Meeting of the Parliament

Meeting date: Thursday, March 30, 2017

Official Report 892KB pdf

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Enterprise and Skills Review

The next item of business is a statement by Keith Brown, on the enterprise and skills review. The cabinet secretary will take questions at the end of his statement, so there are to be no interventions or interruptions.

16:11  

I wish to provide an update on the progress of the enterprise and skills review, which aims to align and improve our enterprise and skills system. In doing so, I am fulfilling the commitment that I made to Parliament in January to provide an update on the governance aspects of the review. Since January, there have been two debates in the chamber that have highlighted the Parliament’s views on matters relating to the strategic board. On both occasions, Scottish ministers have been clear that we would listen to the views expressed. I have done that, and I am thankful for the opportunity to address the concerns that have been raised.

As well as talking about governance today, I also want to highlight our vision for a more productive and inclusive economy and the economic objectives that we want to achieve. I published phase 1 of the enterprise and skills review in October last year, when I set out the level of the challenge that the Scottish economy faces—in particular, the urgent action that is necessary as a result of the European Union referendum.

Despite those challenges, the Scottish economy continues to perform, and I am delighted to note that we have recently progressed to the second Organisation for Economic Co-operation and Development quartile for productivity. That demonstrates that the fundamentals of the Scottish economy are strong and that progress is possible with sustained and concerted effort. We have substantial natural resources, one of the most highly educated workforces in Europe, a longstanding reputation for innovation and an internationally recognised brand. We are world leaders in key industries of the future, such as life sciences, financial services and financial technology, as well as in the creative industries and sustainable tourism.

However, the status quo will not deliver the economic step change that is necessary to realise our ambition to rank in the top quartile of OECD countries for productivity, equality, wellbeing and sustainability. Productivity drives the overall standard of living in our economy and the competitiveness of our businesses. A step change in productivity will deliver an opportunity to see higher wages, greater competitiveness, and increased quality of life for everyone across Scotland. The review is exploring how our agencies can leverage the strong fundamentals of our economy to help individuals and businesses realise their ambition, taking advantage of the rich opportunities that exist in Scotland.

As just one example of our increasing effort, I will be committing £1 million in the next financial year, and for the following three years, to create a new Scottish public sector innovation challenge fund. I have asked Scottish Enterprise to lead on that and to work with partners to scale up the fund in 2017-18 and in future years. The fund will use the public sector’s demand for improved services to stimulate and support the development and commercialisation of innovations from indigenous supply chain companies. The approach will benefit everyone by finding innovative private sector-led solutions for complex public sector issues, improving services for citizens across the whole of Scotland, saving money and increasing opportunities for business innovation.

The enterprise and skills system is fundamental to achieving our ambitions. Sharing a common purpose and strong leadership, our agencies can create the conditions to increase productivity and help deliver the skills that Scotland’s people and economy need. That is why we put productivity growth at the centre of our vision for the enterprise and skills review.

We recognise and appreciate the vital contribution that the four agencies—Scottish Enterprise, Highlands and Islands Enterprise, Skills Development Scotland and the Scottish Further and Higher Education Funding Council—make to creating a more successful country, delivering opportunities across Scotland that support inclusive and sustainable economic growth.

Far from diminishing the role of the agencies, I want the review to set out how we can enhance the impact of the investment that we make on economic and skills development. We want our agencies to create the best conditions in the world for inclusive growth, so the review is exploring how our agencies can transform the services, the skills and the support necessary for business and individuals across Scotland to be successful. I want to create a system of enterprise and skills support that is greater than the sum of its parts.

Many of the responses, including the response from Audit Scotland, to phase 1 of the review highlighted the need for greater alignment in order to deliver greater economic impact. Our commitment to create a strategic board will deliver greater collaboration, innovation and common purpose across the agencies.

Although support for the strategic board has been considerable, it was clear that there were concerns about how it would impact on our agencies, particularly Highlands and Islands Enterprise and the Scottish funding council. I agree that any new arrangement has to balance carefully the different interests of the regions of Scotland and the full statutory functions and responsibilities of each agency.

I asked Professor Lorne Crerar, the chair of Highlands and Islands Enterprise, to lead discussions with his fellow chairs and others to scope potential structures and functions for the new board and to consider how that would align with arrangements at agency level.

I thank Professor Crerar for his considered and detailed paper. He has shown great personal commitment and objectivity in taking forward the work. I have reflected on his proposals and the views that have been expressed in the chamber—in the debates that I mentioned—and more widely in determining the strategic board’s role, function and structure and its relationship to governance at agency level. Similarly, I have tested all that against what will best deliver our ambitions.

My intention is to build on Professor Crerar’s proposals and to establish a strategic board with the aims that he identified, and with a further aim: to deliver wider collective leadership, based on common culture and values, and which inspires and empowers delivery. The final aim recognises the need for a step change in the culture across the system and with those that the agencies engage with. That must take the shape of fundamental, meaningful collaboration and be reflected in day-to-day joint working at every level.

The board, which will be led by an independent chair from the business community, will develop a strategic plan that is underpinned by common, evidenced performance measures on which the agencies can collaborate. Each agency will have a seat at the table through their chair, and will be joined by strong non-executive members drawn from wider economic and societal interests, including members with experience of business, local government, research and skills, and the trade unions.

We recognised the need for change following the phase 1 report, but I have listened to the views of the Parliament that more can be done in the existing structures to drive change. Professor Crerar also helpfully set out a way that he thinks we can achieve that and, on that basis, I do not intend to bring forward legislation to change the name, the functions or the structures of the agency boards.

I have listened to a wide range of voices over the past few months, including those of my Highlands and Islands Scottish National Party parliamentary colleagues and MSPs from other parties. I have spoken to all Opposition party spokespeople for this area, too. I have also spoken to the business community, which asked that, across the parties, we should, if we can, and as far as we can, demonstrate consensus on the fundamental importance of business support and enterprise. That is of particular value to the business community. In particular, I have listened carefully to this Parliament.

Consequently, I confirm today that the boards of HIE, the SFC and the other agencies will remain. However, there is an expectation that the agencies will work to align their delivery to maximise their positive impact on the economy. As I have previously promised, HIE will continue to be locally based, managed and directed, and the new arrangements will protect and enhance its unique service.

As recommended in Professor Crerar’s report, I will obviously want to work with the boards to develop their functions, consistent with their existing statutory basis, to ensure that they can collaborate effectively to deliver the strategic board’s purpose and achieve our overall vision.

I recognise the value in bringing together the agencies quickly to form an implementation board. That board will include some members of the ministerial review group and will develop the detailed work that is necessary to bring the strategic board into being.

Phase 2 of the review, which began in November 2016, is due to last six months, and in the coming weeks, I will publish a report that will demonstrate progress across all areas during that phase. For example, it will highlight work that VisitScotland is leading in collaboration with other agencies and which will result in powerful, consistent messaging and an identity that can be used collectively across different Government agencies, universities and businesses as well as individually, where and when appropriate. That narrative and campaign will use our natural and built assets, be it the renowned beauty of our landscapes and seascapes, our rich history and culture or the pioneering drive of Scotland across academia and industry, to show what a modern and progressive Scotland can offer the world. Such measures, which will support our international economic aims, will be crucial in helping us to deliver our collective ambitions.

I am setting out the principles of the governance architecture today to allow us to rapidly progress those progressive initiatives across the whole range of the review. I repeat, however, that the reform to the governance structure that I have set out, as well as the supporting initiatives that I have laid out, remain a means to an end. The review’s core purpose is to drive a step change in our economy’s performance and deliver strong, vibrant and inclusive growth. I am confident that those ambitions are shared by everyone in the chamber, and I hope that members will endorse them.

Thank you very much. We will now have questions on the issues that were raised in the statement. I will allow 20 minutes for questions, and I have 16 members who want to speak.

As Dean Lockhart was not in the chamber for the opening of the statement, and as I have had no letter or note of excuse, he will slip to the bottom of my list of questioners. That is what I would do to anyone else. Have the courtesy to be here, as every other questioner was, when statements are read out.

I call Jackie Baillie.

I thank the cabinet secretary for the advance copy of his statement.

I must confess that I feel some sympathy for Keith Brown—it has been a bad week for him. On Tuesday, he announced the delays to the Queensferry crossing, and on Wednesday, he had to apologise for being conned by a Chinese investor. Today, he appears to have performed a series of spectacular U-turns.

The Parliament made it clear that it wanted to retain Highlands and Islands Enterprise and the Scottish funding council in their current form, and there was also support for Scottish Enterprise and Skills Development Scotland. I therefore welcome the cabinet secretary’s apparent change of mind to abandon legislating for a new board. However, I must warn him that trying to exert control in another way does not respect the will of Parliament, and I would be grateful if he would confirm that the new board is not statutory.

I find it strange that Keith Brown is not chairing the board—and he knows that that is my view. After all, John Swinney used to chair the strategic forum, and the cabinet secretary’s denial of chairing the board downgrades its importance and actually blurs the lines of accountability. Surely if the cabinet secretary thinks that the economy is so important, as I believe that he does, he should chair the strategic board.

First, I thank Jackie Baillie for her genuine and sincere concern for my welfare. I think that the Labour Party said to me recently—it was at general question time—that, if we did as it had asked us to do, it would be a sign of strength, not weakness. However, that view did not seem to last too long.

On the strategic board, it is not just other members in the chamber but members from other parties who have told me that, unlike Jackie Baillie, they would prefer the board not to be chaired by a minister. The decision has been taken not solely because of those representations; I have also had very strong representations from those in the ministerial review group and have heard very powerful arguments about what a chair with a strong business background could mean for the board’s progress. Ministers will, of course, input to the board—indeed, that is bound to be the case.

As for the other points that Jackie Baillie made, it is not the case that this will be a statutory board. In fact, there is no reason why it cannot have as much—and possibly even more—effectiveness through its not being a statutory board. I think that that also meets concerns that were raised by other members in the chamber. Of course, there is no conceivable way that I can meet all the concerns expressed by every member and every party in the chamber. Instead, I have to take a balanced approach to all the representations that I have received. I promised to listen; I have listened; and I will continue to listen.

I call James Dornan to be followed by Liz Smith—and I must ask for short questions and short answers, please.

Will the cabinet secretary confirm that the dedicated, locally based support managed and directed by HIE will remain in place alongside its role of working in close collaboration with the other agencies for the economy’s benefit?

As I have said repeatedly, Highlands and Islands Enterprise does great work in the Highlands, and this Government is determined to support it in continuing to do that work.

I have also previously promised that HIE will continue to be locally based, managed and directed, and that the new arrangements will protect and enhance its unique service. HIE will continue to have a board and its core functions, as set out in statute, will remain legislatively unchanged. The new arrangements will not only protect the service that HIE delivers for our Highlands and Islands economies, but—through the collaboration that we seek with other agencies—enhance the support that is available to businesses, employers and employees across the region.

I warmly welcome the very substantial U-turn on the original recommendation to scrap the individual boards. In the case of the Scottish funding council—as only part of its activities are directed at skills and enterprise—can the cabinet secretary confirm that any formal collaboration with the other agencies via the new strategic board will be for skills and enterprise activities only? Can he also confirm that the statutory and legal basis of the current SFC board will not in any way be diminished and that it will still be for Parliament to determine its allocation of funding?

There is no intention to change the functions and structures of the SFC—if I heard Liz Smith right.

So the board will be left as it is.

I said in my statement that we will work to develop the boards themselves. That has been part of the review and was recommended by Lorne Crerar, although it was not specifically mentioned in relation to the SFC. We will continue to have a dialogue—as we always do—about the nature of the boards, but the board will not be abolished and it will stay where it is. We will not go in and look at the structures of the boards.

In addition, we might see a strengthening of the boards, because the chair of the board of the funding council will also sit on the strategic board, as will the chairs of the boards of the other agencies.

I am not sure that I have picked up on all the points of concern that Liz Smith expressed; if I have missed one, I will be happy to respond to her in writing.

I am afraid that there are no supplementary questions.

I welcome the cabinet secretary’s statement and his confirmation that the HIE board will continue in its current form. Does he recognise the important role that was played by HIE Moray in attracting the company Kura to Forres, which has saved local jobs and has the potential to grow many more? Will he confirm that HIE Moray will continue its good work in the times ahead, particularly given the threat that is posed to the Moray economy by the Conservative Party’s hard-Brexit policy?

I can confirm that. On Richard Lochhead’s final point, it was clear from phase 1 of the review and subsequent discussions that there is fear about Brexit, especially in the Highlands and Islands, and particularly in relation to European structural funds and other funds that have performed a function that the United Kingdom Government departed from in the 1980s. Those funds are crucial and there is an extreme level of worry about the nature of that support and whether it will continue post-Brexit. That is one of the major challenges that the review seeks to address.

Although the retention of the HIE board is welcome, a board with no power is useless. The parts of the cabinet secretary’s statement that worry me state that

“agencies will work to align their delivery”

and that they will

“deliver the strategic board’s purpose and achieve our overall vision.”

If HIE has to conform to a Scotland-wide delivery plan, purpose and vision, how will that allow for local accountability and decision making? Who will be boss: the strategic board or the HIE board?

I do not think that there is anything further that I can say to answer the concerns that were expressed by Rhoda Grant, and I do not understand those concerns. I have said that the board will remain as it is and that it will have the powers that it currently has. It will not be second-guessed in terms of its strategic investments and it will continue to take the decisions that it has taken up until now.

I do not know why anybody would object to the idea that our main enterprise and skills agencies should collaborate and align for the greater purpose of improving economic performance around Scotland. It is my responsibility, and the responsibility of each of the agencies and their boards, to ensure that that happens. That is a perfectly proper and necessary ambition for us to have and I do not understand why the Labour Party as a whole—or it might just be Rhoda Grant—opposes that.

The short answer to the question is that HIE will have the powers that it currently has.

I thank the cabinet secretary for listening with regard to the HIE board. He will recognise the role that social enterprises play in economic growth, particularly in the Highlands and Islands. If the policy is to align the agencies, will the cabinet secretary broaden Scottish Enterprise’s remit to encompass social enterprises, and will he agree to meet me and Green Party colleagues to discuss some continuing concerns?

I thank John Finnie for his willingness to engage in the process. I have listened to him, as I have listened to many SNP Highlands and Islands MSPs and MPs who have made very strong representations on the matter.

As I just said to Rhoda Grant, it is our intention that the social function of Highlands and Islands Enterprise will remain. It is also my intention that that should be the same for the south of Scotland agency. It should have a similar power. Scottish Enterprise currently has the ability to do many of those things that John Finnie seeks. In order to ensure that we bottom that out, I am of course more than willing to meet John Finnie and his colleagues.

I, too, thank the cabinet secretary for the advance copy of his statement.

I would welcome the U-turn, but I am struggling to square it with the sentence in the cabinet secretary’s statement, which he delivered very carefully, that says that the boards will

“collaborate effectively to deliver the strategic board’s purpose and achieve our overall vision.”

If collaboration and delivering that vision are the purpose of the strategic board, what are the boards of Highlands and Islands Enterprise and the Scottish funding council going to do?

The boards of the funding council and Highlands and Islands Enterprise will do the things that they currently do. In fact, it may well be the case that they do substantially more. I mentioned that there is also a stream of work on regionalisation and I am grateful to Tavish Scott for the engagement that we have had on that. It may well result in local areas, whether at agency board or some other level, taking on additional powers that are currently exercised by agencies such as Skills Development Scotland.

There is potential for the boards to be more powerful than they currently are. It is right for us to set out an overarching vision about productivity, increasing exports and meeting challenges that apply not just to one part of Scotland but to the whole of Scotland.

The boards will continue to have the powers and the functions that they currently have. We can achieve a lot more if we can make sure that the boards come together. I have given the example previously of internationalisation, where sometimes there is not the collaboration that there should be. People in HIE told me during the consultation process that they had access to one person in SDI. HIE needs to have more resource and more collaboration with the other agencies than is currently taking place. That is the purpose of this. There is no sinister purpose to the review. It is to increase the benefits for everybody.

Does the cabinet secretary agree that creating a strategic board will help to co-ordinate the activities of SE, HIE, SDS and the SFC and bring greater integration and focus to delivery of our enterprise and skills support?

I absolutely agree—that takes up the point on which I responded to Tavish Scott. It is clear from the overwhelming evidence that we had in phase 1 of the review that there is a need to align better the services and the support that our agencies offer in order to deliver across Scotland opportunities that support inclusive and sustainable economic growth.

The review aims to help agencies to transform collaboratively the services, skills and support that are necessary for businesses and individuals across Scotland to be successful. I want, as I said in my statement, to create an enterprise and skills system that is greater than the sum of its parts. A strategic board will assist the four agency boards—and the proposed south of Scotland agency board—to align their services to achieve greater collaboration, innovation and common purpose.

I welcome the fact that SNP members have now found their voice on the issue—although sadly only after their ministers announced their U-turn.

As Rhoda Grant did in her question, I ask what assurances can be given that decisions that are taken locally in Moray and across the Highlands and Islands by the board of HIE will not be overruled by the new strategic board?

I am glad that Douglas Ross was able to join us after the statement had begun. Well done on finding your way to the chamber.

I will excuse Mr Ross. He was trying to locate a colleague.

In addition to what I have said to other members, councils including Moray Council were involved in the consultation on the HIE board, and I have had a number of discussions with them. The statement meets many of their aims in defending the continued existence of the HIE board. They will be pleased to have that assurance.

The councils, including Moray Council, also expressed support for the strategic board. I am happy to check that, but I am fairly sure that it was a unanimous view among the Highlands and Islands local authorities. They also asked that further development take place in relation to the board because they have concerns about its current structure. I will do that only in conjunction and collaboration with the board. The reassurance that Douglas Ross seeks has been provided.

Will HIE retain its much valued social responsibility role?

That role has been one of its strongest points. I think that in a previous debate members on all sides quoted the words of Jim Hunter. When I met him, he expressed a number of concerns. I recognise that the statement will not satisfy all those concerns. Crucially, he pointed out that when Highlands and Islands Enterprise—then, the Highlands and Islands Development Board—was first established, it was necessary to create the capacity to take up business and entrepreneurial opportunities, which meant taking social and, sometimes, cultural initiatives in order to build that capacity. HIE has a very strong track record of doing that, and I have always said that that function should remain. I hope that members welcome the fact that I intend to ensure that that facility and extended remit are also available to the south of Scotland agency.

I note that the cabinet secretary failed to answer Liz Smith’s question about budgets. Will the Scottish Parliament continue to set the Scottish funding council budget, or will that be a responsibility of the new board? Will the new board be able to move money between the agencies? Will the chair of the Scottish funding council be a ministerial appointment, as is currently the case, or will that appointment fall to the new board?

I am happy to reassure Daniel Johnson on both points. That appointment will not be by the strategic board; it will be by ministers, as is currently the case.

The current budgetary arrangements will apply. The strategic board will not allocate budgets to the agencies.

Will the cabinet secretary guarantee that the board of HIE will retain

“all strategic, operational and budgetary decisions”,

given the motion that was passed by a majority vote in Parliament on 18 January?

I have given that reassurance a number of times already, with the caveat that I expect collaboration and alignment among the agencies in respect of their activities. One or two members have mentioned that. That collaboration and alignment will benefit the agencies and Scotland as a whole.

HIE and some of the constituent councils in the Highlands and Islands area will tell members that they believe that further support is required from other agencies. It is important that that happens. I have given the example of SDI, but that is true for other areas, not least in relation to data. It is very important that, in addition to what the agencies currently do, we have a common function to create the right data to help to inform decisions. What Highlands and Islands Enterprise does will be strengthened and extended; I hope that Donald Cameron welcomes that.

I refer members to my register of interests as a local councillor in Dumfries and Galloway Council.

The cabinet secretary will not be surprised that I am disappointed that he did not cover the south of Scotland in his statement. Will he accept the proposal that the new south of Scotland enterprise body—which was proposed during phase 1 of the review—be based on a boundary of the Scottish Borders and Dumfries and Galloway? When can we expect the new body to be up and running, given that the cabinet secretary has received a proposal from the local authorities for a body that could be established in just a matter of months? Can the cabinet secretary give a commitment that the governance arrangements for the new body will mean that decisions will be made in the south of Scotland for the south of Scotland? It would be disappointing if, like the Highlands and Islands, we needed a vote in Parliament to achieve that.

Members should be quick, as I want to get everybody in.

I think that there were three questions there. I hope to cover each of them.

Discussions about the boundaries are a key part of the current phase of work. I agree with Colin Smyth that there appears to be an emerging consensus that the body should be based on Dumfries and Galloway and the Scottish Borders, but there are other perspectives. It is very important that we take the temperature of the new councils once they have been elected to see whether they agree.

On when decisions about the new vehicle will be taken, phase 2 of the review began on 1 November, and we said that it would take six months. The final phase 2 decisions are likely to set out a programme of work that we will undertake.

I have covered the functions and powers of the board in previous responses. My intention is that they should be similar to those that Highlands and Islands Enterprise exercises.

I think that that answers the questions, but if Colin Smyth wants to get back to me on anything that is unclear, I will be happy to deal with that.

I am disappointed that there was no direct reference to the south of Scotland in the statement. There has been insufficient clarity on what that vehicle will look like. Can the cabinet secretary confirm that the model will be similarly constituted to HIE in respect of its governance? How will the interests of our region be represented on the implementation board, given that there is not an existing structure?

At least the last point is a reasonable one. I have covered the other points a number of times.

It is very important that there is representation on the implementation board, and I acknowledge the point that there is not currently a constituted board.

However, I am sure that Oliver Mundell will want to congratulate the Scottish Government on being the Government to have introduced a south of Scotland agency, when no previous Government has done so. That will be an achievement for the SNP Government.

The review and the Economy, Jobs and Fair Work Committee found that there is a certain amount of duplication and, perhaps, not the best use of resources among the agencies. Can the cabinet secretary assure us that there will be improvement in that respect and that there will be more co-ordination than there has been?

The change has to be about collaboration and alignment. I do not think that any member or any member of the boards would say that there is no duplication. Every pound that is spent on duplication is a pound that does not need to be spent; we need every pound to work for the people of Scotland. John Mason is right that we want to ensure that we address issues of duplication; we will do that, especially in relation to some of the activities of the SFC and Skills Development Scotland, which would freely admit that there can be duplication. It is right that we get those organisations as lean, as effective and as efficient as possible and that we drive out duplication.

Before I call Dean Lockhart, I thank him for his note and say that he has learned the hard way. Business in here follows on, so all members should watch out and not just think that an item will be taken at a certain time. Members have all learned a lesson—I learned it once myself, and it is a hard lesson.

I now call Mr Lockhart.

Thank you, Presiding Officer. I can assure you and the cabinet secretary that the reason why I was not here earlier was that I was busy reading his statement, if that makes any difference.

I welcome the U-turn that the cabinet secretary has made and I agree with him that we need a step change in the economy. However, that step change will not be delivered by tinkering with the organisation of the agencies: it needs leadership and clear policy direction and implementation by the Government. Does the cabinet secretary agree with Audit Scotland’s conclusion, when it reviewed the enterprise agencies, that

“the enterprise agencies are performing well but the Scottish Government needs a clearer plan for delivering its economic strategy”?

The answer to that is based on the very fact of the review. The review acknowledges that, on some things, especially in relation to competitiveness, exports and the international-facing nature of our businesses, we have more to do. I acknowledge that. We have discussed previously the Government’s overarching economic strategy, which will be informed, as it must be, by pressures such as Brexit. That is a huge pressure and we are only now starting to see that. Just today, François Hollande phoned Angela Merkel and told her that there will not be a trade deal at the same time as the Brexit deal. That has huge implications, and we have to prepare ourselves for it.

That is the purpose of the review. There is nothing sinister in it. It is about making sure that we establish the right structures and infrastructure so that we can do what we need to do on business support, data collection, economic activity and skills. That is the whole purpose of the review. I am, of course, grateful to Dean Lockhart for his engagement in relation to that. I genuinely hope that we can come together, because the business community is asking that of us. I will continue to seek further common ground where possible, so that we can all face in the same direction when dealing with the challenges that confront Scotland.