Meeting of the Parliament

Meeting date: Wednesday, May 22, 2019

Official Report 1021KB pdf

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Business Support Inquiry

Good afternoon. Our first item of business is an Economy, Energy and Fair Work Committee debate on motion S5M-17360, in the name of Gordon Lindhurst, on the committee’s business support inquiry. I encourage all members who wish to contribute to the debate to press their request-to-speak buttons as soon as possible.

Words, concepts, arguments—are those not the tools of our trade, Presiding Officer? We speak, therefore we are. It was P G Wodehouse who said:

“One of the drawbacks to life is that it contains moments when one is compelled to tell the truth”.

That is a caricature, of course—and yet?

I will focus on the content of the response to our report by the Convention of Scottish Local Authorities and try to overlook the grievous tone. The letter from the Scottish Government was, by contrast, a ray of sunshine; I will focus on the tone and try to overlook the content, which—I am sorry to say—was somewhat scant.

I will address four areas of the committee’s report—transparency, accountability, alignment and engagement—with, first, some context. Business gateway was envisaged as a one-stop shop for business start-up and support and the Scottish Government’s flagship for small and medium-sized enterprise. A decade has passed since the service transferred to local authority control, so it is a perfect time, perhaps, to assess where we are and where we want to be.

It is also a chance to follow up on a narrower piece of work by our predecessor, the Economy, Energy and Tourism Committee, which advised in 2011 that business gateway should be operating at peak effectiveness and suggested that we might want to take a future look at the performance of business support services, the “future” being now.

This inquiry could have been this committee’s first, in 2016, before what members of the House of Lords refer to as “the other matter” came along—is there an election tomorrow? I will say nothing further on that point—so we began with an inquiry into the economic consequences of leaving the European Union.

However, I digress. The remit of the inquiry that we are concerned with today is:

“To understand the range of support services available to new and existing small and medium sized businesses at a local level across Scotland, with a particular focus on Business Gateway.”

To do that, we wanted to engage with businesses directly. We received 355 responses to an online survey and 41 submissions to our call for views; we visited companies in Lanarkshire, Inverness, Aberdeen and Edinburgh; and we studied the Enterprise Ireland approach during a visit to Dublin. We took evidence from support providers, representative bodies, financial lenders, local government and others. We heard that the variety of support, advice and products that is available to businesses is a strength—“no wrong door” is the phrase.

However, opportunities to align local and national economic priorities had been missed. Business gateway was not included in the enterprise and skills review, although it has been involved since. We recommended a number of ways to improve transparency and accountability, including publication of regional budget and performance information.

The inquiry also led us to look at how others provide business support. We found the approach in Ireland to be a mix of tailored local delivery and national strategic direction and recommended a review to see which aspects of that model could work in the Scottish context.

How was our report received? The cabinet secretary wrote to say:

“I recognise that many of the points you raise about Business Gateway do need to be addressed.”

He told us that he and his COSLA counterpart agreed that we can do things better, and that they would work to co-produce solutions as part of a single-system approach. So far, so encouraging, although I suppose that Mr Hepburn could provide us with a few more clues today, particularly on the work with COSLA to improve transparency around performance, and his officials’ review of the Irish model.

The Scottish Government’s response referenced the “Scotland CAN DO: Boosting Scotland’s Innovation Performance” innovation action plan several times. The committee heard little about that initiative during the inquiry. Doubtless, the minister can elaborate later in his usual can-do manner. We do not want to invoke the cynical rebuke of satire but, of course, Jim Hacker’s first rule of politics was:

“Never believe anything until it’s officially denied.”

The committee was deeply concerned about the lack of transparency around business gateway. There is no regularly published information on local targets, performance or budget allocation. We were looking not for a league-table approach but for an approach that encouraged more openness. COSLA rejected our findings, citing the availability of economic indicators and a benchmark framework, both of which we had considered during the inquiry and found wanting. The local government benchmarking framework includes only one element for business gateway and provides nothing on business gateway other than spend. The Scottish local authorities economic development group’s economic indicators report covers three strands but does not contain enough detail on any strand to enable us to scrutinise performance. There is nothing on performance against targets—in fact, targets are not mentioned at all—and there is no reference to the budget that is allocated across different council areas. COSLA said that it was

“moving towards output and outcome-based measures of performance”.

That sounds encouraging, but the problem is that it did not say how it was going to do that. We recommended that an independent body monitor performance against targets. COSLA rejected that, defending its position on the basis of local democratic accountability. That is an important point of principle but, in this context, I doubt that it will satisfy the Federation of Small Businesses Scotland.

Susan Love pointed out that business gateway is a national service and said that inconsistency in delivery was, for her, “the ultimate question”. She asked:

“Who do I speak to in COSLA? What will it do? What is the Scottish Government going to do? Is the local authority going to do something? The sanctions for failure to meet contract are completely unclear to me.”—[Official Report, Economy, Energy and Fair Work Committee, 13 November 2018; c 26.]

The expertise of bodies such as the FSB and Scottish Chambers of Commerce should not be overlooked. They are well placed to provide feedback in the interests of continuous improvement.

The committee called for the business gateway stakeholder group to be re-established in order to encourage collaboration and better alignment with other services. Confusingly, COSLA said that consideration would be given to a forum for public sector partners. It had previously told us that it could see no advantage in a

“formal relationship at the national level”.—[Official Report, Economy, Energy and Fair Work Committee, 18 December 2018; c 8.]

I have no wish to be unduly negative. We all know that the relationship between central Government and local government can be difficult—perilous, even. There are sensitivities and there are balances to be struck, but there are also times when an inadequate response is just that, and we should call it out. As an American Secretary of State once observed,

“A memorandum is written not to inform the reader but to protect the writer.”

Let me be clear: there is a good story to be told with business gateway. Our report welcomed the monitoring of client satisfaction and the systematic way in which that is being done. We heard praise for online services, the level of understanding of local needs and the provision of early stage support. We saw examples of innovation and best practice, and there is cause to be upbeat about how we birth, nurture and grow businesses in Scotland. We should celebrate those areas where the service is seeking to replace vanilla spaces with go-to places. However, there is also ample room for improvement. In the words of Bill Gates,

“Your most unhappy customers are your greatest source of learning.”

We applaud local authorities for what business gateway does well and where they strive to be the best in class. However, COSLA cannot afford to be complacent; Scottish businesses cannot afford for COSLA to be complacent; and, indeed, the Scottish Government, the cabinet secretary and others cannot afford for COSLA to be complacent. Our report recommends where it can do better in balancing local needs with the single-system approach because, to borrow from the Scottish Government’s response, we want businesses to have the right support in the right place at the right time.

I move,

That the Parliament notes the conclusions and recommendations in the Economy, Energy and Fair Work Committee’s 2nd Report, 2019 (Session 5), Business Support (SP Paper 470).

13:41  

I thank the convener, the committee and all those who took part in the inquiry by sharing their views. Their contributions shaped an insightful and highly relevant report on the state of business support in Scotland. As Mr Lindhurst set out in his opening remarks, the committee’s report comes 10 years after the passage of business support, through business gateway, into the hands of local authorities. This is therefore a highly appropriate juncture at which to consider these matters.

The report’s findings bear open and frank discussion. I am pleased to have the opportunity—along with members from across the chamber—to contribute to that discussion this afternoon.

Supporting businesses effectively in Scotland is an absolute necessity. In particular, I am clear that small and medium-sized businesses are no less than the bedrock of the Scottish economy, given that they make up the overwhelming majority of Scotland’s business base. Their needs are in constant flux, changing due to pressures from outwith or within and in response to new conditions in which they find themselves operating.

It is therefore crucial that, in turn, our system of business support adapts to those changes, remaining responsive, appropriate and tailored to the needs of its users. That is essential for businesses to feel empowered to succeed and for our economy to flourish. Business gateway delivers a tremendously important service throughout Scotland. However, it simply cannot, as it operates today, be as responsive as businesses need it to be. I will take a moment to revisit the successes of business gateway and then I will build on that point.

As Gordon Lindhurst rightly said, there is a good story to be told. It is important that we properly acknowledge and reflect on the really effective support that business gateway provides every day.

Late last year, as part of small business Saturday, I visited Indeglås, which is a contractor and distributor of specialist glass products that is based in Cumbernauld in my constituency. It provides

“architects, designers and construction companies with advanced industry knowledge, providing solutions to transfer light to the heart of buildings”.

With support from business gateway, it has delivered award-winning campuses for Glasgow School of Art and the City of Glasgow College, along with a range of other impressive projects.

All the other finance and economy ministers have seen examples first hand, too. The Minister for Public Finance and Digital Economy, Kate Forbes, for example, visited Advantures in Inverness. It builds camper vans for rent that allow people to explore the Scottish Highlands in vehicles that are constructed from as many local and sustainable products as possible. To ensure that as many new customers as possible could reach its new website, it sought help from business gateway and received one-to-one digital boost support.

The Minister for Trade, Investment and Innovation, Ivan McKee, visited B-DACS, which is a family-run air conditioning and ventilation business. It operates throughout Scotland and has grown substantially over the past 15 years. It has won a number of accolades and employs more than 20 people as well as being a living wage employer. It received support from Glasgow City Council to develop a growth plan and workplace innovation funding to support staff development.

In March of this year, the Cabinet Secretary for Finance, Economy and Fair Work, Derek Mackay, paid a visit to Elevator UK in Aberdeen, which is a business gateway deliverer. I know that members of the committee also visited it, and, like those committee members, the cabinet secretary saw evidence of the collaborations that put Elevator UK and business gateway at the heart of the local business ecosystem.

Those are just some examples of the excellent outcomes that business support can yield for many users.

It is right to acknowledge the diligence, commitment and expertise of the many business gateway staff across Scotland. However, in doing so, we must also acknowledge that things can be improved. The Government’s attitude to improvement is embodied in that approach: it is right to recognise and celebrate good work, and there are reasons to be proud of that work, but we should never be so proud that opportunities to make things better are ignored.

We undertook the enterprise and skills review in 2016 on that basis: we acknowledged that there were issues and wished to address them. In the same way, the Economy, Energy and Fair Work Committee’s report raises a number of issues, which we readily acknowledge. We are here not to debate whether business support could be improved but how it can be best improved.

Adopting the spirit of collaboration is essential if we are to learn from the report and proceed in the right manner. I am pleased to say that we have already received supportive contributions and opened up productive dialogue with a number of partners on that basis. I cannot comment or respond for COSLA on the committee convener’s perspective on its response—I am sure that he will follow that up with COSLA. However, we have engaged with COSLA, and we have engaged, and always will engage, with the Federation of Small Businesses and with Scottish Chambers of Commerce and its local networks. The FSB has been clear and consistent in raising issues relating to transparency and accountability. Like the committee, the Government agrees that we need to address those issues in order for businesses to know where to go if things go wrong and to drive forward improvement.

Throughout the process, we must not lose sight of the pivotal role of local government. It is critical that local authorities remain key partners in the process, as they are close to many of the issues in their areas.

A collaborative approach is central to our existing policies on entrepreneurship and enterprise support, and that has already generated remarkable results. In that regard, I want to talk about the Scotland can do initiative, which Gordon Lindhurst mentioned. I say to him genuinely that, if the committee wants more details and any more information about that initiative, we will always be happy to provide that. The Scotland can do initiative embodies the principles of the collaborative approach. The platform was developed with our public, private and third sector partners, and it represents our shared ambition to become a world-leading entrepreneurial nation. It emphasises collaboration and champions an approach in which sustainable growth and innovation go hand in hand, bringing wider benefits to society.

The ethos that positive outcomes occur where partners work from common principles towards common goals underpins our work. We are joined by a thriving community of partners that are committed to improving the resources that are available to their peers. We look to that community to help develop and implement policy, and its energy and commitment have allowed us to deliver an enormous collective impact.

Members should make no mistake: that approach is paying off. Since the introduction of the Scotland can do initiative in 2013, the effectiveness of Scotland’s business support environment, as measured by the global entrepreneurship and development index, has risen from 13th in the world to fifth—ahead of all other parts of the United Kingdom. I fully believe that we can bring that energy and good will to bear on the committee’s recommendations.

Those developments speak to an attitude that is, I believe, shared by all of us in the chamber and by our partners. Identifying areas in which improvements can be made does not mean laying blame at anybody’s door. Instead, it is an opportunity to foster constructive and collaborative dialogue, and to explore together how the needs of Scotland’s businesses can best be met. Along with our agencies and wider partners, we are already committed to the work that is necessary to make that happen.

I hope that that engagement will continue in the chamber today as we exchange ideas about how best to improve business support. The debate is rightly one of the first steps. I look forward to hearing members’ speeches on getting on together with the work at hand.

13:49  

I add my thanks to the clerks and others for their hard work in preparing a valuable report, and I acknowledge the hard work of everyone who is involved in the business gateway network.

Three years ago, the Scottish Government embarked on its enterprise and skills review with the objectives of delivering a more coherent enterprise support system, achieving strategic alignment between the various enterprise support bodies, and delivering higher growth to the economy. Three years on—and following the Economy, Energy and Fair Work Committee’s report on business support—it is difficult to avoid the conclusion that those objectives are not being met.

Before I turn to the detailed recommendations that the report sets out, it is important that I remind members of the broader context of the Scottish Government’s enterprise policy. In Scotland, we spend more than £2 billion a year to support enterprise and skills, which is about £100 more per head of population than the rate in the rest of the UK. However, we still lag behind in many areas, including business formation and research and development. The latest numbers show that economic growth in Scotland continues to trail behind growth in the rest of the UK. That background information highlights the importance of having an enterprise system, including business gateway, that is fit for purpose.

The committee heard evidence from a wide range of witnesses and stakeholders that there is a lot to commend the business gateway network, and the minister quite rightly highlighted a number of successful examples. However, the report highlights real concerns, across a number of areas, that business gateway is not delivering the support that start-ups and SMEs across Scotland require.

The first concern that the report highlights relates to the Scottish Government’s cluttered approach to economic policy, which is holding back economic growth. Pamela Stevenson, from the Scottish local authorities economic development group, said:

“we continue to be faced with clutter on a daily basis.”—[Official Report, Economy, Energy and Fair Work Committee, 13 November 2018; c 36.]

She referred to the Scottish Government launching a number of new initiatives, none of which involved consultation with business gateway. That view was echoed by Andrew Dickson from Business Loans Scotland, who said:

“I am not sure whether we are totally aware of what one another is doing, and that is certainly the case for the understanding by small and medium-sized businesses about what”

support

“is available.”—[Official Report, Economy, Energy and Fair Work Committee, 27 November 2018; c 2.]

Other witnesses agreed. Scottish Chambers of Commerce said that

“finding the right route to”

business

“support can be frustrating for firms in need of advice.”

The report found that there is a lack of alignment and accountability. In its submission, the FSB called for business support to be

“designed from the user’s perspective”,

in order to take into account the needs of business, but it also highlighted that

“duplication, or failure to join-up with other services make this difficult to achieve.”

Many other witnesses identified that issue, which led to the committee concluding that

“the lack of clarity on the strategic alignment between Business Gateway and the enterprise ... agencies”

is

“disappointing.”

As the convener outlined, another problem that the committee identified is the lack of transparency, particularly in relation to business gateway budgets. To the committee’s surprise, it is not possible to determine how much money is being spent on business gateway services at the local government level. During much of the inquiry, we had to rely on budget information that was obtained by a Scottish Conservative freedom of information request, which found that the business gateway budget has not increased in the past decade and that there is wide variance in spending across local government. Based on that, the committee rightly concluded that it is unacceptable that financial information on business gateway is not recorded and published in a consistent manner across local authorities. The committee recommended that budgets should be published annually in a consistent format to ensure full transparency.

Strongly linked to concerns about transparency and accountability are the challenges that were identified in relation to targets and performance measurement. Local authorities are responsible for setting their own targets, but there is no reporting on what such targets are, on performance against targets or on spend on business gateway services. In response to the committee’s survey, one person noted that

“where there is poor performance, it’s accepted and targets simply get reduced.”

Not surprisingly, the committee found that unacceptable.

We looked at practice in Ireland, where each local enterprise office publishes information about local targets—and performance against them—priorities and spend, which ensures full transparency. Therefore, the committee calls on the Scottish Government to examine whether such a model can be applied in Scotland.

The final concern that I have time to highlight is the inconsistent quality of service delivery across Scotland, with some businesses calling the delivery of services a “postcode lottery”. The Scottish Council for Development and Industry expressed concerns and said that evidence from its members

“suggests that there is a very mixed bag in terms of the support that they receive.”—[Official Report, Economy, Energy and Fair Work Committee, 13 November 2018; c 3.]

That divergence can be seen in the limited data that is available, showing that Elevator, which runs business accelerator services in Aberdeen and Dundee, delivers 25 per cent of all business gateway start-ups in Scotland.

Business gateway was reformed by the Scottish National Party in 2008 to support start-up businesses across Scotland. The report clearly shows that the Scottish Government has neglected that vital part of the enterprise landscape over the past decade. Although there are examples of good practice, which we should highlight and promote, business gateway under the SNP is not delivering the support that Scottish SMEs require.

I have to say that the cabinet secretary’s response to the committee’s recommendations is disappointing. It shows that there is a lack of understanding of how much reform is required in this area, and that the Government is not willing to engage properly in the debate about how we encourage and expand Scotland’s start-up sector.

As the committee’s report makes very clear, business gateway needs to be reformed, and I look forward to hearing the minister’s closing remarks and finding out how that will be done.

13:55  

I welcome the committee’s report on business gateway.

If we are to grow our own economy, we need to grow our own businesses. Because home-grown businesses are rooted in Scotland, they stay here and are much less likely to move abroad. As a result, they pay their taxes here, employ their workers here and build local economies, and we need an industrial strategy that puts indigenous businesses at the heart of things and seeks to help people to establish and grow them.

Although many people have ideas for what they would want to create a business around and know what they want to do, they have no knowledge of business regulation or access to finance, and they need to be supported in that respect. Business gateway was set up as a one-stop shop for signposting support, but it does not, from the committee’s report, appear that it has integrated with other agencies. In fact, Susan Love of the FSB told the committee:

“I have not seen a commitment from other parts of the public sector to support business gateway as a gateway. Most agencies have been preoccupied with their own brands and programmes ... The Scottish Government has not helped with that by funding a lot of additional programmes”.—[Official Report, Economy, Energy and Fair Work Committee, 13 November 2018; c 17.]

Although it is always good for the Government to announce new initiatives, it appears from the report that such initiatives are causing rather than solving problems.

As the committee has pointed out, business gateway has not been included in the enterprise and skills review, and I find that incredibly disappointing. After all, if the very vehicle for facilitating entry into the enterprise support system is not included, how can those organisations be expected to work together? The committee is critical of that in its report and has recommended—I believe, rightly—that business gateway be included in the review. Phase 2 of the review recommends a single access point for business assistance to ensure a more coherent and joined-up system, but it appears that if the review itself had covered business gateway, it might have had a better idea of the business support landscape and would have considered what needed to be changed to help the gateway to fulfil a role that it is recognised is required.

I also note that there are around 100 employee-owned businesses in Scotland with a total turnover of £940 million, which averages out at approximately £9.4 million per business. In comparison, the average turnover for other businesses with at least five employees is £5.66 million per business, which shows that the turnover of employee-owned companies is much greater. Surely, given that rate of return and the likelihood of most of that money being retained in our communities, we should be encouraging such enterprises. Of course, the Scottish Government will point to Co-operative Development Scotland and Community Enterprise as two bodies that are able to give help and assistance, but if they cannot be reached through business gateway, they will not be accessible where they are most needed.

I very much concur with the member’s point about employee-owned businesses. Does she therefore welcome the creation of the industry leadership group, which I will co-chair and whose ambition is to rapidly and greatly increase the number of employee-owned businesses? We already have above-average ownership compared with the rest of the UK, but we want to go much further, and that is what we are going to do.

I do indeed welcome that, but it must be accessible to people who might set up such a business. One way of doing that is to ensure that business gateway can signpost them to the organisations that can help.

Small businesses, which are also rooted in our communities, are critical to our economy, too. We recognise that they require additional support—for example, through a small business strategy—to help them to grow, and they will need access to the proposed Scottish national investment bank and Government procurement. Currently, only around a fifth of Scotland’s £12 billion procurement budget goes directly to small businesses, even though they account for 98 per cent of the Scottish business community. Scottish Labour would break procurement contracts into smaller units so that it would be much easier for SMEs to bid for them. We would also tackle the culture of late payments, which are a huge problem for SMEs, by requiring any company bidding for public sector work to ensure that it paid its suppliers within 30 days.

It appears from the committee report that the landscape for support is cluttered, which makes it difficult for organisations to know who to contact. Highlands and Islands Enterprise and Scottish Enterprise have narrowed the range of organisations and sectors that they assist. The committee gave the example of the Bad Girl Bakery in Muir of Ord, which did not receive assistance from HIE to expand to Fort William because it was categorised as retail. When a business is able to expand and grow, surely it qualifies for support.

The committee report is a wake-up call to the Government to create an integrated business support system that helps the start-up and growth of Scottish businesses, and I hope that the Scottish Government takes heed.

14:01  

As other members of the Economy, Energy and Fair Work Committee have done, I thank the clerks and the Scottish Parliament information centre for all their assistance, as well as everyone who gave evidence to the committee’s inquiry into business support. As Gordon Lindhurst said, the inquiry focused on business support to SMEs at a local level, with a particular focus on the business gateway service. The inquiry was timely, given that it is a decade since that service, which was previously delivered by local enterprise companies, was transferred to local government.

In the context of some of the remarks that have been made about our inquiry, I commend all those who deliver business gateway on a daily basis. Committee colleagues and I visited a number of businesses and business gateway offices across the country, and we were generally impressed with the level of service that advisers on the ground deliver. Of course, there is always a danger on such committee visits that we get to see all the good stuff but, nevertheless, it was impressive to see the range of work. During the visits, we learned of the different approaches that councils take, which is an issue to which I will return in a minute.

It is important to stress that the inquiry was not an evaluation of the quality or content of business gateway services per se, but an evaluation of and an inquiry into the nature and structure of the service in the context of wider support for business. On one reading, the issue has nothing to do with the Economy, Energy and Fair Work Committee, because the business gateway is a local service that is delivered by local government with local government revenues. However, it is legitimate for Parliament to inquire into how critical services such as business support are delivered.

We know that authorities provide the service in different ways, and we heard good reasons why Glasgow does not do the same as other authorities. However, one reason why we wanted to look at the issue and why we discovered that it is important is set out in one of our key recommendations. We concluded that it is

“regrettable that there has been a drift away from the original intended purpose of Business Gateway”.

COSLA has explained why that has happened, but our point is that it has happened

“without any strategic plan or review”

to inform the change. We went on:

“The policy intention for Business Gateway to act as the entry point for businesses ... has not been fulfilled.”

COSLA does not agree with that, which is fair enough because, of course, our findings are open to challenge. The Government’s response, as well as COSLA’s, provide plenty of challenge.

I welcome the broadly supportive tone of ministers’ response to the committee, although there continues to be confusion over whether and how the enterprise and skills review engaged with the topic. Rhoda Grant made some remarks to that effect a moment ago. In the Cabinet Secretary for Finance, Economy and Fair Work’s letter to the committee, he said:

“The Enterprise and Skills Review did not explicitly involve Business Gateway and that is a matter you note. That Review was a discussion about improving national systems and as such would not have been the right forum to account for the local nuances of the Business Gateway offering.”

However, the Scottish Government said in its response to the committee’s recommendation 52, on the drift away from the original rationale:

“The Enterprise and Skills Review concluded that the division of responsibilities between national agencies and locally delivered Business Gateway was right.”

I am not sure how a review that explicitly did not look into local service delivery could have concluded that the division of responsibilities is right. There is quite a lot of retrospective fudging of what the enterprise and skills review said.

COSLA provided a robust challenge to some of the committee’s findings. That is welcome. It has to be said, as Dean Lockhart said, that we were frustrated by the difficulties associated with obtaining and collating data on performance. My dear colleague Jackie Baillie will bring light to bear on that concern of the committee.

Contrary to what COSLA asserted in its response, the committee never alleged that

“Local Government is not accountable”,

per se. What we found was that, from the information that was available to us, it was not clear how the service could provide the kind of information that would allow for accountability, not just to councillors and officials but to the wider community, which expects a good service from business gateway.

Likewise, the committee did not argue that business gateway should be subsumed into some wider national programme; rather, we argued that there should be better alignment.

That is why the Irish experience appears to us to be very instructive and why the visit to Dublin was of such keen interest—and that was not only because it was my first trip to Ireland travelling on my new passport, because I travelled directly from Dublin to the European Court of Justice to hear our article 50 case, or because I was in the company of my dear friend Jackie Baillie and Gordon MacDonald and we had a wonderful day in Dublin.

The Irish experience is interesting, because the EU has identified Ireland, Finland and Denmark as three of the top-performing countries for business support. In Ireland, a service has evolved that provides what appears to be a good integration of national programmes, through Enterprise Ireland, with the work of local enterprise offices, which are embedded in local councils. Service-level agreements and funding are agreed with Enterprise Ireland, but—an important point—local councils have substantial discretion and freedom to develop and pursue their own priorities. A consistent framework of accountability and alignment appears to deliver a good service.

I welcome the commitment from ministers and COSLA to take note of the Irish experience. Business gateway is and should remain a local service that provides locally based business support to those who need it, but our inquiry demonstrated that quite a lot of work could be done to improve delivery and to ensure that there is better integration with national services.

14:07  

A good place to start is the cabinet secretary’s response to the committee’s report. Derek Mackay said:

“the answer as to how we best support our business base does not come from one voice ... it is through breadth and diversity of opinion that we will ensure the right choices are made.”

That is a mature reflection of where we are at, and I am sad that such mature reflection was somewhat lacking in COSLA’s response to the committee’s report.

I want to be crystal clear in stating my fundamental belief in local democracy and local accountability. I really want the local governance review to herald a new relationship between local and national government and the communities that we seek to serve.

It is fair to say that, in calling out the risks that come with the withdrawal of European structural funds, the committee has been standing up for local government and local business support programmes. Whatever our views on Brexit, the issue has never been far from our thoughts.

The central point, around which members of the committee from across the political divide coalesced, is that business gateway is a nationwide service, which is delivered locally, and that although it is a good service, as the convener said, there is ample room for improvement.

The committee made a number of recommendations on, for example, a review of key performance indicators in collaboration with stakeholders and the business community, external monitoring of performance against targets, better publicly available local information on financial inputs and outcomes, and transparency on budgets. In my view, none of that is rocket science or particularly radical. Is it not the humdrum or normality of everyday life? Yet sadly, we have seen real resistance from COSLA to much of that agenda.

Throughout its response, COSLA persistently stated that business gateway is “a local service”, subject to scrutiny by “democratically elected councillors” who are “accountable” and have to operate within the standing orders of their councils, which are “audited annually” and subject to “best value”. That is absolutely true, but it misses the bigger picture of a modern participative civic democracy that rates high on transparency, is inclusive in approach and is able to develop meaningful partnerships with communities of place and interest, so that services are shaped by the needs of users.

In other words accountability and scrutiny of one sphere of government will take place at many levels in many different ways; they do not come from one voice.

That brings me to diversity and the recognised wisdom that supporting more women, rural Scotland, people living with a disability, young people, or people from our black and minority ethnic community into business, is not just the right thing to do but—for the sake of our economy and to reduce the cost of inequality—the smart thing to do. It is absolutely necessary. Therefore, statements such as,

“Business Gateway service is a universal service which is available to all”,

do not do enough to recognise and remove the seen and unseen barriers faced by underrepresented groups.

Again, lack of data was an issue, and there was no solid, overarching commitment to find the best ways to reach underrepresented groups and to tap into all of our talents. On that point the committee made a very specific and practical recommendation for a wider range of more tailored and targeted programmes, but COSLA’s response was somewhat lacking. It said:

“with limited resources, the partners must focus their efforts on those businesses most likely to achieve a result”.

That is simply not good enough, when it implies an inherent bias by omission against businesses from underrepresented groups.

Will the member take an intervention?

Yes, briefly.

Again, I make the point that I cannot speak for COSLA, but I want to underline that through our race equality action plans and the commitment that we made through the women in enterprise action framework and the action group that I chair, the Scottish Government is very clearly determined to see significant and vast improvements in that area.

I am pleased to hear the minister put his commitment on record.

In fairness, the committee heard some great evidence on proactive outreach to underrepresented groups, for example on Glasgow’s tailored programmes for women, work with social enterprises and support for employers to recruit and retain people with disabilities.

I would like to press the Government further in particular on the recommendation to create a national head of women in business to co-ordinate national policy and work towards the establishment of a national women’s centre for business. The cabinet secretary’s response was that the Minister for Business, Fair Work and Skills was committed to developing

“the concept of a ‘women’s business centre’”.

That was somewhat lacking in specific detail on the if, when and how—to be frank, I found it a bit limp. I would be grateful if, in his closing remarks, the minister could be a bit more rock and roll and fill in some of the blanks. Alternatively, he could just say, “Aye, we’re doing it,” and make a very clear commitment to creating a post of national head of women in business and establishing a national women’s centre for business.

14:14  

I am pleased to take part in today’s Economy, Energy and Fair Work Committee debate on support for the business community.

As someone who served on Perth and Kinross Council for 18 years, I have first-hand experience of how local authorities deal with business support services and I admit that I find the conclusions of the report all too unsurprising.

The decision back in 2008 to pass the then still relatively new business gateway services to local councils was the right one, and that is still the case. Although the vast majority of Scottish businesses employ fewer than 50 people, there are significant differences in our local economies around Scotland, particularly in more rural areas, which require local flexibility and discretion to suit their needs. Having more localised services ensures that there is understanding of the local economy, which provides an ability to ensure that areas are supported.

That is not to say that there should not be high expectations nationally for what should be achieved at a local level. Unfortunately, the Scottish Government’s current national economic strategy is confused and muddled. The Fraser of Allander institute warned that the “cluttered landscape” of a

“myriad of different strategies, advisory groups and bodies”

has not achieved the Scottish Government’s stated aim of a single economic strategy that all public sector initiatives should align behind.

To be fair to the Scottish Government, 10 years after setting out the approach, its enterprise and skills review admitted that the current situation was entirely the opposite of the stated ambition. The review failed to consider business gateway, and the committee report describes that as “a missed opportunity”. I call it a glaring omission.

The SNP’s muddled approach to supporting the economy is particularly evident when it comes to business gateway, which, as the committee report identified, has been unsuccessful in achieving entry levels that we might have seen in other sectors.

At the start of the report, the committee talks about trying to ensure that Scotland has a good business base. A number of good things are taking place in business communities, but they are not all singing from the same hymn sheet and they do not all get the same support. While the business base around the UK expanded by 26 per cent between 2010 and 2018, the same measure for Scotland was only 16 per cent. The rate of Scottish business growth since 2016 has also slowed significantly to 1.6 per cent, whereas the rate for the rest of the UK was 4.5 per cent.

We are also slipping behind the rest of the UK when it comes to retail sales. Although there are undoubtedly other factors at play, the lack of sufficient support being provided to businesses by business gateway is a factor.

From my experience in Perth and Kinross, I can say that next to no scrutiny of business gateway took place, which is not how we should run that sector.

Alexander Stewart just said that he felt that a lack of scrutiny took place in Perth and Kinross Council during his time there. Is that an admission of his own shortcomings?

It is certainly not, by any stretch of the imagination. However, more transparency and accountability were certainly needed. During my final four years there, I had the privilege of being the convener of scrutiny, and we looked into some of those locations and found areas that were lacking. As leader of the opposition during an SNP-led administration, I was quite happy to identify that.

As the committee reported, targets are set by local authorities, which means that there are now opportunities for us to see how we can take things forward. Local government provides significant opportunities in terms of spend and the importance to the local economy, so it is important that we do that.

The committee is absolutely right to demand greater transparency in reporting and for that to be aligned to the targets that are set by the Scottish Government and its economic plan. Local targets are nevertheless still key for business communities, due to their different sizes and complexities.

Local authorities should be required to publish information on targets and performance annually, as suggested in the report. They should also be encouraged to interact better with business support services and, specifically, business gateway in their local areas. Locally elected members must have ownership of strategic direction and more information about the services to improve transparency and accountability.

I note from the committee report that there was discussion about the lack of signposting by business gateway to funding options for small and medium-sized enterprises. Signposting is vitally important. Many of our small businesses, particularly in rural areas, need small amounts of money to allow them to expand their business, perhaps for a specific bit of equipment or a machine. Microcredit solutions are particularly attractive, as such support is given in the form of loans, which tend to have high repayment rates, and the money can be recycled to support other businesses in future.

The Conservative-led administration on Perth and Kinross Council has introduced two initiatives to ensure the funding of small grants and the support of small loans. I welcome that new opportunity. Other councils should be encouraged to take such local initiatives and continue to support them.

In conclusion, Deputy Presiding Officer, we need to ensure that business gateway services are more accountable and more transparent, both in service and delivery. There have been success stories but they have been too few. Targets must be set by local authorities, taking into account national objectives. Elected councillors must take responsibility for setting the direction of and implementing local business support services. By doing that, we will achieve much more, which is what business wants us to do.

On a point of order, Presiding Officer, I am sure that Alexander Stewart did not mean any disrespect when he addressed you as the Deputy Presiding Officer.

That is very helpful. I am sure that no slight was intended.

14:21  

Thank you, Presiding Officer. As a member of the Economy, Energy and Fair Work Committee, I thank the clerks, SPICe and all the witnesses for their assistance with this inquiry.

A decade on from the transfer of responsibility from Scottish Enterprise to local authorities, it is right to consider business gateway and the support available for small businesses in our communities. It is a cluttered landscape but, at a local level, there is considerable support for the work of business gateway, which is welcome. However, as with any service, there are areas that require improvement.

If sustainable economic growth is a key priority for the Scottish Government and for the country, we need to make sure that all actors are pulling in the same direction and that there is signposting and collaboration across agencies. We need to ensure that businesses opportunities in every part of the country are supported and developed, but that is not the case everywhere. As we have already heard, some business gateway services are second to none—exemplars in the field—but others are not at the same stage of development. As somebody who worked in local government, I am a believer in localism, but I do not like it when it is used as an excuse to defend unsatisfactory services and deny any need for improvement.

Before I turn to the responses from the Scottish Government and COSLA, I will highlight two of the committee’s key recommendations. First, never mind the good outcomes that it has achieved, the governance structure of and approach taken in Enterprise Ireland have much to offer. A national approach and policy framework give a clear direction that is predicated on local delivery. That local delivery in Ireland is undertaken by local government; shared common standards and reporting frameworks mean that there is consistency across the country. There is also local variation and flexibility to take account of local economic circumstances. Because it respects different responsibilities, it is a useful model to follow. I commend it to the Scottish Government.

I will also highlight the specific recommendation about a national women’s centre for business. I echo many of the comments that Angela Constance made. The committee received clear evidence that women-led businesses need specific, tailored support. Women set up businesses differently from men. They capitalise them differently from men. We will have more success if we tailor our approach. We know that if women started up businesses at the same rate as men, we would add £7 billion to gross domestic product. What is not to like about that?

Will the member take an intervention?

I will take an intervention in a second, when I will get the minister to answer a question for me.

I believe that we need a national head of women in business to co-ordinate policy and action and a national centre for women in business to drive forward good practice across all business support services. Angela Constance phrased my question to the minister better than I can, so will he be a bit more rock and roll? Will he agree today to that recommendation?

I am always rock and roll. I acknowledge the points that have been made. If time had allowed, I would have intervened when Angela Constance made the point about the women in enterprise action group, which has been a matter of discussion. At our next meeting, we will be discussing how to take forward the concept of establishing a women’s business centre, informed by research undertaken by Sara Carter, professor of entrepreneurship at the Hunter centre at Strathclyde business school.

I will take that as a yes.

Let me turn to the Scottish Government’s response, which is a veritable blancmange of warm words. For example, the Government said that it would

“make progress without prejudice of a predetermined destination”.

In real language, that means “We don’t have a clue about the destination but we will hurry towards it.” I know that the response is broadly positive, but it is little wonder that we cannot work out whether or not the Government is supporting individual recommendations.

Turning to COSLA’s response, where shall I start? I associate myself with Andy Wightman’s remarks. As I said, I used to work in local government so I am a fan, but it is one of the most negative and defensive responses that I have ever seen. Instead of embracing the committee’s recommendations as an opportunity for self-assessment in order to change and develop, COSLA has simply pulled up the drawbridge. It said that we did not understand what it does. Being insulting to the intelligence of the committee is a sure-fire way to win friends and influence people. COSLA might share some of the blame for its perception that we did not understand it, because the committee was supplied with only limited evidence, despite repeated requests.

Let me share some of that with the chamber. The committee asked for information from the business gateway national unit in COSLA on 23 October. There was a discussion in Parliament on 25 October. COSLA was chased on 2 November and we got a little bit of high-level information back, but not the range or detail of information that was required. On 21 November, the committee took the unusual step of writing formally to COSLA requesting information, because we had run out of patience.

Let me be clear: we were requesting regional data about performance, which should be collected anyway. It is everyday stuff, so it should not have been difficult to do. We were then told that we could have the information only if we kept it private, which was, frankly, ridiculous. It is basic monitoring data. Finally, in mid-December, just in time for Christmas, COSLA agreed to make the information public. The majority of the information that the committee requested on 23 October remains outstanding to this day. That lack of transparency is a real problem.

Growth is a national priority. We cannot have a situation in which some of our agencies are pulling in different directions. It needs to be a joint effort and business gateway should be a critical part of that. That is why I think that it was a missed opportunity not to include business gateway in the review of enterprise and skills. That said, I am glad that it is at the table now, but there needs to be recognition of the challenges ahead and a commitment to embrace change and improvement.

14:27  

We should put examination of the performance of business gateway in the context of the growth in new enterprises. Since 2007, the number of registered businesses in Scotland has increased by nearly 17 per cent and, as of March 2018, there were 343,000 SMEs. The latest five-year survival rate of start-ups in Scotland is the same as the UK average, at 44 per cent.

Part of the increase over the past 11 years is a result of our university sector. Scotland’s universities are empowering spin-off companies from the inventions and knowledge that are obtained from university research, and universities in Scotland are doing that far more than those in any other part of the UK.

We found that business gateway plays a key role in growing the number of new businesses. The Federation of Small Businesses recognises that, and has said that one of the strengths of the Scottish system is that start-ups have access to a wide range of business support—wider than is available elsewhere in the UK.

The FSB agreed with the committee’s finding that business gateway is

“a generally good national advisory service with high satisfaction rates”.

That said, it also highlighted that

“there are ... differences in quality around the country.”

That difference in quality is difficult to measure because, as the committee found, there is a lack of transparency. There is no readily available published information on targets, performance against those targets or budget allocations for business gateway at local authority level.

In its submission, the FSB stated:

“Significant improvements are required around governance, transparency and scrutiny of the national service.”

What it has said in respect of transparency is in stark contrast to what committee members found when we visited Ireland. We in Scotland should consider using the Irish model if we want to improve our approach. In Ireland, targets and budgets are published regularly.

I will briefly outline the set-up in Ireland. The country has one overarching agency—Enterprise Ireland, which is the equivalent of Scottish Enterprise—and 10 county enterprise offices that are operated by councils and carry out Enterprise Ireland’s work locally. Each local enterprise office must publish local targets, priorities and spend. The targets are agreed with and monitored by Enterprise Ireland. Each local enterprise office produces a local annual report, which provides an economic baseline and transparent targets.

On top of that, the local enterprise office co-ordination unit, which is run by Enterprise Ireland, publishes an annual impact report that details the key results and initiatives of each of the local enterprise offices. Enterprise Ireland regularly meets local authority managers in order to monitor the work that is being undertaken locally and to offer any support that it can.

While searching online, I found the development plan for the local enterprise office in Donegal, which covers the period from 2017 to 2020. The 60-page document profiles the county, what it wants to achieve and how it intends to do so. There is a set of metrics on how well it is performing in creating jobs, increasing the number of start-ups, offering support for existing businesses and so on.

We can compare that with what the committee found in relation to business gateway, which had published only one benchmark: the number of business gateway start-ups per 10,000 of the population.

Does Gordon MacDonald feel that the Irish model offers enough local accountability and control?

If John Mason waits for about a minute, he will hear my answer to that.

I do not accept COSLA’s response that

"reporting at the local level is a matter for each council".

If we are to continue to encourage the establishment of new home-grown enterprises, it should be for all of us to ensure that we have a consistently good service for entrepreneurs and SMEs across Scotland.

Ireland’s mix of local delivery, national strategic direction and national evaluation allows for local authorities to be held accountable, which is an element that we in Scotland are missing. The Irish Government’s Department for Business, Enterprise and Innovation told the committee that central accountability has improved networking and sharing of best practice among local authorities. Scotland could benefit from that.

In answer to John Mason’s question, I say that the committee found that initial concerns in Ireland about lack of autonomy and flexibility in the structure had turned out not to be the reality. One of the local enterprise offices told the committee that it had found that it had the flexibility to do things differently, according to its local needs.

It is clear that the Scottish Government is committed to creating conditions in which businesses are empowered to succeed, and I am glad that its officials are already in contact with their counterparts in Enterprise Ireland. The approach that is being taken in Ireland seems to be more holistic. I look forward to seeing how that could inform future developments of our business support landscape.

I will leave the final word to the FSB, which said that it welcomes the Scottish Government’s commitment to work with local government to make improvements to the service.

14:33  

I am grateful for the opportunity to speak in the debate, and I thank the Economy, Energy and Fair Work Committee for its report.

It was interesting to read how other businesses’ experiences compare with mine when I sought help from organisations including business gateway and its predecessor local enterprise companies. Over time, I had dealings with several local business gateway offices and local enterprise companies. My experiences reflect what was said in submissions to the committee’s inquiry and in its findings, which is that the picture is a very mixed one. It can be a very strangled route to finding the service and potential funding stream that relates to the issues that a business might have, either in start-up or expansion.

A wide variety of potential businesses and business experiences present at business gateway, so I recognise that there is disparity in its responses, with business gateway faring better with people who are at the basic beginner level than it does with those who already have business experience.

I have tried on several occasions to use the services of business gateway, but I found navigating the system to be quite frustrating. Although I found that the advisers were willing and able, there was a lack of clarity about what they were supposed to be delivering. I have never really got past the first couple of meetings with business gateway. In my experience, it does not move fast enough to keep up with a business plan. Very often, businesses cannot wait as long as is required to work through the business gateway process.

The whole point of the public bodies that work on business support is to encourage entrepreneurship and ensure that good business ideas get the best opportunities to succeed and add to our economy. Given that the biggest proportion of businesses that do not make it will falter within the first five years, it is crucial that those public bodies get it as right as possible at the inception.

The initial business plan is important, but as any businessperson will tell us, it rarely resembles the actual pathway on which the new business eventually travels. Any help and advice that is offered needs, therefore, to mirror that adaptability and flexibility. That is something that business gateway and other agencies need to consider and improve on.

The advice and funding landscape is cluttered. Moreover, it can be confusing and frustratingly slow moving, with too many hoops to jump through for what I think can be quite basic advice. Progression on to Scottish Enterprise business support offerings is not always signposted, and if people have not travelled the path before, that can delay progress. Some very good funding and advice avenues are available, but signposting towards them is often not apparent, as is reflected in the committee’s report.

The aim, of course, is to encourage entrepreneurs—the risk takers, job creators and wealth creators—in order to feed a prosperous and sustainable economy in as diverse as possible a range of sectors. Scotland has a fantastic legacy on the world stage and we should be very proud of it. We can—as has been proved—punch way above our weight. However, as recent statistics show, and as has been mentioned already, our level of new-start businesses trails behind that of the rest of the UK, despite the investment through business gateway and Scottish Enterprise.

There are support networks out there. The trouble seems to be lack of visibility of services and lack of continuity between the offers from those services, which leads to confusion when people are seeking the most appropriate support. I note that the committee says in its report that business support agencies need to be more integrated, which would lead to more partnership working. I agree with that. It is not just about initial support for a new-start business; it should also be about support for growth throughout a business’s evolution. Again, however, that pathway is not clear.

Good advice is available on how expansion can be funded, on support for marketing and on innovation and technology, but unless a business knows how to navigate the system, it can miss out on that important support.

As has also been noted today, the business support network has not been properly audited. That has to change, too. In fact, the whole system needs to be audited, streamlined and made more fit for purpose.

A person who has the spark of an idea and the bravery to pursue it needs encouragement, and the pathway should allow them a resource that allows them to deliver from that spark right the way through to being a global leader, if that is their ambition. Our number of new-start businesses that are registering is lower than that in the rest of the UK, and the number that are reaching “big business” status is low. We can point to a Scottish economy that is heavily reliant on SMEs, with few big businesses.

Rhoda Grant mentioned that—although I slightly disagree with her in that one of the main stepping stones for an SME that is seeking to become a bigger business is for it to capture projects in the public procurement process. The Scottish Government can definitely do better in that area. Too many public projects end up being awarded to companies from beyond these shores, with our companies not being given opportunities to deliver them and become bigger.

The journey of an entrepreneur is a difficult one. It usually takes several attempts and involves much personal risk and sacrifice along the way. It probably requires an injection of personal equity and loans against property, and it probably means that the entrepreneur is the last person to be paid at the end of the month—if they get paid. It also means inordinately long hours. After all that, if the person succeeds, is still there after five years and has reached the position in which they can begin to reap the rewards of their bravery and effort, we find that the Scottish Government wants to tax them more than such people are taxed in any other part of the UK.

The system is not entrepreneur friendly and is not best designed for business growth. The truth is that rather than punish businesses for daring to be successful, we need to encourage them to take risks, because in order to support our public services we need to grow the tax base and develop a well-paid workforce—we need to increase the tax take by developing the economy. We need to give businesses the very best start and the chance to succeed on their journey.

The current support system is cluttered and clumsy. It needs to be reviewed and streamlined, with clear definitive objectives. Being a business owner is a hard enough road; the least that we can do is give people the best possible start.

14:40  

I am grateful for the opportunity to speak in the debate on the report. I thank the clerks and all concerned for producing it.

The key area of scrutiny was business gateway, which is of huge importance to businesses that are in the early stages of development, particularly those that are in start-up mode. Business gateway was originally intended to be a one-stop shop to service clients, but as time has gone on, that direct focus has been diluted.

The full scope of the committee’s review is clearly too extensive to be adequately referenced in the few minutes that I have, so I will touch on some of the aspects that made the greatest impression on me.

It is 10 years since the Scottish Government transferred responsibility for, and control of, business gateway and local regeneration services to local authorities, after a brief period during which Scottish Enterprise had administered that function. At the same time, local enterprise companies were abolished. In 2007, the Scottish Government said of business gateway:

“It is appropriate that it should be delivered by local authorities with whom these businesses already interact on a range of local issues.”

Many positive aspects were uncovered. There are 57 business gateway offices across Scotland, employing 356 people. In the past 10 years, nearly 100,000 businesses started up, with the creation of more than 108,000 jobs. Those and other statistics seem to be impressive.

However, it soon became clear that the picture across the country is rather patchy. Not all offices operate to the same standard; there is evidence of differing standards and results. There seems to be an opportunity to identify good practice and to seek to share it. However, there also seems to be no clear mechanism to allow that to happen.

Rural areas in particular feel that they receive a less effective service and that being distant from areas of high population disadvantages them. Time and financial constraints limit opportunities for rural businesses to access support, which might be geographically remote from them, in cities and towns.

Some people who have used the services feel that they are confusing and time consuming to navigate. The partnership with Scottish Enterprise and other agencies seems at times to be less close than should be the case to allow seamless service to businesses. There seems to be a need for better alignment of those bodies. There is also evidence that some companies have not engaged with business gateway due to frustration at the length of time that it takes to navigate the online information.

There appears to be a general impression that business gateway is a little bit divorced from the big picture because of its delivery through local authorities, and that perception needs to be changed.

Perhaps due to its highly localised model, there seems to be a lack of transparency and accountability within the business gateway network. I know that COSLA rejects that view, but there seems to me to be clear evidence in support of it.

It is unclear how targets are set and how performance is measured. Some of those who gave evidence felt that targets had stagnated, while others felt that if a target could not be met, it was simply reduced in order to accommodate lower performance. Also, the appropriateness of some targets was questioned.

Concern was expressed about local authorities working in isolation and simply choosing their own targets. The committee’s recommendation that business gateway’s core target should align with the strategic direction of the Scottish Government’s national priorities and economic plan seems to be fairly obvious, so I hope that it will be complied with.

Some questions were raised about how accountability works across offices as well as at regional level. Even that seems to be obscure. However true that is, the perception that was presented needs to be addressed.

It was asked why it is not possible to ascertain how much is spent on business gateway in each of its 57 offices. How do the offices perform against budget? Little detailed information on business gateway at regional level is available. The Scottish Parliament information centre estimates that approximately £15 million is spent annually, which seems not to be a huge sum of money to deliver such a fundamental and key business support. Evidence indicates that some councils have reduced business gateway budgets while others have let them stagnate. The lack of ring fencing of funding seems to be driving service inconsistencies across the regions.

Nonetheless, despite all its apparent shortcomings, business gateway does deliver for many up-and-coming businesses, and many more good stories than bad stories emerged. I welcome the response of the Scottish Government, which appears to offer a positive way forward that might well address the issues that are rightly raised in the committee report.

Business gateway offers a service that is used, valued and appreciated by many: 50,000 existing or new businesses are supported every year, 700,000 people visited its website and read 2.7 million pages and, encouragingly, almost half the new start-ups have been led by women. That is all continuing good news for business gateway.

Perhaps business gateway’s role needs to be better defined, which would assist that important service to fill perceived gaps in the support landscape. It is important that the role of stakeholders and partners that offer support services does not duplicate the work that is done by others. We were told consistently by witnesses that the support landscape is cluttered, which has resulted in confusion and difficulty in identifying which agency a client should approach. The evidence suggests that some clients simply gave up. The agencies should not see themselves as competitors, but as collaborators in delivering a seamless service to their end users. It is natural that agencies should be a little preoccupied with promoting and servicing their own brands and products, but that should not happen at the expense of their clients. Perhaps a more formal arrangement is needed to drive that home.

I hope that the committee’s report will trigger work on better access to information for new and existing businesses. The enterprise and skills review highlighted the need for a single digital access point to address concerns about businesses being passed back and forth between agencies. I believe that business gateway would benefit from that, as would other agencies and, most important, users of the service.

The importance of getting this right cannot be overemphasised. In its mandate, business gateway should be at the heart of supporting new business, as well as being a preferred partner in business expansion. It is clear that the concerns are mostly around business gateway’s structural issues and consistency of service, which should be relatively straightforward to rectify with some effort from stakeholders.

It is right that business gateway should be nuanced to take into account local priorities, but it is also essential that it take into account our national priorities and policies. It must also demonstrate value for money and measure its performance against acceptable standard key performance indicators. It has to become more transparent and more clearly accountable.

The committee report draws out those important points. I am pleased that the Scottish Government has responded so positively. I commend the report to Parliament.

14:47  

In closing for Labour today, I commend the work of the Economy, Energy and Fair Work committee in producing its very thorough report into business support in Scotland. Gratitude should also be given to the various stakeholders that contributed to the report and the businesses that provided valuable insight into the reality of seeking business support on the front line.

There seems to be agreement in the chamber today that the response from COSLA perhaps leaves more questions than answers and that it is crucial that we get joined-up working at every level of government. I hope that the committee convener and deputy convener can follow up with COSLA and iron out any difficulties that they have perceived.

Another thing on which we can agree is that support for start-ups, local businesses and entrepreneurs across the country should be welcomed, encouraged and strengthened. There is also agreement that, in those areas, we can do better. Taking that to the next stage demonstrates why the committee report is important.

The vast majority of businesses in Scotland are sole traders, which make up 69 per cent of the business base; a further 30 per cent of businesses are classed as small and employ between one and 49 people. Those businesses contribute vastly to our communities, with many of them being the lifeblood of our high streets at a time when high streets across the UK are struggling. We should be doing all that we can to ensure that businesses such as those have clear access to whatever support is available to ensure that they can flourish, helping to employ people in our communities and reversing the decline of our high streets.

It is clear from the committee report that, although there is a lot to be celebrated in the current Scottish landscape for business support, there is a huge lack of joined-up government in relation to the various support services that are on offer. The report makes it clear that

“signposting and co-ordination between multiple stakeholders and partners remains an ongoing challenge.”

The report notes that, when the committee scrutinised the 2018-19 draft budget, it found

“gaps in business support, despite a cluttered landscape of programmes and services.”

That needs to be addressed.

In 2008, when the Scottish Government transferred business gateway and local regeneration activities to Scotland’s local authorities, the intention was to steer businesses through the multitude of programmes and services that were available, such as enterprise agencies, city deals, private sector programmes, growth deals and other regional partnerships. However, it has been noted that even 10 years later,

“signposting and co-ordination between multiple stakeholders and partners remains an ongoing challenge.”

Indeed, the committee report notes:

“The policy intention for Business Gateway to act as the entry point for businesses seeking business support has not been fulfilled.”

In its written submission to the committee, COSLA highlighted the uneasy mix of national and local priorities. We need to consider that. COSLA said:

“The enterprise agencies are gatekeepers to the additional support available in the Growth Pipeline and Account Management, but the national priorities placed on them by the National Government do not necessarily fit with those relevant to Local Government which has a greater focus on local priorities.”

We need to work together. COSLA paints a picture that is recognisable to many who work in and alongside local government of a lack of a joined-up approach between the Government in Holyrood and local government. There is more that can be done there; we can do better, whether we are talking about house building strategy, planning or—with regard to today’s debate—business support. There clearly needs to be a rethink in the way in which interactions between local and national Government are communicated and planned. I hope that those discussions can follow the publication of the committee’s report.

The Scottish Government’s failure to work closely with local authorities to review, set targets and appropriately fund business gateway has resulted in the business landscape becoming cluttered, misaligned and confusing for businesses to navigate. The Scottish Government spends only £15 million a year on delivering business gateway services. That is not nearly enough to promote the Scottish economy at the local level. A decade of austerity has meant that local authorities are struggling to deliver essential services, so we need to address the funding crisis that local authorities find themselves in. However, most of all, we can do better with regard to growing our economy and supporting business start-ups and business growth.

14:53  

I place on record my thanks to the excellent clerking team who supported the committee’s work throughout the inquiry. Our convener, Gordon Lindhurst, eloquently set out many of the main themes that the inquiry covered, as well as our conclusions.

Following the enterprise and skills review and the publication of the Scottish National Investment Bank Bill, which will require close co-operation with the enterprise bodies, our inquiry has been timely. Small and medium-sized businesses are the backbone of the economies of areas such as my region, the Highlands and Islands. That is particularly the case in the most rural and remote parts. Access to services such as business gateway is vital in supporting local businesses that are already established and nurturing the vast pool of untapped entrepreneurial talent across the region.

Although business gateway is, for many, the first port of call for business support, the committee’s report found inconsistencies in its co-ordination with existing agencies, leading to the cluttered landscape that was referred to by the Fraser of Allander institute, as well as by many members today.

During the committee’s evidence taking, I raised questions about the cohesion and collaboration between business gateway and key partners in local economic development, such as Highlands and Islands Enterprise. In many ways, the distinct geography and business environment of the Highlands and Islands is reflected in the institutions that support businesses locally. It is not long since the Parliament had to fight off the threat of HIE’s board being folded into the Scottish Government’s strategic board, which would have led to it losing its own identity and oversight.

The inquiry was an opportunity to meet a range of business support services in different parts of the country. Along with other members of the committee, I visited business gateway, HIE and four SMEs in the Highlands as part of the evidence-gathering process. As the report noted, ease of access to financial support was an on-going problem for some of those businesses. I met services in Orkney and Shetland, and the divergences and discrepancies were stark. For example, in both Orkney and Shetland, the services co-locate with Highlands and Islands Enterprise. However, in the Highlands, they do not.

The summary of the committee’s business support survey notes:

“In general, too many agencies involved, and the business support landscape is confused.”

The Scottish Government’s 2017 enterprise and skills review recommended that it should streamline services. The question therefore has to be asked: why has the co-location of services, and the integration of customer relationship management systems, not been made a priority?

More can—and should—be done to improve agency-to-agency referral, and to recognise that it is all too easy for rural firms to suffer from passive officialdom. A proactive approach is the best way forward, along with an appreciation of the challenges, particularly in productivity, that we have to address.

In its written response to the report, the Scottish Government said:

“The Enterprise and Skills Review concluded that the division of responsibilities between national agencies and locally delivered Business Gateway was right”.

However, given the lack of co-ordination in some areas, and the different approaches that have been adopted across Scotland, that is a difficult position to hold. It seems that there is no real clarity as to where those responsibilities lie, or ought to lie.

I will touch briefly on equalities. The committee’s report asks the Scottish Government and its agencies to review the funding streams that are available to new and existing female entrepreneurs. We know that economic growth simply will not reach its maximum potential until more women are supported to start businesses. Women’s Enterprise Scotland published research that showed that our economy would be boosted by millions if the number of female-led businesses matched the number of those that are led by men. Angela Constance and Jackie Baillie called on the minister to be more rock and roll. I think that they hope that he will be like Mick Jagger, but we will probably have to settle for Mick Hucknall. [Interruption.] I am sure that the minister will take that comment as he wishes.

I welcome the commitments that the Scottish Government made in its written response, particularly the commitments to encourage entrepreneurship in underrepresented groups, and to work towards a national women’s centre for business. I am sure that all members of the committee will be keen to monitor progress in that area over the coming months and years.

There were a number of positive contributions from around the chamber today. My colleague Dean Lockhart identified the key failings of the enterprise and skills review—as well as other aspects of Scottish Government policy—in relation to reducing the cluttered landscape in business support. He also highlighted, as did others, the lack of accountability and measurable performance, which, inevitability, lead to inconsistent delivery and a lack of real impact on many of the Government’s economic priorities.

Alexander Stewart highlighted his 18 years of experience as a councillor, as well as the lack of transparency and accountability. He also highlighted the particular needs of rural communities and businesses, which Colin Beattie also mentioned. Brian Whittle spoke about his own experience of engaging with business gateway as well as the frustrations of others with whom he has spoken about the responsiveness of the service and the administrative burden of seeking support.

Entrepreneurship is a fast-paced world and it is important that the support that is offered moves at a similar pace. Rhoda Grant mentioned the Bad Girl Bakery, which I and my committee colleagues very much enjoyed visiting. She also talked about late payments, which are a real issue for many SMEs

Andy Wightman highlighted the Irish model, and the importance of local services and their integration with the national strategy. Gordon MacDonald covered that area, too. Like others, Angela Constance expressed her disappointment with COSLA’s response—she is certainly not alone in that among committee members. Jackie Baillie highlighted the need for business gateway to provide a good service across the country and not just in one or two areas.

There is much in the work of enterprise bodies at the national and local levels that is to be commended. I have met many dedicated members of staff in services such as Highlands and Islands Enterprise and the local business gateway, and people have shown great commitment to driving forward our local economies and supporting local businesses that need support. However, the committee found clear structural flaws that cannot be ignored by the Government or COSLA. Practical national solutions with a local reach must be found, and there must be an emphasis on cohesion, decluttering and developing a national strategy that ensures that the business gateway has a clearer remit.

It is crystal clear that there is not a shortage of potential growth and talent in Scotland. The challenge to the Scottish Government is to seize the opportunity and deliver for Scotland’s economy.

15:00  

I thank all members who have taken part in the debate, in which there has been a fruitful exchange of ideas on how we can best support our wonderful businesses across Scotland. I also thank the Economy, Energy and Fair Work Committee for its work and the clerks for supporting it in that work.

The committee’s report gives us much food for thought as we look to deliver the right support for businesses in Scotland. The first point that the committee saw was that not including business gateway as part of the enterprise and skills review was potentially a missed opportunity. Although business gateway was not explicitly mentioned in the review, it has been heavily involved in the work to create the new operating model for a single-system approach. The Government very much recognises the crucial role of business gateway in the business support system, and Councillor Steven Heddle and the leadership team at COSLA are committed to working closely with the Scottish Government and wider partners to ensure that business gateway is part of a single-system approach that is responsive to the evolving needs of our business base.

I take on board Alex Rowley’s point about alignment. That is very much part of the discussions between the Government and COSLA. We both see the committee’s report as an opportunity and as part of a learning curve; it challenges us to develop robust, co-produced solutions that involve wider stakeholders and clearer accountability and transparency. We readily accept that challenge and we are taking steps to act on it.

We are working with COSLA and others to address the structural concerns that the report raised, to reinforce the clear role that business gateway has in the wider support system, and to clarify responsibilities. We cannot have a situation in which our business base is not sure when it should go to business gateway. That will involve working closely with the Federation of Small Businesses and Scottish Chambers of Commerce, and making it clear where accountability for performance lies in local authorities.

Central to that activity is the single portal that we are introducing to identify all the services that are available to businesses. The portal will include everything that is happening across business gateway and all Government agencies. Colin Beattie and other members mentioned that.

The committee highlighted the support systems in Ireland and elsewhere and how Ireland goes about achieving national strategic alignment, accountability and local delivery. That system evolved from a situation that is similar to that which currently exists in Scotland. We think that it is wise to take a closer look at the structure of enterprise support in Ireland and other global best practice examples to see what lessons we can learn and use to inform our work on what is best for our business base and the unique make-up of our ecosystem approach to enterprise support in Scotland. Gordon MacDonald, Andy Wightman and other members raised points about that. It is important to recognise that we cannot simply cut and paste a solution from Ireland. Their system is tailored to Irish businesses and Scotland has specific needs. For example, some Irish services are fee based, and we might not want to take that approach in Scotland.

Why has it taken a critical report from the Economy, Energy and Fair Work Committee to force the Government to address the issue? It has been clear for years that business gateway has not been functioning as it should.

I thank the committee for raising the issues. It is not clear that business gateway has not been functioning; it has been, and many members across the chamber—committee members and others—have highlighted many examples of the great work that business gateway has done. The report, for which I thank the committee, highlights some areas that need to be addressed. Performance can be patchy, and we need to look at some of the frameworks. As I said, we are very clear about taking forward work with COSLA to address those issues.

We are working together on how best to measure the performance of business gateway and on how we assess whether we are providing value for the business base. That means co-developing solutions that create greater transparency in how money is spent; addressing concerns about the consistency of service across different local authorities; ensuring that stakeholders such as the FSB and Scottish Chambers of Commerce play a regular and active role in developing solutions; continuing to develop a stronger team approach in the wider business support system; building on the work of the Scotland can do initiative; and ensuring that service users are dealt with by one single system, rather than being passed from one organisation to another.

Some members mentioned the work of the Scotland can do initiative, which is a framework that has been taken forward by the private sector and entrepreneurial Scotland. It includes, for example, the Scottish EDGE competition, which has supported businesses through £13 million of investment and has leveraged more than £100 million of additional investment. There is also the can do fest and venture fest, as well as the work of women and youth enterprise. Therefore, a range of support activities are driving an entrepreneurial culture within the Scottish innovation ecosystem.

Together, all that work has lifted Scotland from being the 13th most supportive economy in the world to the fifth most supportive economy, ahead of the economies of other parts of the UK. That is a testament to the work of people who are involved in the Scotland can do movement.

We are working together on mainstreaming best practice and on continuing professional development, building on business gateway’s good work and using constructive feedback to drive improvement.

Presiding Officer, can I check whether we are pressed for time? Can I have one or two extra minutes?

I can give you some extra time.

Thank you very much.

The committee rightly raised the issue of engagement with women and other underrepresented groups. We are looking at how business support systems can be more effective in that area. We are building on our work to help more women to start businesses through the women in enterprise action plan and framework, and the collective impact approach of the Scotland can do initiative has helped to increase the proportion of women who actively start businesses. That has reduced the gender gap in that area at a time when it is increasing in the rest of the UK. Scotland’s performance is on par with the performance of the best in the world, including that of the US and Canada.

Angela Constance and Jackie Baillie made their points eloquently. Jackie Baillie will be aware of my interest in the area through my former membership of the cross-party group on women in enterprise. Angela Constance asked for more “rock and roll”. I will not provide that this afternoon, but I am sure that there will be opportunities in the near future for that to happen—watch this space.

The minister has promised that there will be further action. Will he give us a wee bit more detail on how and when we will be able to make substantive progress towards the establishment of a national women’s centre for business and the head of policy role?

I promised rock and roll; I did not promise specific actions or measures.

Seriously.

On a serious note, I take those points on board. My colleague Jamie Hepburn has said that the issue will be discussed at the next meeting of the women in enterprise action group, which he chairs. It is also worth noting that Dr Norin Arshed, from the University of Dundee, has now been appointed as the minister’s independent adviser on increasing women’s entrepreneurship across Scotland. Jamie Hepburn will take an evidence-based approach to identifying the best concrete steps that we can take to deliver in that regard. Members should rest assured that the Government is very serious about making further improvements in the area.

The committee raised the desire, which I share, to help our minority ethnic and migrant entrepreneurs to realise their full potential. A recent FSB report highlighted the huge potential that exists in that area. We are working with business gateway and COSLA and are taking forward research geared to helping those groups make full use of the public business support that is available.

On the issue of funding, we are working with COSLA and partners to assess whether business gateway can do more to make small businesses aware of the various funding options that are available and to ensure that the options are relevant and that businesses get the right support that will put them in the best position to secure that funding.

Rhoda Grant and Brian Whittle highlighted the issue of public contracts and procurement, and I can tell members that in the past year 59 per cent of public contracts were won by Scottish SMEs—

Will the minister give way?

Indeed.

This will have to be a quick intervention, and then the minister will need to wind up.

I am interested in the value of those contracts compared with the total value awarded through public procurement.

I do not have that data to hand, but we will get back to the member on that matter. However, I can tell him that that figure, too, is increasing and that 11,500 businesses are now working with the supplier development programme, which is a 17 per cent increase on the previous year. It is an issue that we recognise, but we believe that we are making good progress on it.

Dean Lockhart referred to one or two pointers with regard to the economy, and I think that it is worth taking this opportunity to remind the member that, in the last quarter of 2018 for which we have data, the Scottish economy grew faster than the UK economy—

Will the minister give way?

No—the minister is winding up.

Unemployment in Scotland is now at 3.2 per cent, which is a record low; indeed, it is significantly lower than the figure across the UK and has been so for a period of time. Moreover, youth unemployment in Scotland has been significantly lower than in the rest of the UK for a number of years now, and over the past year, productivity growth in Scotland has gone up significantly more than in the rest of the UK.

Will you come to a close, please?

Scotland’s economy is delivering, but we recognise that there is room for improvement. We thank the committee for its report. We will work closely with COSLA in taking its recommendations on board and move forward to make Scotland’s economy even stronger and to deliver for our small business community.

15:12  

A lot of positive things have been said in the debate, and I will start by highlighting some of the positive comments about business gateway. The committee’s convener, Gordon Lindhurst, said that it was a good service; Dean Lockhart said that it had a lot to commend it; Jackie Baillie said that some business gateway services were second to none; and Colin Beattie referred to the number of interactions and the positive fact that more women are interacting now than before. Jamie Halcro Johnston specifically mentioned our visit to the Bad Girl Bakery, whose cakes, I remember, were very good—although we decided not to take a photograph of me standing under the “Bad Girl Bakery” sign.

I want to move on to some of the issues that have been raised, specifically the quite strong response from COSLA, which a number of members—I am thinking, in particular, of Jackie Baillie—have touched on. As someone who was a councillor for 10 years, I am very enthusiastic about and want to be very supportive of local decision making, but it is clear that a balance has to be struck when we have a national service—in this case, business gateway—that is controlled locally. The same balance applies in other sectors—for example, it applies to education in schools—but it strikes me that the variation that exists among schools is much less than the apparently huge variation across Scotland with regard to the business gateway model. That is not necessarily a bad thing, but it makes it very difficult for the committee and anyone else who wants to look at the issue even to try to make comparisons between what is happening in, say, Lanarkshire, Aberdeen, Inverness and Glasgow.

We reflected that view in our report and, as we know, it led to quite a strong response from COSLA. I very much welcome Ivan McKee’s statement that he is working with COSLA on all of these issues, and we are looking forward to seeing where that work goes, but as Jackie Baillie has pointed out, COSLA could have been a bit more forthcoming, and that might have better informed our report. I was interested in Alex Rowley’s suggestion that the convener and I could meet COSLA representatives to discuss some of the issues; I cannot speak for the convener, but I personally would be open to such a move.

I will move on to a few other points that were made in the committee’s report. A number of members have referred to the fact that business gateway is not an entry point for all business support. The fact that the enterprise and skills review did not include business gateway seemed a bit strange to us, although there were reasons for that. There is a lack of clarity on strategic alignment. I am hopeful that the strategic board, which is still relatively new, will not just bring together bodies such as the Scottish Further and Higher Education Funding Council and Scottish Enterprise but will bring in business gateway a bit more.

On our visits, we saw more models than I had expected. For example, in Inverness, we visited a small business that has not had much input from business gateway but has had good input from Highlands and Islands Enterprise. By contrast, in Lanarkshire, we met a much larger business that operates internationally but that is still being supported by business gateway because it is not in a sector that Scottish Enterprise supports. There was obviously a good relationship there.

Gordon Lindhurst talked about targets and performance, so I will not spend too much time on that. The committee found it difficult to get information from the different council areas on who sets the targets and who monitors performance. It appeared to us that even councillors do not get the information on the targets that they need in order to monitor things properly. Andy Wightman made a lot of good points in that regard. Of course local councils are accountable—none of us on the committee questioned that—but the lack of data to enable local councillors to hold business gateway to account concerned us. The word “alignment” is a good one. We do not want business gateway to be subsumed in any way into national activities, but we want better alignment.

In that regard, Gordon MacDonald talked about the Irish model, which is interesting and relevant. I was interested in the minister’s response, in which he said that we cannot cut and paste the Irish model directly into Scotland, with which I agree.

Is it local specialism or is it inconsistency? It is a national programme, but who is it accountable to? Those are some of the questions that we looked at. I agree very much with the committee’s recommendation that

“there is scope for ... greater sharing and mainstreaming of best practice”,

not just between business gateway and the outside but within the different parts of business gateway. For example, in Glasgow, there is more emphasis on growing businesses than on starting businesses, which is interesting.

Is it complexity or clutter? As Dean Lockhart mentioned, businesses find it difficult to know who to go to. We picked up that point when we met businesses. Some immediately had a good relationship with the right body, but others toiled to get that experience. I expect that Brian Whittle’s experience in that regard could have been very different in a different part of the country. In passing, I note that I was interested in Mr Whittle’s comment that tax is in some way a punishment on businesses; obviously, I see tax as a contribution to good public services. Colin Beattie mentioned the desire for seamless services, which is what everybody really wants.

The committee broadly accepted that there has been a drift away from the original remit. As Rhoda Grant said, the service was set up to be a one-stop shop, and that is what most of us imagined it was, even though it became apparent that that is not the case and that there are many ways to get business support other than through business gateway. Perhaps the most telling point on that was made by Andy Wightman, who said that there was no strategic plan or review that caused the service to drift in that direction.

We have not touched much on the enterprise culture, but we picked up on that in the report and we have done so in the committee’s other work. In speaking to young entrepreneurs, we find that many of them have parents or other family members who are also entrepreneurs, which is how they picked up on that. As a society, we must consider how to get more young people whose parents are employed by big organisations, as was the case for me, to start up their own businesses.

Angela Constance majored on the issue of diversity. I agree with her that we need to get more BME young people to start businesses and that we need to reach out to other underrepresented groups. When we visited Lanarkshire, which has a contracted-out service, I was very taken by the evidence that women who were starting businesses really appreciated getting advice from a woman officer in business gateway and were positive about the service.

I thank all the witnesses who took part in our inquiry and, in particular, all the people who hosted visits. When we were out driving in the dark near Inverness and could not find the little local business we were going to, the host patiently waited for us and then gave us lots of good information. The committee went to Lanarkshire, Inverness and Aberdeen, and I benefited from all the visits. I also thank the clerks and SPICe for all their input.

I think that the committee gave business gateway, and business support more generally, a thorough inquiry. As other members have said, we found a lot of positives, but we agreed that we have not yet got the balance right so that we have a national service that is—as it should be—under local control, with local democratic accountability.

I am happy to commend the report to Parliament.