Meeting of the Parliament (Hybrid) [Draft]

Meeting date: Thursday, February 24, 2022

Official Report 1048KB pdf

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Ports

The next item of business is a statement by Ivan McKee on building industrial clusters around Scotland’s ports. The minister will take questions at the end of his statement so there should be no interruptions or interventions.

14:55  

Scotland has significant strengths in the industries of the future. In renewable energy and hydrogen, life sciences, financial services and fintech, quantum photonics, advanced manufacturing, digital and space, we have genuinely world-leading technology, underpinned by the excellence of our academic institutions. Although we have had significant success in building clusters of manufacturing excellence around those opportunities, we recognise that we have much more to do. The Government is committed to maximising opportunities across Scotland’s regions, and in doing so, to creating high-paying jobs, delivering on our fair work agenda, ensuring that everyone is paid at least the real living wage, and meeting our ambitious net zero commitments. We will use all the tools that are at our disposal to deliver on those ambitions, including maximising exports and inward investment, building Scotland’s indigenous business and supply chains to scale, leveraging public sector procurement, and supporting businesses with targeted support and investment.

Our vision is of a Scotland that has world-leading capabilities in the industries of the future. Our focus is on high-innovation, high-wage and high-technology opportunities. We are not interested in a race to the bottom in low-cost, low-wage and low-tech manufacturing. Our national strategy for economic transformation will clearly articulate our vision, and we recognise the key role of Scotland’s ports and airports in delivering it.

Today, I want to update Parliament on the progress that we have made in the implementation of one initiative that will support delivery of this vision—our green ports model—and on how we have managed to secure significant additional investment in Scotland to upgrade port infrastructure and build clusters of manufacturing excellence that are fully aligned with our fair work and net zero commitments, on a partnership basis between the Scottish and United Kingdom Governments.

The UK Government has presented its free port model as a dividend of the economic vandalism that is Brexit. We reject that hypothesis. Free ports already exist in many European Union member states, and indeed did so in the UK within the EU, until 2012. We are well aware of the reputation of some free ports globally, while also recognising their value, in other cases, in driving innovation and high-technology economic development.

This afternoon, I will set out our ambitions for and expectations of Scotland’s green port model. I will explain why, after careful consideration, we engaged in intergovernmental dialogue on an equal footing with the UK Government to improve the free port model by introducing a tailored model for Scotland that delivers the Scottish Government’s requirements, addresses concerns and ensures proper safeguards and enforcement measures.

Four principal factors resulted in the recent agreement with the UK Government. First, we negotiated a partnership in which the Scottish Government will have an equal say in decision-making and in delivery. That demonstrates our determination to ensure that the influence of devolved government is strong in collaborative dialogue with UK ministers. That was not on the table previously. Indeed, it is a model that can and should be used in other areas in which the UK has recently been all too willing to ride roughshod over the devolution settlement.

Secondly, we insist that bidders must set out clearly how they will embed fair work practices into how they, and the companies within the area, conduct business. That was not on the table previously. All applicants in Scotland will be familiar with the Scottish Government’s ambitious policies on fair work. Specifically, they will all know about the features set out in the fair work first criteria. Naturally, applicants will want to refer to those criteria, considering how as robust a case as possible for designation can be set out.

We are crystal clear on this. Any bid that does not aim for the very highest standards in fair work practice, including payment of the real living wage, will not be supported by the Scottish Government. Our commitment to fair work is clear, and this programme will be an exemplar of how we will deliver it.

Thirdly, we insisted that applicants be required to set out robust plans on how they will contribute to Scotland’s just transition to a net zero economy. We have been clear about the need for green ports to be an exemplar in the use of technology and innovation to decarbonise Scotland’s economy, to incubate and foster clusters of new green technology and industries and to benefit wider supply chains in Scotland. The UK Government has now agreed to that requirement, which, of course, is all the more pressing in the aftermath of the 26th United Nations climate change conference of the parties—COP26—in Glasgow. Previously, that was not on the table.

Last month, ScotWind announced 17 projects. ScotWind will provide us with enough power for every home in Scotland and will create the opportunity for Scotland to build a world-leading offshore wind manufacturing and export sector. As highlighted in the strategic infrastructure assessment for offshore wind that was commissioned by the Scottish Offshore Wind Energy Council, which I co-chair, there needs to be greater collaboration between developers, the supply chain and the public sector to help to focus activity and investment in Scottish ports, and to help Scottish suppliers to grow and win offshore wind work. The green ports policy will support delivery of the crucial objective of securing more offshore wind contracts for Scottish ports.

My use of the word “green” is about more than semantics; it signals clearly to global investors our ambitions and our unique offering, along with our intention of cementing Scotland’s already well-deserved reputation as a leading global environmental, social and governance and net zero investment destination. Anyone who engaged with investors during COP26 will be well aware of the significant opportunities that that presents for Scotland.

Finally, the UK Government has now decided to provide fair funding for Scotland. The agreement to invest up to £52 million to create two new designations means that the same set-up funding will be available for England and Scotland. That was not on the table before. Indeed, that funding is almost three times as generous as the funding package in the Secretary of State for Scotland’s formal offer to me last autumn.

On the four criteria—fair work, net zero, funding and an equal say—the Scottish Government has secured everything that it sought in the negotiations. On that basis, we are content to proceed with the implementation of the green ports model in Scotland.

Operation of the model will include the Scottish Government providing investment support through non-domestic rates and land and buildings transaction tax. In addition, operators can expect a wider package of developmental support from Scotland’s enterprise agencies, local authorities and others.

I have heard the criticism that the Scottish Government delayed discussions, somehow disadvantaging Scotland, but the contrary is true. Any delays were a consequence of the UK Government being slow to come to the table and slow to recognise our specific requirements. Thankfully, that situation was resolved towards the end of last year, which enabled the negotiations to conclude.

I will not shy away from the fact that the reputation of free ports around the world is mixed. Concerns have been expressed about deregulation and the risks of criminality, tax evasion and reductions in workers’ rights. However, that is not a model or an approach to which the Scottish Government would agree. We are optimistic about the potential of the model, but we will remain vigilant and focused on firm monitoring and evaluation of progress on the ground. I have engaged with trade unions and others on the matter to ensure that their concerns are taken into account, and I will continue to do so.

As we will have an equal say in choosing the two designations in Scotland and in how they are governed subsequently, I can assure members that the Scottish Government will remain focused on ensuring that the highest standards of governance and probity are maintained. I also point to my confidence that our ports, local authorities, businesses and others that will submit applications will be similarly focused.

In that element of our partnership work with the UK Government, we will ensure that issues of compliance with the law, governance and management of performance are placed at the top of any hierarchy of priorities. I make it clear that that which is granted can also be recalled.

In addition to the issues that I have already covered, we are conscious of the need to avoid economic displacement within and from Scotland. Bidders will be required to make clear what assessments they have made of potential displacement.

Scotland’s green port model is designed to support the development of innovative industries that are committed to developing new green technologies, supporting fair work opportunities and, crucially, embedding themselves in the local communities in which they are based. Further, we want the areas to assist the development of their regional economies and benefit wider national supply chains.

A full applicant prospectus is scheduled for publication next month. The selected designations will take part in a fair, rigorous, open and transparent process.

We look forward to considering all applications, in the expectation that they will serve to demonstrate the ambition, potential and commitment of the partnerships that assemble them—including local authorities, which are central to the bids that we expect to come forward.

The agreement delivers fair set-up funding for Scotland. It demonstrates the negotiating strength of the Government and the fundamental importance of fair work, payment of the real living wage and net zero to the Scottish Government and to Scotland’s future economy.

I will ensure that the Parliament is kept fully up to date as the matter progresses.

The minister will now take questions on the issues that were raised in his statement. I intend to allow around 20 minutes for that, after which we will need to move to the next item of business. I ask members who wish to ask a question to press their request-to-speak button or type R in the chat function, if they have not yet done so.

I thank the minister for advance sight of his statement. It was an extraordinary rewriting of history. No one has forgotten that, having described the very concept of free ports as “havens for criminality”, the minister’s desperation to find fault with anything that the UK Government proposes and his initial reluctance to deal have meant that Scotland came very close to missing out on investment that could bring—just as an example—22,000 jobs to the north-east, as well as an economic shot in the arm of £8.4 billion. People recall well that the mayor of Tees Valley said in December that people are investing in his area who would have invested in Scotland, had the minister backed free ports. It was only when the Cabinet Secretary for Finance and the Economy took personal control of the matter, saying that free ports would deliver a “major economic boost”, that the position moved.

What we have just heard from the minister was grudging, negative and—dare I say it?—petulant, which is hardly surprising given that it is an open secret that he had to be persuaded, from within his own Government, of the enormous economic value of free ports. Does he really think that he can now, in good conscience, tell Parliament and industry that he is the minister who can make the free ports project a success?

Furthermore, what will he do proactively to ensure that Scotland is at the forefront of bids and to ensure that the negative and divisive language of his statement does not scare off potential investors?

Finally, the minister acknowledges that a whopping £52 million investment by the UK Government will make the two Scottish free ports a reality. Will the Scottish Government commit to matching the scale of that ambition for Scotland?

It is Liam Kerr who is rewriting history. The reality is that we have been clear on exactly where our red lines are throughout the process of extensive engagement that I have had with businesses, ports and others, as anyone whom he talks to will confirm. We have articulated that clearly. We identified the risks—as I did in my statement and as I have done previously—around the free port model globally. We worked extensively, with the team in the Government and beyond, to understand the opportunities. I have, as I said, listened very closely to business throughout the extensive engagement on the process, over the past year and a half.

We have been clear about our red lines—on fair work, on the real living wage, on a commitment to net zero, on having an equal say in designation and on the UK Government putting in, in Scotland, funding that is equal to what it has put in in England.

It is the UK Government that has been slow to come back to the table. I wrote to the UK Government on 27 February 2021, but I got no answer. I wrote again on 5 March, but I got no answer, and again on 12 March, but I got no answer. I wrote again on 24 March—to try to get something away prior to the election period—but I got no answer. Immediately when I came back to Parliament on 11 May, I wrote to the UK Government, but I got no answer, and I wrote again on 22 June, but I got no answer. I wrote to the UK Government six times, and its silence was deafening.

I had a discussion with the Chief Secretary to the Treasury, Steve Barclay, back in February 2021—more than a year ago—when we had a deal laid out. However, for some reason the UK Government pulled the plug on that: the deal was supposed to have been announced by the Chancellor of the Exchequer, Rishi Sunak, in the budget in March 2021, but the UK Government pulled the plug. The UK Government has been disconnected internally on the issue. It has been unable to come to the table and has been unable to come to a negotiating position.

In contrast, the Scottish Government—including me, the Cabinet Secretary for Finance and the Economy, the First Minister and others—has at every stage of the process been very clear and consistent about what would be required in order for us to agree to the green port model. As I have laid down, the red lines have not changed.

I am thankful that, in November last year, the UK Government came back to the table. It approached us and said that it wanted to reopen negotiations, because it recognised that our proceeding on our own with the green port model—which is exactly what we were on course to do, towards the end of last year—was a suboptimal solution for business in Scotland, and that it would look very stupid indeed had it not committed to the situation. That is the reality.

Minister, I ask you to wind up your response.

Finally, I say that we are absolutely committed to bringing foreign direct investment into Scotland. That is why, for seven years in a row, Scotland has been, and continues to be, the best-performing part of the UK in attracting foreign investment.

We have a lot of questions to get through, so I would appreciate more succinct questions—and, indeed, more succinct answers, minister.

I thank the minister for advance sight of his statement.

The ability of our two Governments to argue about almost every issue means that Scotland’s ports find themselves months behind England’s in developing free ports—or green ports, as the minister referred to them. There remains a lack of clarity on the fair work requirements. In his statement, the minister, somewhat vaguely, said that

“applicants will want to refer”

to fair work criteria and should

“aim for the ... highest standards in fair work practice”,

but it is not clear what, if anything, will be legally binding.

Will the minister say whether successful bids must include commitments on workers’ rights, including the ability of trade unions to access sites and organise in green ports? Given that the minister has not even met trade unions that represent workers in Scotland’s ports to discuss green ports, will he not only do that but confirm that application criteria on fair work will be legally binding and agreed with the trade unions?

We know that Green MSPs say that they do not support green ports. Can the minister confirm what the estimated total value of the Scottish Government’s financial contribution will be to green ports and whether that funding was included in the recent Green-Scottish National Party budget?

Yesterday, Conservative MSPs ruled out supporting bids from about seven of the nine areas that have so far expressed interest in having green port status, including Cairnryan in my South Scotland region. Will the minister ensure that support for the economies of more peripheral areas, where there are, arguably, the biggest economic challenges, will be part of the application criteria?

I am conscious that the audio was not brilliant, but I hope that you got most of that, minister.

I got the gist of it.

We have been absolutely clear, in my statement today and throughout the process, that fair work and payment of the real living wage will be essential in any bids that come forward. As we have secured equal partnership with the UK Government in the decision-making process, we have signalled clearly that we will not support bids that do not meet those criteria. That is absolutely clear. We are very proud of the work that we are doing on conditionality, with regard to fair work and the real living wage. The green port model is absolutely part of that.

I have engaged with trade unions extensively throughout the process, through four meetings with trade union representatives and a separate meeting with a wider stakeholder group at which trade unions were present. Trade unions have been very much part of the process. I am very clear about their desire to protect workers’ rights, to protect environmental and other standards and to see no degradation as a consequence of the model’s operation. It is our ambition that the model will be not a race to the bottom but—as I said—a climb to the top. We are committed to continued working with trade unions to ensure that that is the case.

Colin Smyth raised the issue of displacement. As I said my statement, we are conscious of that. We see this as an opportunity to attract into Scotland more investment, more business and additional jobs, not to move business around in Scotland. As I have said, bidders will be required to say what consideration they have given to the risk of displacement and how they will seek to mitigate that risk.

On the financial contribution, my colleague the Cabinet Secretary for Finance and the Economy will be working through the detail of that. Clearly, it will depend on the successful bids. The types of businesses in green ports will influence the extent of the reliefs that will be in place. That will be an issue not for this year’s budget but for future years’ budgets.

Can the minister provide more information on the economic incentives that will be provided to green ports to encourage business growth and economic development? Will scoring systems for the two locations fully consider local economic and social conditions?

The two green ports will benefit from a comprehensive package of support, including additional revenue support to establish governance structures and business plans; substantial seed capital for land assembly and infrastructure; reserve tax reliefs in respect of capital land and structures; national insurance relief; customs easements; and devolved tax relief in respect of non-domestic rates and of land and buildings transaction tax.

On the plans and circumstances of the winning bids, we will also look closely at how mainstream economic development support from the Scottish Government and the enterprise agencies could increase the bids’ impact on the ground. We will consider whether additional targeted support—for example, in skills development—could also supplement the package that is on offer.

I am happy to confirm that local economic and social conditions will be taken into account in assessing the strategic context for the bids, and that regeneration and job creation will be the lead objectives of the programme.

Jamie Halcro Johnston also joins us remotely.

The statement claims that operators can expect a wider package of development support from Scotland’s enterprise agencies, local government and others. Given that the Scottish Government has squeezed the budgets of our enterprise bodies and local councils, is the minister suggesting that additional money will be made available to them to fund support and, if so, how much? Given the progress that has been made elsewhere, can the minister confirm when, next month, the application prospectus will be published, when a request for bids will be opened and closed and what his projection is of when the winning bids will be effectively operational?

I thank Jamie Halcro Johnston for his question. Again, the sound quality was not great, but I think that I picked up the gist of it.

Funding from enterprise agencies and others will depend—as always—on the quality of the bids and how they comply with the scheme’s strategic objectives and those of the enterprise agencies. Applications for future funding will be dependent on individual circumstances.

On the timing of the bid prospectus, we are working with the UK Government. The two partners will have an equal say on how we will move forward together. The full timetable will depend on both Governments agreeing on all aspects of the detail. That process is well in progress. I expect that the bid prospectus will be launched during the course of March and that, by the summer, bids will have been submitted, with decisions being made shortly thereafter.

At another time, I will be interested to hear Jamie Halcro Johnston’s reflections on Liam Kerr’s comment that the Conservative Party has decided to support the Aberdeen bid. I assume that is in preference to bids from Orkney, the Shetland Islands or other areas in the region that the member represents.

As the minister said in his statement, it is important that steps are taken to avoid the possibility of green free ports displacing economic activity. Can the minister say any more about the steps that can be taken to ensure that green free ports make an additional contribution as opposed to displacing activity?

As I said, the Scottish Government will not support any bid that does not feature a clear and commitment to fair work practices, including the real living wage and other elements of the fair work first agenda. We are also very clear that we will look at the bids carefully in order to understand that displacement activity has been considered within the offers that come forward and that steps are in place to ensure that there are safeguards against the displacement of economic activity.

The next three speakers join us remotely.

I echo Colin Smyth’s plea on behalf of peripheral communities where the benefits of these ports could have a far greater regional impact. When will decisions be made about where green free port status will be allocated and how will decisions and agreement be reached between the two Governments?

As I said, the process is moving forward at pace and both Governments are agreeing on the details as we take the matter forward. I expect the final two designations will be indicated later this autumn, once we have gone through the full process. The bill prospectus will lay out in detail how the process will be taken forward and how bids will be scored. That will be launched at some point in March.

I am well aware of the issues that have been raised. With this initiative, we are seeking to ensure that Scotland is able to compete on an international stage. The quality of the bids that come forward will be judged on that basis as well as against the other criteria that I have already identified. We are very conscious of the need to mitigate displacement and the impact that the model could have. That is why we are being very careful to guard against displacement activity.

Can the minister give any reassurance to ports not in the running to be designated as a free port that are concerned that they might be negatively affected by the scheme?

Businesses, ports and others have raised that concern with me. As I have said, we believe that what we are doing with the green port model is absolutely the right thing to do to put Scotland in a competitive position internationally. My priority is to ensure that the ports are beneficial to the national economy and wider supply chains throughout Scotland.

All ports are, of course, welcome to apply alone or in partnership. When we are clearer later in the year about where the two green ports will be, that will be the time to have a look at the impact of the designation and how it plays in the wider context across all Scotland’s ports and in the wider ecosystem to ensure that, as Emma Roddick has said, ports that are not successful are supported to take forward their business expansion plans.

I thank the minister for the advance sight of his statement.

The minister will be aware of the Scottish Greens’ very strong opposition to free ports. I will not rehearse all our reasons for that now, but I must make it clear that what we have heard today does not do enough to challenge the fundamental functions of free ports—that they facilitate and legitimise tax avoidance, poor labour conditions and environmental degradation. It is not enough that bids will

“aim for the very highest standards in fair work practice”;

we must demand and require that companies meet those high standards. Our workers and trade unions deserve nothing less.

Are not the proposals just a UK Government Brexit project that has been greenwashed and that will result in tax avoidance and the loss of public resources and commons wealth to the private sector?

No. I know that the Greens support fair work and payment of the real living wage and accelerating conditionality to deliver that. The green port model delivers that. I know that the Greens are in favour of accelerating our move towards net zero and requiring businesses to come forward with plans to deliver on that. The green port model delivers that. I know that the Greens are in favour of building Scotland’s industrial base so that we can benefit from the development of offshore wind in particular and other sectors and technologies that are focused on net zero. The green port model delivers that. I know that the Greens are in favour of supporting business where that makes sense to enable Scottish businesses to take advantage of those opportunities. The green port model delivers that. The model is also very clear about there being no degradation of worker rights or environmental standards.

Frankly, I am a bit perplexed about why the Greens do not support the green port model, given that it ticks all those boxes in respect of their requirements for such a model.

Does not the previous exchange show the complete irrelevance of the Greens in government and that they cannot have any influence over Government policy?

The Government has a shocking record in the area. It spent millions of pounds failing to save Burntisland Fabrications, but the site owner, InfraStrata, is now recruiting from abroad because the Government did not train enough workers to build the tiny number of turbine jackets that are being built in this country. Is the Government going to get anything out of the free port/green port deal, or will that simply be a repeat of the BiFab shambles?

We are hugely focused on delivering and maximising opportunities for Scotland from the policy and from other opportunities that present themselves as a result of the transition to net zero. I am working with my colleague Michael Matheson and heading up a working group that is looking to ensure that we can maximise the benefits for Scottish businesses and that they are well prepared with the capacity, capability and skills in place to take advantage of those opportunities as they come forward.

Skills development is absolutely key to the transition, of course. I do not need to rehearse—indeed, I do not have the time to list—all the Scottish Government’s initiatives to ensure that we have the skills in place to support a fair transition to net zero. The green port model is another tool in the box and another opportunity for Scotland to further build on the very promising offshore wind sector and other sectors in the transition to net zero. That is what the model is focused on. It is taking forward that agenda, delivering for businesses, ports, communities and workers throughout Scotland, delivering on the fair work agenda, delivering on economic development, and delivering on the transition to net zero.

Three more members want to ask questions in a minute and a half. I am prepared to go over the time a little, but I repeat my plea for as succinct questions and answers as possible.

How will green ports contribute to the exporting infrastructure that an independent Scotland will need?

Our objective is to build Scotland’s economy and make it as strong as possible so that, when we become independent, we have an economy that can compete internationally. Much of that is already in place. The initiative will help to further cement that, enhance Scotland’s international competitiveness in the key sectors that were identified in my statement, in which Scotland has genuine global advantage, and build our economy to face the net zero future. As such, the initiative provides an important platform and an opportunity for an independent Scotland.

Greenock, on the Clyde coast, has a long, proud and industrious history of maritime trade, with deep coastal waters, border checks and transport links. It already has much of the infrastructure that would be needed for a huge investment of the sort that we are discussing. We also desperately need jobs and investment. Would the Scottish Government support, in principle, a Clyde port bid of this nature? Would the minister work constructively with all parties to ensure that we can bring that much-needed opportunity to my region?

I thank the member for the very positive way in which he framed his question, unlike some of his colleagues. I would be delighted to work with him to look at the opportunities within his region, as I would be to work with ports across the country. I have met representatives from some and intend to visit others over the coming months. I am always open to constructive discussion to support Scotland’s economic development.

I would be interested to know what Jamie Greene thinks of Liam Kerr yesterday committing the Conservative party to supporting the Aberdeen bid to the exclusion of all others.

It is important that green ports make a beneficial contribution to the Scottish economy by offering inclusive growth. Exactly how will growth be measured to ensure that the benefits are accrued to Scotland’s balance sheet, given the complex supply chains that might be involved?

Ensuring that Scotland’s wider supply chains benefit from the two new designated green ports will be of critical importance. Accruing that broad economic benefit is part of avoiding the displacement effect. The applicant prospectus will ask for commentary on bidders’ plans in that respect.

I strongly agree that we must deliver benefits for the communities around the new sites. I want to see net new jobs being taken up by local people who will enjoy good pay, terms and conditions.