Meeting of the Parliament (Hybrid)

Meeting date: Tuesday, September 1, 2020

Official Report 872KB pdf

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Logan Review (Technology Sector)

The next item of business is a statement by Kate Forbes on the Logan review in the technology sector. The Cabinet Secretary for Finance will take questions at the end of her statement, so there should be no interventions or interruptions.

16:58  

Coronavirus is, first and foremost, a crisis of public health, but it has also emerged as the defining economic challenge of our time. Its impact is already devastating, and that will continue to unfold over the coming weeks and months.

The Scottish Government tackled the immediate crisis head on. We moved swiftly to inject £2.3 billion into the economy to preserve businesses, protect jobs and provide new opportunities for reskilling. Today’s publication of the programme for government marks the beginning of a new phase of Government action in which we look beyond crisis management to Scotland’s economic future.

Over the past few months, we have seen businesses, through necessity, embrace new technologies at pace and at a scale that would normally have taken years. Members will be as proud as I am that so many businesses chose to pivot their operations to serve our national health service. They have innovated to save jobs and lives.

We are seeing a blurring of the distinction between tech and the traditional. The everyday economy is striving to maintain productive capacity, just as our most inventive tech minds seek to ignite innovation in sectors as diverse as finance, healthcare and tourism.

The lesson is clear: against the backdrop of the pandemic, there will be acceleration in the global trend towards innovation-led economies. Scotland has nothing to fear from that future—few nations do innovation and ingenuity as well as we do.

However, that means that our recovery cannot be built purely on restoration of the status quo. What we require is economic renewal. That means moving with vigour towards a high-tech, low-carbon economy that creates high-value jobs and harnesses the power of technology as a force for social and economic good.

To realise that vision, we need to catalyse our most innovative emerging sectors, and to ensure that they maximise both their individual potential and their capacity to drive growth and job creation across the whole economy. That is why, in July, the Cabinet Secretary for Economy, Fair Work and Culture announced a new £38 million package to support early-stage high-growth businesses.

It is also why, earlier in the summer, I invited Mark Logan to conduct a review of Scotland’s tech ecosystem. As members in the chamber will know, Mr Logan brings a wealth of experience that has been accumulated through 30 years of building Scottish start-ups that perform on the global stage. That culminated in the success of Skyscanner, which remains to this day one of the most significant European tech unicorns ever created. He is widely respected across industry as an investor and adviser, and is passionate about creating an ecosystem that provides a new generation of tech talent with the opportunity to replicate his success. I put on record my sincere thanks to him for his time and his dedication to the review, which was published last week.

Seldom have we seen a report attract such universal acclaim, with key figures from across business, technology and academia endorsing it as being potentially transformational—and with good reason. It is a work of intellect and ambition that makes 34 detailed recommendations that lay down challenges to Government, universities and industry across the key themes of talent, infrastructure and funding.

Mr Logan defines a clear and simple purpose for the ecosystem: it is to produce a consistent

“stream of technology start-ups that reach sustained profitability, including a significant proportion that do so at scale”.

He dismisses complacency with a sober analysis of Scotland’s current performance. Yes—we have had some high-profile successes, but that must not obscure the fact that too few of our best start-ups and university spin-outs succeed in the long term. That is costing us in growth, jobs and tax revenues for reinvestment in a better Scotland.

The report goes on to explain the differences between “post-tipping point” ecosystems, such as London and silicon valley—which achieve a critical mass of investable start-ups, capital and talent—and high-potential “pre-tipping point” tech hubs, such as Scotland. The review’s objective is to identify the actions that are necessary to nudge Scotland over that tipping point.

In the programme for government, we have committed to multiyear, multimillion-pound investment to implement the recommendation to establish a national network of tech scalers. Such facilities are the report’s centrepiece, and would transform the quality and intensity of support that is available to Scotland’s start-ups. In addition to networking, meet-ups and cross-pollination of ideas, they would deliver formal world-class founder education, which would potentially be secured on a national licence from the best providers in silicon valley. Those are powerful commitments that will put the wind of silicon valley commercial technique in the sails of Scottish ingenuity.

Over the next five years, we will also invest in the creation of an ecosystem fund. The fund responds to multiple recommendations, and will be used to make strategic investments in the organisations and activities that create the best possible environment for our start-ups to succeed. Examples include learning from the Finnish model of investing in key tech conferences to attract talent and external capital, programmes to increase the volume of new start-ups emerging from universities, and extracurricular activity in schools to ignite pupil interest and tackle gender imbalance.

We also accept Mr Logan’s view that, in the context of the pandemic, we need to do more to help people to get the digital skills that are necessary for them to enter high-value employment in the technology industry. To that end, we are actively considering how immediate action could be taken through the recently announced training transition fund.

The review sets out proposals for a series of radical interventions across the education system, as it relates to teaching of computing science and related disciplines. However, a hallmark of the review’s quality is its refusal to engage in oversimplifications.

Mr Logan acknowledges that the challenges can be met only through investment of significant time, energy and resource. He places a mutual obligation on Government, educators and industry to work together to deliver progress.

Although we might differ on points on implementation of the recommendations, we do not shirk from the overall challenge. To paraphrase Mr Logan, the Government is prepared to do its part in bringing to life the inherent magic of software development. I am pleased to confirm that the Deputy First Minister is fully engaged with the report, and has already held discussions with Mr Logan about next steps.

In such a short statement, it is possible to offer only a snapshot of what is a very detailed and inventive analysis. There are more recommendations on matters as diverse as improving start-up infrastructure in universities, collaboration with investors, and more effectively harnessing the strategic value of the Scottish diaspora.

That is why, in line with Mr Logan’s advice, we will establish a formal partnership with the tech industry in order to drive progress on the recommendations for which a sustained implementation programme will be required, in order to achieve the necessary outcomes. We are working with Mr Logan to develop that model as a matter of urgency, and will make further announcements in due course. Let there be no doubt, however, that the Government will do what it takes to ignite Scotland’s rise as a first-class start-up nation.

It is my hope that members have been as refreshed as I am by the excitement and optimism that have been provoked by the review. I share that excitement. We have an opportunity to advance a model of economic development by which we not only back singular programmes for incremental progress, but by which we make more systematic interventions that are co-designed by and co-delivered with industry, investors and academia.

I have had responsibility for tech from the very beginning of my ministerial career. I have often said that I consider it to be one of the most exciting portfolios in Government. I am consistently inspired, not just by the community’s creativity and imagination, but by its desire to use those gifts for the good of our country.

What we have lacked is what Mr Logan has now given us: a compelling blueprint with which we can channel that collective energy and spirit. I look forward to getting started.

Thank you very much, cabinet secretary.

The cabinet secretary will take questions on issues raised in her statement. I intend to allow about 20 minutes for that, after which we will move on to the next item of business. Members who wish to ask a question should press their request-to-speak button now.

I thank the cabinet secretary for her statement, and for advance sight of it. I agree with her about the value of the excellent report by Mark Logan. It contains some very good ideas about how to sustain and grow a vital sector in which Scotland already has a strong track record.

In particular, I welcome the recommendations on how to better attract investment in new start-up companies. That has been a challenge for as long as I can remember our having economic debates in the Parliament, which is quite a long time. The question how we better support and nurture our home-grown talent has always been a feature.

On education, according to the latest statistics, the number of computing science students in our high schools fell between 2017 and 2018, from 4,476 to 4,099. More worryingly, however, over a much longer period—the 10 years from 2008 to 2018—the number of computing science teachers fell by nearly 25 per cent, from 766 to 595. What practical steps are being taken to reverse that concerning trend in our schools?

In the spirit in which they were asked, I thank the member for both questions.

On the value of the report, Murdo Fraser talked about the need to attract investment. A fascinating element of the report is the comment that it is not necessarily the availability of investment that is at fault—there is public and private investment out there—but the availability of a steady stream of investable propositions, and the ability to take start-ups through the various levels of growth, so that they emerge as successful large companies. That is what we will seek to do with the tech scalers that we will invest in.

Murdo Fraser is right to comment that education is a core element of the review. In the past few years, we—like many Governments around the world—have taken steps to ensure that computing studies are part and parcel of the curriculum. Part of the challenge is to ensure that there are sufficient computing science teachers, given that the pace of change in the tech industry is extremely quick and there are a lot of attractive career options for those who have done computing science at university.

Through our STEM—science, technology, mathematics and engineering—strategy, we have taken steps to boost the number of people who go into STEM teaching, including computing, in the first place. The obvious example is the £20,000 bursary that is offered to those career changers who want to train to teach those subjects.

At its core, the report highlights the need to inspire pupils to continue with computing science and to inspire teachers to recognise the exciting job opportunities for their pupils. Its recommendations for how we enthuse and inspire people in order to attract more youngsters and teachers will be part of the agenda that we take forward.

I call Rhoda Grant, to be followed by Kenneth Gibson.

It seems that we do not have any sound from Rhoda Grant. We will take Kenneth Gibson next, and come back to Rhoda Grant when we can.

I welcome the cabinet secretary’s statement. The Logan review makes it clear that Scotland’s high-tech start-ups must meet the standards of global best practice in order to be competitive. It is clear that the cabinet secretary does not want Scotland’s role to be primarily one of nurturing new high-tech companies while anticipating that many of them will, in time, likely relocate elsewhere, as has happened so often in the past. How does she plan to develop technology clusters that will grow and be sustainable in Scotland? What support, both practical and financial, will be made available to enable that to happen?

I agree with Kenneth Gibson’s analysis that we do not want simply to nurture high-tech companies that then leave and relocate. Covid-19 has shown us that business, and tech businesses in particular, can operate successfully and continue to grow remotely. I hope that the implementation of the report’s recommendations to enable start-ups to flourish and grow will mean that businesses stay in Scotland.

I will make two points in direct answer to the question. First, the report is not overly prescriptive with regard to the development of clusters. Instead, it seeks to provide the support and mechanisms that will enable the industry to grow more generally and enable sub-sectors to develop. Secondly, the ecosystem fund that I announced today will be a central point for that support, which will enable us to make strategic investments in organisations and activities that will create the best possible environment to allow our start-ups to succeed.

I hope that putting in place the right environment and education will, in parallel with the tech scalers, mean that we have highly successful companies at a much faster start-up rate.

Earlier today, the First Minister said that the Logan review would be implemented in full. Recommendation 18 of the review is for a reduction in intercity rail travel costs. I ask the cabinet secretary: when, by how much, who will fund it and what will the total cost be?

As I said in my statement, we have accepted Mark Logan’s analysis and the need to implement the recommendations. With regard to the substance of those recommendations, our point is that we want to get to the same outcome.

On intercity travel, Mark Logan makes the point that we have two cities, one of which—if I can say so without offending the other—has become very well known for its start-up culture and has produced a lot of impressive tech businesses, and one of which needs a little bit more assistance. The point is to ensure that we do not focus only on one city in Scotland. Instead, through the tech scalers—we have announced five locations today, which include Inverness and Glasgow along with other cities—we will ensure that the opportunities are spread throughout Scotland, rather than concentrated in one wonderful city.

Scotland has a world-beating reputation for leading in computing science and technology. Does the cabinet secretary agree that collaboration between schools and further education is a major contributor to that?

Yes, and that is highlighted in this independent report. That goes to the question that Murdo Fraser asked, because inspiring teaching is key to engaging children and young people in the first place. That is why, as I said at the outset, it is important that the Deputy First Minister has already been in follow-up discussions with Mr Logan.

We will respond to the detail of the recommendations in due course; I received a copy of the report only last week, when it was published. We have already refreshed the curriculum to introduce the fundamentals of computing and cyberskills from the earliest years onwards, and we are doing what we can to attract more computing teachers in. However, a lot of the best work going on right now is in the extracurricular space, where schools and the tech industry are working very closely together to inspire young people.

I welcome the report and the cabinet secretary’s statement. For many years, employers have told me that it is difficult to get information and communications technology graduates. I have often wondered why we do not take action on that, so this is refreshing and I am excited about the report.

The Child Poverty Action Group recently produced a report that included the finding that low-income families are twice as likely to say that they lack all the resources needed to support learning at home during Covid. And it is not just at home that there is a digital divide. The cabinet secretary talked about igniting the interest of schools and pupils, as well as tackling gender imbalance, but the digital divide is also an income imbalance, because people on low income can be unable to access ICT and the internet. What are we going to do about that? Would it not be a good start to instruct education authorities to audit every school in the country, including teachers, so that we know which schools have got appropriate ICT and which have not?

Alex Rowley is spot on in talking about the digital divide, which is why it was very appropriate that, earlier today, when she set out the programme for government, the First Minister also announced the connecting Scotland programme, which is focused on reaching 50,000 people who are currently digitally excluded with the hardware that they need—the laptops, iPads or whatever—and the digital skills to make use of it. The challenge that we have seen throughout the pandemic is that so much has moved online that it has exacerbated digital exclusion.

The report must go hand in hand with the work that Aileen Campbell and I are doing around digital exclusion. Mr Rowley started his question by talking about the difficulties in recruiting tech grads. That is a point. If we are to expand the pool of available talent, we should be working with young people, whatever their background, to ensure that they have the skills to go on and have a relatively high-value job in the industry.

Technology has immense potential to help us to tackle the climate emergency, so I was a little surprised that the report includes only two throwaway references to the subject, one of which is completely meaningless while the other is used as cover for a request for aviation growth. Is that the inevitable consequence of commissioning a report from someone who made their name from finding clever new ways to flog cheap airline tickets?

I agree with Patrick Harvie that high-tech growth is a very effective means of delivering on our low carbon aspirations. I take his point that that never happens accidentally; it has to be intentional from the outset. Something as basic as people working from home and accessing work, markets or customers without having to travel and increase transport emissions may seem like a trivial example, but it is indicative of the potential of using tech to meet our low carbon aspirations. We have to use all the levers and resources at our disposal to meet our net zero target. If we do it right, I see hi tech as a means of improving our productivity and reducing our carbon emissions.

I, too, welcome the report. What the cabinet secretary said about the gender imbalance in tech education is true, but the imbalance goes further than that. The report states:

“In industry as a whole, women found 20% of our businesses but receive 1% of total investment capital”.

It also states that the Scottish Government and Scottish Enterprise

“should consider creating a specific vehicle to make seed investments in technology start-ups founded by women, to contribute to rebalancing this aberration.”

Will the Scottish Government accept and implement that recommendation?

As Rhoda Grant says, one of the recommendations in the report is to look at how we ensure a reduction in the gender gap, not only in terms of women going into the workforce and starting a business but in their being able to attract investment. That has also been one of the Scottish Government’s priorities. We have long worked to tackle, at a much earlier age, the gender gap in participation in STEM subjects so that participation flows through beyond school. The short answer to Rhoda Grant’s question is that, yes, we will see how we can work with that recommendation to reduce the gender gap.

As people develop digital businesses, slow internet speeds are hampering opportunities for innovation and transformation, but the promise to deliver superfast broadband by the end of 2021 in the north of Scotland will not be met—we are now looking at 2023. How will the Scottish Government make sure that rural and island communities such as those in my constituency are fully included in the blueprint that will be taken forward?

I have visited very exciting tech businesses—some of the most exciting businesses that I have seen—in Beatrice Wishart’s constituency and, slightly further south, in Orkney. Because they are able to operate on a global scale yet are based on some of our islands, they are an advert for the potential of using technology to reduce depopulation.

Having announced it a few days ago, today we re-emphasised the voucher scheme to help those who do not have superfast broadband to get it. I recommend that Beatrice Wishart and her constituents look to that scheme. Of course, our objective is to deliver superfast broadband to every household in Scotland.

I welcome the suggestion, on page 39 of the report, of “self-organised tech” meet-up points giving

“free meeting space and resources”.

That is clearly part of an across-Scotland approach to creating hubs for entrepreneurs. Can the cabinet secretary advise how many jobs might be created directly from the creation of hubs across Scotland? I am thinking particularly of those that might come out of the back end of the funnel that the Logan report refers to, which are permanent, international-standard jobs that we can keep for generations.

The potential for job creation is enormous. We aim to support between 300 and 500 companies through the tech scalers programme, providing world-class training and mentoring for entrepreneurs in the hope that their businesses go on to grow, develop and employ more people. The initial aspiration would be for approximately 50 jobs, knowing that that is a very immediate start and that the number can only grow.

I, too, welcome the report, which is a good commercial guide for the Government to take forward. Does the cabinet secretary recognise that leaving the European Union might afford us greater opportunities to attract the best in global tech talent, given that the four major exporters of tech graduates—Russia, China, the USA and India—are all outwith the EU? Will she be looking to negotiate national licences with other countries—as the report recommends—to give our entrepreneurs access to the training materials and resources that are currently used in places such as silicon valley? How quickly will she set to work on that?

The thing that would make the biggest difference in attracting international talent would be ensuring that people could access visas in the first place. As the First Minister said earlier, if this was the programme for government of an independent country, we would start by having a more positive approach to immigrants and to attracting the skills and talent that we need to build a successful tech industry and grow the economy.

On the second part of Michelle Ballantyne’s question, my ambition is to get to work on the recommendations as quickly as possible, knowing that it is not just up to the Government to implement them and that we have to work collaboratively with industry and academia to make progress and reap the benefits of what the report has to offer.

What plans does the Scottish Government have to support those who have an interest in pursuing a new career in technology and the growing digital sector in Scotland, including software development? Will she consider a more balanced distribution of the tech scaler locations, so that the south-west of Scotland is included?

On the second point, as a Highland representative, I am always keen to ensure that there is support and investment outside the main urban centres—that is one of my priorities.

To support those who want to change their careers—the situation is acute right now for those who have been affected by the pandemic—we have announced the transition training fund, which will help to re-skill those who have been impacted by Covid-19 and help them to move into paid work in high-growth areas such as technology.

Recommendation 16 of the review highlights that the introduction of a Scottish tech visa would be a highly desirable mechanism for attracting international talent to Scotland. Will the Scottish Government make such a proposal to the UK Government? Does the cabinet secretary agree that, with the powers of independence, a tech visa could be a pathway to Scottish and European citizenship for talent in other parts of the UK seeking an alternative to the bleak isolationism of Brexit?

As is demonstrated in other countries, the tech visa has the potential to transform the talent pool that is available and ensure that we can grow. I will certainly make that case to the UK Government, although probably without any great optimism that it will lead to change, given that we have long stated that the current UK Government’s immigration proposals are wrong for Scotland and threaten to cause serious and lasting harm to the tech industry and several other important sectors. It is not just me making that point—academic and business representatives make that point, too. Our demographic and economic needs are not the same as those of the rest of the UK, and a one-size-fits-all approach is not appropriate.

We will consider how we can use elements of that recommendation to ensure that we are attracting talent. However, without the immigration levers, it is a lot more difficult.

That concludes questions on the statement.