Scottish Enterprise
We come to the next item of business still some distance behind the clock. I have taken the opportunity of inviting one member to stand down from the debate. It may be necessary to reduce speaking times in the open debate, but I will try to protect time so that all members who wish to speak are called.
The debate is on motion S2M-4367, in the name of Jim Mather, on Scottish Enterprise. Mr Mather is entitled to seven minutes for his speech, but any economies will be greatly appreciated.
Today's issue is not Scottish Enterprise's management trying to do an impossible job. Scottish Enterprise is a subset of the tools that Scotland needs—that view has been endorsed recently in reports that have slipped out from Scottish Enterprise under cover of darkness, such as those on the knowledge economy and on headquarters. As we have seen in recent weeks, Scottish Enterprise's management labours under considerable structural and procedural complexity. Meanwhile, other nations enjoy the lean and focused efficiency of financial autonomy and of getting on with growing their economies.
The debate is more about the Executive's promotion—amazingly—of the idea that that inadequate tool is enough, which is a big lie that goes back to 1974. We know that because we have an internal Government memo from 1974 that says:
"an SDA would be attractive just because it might make it possible to buy off some of the pressures from Scotland without a substantial addition to expenditure there."
That was said in the McCrone era.
The memo also says:
"There would be an element of window dressing about it in that the SDA would take over money now spent through the Department of Industry's Regional Office."
That window-dressing continues. We have had 30 years of Scottish Development Agency and Scottish Enterprise activity, which have resulted in the lowest growth rate in western Europe in that period.
Our objective is to knock more scales from more eyes. As Peter MacMahon said in Scottish Business Insider this week,
"We need a more mature attitude to this area of public policy".
We must find a better way—that is the mature approach—and make the Executive's top priority much more than rhetoric. Recent events have further endorsed our position and our aspirations for Scotland.
Will the member give way?
Will the member take an intervention?
I am delighted to take an intervention.
If our strategy is such a basket-case, how does Mr Mather explain the view of the Financial Times that Scotland is the United Kingdom region of the future and the best region in Europe for human resources, skills and education, and that it has the best strategy for inward investment?
I will meet Scottish Enterprise representatives tomorrow. We should take that medal and use it where we can, but I hope that our opponents do not subject it to audit, because it is the thinnest thing that I have ever seen.
The fact is that senior managers of Scottish Enterprise and ministers support something that cannot work. The growth rate over the years shows that Scottish Enterprise is certainly not enough on its own. We have evidence that managers and ministers are trying too hard to make an engine that cannot work move into action, hence the deficit and the cuts to, and threats and uncertainty about, services. There are asset disposals that look like a fire sale, redundancies and last-minute cash and resource transfers. The net effect is that Scottish Enterprise—our only tool—has been damaged by the people who are supposed to be its custodians.
Can Scottish Enterprise—our only tool—lift our living standards to the average level elsewhere? We face a choice: will we continue to hear the claim that the current strategy will work—that strategy would increase the damage and earn the condemnation of posterity—or will we admit that it cannot work on its own without economic powers? If we admit that, we can start the recovery process and gain the plaudits of posterity. Members will note that on 25 April, neither Jack Perry nor John Ward felt able to answer the question whether the strategy will work.
Will the member give way?
No. I will crack on and put some content on the record.
The question whether we can converge must be answered. An honest answer from the minister that would stand the audit of posterity would start a new era and would be good news. It would acknowledge that Scottish Enterprise and the minister are responsible to the people of Scotland and that the powers have limitations and would recognise poor continuity and poor expectation setting. It would force the Scottish Executive and Scottish Enterprise's management at least to start the process of taking a new mature attitude to public policy.
Will the member give way?
Mr Stone is persistent, so I will give way.
Jim Mather's colleague Alex Neil first gave Scottish Enterprise's management three months to sort out the situation and then said 10 days later that the management should be fired. I notice that the motion does not mention that. What is the Scottish National Party's policy?
The SNP's policy is to make the best of what we have, and Scottish Enterprise is all that we have. The roots of its failure and difficulty are in the window-dressing of 1974 that Governments have kept going for 30 years. For my entire working life, Governments have kept that farce going—I expect Kafka to appear to analyse and audit Scottish Enterprise.
Will the member take an intervention?
Sit down—I will not take an intervention.
Governments have created a system that is complex and confusing. The Executive is either a player, the coach of Scottish Enterprise or at arm's length away from Scottish Enterprise when it says, "That is an operational matter for Scottish Enterprise—we won't touch that." The Executive will never recognise its joint and several liability for making that one engine of economic growth its responsibility.
Will the member take an intervention?
Karen Gillon can sit down.
In the past week or two, Ronald MacDonald has moved from fiscal federalism to financial independence or full independence, on the basis of the implicit moral hazard of a safety net. That moral hazard prevents wise spending and the achievement of economic growth. I advise the minister to read Ronald MacDonald's paper with great interest.
The mature approach for which MacMahon calls is the Ronald MacDonald approach—the full-powers, standing-on-your-own-two-feet approach. That is why I will write to members today to seek support to create a cross-party group on Scotland's financial future that will debate all the options, inform the debate, properly assess the problems, challenges and opportunities, examine all the alternatives, create a climate for honest examination of the options and honestly assess others' experience. The question is who will join that cross-party group. Who is callous enough not to join the debate? Scottish Enterprise and Highlands and Islands Enterprise will never be enough. I have pleasure in moving the motion in my name.
I move,
That the Parliament views the current financial position of Scottish Enterprise with mounting concern, given that the overspend is now estimated to be in excess of £60 million; is doubly concerned that this overspend will jeopardise jobs, skills and training, including those jobs of Scottish Enterprise employees; is disturbed to discover that Scottish Executive ministers were unaware of the true extent of the overspend for four months after it was first identified; criticises the failure to address this mismanagement at an earlier stage, and calls for urgent action to be taken to address the current problems facing Scottish Enterprise, for future guarantees that organisations must live within their established budgets and a recognition that the activity of enterprise agencies will never adequately compensate the people of Scotland for the lack of economic powers and the full means to manage the Scottish economy competitively and effectively in the interest of everyone in Scotland.
Jim Mather called for a mature debate—he certainly quoted Peter MacMahon's call for a mature debate. Jim Mather started the SNP's contribution by saying, "It's just a lie," and he quickly distanced himself from Alex Neil's call for the chairman and the chief executive of Scottish Enterprise to have three months to prove themselves, which was followed by his call days later for them to be sacked.
Over the years, Jim Mather has made interesting contributions on the Scottish economy. I recall that when he spoke to The Courier newspaper back in June 2004, he called the Scottish economy "a crazy, deviant economy" and "A busted flush." I ask members to judge whether that was part of a mature debate. Is that likely to develop Scotland's economy, to attract international investors or to create the cross-party consensus on the economy that is important to Scotland's future economic success?
People are entitled to make such comments when the economy is unlike anything else in the world and when the results justify them.
Will the minister tell us what Jack Perry and John Ward could not tell us? Will the current strategy make the living standards of Scottish taxpayers converge with those in London, the south-east and elsewhere? Yes or no?
Given the language that Jim Mather has used in the past and has continued to use in today's debate, perhaps he should consider whether Peter MacMahon's call for a mature debate is not directed at him and the Scottish National Party.
I will take the opportunity to update members on developments since my previous statement to the Parliament on 30 March. As members know, KPMG was commissioned to investigate the reasons for the overspend, to check the accuracy of the overspend estimate and to make any recommendations on financial practice and reporting. The KPMG report points to some serious failures, which I have instructed Scottish Enterprise to address. I have written formally to Sir John Ward to require implementation of the recommendations of the KPMG report. In addition, Scottish Enterprise intends to implement the detailed recommendations of its own internal audit process. The Enterprise, Transport and Lifelong Learning Department will liaise with Scottish Enterprise on the implementation of the KPMG recommendations, but I also intend to ensure that there is an external check on progress.
Will the minister give way?
I give way to John Swinney.
Can we have sound for Mr Swinney please? I suggest that Mr Swinney should speak from the microphone next to him.
I am grateful to the minister for giving way.
Mr Swinney, your own microphone has now been switched on.
Is the minister aware that, as a consequence of Scottish Enterprise's budget crisis, several local projects that the agency had committed to deliver in partnership with local authorities and private sector providers have now been cut back?
You must be quick.
Those projects include initiatives in my constituency that were due to receive rural initiative funding and a crucial enterprise programme in Dundee's life science industry centre. What action can the minister take to ensure that the economy is not damaged by Scottish Enterprise's withdrawal from those programmes?
I should perhaps signal that I am happy to take interventions—
Minister, we are very short of time.
—and I would be willing to release time from my summing-up speech if that would be helpful.
It is important that we make available to Scottish Enterprise additional resources, which will also assist those partner projects that are under threat. However, I realise that Scottish Enterprise will continue to experience difficulties—I will focus on that point later in my remarks—and I ask MSPs to continue to keep both Scottish Enterprise and me informed of any particular concerns that they might have. Along with the staff of my department and of Scottish Enterprise, I will work hard on those issues over the coming weeks.
Scottish Enterprise has accepted that it should have taken stronger action in November and December once the scale of its estimated overspend became known and that the lack of such action is the key cause of the overspend. Scottish Enterprise's non-cash budget, although it was not the central issue, has been an important factor.
Regarding the financial situation over the coming 12 months—the period 2006-07—I promised last week, when I gave evidence to the Enterprise and Culture Committee, to announce funding to allow the Scottish Enterprise board to fix its budget at its meeting on 12 May, which is tomorrow. Today, I have written to that effect to Sir John Ward and I have met Jack Perry, who is the chief executive of Scottish Enterprise. I have also answered a parliamentary question on the issue and I have written to Alex Neil, who is the convener of the Enterprise and Culture Committee.
Will the minister explain where in his resources the £25 million that has been given to Scottish Enterprise will come from? What would that money have been used for if it had not been given to Scottish Enterprise?
Clearly, within the enterprise and lifelong learning budget, we have had to reprofile spend and use the limited flexibility that existed within budgets that were already fixed so that we could deal with the issues.
I want now to clarify what additional funding has been made available. The Executive will provide an additional £45 million of resource cover so that Scottish Enterprise can meet its non-cash requirements in 2006-07 and access its reserves. Scottish Enterprise will also be able to retain receipts of up to £5 million above the previously agreed target. Those steps will cover repayment of the non-cash element of the budget overspend in 2005-06. Scottish Enterprise will therefore be able to deploy an additional £50 million of resources, which will allow the board to agree Scottish Enterprise's budget for 2006-07 in a way that reflects the Executive's priorities.
Will the minister take an intervention?
I would be happy to do so, but I am already significantly over my time and, unfortunately, I still have some more remarks to make. Perhaps I can come back to the member in my summing-up speech.
On that basis, I now expect that Scottish Enterprise's allocated budget, taking into account all income and from which it must allow for all resource-spend items, will be £550 million. As I said in response to John Swinney, Scottish Enterprise will still face significant pressures due to the scale of projects in the pipeline. I have asked Scottish Enterprise to keep closely in touch with me on those matters. Clearly, MSPs will wish to continue to keep me informed of local issues.
For Scotland's economy, it is important that Scottish Enterprise gets back on track in terms of support. I signal my strong support for Scottish Enterprise in its challenge over the coming year. Scottish Enterprise is doing good work that is vital for Scotland's economic future through investment in the intermediary technology institutes and in skills and training. Scottish Enterprise is winning international recognition and success, with new projects such as those involving Wyeth, Invitrogen and Morgan Stanley.
Scottish Enterprise must support the local initiatives and projects of its local enterprise companies and their boards. I pay tribute again to the hard work of the Scottish Enterprise board and the local enterprise company board members. That is the mix that is supported by ministers and which the Executive's amendment backs.
I move amendment S2M-4367.2, to leave out from "views" to end and insert:
"recognises the important role of Scottish Enterprise in supporting the growth of the Scottish economy; endorses the strategic direction set by ministers for Scottish Enterprise in terms of business growth, regeneration and local development initiatives, training, skills and maximising international opportunities; welcomes the steps taken by the Scottish Executive to secure effective financial management by Scottish Enterprise in the future, in particular the commissioning of the robust report by KPMG and the commitment to the implementation of its recommendations; welcomes the additional non-cash resources to be made available to Scottish Enterprise, and confirms the important role that Scottish Enterprise will play in contributing to the growth of the Scottish economy."
The motion in Jim Mather's name highlights mounting concern about the shortfall in Scottish Enterprise's budget. I am sure that, like me, all members have been contacted by local groups and businesses in their constituencies that have expressed concern at projects being put on hold due to Scottish Enterprise's uncertain budgetary position. I know that a great deal of distress has been caused, particularly amongst those who had anticipated funding in the current year for projects that have now been put in doubt.
The fact is that the handling of Scottish Enterprise's finances has been a credit neither to that organisation nor to the minister and his department. Two key concerns exist about how Scottish Enterprise responded to the impending overspend. First, as the KPMG report makes clear, Scottish Enterprise
"were slow to act when it became clear that the new budget and resource allocation system had stimulated expenditure well ahead of budgeted income. In November 2005 SEn became aware of a significant overspend but action taken at that time was not sufficiently robust. This was not helped by poor and slow financial reporting and unclear budget accountability."
Clearly, a serious error was made. When I challenged Jack Perry and his colleagues on that point at the Enterprise and Culture Committee meeting on 25 April, Jack Perry accepted that a mistake had been made. We should be grateful to him for at least admitting that.
The second problem is that, apparently, Scottish Enterprise was told by the Executive as from May 2005 that there was no scope for additional funding in the current year but, notwithstanding, Scottish Enterprise still believed that additional resources might be made available. When I asked Jack Perry whether he had believed that the door was still open, he said:
"We felt that it was still ajar."—[Official Report, Enterprise and Culture Committee, 25 April 2006; c 2946.]
However, the minister told the committee:
"I certainly never suggested that the door was open for additional spend."—[Official Report, Enterprise and Culture Committee, 2 May 2006; c 3009.]
At best, a serious breakdown in communication took place between the minister's department and Scotland's largest public agency.
The overspend issue has been poorly handled by Scottish Enterprise, but I do not believe that it should be a resignation matter for the organisation's senior officials. In that respect, I disagree with Alex Neil's stance. For me, the more interesting question concerns the position of the Minister for Enterprise and Lifelong Learning in all this. Why did he allow the situation to develop within a department that comes within his brief? By his own admission, the minister was made aware of the seriousness of the emerging problems at Scottish Enterprise by "press reports". Thereafter, a meeting was requested between the Executive and Scottish Enterprise officials so that the situation could be fully understood. Only subsequently was the minister advised of a likely overspend. It is simply extraordinary that the minister had to rely on information from the press to tell him what was happening in a public agency under his own brief. Perhaps we should not be too surprised, because the minister's stock is not high in the business community. Peter Hughes, chief executive of Scottish Engineering, was quoted in The Scotsman on 28 April as saying:
"The SE board has lacked political support all along … My impression is that they are an unhappy bunch because the minister has lacked the balls to support them. As they were appointed by politicians, I firmly believe that politicians should get behind them. The fence-sitting and failure to support has been appalling."
That may not be parliamentary language, but nothing can disguise the seriousness of that attack on the Minister for Enterprise and Lifelong Learning by a senior business figure. I cannot recall any previous minister with responsibility for enterprise being attacked in such a way by a business leader. What a mess the minister has allowed his department to get into. Calling him a hands-off minister is putting it mildly. It is impossible to imagine Wendy Alexander getting into such a situation.
What is to be done? Scottish Enterprise must sort out its finances. We need more clarity from the minister as to where that £50 million is coming from. What budget will be cut? Will it be the green jobs strategy, the skills and training budget or transport? The minister needs to get a grip on his department and tell us what programmes are being cut.
I move amendment S2M-4367.1, to leave out from "calls" to end and insert:
"believes that the time has come for Scottish Enterprise to be restructured, refocused and slimmed down, with the savings made being invested in transport infrastructure improvements and reductions in the business rate which would deliver real benefits to all businesses across Scotland."
Let me start with some stats. Employment in Scotland: up. Gross domestic product in Scotland: up. Growth in the private sector: up. That is all due to the strategic direction given by Scottish ministers to Scottish Enterprise national under "A Smart, Successful Scotland", and to the stable United Kingdom economic climate generated by my Westminster colleague, Gordon Brown.
I am pleased to support the amendment in Nicol Stephen's name. It confirms that, although we rightly recognise the concern about the recent budget issues at Scottish Enterprise national, this Parliament and the Labour-led Executive are about more than just micromanagement, which is what the SNP motion and the Tory amendment call for. It is a question of setting a vision for the nation, and I suppose that we should not be surprised by such motions from two parties whose only economic policy was to halve or cut completely the budget of Scotland's economic development agency.
How can Christine May, having read our amendment, consider that we are calling for micromanagement?
It is not just the Tories' amendment, but also the tone of what they say, how they say it and the history of what they have said. However, I want to move away from personalities and concentrate on strategy.
As a former board member of Scottish Enterprise, having served in a non-voting capacity on what was then known as Fife Enterprise, and as a former council leader, I know about the difficulties of balancing priorities within limited budgets. I entirely support the contention that Scottish Enterprise should be administered efficiently and I share the concerns that have been expressed throughout Scotland about recent events. However, the important question for us is what the right economic policy is for Scotland. For me, it is about setting strategic priorities in the energy and biotechnology industries, about maximising international opportunities and about the development of human capital, which must be at the heart of our approach. If Scotland's people are to be able to take advantage of the economic opportunities that are now flowing from that successful strategy, human capital, skills development and lifelong learning in our local areas will be as important as the riskier support for developing and emerging sectors.
How can that be a successful strategy? In the 50 years from 1970 to 2020, Ireland will double its population while our population flatlines.
I regret that I do not have time to deal with the population issue, although I have statistics on that.
I want to concentrate, in the final minute of my speech, on taking risks, because that is what the private sector does well. Those who argue that politicians should or could second-guess the private sector on those judgments of risk are living in cloud-cuckoo-land. My judgment of risks and priorities has frequently been the subject of comment and I can tell members that, if we were to move, as has been suggested, to a situation in which ministers took micromanagement responsibility for those decisions, the comments that we have seen hitherto would be as nothing compared with the huge media storm that would be unleashed.
That does not mean that I do not share people's concerns, and I remind the minister that my concerns have not gone away, either as a result of his statement or because of Scottish Enterprise's agreement to implement the recommendations of the KPMG report. I am from a constituency on the periphery of two metropolitan regions. I want to see the metropolitan region strategy develop to recognise the peripheries. I want the operating plan from Scottish Enterprise to strike that balance between skills and training, local discretionary spend and the impact of any reductions in spend on work in progress. I hope to hear from the minister how he will ensure that the operating plan can do that, and how he will manage the implementation of that plan in policy terms.
Scottish Enterprise is clearly in financial trouble, and it seems from his amendment that the minister wants to run away from the situation. His motion is the usual self-congratulatory set of words that do not accept any kind of responsibility, but that is typical of the Executive and of the role that the Liberal Democrats play in the Executive. The appointees the minister has put in place to run Scottish Enterprise are under fire, and quite rightly, from the convener of the Parliament's Enterprise and Culture Committee, but the minister himself must accept some responsibility for the situation. The fact that his appointees did not know how bad the situation was is a measure of the incompetence in the organisation and in the ministerial approach to dealing with the matter.
I would like to refer, as the minister invited us all to do, to some local matters that illustrate the impact that the problems will have. Scottish Enterprise Grampian has told me that, in the past financial year, it spent around £4 million on four programmes relating to the national delivery of training—modern apprenticeships, modern apprenticeships for the over-25s, skillseekers and the get ready for work programme. I understand that there has been a national direction that there will be no money for the over-25 modern apprenticeships, and that that direction is being applied. That is extremely short-sighted in circumstances where we are trying to diversify our economy and accept that people will have not just one, but several careers. The MA 25 programme gave people the opportunity to retrain.
In the area that I represent, we have an oil and gas industry that is crying out for people. In the past day or two the United Kingdom Offshore Operators Association's report has said that there will be thousands more jobs and we need to retrain people to go into those jobs. There have been big cuts in training programmes across the board. There is to be a 40 per cent cut in the skillseekers programme in my area and there has been a major cut in the get ready for work programme.
Will Brian Adam give way?
I am in the final minute of my speech. I am quite happy to provide the minister with details of the cuts that I mentioned, but I am looking for some guarantee that the announcement that he is making today will mean that there will be a restoration of funding to those programmes where there have been cuts, so that the major programmes that will deliver the skills that are required across the board will not suffer as a result of the incompetence of the people at the top of Scottish Enterprise or, indeed, of his own department.
It is an unfortunate but recognisable human trait that one of the best ways to learn is by making mistakes. Scottish Enterprise has made some serious errors of judgment, but the blame cannot be put entirely on its shoulders. It may represent the business world, but it is being asked to work within constraints in which no ordinary businesses would work. The indication from the Scottish Executive that a review will take place on moving from annual to triennial funding is welcome. Such recognition of the need for flexibility would address some of the problems that have arisen.
How Scottish Enterprise chooses to resolve its funding problems will, in my view, be the defining factor in establishing its future credibility. If it cuts the funding of vital services such as skillseekers and modern apprenticeships, it will lose considerable support from the companies that need those skills. There are concerns in business gateways that budgets may be cut and that some services that were previously offered will be delivered in other ways. There must be absolute clarity that those vital grassroots services—although they are often perceived as lower profile—will not suffer.
I want to move on—as, I am sure, does Scottish Enterprise. Few people are fully aware of the changes that we face to our economy. The impact of climate change must be seen also as an economic issue, not only an environmental one. Rising oil prices and declining raw materials worldwide will all contribute to a very different economy. Scottish Enterprise and the Executive both include sustainable development in their policy documents, perhaps without fully understanding its implications.
Work must start now to move towards a more locally-based economy. A good starting point is to recognise and support the start of social enterprises. They have a valuable role to play in providing supported employment opportunities and they encourage and foster entrepreneurship. Scottish Enterprise must support indigenous businesses of all sizes, but the support does not have to be monetary. Proactive acknowledgment of the contribution that a business makes and being available to offer advice is often sufficient.
Scottish Enterprise will need to work hard to stem the rising tide of criticism, but fundamentally it must recognise that Scotland is more than the central belt, it is more than the city regions and it is much more than the high-profile large employers.
I welcome the opportunity to contribute to the debate. Some of the comments made by my colleague Christine May are important and pertinent.
The Scottish economy is going in the right direction. It is typical of the SNP to take away from some fair points in its amendment by seeking to make the issue a constitutional crisis and by excusing from responsibility those within Scottish Enterprise—who have failed to do what they were supposed to do—by saying that it is the tool and not the implementation that is to blame.
It is interesting that Jim Mather failed to pass judgment on either Jack Perry or John Ward, as his colleague Alex Neil has done.
Will the member give way?
I have only three minutes, so I must make progress.
The situation has been a shambles. Scottish Enterprise said that it knew and understood the accounting rules under which it was working, so by implication it chose to ignore those rules in the hope that somebody, somewhere within the Scottish Executive, would find it the money. The truth is that that is what had happened in the previous two years. We were told by Jack Perry and Iain Carmichael that slack had been found in the previous two years and money had been vired from within the enterprise budget. Scottish Enterprise knew the rules, but it chose not to implement them.
The reality now is that not-for-profit training agencies in my constituency were told in January that from then onwards there would be a £300 per week cut in the amount of money that they would get to deliver training, which has seriously affected their ability to deliver. This week they have been told that they will be able to offer fewer places and that less money will be available per place. Those cuts are impacting on the people at the coalface who are working to regenerate some of our most vulnerable communities. I asked the minister—I still await an answer—where the £50 million will come from and what is being cut to provide that money?
I am not saying that Scottish Enterprise should not get the money, provided that it gets to the front-line services that I am talking about, but what guarantees does the minister have that the rules that are in place now will be followed this year? We do not want to be in the same situation again next year with Scottish Enterprise saying that it is sorry but that it did not really understand the rules and it did not have enough money anyway, so it has again overspent. What guarantees has the minister been given? How does the minister's announcement today impact on local economic regeneration in constituencies such as mine? How does the approach that he has announced ensure that more money will go to the people who deliver essential skills and training in constituencies such as mine and that it will not be sucked up by the big, sexy projects of which the leadership of Scottish Enterprise is very proud, although they do not want to get their hands dirty delivering hard stuff on the ground?
Today's debate has been hampered by time constraints, not only because of the fire alarm but because the SNP allowed us only half a session to discuss such a huge issue. Some cynical people might think that the SNP is more interested in its press release than in genuine debate. I will not join Jim Mather's cross-party group on fiscal autonomy; as Karen Gillon rightly said, the debate should not continually be reduced to constitutional matters.
Although there is undoubtedly genuine concern about the budget situation at Scottish Enterprise, some of the Opposition comments ring hollow; they come from the very people who went into the previous election demanding cuts in Scottish Enterprise's budget. Opposition members have described as indispensable key areas of the agency's work that they have rightly identified as crucial local projects. Those projects were, however, clearly dispensable to the Opposition parties at previous elections. Labour members regarded the projects as indispensable then and we regard them as indispensable now.
Will the member take an intervention?
I am sorry, but I do not have time to take an intervention.
We are now entering a period when we can see how great an impact the Executive's economic strategy is having. Of course we want economic growth in Scotland to be stronger, but already our rate of growth has caught up with the rest of the UK and there is significant new business investment in Scotland. The huge new investment by Wyeth is exciting and I am pleased that the University of Dundee and the University of Aberdeen will play vital roles in that project. A number of indicators show that our economic strategy is working.
Questions have been asked this morning about how Scottish Enterprise arrived at this situation. It is right that those questions are asked, but people in Scotland are not as interested in a fruitless hunt for a smoking gun as they are in knowing that Scottish Enterprise will continue to do its job and support key local projects in their area. I am sure that the minister is aware that reassurance must be provided. It is good that the business gateway is being protected, but along with other members I have received letters from individuals and organisations that are concerned about funding for vital skills programmes. I have received letters from companies in the oil and gas sector in Grampian that state that funding for their skillseekers and modern apprenticeship programmes
"is being severely restricted with immediate effect".
That follows similar contact about get ready for work programmes in the area. As Christine May and other members have said, it is crucial that urgent action is taken to ensure that the projects are protected and that they continue. They are a key priority for this Executive.
Members have also referred to the restructuring of Scottish Enterprise. Much of the new strategic approach is welcome. I, for one, also welcome the fact that there is still a role for local enterprise companies. However, although the Deputy First Minister took action on the local enterprise companies, I question why there was a need for Scottish Enterprise to draw the work on all the key strategic areas to its headquarters. The energy team being moved from Grampian to HQ is a prime example; that team is being moved away from the majority of companies that it services. In a world of information and communication technology, it strikes me as bizarre to physically centralise operations in that way.
The key issue is not only to agree a new budget for Scottish Enterprise but to ensure that, in the longer term, the new strategy evolves and works for Scotland's economy. The true story is that the Executive's overall economic strategy is working. Labour, at Westminster and at Holyrood, is delivering for Scotland's economy. We will continue to ensure that Scotland's economic growth is even stronger in the years ahead.
It does not really matter whether Scotland's economic record is the responsibility of Scottish Enterprise, the Scottish Executive or even the Labour Government. I think that we all accept that Scotland is not performing to its potential. Economic growth in Scotland is not at the level at which it should be. Before Labour members get too excited about lauding their chancellor, let us not forget that this week the independent ITEM club, which uses the Treasury's own model of the economy—the independent Treasury economic model—has said that the tax burden, which is rising all the time, is rising towards the highest level on record.
Is the truth not that if people are in work they can pay their taxes? Under the Conservative Government more people in Scotland were out of work, languished on the dole and contributed nothing to the Scottish economy.
The point is that everyone, whoever they work for, pays more tax under this Government. As was mentioned in the previous debate, some people who do not work still pay a significant amount of tax.
Wherever we think the responsibility lies, we need to consider what contribution—it is perhaps a limited contribution—Scottish Enterprise can make. We could adopt different models. We could go down the route advocated by Brian Wilson, which is to bring the organisation in-house. I presume that that would require the Minister for Enterprise and Lifelong Learning to take a more hands-on approach than he has to date. The arms-length model adopted for Scottish Enterprise, which is designed to bring in business expertise, seems to be fundamentally the right model if the agency is to be allowed to get on with the job. However, Scottish Enterprise seems to have the worst of both worlds as it has neither leadership and direction from the Executive nor the ability to get on with what it is asked to do. It would be interesting to know how much direction has come from the Enterprise, Transport and Lifelong Learning Department since the discovery of Scottish Enterprise's financial difficulties and how prescriptive the Minister for Enterprise and Lifelong Learning has been about what Scottish Enterprise can and cannot do.
We are all concerned about the fundamental budget issues. I hope that the minister will answer Karen Gillon's fundamental question about where the additional money is coming from. It must come from somewhere in the Executive's budget and it should not be beyond the wit of man for the minister to stand up and tell the Parliament from where it will come and what impact that will have on projects that might otherwise have taken place. Indeed, the "Scottish Public Finance Manual" suggests in its basic points of financial management that staff in charge of budgets should have clear guidance on the size of the budget, what it can be used for and how it can be varied. Scottish Enterprise certainly has not had such guidance and it will be interesting to know what the minister thinks of that.
On the local impact that other members have talked about, it is the uncertainty as much as anything that is causing problems. We are part way through the financial year, but only now are local enterprise companies about to get assurance on the level of their budgets and on what they can do. A number of other members and I received a letter from Scottish Enterprise Dumfries and Galloway from which I will quote because it is illustrative. The letter states:
"We will not know our final 2006/7 budget until the Scottish Executive's commissioned external advisers at KPMG have confirmed Scottish Enterprise's projected resource figures for 2005/6 and the Scottish Executive has discussed the findings. This is expected to take until the end of May 2006."
The letter continues:
"Until that time, I am unable to confirm what our annual operating budget will be for Dumfries and Galloway and what the restructuring implications will be on our services and planned projects."
That will be the case not only for Dumfries and Galloway, but for every local enterprise company up and down Scotland and, of course, for Scottish Enterprise itself. It is clarity on budgets and on what can be done with them that is so vital and we have now wasted two months of the financial year. It is time that the Executive and the minister got a grip on Scottish Enterprise.
I call Nicol Stephen. Minister, you have about two and a half minutes.
We must remember that the SNP wants to cut Scottish Enterprise—we should keep that firmly in our minds. In addition, Alex Neil wants to sack the chairman and the chief executive. Would doing that strengthen Scotland's economy? Is that a mature contribution to the debate?
Will the minister give way?
I will, but I have very little time.
Okay, I have two short, sharp questions. First, can the minister answer Karen Gillon's question about where the £50 million will come from? Secondly, after Scottish Enterprise's legal commitments are met, how much of the £550 million will be left to spend?
On the £550 million, I have set the overall budget for Scottish Enterprise and it is now for its board to meet tomorrow and agree its operating plan. Further information on that will be given next week.
Murdo Fraser talked about the need to get behind Scottish Enterprise and its board. Well, that is exactly what I have been doing, but I do not think that that is what he has been doing. Contrast that with Conservative plans to axe Scottish Enterprise spending, which would mean axing projects and plans that would be good for the Scottish economy and axing Scotland's future economic success.
Christine May made fair points about the new approach that is being taken in Scottish Enterprise. There are new industrial sector groups and I think that it is important for them to get established and for us to get behind that. There is new metro-region planning, which is also important; so, too, is the involvement of local business people in local enterprise companies, involving board members in real decision making about local budgets.
On Karen Gillon's point, I will ensure that, through today's announcement and the decisions that the Scottish Enterprise board will make tomorrow, £50 million of additional funding that would otherwise not have been available for Scottish Enterprise this year will be allocated to the sort of projects, plans and priorities that the Parliament wishes to see.
I am certain that there will still be difficult issues ahead, but I am particularly concerned to ensure that local discretion in the local enterprise companies will remain and that partnership projects will still be an important part of Scottish Enterprise's strategy and budget. It was vital today to end the uncertainty and start the process of getting Scottish Enterprise back on track with strong ministerial support. All the Parliament should work together on Scotland's future economic success. However, wider than that, politicians, public agencies and the private sector should all be in partnership—that is the best way to secure Scotland's economic success in the future.
I emphasise that the minister has not answered two basic questions. The first, fair question was from Karen Gillon and it has now been asked of the minister three times and three times he has dodged it; either he does not want to answer it or he does not know the answer. If he increases the spend of Scottish Enterprise this year by £50 million, unless there is an overall increase in public expenditure of £50 million—there is not—that £50 million has to come from existing allocations.
Yesterday, we read in The Herald, which is better informed than the Parliament, that the money was coming from the green jobs strategy, non-Scottish Enterprise spend on skills and training and the transport budget. Can the minister tell us, therefore—I will take an intervention if he has the answer—where are the £50 million-worth of cuts in existing allocations?
I have made it clear that there are two sources for the additional funds: reprofiling the spend in the Enterprise, Transport and Lifelong Learning Department and using the limited flexibility in our budgets. More information on that will be issued in due course, but I have given a clear explanation of the difficult decisions that have had to be taken to find the £50 million of cover. Of that sum, £45 million is of course non-cash cover. However, the £50 million total of additional resource will now be available to Scottish Enterprise.
It does not matter whether it is cash or non-cash. If the total level of spend is £50 million, it must come from somewhere. The minister says that that spend is being reprofiled, but the question is: reprofiled from which original profile? Can he give us a photograph? Can he give us a profile? Does he know the answer to the question?
Surely, before he allocated that £50 million and before he reprofiled it, he would have known where the money was coming from. If it is coming from elsewhere in his department, does that mean a reduction in money for colleges, universities, student awards or non-Scottish Enterprise skills and training spend? Is the money coming from the transport budget? If some or all of it is coming from that budget, which part of the budget is it coming from? It is absurd that the minister has come here this morning and been unable to answer such a fundamental and, if I may say so, simple reprofiling question.
He has also failed to answer the second question, though he told us at last week's meeting of the Enterprise and Culture Committee that he would have the answer this week. To be fair, the week is not yet over, so he may have the answer later on today or tomorrow—no doubt we will read it in The Herald tomorrow. The second question is: after Scottish Enterprise's legal commitments have been met, how much of the new budget of £550 million is left?
Will the member give way?
I will do so in a minute. I know that Christine May likes to get in on the act.
How much of the £550 million is left? Perhaps Christine May knows the answer—let us find out.
You have a minute and a quarter, Mr Neil.
While I agree that these are important questions, perhaps Alex Neil can say whether he and his SNP colleagues welcome the money being made available to Scottish Enterprise.
You have a minute, Mr Neil.
If there had not been this shambles in the first place, we would not need to be allocating the money. We should consider the money that has been wasted. For example, over the past six years, Scottish Enterprise has allocated £194,000 to the lobbying organisation CBI Scotland—of which John Ward and Jack Perry are former chairmen—while many a small company was told that there was no money left for them.
The Presiding Officer is trying to reprofile my timescale, so I will be brief. Two issues are at stake: first, the shambles at Scottish Enterprise; and secondly, the shambolic way in which the minister has failed to deal with the crisis.