Official Report 980KB pdf
The next item of business is a statement by Kate Forbes on Alexander Dennis Ltd. The Deputy First Minister will take questions at the end of her statement, so there should be no interventions or interruptions.
14:55
I welcome the opportunity to update Parliament on this topic. My previous statement on Alexander Dennis was made on 17 September, just two days after the First Minister joined hundreds of workers at Larbert as they received the welcome news that the threat of redundancy had been lifted and Alexander Dennis had decided to continue bus manufacturing in Scotland. That landmark occasion was welcomed by members across the chamber and was celebrated in the local communities of Larbert and Falkirk. The preceding few months had been deeply worrying for the workforce, as they faced the loss of up to 400 roles.
As I made clear in September and reiterate today, that positive outcome was by no means guaranteed. In truth, it was hard won and achieved only through the good will, determination and collaboration of a range of partners, including the management and the workers of Alexander Dennis, the trade unions and our enterprise agencies.
The Scottish Government’s key contribution was to put in place a truly innovative and exceptional intervention. The First Minister was delighted to announce up to £4.1 million of Scottish Government funding towards a 26-week furlough scheme—the first time that any Scottish Government had supported a company-administered furlough scheme. The furlough grant is restricted to shop-floor workers who are based in Scotland and whose roles are linked directly to bus production.
During the grant period, the company is entitled to recover from the Scottish Government 80 per cent of the basic wage costs of its manufacturing staff, up to a maximum claim of £2,500 per employee per month. Alexander Dennis continues to be responsible for the payment of wages above that threshold and for employer national insurance and pension contributions. Our furlough support is a time-limited, proportionate and targeted intervention that is designed to preserve bus production in Scotland. Had we not acted at pace over the summer, Scotland would have lost for good the capability to build the latest zero-emission electric buses—the very technology that is required to decarbonise the bus network. We took that bold and innovative step because we believe that Alexander Dennis is synonymous with bus building in Scotland and because the Government is committed to retaining the skills and industrial capacity that are needed to build zero-emission vehicles.
Alongside our duty to support the workers and companies who are producing the technologies that will power the transition to net zero, our policy is to support travel by bus and to encourage investment in a more efficient vehicle that directly emits no greenhouse gases.
Bus travel remains the most frequently used mode of public transport, linking communities, people, businesses and essential services in every part of Scotland. Buses provide an effective alternative to the car in busy city centres and in rural areas, such as my constituency, where rail services are limited.
Around 334 million passenger journeys were made by bus in Scotland in 2023-24—up 13 per cent on the previous year and boosted by the huge success of the under-22s free bus travel scheme. The Government has increased our funding for bus services and concessionary travel from £430 million in 2024-25 to almost £465 million this year. We invest all of that because bus travel offers a more sustainable way to keep our country moving in a way that is accessible to many.
In addition, the Transport (Scotland) Act 2019 has now delivered the powers to enable local authorities and regional transport partnerships to take forward partnership working, franchising and local authority-run services, alongside their existing ability to subsidise services. Furthermore, with the passing of the Bus Services Act 2025 earlier this year, the bus sector now has increased certainty on the timing of the journey to net zero.
As Ms Hyslop advised the Net Zero, Energy and Transport Committee on Friday last week, we continue to support the sector on its journey to net zero by providing £45 million in a third competitive round of the Scottish zero emission bus challenge fund. The scheme will open for applications in early December, with the outcome of the competition to be declared in early spring 2026.
What has happened since furlough was announced? Following dialogue with individual employees and union engagement, Alexander Dennis commenced its furlough scheme on 22 September. In the eight weeks since then—and with the support of the unions—furloughed employees have been offered a range of volunteering opportunities to use their skills and support their communities until orders pick up again and production restarts.
I want to praise the shop-floor workers of Alexander Dennis. Their resilience and willingness to modernise operational working practices is a testament to their commitment to the future of Alexander Dennis and was a key factor in the company’s being able to take a different approach.
I continue to engage with representatives of Unite and GMB—indeed, I have just come from a conversation with both unions—and I remain impressed by their determination to support their members, their desire to find solutions and their openness to change.
The Scottish Government and our agencies also remain in regular direct contact with the business. Last week, the First Minister and I spoke with senior executives of Alexander Dennis and the NFI Group, and Scottish Enterprise continues to offer training and other productivity-enhancing assistance. Research and development and operational support from Scottish Enterprise is helping the company to meet market challenges and make sure that the production sites exit furlough with improved performance.
Members will, no doubt, ask me about the order book for Alexander Dennis. As I said in response to questions following my previous statement, that is a commercially sensitive matter for the company and I will not be able to go into any detail on it. However, I have been assured that the company has been working hard to secure orders in national and international markets, and Alexander Dennis is confident in its ability to secure new work.
I turn now to the role that the United Kingdom Government can play in supporting domestic manufacturing. I am aware that Alexander Dennis is, this week, meeting with UK ministers and will press them for change in UK procurement and subsidy control rules. As nine in every 10 public service buses in the UK operate outside Scotland, we need a long-term pipeline of orders and a supportive UK approach to subsidy and procurement. The future pipeline of demand for zero-emission buses across the UK is essential in supporting bus manufacturing in Scotland. Transport Scotland is working with the UK bus manufacturing expert panel, which is working with UK local and mayoral authorities to develop a demand pipeline for zero-emission buses. That work has enormous potential for Alexander Dennis, but future demand is not yet clearly visible to manufacturers and is not coming to market as quickly as expected.
We have always been clear that the Scottish Government’s furlough support scheme is a necessary but temporary measure that provides a platform to secure the highly skilled manufacturing jobs that we need for Scotland’s transition to net zero during the present gap in orders. It is essential that the UK Government is wholly engaged in this matter and does all that it can to support domestic bus manufacturing. I urge the Westminster Government to accelerate progress in this area towards immediate publication of the expert panel’s demand pipeline for electric buses.
I have every confidence that the management team and workforce at Alexander Dennis are committed to developing great products and can win the orders that the company needs if it is to thrive.
The Deputy First Minister will now take questions on the issues raised in her statement. I intend to allow around 20 minutes for questions, after which we will move on to the next item of business. I invite members who wish to ask a question to press their request-to-speak buttons.
I thank the Deputy First Minister for providing advance sight of her statement. When previously asked about the procurement rules tilting the field against domestic producers, she has pointed to section 17 of the Subsidy Control Act 2022, which prohibits the giving of subsidies that are contingent on
“the use of domestic over imported goods or services”.
I also note that, throughout the Deputy First Minister’s statement, a recurring theme was pointing the finger of blame at the UK Government, as opposed to the Scottish Government taking responsibility. However, given that the Procurement Reform (Scotland) Act 2014 mandates the consideration of social value in procurement, surely the Deputy First Minister must realise that the Scottish Government has failed to create frameworks that recognise the social value of Alexander Dennis and other domestic manufacturers, as well as what they contribute and add to our economy.
This question is similar to the one that I put to the minister the last time the issue was raised: does she accept that, without progress on the underlying structural and policy barriers that have left Alexander Dennis—our flagship bus manufacturer—exposed to unfair competition, that situation will keep recurring until the Scottish Government puts measures in place to make sure that we not only bolster our economy but protect the jobs and the skill sets that we need?
I take issue with Meghan Gallacher’s characterisation of finger pointing. In my statement, I was open about the areas in which the Scottish Government can take action, and the proof of that is that we have taken action. Promises were made by the UK Government, but we have not seen the progress that we would have liked to see. I read the commentary that is given by businesses, including today in relation to Mossmorran, to see their identification of UK Government policies.
The bottom line is that procurement law is a devolved matter but it is subject to international obligations, which are reserved. In common with the rest of the UK, we cannot legislate to allow for discrimination in favour of domestic bidders at the expense of bidders from countries with which a relevant international trade agreement applies. To be able to amend procurement law to enable preferential treatment for domestic manufacturers would require the UK to make fundamental changes to its international trade obligations.
I was pleased that Meghan Gallacher identified the progress that Scotland has made. Under the Procurement Reform (Scotland) Act 2014, Scotland has a sustainable procurement duty that requires authorities to consider
“economic, social, and environmental wellbeing”.
The public procurement strategy for Scotland, which runs from 2023 to 2028, reinforces that requirement, with the aim of embedding community wealth building, fair work and net zero objectives.
When discussing such issues, I have always invited members to deal with the facts. I give total reassurance that we are committed to supporting Scottish industry. If members want any proof, they should look at what we have done with regard to Alexander Dennis.
I welcome the opportunity to ask questions about this incredibly important topic.
The Deputy First Minister said that she could not provide detail on specific orders. However, given that we are a third of the way through the process and that the furlough scheme is contingent on orders coming forward, will she at least tell us what level of insight the Scottish Government has been provided with? Does she share the firm’s confidence that those orders are in train?
Secondly, during the summer, there was correspondence from the Cabinet Office that pointed out that social value criteria can be used in relation to the Subsidy Control Act 2022. Given that a third round of ScotZEB is coming forward, what re-examination of the accommodations in the 2022 act has the Scottish Government undertaken, and what work has it done to redesign the grant scheme to enable more money to go to domestic producers?
On our level of insight and confidence, I assure the member that we remain extremely close to the conversations that are being held with the company. I mentioned the conversation that the First Minister and I had as recently as Thursday evening on these matters. It is extremely helpful for us to understand the level of engagement. I note that the company today issued correspondence to its workforce to continue to provide a level of reassurance. There is also engagement with the unions—I hear directly from them about how the workforce is feeling, a few weeks into furlough.
We are still engaging and having conversations with the UK Government on subsidy control legislation. Changes to the Subsidy Control Act 2022 are not likely to unlock an ability to place bus orders with Alexander Dennis, because buses are typically purchased by bus operating companies, which are not normally subject to public procurement or subsidy control law. Section 17 of the 2022 act prohibits subsidies from being given that are contingent on
“the use of domestic over imported goods or services”.
In our engagement with the UK Government, we are looking at how community benefit criteria can be defined and some of the points that I have shared with Meghan Gallacher.
However, the bottom line is that, on ScotZEB 3, Fiona Hyslop updated the parliamentary committee last week and, considering the level of discussion that we are all having about supporting Scottish industry, I can assure the member that we are doing everything within our powers and within the law to ensure that we support Scottish industry. I am always open to ideas and suggestions from across the chamber, but I can assure the member and others that we have taken a very proactive approach to how we use procurement to support Scottish industry.
I am grateful to the Deputy First Minister and the First Minister for their on-going engagement with ADL, which is based in my constituency.
It is important that we address the structural issues that have led us to this situation, which relate to the Subsidy Control Act 2022. I therefore ask the Deputy First Minister to engage with the UK Government on two measures. The first is increasing the social value weighting across public sector procurement, and potentially moving it as high as 30 per cent to support domestic production. The second is ensuring that domestic and international bidders are subject to the requirements of the fair work first policy in an equal way to the way in which ADL invests in its workforce. I believe that those measures would help to create a level playing field for ADL and, importantly, for the workforce at ADL.
I appreciate Michael Matheson’s questions on that. I am sure that my colleague Fiona Hyslop, in the work that she is progressing on procurement, will listen carefully to the points that Michael Matheson has made on fair and open competition that is focused on operators of public service routes.
On the two points that Michael Matheson has identified, he will appreciate that we are looking at all opportunities to continue to support the Scottish economy and key industries in it.
I call Stephen Kerr, who joins us remotely.
First, I thank the Deputy First Minister for responding to my request for a statement on ADL. I have to say that I am not content with her line that the UK Government is solely responsible for changes to procurement frameworks. That is also down to the Scottish Government. When did the Deputy First Minister last meet UK ministers? What did she discuss? What expectations does she have of a change to procurement frameworks being made by the UK Government?
In respect of ScotZEB 3, what specific reforms have been made to Scotland’s procurement systems since September to give proper weighting to domestic, economic and social benefit and industrial capacity?
I engage regularly with the UK Government. If the member wants to know about my diary, I can say that I engaged with a UK Government minister—the Secretary of State for Scotland—as recently as the middle to the end of last week.
On Stephen Kerr’s question about changes since September, I laid out clearly in my answer to Meghan Gallacher where some of the restrictions are. We have already made significant reforms to Scotland’s procurement systems. We have a sustainable procurement duty that requires authorities to consider many of the issues that the member has identified. That is reinforced in the public procurement strategy for Scotland.
The point is not a matter of my opinion; it is a matter of fact that awards of grant funding are subject to subsidy control law and procurement law, while the devolved matter is subject to international obligations, which are reserved.
Alexander Dennis has an important footprint across the entirety of Falkirk district, and I am grateful for the Scottish Government support. However, the wider supply chain is also at risk. The cabinet secretary correctly calls on the UK Government to accelerate the demand pipeline for electric buses, but can she confirm that there are also positive implications for the wider supply chain in calling for that action, which makes the need for pace even more important?
Michelle Thomson is absolutely right to highlight the impact on the wider supply chain. We have been conscious of that impact throughout, and its supply chain is one reason why we recognise Alexander Dennis as a critically important asset in the Scottish economy and within that area.
With regard to impacts on the supply chain, we have focused our support for Alexander Dennis on how to ensure that it has an appropriate order book. Although there are various initiatives that we can support, such as furlough, the long-term future of the company and the knock-on benefits to the supply chain are contingent on a healthy order book. That remains the focus for the company.
A number of members have asked about procurement rules. Since 2022, under current procurement rules, the Greater Manchester Combined Authority purchased more than 160 buses from Alexander Dennis, which is more than four times the number that the Scottish Government’s ScotZEB scheme has purchased from it. Sixty-seven per cent of ScotZEB 2 orders were sent to Chinese manufacturers.
Could the cabinet secretary clarify—a number of people have tried to get clarification on this matter—how the current round of ScotZEB funding will prevent that from happening again?
The Labour Party keeps rerunning that question, despite the fact that we have provided facts in the past and have pursued suggestions that have come to us. For example, the big Labour question used to be why we did not use the Crown Commercial Service framework; the Chancellor of the Duchy of Lancaster also suggested that approach. Unlike Transport for Greater Manchester, Transport Scotland does not own or operate buses, so there is limited rationale for Transport Scotland to procure buses directly.
We will continue to exhaust all the options at our disposal to support ADL.
The Deputy First Minister mentioned the Transport (Scotland) Act 2019. Does she agree that, just as local communities are looking for improved bus services, Alexander Dennis is well placed to benefit from local authorities using the franchising powers that they have under the 2019 act?
We want all local transport authorities to be able to improve the bus services in their areas. I have seen huge progress on that in my own part of Scotland. Through legislation, we have given local authorities powers on partnership working, franchising and running their own bus services. That approach enables local transport authorities to determine what it is best to do to address transport challenges in their local areas. That devolved decision making allows for a much more tailored approach across Scotland.
I welcome the fact that the 26-week furlough scheme has been in place since September and is supporting workers at ADL. However, I am still trying to gauge how deep the Scottish Government’s commitment is to ADL. What will happen if, at the end of that 26-week process, the orders have not come? Obviously, I hope that they will, but if not, will the Government be prepared to extend the furlough scheme?
Also, £45 million will be coming out of ScotZEB 3, and we hope that ADL will get some business on the back of that. Will that be announced before the end of the furlough scheme, which could help to give ADL some more certainty?
The member will appreciate that I do not want to get into hypotheticals and the what-ifs regarding things that might not go as we hope, because we are working extremely hard to ensure the best outcome for Alexander Dennis. The whole point of implementing a furlough scheme was to give us a bridge, so that we could overcome this gap. We remain very close to ADL.
The member will recall that, when we first announced the furlough scheme, I was clear that Alexander Dennis was responsible for evidencing substantial orders before any grants could be claimed. The whole approach is to ensure that there is an order book.
I will therefore avoid answering the question, but I hope that the member can see from our track record that we absolutely have done everything that we can to support ADL to this point. That should give him confidence that we will continue to do everything that we can to support ADL.
The Deputy First Minister is not able to tell us an awful lot about Alexander Dennis, following on from her previous statement, so I will ask her about the franchising powers in the 2019 act, which Jamie Hepburn referred to. The First Minister will be able to say, quite rightly, to the Deputy First Minister that Stagecoach is a law unto itself in Tayside and Fife, chopping and changing services regularly. We will not get the franchising powers in Scotland until at least 2030. Why is it taking so long to get the powers in place? Work is moving forward in Strathclyde, but Fife is even further behind. Why are we not making progress?
I am not entirely sure of the direct relevance of that question to the statement. I think that it is a bit wide, so we will move on to the next question, which, I hope, will relate directly to the matters that were raised in the statement. I hope that Jackie Dunbar will be on point.
On a point of order, Presiding Officer. The Deputy First Minister specifically referenced franchising in her statement and, in fact, Jamie Hepburn also referenced franchising in his question, so I think that my question is particularly appropriate.
I heard a lot of talk about Stagecoach and franchising in Tayside and Strathclyde, but I am not entirely sure that those issues are relevant to Alexander Dennis. As I said, I would like to move on to Ms Dunbar’s question.
Thank you, Presiding Officer. I will try my best.
Will the cabinet secretary provide an update on the latest Scottish Government engagement with Alexander Dennis employees and trade unions? How has their vital input contributed to getting us to the point that we have reached?
Earlier today, I spoke separately to GMB and Unite the Union, and I heard directly from workers on the shop floor. We talked about the general sense of wellbeing among the workforce. The point was made that, six or so weeks into the furlough scheme, it becomes even more important for workers to have other opportunities, which is why we are supporting volunteering opportunities. That will be particularly important if the furlough scheme lasts for the full 26 weeks.
Through ScotZEB 2 funding, 44 buses were purchased from Alexander Dennis, whereas 171 were purchased from Yutong in China. The Deputy First Minister has said that ScotZEB 3 will be different. Will that require a change in the law? If not, is that an admission that ScotZEB 2 got things wrong?
I urge Mr Lumsden to look at the letter that Fiona Hyslop sent last week to the Net Zero, Energy and Transport Committee. In that letter, which sets out the contents of ScotZEB 3, she stated that the new phase will build directly on ScotZEB 2 and will involve a fair and open competition, with a focus on operators of public service routes. The scheme guidance is being finalised, and ScotZEB 3 will open for applications in early December.
I am sure that Mr Lumsden will appreciate that—in the spirit of moving at pace with those opportunities, as the Parliament is always keen for us to do—if we were to go through an entire legislative process, we would probably still be talking about the issue this time next year.
It is vital that we continue to stand up for Scotland’s manufacturers, including Alexander Dennis, and to protect skills, jobs and industries. Will the cabinet secretary give us an insight into the challenges that are posed by UK economic policies such as the energy profits levy and, in the case of Alexander Dennis, the Subsidy Control Act 2022? What is the impact of such policies on jobs and economic growth?
I take my lead from companies themselves and the reasons that they give for either closures or redundancies. In many cases, we know that policies such as the 2022 act, the energy profits levy and those relating to procurement need to be resolved at source. I am keen to work with the UK Government to do that. We heard a lot of positive sentiment when Alexander Dennis first expressed concern about its future, but, unfortunately, we have not seen a pipeline of manufacturing opportunities or any tangible suggestions for changes to procurement or subsidy control rules that would enable a more proactive approach to supporting domestic industry.
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