Draft Budget Scrutiny 2014-15
Good morning and welcome to the 17th meeting in 2013 of the European and External Relations Committee. I make the usual request that mobile phones are switched off, because they interfere with broadcasting.
I tender apologies from Helen Eadie, who is unable to make today’s meeting. We send our best wishes to her.
The first item on the agenda is draft budget scrutiny. We will be taking evidence from the Cabinet Secretary for Culture and External Affairs. I welcome the cabinet secretary, and the head of international strategy and reputation at the Scottish Government, Craig Egner. I believe that you have an opening statement, cabinet secretary.
Thank you, convener.
The committee will be aware that the budget conditions remain very challenging. In real terms, the Scottish Government’s overall budget will be cut by more than £300 million in the next financial year, which is a cut of 1.3 per cent. Since 2010-11, the Scottish Government settlement has fallen by more than 9 per cent in real terms.
In 2014-15, the European and external affairs budget is expected to spend £15.5 million, which is 1.3 per cent down on 2013-14 levels. Despite the cuts being imposed on us, we remain committed to securing economic recovery and sustainable economic growth in Scotland, in line with the Government’s economic strategy.
In a globalised and interconnected world, it is not only desirable but imperative to deliver those goals for Scotland through diplomatic cultural engagement and a comprehensive strategy for the promotion of trade and investment.
The external affairs budget plays a key role in delivering that engagement, but it does not reflect the totality of the Government’s financial commitment to international work. We have a number of publicly funded agencies active internationally, including Scottish Development International with a budget of £26.2 million in 2013-14, and VisitScotland, which includes EventScotland, with a budget of £50 million in 2013-14. Of course, those budgets form part of the finance and sustainable growth portfolio.
Other parts of the Scottish Government contribute significant sums to international work, too. We witnessed the First Minister’s doubling of the climate justice fund earlier this month, with £6 million being committed to help the world’s poorest countries adapt to the impact of climate change. That of course is funded from the rural affairs and environment portfolio.
The lion’s share of the external affairs budget of £9 million will continue to be directed at helping the world’s poorest countries in 2014-15. Our international development fund provides support to Scotland-based organisations on the ground in a total of seven countries around the world. The relationship with Malawi remains central to our policy and it receives the largest amount of the funding through the international development fund. I have written to the committee to provide further detail on how development spend in 2014-15 will be allocated and on what our development policy is delivering now around the world.
I have reallocated funding in the external affairs budget to ensure an alignment between expenditure and operational need. That includes a 48 per cent increase in funding to the major events line. The increase is accounted for by the shift of policy responsibility for Scottish winter festivals and our diaspora work from our international strategy unit to our major events team. A further £100,000 top-up has been found to facilitate 2014 work around the homecoming.
The international strategy line, which funds international marketing and communications, along with engagement strategies with countries including India, Pakistan and the Gulf states, has been reduced by just under 50 per cent. That includes a transfer of around £700,000 to major events and a further £380,000 transfer to European strategy. The money has been found by making efficiencies, particularly around international marketing and communications work.
The increase in the financial commitment to European strategy reflects my commitment to increasing the Scottish Government’s European Union engagement, particularly with the Nordic and Baltic countries. Increased funding from this line will also help us to continue our work around ensuring that we maximise our return from key European competitor funds, increasing our involvement in the European year of culture and increasing the number of people whom we second to EU institutions and presidencies. I realise that this work needs to be wrapped up now and I am making resources available in the current financial year to facilitate that. My letter to committee members contains more detail on that.
The committee will note that spend on China and the US will remain at their current levels in 2014-15. That reflects the importance that the Government attaches to engagement with both countries. In addition to programme spend, the lines also fund the costs of our offices and staff in-country. The justification for our presence in both countries is seen in the statistics. The US remains by a long chalk the top destination for Scottish exports—£3.5 million in 2011—and our number 1 inward investor; and exports to China increased by almost 90 per cent between 2007 and 2012.
I hope that this short statement has helped set the scene for the evidence session, and I look forward to answering questions from members.
Thank you very much, cabinet secretary. I appreciate that very detailed analysis of the budget. If you do not mind, I will kick off with a couple of questions about China, and then we will go round committee members, who all have different areas that they want to focus on.
I believe that the First Minister is going out to China at some point this week. When we had our inquiry a few months back on country plans, we focused on China because we had the two refreshes and the third strategy. That gave us an idea of how we build that relationship. We looked at many organisations and businesses that were doing work in China and those from China that were doing work in Scotland. Is the level 4 heading that has been inserted in the budget lines a direct result of the committee’s recommendation that the Scottish Government should have a bit more focus on the work that it does in China and specify the work that it is doing?
Over this Government’s term in office we have enhanced our relationships with China. The First Minister’s visit next week is another example of our commitment. There is something about regular engagement, because it is important to build relationships over time. You cannot establish relationships with one visit; you have to build them up.
The committee’s report was very helpful to us. It is important to try to improve the transparency of what we do. We have specifically drawn out the China funding in level 4 figures because we thought that that would be helpful for future accountability and reporting to Parliament.
The funding allocated under that heading is £400,000. We heard during our inquiry that continual relationship building is extremely important; in fact, it is probably more important in the China market than in other areas of the world in which we are working. It is a matter of status as well. One of the points that came across very clearly was that the Chinese like having someone of the status of the First Minister and other Scottish ministers coming to visit. Do you think that £400,000 is enough to realise our ambition? Will it be built on every year?
If that is an invitation to ask for more money from Mr Swinney, with the committee’s support, I can tell you that more money would be very welcome. However, the external affairs portfolio budget is like a hub and spoke. We provide a lot of the core funding for staff for ministerial visits and so on, but we can also mobilise resources and funding from the other organisations that I spoke about.
For example, when the First Minister is in China, he is leading international trade delegations, which the funding from SDI supports. VisitScotland would fund activity around tourism. That funding does not come from my budget—we mobilise funding from others. We have been reasonably successful at that co-ordination. I hope that there will soon be an announcement by National Museums Scotland, which is part of my culture portfolio and which is not funded from the external affairs portfolio budget.
Can we do what we want to do? Yes we can. Are we happy with the results and the impact? Yes we are. Is there capacity to do more? Yes there is, but that would involve more visits and more spend. Probably the best way to describe the budget is to say that it is more about the administration of the ministerial direct visits and our operation and support for staff in Beijing itself, but it also helps us co-ordinate and maximise other budgets.
A couple of members want to ask supplementary questions, but I first want to ask a brief final question.
One thing that was made clear in our inquiry is the benefit of any work that is done in any country. One of the key elements is how we monitor and build on the work that we are doing across the Parliament and the Government. Obviously, transparency in the budget is very welcome. Does the Government have any more plans for monitoring the situation in the countries that we work in—but particularly in China, given the opportunities that exist there—so that we can see whether real progress is being made?
I quoted the 90 per cent increase in exports, which is really important. There is a recognition that businesses themselves and leadership from SDI are really important, but in operating in China it is important for status reasons that there are minister-to-minister visits. I have been twice and I was struck by the difference in the level of engagement and the impetus between the two visits. I am pleased that all that is developing well.
Can we tell more of a story around that? As we progress, I think we will. I know that you are talking about China, but I will give an example from my recent visit to India. I was there last year and one of the companies that I spoke to was Kyndal. We discussed investment opportunities in its line of work in distilling, particularly in Fife. I was delighted that, a year later, Humza Yousaf was able to go on a visit and make an announcement about the investment by the company.
Some of this is about preparation, some of it is about encouragement, and some of it is about making the initial links and identifying opportunities. The investment and the jobs come later. It does not all happen simultaneously. Part of the work involves telling the story to see the links.
We have smashed through our food and drink exports targets—we have already surpassed our 2016 targets. I was part of the delegation to China when the First Minister spoke to the responsible minister on issues around indication of origin status for whisky and salmon. We are now seeing the consequences of that work, but the relationship building, the visits and so on prepared the way for that to happen.
There cannot necessarily be an immediate cause and effect link—that builds up over time. Indeed, good, effective business relationships are based on the trust that we can build over time. Our engagement with China is doing well, despite it being a relatively new endeavour compared with our engagement with other countries.
09:15
Jamie McGrigor has the first supplementary question.
I think that the minister has probably clarified the issue that I was going to ask about. Is it correct that the costs of ministerial visits, such as the First Minister’s visit, do not come out of the £400,000 budget?
It will. Spend on ministerial visits comes out of our external affairs budget.
I am sorry if I have this wrong, but our briefing says that £400,000 is allocated for the China strategy. You have talked about using other funds to pay for ministerial visits.
No. The core cost of Scottish Government spend, whether that is for officials located in Beijing or for ministerial visits, such as Humza Yousaf’s visit to China, will come out of that budget. The issue is how we also mobilise funding from elsewhere. An example of that is the support for the trade visit that is taking place. In that case, the trade activity will come from SDI.
SDI—whose spend is on top of the £400,000. That is what I was trying to clarify.
Yes.
Good morning, cabinet secretary. I do not know how much of the £400,000 budget is devoted to promoting food and drink in China, which is obviously an important sector, but bearing in mind the comments by Owen Paterson, the Secretary of State for Environment, Food and Rural Affairs in the United Kingdom Government, that the UK Government is best able to promote trade in Scottish whisky in China, will the minister comment on that general issue?
I am being diplomatic when I say that I do not think that that was an appropriate comment. We and SDI do a fantastic job, which can be seen in the results of the food and drink promotions. We all know the story about the fact that we have to pay for our whisky receptions in British embassies. That makes a nonsense of the political claims that are made.
Most important is to focus on the jobs and the economic growth, and that is what we do. For example, I was in Berlin promoting Scottish red meat with Quality Meat Scotland and others. I think that was the first time in recent history that an event had been hosted in the British embassy in Berlin. Obviously, all embassies must serve all parts of Government in the UK, which also means serving the Scottish and Welsh Governments and the Northern Ireland Executive. The event was a success, but it would not have happened had we not made the effort to be there. I was delighted that the colleagues present from across UK institutions said that we must do more to support Scotland and the opportunities relating to, in particular, red meat in Germany. The event was led by the Scottish Government, which wanted to ensure that more could be done in that market.
The Government’s economic strategy has seven key sectors, one of which is food and drink. SDI therefore carries out a lot of activity on providing support for promoting Scottish food and drink in China. For example, Richard Lochhead has been to China to promote, in particular, fish. On who is best placed to help promote Scotland, the Scottish agencies are able, capable and very effective. Are we supported by UK Trade & Investment and others? Yes. We are entitled to that support, and a bit less than 10 per cent of UKTI’s activity pro rata should be concentrated on our efforts. Do we get 10 per cent worth of value? Probably not is my reading of the situation. It is therefore more appropriate that we have control over those resources, so that we are able to promote our interests more directly ourselves.
Good morning and welcome to the committee, cabinet secretary. You mentioned a 90 per cent increase in trade between 2007 and 2012, which is a marvellous figure. What is the figure for last year? What percentage increase did we have?
We have the increase over the piece, but I do not have that particular figure. We can provide it later.
Okay. Thank you.
We move on to our second area of focus, for which we go back to Hanzala Malik.
Cabinet secretary, we have an underspend of around £1 million. Will you explain how we got that? Was it a deliberate move to claw back £1 million or have we mismanaged the spending?
We have certainly not mismanaged the spending. We have to operate with a tight budget that has not been increasing. We should also remember that £9 million of the £15.5 million budget that we have is spent on international development, and I have worked hard to protect that despite pressures from elsewhere. That also means that other parts of my portfolio, including the culture aspect, have to take the strain to protect those parts of the budget.
It is also a reactive budget. In other portfolios, and indeed the culture area of my portfolio, there is capital spend on staffing, which can easily be planned. For example, we fund the national companies and the national collections. However, a lot of what we do in the area that we are discussing is in response to need and to projects that are put forward, so we always have to have some flexibility. In 2011-12, for example, there were fewer ministerial visits for the practical reason that it was election year and there was less time. For example, we were in purdah during Scotland week, so we did not send people to that. I was delighted that former First Minister, Henry McLeish, at our request, acted as an ambassador for Scotland in that regard in that year.
We provide flexibility, but it is not the case that the money will not be used. It will be used, and by and large we try to make sure that it is used in areas that reflect the external affairs portfolio. You might remember that previous Administrations reported underspends of £300 million to £400 million every year. The Scottish Government’s general underspend is 0.64 per cent of the entire budget. John Swinney and other colleagues work hard—and we work collectively—in this area, and you will see some transfers between budgets to maximise spend.
This year, in the areas that are more likely to have an underspend, I have made reductions and put the funding into the European budget, which I explained in my opening statement, to help with the secondments and engagement. That meets the recommendations and views that have come forward from the committee. However, with tight and small budgets, and with certain areas being fixed, such as the IDF, we end up having to be more responsive in other areas.
Also, transfers take place between different budget lines. When we are working on international marketing and communications, for example, we commission the work and it is our funding because it is international work, but it is not spent by my portfolio. Operationally, the staff and spending on international marketing and communications come from the cities portfolio. That explains some of the transfers. I am keen that every penny that we can spend is spent.
International disasters happen and there is an expectation that we will respond, so we also keep some flexibility in case such occasions arise. We saw that this year with the initial £100,000 for the Syrian crisis and another £100,000 more recently. One reason why we have managed to protect front-line services and still have the international development funding is that, as a Government, we have had to respond to the need to be smart about how we use funding and resources.
Despite the fact that we have underspent by around £1 million, you have announced a 15 per cent cut in activities in India and Pakistan. Given the large and diverse communities in Scotland, are we missing out on an opportunity? Does the 15 per cent cut mean that our interest is diminishing there?
No. If anything, our interest and our activities are increasing. I visited India last year, and Humza Yousaf visited India and Pakistan just last week. It is just that we are spending the money more on direct interventions with ministerial visits and promotions as opposed to work through the international marketing budget, as happened previously.
I would rather have more delivery of activity on the ground, including more liaison and co-ordination with SDI, which I did on my visit last year. The reduction in the budget is more about marketing, communication and advertising and the sort of activity that takes place in country. Does that diminish our service? We think that we can have as much effect by being more effective in what we are doing.
To return to the budget and your 15 per cent cut for south Asia, why was there a need to cut in the first instance anyway? What made you feel that a cut was needed?
It was not that it was needed, but I cannot manage a 1.3 per cent reduction in my budget without actually looking for something somewhere. Your first question was about underspend and the situation of not spending the budget because we do not need to spend it. Events will happen. If something is happening in India, will the Scottish Government help to advertise or promote it and so on? That means responding to requests in year. More than other budgets, my budget often has to respond to in-year requests, and we have to have resources available for that. If we are not spending as much of it as we need to, there are two consequences. First, there might be an underspend, in which case there will be criticism, but that should lead to there not being a need to budget for the amount of money concerned because we are not spending it and we do not need to spend it to have the impact that we have.
We are getting a bit better in that we are becoming more efficient with other agencies, for example in relation to our digital promotion. You will see from the Scottish Government website that we have invested early in our international promotions using websites and digital approaches, so spend for that will not be required over the next few years. There are a lot of activities, including those in China and India, that use websites to promote our services or what the Scottish Government has to offer. We can make efficiencies there, because we have already provided the spend. There will be less spend on digital work and on advertising promotions in those countries over the next few years, because we have already made the initial investment.
The job is to manage the budgets effectively and efficiently. If I have to make reductions somewhere, I would rather make them in an area in which there is less of an impact on front-line services. I am certainly not going to cut international development to do it.
As regards the recommendations of the committee, we want better European engagement, which is why we are shifting some of the budget there.
If we have an underspend next year, would you still feel the need to have a 15 per cent cut for India and Pakistan?
It depends what the need is for promotion and whether there are any new opportunities in India and Pakistan. However, I do not think that there will be as much of an underspend, for two reasons. First, 2011-12 was an election year, so there were fewer ministerial visits than in a normal year. Also, I deliberately took a chunk of money from the international marketing communications budget and put it into the European budget. I know that it will be spent, because it is on staffing. That is predictable now, and we know what we are doing. For example, we have two secondees with the Lithuanian presidency. That allows us to plan our budget a bit more, and it is a more effective use of the budget to shift it in that direction.
I wish to ask about the European strategy, which is one of the level 4 lines that has received a significant rise, from £120,000 to £500,000 in this year’s budget. You have mentioned that the Nordic and Baltic countries and Ireland will be priority areas. Can you give us more information about the nature of that engagement and how the success of that engagement will be measured?
There are key economic interests with the Nordic and Baltic countries. With Norway, those relate to oil and gas, and there are also some environment-related issues. We also have a keen interest in some children’s issues, as has been the case over a number of years for parliamentary committees. For example, when I was in opposition, I was involved in a committee visit to Denmark and Sweden to find out about early years intervention. Of course, we now have a Government early years intervention programme, a lot of which was informed by the work of committees. That shows why committee work is important.
09:30
Alex Neil is currently in Estonia, at its invitation, to discuss minimum pricing for alcohol. People are interested in many of our programmes. Finland has a keen interest in and takes leadership on e-health, as do we, so that is another area of interest. I know that the committee has taken evidence on the Danish presidency. Renewable energy and climate change issues are a big area of common interest with Denmark. Increasingly, many of our political and economic approaches are aligned, so it makes sense to have more engagement with those countries than we have had to date. I am keen that we do that, and that is what we will do. We are already doing a lot of that but, in terms of ministerial support, if our engagement increases, added spend will be required on that.
I mentioned the presidencies. It is good for Scotland to get the experience, but we also have something to offer, so it is about what we can contribute. We provided secondees to the Cyprus and Irish presidencies. Last year, I met the Lithuanian ambassador and offered to provide secondees to the Lithuanian presidency, particularly in the energy and maritime area, which is a key interest for the Lithuanian presidency and one in which we have expertise to contribute.
That work also has to be funded, but we think that, strategically, it is important for us to do that as a country. That engagement is good for our international relations and it is an example of our positive and progressive approach as good Europeans. The cost of that will come more from central Government. Should those relationships expand and deliver, we would expect SDI, VisitScotland or other agencies to pick up the work. The Scottish Government does a lot of the initial work in building relationships and identifying opportunities. That is where the spend is. I think that it is more effective to use it for that than for advertising or marketing budgets that might or might not be used internationally. That leads on from Hanzala Malik’s remarks.
To clarify, roughly what proportion of the European budget will be spent on secondments?
I would need to get back to you on that, but we are talking about a move from £120,000 to £500,000. We want to send good staff, but I am not going to announce their pay grades in the middle of a committee meeting. If we are looking to do more engagement, the staffing budgets for that have to be met from somewhere.
I will start with a supplementary to Clare Adamson’s question on the European engagement budget. The increase to £500,000 is welcome. Your supplementary letter to the committee talks about the Erasmus programme and student exchange. Does that mean that more Scottish students will have the opportunity to work or study abroad, or does it mean European students coming to Scotland to work with us? It is probably both, I hope.
Part of it is about creating the conditions so that we can improve the access to, use of and contribution to programmes such as Erasmus or creative Europe. On funding, I know that Mike Russell is keen to support that, and many of the student support aspects will come from the Scottish Further and Higher Education Funding Council or from universities or the education budget. However, developing the relationships to do more of that will be done through ministerial support and visits.
I will write to the committee and correct this if I am wrong, but I was pleased to see a recent report that showed that Scottish students are outperforming the rest of the UK on international locations. We are not nearly as good as other European countries, so an awful lot still needs to be done, but that did not used to be the case. Obviously, we are starting to see a bit of a change on that. I hope that that is because more Scottish students are taking up the opportunities of Erasmus and other projects, although it might well be because less of that is happening in England.
We need to do far more on that. We need a common understanding. The youth on the move initiative is a key aspect of the European Commission’s interest. Every time I meet Mme Vassiliou, the European Commissioner for education, youth and culture, she is keen to promote that. We will see more on that area and direction from Europe, but we must be better at maximising opportunities from Europe. The committee has raised that point on a number of occasions, but it requires people to be on the ground and relationships to be built. It is also about how we motivate and galvanise agencies, universities and institutions here in Scotland to engage, and that takes resources too. That is all part of the people investment part and the increase in the budget of the European strategy.
I was interested to see the countries that were chosen to be part of that initiative—the Nordic and Baltic countries, and Ireland. Is there any particular reason for choosing those areas to work with?
The reason was more that we are doing more with those countries. For example, I have been in Italy recently and I was also in Berlin to promote Scottish food and drink and our creative industries. We already have fairly strong relationships with other major countries in Europe. The committee will be aware that a senior French delegation was in the Parliament just before recess. That visit was about an incoming investment opportunity. The First Minister met the French ambassador and they signed a statement of intent on education. We are already developing and maturing relationships with other countries, but we could do more with the Nordic and Baltic countries.
There are lots of opportunities for working with Ireland and I would like us to be doing more there. We have done a lot more on energy in recent years, including with the Irish-Scottish links on energy study—ISLES—project. When we are looking at accessing European projects through partnerships between two or three countries, Ireland is automatically one of the first places to call for different ideas, particularly on the northern periphery funding programmes, which we should be looking at with more of the Nordic and Baltic countries. Ireland is also a natural fit for some of the energy and other programmes.
That is the explanation. We are intensifying our activity and expanding the number of countries that we are working with at a deeper level, and the funding can help to support that.
Is that particular fund a one-off or is it part of a long-term plan? What will the benefits be and what will success look like for Scotland and the countries that we are working with?
Success will mean that knowledge has been exchanged and gained, whether that be with Finland on e-health or Estonia on other health issues. Our knowledge exchange with Norway on oil and gas is already extensive. We obviously have common and important interests in fishing and we have to ensure that relationships with those areas are strong. Democracy is such that Governments change. Norway has just elected a new Government, and we will have to form relationships with new ministers. That is all part of what we have to fund and support.
When the committee calls for more funds for my portfolio, that will clearly be an area for expansion. However, we must be realistic. We have to work within our means, and they have been restricted so we are just trying to be tactical and strategic. Do I think that we are talking about a growing area? Yes, it should be, and the committee has shown leadership in identifying the importance of intensifying our relationships with Europe and using more opportunities for funding to do that, and we have the resources for that within a small budget. If the committee was looking at level 4 in other portfolios, it would not be getting the same detail as it gets in this portfolio because it is such a small portfolio compared with some of the others. We just have to manage it very effectively, which will mean switching resources.
Do I see an expanded area of European investment? Yes, I do.
We will hear later from the Croatian ambassador. As you know, Croatia acceded to the European Union in July. It is a small country of 4 million people, which is a similar size to Scotland. We will have the opportunity to ask questions of him, too. Croatia has just come into the European Union and Scotland has been in the European Union for many years, so what kind of direct engagement do we have with Croatia that will help to foster common interest?
I will meet the Croatian ambassador later today and congratulate the Croatians on their accession earlier this year.
Europe is changing. The European Union used to be a few large states, but now there are 28. Most of them are relatively small and a considerable number are smaller than Scotland. When I attend a European Council meeting, it is striking to see everybody round the table. Obviously, that is an increasing number.
It is also interesting that the presidency is now being taken by some of the smaller countries. Lithuania is a very good example. It is smaller than Scotland and a relatively new member of the European Union, but it is taking on the role and being quite dynamic and forward looking in some of the agenda items that it wants to take forward in the presidency.
That reflects the changing nature of Europe. It is also about identifying common interests with other areas. Historically, Scotland has had a strong relationship with the Baltic and eastern European countries. It is sometimes worth reminding ourselves of that international link and the longer relationships that we have with some of the Baltic countries in particular. It is the same with some of the new accession countries. There are opportunities for trade and investment. We just have to identify what those are and work most effectively in that area. However, it is a two-way street. It ties in again with our Government economic strategy. Scottish Enterprise’s strategy is about how we globalise our business opportunities, how we ensure that our small companies become medium-sized companies and then larger companies and how we maximise the internationalisation of exports for Scottish businesses. That is where our real growth potential is.
As I said in my opening remarks, the United States is obviously a major area for our international trade. The same is true for expanding Europe. It is in our wider economic interests that a strong, robust and vibrant economic market for our goods and services operates in Europe. Therefore, how we work collectively is important and it is important that we learn from the new perspective that a new accession state can bring, so I look forward to hearing what the ambassador has to say to the committee later.
When I attended the British-Irish Parliamentary Assembly last week, your opposite number in the Irish Government, Paschal Donohoe, the Minister for European Affairs, talked about the value and importance of the relationship that Ireland has with the United Kingdom in particular, about being a small country as part of the European Union and about the responsibilities that that brings to Ireland.
Croatia has now joined the European Union as a small nation. The message that I got was that the European Union seems to be shifting towards giving more importance and recognition to small nations and the contribution that they can make towards Europe. What is your view of that in terms of Scotland’s participation in the European Union?
That shift also gives us great opportunities. It is the direction in which Europe is moving. It is also about consensus, negotiations and finding alliances for common interests in different areas. Obviously, there is such a number of smaller countries that we can do that.
There is a bit of a myth that only the larger countries can punch their weight and make things happen. We can see the dominance and leadership of some of the larger countries, such as Germany in the eurozone in particular, but the smaller countries increasingly help to make things happen, help to come to a resolution and identify areas of progress on a number of issues. In future, Europe will just operate in concert and through alliances and we would be very well placed to take part in that.
The major events and themed years budget is increasing by £800,000, or 48 per cent. Is that a one-off or will the level of budget be similar in future years?
Clearly, 2014 is a big year, in which so much is happening. It is our second year of homecoming. Our first year of homecoming was, of course, in 2009 and we have had themed years in between. The themed years and the year of homecoming are jointly funded from my portfolio and Fergus Ewing’s, which funds the VisitScotland and tourism aspects. We have increased the funding for 2014. There is more activity and there are more signature events, so the homecoming budget has been increased as a result. It is important that that support exists. There are separate budget lines for the Commonwealth games and the Ryder cup.
However, to give you an example, there will be quite a call on our portfolio to help to support the many international ministerial and other visitors who will come to Scotland next year for different events. What we do on a regular basis will be increased and ramped up. We have deliberately increased the spend for that, particularly in relation to the events that are taking place here. That was always planned and it is more of a one-off investment.
09:45
We have also transferred responsibility for the winter festivals, for which we announced this year’s programmes yesterday, into major events. That includes all the different free events and the free openings on St Andrew’s day—I know that Roderick Campbell will be very keen on that, given his constituency interest. The other reason for the increase in that budget is, therefore, that we have operationally transferred those festivals out of international strategy and reputation and moved them into major events, because it is more fitting that they are administrated by the major events team.
I am still not quite sure whether you foresee that the budget will stay at the same level in subsequent years.
Unless my overall budget increases—and the committee should remember that I have had a 1.3 per cent reduction in this particular part of my budget, and a reduction of more than 6 per cent in the overall culture and external affairs budget—this element will reduce, although some of it will be maintained as a result of the winter festivals being transferred permanently to major events. There is a combination of two factors this year, but I would not anticipate this budget area being as large in subsequent years unless I were to get an increase in the overall budget.
Thank you. I will move on to the national performance framework. The Government has identified three indicators as being relevant to this committee, which include improving Scotland’s reputation. I have not really dug deep into that area, so perhaps you can help me by commenting on the budgetary implications of improving Scotland’s reputation.
With regard to enhancing our reputation, I would say that we have a very strong reputation. If you look at the Anholt brand index, you will see that Scotland performs very well in comparison with other countries, particularly given that, unlike most of the other countries that we are ranked with, we are not an independent country. In terms of our profile, we have a strong reach.
What is important is not just the budget but what we do with it. We are now far more effective in co-ordinating the different budget lines for VisitScotland, EventScotland and SDI that relate to our international reach. That allows us to maximise the bangs for bucks that we get from our work.
I mentioned earlier our digital work and web activity. Greater co-ordination is really important, and that is an area that we have to work on.
It also depends on what we are trying to do. The advertising for homecoming, the Commonwealth games and the Ryder cup is about to be launched, and it is co-ordinated for all those events. The adverts will be shown in Scotland and the UK but also internationally to attract people to Scotland.
There are different ways of doing that. We want to celebrate Scotland’s natural attributes in this year of natural Scotland, and our great creativity and heritage, but we also want to celebrate our people. In terms of international reputation, one of our strengths is our warm, welcoming people, and we should recognise that it makes a big difference to how people see us.
Our talent in terms of research capabilities and so on is also important, and a lot of that is about what we do with our universities. For example, I visited China with the University of Edinburgh to promote its memorandum of understanding with Peking University in Beijing. That type of work takes place frequently, and a lot of it involves promoting our people and talent in relation to our research capabilities, our companies and what we do. It is not just a question of having a very simple advertising budget to promote brand Scotland; it is also about the integrity of what we have to promote and what we do.
On the subject of international reputation, I recall my visit to Beijing with Touch Bionics of Livingston, which produces bionic hands. Chinese television broadcasts to billions, so our visit promoted Scotland’s capability, ingenuity and talent, which is as much to do with promoting our reputation as simply advertising in magazines.
Yes, our international reputation is important. Do we contribute to it? Absolutely. Is it always measured in spend? Not necessarily—it is about what you do with your budget and how you co-ordinate it.
Where in the budget can we see an indication of help to facilitate the transition to a low-carbon economy?
It is probably easier to see that in the other part of my portfolio, culture. We have done a great deal with the National Library of Scotland, the National Galleries of Scotland and National Museums Scotland to reduce emissions through capital investment.
On the external affairs side, we do not have capital investment to reduce carbon emissions in buildings. However, we do things in our budget lines—you will see the Malawi renewables energy partnership in the international development funding line, for example—and some of our international development funding most definitely supports those areas.
The challenge is also about what we do on climate justice. We were one of the first countries in the world to establish a climate justice fund, which the First Minister launched with Mary Robinson and which Archbishop Desmond Tutu supported. I was quite clear that the fund would not come from the international development fund but would be additional to it. However, we co-ordinate between the climate justice fund and the international development fund on some activities. The University of Strathclyde, for example, has a very good renewables project in Malawi. We support such projects through our funding streams but, because we do not have energy-generating capital investments and so on in our portfolio, what we can do is very limited.
That gives you some example of what we are doing. We are probably doing more in the other side of my portfolio than in external affairs but, around the world, we are recognised for championing climate justice. Part of that includes aspects of our Malawi activity, such as solar panel activity and sustainable village-by-village energy projects that do not require mass clearing of land or deforestation. That is a very practical example of what we are doing.
I was very pleased to speak to Commissioner Piebalgs, who is the international development commissioner in Brussels, about some of the work that the European Union is doing. The EU is very interested in our work in this area.
You told us the good news about your work in China and the universities in China. I draw your attention to the fact that Glasgow and Lahore are twin cities and have done a lot of work to encourage Lahore’s universities to participate in our universities and colleges in Scotland.
I fear that the UK Border Agency is making it more and more difficult for students to come here, which means that we are losing out on an opportunity to expand the relationship that we have enjoyed for many years. There are twinning agreements and memoranda of understanding between universities in Pakistan and Scotland. The UKBA is denying students the ability to come and participate in education and research and development. What will the Government do about that? Are we making active representations to the UK Border Agency on that issue? Are you considering taking some other action?
I have taken very direct action. Most recently, I made a direct request of David Cameron himself at the joint ministerial committee plenary session. International students are a vital part of our life in Scotland in many different ways and we welcome them. They form part of research talent—particularly postgraduates—and I am very keen on them. I have supported our universities over a number of years in my different portfolios by promoting their work on attracting international students.
I have also raised the issue with Damian Green. I was particularly concerned about the messages that are being broadcast as to whether international students would receive a warm welcome here. They do and, when they are here, they rank our universities very highly indeed.
I said to David Cameron that I have particular concerns about the provisions relating to the health levy in the Immigration Bill that is going through the UK Parliament.
The UK Government knows that there are concerns about the messages that are being broadcast and communicated. Indeed, I know that because Damian Green had to go to India and tell students that they are welcome in the UK. Moreover, during his recent visit to China, George Osborne had to let Chinese students know that they are welcome and, in February, before his visit to India, David Cameron issued a statement saying, “We want Indian students.” Why on earth would we do something to put people off? University students are young and healthy and contribute £400 million to our economy, but the proposal that they should also pay a health levy on top of the current restrictions simply does not send out the right message. I do not even think that it is cost effective. If you put off students by adding to their burdens and giving them the idea that the UK is trying to make it more difficult for them to come in, it does not help us go in the direction that we want to go in with our international visitors.
Student numbers are strong and buoyant, which is good. However, given that we have free healthcare in this country, we expect to and will treat people who fall ill here. We also have a far more efficient and effective way of recouping health spending on international visitors than exists in the rest of the UK. In fact, David Cameron has acknowledged as much and I have offered to share with him the information from our health directorate. It might just be a case of the UK becoming more efficient in recouping health costs where that is required, but I am concerned that this approach is sending out the wrong messages.
Mr Malik is obviously referring to previous activity and concerns with regard to the UK Border Agency. I am telling you now that the health levy on international students is a live issue, and I was very pleased that, only a few weeks ago, the National Union of Students Scotland and Universities Scotland issued statements expressing their concerns on this matter. I relayed those comments directly to David Cameron, because it is important that he hears them. The message that should come from the Scottish Government and, indeed, the Scottish Parliament is that we want international students; that they are welcome; and that there should be no unnecessary barriers or measures that make it difficult to communicate our positive invitation.
Thank you very much for that wonderful response. I hope that you will continue to put pressure on this issue for us because, as you have quite rightly pointed out, not only do our universities and colleges welcome students but our educational system and industry rely on them.
Can you tell us what happened to the miscellaneous transfers of £4.9 million between 2010 and 2013?
Yes. As I tried to explain earlier, we ask other parts of the Scottish Government to deliver our services. For example, although we have an allocated budget for international marketing and communications, which we want to be spent on international activities, the money is not actually spent under my portfolio, because a lot of that activity is centralised. A lot of the money for that programme is transferred to the people responsible for delivering it.
Is it likely to happen again in the 2013-14 budget?
Probably. I am reluctant to give up my capacity to spend money on international advertising, communications and marketing. That kind of activity matters a lot to us and I want to retain control of that budget and to have a say over where it is spent and what it is spent on. I am afraid that this is a bit of a housekeeping and technical issue but, in order for the money to be spent, it has to be transferred internally to the department that actually spends it.
As I said to Rod Campbell, this year we have transferred the winter festivals funding, a lot of which is for marketing and communications. In fact, quite a lot of the money goes to VisitScotland, which spends the money that we want to be spent on, say, tourism advertising. The winter festivals programme is great and getting bigger, and I pay tribute to Jamie McGrigor because one of his ideas might be coming forward in this year’s programme. I might let him know about it later when it gets publicised.
I hope that it works.
It comes back to the point about a hub and spoke. A lot of what we do in promoting Scotland internally but also externally involves activity with agencies that are not in my portfolio. VisitScotland is a very important one, in particular in relation to the winter festivals. That is where that transfer takes place, but I would like to keep control of how we spend that budget and I have more control of that if it is in my portfolio than I would if it is transferred elsewhere, although I am sure that my colleagues would be equally as supportive of the winter festivals, in case anybody is getting worried.
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I turn to major events. You said that the theme budget has been increased by £800,000 this year. I presume that some of that goes to Bannockburn day—the event at Bannockburn. I notice that armed forces day is on the same day. Will some of the budget go to armed forces day, too?
Obviously, the Stirling Council bid was very successful, and we congratulate it on that, but it is important that we look at the activities in the round. I reassure you that we are working very closely with armed forces day. The Ministry of Defence provides funding for armed forces day—for the equipment, the flypast and such activity. However, we are working closely with Stirling Council, and our colleagues in the council want to work very closely with us, on the management of the overall weekend so that we can co-ordinate the events, because there are obviously transport issues as a result of the increased number of people coming in and so on. I reassure you that we are working together very well and closely, and that it is our intention to continue to do so.
Thank you. It is stated that, as a result of funding for the European strategy increasing to £500,000, the Scottish Government will increase the level of engagement with the European Union and its member countries. How will that work?
As I have said, it is partly about secondees and staffing, so our budget would need to pay for that. As I explained, for the current Lithuanian presidency we are funding somebody in energy and maritime and somebody in relation to general activities. The extra funding means that we will do more in terms of secondment, as that provides very good experience. Seconding in staff is a natural activity for many Governments, because the staff get the experience and we get the understanding and knowledge of how institutions can work better. A lot of the funding is spent on staffing for activity in the European Union. We are talking about a relatively small number of people, because when staffing costs, national insurance and all the rest of it are taken into account, the money will not go very far. I do not want to overegg the level of activity that will take place, but there will be more activity than there is now.
In the big scheme of things, compared with the staffing and budget levels of other portfolios, our operations in other countries are quite limited.
Turning to the national performance framework, I notice that one indicator is to increase exports. Aside from food and drink, are there any other specific areas in which you are looking to increase exports?
Yes. We are looking to do so in all areas. Scottish Enterprise’s mission and targets are across the piece. We are looking at internationalisation across the piece. Architecture is a good example from my portfolio. We have very talented architects who are providing their services internationally. Such activities might not always be seen as providing an exporting base, but they provide growth in the business that is done internationally by Scotland-based companies. The idea is to do that, whether it is in the creative industries or the energy sector. Energy is a very good example and it also provides a good example of co-operation with other countries, such as Ireland—I have attended the British Irish Chamber of Commerce activities on a number of occasions and have spoken at various events. Another aspect is the opportunities that arise for smaller companies from Ireland and Scotland to benefit from some of our energy policies when it comes to selling their goods and services.
The aim is to increase exports in all sectors. We have seven sectors, one of which is universities. To return to Hanzala Malik’s point, the aim to increase exports also provides a way to measure the increase in international activity by our universities. Our test is across all the portfolios, as it should be.
Lastly, in May 2012 the Scottish Government created the Scottish climate justice fund. Is the international development fund integrated with that fund or is there some duplication?
We want co-ordination to avoid duplication, but I was absolutely clear that I did not want the international development fund to be displaced to fund the climate justice fund, so that fund had to be in addition to the international development fund. The climate justice fund is funded from Paul Wheelhouse’s portfolio.
With regard to the climate justice fund’s delivery and decisions about the fund, I reassure the member that international development colleagues who sit within my portfolio work very closely on that, so there is co-ordination to ensure that we maximise the impact. However, it was important that we did not displace the international development fund in order to do something new, so the new activity on climate justice had to be an additional fund.
We work very closely with the climate justice fund, but you are right to suggest that we want to avoid duplication. We do a lot of work in Malawi, for example, but that forms the bulk of the international development fund’s activity and we were already funding work there—for example, work by the University of Strathclyde. We want to complement and supplement the work through co-ordination. Mr McGrigor makes a very good point.
That exhausts our questions, cabinet secretary. I thank you and your official very much for coming to the committee. I think that we have drilled deeply into your budget again. As you said, it is a small budget, so we can get lots of detail about it. That has helped the committee in its inquiries and it will certainly help us to prepare our report for the Finance Committee.