Plenary,

Meeting date: Thursday, May 18, 2006

Official Report 663KB pdf

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Business Growth

The next item of business is a debate on motion S2M-4405, in the name of Alex Neil, on behalf of the Enterprise and Culture Committee, on the committee's fifth report in 2006: "Business Growth – the next 10 years".

The committee agreed its report unanimously, apart from some slight dissention from our Green member, Shiona Baird. The report was signed up to by all five party representatives on the committee. I hope that that is a good omen for the national consensus that we call for in our report.

It is worth reminding ourselves why a high rate of growth is important. We heard this morning cries for more spending on education, health, transport and a range of other public services. If we were able to achieve a higher rate of economic growth, we would be able to achieve much higher rates of spending in our key public services as well as, overall, a much higher standard and quality of living for our people. Therefore, growth and higher rates of economic growth are important.

When we set out to undertake our investigation and write our report, we agreed on three basic starting points. First, all of us are signed up to and agree with the general thrust of the strategy that is laid out in "A Smart, Successful Scotland". Secondly, for the purposes of the report, we agreed to park our differences about the powers—in particular, the economic powers—of the Parliament and to focus on issues on which the Parliament and the Executive have existing powers to act. Thirdly, although we recognise that there is much that is positive about the Scottish economy—not least our universities, the emerging clusters in life sciences, advanced engineering, the construction industry, and some exciting developments in aerospace and other sectors—we wanted to focus on areas in which we are still lagging behind, in terms of growth and competitiveness, to discover what additional action needs to be taken to increase our growth rate.

It is worth noting the scale of the problem. During the past 25 years, the average growth rate in the Organisation for Economic Co-operation and Development countries has been 2.9 per cent. In the United Kingdom, it has been 2.3 per cent, and in Scotland, it has been 1.7 per cent. Our long-term overall growth rate over the past 25 years has been significantly lower than those of our major OECD competitors. Even in those years when the gap between our growth rate and the UK rate has narrowed, that has been as a result of the UK rate falling rather than the Scottish rate increasing. There is a gap in growth between Scotland and the rest of the UK and our OECD competitors, and we must try to plug it.

A key recommendation in the committee's report concerns the need to double our levels of investment over the next 10 years. A great deal has been written about that since the publication of our report, some of which has been on our side of the argument while some has been against. However, it is important to consider the scale of the problem that we face in relation to investment. By investment, we mean the traditional jargonised definition of fixed capital formation.

Although the committee did not make a big issue of this in its report, we would all agree about the lack of reliable statistics in the Scottish economy. For example, if we look at the Scottish Executive's website for the latest available figures on the level of investment in Scotland, we can see that there is a £1.4 billion discrepancy between what the Executive says and what the Office for National Statistics says. The former says that the level of investment is £12.2 billion and the latter says that it is £13.6 billion. That disagreement on such a basic figure highlights the inadequacy of the statistical information from which we have to operate.

I will go by the latest statistics from the very reliable OECD, which show clearly that if Scotland is to be upsides with her competitors over the next 10 years, we will have to double—more or less—our level of investment. Last year's OECD figures—the latest available—show that our level of business investment as a share of gross domestic product is 9.4 per cent. That compares with an average of 13.4 per cent for the OECD as a whole, which means that our current percentage of investment is only 70 per cent of the OECD average. It is also much lower than that of some of our major competitors, who achieve a much higher figure than the OECD average.

If we look at the forecast for growth in levels of investment for the next 10 years and take the latest figures from the OECD rather than the six-year-old figures from the Scottish Executive's website, we can see that the average percentage increase in investment is 3.1 per cent for the UK—Scotland is roughly the same—compared with an OECD average of 6 per cent.

If we start at 70 per cent of the OECD average percentage of investment and grow at only half the average rate, by the end of a 10-year period our percentage level of investment will be down to almost half of the average for the OECD countries. To those who say that our statistics have misrepresented the problem, I say, "Go back and do your homework, and base it on the latest figures, not on outdated figures from six years ago."

The level of private business investment in Scotland needs to be doubled by the end of the 10-year period.

I have been listening with great interest to the figures that Alex Neil quotes from six years ago. Will he go back a little further, to nine years ago, and tell us what the figures were then? I believe that they were much better than the figures that he has given us.

I am looking to the future rather than the past. Phil Gallie used to represent Ayr; I went to Ayr academy, whose motto was "Respice prospice". Phil can do the respice and I will do the prospice.

As well as talking about the overall level of business investment, I want to highlight two particular areas—research and development. Research and development should be a very high priority for Scotland. Our spending on private sector research and development is the equivalent of 0.6 per cent of our GDP, which is one third of the OECD average. As the committee points out in its report, we need to invest about another £1 billion each year in private sector research and development to get up to the levels of investment in private sector research and development that are achieved by our competitors.

However, it is not only in the private sector that there is a shortfall in investment. Public sector investment figures, too, tell a story of underperformance. For example, and again according to the OECD, public sector investment as a percentage of GDP in the period 1998-2004 was 1.47 per cent across the United Kingdom. The figure for Scotland was roughly the same. That compares with an average of 3.8 per cent for the OECD. In other words, in the public sector we were achieving only 46 per cent of the average for the OECD—although Phil Gallie will be glad to know that, in the preceding period, the figure was higher.

There is underinvestment in the public sector. We will try to draw attention to the need in future to invest a higher percentage of public expenditure—whatever the total may be—than we have invested in the past. We will have to do that if we are to have the capital and the infrastructure that will allow us to compete. The Scottish Executive's infrastructure investment plan calls for an annual real-terms increase in infrastructure investment of over 5 per cent. On that point at least, we appear to be at one with the Executive.

Despite the criticisms, the analysis that was presented by the Enterprise and Culture Committee was perfectly robust. The OECD figures prove that by the end of the next 10 years we will have to double private investment so that we can reach the level of our competitors. That is a prerequisite to reversing the trend of the past 25 years, and it is a prerequisite to closing the growth gap—not just between ourselves and the rest of the UK but, more important, between ourselves and the OECD as a whole. On the basis of that accurate analysis, and on the basis of its exciting recommendations, on behalf of the Enterprise and Culture Committee I recommend the report to the chamber.

I move,

Business Growth - the next 10 years (SP Paper 520).

The Enterprise and Culture Committee's report is a welcome contribution. If we get the spirit right, I believe that this report can provide a solid platform for building the sort of mature consensus that we spoke about last week and for growing businesses and the Scottish economy.

The Executive has published its response and I want to put the committee's recommendations into the context of the six key themes that I have set out as Minister for Enterprise and Lifelong Learning. Recently—while the committee was working on its inquiry—there have been highly significant developments on two of those key themes. On business rates, as members know, the rate poundage was cut from 46.1p to 44.9p on 1 April this year. Parity with the rate poundage in England will be achieved in April 2007. We should remember that small businesses will benefit further still from that initiative, through which we have sought to boost the Scottish competitive advantage.

The Scottish National Party welcomes the fact that business rates discrimination will eventually be removed, but does the Minister for Enterprise and Lifelong Learning accept that it would have been far better for business if higher rates for Scotland had not been introduced by Jack McConnell when he was Minister for Finance, with the support of the Liberal Democrats?

My view is that the reduction in the rate poundage can give our businesses genuine competitive advantage, the consequences of which will be evident over the coming years. I am determined that we maintain that advantage.

Regulation, red tape and procurement make up the second area on which significant progress has been made. We are determined to reduce the burden that is imposed on businesses by red tape and regulation. The McClelland report on public sector procurement will have practical benefits, especially for small and medium-sized businesses in Scotland, which will have better access to public sector contracts.

As Alex Neil has identified, infrastructure improvement and business investment—two more of my themes—are at the heart of the debate. Everyone knows that the Executive is now investing far more in major capital infrastructure projects. Hundreds of millions of pounds are being invested in new railways and trams and in road improvements. Increasingly, investment is being shifted towards public transport and tackling congestion. Broadband is now delivered to 100 per cent of Scotland's communities—that goal was achieved ahead of target. We are taking the sort of measures that Government should be taking for the economy and which business constantly urges us to take.

As Alex Neil mentioned, business investment is the issue that has generated the most heat in the debate on Scotland's economy over the past few months. Stacks of newspapers have been full of exchanges of views on the subject, both in the letters columns and in leader articles. Commentators, politicians, academics and economists have all claimed to be experts on the issue. There has been a lively debate on the measurement of the overall levels of investment in Scotland. I hope that we can concentrate on business investment, which is particularly important.

Two things are clear. A great deal is being done, especially by the public sector. Through the co-investment fund, 130 deals have been supported. Scottish Enterprise and the Executive have grant schemes that help the pipeline of research and development. New initiatives such as the intermediary technology institutes have strong cross-party support and the strengths of our universities internationally are evident. As the figures bear out, it is clear that public sector investment in research and development in Scotland is strong. It is on the private sector side that investment in research and development is weak. The level of such investment in Scotland is only about half the level in the rest of the United Kingdom.

Although there are disputes about the detail of the figures, the overall picture is clear. In today's edition of The Scotsman, Bill Jamieson has written a good article in which he mentions some of the gaps in our knowledge of business investment. He makes his point well. However, MSPs are already aware that Scottish economic statistics are more comprehensive than the statistics for other parts of the UK. We should remember that 5,000 Scottish firms are surveyed for GDP statistics every quarter. It is important that we do not spend all our time measuring and not enough time doing.

I accept, however, the need for action by the Executive and the ONS. I can announce that officials will meet colleagues from the Office for National Statistics tomorrow to start the process of improving the availability of business investment data. It is clear that we need action.

In that regard, I want to see other areas of action. I mentioned doing and how we can make a difference. I believe that there is the need for a major initiative with the clearing banks in Scotland and the whole Scottish investment community, with its world-class financial clout, to change the attitude and culture towards private sector investment and research and development in Scotland.

My fifth theme of skills and training is vital, and I am confident that Scotland is doing well in that regard. I believe that we have the skills and education system that allow us to take advantage of better levels of investment. In the current spending review, the Executive made a major commitment to putting greater investment into our colleges and universities. The Executive is publishing its plans to address the skills and training needs of the 19,000 people in Scotland who are not in education, employment or training. The NEET group, as it is often termed, is the area in which we have to maximise the potential of young people in Scotland to contribute their talents and abilities to the future of Scotland's economy.

We have to build on the strengths of our world-class universities and colleges. As Christine May mentioned in the debate on Scottish Enterprise last week, the Financial Times fDi magazine awards recognised Scotland as the best place in the world for human resource strengths, particularly in financial services and life sciences. It is worth while reminding ourselves of that. Companies such as JP Morgan, Morgan Stanley, Stirling Medical, Dell and Amazon are choosing to locate in Scotland—all of them have a choice; they have chosen Scotland.

Last week I announced Invitrogen's plans for more investment in Scotland with the creation of its Scotland-based European headquarters. Wyeth is establishing a world-leading translational medicine centre in Scotland and, in life sciences, two Scottish universities were judged to be in the top five places in the world to work in life sciences.

My final theme is Scotland's excellence; it is about being the best. Last year, 20 per cent of life science initial public offerings across the whole of Europe were from Scottish companies. In renewable energy, the first commercial wave scheme in Europe was designed and built in Scotland. For innovation, we can champion the success of Wolfson Microelectronics, which was spun out from the University of Edinburgh. In the early stages of its development, Wolfson was awarded a small firms merit award for research and technology—or SMART award—that amounted to tens of thousands of pounds and it now has a market capitalisation of more than half a billion pounds.

Scotland is strong globally. That is why minister Zhou Ji, the Chinese Government's Minister of Education, came to Edinburgh to study our education system and visit the University of Edinburgh. Bill Gammell from Cairn Energy has shown the international strength of our energy sector. The Swiss Minister for Home Affairs was in the gallery earlier today because the strength of our financial services sector means that, with funding support from the Executive, we now have a direct route from one financial capital—Edinburgh—to another financial centre, Geneva.

If we are international in our outlook, build on our excellence and our strengths, and work together, we can achieve a lot. That is the challenge for us all, in the debate and from here forward.

I welcome the opportunity to speak in the debate. I commend the committee for coming as close as devolution permits to Charlie McCreevy's vision of competitiveness, investment in infrastructure and skills, and getting more people into work. The report is positive and consensual.

I am pleased to see that the Executive's response largely welcomes the report. I am also pleased to see that the Executive is taking a less defensive approach to the important issue of investment. As the minister said, the issue is worthy of proper study; we need to fill the gaps in our knowledge. The issue is deserving of study in order for us to have the objective and current data that will allow us to compare apples with apples. I am very happy to hear that the meeting with the ONS will go ahead. We need the Executive to be open in its acceptance of any help from any source that can assist with its top priority of investment, which is also Scotland's top priority.

Beyond that, the report has delivered positives from elsewhere. Gavin Don made an eloquent call for a Scottish economic commission. His proposal is very similar to the theme of a cross-party group that I am trying to start up. Bill Jamieson called today for an independent office for national statistics, as we have done. Professor Ronald MacDonald has called for more powers and pointed out the moral hazard of Scotland's present economic safety net, which leads to an inability to achieve meaningful growth. Ronald MacDonald's paper supplies proof that the low level of private sector research and development is a result of our lack of economic powers.

The key point is that I would prefer the Executive to deal with the current constitutional inadequacies and not just the statistical inadequacies. The Executive must realise the international consequences of Scotland being seen to be powerless and to have inadequate statistics.

I am not exactly sure what point the member is making about a correlation between the low level of private sector business investment in our future economic progress and economic powers for the Parliament. Will he expand on that?

I trekked to Glasgow to take the minister through my economic case and to show him my slides, so he will understand that a lack of head offices correlates to a lack of research and development investment. I will e-mail the minister a fresh copy of the information, because the updates will take him forward to a new place.

We need objective data and empowered competitiveness if we are to inform and motivate domestic and overseas investment. The Executive would be well advised to advocate emulation of Westminster attributes—not only an independent office for national statistics, but the powers. Only in that way will we fill the gaps and move forward, and guarantee that Scotland moves on to a better basis.

I am happy that Scotland's statistical profile is being measured and will influence our future, thanks to the International Institute for Management Development of Switzerland. We have heralded the IMD's annual competitiveness yearbook for some time and the Executive and others have been forced to engage with that. I suspect that our attention has resulted in an improvement. Scotland has moved from 36th to 35th and now to 30th on overall performance—such improvements always happen when outcomes are focused on.

However, the IMD has also bolstered the need to pay attention to the recommendations of the business growth report, because the IMD has shown that it can demolish the Executive's pretence that the top priority of economic growth can still be delivered when the Executive lacks economic powers. A subset of the IMD's report tells us that on economic performance, Scotland has fallen from 38th in 2004 to 40th in 2005 and 51st in 2006 out of 60 or so countries. That is a cause for concern. Scotland is a long way from fulfilment of the top priority.

The same report says that Scotland's position for business efficiency has improved from 36th in 2004 to 34th in 2005 and 26th in 2006. Business is doing its bit. Scottish business is hungry, becoming efficient, developing overseas and making connections.

What impact does Jim Mather think that introducing a third-party right of appeal would have on business growth and economic growth?

Richard Baker knows my view on that—it is well publicised. I am agin that right, but that does not mean that I am against communities having a basis for appeal in extreme situations, as I will advocate at a public meeting in Innellan on Monday night—Richard Baker should come along and see what is happening there.

The IMD report provides evidence that although business is becoming more efficient and employees are being competitive and making an effort, Scotland is still in a lamentable position. On the Government's top priority, Scotland has gone from 36th to 51st in the blink of an eye.

I therefore encourage members to accept and work on the business growth report. We should get ourselves into the position where we start to see that we cannot move forward without what is in the report. I am pleased that in the month since the report was produced, a move has been made towards engaging with sceptics and understanding.

We need to listen and learn—that is the only way in which we will converge. Jean-Philippe Cotis, the much-quoted chief economist of the Organisation for Economic Co-operation and Development, has said that a failure to converge is a failure to learn. The business growth report gives us much to learn, as does the IMD report. We must change Scotland's competitive footprint and we cannot do that without economic powers. The more the Executive denies that, the more it holds us back and impacts on us with a negative opportunity cost and the more it will be condemned by posterity.

I wonder whether we could do a deal with Jim Mather: we will promise not to mention third-party rights of appeal if he promises to write a new speech.

I thank the Enterprise and Culture Committee clerks and the Scottish Parliament information centre researchers for all their hard work in helping us put the report together. I thank the many people who gave us written and oral evidence for what turned out to be a substantial and, I hope, influential, piece of work.

I put on record our special thanks to the committee adviser, Wolfgang Michalski, who was formerly the head economic adviser to the OECD in Paris, for all his guidance and input. Wolfgang Michalski's contribution was particularly valuable. He helped to distil all the information and different points of view that we received into key areas so that we could reach conclusions on them. Those committee members who made the trip to Hamburg will remember the splendid hospitality that we received, courtesy of Mrs Michalski, at their gracious home on the riverside. Throughout our trip to Germany, in both Hamburg and Bremen, we were treated extremely well, and we gained a very useful insight into city region policy.

One incident that sticks in my mind took place when we were being shown round the Airbus factory in Hamburg by one of the production managers there. Airbus is a major employer even by European terms, with a huge base in Hamburg employing tens of thousands of people. By coincidence, the Airbus A380, the world's largest passenger jet, which we saw in production, landed in London for the first time this morning. When we were discussing efficiency with the production manager in Hamburg, he told us that the Airbus efficiency target was 5 per cent—that means 5 per cent this year, 5 per cent next year and 5 per cent every year thereafter. Airbus goes on making planes to the same standard and quality, but it looks for that scale of reduction in overhead costs every year. Of course, we immediately offered to take the production manager to Scotland to meet Tom McCabe to teach him a thing or two about efficient government. If Airbus can make those efficiencies and still build planes of the same quality, why can the Scottish Executive not do the same with our money?

The background to our inquiry was the relatively poor performance of the Scottish economy in recent years compared with the performance of the wider United Kingdom economy and, in particular, the widely perceived lack of entrepreneurial culture in Scotland. I do not want to go over all the statistics, but we know that the rate of business start-ups is poorer here than it is in the UK as a whole. We have higher levels of business failure and a lower level of entrepreneurial activity. The Enterprise and Culture Committee was trying to identify some initiatives that the Executive could develop to deal with the problem.

As Alex Neil said, a key finding of the committee's report concerned the investment gap in Scotland compared with the situation in more successful economies. We have a shortfall in both public sector and private sector investment. That is particularly evident in the low level of business research and development spending. The committee made a plea, as has been well reported and mentioned in the debate already, for an additional £8.5 billion of private and public investment in the economy. That figure attracted a great deal of press interest and was widely criticised by apologists for the Executive, prominent among whom was the Executive's apostle on earth, Mr Alf Young of The Herald.

The difficulty for such critics is that the statistics that they use to try to debunk the £8.5 billion figure date from as far back as 2000, six years ago. We could have a long statistical battle over the figures—I think that we have already done so this afternoon—but that would rather cloud the central issue of the committee report, which is simply that we need more investment. I hope that we can all agree on that.

We spent a great deal of time in preparing the report and in our evidence sessions discussing the level and quality of public sector expenditure. Inevitably, the committee could not agree on what the overall size of the public sector in Scotland should be—we all had our different perspectives on that. However, we agreed that the right balance had to be struck between investment in the future and the obligation to spend on the current needs of society. We felt that investment in areas that would deliver long-term economic benefit had to increase. We identified physical infrastructure, specifically in transport and education, as being the area in which we need a proportional increase in spending if the long-term rate of business growth is to go up. By implication, we were making a criticism of the current spending balance.

I was interested to read the Executive's comments on that recommendation in its response to the report. The Executive referred to

"the perception that over the 30 years prior to devolution long-term investment had been neglected",

which rather made me smile because, if such a perception exists, it is largely because people in the Executive keep repeating it. The sad fact for the Executive is that, post-devolution, far from an increase in investment in infrastructure, levels of spending, for example on transport infrastructure, have been slashed. In fact, it was four or five years into devolution before levels of transport spending recovered to the levels that they had been under the Conservative Government. I could bore members with a long list of all the transport improvements and other infrastructure investments that were made under that Conservative Government. I have the list here, in case any member wishes to challenge me, but I will refrain from reading it.

Will the member give way?

If the member wants to hear the list, I will be delighted to read it.

I refuse that kind offer. I am not sure that I accept what Murdo Fraser says about the slashed expenditure, but how does he marry his argument with what I and other members heard in Finland about the cuts that were made there to turn round the economy? Finland is now held up by Jim Mather and other members as a real success story.

I was not on the trip to Finland, so I am not sure to which cuts the member is referring. Would he like to elaborate?

The economy had to be completely restructured following the disengagement with the Soviet economy next door. As Christine May will remember, it was outlined to us that that was a painful experience and that a fundamental change was required. How does that fit with the member's philosophy? I am not saying that the Finnish way is right; I am interested in exploring the member's thinking.

I am still not entirely sure that I understand Jamie Stone's point, although I understand that Finland's circumstances are entirely different from ours. Clearly, costs were involved in disengaging after the collapse of the Soviet Union. Perhaps the lesson is that we should not engage in political divorce from our neighbouring countries—I do not know.

Two out of 10.

If the member had asked the question more clearly, I might have understood the point that he was trying to make.

Another of the committee's recommendations on transport was that the Executive should agree an order of priority for proposed transport projects that refers to their economic benefit. When I asked the Minister for Transport and Telecommunications to do that, he gave a less than clear answer. It surely makes sense to ensure that we spend on the most important infrastructure projects that will deliver the most economic benefits. For example, we should know whether the M74 extension could deliver more economic benefit than the Borders railway or the Edinburgh or Glasgow airport rail links could deliver.

Does it?

That is a good question to which we do not know the answer, because nobody has told us and the Executive has not done that work. It is good that Highlands and Islands Enterprise has a priority list of future transport projects, but it is a shame that the Scottish Executive or Scottish Enterprise has nothing similar for the rest of Scotland.

I agree that there should be a priority list. However, the figures on the benefits of transport projects are published clearly through the Scottish transport appraisal guidance assessments. Those figures show clearly that the M74 extension is the highest-value-added project in Scotland, which is why the Executive should give that project top priority, perhaps alongside the restoration of Waverley station.

I do not disagree on that priority, because I am in favour of the M74 extension. However, the member makes my point for me, which is that we do not have a priority list but we should have one so that we know how projects rank.

I could say much more about social enterprises and procurement, but I must close soon. The committee's report suggests the creation of a national economic forum. Some people are critical of that idea, but the important point is that we need a national consensus about the importance of the economy. In Ireland, such a consensus was the precursor to turning round economic decline and building the Celtic tiger. I hope that we can go Ireland's way and start building a consensus. I hope that the committee's report, into which a lot of effort has gone, will help to build a new consensus that economic growth should be our top priority.

A range of themes ran through the debates and the many discussions that took place in and around the Enterprise and Culture Committee as we carried out the inquiry into business growth. The same themes run consistently through the report, but anyone listening to the debate could be forgiven for missing some of them. Those themes are about confidence; building on and celebrating success; fostering an enterprise culture; building creativity in our land; and looking at how we can come together to build a meaningful consensus to take forward our key, strategic economic objectives for Scotland. When it comes to taking forward those key objectives, the tone and substance of much of what we hear in the Parliament talks the talk but does not walk the walk.

Let us be honest about this: Scotland is doing well. All our work in the inquiry showed that, on the world stage, we are doing well. There is never room for complacency, but we are doing well, not least through Labour's stewardship of the economy at a UK level. We have record levels of employment; more school leavers than ever before are staying in education; and 30,000 more businesses have been created since 1998. In recent weeks, we have had good news in manufacturing. We consistently have good news in areas such as financial services and biotech. Our universities are punching above their weight on the world stage. There is good news about Scotland's growth rates.

I do not want to see the debate get lost in a fog of numbers, statistics and technospeak. Those debates are legitimate and they will continue, but I want us to focus on what the debate should be about, which is people. It is about the entrepreneurs who set up and grow the businesses on which our nation's growth and future economic prosperity depend. It is about the people who depend on employment from that economic growth. It is about the people who have their social needs met through the growing success of the social enterprise sector. Those are the themes that ran through the committee's inquiry. No committee report, however well written and robust, and however good its evidence base, can ever capture that human dimension, but that was what we heard when we carried out that work. For me, it was those conversations, insights and human experiences that spoke far louder than any body of data ever will. I wish to highlight some of the messages that leaped out at me.

We can talk until the cows come home about structures, agencies and the pots of investment and R and D budgets that are required, but the reality is that economies around the world are competing for people. There are many things that can and should be done to attract and retain people. Some of those are tangible, such as housing opportunities, quality of life, skills, education and job opportunities, but there is something deeper as well. It is about the messages that we send out from our land about what kind of country Scotland is. If we are serious about retaining and attracting talented, creative, ambitious individuals who will contribute to Scotland's economic growth in future, we have to be prepared to send out a message that we in this Parliament and this country are creative, ambitious and positive.

Will the member take an intervention?

No, thank you.

Do we always celebrate success or are we quick to pounce on failure and call for scalps? Do we—I mean the Parliament in its entirety—work to empower, to enable, to facilitate and to foster enterprise and achievement, or do we rush to regulate, to measure and to make rules? Do we create a climate in which people can take risks? On the one hand, we are teaching our children enterprise. On the other, in aspects of our public policy we are wrapping them in cotton wool. If we want to breed a generation that is truly entrepreneurial and enterprising, we need to give our children the space to explore and to experiment, in business and in life.

What about our workforce? What are we doing to make the best and the most of our people? As the committee report identified, there is so much that we can do to think creatively about issues such as work-life balance, phased retirement and the choices that individuals want, so that they can have a good quality of life while remaining economically active. Given the demographic trends that we face, we have got to address those people issues.

I will also mention one of my favourite subjects: leadership development, which we also explored during our inquiry. We heard a lot about management development—I speak with some interest and experience in that field—but it is not acceptable that so many individuals and corporate entities in Scotland still look beyond these shores to find institutions and business partners to develop their leadership development programmes. We could and should do more at home.

I am surprised that we did not hear from Murdo Fraser about the role of the public sector, as we have heard him speak about it often in connection with business growth. We heard little evidence to support the caricature of Scotland as having a bloated public sector that saps skills and resources. The question is not what size our public sector is but whether it is efficient, whether it is effective and how it could be improved.

There certainly is room for improvement, which must include improvement in how we do business. I ask members to consider how we take decisions on major transport infrastructure projects. We add years, not value, to the decision-making process because of the way in which we consider proposals such as those for Edinburgh's tram system, the Glasgow and Edinburgh airport rail links, the Waverley railway line or the Larkhall to Milngavie rail link. We must hold up a mirror and determine what we can do to turn round that plodding and protracted process, which means that Scotland will not be able to move far enough and fast enough to compete on the world stage if we are not careful.

Whether one loves or loathes the strapline of Scotland being the best small country in the world, it is a statement of fact that we are small. However, that can be a virtue if we handle it correctly, play to our strengths and realise that we cannot compete in every sector and every field. It also means that we must be careful not to overlayer our decision-making processes or to have a clutter of organisational furniture and boundaries through which business and those who are involved in taking decisions that affect business must swim every time that they want to move forward. We must create the climate and the infrastructure in Scotland that enable us to be strategic and to see and embrace the big picture.

Without question, the Executive is moving in the right direction, but it can and should move further and faster. It is incumbent on all members to embrace and champion change. If we are to talk the language of confidence and positivity, we too must behave positively and confidently. We can send out a signal to the country and the wider world, and that signal can make a difference to our future economic and social success.

On 19 October last year, the leading daily newspaper in the north of Scotland, The Press and Journal, telephoned me for a quotation on Highlands and Islands Enterprise's announcement of the proposed £1 billion investment in the Highlands by a company called Forscot. The HIE press release said that that proposal would result in the creation of 6,000 jobs in the Highlands. That would, of course, be welcome news if the proposal is sound, but I chose to make no comment because I was not aware of the facts—members can call me old-fashioned if they like.

Since then, I have made it my business to acquaint myself with the facts by going round many of the successful companies that are engaged in the timber and timber products sector in the north of Scotland and by speaking to representative bodies such as the United Kingdom Forest Products Association. Those companies included BSW Timber, which is receiving assistance from HIE to create the largest sawmill in the UK in Fort William, and Norbord, which is based just outside Inverness and which has supplied panel products for decades. They also included John Gordon & Son in Nairn, which is a family business, like many others in the timber sector. Such companies are the backbone and bedrock of a successful and essential part of the rural economy. They also contribute to the success of the construction sector by supplying the products that allow us to seize the opportunities, which did not exist a generation ago, that the construction sector has provided in Inverness.

Since that phone call, I have given some study to the Forscot plan. Based on my discussions with those businesses that I mentioned and with others, my view is that the proposal is not a sensible plan but a flawed plan. Quite simply, Forscot has miscalculated the amount of timber that would be required to make the plan work. Forscot is looking for 4 million tonnes a year, but only 6 million tonnes a year are cut and there ain't an extra 4 million tonnes.

To invest public money in the proposal would, I believe, be foolish. When I met Mr Frette, who is one of Forscot's directors, he told me that, in theory at least, £150 million of public money might be available. No application has yet been made and, understandably, the enterprise company would not share with me what amounts it has discussed with Forscot.

However, the point is that we want to promote sensible development. Bill Jamieson was right to point out that the word "sustainable" is popular with politicians because it has no fixed meaning. I suggest that the investment that we support can be either sensible or risky. Enterprise companies have a difficult job to do, in that they must both manage risks and take risks. However, they must do so with the benefit of the tools of rational analysis and evidence-based judgment that Adam Smith bequeathed to the nation.

Therefore, my first recommendation is that, although Forscot, if it so wishes, should be allowed to spend £1,000 million—its lack of cash, unfortunately, is a slight difficulty—we should not invest £150 million, which could dual the A96 from Inverness to Nairn, in a proposal that, according to all the advice that I have received, is flawed.

My intervention will come as no surprise to Fergus Ewing, given that the proposed project would be centred in my constituency. I am not unsympathetic to what he has said but, in considering the documents before him, does he have anything to say apropos the global nature of the market for the product that Forscot is talking about, given what is being produced in Scandinavia and other parts of the world, and the links with Invergordon?

Yes, I believe that the Forscot plan emanated from the Jaako-Pöyry report, which has been peddled for some years without success. There may be a need for an integrated pulpmill, paper mill, sawmill and energy plant, but I suspect that any such plant is more likely to be successfully created in China or South America. My point is that Forscot can invest £1,000 million if it wants to do so, but it should not be given £150 million of public money that would be better deployed. That is my judgment.

My second point is that the timber sector has a parallel opportunity in biomass. For example, a company in Invergordon called Balcas Limited, which is a well-established company that is led by Ernest Kidney and has a good track record in the north and south of Ireland, is planning to create a biomass project that certainly appears worthy of support. Mr Kidney will make a presentation to the Parliament and I hope that we will hear more about that project soon.

My advice to the Minister for Enterprise and Lifelong Learning and his deputy is that the dash for biomass is too unconstrained. If too much of the available timber that is cut is used for biomass, we will see displacement, which would cause severe problems especially in the panel products industry. Given the grave concerns that exist, once the Forestry Commission report on the available cut in the public and private sectors is published, the ministers need to engage in thorough talks with the heads of companies such as BSW Timber, John Gordon & Son and James Jones & Sons. If we continue with the unconstrained dash for biomass, we could end up subsidising through renewables obligation certificates one sector at the expense of another viable sector—namely timber—which could be put at risk.

I want to see more renewable energy from biomass. It is not that we should have no biomass industry but that the Executive should engage in discussions with the people who run Scotland's timber businesses to ensure that we get it right. At the moment, we have seen the dash for gas replaced by the dash for biomass subsidised through ROCs. That is wrong.

I apologise for focusing on one specific area of the Scottish economy, but Alex Neil is much better at the generalities than I am so I will leave that to him. I assure the minister that, next May, the SNP-led Executive will seek to achieve the unrealised potential of our timber sector and timber products industry.

I whole-heartedly endorse Alex Neil's opening remarks about the primacy of economic growth as our top national objective. I do so not just because I want greater prosperity for all, but because I believe that greater prosperity is the most significant way of improving social inclusion in our country.

Many of our social problems today can be traced back to the callousness of Tory chancellors such as Norman Lamont, a man notorious not only for being unable to pronounce properly his own surname, but for regarding unemployment as a price well worth paying for low inflation. Soon after he said that, he was a busted flush. The trouble was, so was the UK economy. Today, we have a man in 11 Downing Street who has brought low inflation and full employment. The overall UK growth under his stewardship has enabled the Scottish Executive's financial resources virtually to double over the seven years of devolution.

Alex Neil rightly stresses the significance of all-party endorsement for the top-line objectives that are analysed in the Enterprise and Culture Committee's report. There is a national consensus in Scotland around economic growth, low inflation and full employment. Rightly—and, if I may say so, remarkably—Alex Neil told us that the SNP parked the constitutional issue during the committee's research into current economic issues. That consensus and realism is vital to business confidence in our country. Let us not talk our country down, because that might cost us investment and jobs. However, in the very first sentence of his speech, Jim Mather bemoaned—for moaner he is—the constitutional situation. As Richard Baker indicated in his intervention on Jim Mather, the SNP's two-faced view on third-party rights of appeal in respect of town planning hardly validates its business-friendly credentials.

Do the contradictions of the SNP matter, other than to supply us with debating points?

If they do not, why is the member talking about us?

They do matter, because the national consensus must not be sacrificed if business confidence and, therefore, growth are not to be endangered. I have seen that happen elsewhere. Many people in Montreal, Canada, attribute the loss of their city's national pre-eminence to Toronto and, indeed, Vancouver to a series of referenda and constitutional crises in Québec province.

Alex Salmond says that, because of the Moray by-election result, he will be in power next May, but Alex Salmond thought that the SNP would win the Cathcart by-election. In the unlikely event of the scenario that he predicts being realised, business in Scotland will be on tenterhooks. Will Scotland be another Québec? Indeed, will Alex, like Samson, bring the house down?

I echo Murdo Fraser's thanks to the committee clerks, who do remarkably sterling work behind the scenes. I am particularly grateful to them for the help they gave me, because I came to the inquiry late. My colleague Chris Ballance was a member of the Enterprise and Culture Committee at the beginning of its work on business growth.

I am grateful to Chris for getting many points included in the report that might otherwise have fallen by the wayside. In particular, he was instrumental in ensuring that the committee examined the enormous contribution of social enterprises, a sector that has often been overlooked by the business mainstream. The inclusion of social enterprise in a report of this nature is something of a watershed moment. It sends a clear, unequivocal message that social enterprise is a viable, robust business model that we should aim to make part of the business mainstream in Scotland. The sector has frequently been frustrated by misguided assumptions that it is about charity or the old-school voluntary sector.

Does Shiona Baird accept that in supporting the co-operative development agency for Scotland, the Executive is the first Government to put some money behind social enterprise?

On that very point I commend the report and congratulate the Executive. The report recognises that the social enterprise sector has business goals and needs. Christine May and I agree that that is a major step forward.

Another watershed in the report is the explicit acknowledgement that business must be not only socially responsible but environmentally sustainable. For too long, business has taken the attitude that the environment does not affect it. That blinkered, head-in-the-sand approach will not do any longer. A healthy and sustainable environment is not an alternative to a healthy and successful economy; it is an absolute prerequisite. If the committee's report manages to get that message across, it will be one of the most significant pieces of work that it has ever done.

The committee did other important work when it investigated the nature of GDP. The Greens have spoken about that matter in the past, and I make no apology for doing so again. If we accept that there is more to sustainable business than simply turning a profit, GDP is no longer an adequate measure of progress. There are viable alternatives out there and it is time that we looked into using them.

There have been some major steps forward in the way that we view business. We can have sustainable business growth, but not at any cost. If we recognise that there are limits to economic expansion and then stay within them, we will do a massive favour to the businesses of the future. If we ignore and ride roughshod over those limits, future businesses will suffer for our short-sightedness.

Will the member give way?

I will run out of time if I do, so if the member does not mind I will keep going.

Although the report represents genuinely progressive and original thinking, I regret that in some areas it is stuck in the bad old days. Although the committee often makes all the right noises about sustainability, now and again it does something that makes one wonder whether it really has a grip on the concept. Its refusal to accept that environmentally sustainable transport options should be prioritised over damaging ones is just such an example. Does the committee believe that unsustainable transport infrastructure can play a part in a sustainable economy? I do not think that it can. It is either sustainable or it is not. If it is not sustainable it is not part of the solution, it is part of the problem, and we should not support it. I regret that other committee members have shied away from taking on board that point.

One other misgiving that I have about the report is that it assumes that the basis of Scotland's economic activity and growth will remain essentially unchanged in the foreseeable future. Projections that fail to take into account the impact of climate change and the challenges of oil depletion are most unlikely to bear much resemblance to reality. Climate change will affect business for better or worse, and oil depletion likewise. By not taking those factors into account, the report misses an opportunity for Scotland's business community to go into the future with its eyes wide open.

Those criticisms apart, the report is a major contribution to the thinking on Scotland's economic future—at least in the short term. A sustainable and secure economic future is there to be enjoyed by the people of Scotland. We can adapt to the challenges of the future, but we have to accept that if we want sustainability it must underpin everything we do—it can never be an add-on. If we take that message on board, the next 10 years will be good ones for Scotland.

I am going to disagree a wee bit with Shiona Baird, but not on points of Green politics, about which I normally disagree with her. I do not think that the report is particularly good. It does not develop the argument about how to take the economy forward. It is riddled with basic errors and misunderstandings about investment patterns. Alf Young was almost entirely right to monster some of the arguments that underpin the report's statement that Scotland's economy needs an additional £8.5 billion of investment. Indeed, in The Scotsman today, Bill Jamieson, who almost never agrees with Alf Young, appeared to do so when he pointed out that, on the basis of gross fixed capital formation, there is no evidence that Scotland lags behind. In fact, the pattern of investment in Scotland is about 20.3 per cent of gross value added, which is higher than the figure for London and, indeed, the UK average. Some major issues need to be addressed.

Will the member give way?

No, I want to carry through this argument.

The report argues for increased spending on investment over consumption—on roads, transport, water and sewerage and other aspects of physical infrastructure, as well as human capital, education, training and skills. I do not disagree with that; in fact, the Finance Committee has consistently argued as much. However, the report's central argument, which suggests that 80 per cent of Government expenditure is on consumption and 20 per cent is on investment, is based on data from "Government Expenditure and Revenue in Scotland"—surprisingly so, given that Alex Neil and Jim Mather are against the use of such data. In fact, it is based on 2002-03 GERS data, which include spending by UK departments on social protection, defence, agriculture and employment. Moreover, GERS does not differentiate between current and capital spending, and a closer look at the figures shows that the share of physical investment in the Scottish budget is closer to 30 per cent. Such basic interpretative errors disfigure the report and raise questions about its usefulness.

The report also fails to note the 7 per cent real-terms increase in capital spending that was proposed by the Finance Committee and implemented by the Executive in the 2004 spending review. That is twice the average growth in the budget. If the committee is arguing that consumption has taken preference over investment and that that trend will continue, its analysis is fundamentally flawed. By 2007-08, the capital departmental expenditure limit will hit £3 billion and total education spend will amount to £6 billion, or 29 per cent of the budget.

Of course, Alex Neil's party opposes certain elements of that spend, such as public-private partnership investment in schools. However, he cannot have it both ways. Arguments must be based on facts and figures. For example, substantial investment has been made in water infrastructure. I have argued with Jim Mather—indeed, everyone has argued with Jim Mather—about such investment, which he believes should be funded by borrowing. However, it would be a basic error to subsidise the future on the basis of current expenditure.

Let me be clear: we need a properly constituted analysis of the economy that is realistic about the substantial investment that the public sector is making. Indeed, as Bill Jamieson has pointed out, what Scotland lacks is investment by businesses, and we need to ask them why that investment is not being made. After all, to a certain extent, business is as much—if not more—responsible for that activity than Government.

Finally, we must realise that, in telling Highlands and Islands Enterprise and particularly Scottish Enterprise what we want them to do, we need to make certain choices about the priorities that we decide to spend and not spend money on, and to be explicit about those decisions. I am not sure that the punt on the ITIs—which involve business leaders who are funded by politicians making decisions on industry areas in which to invest—is right. I would prefer there to be more focus on land and the physical infrastructure.

I agree with Jim Mather that transport investment must be faster. We must prioritise investment. Investments that will deliver the biggest economic returns—the M74, the M8 and Waverley station, for example—should have a higher priority and should be dealt with before the Borders rail link, for example, because they will deliver more for the Scottish economy, but politics is getting in the way. It will continue to get in the way until we are honest with one another; until we consider how we will invest, what choices we will make, why we make them and how we can justify them economically and systematically; and until we follow the logic of our investments.

For that reason, the consensus that has been pointed to is fundamentally empty. Our problem is that there is a false and empty consensus in the chamber that we can do everything with the cash that we have. If we want to move ahead, we must make systematic choices in the same way that a company would. If we are going to talk about Scotland plc, we must make choices—we will not be able to do some things, but we will be able to do other things. We cannot do everything, and we must explain why that is so. We must be systematic, make decisions and put cash in the right places with reference to criteria. We are not sufficiently systematic at the moment, and building an argument on misinformation and poor quantification will not advance us far.

I commend the Enterprise and Culture Committee for producing its report. I recognise that members of the committee had diverse views, but I say to Des McNulty that we should not be negative about the report that they produced. In order to pull together such diverse views, committee members sometimes have to compromise on issues that they feel strongly about and there are party-political lines, and there is evidence in the report that there was compromise.

I back 100 per cent what Des McNulty said about transport priorities and the M74, but Shiona Baird—I say this not to discredit her—profoundly disagrees with the option that I favour, which goes against everything in which she believes. Des McNulty spoke about the democratic process and it is right that Shiona Baird's voice should be heard in a report that is produced through that process. She knows that I disagree with her on the issue in question.

Susan Deacon almost made a plea to members of all parties to back unanimously everything that the Executive is doing and to believe that everything that the Executive has done is right. She gave a rather glossy account of the current situation and she must recognise that in politics and within the democratic process—she mentioned that process—it is inevitable that all people will not have the same view.

The member should acknowledge that I have not asked anyone today or on any other occasion that I can remember to back everything that the Executive is doing. I am saying that if we are serious about wanting to build the consensus that a cross-party report seeks, we must work to build it, and everybody has a responsibility to do so. People should not simply pay lip service to building consensus.

I agree that there should be an overall consensus on objectives. Susan Deacon talked about Scotland being the best wee country in the world. To be honest, that phrase makes me and many others cringe. However, the report refers to a smart, successful Scotland whose aims are based on economic development, and most members would get behind such development in looking to the future. The difference is that, in a political world, there will be different objectives and the means of obtaining those objectives will differ right across the political spectrum. We must take account of the fact that all sides have to be heard when we seek the consensus that we all want.

When I read the report, a thought crossed my mind. I recognised that although, to some extent, the report was supportive of the Executive's objectives, in other ways it was critical of the current situation and the way in which the Executive is going about achieving those objectives. To ministers, I say that when a report such as this is produced, they should take on board the words of Rabbie Burns. He wrote:

"O wad some Pow'r the giftie gie us
To see oursels as others see us!"

What we have in the report is not an acceptance of the Executive's words but the views of others who have analysed them in great detail over 18 months. They perhaps give prompts and advice on how the Executive could change course and achieve things better in the future.

Would Phil Gallie care to elaborate on one or two of the areas that he found particularly striking?

Certainly. There are a number of such areas. Today we heard the minister talk about the rates situation. He said that, in a couple of years, rates will be back to the uniform business rate as it was. The fact is that the move away from the uniform business rate that the Executive inherited has done untold damage to businesses. It has perhaps cost the lives of many businesses; it has certainly cost them many millions of pounds. I believe that that move was a fundamental mistake and I am delighted that the minister is going to take us back to where we were before. However, we cannot go back in time; we must recognise that we have to go forward. That is the kind of criticism that I think is more than justified in assessing the Executive's performance to date.

I could cite many other areas. Karen Gillon drew the minister's attention to the failure to repair Scotland's roads infrastructure in recent times. I look back to the roads programme that was inherited from the previous Conservative Government. The Executive and the Labour Government put a block on development of the roads infrastructure, and we lost five or six years of much-needed investment.

Charlie Gordon spoke about Norman Lamont. I go back to the 1980s and 1990s, when Norman Lamont was Chancellor of the Exchequer and had hard decisions to make. Certainly, Scotland's ancient industries had much to lose by the actions that he took. People lost their jobs and that was sad. However, thanks to the strong actions that were taken then, the private industries that have developed have provided the economic structure that has allowed Gordon Brown to achieve what he has achieved in recent times.

Sadly, I believe that the economy is not in as strong a state as it was when Tony Blair took over the Government in 1997. He went to Amsterdam and boasted that the UK economy was the strongest in Europe. I referred Alex Neil back to the OECD figures. Those figures show that at that time Scotland was third in the level-of-growth league in the UK; now, we are about eighth. That is not progress; that is moving backwards.

Let us put that behind us and take this report as a starting point for achieving consensus across the chamber. Let us hope that the minister will build on the report. If he does that, all the hard work of committee members will have meant something.

With the greatest respect to Phil Gallie, only a Conservative could think that the economy was stronger in 1997 than it is now. He should ask the people who are in work today who were not in work then and they will tell him that the economy is stronger today.

To come back to the issue of a national consensus, there is no doubt that the committee's report has stimulated debate not just in the chamber but outside Parliament too. Although there might not be agreement on all the report's recommendations and conclusions, the debate is productive as it is focusing minds on the key issues for the encouragement of business growth in Scotland. If there is no national consensus on our every point, there is a great deal of agreement that our economic strategy should prioritise key areas such as encouraging investment in R and D, improving the labour market and targeting key markets in which Scotland can take a lead.

No one can accuse our committee of not having been ambitious with the report's scope. It discusses the broad spectrum of issues that affect business growth in Scotland and considers a long-term agenda. By engaging in that exercise, we set ourselves a tall order and we were bound to provoke debate. However, it is vital for the committee to engage in this sort of inquiry if we are to have the kind of economic strategy that Scotland needs.

Members have clearly taken different views of the economic context of the report, current trends and the Executive's strategy. I am not prepared to share in gloomy economic prophecies or a refusal to acknowledge the current strength of our economy, with our economic growth now matching that of the rest of the UK and forecasts for stronger growth ahead in challenging global economic conditions.

Can the member tell me how to reconcile the euphoria that we have heard several times today from the Executive parties with the fact that one third of the people who are in work in Scotland are earning less than £6.50 per hour and the IMD is saying that we have gone from being 36th in economic performance to 50th?

Respected institutions such as the Fraser of Allander institute are forecasting that our economic growth will become even stronger. The Labour Party was responsible for wages coming up in Scotland through UK initiatives such as the national minimum wage.

I am not saying that there is any reason for complacency on our economic strategy. The Executive's response to the committee's report shows the breadth of its activity in the key areas that we identified. I note that the Scottish Trades Union Congress was disappointed in that response; that disappointment seems to be based on its desire for further consultation on economic policies with stakeholders. I hope that the Executive can respond to that.

There is much to be welcomed in the Executive's response. There is fundamental agreement that encouraging business growth is not just about more Government spending but about encouraging greater private investment to expand businesses. The committee identified that as crucial and the Executive response states that it is expected that investment in the Scottish seed fund and the venture fund will lever in £500 million of private sector funding over a 10-year lifespan. The ITIs will have a vital role in encouraging more research and development and linking that to successful business creation and growth. We can see the impact that that is having in areas such as the life sciences, with the ITI in Dundee and Wyeth's new investment in our universities.

It is right that the Executive should monitor the success of our efforts in the three areas in which the ITIs currently work before identifying other areas in which Scotland could engage in similar activity. While the Wyeth investment is great news, it is clear that we have much more to do to encourage further private sector investment in the areas in which Scotland already has an academic lead and to encourage commercialisation by building on that knowledge base.

Whatever else we debate in relation to business growth, it is clear that Scotland can flourish only as a knowledge economy. That is why investing in research and development and ensuring that we have a skilled labour market are crucial. While we welcome the fact that the work of the business gateway has been guaranteed despite Scottish Enterprise's current budget difficulties, similar action is required to guarantee protection for important local skills programmes. Scotland cannot compete with low-skill, low-wage economies, and with the rapidly developing economies, particularly in Asia, that are expanding their higher education base; we need to work harder to stay ahead of the game in skills and research—in which the report identifies Scotland as performing well—and in developing leadership skills. As Susan Deacon rightly said, we are talking about investing in people.

In that, as in many areas, the key message of the report is that much is working well in our economic strategy, but there is no room for complacency. We must never stop considering what obstacles to business growth can be removed and what more can be done to support businesses in Scotland and to encourage the entrepreneurial spirit that we need when people start their own businesses or have the skills and innovation to turn small businesses into medium-sized businesses and grow them from there.

In gathering evidence for our report, the committee heard excellent examples of where that is happening in Scotland. More must be done to ensure that other Scottish businesses can learn from those experiences. Support must be there so that that can happen more often. The Executive has an economic strategy for Scotland; it is working, but it is always right to review and refresh it, as happened earlier in this parliamentary session. As a contribution to the debate on that process, the committee's report is to be commended to Parliament.

Like other members of the Enterprise and Culture Committee, I take the opportunity to thank the clerks and my committee colleagues for the enormous amount of work that they have done. Even in some of the darkest hours—and I think of Helsinki airport in a snowstorm—we kept our spirits up, as I am sure my colleagues will recall.

Alex Neil outlined the thrust of the committee's report and made some play of issues such as private sector research and development funding being 0.6 per cent of GDP and public sector funding being 1.4 per cent of GDP. He also talked about closing the growth gap. Although I do not always agree with the political thrust of what Alex says, his brief synopsis of the report was fair.

By way of a response to the report, Nicol Stephen made a number of important points. As a member of the Executive, he spoke of very real progress in certain areas. He mentioned the attack on red tape and regulations and the determination to help small businesses to gain access to public sector contracts. I come from a small business background myself—although I dare not say in which sector—and what the minister said was music to my ears.

People who represent constituencies such as mine have seen real investment in infrastructure, especially in transport. Every single member in the chamber will have detected the benefit of the roll-out of broadband to almost all of the smallest communities. That makes a real difference and puts the small guy—no matter where they are in the UK—on an equal footing with the big guy.

I was taken with what the minister said about underpinning the future of some of our young people and helping them to develop. After all, they are our future and we must all invest in them. I will return to that point in my closing remarks. The minister also talked about private sector investment and working together. Again, I will return to those points.

Murdo Fraser made a thoughtful contribution. He slightly gave the game away, as I may have indicated in my sotto voce comments during his speech, but he at least alluded to investments—he spoke about the M74 and the Borders railway. We cannae get round it—facts are chiels that winna ding—the cash is going in. Susan Deacon also made a thoughtful contribution.

At this point I crave the indulgence of the chamber to consider in some detail Fergus Ewing's contribution. I would not say that I am unsympathetic to what Fergus Ewing said. He mentioned a couple of initiatives in my constituency—two companies that want to work with wood and are thinking about working in Invergordon. One is ahead of the other; Balcas is perhaps further forward. It has a proven track record in both the north of Ireland and the Republic of Ireland. The jury is out and questions will have to be asked and answered. I do not think that Mr Ewing would disagree with that.

From her perfectly principled point of view, Shiona Baird played a prominent role in the debate and in the workings of the committee. As others have said, we cannot get away from the fact that everyone has their own political view. Shiona has honoured hers. Committee members have agreed to note each other's differences but to try to work together.

I noted Des McNulty's comments. As a member of the committee, I am not used to the new, conciliatory, moderate, mark II Phil Gallie, but I nevertheless welcome it for what it is. He emphasised the issue of working together.

I beg Christine May's pardon, but I want to mention a point that she may mention too. In Finland and Sweden, we heard a great deal about the importance for business growth of Government working together with the business community, the education community and local government. I see Mr Neil nodding, and I think that all members of the committee would agree that we saw how important that could be. We could learn a great deal about working together.

I turn to two points that I want to make off my own bat. The first is about the young and the second is about the old. Mention has been made of social enterprise. In my constituency, young people in Lochinver have set up Assynt Youth Enterprise, which is a fledgling social enterprise. It is working on a business plan to set up a community arts centre, which will have facilities such as a recording studio. AYE has been supported by the Highlands and Islands Social Enterprise Zone, which is the local incubator company.

The young people in such organisations, which are springing up all over Scotland, are business pioneers. Importantly, those social enterprises are emerging in areas in which the private sector will not go first. My message to the Parliament is that where social enterprise goes first, the private sector will often follow. I see that Mr Mather agrees with me.

I come to my final point, which concerns one of the report's main recommendations. It states:

"The changing demography could be a good-news story for Scotland. The Scottish Executive and businesses should endeavour to maximise the positive contribution that more mature workers can make to the economy. This will involve thinking creatively about matters such as work-life balance, phased retirement and ensuring that learning and skills training are truly ‘lifelong'".

The nature of work is changing: people do not stay in the same job for the duration of their working lives, nor do they aspire to. People aspire to better jobs, better earnings and playing a more fulfilling role at every stage of their working lives. It is the job of the Parliament and the Scottish Government to facilitate the meeting of that aspiration. In an increasingly globalised world, Scotland will have to add value to its industries by creating higher-level jobs and being on the cutting edge of new technologies. If we do not, we face the prospect of more jobs in traditional sectors being moved to lower-skilled industries in the cheaper havens of the east.

We have made good progress on the opportunities that exist for the young, but we must go further on those that exist for older people. We must work to deliver genuine lifelong learning. There is still more work to be done to make it easier for people of any age to add to their skills, change their career, develop a passion for learning and improve their quality of life. By adopting such an approach in a global economy, we will utilise all our skills, regardless of the age of the people who possess them. At a time when we are perhaps no longer able to compete on some manufacturing fronts, we can play to our strengths, one of which is the sheer brain power and experience that we have among some of the older members of our community.

I support the committee's report. I do not want to sound silly but, as someone who was involved in its preparation, I am proud of it. We have done well and I congratulate all the members of the committee, regardless of their political colour. The production of such reports is one of the things that the Parliament does best. I commend it to the Parliament and I hope that the minister will give consideration to my remarks on the young and the elderly.

I, too, commend the committee and everyone else who has been involved in the report's production. Jamie Stone is right to be proud of a document that leads Phil Gallie to call for consensus. That is a significant achievement and I look forward to members of all parties converging towards Phil Gallie's view of life in a whole host of areas: it will be an interesting process to watch.

There is nothing wrong with having consensus on the importance of achieving business growth in the Scottish economy—it is a healthy thing for us to be consensual about—but I am sympathetic to Des McNulty's points about the downsides of consensus. I am sceptical about consensus partly because if we do not have a battle of ideas, it is easy to get into sloppy thinking and to accept trite statements without testing them as much as we should. We sometimes downplay the importance of argument. Although consensus sometimes has its place, we should not overplay its importance. I notice that many members of the Executive parties want us to agree with them about how great the Executive is, but I will not indulge them on that.

In some respects, the report asks more questions than it answers, which is perhaps what such a report should do. The questions that it asks are not just for the Executive—although the Executive should answer some of them—but for all of us, whether we are in government, in opposition or outwith politics. It asks important questions about how much the Government can contribute to economic growth and to business growth.

I wonder whether the Executive knows—or ever could know—by how much the policies it has pursued have increased economic growth in Scotland while it has been in power. How many businesses have been created that would not have been created but for the policies that the Executive has adopted? How much more do businesses in Scotland invest than they would have invested if the Executive had not adopted those policies?

Whatever the Executive says about the importance of statistics, I wonder whether we will ever get empirical evidence, particularly in view of the complicating factor of the policy agenda being driven from Westminster.

It is important to place a lot of emphasis on transport. I was interested to see that, in its response to the report, the Executive said that it

"agrees that a focus on the transport priorities for a particular region is helpful"

and that it is

"also currently developing a National Transport Strategy".

That is all very well and good—we seem to have a strategy on pretty much everything else. We have a volunteering strategy, a national physical activity strategy, a draft geographic information strategy, a walking strategy and a strategy for golf tourism.

As the Executive has spent billions of pounds on transport since it came to power and as it is proposing to spend billions more, it is pretty important that we should have a good national transport strategy. However, I believe that the transport strategy, along with so many other things, has been delayed until 2012.

The report has probably been most widely recognised for what it says on research and development. I do not wish to disagree with the committee about the importance that companies and the public sector should place on appropriate research and development, but I wonder whether Alex Neil and his colleagues got a wee bit carried away in their enthusiasm for praising the Executive. In its report, the committee

"welcomes the recent announcements by the Scottish Executive for further reductions in business rates for companies investing in R&D",

but the reality is that nothing has happened yet. In its response, the Executive says that it

"would consider reducing business rates for research and development intensive companies".

The Executive says that it will consider some of the reasonable points the committee makes about research and development, European Union state aid rules and how research and development is defined. It has promised us the usual consultation document. We should not forget that that was trumpeted by the First Minister in his speech to Parliament last September. We did not get the consultation document. We are entitled to ask whether it was tacked on at the last minute or dreamed up the day before. Why were all the issues that are apparently delaying the consultation paper, to say nothing of the measures, not considered before the First Minister made his announcement back in September?

When the minister winds up today, I hope that he will answer three simple questions. In putting them, I assume that the Executive has got all the issues right for our research and development companies. First, when will the consultation document be published? Secondly, how much will the Executive cut from business rates? Thirdly, when will the reduction be introduced? If we cannot get the answers to those pretty fundamental questions today, I suspect that the chamber will conclude that the number 1 priority of the Executive is not so much growing the Scottish economy as achieving newspaper headlines.

In its response to the report, the Executive downplays some of the committee's points about the impact of the tax system on growing businesses. It is undoubted that the changes that have been introduced south of the border at UK level have made it more attractive to sell businesses, particularly if they have been taken to a particular level and have been owned for a number of years. I think someone has to own their business for two years before they can seek a reduction in their tax rate from the typical 40 per cent to 10 per cent.

The Executive says that there is no evidence that what it is doing is

"holding back the growth of Scottish businesses"

but it must surely be encouraging people to sell on a business that they could take further. I will leave it to the minister to explain precisely what the Executive will do in this regard.

In its report, the committee did not ask the Executive to ask the Department for Trade and Industry whether it thinks what I have just described is happening; it asked the Executive to make representations to the Treasury on the point. One of the reasons the Tory Government—which a great number of Labour members have maligned today and no doubt will malign further—introduced common rates of capital gains tax and income tax was to help business by removing distortions in the tax system.

Susan Deacon made some points about the chancellor's record. We should be talking about his record since 1997 or 1999 not in the abstract, but in terms of what could have happened if he had pursued different policies. While Gordon Brown has introduced the highest tax burden the country has ever seen, the Executive has been jumping up and down to do its bit through having higher business rates.

I cannot remember the precise phrase he used, but the minister conceded that the reduction in business rates would help business. Will he also concede that the increase in business rates that the Executive introduced has harmed business? That would seem to be the logical conclusion of the argument. I could refer to numerous studies that show that the impact of higher taxes on business is a reduction in economic growth. If the Executive's number 1 priority is to increase economic growth, it should consider reducing taxes and not maintain artificially high taxes.

I am a member of the Enterprise and Culture Committee and—like other committee members—I wish to put on record my thanks to the committee's clerks for their hard work in pulling together the report and to the many individuals and organisations that took the time to give the committee written and oral evidence, which was extremely useful. I share the view of other committee members that the support and assistance of Wolfgang Michalski, our adviser, were invaluable.

The debate has been interesting. People could almost be forgiven for thinking, at points, that we have been debating an SNP report on business growth in the next 10 years. I remind members that the report's key recommendations were supported by all committee members except Shiona Baird, who had concerns. Members who have chosen to make attacks on issues that are highlighted in the committee's report and to present them as an SNP conspiracy are misguided; I am sure that people such as Christine May and Susan Deacon would have been the first to twig if any conspiracy had taken place in the committee.

Alex Neil set out the importance of higher growth in the Scottish economy, primarily to achieve the greater investment that we need in order to allow investment in our key public services and to give the people of Scotland a better quality of life. He was correct to describe—as the report does time and again—progress that is being made on the Scottish economy and good things that are going on.

The report focuses primarily on what more can be done to improve the Scottish economy further. The statistics on business investment that the committee used have been the subject of much debate in the media and some debate this afternoon. Some challenge the statistics in the report as inaccurate and others argue that they are accurate and that other statistics reinforce the position that the committee reached. The minister referred to the ensuing debate in the media.

After the debate in the media and in the chamber, it is clear that we need to have independent and robust statistics on the state of the Scottish economy, to ensure that businesses that want to invest in Scotland understand clearly the state of the Scottish economy and that those who are politically responsible for putting in place strategies to support the Scottish economy have the right information to make the right decisions. As Jim Mather said, we need to consider having our own office for national statistics in Scotland. I look forward to hearing the outcome of the discussions that the minister's team will have with the ONS in the weeks to come.

The minister highlighted several activities that are being undertaken to promote business investment in Scotland. As I said, the report refers time and again to such measures, including Scottish Enterprise's business growth fund, R and D plus, and the Scottish venture fund, all of which are of some benefit. However, the report seeks to consider the additional carrot—the additional incentive—that can be provided to ensure that we have more long-term private investment in our economy. That is why the committee highlighted the need to consider establishing a long-term private investment fund.

Although the Executive might not accept the need for £8.5 billion of additional investment over the next year, it is important that it has conceded the need for greater business investment in the years to come.

Susan Deacon made a very good point. She said that the debate that has been taking place outwith the Parliament and in the media has highlighted a danger that some of the valuable points that the report raises could be lost in the blizzard of statistics and the frenzy of figures. People will often get caught up in one statistic or another. She was correct to highlight the fact that there are those who will claim that the whole idea of a lack of, or limitations on, business investment in Scotland is based on the problem of having too big a public sector. I found from my visits to Finland and Sweden—two countries with a large public sector—that the key issue there is not the size of the public sector, but its efficiency. Efficiency can give leverage to greater private investment for business in those countries.

One of the key issues in the report is the quality of the investment that has been made in Scotland. I was struck by the partnership in Finland and Sweden between business, academia and the public sector, which was alluded to by Jamie Stone—a triple helix of sectors working together to secure advantages in particular areas. As the report highlights, Scotland is well placed to take advantage of such an approach, given our world-class universities. However, despite the fact that 17 per cent of UK-registered patents originate in Scotland, only 5 per cent of UK patents are developed in Scotland. It is a matter of getting a critical mass here in Scotland in key areas, working together to achieve a higher level of business investment.

I hope that members will look beyond some of the statistics that have been bandied around and recognise that there are some very good recommendations in the committee report, which can help improve the Scottish economy. I commend the report to Parliament.

It is my pleasure to wind up, on behalf of the Executive, this interesting and at times philosophical debate. I would like to continue the theme of consensus that we have just heard from Michael Matheson and dwell on Murdo Fraser's Hamburg recollections—or perhaps not. More surprisingly, there was a plea from Phil Gallie—or was it Robert Burns—for consensus.

We have discussed the Enterprise and Culture Committee's proposals for a new national economic forum. We agree about the importance of establishing a national consensus on business growth issues. It is significant that there is considerable common ground in the debate on our key priority areas. We engage and work actively with others, including the STUC and business organisations, to grow that consensus. The recently introduced business in the Parliament conference is central to that process. I think that it has been a success, and we need to avoid making changes that might undermine its effectiveness. The introduction of a new national forum would have to be considered against that background. We will consult those involved in business in the Parliament and other business representative organisations about the national forum proposal before we reach a final view.

Scotland is doing well. It is prospering and it is increasingly distributing wealth more equitably. Susan Deacon and others, including Michael Matheson, were right to point that out. More generally, as the committee identified, partnership working is key to that success, particularly in developing our priority industries. Effective partnerships need to focus on developing the opportunities and addressing the challenges in a given sector, drawing together the knowledge and experience of government, industry, academia, trade unions and the investment community. A good example of that is the Scottish life science alliance, and the life sciences sector more generally.

Nicol Stephen referred to the importance of investment by Scottish business in our economic infrastructure. That is as important as any other issue that we have debated today. I am proud that the Scottish Government is addressing the pre-devolution underinvestment in our roads, hospitals, schools and housing. Our commitment to a 5 per cent real terms annual increase in net investment during the spending review period shows that we will reinvest the proceeds of our growing prosperity and economic success to improve public services and encourage further growth, which many members have mentioned.

The committee highlighted our poor research and development expenditure levels, as have Michael Matheson and Alex Neil. That is nothing new: it is an historic, long-term problem, but we are doing something about it. Since 1997, our expenditure total has increased by 40 per cent in real terms, compared with a 24 per cent increase for the UK as a whole. All members will acknowledge that that is a major step forward.

It is true that we have a long way to go, but the gap with the OECD average is beginning to close, which suggests that our strategic approach is beginning to bear fruit. We are investing record amounts of cash in our business research and development grant schemes, as Des McNulty and Richard Baker emphasised. I point out that those data, as well as comparators beyond the UK, suggest a picture that is far removed from the doom and gloom of some of the nationalistspeak we have heard today.

Although wider international comparisons are complicated by the OECD's use of slightly different measures of GDP in the same year, the figures show that the United States invested 19.9 per cent of its GDP, Germany invested 21.5 per cent, and France invested 19.5 per cent. Our rough estimate is that, with a comparable measure of GDP, the Scottish figure would be about 18.1 per cent. Progress has been particularly striking in life sciences, on which we are beginning to deliver critical mass. The sector has doubled in size since 1999 and a number of our companies are on the verge of great things. In 2005, 20 per cent of life science initial public offerings in Europe were by Scottish companies. In that regard, the Parliament should congratulate Ardana, the ProStrakan Group, Stem Cell Sciences, IDMoS and Optos.

We all agree with the need for more research and development investment in life sciences, but does the minister recall the lecture that Mr McKillop of AstraZeneca gave, in which he pointed out that, proportionately, the amount of research and development in life sciences in Europe is a small fraction of that in the United States? To be frank, we have fallen way behind.

I have accentuated our success in the life sciences sector. I compared our gross investment of circa 18.1 per cent of GDP with the figure of 19.1 per cent of GDP in the USA. If there is a difference, it is relatively modest.

We are doing much to support our high-potential firms. On Monday, I will present 42 SMART awards to some of our most exciting and innovative young technology companies, which are supported financially by the Executive at the crucial early stage. Many SMART winners—such as Wolfson Microelectronics, which Nicol Stephen mentioned—go on successfully to exploit their technology.

We are making sizable inroads into the risk capital market to meet our twin aims of supporting Scottish small and medium-sized enterprises and stimulating new players on the supply side of the market. Investors and companies acknowledge the success of the Scottish co-investment fund. In the past three years, the fund has made 130 deals in 85 companies, investing a public-private sector total of £58.9 million. The public sector is crucial in levering in private sector investment. However, we will not stop there. Like the committee, we are keen to have increased levels of equity investment. We look to the Scottish venture fund to address the current market gap in follow-on funding of £2 million to £5 million.

The issues are long term and such investments involve an element of risk, but I am pleased that that is increasingly understood. If we took a 10-year view of the extent of that investment in business through the new Scottish seed fund, the Scottish co-investment fund and the planned Scottish venture fund, the public-private sector investment would be only slightly short of £1 billion. That is a significant strategic sum.

The Scottish Executive is happy to continue to work with the Enterprise and Culture Committee on the crucial issue of enhancing Scotland's business growth performance. We welcome the committee's report and proposals; we have accepted many of its recommendations and are already acting on some. While we have thought it right to reject some proposals, in all cases the committee's report has made an important contribution to the overall debate on Scotland's economic future. It will no doubt stimulate future debate.

This speech is perhaps the most eagerly anticipated of many that I have given recently. There have been many references to what I am about to say. I hope that, as usual, I will more than exceed members' expectations.

There have been excellent contributions on all sides: from those who agreed with the report and those who found elements of it to criticise. Many recent debates have been about growing business and the Parliament's impact on business and the economy, such as the debate on Scottish Enterprise and that on the Planning etc (Scotland) Bill. It will give me some pleasure to go back and read through those debates to see where members contributed to the consensus that many of us have talked about today.

The minister referred in his final remarks to having accepted many of the committee's recommendations and rejected some. We accept that he has rejected them for now, but we may press the case in future for those recommendations that we believe are good, because the report was about the development and growth of business and, by implication, the Scottish economy and benefits to the Scottish people for the next 10 years.

Would the member agree that there is a culture that to be an entrepreneur one has to be a whiz kid who has just left university? Does she agree that some of the finest entrepreneurs in Scotland are well past retiral date?

I absolutely agree. Some entrepreneurs are whiz kids, but we need to encourage both kinds. The same goes for politicians. And of course, many entrepreneurs are women.

I thank the clerks, the Scottish Parliament information centre, committee staff, the official report, fellow committee members, those in other countries who hosted our visits, the many ministers we met, senior figures in the Finnish, Swedish and German economies and those who gave evidence, including those who were perhaps unfortunately excluded from the final report. The STUC gave us an extremely good written contribution. We have picked up on at least some of its recommendations in the report. I will come back to that.

One of the defining features of the Parliament is its committee system. One of the functions of the committees is to think the unthinkable and say the unsayable. I am pleased that our committee report has produced strong positive and negative reactions. Those members who were in the chamber yesterday to hear the Rev Alex Forsyth lead time for reflection will recall him saying, on the subject of decision making, that

"according to popular wisdom, to every complex problem there is a simple solution—which is wrong."—[Official Report, 17 May 2006; c 25643.]

Unfortunately, much of the external commentary has tended to the simplistic and populist view of what the correct answer is.

Both ministers picked up on some of the committee's key recommendations. I very much welcome not just the exposition of what has been done already but those areas where the Executive is prepared to take up the committee's suggestions. When we visited other countries, it was interesting to hear representatives of business in Finland and Sweden—I believe that the same was the case in Germany—tell us that the most important thing is national consensus, not on how great the Government is, but on the best way forward. Such national consensus entailed a stability of approach that was the most important factor in those businesses' consideration of whether to invest, and whether to stay put or outsource to other countries. It was not levels of taxation, although they were an important factor, and it was not the size or efficiency of the public sector, although that too was important. I commend to some members the evidence that we had that, every two years, the Swedish equivalent of the Confederation of British Industry conducts a national survey of the efficiency rankings of public sector bodies, particularly planning departments. It might be interesting to do that in Scotland.

Des McNulty is right that, for parliamentarians in agreeing priorities—and eventually for ministers in taking the decisions—the debate is about how we prioritise. If we prioritise, by implication, some things will fall lower down the scale of priority. We will have to decide whether to prioritise ITIs and investment funds, which lever in significant sums of private sector money—that is one of the key points that we made—or investment in the social economy. It is a balance; it is a question not of investing in one or the other, but of the degree to which we advantage one over the other.

Des McNulty raised another interesting point about the level and relevance of the statistical information that we have and the use to which we put it. I welcome moves to produce figures for Scotland. I hope that, when we get that information, we are able to use the figures to determine the effectiveness of our spending and the outputs that we get for it.

In its evidence, the STUC identified the success of the Irish, German, Swedish and Spanish collective bargaining mechanisms and supported the establishment of a national economic forum. We acknowledge the many bodies that the Executive has set up and supports and that help to determine national economic policy. However, we believe that a national economic forum should be established above all those bodies, not instead of them—perhaps it should replace them ultimately, but not initially. The forum should be a serious body, where ministers, the Enterprise and Culture Committee, the Parliament and key figures from finance, industry, academia and the trade unions can reflect on the statistics and outputs and help to refine the approach.

It is also important to remind the Parliament that, in making its comparisons, the committee examined equivalent small nations and regions and did not seek comparisons with the United States or other large economies. We were also frequently reminded that the small nations and regions were all competing for a similar slice of the economic market. Our report must be seen in that context.

I accept that the Executive is doing many good things. As I said last week, the economy is not a basket case. Susan Deacon and other members referred to the fact that the number of those in employment is up, productivity is up and GDP is up. It is worth repeating what I said last week, because the statistics are good: the nation's health and our pupils' educational attainment are, by and large, improving. That is all contributing to the economy's health and is all a result of Executive spending decisions.

I return to the triple helix to which Michael Matheson referred—that is, encouraging the public sector, academia and business to co-operate on investment and economic decisions. It is the carrot and stick approach, of which there was considerable discussion in Helsinki, as I recall. The Finnish Government will not fund with public money anything that does not have an element of collaboration between big business, the local SMEs and academia. That is good for big business, academia and SMEs. For example, it means that Nokia has developed its own clusters—and we are encouraging Scottish Enterprise to invest in clusters. I commend that model to ministers; I will be interested to see how they refine the existing approach and improve Scotland's economic prospects.

I commend the report to the Parliament. I thank everybody who has spoken today and all those who participated in the inquiry.