Meeting of the Parliament (Virtual)

Meeting date: Thursday, January 21, 2021

Official Report 1022KB pdf

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Place-based Economic Development Zones

Good afternoon and welcome to this virtual meeting of the Scottish Parliament. The first item of business is a statement by Ivan McKee on the contribution of place-based economic development zones. The minister will take questions at the end of his statement.

Today, I have published “Scotland’s Economic Performance - The contribution of place-based economic development zones”, which is an analysis of the findings from a survey conducted at the end of 2020. I welcome the opportunity to set out some of those findings and the next steps to Parliament.

The survey sought the views of businesses, local authorities and other partners on how we might develop future plans to nurture Scotland’s regional and local economies. I thank everyone who responded to the survey.

The survey was conducted for two principal reasons. First, in mapping out the future of the current network of 16 enterprise areas across Scotland beyond March 2022, we wanted to obtain views on the efficacy of the enterprise area model and how it, and other place-based economic development initiatives, could be improved to support delivery of our fair work first and net zero agendas. Secondly, we wanted to obtain views on the merits or otherwise of United Kingdom Government plans for free ports and how they might work in the Scottish context.

The Scottish Government is clear that all our efforts to develop Scotland’s future economy must enable an inclusive and sustainable recovery from the impact of the Covid-19 pandemic, with wellbeing and fair work at its heart. The hallmarks of that recovery will include the creation of new jobs, good jobs and green jobs, which we adopted as a national mission in our programme for government.

For now, Scotland finds itself outside the European Union and denied all the benefits of being within the single market and the customs union. The UK Government has cited the creation of free ports as something that is made possible by Brexit—that is, a new ability following our collective, enforced departure from the EU. Its narrative ignores the inconvenient fact that free ports operated in the UK while we were in the EU, and that they still exist across the EU. In that sense, they are being oversold as a Brexit dividend.

With that as our backdrop, the Scottish Government will leave no stone unturned in seeking to create a technology-enabled, net zero, inclusive wellbeing economy that delivers for every place and community in Scotland.

The very helpful returns to our survey have helped to frame our thinking and will be used to inform the Scottish Government’s policy position. The approach that I am setting out today is one that is informed by a range of opinion and knowledge from Scottish stakeholders.

In general, respondents were supportive of the development of a tailored Scottish approach to the free port model, tied to Scottish Government policy priorities around inclusive growth, fair work and the just transition. Some of the comments highlighted Scotland’s natural advantages around renewable energy and net zero transition activity and reinforced the need to create high-value jobs. Some respondents also reflected on the impact of Covid-19, in terms of the impact on current activity and timescales for progress in that area and the importance of new interventions to help with economic recovery.

We are already taking a range of initiatives to grow regional and local economies. We provide incentives and assistance to encourage cluster building through the enterprise area network. The importance of building on the strengths of places was reinforced in “Shaping Scotland’s Economy: Scotland’s Inward Investment Plan”, which identified opportunities for cluster building based on our strengths in high-technology, high-productivity and high-wage sectors.

Every part of Scotland has a commitment to new investment through the city region and growth deal programme. Many deals are in delivery, with communities beginning to benefit from a commitment of more than £1.9 billion of Scottish Government investment. We have worked with the UK Government and our regional partners to assemble a £5 billion programme over the next 10 to 15 years. Building on that partnership working, we have considered whether the UK Government free port proposition can fit our model of economic development by helping to drive inclusive and sustainable growth in Scotland.

The reputation of free ports across the world is mixed, with concerns having been raised about deregulation and the risks of criminality, tax evasion and reductions in workers’ rights. That is not a model nor an approach that the Scottish Government will sign up to or allow here in Scotland.

We have considered carefully those risks and the views that were shared through our survey, and I can confirm that the Scottish Government, having looked at the available evidence, has developed a proposal that adapts the published UK Government proposition to make it fit the Scottish context. We will take the UK Government’s free port model and apply Scotland’s values and priorities to it, so that it meets our ambition to deliver a net zero economy and uphold the highest standards of environmental protections and fair work practices.

I can announce that Scotland will turn free ports into sustainable and fair green ports. We will not engage with any economic model or mechanism that allows for a race to the bottom. Instead, the Scottish green port model will be an exemplar, adopting best practice to help us to deliver our net zero and fair work principles alongside support for our regeneration and innovation ambitions.

The designation of a green port, or operating within such a zone, will come with benefits and incentives. It is therefore right that it also comes with responsibilities to uphold high standards, put into practice our fair work principles and work towards a just transition to net zero.

We are conscious of the need to avoid economic displacement within and from Scotland. Scotland’s model will seek to anchor our newly designated economic development and trading zones. They will be designed to support the development of innovative industries that are committed to developing new green technologies and fair work opportunities, and to embedding themselves in the local communities in which they are based.

I am confident that we can align key elements of the UK model with our Scottish values to make sustainable and fair green ports work. The Scottish green port model will include the following key features. Clear conditions will be applied to ensure that such zones contribute to sustainable and inclusive growth. The conditions will centre on specific commitments being made by applicants, and subsequent obligations will be placed on successful applicants, which will be linked to a dual commitment to supporting decarbonisation and fair work. The conditions will include payment of the real living wage and the adoption of the Scottish business pledge by the operator of the zone and by all new businesses operating within the zone boundary that benefit from any governmental assistance through devolved or reserved tax incentives.

Applicants or applicant partnerships and new beneficiary businesses that are set up in the zone will also be expected to demonstrate how they are contributing to Scotland’s just transition to net zero emissions and a low-carbon economy—for example, by meeting certain standards related to reductions in greenhouse gas emissions and waste. Under the model, applicants will be required to set out a robust and ambitious transition plan to show how they will contribute to a just transition towards a net zero economy.

As is the case with the UK Government’s model, the incentives and support offered to Scottish green ports will be a mixture of reserved and devolved tax benefits and other support. Devolved tax benefits, which might include non-domestic rates and land and buildings transaction tax reliefs, will be designed specifically for the Scottish green port model, taking into account the complementary reliefs that are on offer from the UK Government.

From my discussions with UK Government ministers, I am confident that we can realise our proposition for sustainable and fair green ports and that we can create something inspirational. We can set the standard in accelerating decarbonisation, promoting job creation and fair work, and sending out a signal about Scotland’s commitment to being a dynamic, open and principled trading nation, with fair work and the planet’s future at the top of our priority list.

Equally, I am clear that we will not allow any free port to be created in Scotland that enables or allows potential tax evasion. I have raised that specific issue with the Chief Secretary to the Treasury. It will be essential that the UK Government plays its part by including firm legislation and measures to ensure good tax behaviours. More widely, our Governments will want to work together on compliance, governance and management of performance related to the operation of Scottish green ports and the business that is conducted within their boundaries. I am happy to keep the Parliament updated as that work develops.

Having published the responses to our recent survey, our next step is to publish an application prospectus for green ports in Scotland for potential bidders. I aim to make that available for interested parties this quarter so that we are in a position to dovetail the establishment of the zones with the UK Government’s plans.

Place-based economic development has significant potential to grow our economy sustainably in communities across Scotland, not least through our cluster-building approach to key sectors. Work in that regard is under way and is being marshalled in particular through the regional economic partnerships and Scotland’s inward investment plan.

Our green ports proposal also plays a role in that respect. We will now seek to optimise key aspects of the UK Government’s free ports model, principally around innovation and regeneration. In particular, we will ensure that Scottish green ports help to drive desirable investment and inclusive growth in a way that is focused on the Scottish Government’s twin ambitions of creating a net zero carbon economy and promoting fair work. For those reasons, this Government now intends to move forward with our proposals to secure the development of Scotland’s first designated sustainable fair green ports, based on the criteria that I have just outlined, and we would welcome the Parliament’s support in that endeavour.

The minister will now take questions on issues that were raised in his statement. I can take us up to 1.30 pm with that.

I thank the minister for advance sight of his statement.

This is a humiliating climbdown for the Scottish National Party. Just a few months ago, Ivan McKee was claiming that free ports were a “shiny squirrel”, and the SNP conference backed a motion slamming them, so this screeching SNP U-turn is very welcome. It seems that the SNP has finally realised that businesses are desperate to reap the benefits of free ports.

For months, the Scottish Conservatives and the UK Government have said that the SNP should stop playing politics and start working constructively to take the proposals forward. Yet again, the SNP has treated the proposals as an afterthought and ignored the benefits in order to make political points. Only now has it finally backed down.

[Inaudible.]—hope that that will help the SNP Government to improve its poor climate change record. The recycling rate is now lower than it was in 2016, and transport emissions—[Inaudible.]—jobs have never materialised.

Mr Golden—

Can the minister say whether the proposals for free ports will contain specific targets to reduce waste and greenhouse gas emissions?

I am sorry, Mr Golden. My microphone was muted; I say to the engineer that it should not have been. Unfortunately, delivery of your question was a bit intermittent, so I do not know how much of it the minister managed to catch.

Minister—did you manage to catch much of that?

I caught enough, Presiding Officer.

Okay.

To be frank, I am very surprised that Maurice Golden has not taken the time to read what we have actually said about free ports or green ports over the past few months. If he had done so, he would understand very well the Scottish Government’s position, which is that there is potential for economic development through adoption of a model that is designed—as I have just set out—to support and align with the Scottish Government’s economic priorities.

We have also made it clear—I made it clear in my statement that nothing has changed in this regard—that we understand that the UK Government is trying to position the policy as some kind of antidote to Brexit. As I said in my statement—as Maurice Golden would know, had he been listening—that is utter nonsense. The UK had free ports while it was in the EU; 80 free ports currently exist across the EU. The fact is that the UK Government is to some extent using the policy as a mechanism to take attention away from the disaster of its Brexit policy, which Maurice Golden supports.

We are considering practical measures, and we have taken the time to go out and engage with businesses. We have conducted a survey, and I and my officials have engaged extensively over a period of time in order to understand the practicalities regarding which parts of the free port model could be made to work in Scotland and which could not. My statement clearly identified which parts of the model can work, and what we need to do to adapt it to Scotland’s economic priorities, and to focus it on our fair work agenda and the net zero transition. Those two aspects do not appear in the UK Government’s model. We have gone beyond that model on those aspects in order to make it clear that green ports will be exemplars of fair work practice and of the transition to net zero, which is central to our economic development.

I make no apology for using the ports as a mechanism to support our clear focus on cluster building. Again, I say that if Maurice Golden had read our inward investment plan, he would understand exactly where the proposal is coming from and how it is centred in our economic development policies.

To answer Maurice Golden’s question, there will be measures within the model that is laid out in our bid prospectus that will require businesses and operators to comply with reductions in waste and greenhouse gases. That does not appear in the UK Government’s free port model.

A lot was said there. I want shorter answers. Many members want to ask questions.

I thank Ivan McKee for advance sight of his statement.

Labour will work with the Scottish Government to support the endeavours that were set out in the statement. Some dangers could arise from free ports: for example, regions might compete against each other in a race to the bottom, as has happened in some countries. It is important that Parliament comes together to put Scotland’s interests first. That is why we will work with the Government.

Does the minister understand that trade unions and workers see much of the talk about green jobs and green ports as mere rhetoric, because we do not see the high-quality jobs that he talked about materialising? We need to see some progress in that regard. Does he understand why people are concerned?

Does the minister also understand the important roles of local economic development services and local authorities? Local economic development services have been cut to the bone, so their capacity to drive development must be better supported. Is the minister willing to consider supporting councils to establish regional skills academies across Scotland, in order to ensure that our people have the skills to get the jobs?

We want shorter questions from now on. We are using up a lot of time.

I thank Alex Rowley for his positive contribution on the Scottish green ports model. I am willing to work with anyone in Parliament and across Scotland.

Mr Rowley is right that there are issues to address. We must ensure that the green ports do what we want them to do, and that they are exemplary in respect of fair work and our transition to net zero emissions. The bid prospectus that we are developing will make that clear and will include requirements for businesses and operators to meet our standards. I am happy to work with members to ensure that that happens.

I understand that unions and workers might be concerned by what they have seen of free ports in other jurisdictions. We are aware of those concerns and we are determined to ensure that what they have seen is not the case in Scotland. I am happy to work together with others to ensure that our standards are met.

I welcome the minister’s statement. Will Hunterston be considered as a potential green port, given the First Minister’s commitment to developing green energy and the circular economy there? Also, how will Scottish ministers ensure protection of the marine environment at our green ports?

Hunterston, like any other part of Scotland, can submit an application when we open the bidding process. I look forward to seeing any proposal that might come from Hunterston, along with many other proposals from across Scotland. The green focus that Kenny Gibson mentioned will chime with the requirements that will be set out in the bid document.

I assure him that there will be no reduction in existing marine protection standards, which will apply in order to ensure that Scotland’s green ports do not adversely impact on the marine environment.

I welcome the Scottish Government’s change in approach. The analysis of survey responses that has been published today shows that non-domestic rates relief was the most beneficial of all previous interventions. Given that non-domestic rates are a wholly devolved tax, can the minister outline how he intends to offer rates relief to support development of new free ports and to attract businesses to them?

Again, I am surprised that Murdo Fraser has not heard what has been happening in this conversation over the past few months. If he had, he would understand much better the Scottish Government’s position.

On Murdo Fraser’s question about NDR, I highlighted that aspect in my statement. We will, recognising what the UK Government has done for its free port model, work through the details of incentives and how they will be positioned to support the green port model in Scotland. The details will be articulated in our bid document, when it comes out.

The minister said that there are potential tax incentives—both reserved and devolved. Does that mean that the Scottish budget will be reduced and that the Scottish Government will have, for example, to reduce the national health service budget to match the tax incentives?

No, we will not do that. The point of economic incentives—be they tax incentives, incentives for businesses that are delivered through economic development agencies or other mechanisms to support business—is that businesses grow as a consequence of them and the tax take increases, too. That model applies to our enterprise areas and to any intervention that we make to support inward investment or supply chains in Scotland.

John Mason can rest assured that the purpose of the proposed activity, as with our other economic development activities, is to increase the tax take by targeting incentives where they will make most difference, and by ensuring that we have, as a consequence, more rather than less money to spend on public services in Scotland.

The cabinet secretary might be aware of a proposal from Cromarty Firth and Moray Firth ports that includes 12 stakeholders. They promise high-wage and high-quality jobs, through creation of a renewable energy hub that would benefit the whole of Scotland. The jobs will be good new green jobs. Will the Scottish Government favour bids that would deliver high-value jobs and growth for Scotland while tackling climate change, over bids from locations that primarily import goods and are typically dependent on a low-wage economy?

That is a good question. Our intended direction of travel is clear. I articulated clearly that the model is a green port model and that the intention is to attract investment and businesses and to grow good green jobs by making use of Scotland’s tremendous assets, technology and skills in renewable energy and many other aspects of the transition to net zero. Our bid prospectus will set out our focus on those requirements. We expect bids to be for green ports so that they comply with those requirements. They are the criteria that we will favour in the bid process.

Simply renaming free ports “green ports” does not guard against the race to the bottom in standards. In its submission to the survey, Forth Ports identified a new gas-fired power—[Inaudible.]—as a key net zero project. Will the minister—[Inaudible.]—the like of Forth Ports to build whatever they want? How are those powers linked to democratically decided local development plans?

Minister, can you manage a reply, given that the sound was breaking up?

I caught only some of that, unfortunately. I do not know whether Mark Ruskell wants to repeat his question.

I am sorry, but I want to get other members in. If you cannot answer the question—[Inaudible].

I will answer based on what I heard.

It is important to be clear that referring to green ports is not just a semantic renaming exercise and semantics. Mr Ruskell will see that if he reads through the document. I am happy to meet him and other members to put their minds at rest on the matter. Central to our proposition is the requirement to meet fair work criteria. Payment of the real living wage and signing up to the Scottish business pledge are red-line criteria. It is, therefore, the opposite of a race to the bottom; it is a climb to the top and is about working with businesses that are committed to meeting those requirements.

Clearly, if any individual port authority or other enterprise in Scotland wants to submit a proposal, we will look at it in the context of the criteria that will be set out in the bid document. As I said, the transition to net zero and enabling, supporting and implementing fair work practices are central to that.

If Mark Ruskell puts his full question in the chat box, that will be handy, because we can forward it to the minister.

The UK Government published its bidding prospectus in mid-November last year, and the period for applications closes in a couple of weeks. The Minister for Trade, Innovation and Public Finance hopes to publish the application prospectus in the next quarter, with no deadline for applications. How will he catch up?

I think that Willie Rennie must have misheard me. The application process—the bid document—will come out in this quarter, in March, and will run for three months. We will receive bids during the summer, then the incoming Government will take a view on how to progress matters.

We are conscious of the timetable to which the English free port model is running. I am also aware that businesses will make decisions on where they will go based on fundamental considerations. I believe that we will be close enough to the timetable that applies to the rest of the UK for that not to be a material factor in investors’ and businesses’ consideration of our model, when it comes to making big decisions about long-term location of their activities.

Can the minister provide any more information on how Brexit will affect free ports, particularly green ports? Will the ports address any of the challenges that are currently faced by Scotland’s ports?

Let me be clear—I have said this already, but I will say it again, because it is important. The free port model cannot and will not undo the damage that is being caused to Scotland by the UK leaving the world’s biggest single market and customs union.

The impact of Brexit on businesses, ports and Scottish exporters is significant; in many cases, the impact will be critical. We continue to press the UK Government to fix the problems and to do whatever it can to resolve the difficult challenges that are being placed in the way of Scottish businesses.

I believe that our model will support Scottish economic development along the lines that I have described. Our green port model is focused on the journey to net zero, on delivering fair work and on supporting regional cluster building across Scotland. However, let me make it very clear that that does not fix the vandalism that has been done to Scotland’s economy by the UK Government through the Brexit process. It will help to resolve only some of the issues.

I call Graham Simpson. If I have time, I will call Rona Mackay next.

I, too, am pleased that the minister is now on board with the programme on free ports. Is he putting a limit on the number of free ports in Scotland? When does he expect the first one to be in operation?

Graham Simpson is another member who, unfortunately, has been sleeping through this process. If he had watched the various evidence sessions and followed our commentary on the issue, he would know that we have been watching the process closely in order to understand how we might take what the UK Government comes up with and make it work in the Scottish context.

However, I will say it again, because it cannot be said often enough: Scottish free ports will have commitments to fair work, with hard obligations on paying the real living wage and signing up to the Scottish business pledge. Such commitments do not appear in the UK Government model, neither does the commitment to net zero. Those commitments are essential to our green port model.

On the timescale, I have already laid out what will happen. We will release the bid prospectus this quarter, we will get responses from businesses in the following quarter, then we will lay out a more detailed timetable for implementation. Of course, that will be after the election; the incoming Government will progress that work based on applications that are received. That will be done as fast as it can be done.

I am afraid that I do not have time for either Rona Mackay or Richard Lyle. I apologise. We have run out of time, and there is no extra time available this afternoon.