Chamber and committees

I suppose that my issue is about agency for victims, to be specific.

I want to focus on the specific example of the Scottish National Investment Bank. The rules are certainly not yet clear as to what determines market failure. SNIB was set up when we were in the EU, when there was a clear set of rules in that regard. The bill has now passed its third reading in the House of Commons, but we have no certainty whatsoever on the rules relating to market failure. We heard in last week’s evidence that that could impact and limit our net zero ambitions. Do you have any specific concerns about SNIB, given its importance to Scotland’s economic development?

Thank you for that clarification.

Thank you for joining us, cabinet secretary. There are only a couple of areas that I want to explore. I will try to be quick so that all committee members can get in.

The first area is women in business, which the committee has discussed a number of times. It first came up when I put what I thought was a simple question to one of the business development agencies about the extent to which it routinely disaggregated its data for all business services by gender. After some humming and hawing, the answer came back that it did not really do that.

In your response to the committee, you say that

“preparatory work is being undertaken now to establish the actions needed to overcome, and ultimately remove barriers to participation”

for women in business. Will you give me a bit more flavour of that? What consideration is being given to putting conditionality in grant funding at some point in the future? How might data collection and perhaps conditionality work in public procurement? I appreciate that it is early days for the work that you are doing, so I am just looking for a flavour of that.

Given that the bill has been through its third reading, the suggestion is that it will be left to officials in the Department for Business, Energy and Industrial Strategy to further define the rules. We have our own constitutional consideration in the Scottish Parliament, but I suggest that, regardless of where you sit, having an unelected official in BEIS making the decisions, without reference to the House of Commons or to the Scottish Parliament and the Scottish ministers, is not entirely desirable from a democratic perspective. What is your view on that?

I will ask a final wee question. Have you had any discussions about the potential cooling effect on much-needed investment in the light of post-Covid recovery? Surely any Government would want to encourage investment. It would surprise me if it did not. I say “cooling effect” because we have been told that the rules not being clear could lead to legal battles, which are obviously expensive, so the likes of local councils would probably not want to take the risk. Have you had any discussions about that? Have you made that point clear? Is it understood?

I note that there is also a role for the private sector. We need to consider getting it to change its behaviour, given that only 1 per cent of private equity funding goes to female-led businesses while 99 per cent goes to male-led businesses.

Moving on quickly, I have some questions about the Scottish National Investment Bank, which I am very interested in. Some people are not clear about the fact that the Scottish Government has no control over most regulations on property and labour markets, the international migration regime or overall macro monetary policy. However, one of the key ways in which the Scottish Government can really make a difference—I am glad to see this happening—is by protecting the funding for SNIB after the withdrawal of FTs.

Despite that, the chair said in November that the bank would still like to be able to raise third-party funds. Have you considered that? The consumer prices index, which is reported today to have reached 5.4 per cent and is probably only going to get higher, will have an impact on the difference that the bank can make. Have you given any further thought to whether SNIB can raise money from private sources? Are you constrained in any way in allowing that?

The events of recent days have once again highlighted the hypocrisy of the Tories. Perhaps they have already forgotten the waste of public funds in awarding personal protective equipment contracts to their pals and the writing-off—only yesterday—of an incredible £4.3 billion for fraudulent business Covid claims; perhaps they were instead focusing on their penchant for partying.

Even as the Tories were lodging the motion for today’s debate, their Home Secretary, Priti Patel, was launching an outrageous and ill-informed attack on Scotland’s councils in Westminster this week, so forgive me if I am a little cynical about Tory support for Scotland’s councils.

The motion is defective. I will focus on just a few of the issues, given the limited time available. The single ask in the motion is to create a funding settlement that is entirely fixed to a percentage of the Scottish Government budget. That proposal is flawed because it does not allow flexibility for the Government to deal with unforeseen shocks, as was mentioned earlier. The current pandemic is a good example; the fallout from the 2008 economic crisis is another.

Had the Tories put down a sensible economic motion seeking to support the calls by many for increased borrowing powers, that would have been a motion which we could all have rallied around.

The motion is also at serious fault in failing to consider the current economic uncertainties. For example, during 2021, forecasts by the Office for Budget Responsibility, the Scottish Fiscal Commission and independent forecasters were all subject to considerable change. The forecasts that were published in the lead-up to the Scottish budget failed to take account of the then unknown and arguably unanticipated omicron variant, which is likely to lead to further significant downward changes in forecasts. To fail to understand the consequence of such uncertainties for Government funding is simply not realistic.

Of course, there is one other shock, this time deliberately created by the Tories. The word that dare not speak its name is Brexit, which has had serious implications for local authorities. For example, in response to information requests from the Finance and Public Administration Committee, Scotland’s local authorities have raised very serious concerns about the UK Government’s plans for the replacement of European Union structural funds. Those concerns include the questioning of a seriously flawed methodology that does not respond to Scottish conditions and the failure by the UK Government to fund the resources required to operate the replacement funds, yet nowhere in the motion is the UK Government called out for the harms that it is inflicting on Scottish councils.

Of course, the Scottish Government and our local authorities will be constrained by the operation of the Tory-inspired United Kingdom Internal Market Act 2020 and the Subsidy Control Bill that is currently going through Westminster.

The Tory motion fails to recognise that, despite all those challenges, uncertainties and constraints, the Scottish Government has come up with an overall settlement in excess of £12.5 billion, representing a real-terms increase of some 5.1 per cent.

As has been pointed out, the Scottish Government has already committed to working with COSLA to develop a rules-based fiscal framework to support future funding settlements for local government. I hope that all parties can support that.

Finally, no lectures, please, from a Tory party that rewards its own, attacks our local authorities from Westminster and blocks at every turn the need to enhance this Parliament’s financial and economic powers.

I will, Presiding Officer.

I celebrate Scotland’s ambition to take the required steps forward, but, as the debate proves, it will be a considerably complex process to get us to where we need to be.

I celebrate the ambitious targets for reaching net zero. However, as others have said, the scope, scale and complexity of the journey is significant—and nowhere more so than in relation to the national challenge of retrofitting homes. It is not an incremental challenge and it requires an exponential scale-up in an order of magnitude. We have heard references to the estimate of £33 billion in the debate already.

I propose to make a few points about both the supply side and the demand side. On the supply side, there are significant barriers for manufacturers. The high capital expenditure needed to create or repurpose existing manufacturing lines is an issue, particularly for the smaller companies that are currently operating in the market. For installers, there are early-stage product risks and capacity issues that will limit scale-up, as has been mentioned. It will also take time for those small companies to build brand awareness. Most operators are currently small and medium-sized enterprises, which can mean weak financial resilience and limited access to investment finance. For all involved in the supply side, there are complex skills considerations, with the requirements still a bit of a moveable feast. Because there is uncertainty, there has to be hesitancy.

On the demand side, the Scottish Parliament information centre briefing notes:

“The high upfront costs and sometimes uncertain payback periods can put people off making changes to their homes.”

Like other speakers in the debate, I would put it more strongly than that. At this stage, in such uncertain economic times, there is no real demand from home owners, particularly if they do not see their property as their forever home. Some of the costs that are being quoted today, in the range £12,000 to £17,000, will act as a major barrier.

Another point is that new heating models are not yet seen as aspirational in the way that the likes of electric cars are. Despite the urgency of the situation, costs are a concern for suppliers and consumers alike, and on-going assessment for manufacturers, installers, home owners, renters and landlords will be required as initiatives come on stream.

There are other challenges. The Scottish National Investment Bank, capitalised with £2 billion over 10 years, has a key role in addressing market failure. However, at the Finance and Public Administration Committee last week, we heard that with the enabling United Kingdom Internal Market Act 2020 leading to the Subsidy Control Bill, it is uncertain whether and how the SNIB can operate as intended and contribute to the addressing of market failure in retrofitting. Despite the bill passing the committee stage in the House of Commons, there is no definition of the rules as to how the SNIB—and, indeed, the British Business Bank—can meet their core purpose. Clarity is not expected from the UK Government for some time, and the required rules might ultimately be developed by an unelected official in the Department for Business, Energy and Industrial Strategy, without scrutiny by the House of Commons, and bypassing this national Parliament and Scottish Government ministers. The uncertainty will have a cooling effect on councils and other bodies, which will be nervous about risking expensive and time-consuming legal challenges in trying to create programmes that address the issue that we are debating.

Some innovative financing, which would attach funding to the property rather than the individual, has been considered, but such an approach can lead to hesitancy on the part of future buyers and sellers, as we have seen in the context of solar panels.

On financing, the Westminster all-party parliamentary group on fair business banking, for which I am an ambassador, made an interesting point in a report:

“The SME-dominated retrofit supply chain largely falls between the cracks of existing investment funds and approaches: too late-stage and insufficiently high-growth for venture capital; too early-stage and high-risk for institutional investors.”