Financial Services Advisory Board
Good morning. The first item of business is a statement by John Swinney on the Financial Services Advisory Board. The cabinet secretary will take questions at the end of his statement, so there should be no interventions or interruptions.
On 5 February, we debated motion S3M-3384, on the creation of a financial sector jobs task force. The terms of the motion that was agreed were that the Scottish Government would ask the Financial Services Advisory Board—FiSAB—to consider how the financial services industry would adapt to address the current challenges in the sector. It was also requested that, through the Scottish Government, FiSAB would consider the establishment of a task force within its current structures, and that we would consider the role and remit of that task force. Today, as promised, I am reporting back to Parliament on progress following FiSAB's meeting on Tuesday, 10 February.
All the matters that I have mentioned were discussed by FiSAB, which readily agreed to the establishment of a task force. I will provide details of those discussions later, but it might be useful first to remind ourselves of FiSAB's remit, structure and workings so that we can put into context how the task force will operate.
FiSAB is a unique collaboration that involves the Government and the wider public sector, individual financial services organisations, Scottish Financial Enterprise and trade unions. It is chaired by the First Minister and oversees a joint strategy with a vision for the long-term success of the industry in Scotland that recognises that continued collaboration is needed in order to realise that vision. The Government's commitment to FiSAB's success is demonstrated by the fact that we have continued it since we came to office and that the First Minister, Jim Mather and I are members of the board.
The industry deputy chair of FiSAB is the much-respected John Campbell of State Street, and I take this opportunity to pay public tribute to him. After nearly four years, he is standing down from his roles of chair of Scottish Financial Enterprise and industry deputy chair of FiSAB. We have greatly benefited from his focused approach, his knowledge and his huge expertise.
As I explained during the debate on 5 February, FiSAB has met at least twice a year until now. It is supported in the day-to-day operational delivery of the financial services strategy by the financial services implementation group—FiSIG—which meets every two months. Smaller delivery groups meet to discuss specific issues when that is required in the intervening months.
The strategy document articulates a vision of
"an innovative, competitive and thriving international financial services industry in Scotland, underpinned by world-class infrastructure and universally recognised as a leader on the global stage."
Even in pre-credit crunch times, that was an ambitious vision; it is even more ambitious now. However, I want to be clear that it remains our shared vision. Neither the current economic difficulties that businesses in Scotland face, nor the particular difficulties that our banking sector faces, are distracting us from trying to help Scotland's financial services industry to realise that vision.
The strategy has three aims—on people, profile and infrastructure—that underpin its vision. We will strengthen Scotland's world-class workforce through collaborative effort; we will work in partnership to build the industry's profile within and beyond Scotland; and we will identify and work together to achieve the business infrastructure that can support a highly successful financial services industry. A commitment to exploit market opportunities through innovation underlies all the work across those three pillars. The strategy is more relevant now than it was 18 months ago.
FiSAB noted that not all parts of the financial services industry are in difficulty. That is reflected in esure's announcement of 500 new jobs in the insurance sector in Glasgow—all members will want to join me in welcoming that—and in the results of companies such as Aberdeen Asset Management. FiSAB therefore remained convinced that the strategy was essential for the long-term success of the industry.
Following work undertaken by John Campbell to ensure that FiSAB membership continued to reflect the diversity and changing nature of our industry, action has been taken to recruit new members from across its sectors. It has also been agreed that invitations should be issued to the Bank of England and the Financial Services Authority to join FiSAB, alongside Her Majesty's Treasury. That means that representatives of all three regulatory bodies will be around the table with leaders of the main Scottish companies and the trade unions.
I turn to some of the specific matters that FiSAB discussed on 10 February. First, FiSIG reported on progress against actions that are contained in the existing implementation plans and on its review of those plans to ensure that they still meet the new challenges that are faced in the current financial crisis and recession. FiSIG concluded that the aims and pillars that are set out in the strategy are still appropriate, but that some work was required in the coming months to reprioritise and reposition some plans. The main work priorities that were identified were reconsidering education, skills and financial capability priorities; repositioning and re-emphasising communications activity; and ensuring an appropriate regulatory response and that Scotland is a business-friendly location. FiSIG's work fed into a discussion around a presentation on the sector by Professor John Kay of the Council of Economic Advisers. We were also joined at the meeting by Lord Smith, another council member.
Competitive advantage in financial services nowadays depends on locational advantages, brand and reputational advantages, and innovation. Scotland's historical reputation for prudence and strengths in risk management must be built on as we come out of the current economic situation.
The Scottish financial services industry is diverse. Our banks have experienced significant difficulties, but we must be careful to ensure that we do not encourage negative perceptions of our industry as a whole. Many other elements of the industry remain very strong. We need to ensure that we fully understand how our industry is perceived as we take work forward to promote it further.
FiSAB agreed that business can create competitive advantage and that the Government must help with promotion, education, research and training. There has been reputational damage to the industry in Scotland, but we must keep that damage in perspective. The crisis is an international financial crisis, not a Scottish one.
Industry has work to do on rebuilding trust, and opportunities to grasp to help people look after their savings and prepare for their long-term future. As a result, FiSAB tasked FiSIG with ensuring that plans now reflect the outcomes of the discussions and ensure a focus on skills and careers, promotional activities and the need to work with our higher education institutions to reflect the importance of research. As members can see, on-going and targeted work is being done on delivering the aims of the strategy for the financial services industry in Scotland.
Finally—and crucially—the FiSAB discussions focused on consideration of the financial sector jobs task force. FiSAB agreed that it was important that that task force be set up within the collaborative structure that FiSAB provides. It recommended that the task force should be a separate group that meets regularly and that it should report to FiSAB. That will enable it to merge its work with work that is already under way and make use of linkages that have already been created. A draft remit and membership paper was produced, which FiSAB members are now finalising. FiSAB also agreed that the board should meet more regularly and its next meeting will take place on 1 June.
The Government recognises and accepts that in the current economic climate and in light of the specific challenges that the financial services industry worldwide faces, additional work needs to be undertaken on the projected loss of jobs, skills and talented individuals from within the financial services industry and the related business services industry in Scotland. That additional work should supplement, not replace, that which is already being undertaken by various agencies. The partnership action for continuing employment—PACE—service ensures that local public sector agencies respond to potential and proposed large-scale redundancies as quickly and effectively as possible and provide tailored support and help to individuals. Scottish Development International is continuing to work to identify opportunities for future growth; indeed, the terrific announcement by esure on 18 February, which I mentioned earlier, is testament to SDI's continued efforts. Skills Development Scotland, which is Scotland's flagship skills agency, is working to achieve improvements in skills provision throughout Scotland. The Cabinet Secretary for Education and Lifelong Learning will deliver a parliamentary statement on the skills strategy this afternoon.
The task force will co-ordinate efforts throughout Scotland to ensure that maximum levels of employment are retained within the financial services industry. It will focus on understanding the needs of the industry as the industry adjusts to the future structures that will emerge as a result of the current climate. Where restructuring results in head-count reductions, the task force will take action to retain skills within the wider Scottish labour market. That will be done by ensuring the promotion of entrepreneurship and self-employment where appropriate, matching transferable skills within the wider economy, and enhancing skills and qualifications to meet the needs of alternative employers as well as the future needs of emerging industries and markets. The task force will be a focus for information on and analysis of projected changes to the industry to enable full alignment of the current economic development, investment attraction and skills and careers work that is currently being progressed. More than that, it will provide added value by future proofing the high levels of skills in the pool of financial services talent that currently contributes to Scotland's worldwide reputation for excellence.
To achieve all those ambitions, the task force must harness the significant knowledge and expertise that are already available. Key public sector members will, therefore, be the Scottish Government, Scottish Enterprise, SDI, Skills Development Scotland and the Scottish Further and Higher Education Funding Council. The industry and its workforce must also be represented; therefore, invitations to join the task force will go to Unite and Scottish Financial Enterprise. There is a wealth of knowledge of and interest in the issue throughout the country, and the task force will engage with all that by taking advice from appropriate organisations and individuals as required.
On 5 February, I assured Parliament of the Government's willingness to progress issues within our proactive financial services strategy to meet the challenges that are raised by the current global economic crisis. We have taken on board all suggestions in terms of increasing the regularity of FiSAB meetings and the establishment of a financial sector jobs task force. I hope that we can rely on colleagues across the chamber to support our actions.
The cabinet secretary will now take questions on his statement.
I thank the cabinet secretary for the advance copy of his statement. I also welcome the fact that his statement has been made very soon after the original debate. We have always said that we want the Parliament to be responsive to things that are happening in the financial services sector, and this is a step along the way. I associate myself with the comments about the work that has been done by John Campbell.
Most people in the financial services sector are very concerned about their employment. It is important that a jobs task force is set up to show them that we are doing things that matter. We all—particularly the employers—have a responsibility to the workforce and the wider industry. The cabinet secretary has spoken about the competitive advantages that Scotland has, among which are the people who work in the sector and the skills that they have.
I welcome the invitation that has been extended to the Unite trade union, which reflects the Labour amendment to the motion that was debated on 5 February. I welcome the fact that Unite will have the opportunity to sit on the task force. It is vital that the task force also interacts with the likes of PACE, SDI and SDS. I suggest that the task force could interact similarly with the forthcoming apprenticeships summit and other Government initiatives to improve employment in the area.
I have a couple of questions for the cabinet secretary. He has given us some detail about the task force meetings, but can he clarify that further? He says that the task force will meet regularly, but when will it meet, when will its first meeting be held and how many meetings does he envisage will take place over the next year? Given the fact that the task force is an initiative that came from Parliament, has the cabinet secretary considered how it will report to Parliament? Members would appreciate the opportunity to consider its work and to contribute to it.
We look forward to the establishment of the task force and to its making a difference for the people who work in the financial services sector in Scotland.
I thank Mr Park for his constructive remarks. I assure him that it is our intention—it was in the spirit of my statement—to ensure that we draw together all aspects of relevant Government activity in the work of the task force. His point about the apprenticeships summit is well made and I will ensure that that is taken forward.
He is also correct to say that, although times are tough and there are many distressing headlines about the industry, there remains in Scotland a significant volume of expertise as well as high-quality employment and talented individuals in the sector. We must retain those if we are to retain our competitive advantage in the years to come.
On the regularity of meetings, I envisage that the task force will, more than likely, meet on a monthly basis. Obviously, if there were an acute announcement about employment loss, I would expect the task force to meet more frequently than that and to be responsive to the conditions and circumstances that we faced. I hope that that is not required, but if it is we will ensure that those meetings take place. The task force will hold its first meeting in the next few weeks. Since the parliamentary debate, there have been preliminary discussions to establish the arrangements, and I expect the first meeting to take place very shortly.
Mr Park said that the task force is a parliamentary initiative and asked how it will interact with the Parliament. I acknowledge that it was the Liberal Democrats who suggested the establishment of the task force in Parliament during our discussions on the budget, and I am happy to consider how the task force should interact with the Parliament. The appropriate route for that might be through the Economy, Energy and Tourism Committee, of which Iain Smith is the convener; however, there may be other forums. Ministers will be happy to appear before Parliament in any circumstances to do that. I expect that the task force will be chaired by a Scottish Government official, who will also be available to appear before a committee of the Parliament if required.
I thank the cabinet secretary for the advance copy of his statement and I welcome the speed with which the Government has reported back to Parliament on the progress that has been made.
The minister mentioned the projected loss of jobs. We have heard some pretty horrendous figures bandied around in relation to that. Does FiSAB or the Scottish Government have a specific projection of the job losses that are likely or, indeed, possible? If so, what is that projection?
The other part of the motion that was agreed to by Parliament on 5 February stated that each report back by ministers should include details of the number of jobs in the financial sector—both direct and indirect—to enable us to assess the scale of the challenge. When are we likely to see the first official figures from the Government in relation to that part of the motion?
FiSAB has not made any projections on the loss of employment. We can all read the newspapers and the announcements that have been made. This morning, I had a conversation with Gordon Pell of the Royal Bank of Scotland on the results that RBS has just announced. There has been significant speculation about employment loss within RBS. However, I take considerable comfort from the decision that has been taken by RBS to establish a core retail trading operation as a distinct business entity within the United Kingdom. As a consequence of that decision to separate the core, very profitable retail business of the Royal Bank of Scotland from the more unprofitable, loss-making ventures that have been associated with some of its international transactions—particularly its acquisition of ABN AMRO—the employment loss in the Royal Bank of Scotland that has been speculated about may not materialise in this country to the extent that we might, at first, have feared. Nevertheless, that remains a point of consistent dialogue with RBS and other organisations. Obviously, we are continuing our dialogue with Lloyds TSB following its acquisition of HBOS.
Work is being undertaken on information regarding employment in the financial services industry in Scotland. Some initial material has been presented to me, which I will consider further. When we have more information to provide to Parliament, we will do that expeditiously and will deposit it in the Scottish Parliament information centre.
These are significant times for the financial services sector in Scotland and we are pleased that the Government is establishing a task force on financial sector jobs. In addition, this afternoon it will hold the first meeting of the strategic review of the budget process, which is also highly significant. Following the Conservatives, one might say that the next best thing to a Liberal Democrat Government is a Government that does Liberal Democrat things.
Local authorities will, in partnership, play a key role in ensuring the success of the task force. The cabinet secretary will know that the City of Edinburgh Council and other local authorities that cover travel-to-work areas for the financial services sector are already undertaking work that could play a key role, but that needs to be co-ordinated. There was no mention of local authorities in the cabinet secretary's statement. I wonder whether he is able to outline the view of the Government—and, indeed, of FiSAB and the task force—with regard to local authority involvement.
Can the cabinet secretary also provide more detail about the proposed format of the information on the workforce, skills and employability in the financial services sector and the way in which it will be published and reported on? How will that information inform the on-going work of the task force?
Finally, can he provide an assurance that the private sector companies involved with the task force will work with it proactively, so that it is not just a reactive body that responds to the job loss announcements that we fear, but one that can act proactively to make a real difference?
I thank Mr Purvis for his contribution and his warm endorsement of the direction of Government policy, albeit that he had a hand in inspiring it. That should not make it a bad thing, per se; I say that as generously as I can.
On the point about local authority involvement, obviously some parts of the country will have more acute involvement in the financial services sector. Clearly, there will be issues for the City of Edinburgh Council, Midlothian Council, West Lothian Council, East Dunbartonshire Council and Perth and Kinross Council. There are concentrations of local authority involvement, so I will certainly invite local authority participation in the task force's work.
On employment information, we are doing the work that Parliament asked us to do and we will lodge the results in SPICe. Obviously, ministers will be happy to follow up any subsequent inquiries that members raise in that respect.
On Mr Purvis's final point about the work and role of private sector companies, I say to him and Parliament that one of the points that hugely impresses me about FiSAB, an organisation that we inherited from our predecessors, is that a climate has been created whereby private sector companies willingly, positively and enthusiastically contribute to a dialogue with Government about how the sector develops. Clearly, we are in a very different situation from the one that we imagined we would be in—and that we certainly were in when we came to office in May 2007—but there is every evidence of companies being willing to co-operate with, and volunteer information for, FiSAB's work. We have appreciated that since we came to office, and I have every expectation that it will continue in the period ahead.
We come to open questions.
The cabinet secretary touched on esure's welcome announcement that it will create 500 new jobs in Scotland. In the light of that, and of chairman Peter Wood's praise for our excellent people, superb infrastructure and can-do ethic, what else does the cabinet secretary believe that we can do to make Scotland a more attractive place to do business, in not just the financial sector, but all sectors?
Peter Wood's comments at the esure launch were tremendously reassuring and are an effective counterbalance to some of the information that we have had about the condition of the financial services sector, which has been at the doom-and-gloom end of the spectrum. The Government is very much engaged with FiSAB as to how we can effectively promote the sector. Scottish Development International is using all those arguments and attributes to encourage investment in Scotland by financial services companies and to create the conditions that will allow different employers to see that there is a pool of talented individuals in Scotland. Obviously, the Government is interested in putting Scotland at a competitive advantage and we will seek every opportunity to realise that vision through the Government's agenda in Scotland.
As the cabinet secretary will know, PACE works best when it gets in early, so what steps is he taking to ensure that it does get involved early with those who declare job losses, even when we know that they will come from certain companies? What steps is he taking, even now, to get in and do that? Much of the investment that he is looking for will naturally come from the public sector, but does he believe that a contribution should come, too, from those who make people redundant? After all, if a chief executive can get a £16 million retirement pot, it is maybe not too much to ask that those on a much lower salary get some financial contribution from the company that makes them redundant.
On Mr Whitton's first point, the PACE system is structured to ensure that we have an early and active dialogue with companies that may be considering those employment issues. Of course, as I have already shared with Parliament, I had a conversation with RBS this morning and the First Minister has done likewise. We will be in dialogue with companies that may face those employment issues and will ensure that PACE is activated in that respect.
On the second point, about the involvement of companies, there must be a new culture of responsibility within the financial services sector—we all agree on that. Part of that culture is responsibility to the employees, as Mr Park said a moment ago. We will certainly encourage the participation of individual companies in working to support individuals who may face loss of employment and in supporting them to reskill and retrain to ensure that they are equipped for the challenges that lie ahead.
In addressing the immediate credit-crunch problems, will the minister ensure that FiSAB will also maintain focus on a medium to long-term strategy that will build on Scotland's traditional strengths in the financial industry, with safeguards to ensure that recent mistakes will never be repeated and that best practice and integrity become the hallmark and attitude of Scotland's financial industry?
The characteristics to which Mr Welsh refers have, of course, long been associated with the financial services sector. In a sense, what is regrettable about the situation in which we find ourselves is that literally hundreds of years of wise counsel in the sector have been undermined by a relatively short period of poor judgment. What we must do is ensure that the balance is rectified and that we trade on the strength of several hundred years of expertise, experience and wisdom and learn the lessons from the period of errors. That is very much the Scottish Government's focus in our interaction with FiSAB and is very much the approach that we will take in making representations to the UK Government, which is looking at many of the regulatory issues that are associated with the questions of substance that Mr Welsh raised.
I welcome the minister's indication that the task force will be willing to work with Parliament. I am sure that the Economy, Energy and Tourism Committee will welcome an early opportunity to engage with the task force once it is established. Does the minister agree that a key job for the task force will be to ensure that Scotland is the obvious place to locate any new businesses that emerge from the mergers, restructurings and sell-offs that are likely in the financial services sector?
From his role in the Economy, Energy and Tourism Committee, Mr Smith is obviously familiar with the enormous strength in the existing workforce of Scotland's financial services sector. If there is to be some change, we must ensure that we promote and present Scotland as a strong and competitive business location. We take great heart from the esure announcement, which indicates that there was a review of competitive locations and strengths in the area, and I am delighted that those esure jobs have gone to the city of Glasgow. Obviously, the sentiments that Mr Smith described will be very much at the heart of the agenda that SDI will pursue in trying to attract new investment to Scotland and to encourage anyone who may be rationalising or merging operations to look to Scotland as a credible venue for that operation.
What communications have there been with the Bank of England and the Financial Services Authority on bringing in representatives as observers at FiSAB meetings, as noted in the minutes of the FiSAB board meeting of September 2008?
We have extended an invitation to the Bank of England and the FSA to participate and we look forward to their doing so. We have had the participation for some time of a representative of Her Majesty's Treasury. I certainly know from a discussion that I had with the Bank of England's representative in Scotland, just on Tuesday, how acute is its interest in the prospects for the Scottish economy. I look forward to encouraging its participation in the work of FiSAB and the task force.
The cabinet secretary is aware that there are 30,000 financial services jobs in Edinburgh and he may be aware that senior officials of the City of Edinburgh Council are already actively involved with partners in retaining jobs and promoting the abundant skills to be found in Edinburgh. How will he ensure that the task force works alongside and co-operates with that important work that is already being carried out?
I gave a response to Mr Purvis on local authority involvement, which is perhaps best crystallised by the City of Edinburgh Council's involvement. Obviously, I will reflect on how best to take forward local authority participation in the task force with the Convention of Scottish Local Authorities.
In all those circumstances, the Government's view on the role and position of local authorities is that councils have a major opportunity to exercise local leadership of economic development. I know that the City of Edinburgh Council is very motivated in protecting employment and expanding Edinburgh's role in the financial services sector. The council will be able to rely on every support of the Scottish Government and its agencies in that task.
Presiding Officer, I apologise for arriving late this morning. Picking up from where the cabinet secretary left off, I endorse Malcolm Chisholm's point that the Government should be guided by what the local authorities in Glasgow and Edinburgh are doing on the ground, rather than try to incorporate them artificially into the task force. The task force could grow far too big. It needs to be focused.
My second point is to pick up on what the cabinet secretary said in his statement about the profile of the financial services industry. He stressed the necessity of understanding
"how our industry is perceived as we take work forward to promote it further."
Please be brief, Ms MacDonald.
Will the cabinet secretary expand on where Scottish Development International comes into that? I am interested in what we are doing to promote ourselves outwith Scotland.
I assure Margo MacDonald that I have absolutely no intention of creating a task force that gets in the way of focused and constructive work of the type in which Glasgow City Council and the City of Edinburgh Council are already actively involved. Indeed, I stressed in my statement that the task force has the opportunity to build on the work of existing organisations, including PACE and Scottish Development International. By taking that approach, we will ensure that the task force has a focused work pattern.
On the member's second point, Scottish Development International is actively involved in promoting Scotland in countless markets around the world. As I pointed out to Mr Welsh, the characteristics of the industry that we must promote are those such as reliability, prudence, value and long-term investment. All those have been characteristics of significance for hundreds of years, but they have been damaged by a few years of poor judgment. We need to ensure that Mr Welsh's point about taking a long-term view prevails in our promotion of Scotland abroad.
I will allow a final question from Jack McConnell.
I welcome the cabinet secretary's statement and his willingness to consider any measures that might help the financial services industry at this difficult time. First, will he reconsider the support that might be made available for direct flights into and out of Scotland, which was mentioned in FiSAB's first strategy, which was agreed by the industry some years ago? Secondly, will he look again at the funding for Scotland's universities and colleges, which will be vital if we are to ensure that we have the talent in Scotland to keep the industry successful in the years to come? Thirdly, will he look again at how we promote Scotland internationally to ensure that we use the tools that are available to us to preserve and, if possible, to enhance the reputation of the industry in these difficult times?
First, I acknowledge that FiSAB was established during Mr McConnell's period in office as First Minister. We have been pleased to take it forward and I compliment him on the initiative.
On Mr McConnell's first question, over the past few years the position on direct flights to and from Scotland has improved significantly. The Government is anxious to encourage greater numbers of direct flights and to improve connectivity. We will consider different options and different approaches to the issue, but our aim is essentially to improve direct flights and to improve connectivity to London through high-speed rail links, on which we have active discussions with the United Kingdom Government.
On the question of universities and colleges, the Scottish funding council will be heavily involved in the work of the financial services sector task force. Universities Scotland is already represented on the task force. In the work that is being taken forward by the Cabinet Secretary for Education and Lifelong Learning and me, we need all our agencies—including the Scottish funding council, Scottish Enterprise and Highlands and Islands Enterprise—to be focused on ensuring that we provide the skills and support that are relevant to the circumstances that we face. That issue will dominate our discussions with the Scottish funding council in relation to the financial services sector.
On Mr McConnell's final question, I very much agree with his point about how we promote Scotland. As I said to Mr Welsh and Margo MacDonald, our financial services sector has hundreds of years of credibility, experience and expertise. We cannot allow that to be lost because of a few years in which errors have been made. The Government is determined to ensure that that does not happen. That will form an integral part of how we promote the industry abroad.