Scottish Enterprise
The next item of business is a statement by Nicol Stephen on Scottish Enterprise. The minister will take questions at the end of his statement. There should therefore be no interventions.
My reasons for making this statement today are to inform members of the action that I have asked to be taken to ensure that Scottish Enterprise, its business units and local companies are in a position to start the new financial year with some confidence and clarity, and to report the action being taken to build further the strengths that Scottish Enterprise brings to Scotland's international reputation, business, skills and infrastructure.
It is important that this debate is constructive. Scottish Enterprise is well thought of across the world and has been a model for other development agencies. Through Scottish Development International, it promotes Scotland abroad. In recent weeks, Scotland has won further awards for the strength of our international outlook and our potential for the future—that is an important backdrop. Scottish Enterprise invests and will continue to invest over £500 million per year in Scotland's economic future.
I want to update members on the plans, initiated by the chair and chief executive of Scottish Enterprise, to review the structure of the organisation. Their aim is to ensure that it is best suited to deliver our priority of economic growth. Scottish Enterprise has proposed focusing more of its activity on key industry sectors, which are those that have the greatest potential to impact on Scotland's economy. High-growth companies outside those sectors will continue to get the support that they need to make a difference to our economy. Information, advice and support will remain available to all companies in all parts of Scotland. There has been strong support for this industry-led approach from the chambers of commerce, the Confederation of British Industry and other business organisations and I have asked Scottish Enterprise to go ahead with implementation. This is the way to a stronger Scottish economy and it merits our support.
Scottish Enterprise will retain its key priorities of growing business, global connections, learning and skills. They will deliver our ministerial goals of economic growth, social inclusion and regeneration. The ability to link learning and skills and business support is a strength that others admire. Support for training, for those in work, for the young and for the unemployed will continue to be strongly supported by Scottish Enterprise.
Four years ago, we gave responsibility for Careers Scotland to the enterprise networks and that has worked well in the Highlands and Islands. In the Scottish Enterprise area, Careers Scotland has achieved a great deal, but I believe that the present arrangements have not delivered the organisation's full potential. As a result, we have concluded that Careers Scotland should move out of Scottish Enterprise. We will examine options for a new structure with all stakeholders, including Careers Scotland staff, users of Careers Scotland's services, the education and training community, local authorities, trade unions and others.
When considering options, we will work with the grain of the Duffner review and its recommendations for an all-age national guidance service, but with stronger links to our secondary schools as a clear objective. We hope to complete that exercise in the autumn and the expectation is that Careers Scotland will move from Scottish Enterprise at the beginning of the financial year 2007-08.
In going forward, Scottish Enterprise must have a national, a regional and a local dimension. Our economic plans recognise cities as the drivers of wider metropolitan regions and the complementary roles of cities and their surrounding areas. They also recognise the opportunities and needs of our rural areas. Those important priorities are part of Scottish Enterprise's future plans. National and—for the first time—regional planning will sharpen the focus on strategic projects that can make the biggest difference to Scotland's economy. The new approach will also reduce the risk of duplication, thereby saving valuable resources at a local level.
There must also be a local dimension, to take advantage of local opportunities to improve the economic well-being of communities, which means that there must be a role for local decision making and opportunities for innovative partnerships and local priorities. I have therefore asked Scottish Enterprise to retain local decision making in Scotland's local enterprise companies. Many business leaders give considerable time and expertise to the boards of local enterprise companies and all 12 LECs will remain.
I acknowledge that members have been particularly concerned about local responsiveness at a time when difficult decisions are being taken about priorities for spending. I will therefore take a few minutes to discuss Scottish Enterprise's financial position. As has been well publicised, Scottish Enterprise has had financial difficulties this year, which in part come from a deliberate strategy to encourage new project proposals in each local enterprise area and in part come from the identification of a growing number of projects of national significance.
Scottish Enterprise took steps to prioritise, but a projected overspend of £30 million remains. To avoid the most difficult choices, we agreed that additional resource could be drawn forward into the current financial year. I should explain that that does not require an increase in cash grant in aid. Government accounting now properly requires that public bodies take account of non-cash costs such as depreciation and the cost of capital. The additional non-cash resource that is being made available by the Executive will cover those costs and allow some access to cash reserves held by Scottish Enterprise.
Scottish Enterprise has considered its budget for 2006-07. The options that face Scottish Enterprise have been difficult, but I have had a number of constructive meetings with Sir John Ward and Jack Perry. While detailed discussions continue, I have agreed that Scottish Enterprise will make interim budget allocations to business units and LECs that are sufficient to allow operations to continue at expected levels over the coming weeks. That will allow time for Scottish Enterprise to agree with the Executive its full-year allocations by the end of April. Those allocations will, in particular, protect funding of the business gateway. Business gateway contractors should therefore plan with confidence for the year ahead.
I have taken additional steps that will allow us all to be satisfied that the systems of financial management in Scottish Enterprise are robust. I commissioned external advisers KPMG to confirm the projected resource spend figure for 2005-06. If that work confirms the need for further examination of financial systems, such an examination will be undertaken. The approach has been welcomed by the chairman and chief executive of Scottish Enterprise.
Scottish Enterprise has called for a report by its internal audit team, which will shortly be available to the board and to the Scottish Executive Enterprise, Transport and Lifelong Learning Department. Scottish Enterprise will put in place an action plan to deal with every recommendation. The reports will be available to Audit Scotland, which is the external auditor of Scottish Enterprise. That approach will provide ministers with the assurances and information that we require in allocating funding to Scottish Enterprise.
I am not prepared to speculate on the findings of that work, but I assure members that I will report back on any actions that I consider need to be taken as a result of the findings. I will also ensure that all reports prepared for Scottish Enterprise or the Executive are made public. Audit Scotland will, of course, make its findings available in the normal way.
Discussions need to continue to the end of April, but I have used this statement to indicate action to ensure that Scottish Enterprise will issue budget information this week that will allow operations to continue at expected levels; action to protect the business gateway; agreement that Scottish Enterprise will focus on key industry sectors with new regional planning; agreement that Careers Scotland will move out of Scottish Enterprise; and agreement that there will continue to be local decision making within Scottish Enterprise. Above all, ministers and Scottish Enterprise are determined to take steps that meet our ambitions for the Scottish economy—an enterprising, growing economy in all parts of Scotland.
The minister will now take questions on issues raised in his statement. I will allow around 20 minutes for that, before we move on to the next item of business.
I hear the call for confidence, clarity and constructiveness. We are always there for that. Along with Linda McDowell, I spent today at a Rolls-Royce briefing, playing what I think was a constructive role. The most constructive roles lie in the delivery of micro-measures.
In essence, we always come to this issue looking at the impossibility of the task that is asked of the Scottish Executive. The Scottish Executive and Scottish Enterprise have the same incomplete nervous system whereby, no matter how well they do, the tax revenues always go elsewhere.
Could we have a question, please?
In addition, emigrants make the labour participation and unemployment figures look much healthier. My questions are these. Given what we have got, what are the measures that we will now adopt in moving forward? How much will the consultancy fees that are accruing to KPMG be? Is the £30 million overspend gross or net of other remedial steps? How much sits in Scottish Enterprise's reserves for future contingencies?
Those are big, important issues for Scotland's economic future, and I hope that everyone agrees that the measures that are being announced today are also important. It is interesting that Jim Mather suggests that he is always constructive in this respect. The Scottish National Party has consistently talked about cutting Scottish Enterprise, although it has not gone into the detail. Indeed, the SNP's last manifesto suggested that it would replace local enterprise companies in the Scottish Enterprise area with about half the number of regional offices. That would have a significant impact on local decision making.
These will be a difficult few weeks for Scottish Enterprise, but it is very important that local decision making is left in place and that local enterprise companies and their boards are fully involved at this stage in setting priorities.
As far as measures for the way forward are concerned—perhaps Jim Mather was referring to the recent report into Scottish Enterprise—as I have made clear, it is vital to achieve good value for money for every public pound that is spent on the enterprise networks. I am absolutely committed and determined to ensure that, through the process of review that we are instigating today, we achieve exactly that. This is all about reinforcing and improving the enterprise networks and securing a better future for the Scottish economy. That is the approach that is taken by the Executive. Judging from Jim Mather's question, the approach taken by the SNP reveals a different attitude, which is not appropriate in the current circumstances.
I call Christine May, to be followed by Jamie Stone.
On a point of order, Presiding Officer. It has always been the convention in the Parliament that, after a ministerial statement is given, the Opposition spokespeople get the opportunity to ask questions first of all.
You shall be the next to be called, Mr Fraser.
Thank you, Presiding Officer.
First, I call Christine May, to be followed by Jamie Stone.
Does the minister appreciate the deep concern that there has been among national, as well as local, enterprise bodies and those individuals who are involved in enterprise, particularly those who have spent many years building up initiatives, block by block, which are now at the level of national projects?
Does the minister appreciate the great fear that there has been—which I hope he can now allay—among training providers? Is he aware that the Scottish Training Federation is concerned that, without the measures that he has announced today, the guarantee group would be the only skillseekers to get training, and that that opportunity would later be widened only to limited numbers of 19 to 24-year-olds and people in the 25-plus group?
Does the minister appreciate how important training is to the economic regeneration of many of our post-industrial areas? Can he guarantee that the funding for those schemes will be met in full?
I appreciate how important training and skills are for the future of Scotland's economy. In the current environment—with the commitments of the SNP and the Conservatives to cut Scottish Enterprise—it is interesting that people are rallying to protect the important services that Scottish Enterprise funds and delivers. That underscores and emphasises just how important much of its work is to the future of Scotland's economy.
Our message in relation to all Scottish Enterprise's services is that we intend business to continue as expected. Our commitments to existing training providers will remain in place.
There are a lot of detailed issues to resolve, most of which are matters for Scottish Enterprise. I will not be able to give detailed commitments in every area today. However, I can say that the Scottish Executive and its officials, along with KPMG, will be wholly engaged in this exercise, which will receive the highest priority. We intend to be supportive and to come to a good solution, not just for Scottish Enterprise but for Scotland's economy, skills and future training.
Let us recognise the good news when we hear it. The announcement that the business gateway is to be protected is most welcome, because, as we all know, there was considerable concern about what was going to happen on that front. Will the minister ensure that this news is disseminated to all the parties that have been concerned? Can he assure me that there will be protection for the business gateway for today and for the future? That is a fundamental and crucial message.
I thank Jamie Stone for his support. He is correct that significant changes to the business gateway could have been made as part of the difficult decisions that Scottish Enterprise was making. A number of MSPs have contacted me to emphasise how concerned they were at the scale of rumoured local cuts.
I give Jamie Stone the absolute assurance that Scottish Enterprise is protecting the business gateway, that the gateway contracts will continue and that the gateway will continue at its present level. That is good not just for MSPs, local enterprise companies and gateway contractors, but for new businesses and small businesses, which depend heavily on the services the gateway provides—that is why, in the past 24 hours, I have received representations from a range of business organisations, including the chambers of commerce and the Federation of Small Businesses in Scotland. They made exactly the points that Jamie Stone and others have made about the importance of the gateway and the quality of its work. I hope to improve on those services in the future, not to cut them.
I am grateful to the minister for his statement, and for the advance copy of it. We have had weeks of press speculation, leaks and concerns being expressed to members. Eventually, the minister has given us an update—not before time, I have to say. I have four quick questions for him. First, how will the £30 million overspend in the current year's budget impact on the budget for the next financial year?
Secondly, the minister has given us an assurance that the business gateway funding will be protected. What guarantees can he give us about funding for other key projects, such as the new business growth fund, the intermediary technology institutes and R and D Plus?
Thirdly, there is no mention in the statement of redundancies. We have heard speculation about redundancy levels in Scottish Enterprise of 100, 130 and 200 jobs. How many jobs are going to go? Is that a result of the overspend?
Finally, is not this a missed opportunity to take a long, hard look at Scottish Enterprise to see whether it is fulfilling its objectives with its £0.5 billion budget of taxpayers' money? Surely the minister should seize the chance to turn Scottish Enterprise into a leaner, more focused and more effective organisation.
We see Murdo Fraser wearing his David Cameron tie. He is suggesting that if we just slash Scottish Enterprise, everything will come right.
The Tory manifesto for the 2003 election said:
"We will retain Scottish Enterprise and Highlands and Islands Enterprise, but reduce their budgets and focus their energies on delivering advice and training services to all businesses in Scotland."
The Tories support cuts in Scottish Enterprise, but it is interesting to see that their manifesto places on advice to small businesses a priority that is similar to the one that I have announced today. I hope that Murdo Fraser will welcome the protection of the business gateway.
The impact of the £30 million overspend on next year is exactly why I have asked KPMG to consider the situation. We want to get the organisation on a stable footing for the future. These are issues that will be carefully considered in the coming weeks.
Mr Fraser asks about funding for other key projects. I share the priorities on his list. It is good to see Mr Fraser and other MSPs—regardless of whether they might believe that Scottish Enterprise should be scrapped or have its budget slashed—supporting individual projects that are being carried out by Scottish Enterprise. I question the logic of seeking to undermine the organisation and imposing cuts on it while seeking to be seen as the champion of the projects that that organisation delivers. However, I will not dwell on that point.
It is not only the business gateway that I want to be preserved. For example, local priority setting and decision making are important and should be preserved. However, difficult issues lie ahead. As part of its organisation review, Scottish Enterprise has identified the need to improve the skill set of its staff and has identified the opportunity to reduce staff numbers overall. However, those plans, including the scale of reduction, have not been finalised. In all those plans, the driver will be business effectiveness. Proposals are not related to the financial situation.
I think that I have answered fully Murdo Fraser's point about there being a missed opportunity to cut the organisation. This organisation deserves support and stability. That is important not only for the organisation, but for Scotland's future.
Sustainable development is one of the core principles of the Scottish Executive, yet it was conspicuous by its absence in the minister's statement.
Does the minister agree that, to build a genuinely sustainable Scotland, a core function of Scottish Enterprise must be to develop not only economically but socially and environmentally sustainable businesses? In other words, will the Scottish Executive and Scottish Enterprise change their ways?
It is ironic that that question is asked on the day that Ross Finnie has launched the climate change initiative, which has sustainable development at its heart.
I believe that sustainable development issues and the opportunity to develop renewables and create green jobs in Scotland are at the heart of the work of Scottish Enterprise and form a key element of the work of the intermediary technology institutes. Shiona Baird is wrong on this issue. Sustainable development is vital to the future not only of our communities but of our economy. This Executive and Scottish Enterprise treat those issues as ones of the highest importance.
The minister referred to local decision making. Does that involve control over budgets, as is current practice? What community planning role will Scottish Enterprise play at a local level, particularly in local economic development, skills and training and regeneration?
In the exercise of their responsibilities and in the use of their budgets, local enterprise companies have always had to have regard to national Scottish Enterprise priorities. That is appropriate. I announced today that there will be a new level of planning—regional planning—which will help to avoid some of the duplication of effort that can take place among neighbouring LECs and encourage greater co-operation and partnership between LECs at the regional level.
However, in my statement, I was anxious to emphasise the importance of the local boards and the hours of unpaid effort that businesspeople put into local enterprise companies. It is appropriate for those boards to have devolved decision-making and budget responsibilities but, as has always been the case in Scottish Enterprise, they should have them within the context of national and, now, regional planning. Budgeting and decision making will continue in Scottish Enterprise. There will be opportunities for local input on all the issues to which Marilyn Livingstone refers. We should thank the businesspeople who get involved in local enterprise companies and encourage them to maintain their commitment for the future.
I welcome one or two of the proposals in the minister's statement. In particular, I welcome the reorganisation of Careers Scotland outwith Scottish Enterprise. I advised Wendy Alexander that she was making a mistake when she took Careers Scotland into Scottish Enterprise.
I draw the minister's attention to the reply that I received from the First Minister on 19 January, when I asked him about the emerging budget crisis at Scottish Enterprise. He said:
"We should ensure that Scottish Enterprise knows its budget and that it implements its decisions within that budget. That is what we expect Scottish Enterprise to do. That is its responsibility, and it is properly audited for that purpose. I expect Scottish Enterprise to meet its budget targets."—[Official Report, 19 January 2006; c 22555.]
None of those objectives has been achieved. The minister says that £30 million will be rejigged on the balance sheet from next year into this year. What are the implications of that for core services next year? We have not been told the answer. The only service that the minister has said will be saved is the business gateway. What about all the other services, including the ones that Murdo Fraser mentioned?
Is there a question, Mr Neil?
Is it not time that ministers dealt with the crisis and sorted it out once and for all? We are about to go into a new financial year. Is it not the case that, far from knowing the budget, ministers do not have a clue what the budget will be?
I welcome Alex Neil's support for the movement of Careers Scotland. He talks about core services that require to be preserved and protected, but they are the same services that he calls on us to cut when he asks for a reduction in the Scottish Enterprise budget. He is on the record as being highly critical of Scottish Enterprise. If we are looking for the person who talks down Scottish Enterprise the longest, the hardest and the loudest, it is Alex Neil.
The simple answer is that we expect Scottish Enterprise and all the other organisations for which the Executive is responsible to keep within their budgets. That has not happened in this case, and we are taking action. Today I announced firm, clear and strong action that is appropriate in the circumstances and we intend to deliver on that.
Will the minister clarify when he first became aware of the projected overspend at Scottish Enterprise? In relation to his response to Marilyn Livingstone, will he clarify whether the LECs will have access to budgetary powers but will have fewer resources than they have at present? Finally, will he tell us by how much Scottish Enterprise has increased Scotland's output and economic growth since the Executive took office?
The seriousness of the situation at Scottish Enterprise became apparent only recently. Since then, we have been working hard with Scottish Enterprise to resolve the situation and to put in place the measures that I am announcing today.
The budget position for the local enterprise companies and other parts of the organisation will be made clear by the end of April. A great deal of hard work requires to be done in the next few weeks to ensure that the right decisions are made, that the key core services that Derek Brownlee, Marilyn Livingstone and Alex Neil mentioned are preserved, and that an appropriate level of decision making is retained. I believe that that is important for our local enterprise companies and their future.
I call Margaret Jamieson, to be followed by Margaret Curran. Sorry, I mean Frances Curran.
Can the minister reassure us that Scottish Enterprise will continue to take account of all Scottish Executive policies, including local regeneration, while continuing to deliver on ministerial objectives?
Yes I can. That is why I specifically referred to ministerial priorities in my statement—not only economic priorities, but social inclusion, closing the opportunity gap and regeneration. The recent launch of the regeneration statement by the First Minister, with me as Minister for Enterprise and Lifelong Learning and Malcolm Chisholm as Minister for Communities, emphasises the importance that we attach to the key regeneration projects around Scotland. It is another example of the very important contribution that Scottish Enterprise makes to all aspects of our economy in the widest sense. Many of our communities benefit from Scottish Enterprise initiatives and, although difficult decisions will still have to be made, I want to ensure that the strength of the organisation continues to be reflected in all parts of Scotland.
Given that we have had a number of critical auditor's reports on Scottish Enterprise—one in 2003 and the current one—that highlight a complete lack of financial control, I am questioning the wisdom of throwing £0.5 billion at this quango. The minister does not know how many jobs it has created, and neither do we. I welcome the announcement about Careers Scotland being removed from Scottish Enterprise's remit. Is not the real issue that instead of an internal restructuring, we need to start to transfer those responsibilities—learning, skills, education, apprenticeships and regeneration—and the £0.5 billion that goes with them, back into the hands of publicly accountable local authorities? So far, the exercise has been a failure.
I think that Margaret Curran— [Interruption.] I am sorry; I will start that again.
Frances Curran is simply wrong about those issues. It would be quite inappropriate to lose the opportunity of business involvement not only in the Scottish Enterprise national board but in the local enterprise companies. One of the great strengths of Scottish Enterprise is that there is very strong business support for its work.
There are different models of delivery to be seen in different countries around the world, but there is one absolute certainty: the Scottish Enterprise model and approach are admired and have been followed by many others. We need to build on Scottish Enterprise's strengths and continue to work with the organisation to get through these next few difficult weeks, to ensure that we stabilise the organisation and have a very successful future. That is the best way to strengthen the Scottish economy and I will work hard at it over the coming days and weeks.
I have a question about the relationship between the Executive and agencies such as Scottish Enterprise. When Scottish Water produced a business plan that was not to the satisfaction of ministers, the chairman of Scottish Water was removed. Now, Scottish Enterprise is delivering performance that is not to the satisfaction of ministers, but it is getting a £30 million handout from next year's financial settlement. How is that a consistent arrangement for the management of agencies that deliver Scottish Executive policy? How can the public be confident that the approach is subject to effective accountability and performance measures and that it can deliver value for money for taxpayers?
We are determined to ensure effective delivery and performance; that is why I have announced the measures that we are taking today. We are not taking any of this lightly in any sense. We are taking the financial difficulties of Scottish Enterprise very seriously, which is why we have appointed outside advisers to consider the situation and to report back to the minister. We are giving strong support to the organisation's overall strategy, and to Sir John Ward and Jack Perry because we believe that their view of the future is the right view.
With the exception of the indication that I have given today about local enterprise companies and the continuing need for local decision making, the Executive is giving strong support to the proposals for Careers Scotland, the new approach to metroregional planning and the other measures that John Ward and Jack Perry have proposed.
That ends questions to the minister.