Chamber and committees

I would quite like to have £1 billion.

The thing with productivity is that we cannot deliver productivity only through public spend. One of the challenges that Scotland has had for so long is incentivising business investment in productivity—

My view is that it has been a challenging decade for many businesses and for the economy. Ultimately, that points to the need for a diversified economy in Scotland. We always see it in the income tax figures but, compared to the rest of the UK, Scotland’s industry is made up of some big beasts, such as financial enterprise and energy.

That means that, when either of those sectors is affected, there is a disproportionate impact on the Scottish economy, whereas England, for example, is less dependent on its big beasts and is more diversified. The past 10 years have been particularly challenging for the two industries that I mentioned. Economic headwinds have a disproportionate impact on Scotland because of our reliance on some of the big industries.

Yes.

There are three things. Businesses are always more likely to invest when their costs are lower. If businesses are spending more on national insurance contributions, to take one example, they are less inclined to reinvest their profits. The first thing, therefore, is to support businesses by giving them a bit of breathing space to reinvest in productivity, which is a business choice. There is also something around demonstrating the benefit to the business of reinvesting in productivity. Some of the headwinds that we are experiencing, particularly those affecting labour shortages, are already driving businesses to reinvest, because they have to reinvest in technology if they cannot recruit. That is point number 1.

Point number 2 is about supporting businesses to transition to the new world in which we operate. There was a huge focus on that in 2018, 2019 and 2020, focusing on things such as digital boost through Business Gateway, with its adoption of technology. Covid drove that exponentially higher, in that businesses had to adapt anyway. We are now facing new challenges around AI—and I have already talked about what Richard Lochhead is doing around supporting businesses with AI.

Thirdly, there is the question of what businesses can do internally, among their sectors. We already support a number of initiatives. For example, in the advanced manufacturing sector, we have the National Manufacturing Institute Scotland, or NMIS, the job of which is to support innovation in manufacturing across all businesses that operate in that sector. A couple of weeks ago, I launched the deep tech supercluster, which is all about getting businesses to embrace technology. We are doing a six-month pilot with different sectors that need to embrace a more technological approach.

Those are three examples of what can be done and is being done, but it cannot be public-sector led alone.

We will have to demonstrate how every part of the Government is in accordance with the climate change plan. That is the approach that we will take, and the economy directorate is not immune from being part of that process.

The temptation for me to comment on that is quite significant, but the Scottish National Investment Bank is operationally independent. The moment that I start to pass comment on its commercial decisions, that independence is compromised. Given its independent position, it will make investments that members might think are great ideas and others that members might think are not such great ideas. The whole point is that the Scottish National Investment Bank is free from political interference, which is what makes it such an impactful investor. I do not want to compromise that.

We have very clearly set out the three missions that the bank is to focus on: pursuing a just transition to net zero carbon emissions by 2045, which might involve forestry; extending quality of opportunity by improving places—it is a place-based approach; and harnessing innovation to enable our people to flourish by 2040. By design, those are not prescriptive, so that, again, the bank knows that it operates within parameters but that it is free to make investment decisions independently of the Government.

The legislation is extremely flexible. The point is that, under the legislation, local authorities must consult extensively with industry and, if they wish, introduce a scheme that is operational—in other words, one that can actually be implemented. On the basis of the communication that you refer to, I would assume that there is a point there that needs to be highlighted to local authorities about the way in which they charge the visitor levy.

For me, that is a question of operational implementation. Fundamentally it is a question for the City of Edinburgh Council, which should be consulting with industry as we speak to determine how to do it.

That also feels as though it could have been a planted question, because it is the question that I was hoping somebody would ask me, and we have had no conversations prior to the meeting.

I have been commissioning the audit for the past few months. We are doing it on a regional basis. The committee might be interested in bringing Skills Development Scotland before it to go through the audit that it has just done, particularly for the energy transition in the north of Scotland. It focuses on the Highlands and Islands, I am afraid, but the model could be replicated for other regions.

What SDS has done means that it has incredibly granular data, because it started with the inward investors and businesses. Rather than just getting high-level figures from them, such as that they need more people or more engineers, SDS has asked them specifically how many engineers and what kind of engineers they need over the next 10 years. How many welders and what kind of welders?

As commissioned and supported by Highlands and Islands Enterprise, SDS has produced an industry-led data audit of the skills that are required. You heard it here first—I do not think that it is in the public domain yet. The next stage is to launch that audit with commitments from the colleges and universities on how they will support the delivery of every last one of the individuals that are required. We have done it.

I think that it is better to do it on a regional level, because we are more likely to want to be able to retrain people who live in the locality than to attract people in, and we will only attract people when we know that there is a shortage. That model could be replicated for other regions, but we have proved that it works.

That is very interesting. I am not sure that it does. It is certainly broader than just the obvious industries. For example, it says if we need this many people for the energy transition, how many people do we need to build new houses? It looks much wider than the direct jobs at the indirect jobs, but I am not sure that it goes as far as the indirect jobs in the public sector, unless Aidan Grisewood tells me otherwise.