder. That has worked for me, and we have invested from there. If there had been another route to go down, I would probably have had more equity in my business today, but that sort of problem has existed for a long time. The PSYBT has an excellent solution to the problem in the form of the high-growth fund, but we need more than that.
I share Andrew Wilson's and Tom Hunter's opinions about the banks; I do not think that the problem is necessarily one for the big banks to come and solve because they currently do an amazing job. The banking sector in Scotland is probably the premium sector in terms of the value that it adds to the economy. The banks are tremendous businesses; for example, the Bank of Scotland is the only bank in the world that provides a specific kind of debt finance to the games industry, which it does through us. That means that we will, in the next couple of weeks, announce the highest profit margins of any company in the world in our sector. I put a good chunk of that down to the fact that the Bank of Scotland took a major risk; nobody else in the world would have taken such a risk.
The banks are entrepreneurial—but not at the £25,000 or £50,000 level. The bank told us, "Well, you only want to do a couple of million. We would rather round that number up and make it £20 million, which would make it a bit more worth while for us." There is a mismatch of quantum; it is not necessarily the case that there is a non-entrepreneurial focus. The Royal Bank of Scotland's takeover of NatWest only goes to show how entrepreneurial those businesses can be, but we need to get the scale of the thing into perspective. If we could bridge that gap, that would give us the most tremendous opportunity to provide springboards for our businesses. Tom Hunter would happily tell you that a big chunk of the success that he found at Sports Division was down to the backing of the Bank of Scotland and to the real entrepreneurial spirit there. At the right level, the opportunity definitely exists; we just need to work a bit more on the gap.
I support what Chris van der Kuyl just said: it is a matter of scale. Over the past few months, my partners and I have become involved in the Entrepreneurial Exchange, which is a relatively small networking institution in which Tom Hunter is involved quite heavily. I recently went to one of its events, and one of the speakers there had set up a business in the 1980s. He said that, between the light bulb coming on and his starting the business, it took him three months to convince the Nationwide Building Society to give him £600 million. During the questioning at the end of the event, I asked him what advice he would give to someone who wants to ask for £600 million, and he said—this backs up what Chris van der Kuyl said—that it is probably easier to get £600 million than it is to get £6 million.
I am sure from what Chris van der Kuyl said about the risk that the Bank of Scotland took on his business that the banks' behaviour is not risk averse; it is all about scale. Although the sums of money involved are quite small—we are talking about the difference between £5,000 and £10,000 or even £10,000 and £20,000—those jumps are considered very differently by the banks.
Can I ask a question?
Can you make it very quick because I need to give David Mundell and Ken Macintosh a shot as well?
I will come back to the question later.
Tom Hunter spoke about attitudinal changes, especially at school. Was the situation summed up when Lisa Naidoo from St Helen's Primary School said in answer to the question about what job she wanted to do that she wanted to go into medicine? Are we caught in a culture in which, despite what they do at school, when children go home and tell their parents that they want to start up a business, that is not regarded by their parents as being worth while compared with going into the professions or to university?
I want to ask Stephen Rattray and Graeme Semple in particular whether friends and family were generally supportive or whether they thought that you were mad. I want to know how people reacted to Stephen when he gave up a secure job. Despite what you might think, I assure you that my mother thought that I was mad to give up a secure job to become an MSP.
People to whom we are close—girlfriends, families and friends—came up with the goods. The mother of one of my business partners, Alan Murray, in particular gave us quite a bit of money—twice, in fact. We received quite a lot of support. However, I accept the point about getting good grades, going to university and then straight into a job. In the short term, in the current climate and given the current culture, setting up one's own business is risky, because not everyone ends up with the success story that they want. I do not know about Stephen Rattray's experience, but I had the full support of everyone who is close to me.
My mother still tells me to stop. She still tells me, "You're nae making enough money," and that sort of thing. The parents of the lassie who said that she wanted to go into medicine might tell her to go to university and get a good job, but in 20 years she will be a parent and if changes are not made to encourage kids such as her to do entrepreneurial things, the next generation will have the same problems. My parents tell me that I should be doing something else, but I do not think that I will say that to my children.
It is fantastic if children want to do medicine, law or accountancy, as long as they have enterprise etched on their brains. Some of the best entrepreneurs in the world have to go through full degrees, post-graduate degrees and become researchers until they get their idea. David Lane, who works in cancer research at Dundee, is one of the most fantastic examples of that—he is a tremendous entrepreneur, but he is also a professor at the University of Dundee and a member of the faculty of medicine. People need different skills depending on the kind of business that they go into and going into further education is not a barrier to starting a great business.
The answer to David Mundell's question is that we do need attitudinal change. Cultural attitudes come in waves and the more entrepreneurial role models we have, the more acceptable becoming an entrepreneur will be. The current wave started 10 years ago and it is still gathering speed today, although there is still some way to go.
It is worth pointing out that the entrepreneurship monitoring report that was published last week by the Hunter centre for entrepreneurship—it was mentioned in somebody's submission—says that Glasgow is now producing the highest or the second highest business start-up rate in the UK.
I would like to take the credit for that report, but it was not by us.
There was some report about the matter, anyway.
I thank everyone for their contributions so far, especially Stephen Rattray and Graeme Semple for their illustrations of the difficulties that face early business start-ups. You have identified a number of problems, including the artificial geographical boundaries between regions and the expense of using banks for business start-ups. You also highlighted the difficulty of—or the lack of—benefits or jobseekers allowance for those who are starting out in business. There are also issues related to the rural infrastructure.
Across the board, the PSYBT has so far come out well and seems to get a big thumbs-up from everybody. Family finance also seems to be a running theme; witnesses' families have supported them and provided them with some cash. I note the comments of Tom Hunter and Chris van der Kuyl about inspirational teachers and the young entrepreneur scheme. I have a question for Stephen Rattray and Graeme Semple. Did either of you become inspired to go into business because of an entrepreneurial scheme at school or through any kind of support network at primary or secondary school that brought out the entrepreneurial spirit in you?
I do not want to sound negative, and I am perhaps contradicting what Tom Hunter and Chris van der Kuyl said, but I do not think that that was the case. I left school in 1992 and my motivation for setting up my business was not to make a fortune; rather, it was to be in control of what I was doing and to have the respect of my partners.
The three of us are generally reading from the same page when it comes to the direction of the business. We blur the lines between friendship and business and the main reason for our being driven to get involved in the business was our dissatisfaction with the jobs that we had. Two of us had become unemployed—essentially, we had made ourselves unemployed—and the third guy had a reasonable job but was facing redundancy; our circumstances dictated our actions. It was certainly my circumstances that drove me on. I am referring to 1999 because there were more than six years between my leaving school and setting up my business.
People need continuity and to be aware—as Chris van der Kuyl and Tom Hunter said—that it is not just a matter of leaving school, a light bulb coming on and then you start up a business. It is also to do with where the fault lines in the education system are.
I went to a rural school and projects such as the one that we are discussing tend not to be rolled out first in rural areas. There was never anything at my school to fit that model. I cannot remember whether I put this in my submission, but 90 per cent of the guys who report on matches are between 16 and 18 years old. I approached schools in Wick, Fort William and Kincorth in Aberdeen and all the places in between directly in order to get school kids who would go along to games. Reporting on matches gives them genuine intellectual work experience, and they get to meet me as a businessman. Many of the young people ask me, "Do you really run your own business?" They think that it is strange to see someone who is not much older than them doing that. When they go to the football grounds, they meet the main local businessmen in the area, who are spending some of their cash.
Learning in school can help to instil confidence in young people. They can be persuaded that no one is above them, even those who are older and have better jobs. We refer simply to "Tom" and "Chris", for example, who are—at the end of the day—just the same as everyone else. I have tried to put that idea back into my school. The school might not have had the infrastructure when I was there, but I and the schools enterprise programme can perhaps help with that in the future.
A number of points are made in your written submissions, which are there for us all to see and learn from. Tom Hunter mentions in his submission that friends and family investment has declined. Everybody here has benefited from friends and family investment. Is it the case across the board in Scotland that families are unwilling to back their offspring?
Yes. That is in the context of the Global Entrepreneurship Monitor—GEM—report. Such investment is monitored through the centre for entrepreneurship at the University of Strathclyde. Friends and family investment has declined from last year; that is the baseline. When we measured such investment this year, less was going on than there was last year. That is all that what I say in my submission means.
I have been involved in business start-up for about 20 years and I started up my own business. I became involved with the PSYBT back in 1988. The PSYBT in Scotland and its southern equivalent, the Prince's Youth Business Trust, started off across the UK with £80 million. Essentially, £40 million was raised through the efforts of Prince Charles, which the then Secretary of State for Employment, David Young, agreed to match pound for pound. The investment was £40 million on either side because it was the prince's 40th birthday. It is now a revolving fund. The PSYBT is way ahead of the PYBT south of the border. Obviously, the level of funding available to an applicant has been £5,000 for a long time: it is not a lot of money with which to start a business.
It always struck me that it would—instead of having all the local enterprise companies, the co-investment fund and all the rest of it—be sensible to have the equivalent of the PSYBT for those who are over 25 years old. The PSYBT does not have bureaucracy—businesspeople are involved voluntarily in assessing the business plans. Aftercare in the PSYBT is 10 times better than anything that I have seen in any other organisation. Stephen Rattray and Graeme Semple talked about the problems that they have faced but, if we change the culture, the demands from the Stephens and Graemes of the next generation will be far greater than the demands of this generation. There is no point in changing the culture but saying that we cannot provide the mechanisms and money for start-up. Are you thinking along the same lines? Do you think that we need to take the bureaucracy out of the system?
One of my great themes is duplication. We do not need to reinvent the wheel; we just need to give the funding to the PSYBT. It knows what it is doing and its track record is second to none. We should take £50 million out of the Scottish Enterprise budget and give it to the PSYBT. I cannot wait until Prince Charles is 100 years old; we might get £100 million out of him. We can put those thoughts to the committee but, to be frank, businessmen get disillusioned when such plans disappear in the treacle. I praised the Scottish Executive for doing what it has done on education. [Interruption.]
Will the person whose phone rang please switch it off?
We must act decisively and boldly and we must take a few risks along the way. As I said earlier, if we always do what we have always done we will always get what we have always got, which is not good enough. We have the answers. Mark Strudwick, who is in the public gallery, is chief executive of the PSYBT, which is a fantastic organisation. Annabel Goldie and I sit on the PSYBT board. If the PSYBT was given the money that is available from elsewhere it would not be extra money, but it would be money that was being better used and better focused. The PSYBT has a system and it bloody works.
It was brilliantly set up.
It is not what you know; it is what you do. If you know how to do it, just get on and bloody do it.
At a meeting in Israel a couple of years ago I met the Israeli equivalent of Robert Crawford, the chief executive of Scottish Enterprise. Israel has a tremendous start-up rate and is an incredible worldwide player in high technology. There are obviously lots of reasons for that. I was amazed to find out that her budget—which is almost equivalent to Scottish Enterprise's budget, for a country that has a similar population—is wholly focused on starting up and building indigenous business. That goes back to what Stephen Rattray said earlier about there being 10 or 20 years of fake inward investment, after which Chunghwa Picture Tubes (UK) Ltd and others rapidly headed for the hills. There are some fantastic inward investments; I am thinking of the value that has been added in National Cash Registers in Dundee, for example. What the ultimate parent company is does not matter; the issue is the effort that is focused on the quality of the business that is being invested in.
Scottish Enterprise has done some tremendous work in the past few years and Robert Crawford must be commended for taking on an incredible challenge and doing such a great job. However, I am always maddened when I hear about more elements of Scottish Enterprise's budget being passed on to retraining, for example, and dressed up in whatever way possible, whether the funding is for bits of the McCrone settlement or God knows what else. Such money should be focused on building business. I echo what Tom Hunter said, but the amount should be much more than £50 million. The key issue is that the whole budget should be focused on building business and not on building walls.
One strength of the PSYBT is in the proviso that money must be matched pound for pound by the private sector. Such matching results in a commercial edge that might not exist if the money is all public money.
Such a condition would be fine—we would find the private money.
Is that a commitment?
We will find the money.
It will not be a surprise that I pretty well totally agree with what Tom Hunter has said. However, should not people other than politicians engage in the debate? You are aware that I am fairly candid in expressing my views, but I have found that the business community is reluctant to put its head above the parapet. It is refreshing to hear what Tom Hunter said, but should a debate take place in the business community in Scotland on what it thinks would be in its best interests before it seeks to inform the political process? It seems that, post-devolution, Scotland is a small village and some sectors of the business community have become almost protectionist in preserving their territorial positions.
Annabel Goldie is probably right. The issue probably goes back to business saying that such a debate is not bloody worth it, because nothing is ever done. I praise the Parliament for the experience that I have had in getting education and for getting on with things. When more businesspeople have more positive experiences, that will have a snowball effect. However, I caution against big presentations with many businesspeople—if they simply talk shop, we should forget it. A small group of committed people is probably what is needed. Not every businessman is committed to such an approach, although that is not wrong, because they are too busy building their businesses. However, there are people who are committed to that approach. If business feels that the Executive has a real will to make things happen and businesspeople see things happening—which is the key—business will be engaged, although getting every business engaged will never happen.
It is unfortunate that I must end the discussion there: we have had another fascinating meeting. I suggest that we recommend in our legacy paper that our successor committee discuss after the election how to progress the issues that were raised during the first session with the kids, and in the subsequent session: we do not want those issues to disappear into the ether. Many points have been made and many good ideas have been outlined, which the Parliament needs to follow up. I hope that the successor committee will return to the witnesses and follow up on those ideas—we will certainly recommend that. The discussion has been extremely helpful. I thank all four witnesses for taking time out of running their businesses to come to talk to us.