Chamber and committees

The short answer is that those issues will be reflected in the budget, because they are some of the most pressing issues that businesses face and it will potentially hamper our economic recovery if we do not resolve them.

I will go through a number of the levers that we have. There are financial levers. Where businesses need financial support or investment in supply chains, there are things that we can consider. However, our budget is severely challenged and, clearly, resolving issues in one area requires budget to be taken from another area. The financial efforts are fairly limited when it comes to resolving supply chain or labour market shortages.

With regard to the labour market, I have already referred to the need to ensure that the right people have the right skills for the right jobs. There is a short-term imperative to help those who face redundancy or who have recently left work to reskill or retrain for new jobs, and we are doing that through the national transition training fund. In the longer term, looking ahead over the next five to 10 years, it is about making sure that our higher and further education institutions are set up to deliver the skills for the future. That is a longer-term measure that will not fix the immediate issue.

The next lever that we have is procurement. We need to incentivise the use of local supply chains so that we strengthen them and are less dependent on uncertain supply chains elsewhere. However, that has limited benefit, because we cannot avoid the fact that our supply chains are exposed to international fluctuations and challenges.

The last lever that we have is engagement with the UK Government, which I take very seriously. I recognise my responsibility to engage with the Chancellor of the Exchequer and with the new Chief Secretary to the Treasury. As you can imagine, over the past two weeks, I have had conversations and correspondence with the business secretary on the impact of rising energy costs, alongside Michael Matheson, and when there was a crisis or potential challenge in relation to CO2. We have been engaging with the UK Government, exchanging data on what is happening in Scotland and trying to help the UK Government to come to a resolution on the issues.

The biggest challenge for us in engaging with the UK Government is in trying to put in place solutions to the labour market shortage. The issues have been emerging since June or July. I had early conversations about labour market shortages when they were being raised by the tourism and hospitality industries back in June, so a solution has been a long time coming. The most recent announcement on a visa option for haulage is part of the solution, but most people would agree that it is too little, too late, and that haulage is not the only industry that is struggling with labour shortages.

My official Helena Gray is working alongside business to develop a 10-point plan for how we respond to the issues and where we have levers. I am sure that she would be happy to come in if the convener wishes, although I am conscious that you perhaps want to move on to other issues.

Can I come in on that, convener?

I have been raising the issue of measuring outcomes in discussion with all the enterprise agencies since I first took post. They have metrics of their impacts that they publish publicly, which I can share with the committee. Some performance in businesses is quite difficult to measure. We look at how many jobs have been created, for example, but that might not be the best metric for a small business that is just starting out.

We need to be careful with applying blanket metrics, because that might distort what businesses are trying to do to be successful. The point was brought out in Mark Logan’s report on developing the tech industry, in which he criticised the fact that we often look at job creation as a measure of success without realising that maybe the worst thing for a small entrepreneur to do at the outset is to try to create multiple jobs instead of growing first then creating the jobs.

I am happy to share more with the committee after this conversation and certainly share what—[Inaudible.]

Yes—that is right. I can share the metrics that the enterprise agencies already use.

The enterprise and skills strategic board has made a very strong start in trying to streamline what is available. Covid has complicated that work quite substantially, considering the number of new schemes and initiatives that were announced over the Covid period. The challenge in Government—and, I think, the challenge to the Opposition—is to identify what needs to stop when something new starts. It is easy to call for new things and it is easy to announce and implement new things. It is much more difficult to stop things, because you know that that will never be met with support or with a commendation.

The challenge after Covid will be to reflect on what has become even more complex for businesses to navigate, and to streamline that. Some of the Covid supports have come on stream and have then been turned off because they were no longer needed, but others are still available. There is an action there for the Government, working with the enterprise and skills strategic board, to try to streamline further, taking into account the complications that Covid has added.

Three things immediately spring to mind. I do not, in any way, dispute your characterisation of the need to do that—just to make that clear—and I think the need is doubly so after Covid.

First, small businesses do not care who is behind the portal; they just need one portal that they know they can go to in order to get help. It is our business in the public sector to ensure that they get the right help—that, if they input the question, they will be guided to the right people. Over the pandemic, we trialled the find business support portal, which you will probably be familiar with. I think that it needs to be something like that.

Secondly, it is about making sure that the support is as local and as regional as possible. You and I know how successful South of Scotland Enterprise and Highlands and Islands Enterprise are in providing localised regional support. However, there are other areas in which the support is not as localised or as regionalised. I had a conversation yesterday with Scottish Enterprise about how we can break it down so that individuals know precisely who to go to in their local area for support from SE if they are not getting support from HIE or South of Scotland Enterprise.

The third thing that we need to do is rationalise all the pots of funding that are available. I think that the enterprise and skills board was trying to count up all the different pots. I would like to see all that funding condensed into one pot so that, if a business needs support for anything related to, for example, export markets, it knows where to go. Similarly, if it is trying to get help with digital, it will know where to go and will not be trying to weigh up five or 10 different pots for digital—it will know there is one place to go.

Those are my three suggestions for things that need to be done, and we will actively move to implement them. I think that that work needs to done alongside the national strategy, though, so that our delivery is as simplified as our aims and objectives.

It is difficult. I recorded my concern this time last year, in advance of the budget, because the UK spending review in 2020 gave only the financial transactions budget for this coming year. That means it is difficult to plan beyond that. The budget gave us a 66 per cent reduction in FTs, which we have had to manage through quite rigorous prioritisation. You will have seen the consequential headlines, where we have not been able to fund things because of a very limited pool of FTs.

It might be helpful to say that the majority of FT consequentials used to come from the UK Government’s help-to-buy scheme, and that is expected to continue into next year. That might mean that we will continue to get consequentials from the FTs, but that will not be confirmed until 27 October this year, in the UK Government’s budget. A 66 per cent reduction is quite a substantial reduction to manage in one year. Our FTs have previously been used to fund the Scottish National Investment Bank and our housing programme, as well as some of the financial support that is provided to the enterprise agencies. It was tough to manage that substantial decline in one year, and we will have to wait and see what the UK Government does with FTs in its budget on 27 October.

It is right to say that that was a direct response to the tourism task force, on which a lot of industry leaders were represented. The £25 million was for phase 1 of the tourism recovery programme. It provided support for reskilling, retraining and marketing campaigns to try to increase footfall. It had a number of different elements that recognised that tourism and hospitality businesses more widely had been particularly hard hit.

It is clear that labour shortages have been among the biggest challenges that those businesses have faced in recent months. The industry was perhaps among the first industries to be hit by labour shortages. In conjunction with it, the Scottish Government launched a recruitment campaign that ran over the summer months, from 5 July to 18 August, with financial support from us, to try to bring more people into the industry.

We have implemented phase 1 with £25 million, but we have been working alongside the tourism task force to consider what phase 2 of the support will be.

On the latter point, as of a fortnight or so ago, there is provision online with the details of the R100 north lot so that households can understand when and how they will be connected. I am happy to share the link with the committee. The contact details might already have been shared with MSPs, because my team regularly informs members of progress. I recommend that, for feedback, you use the contact details that are already being used to inform MSPs of progress.

I assume that your reference to a review means a review of the overall contract rather than of individuals’ positions. That process is almost iterative and on-going. I have regular conversations with Openreach, which we continue to push to go as far as possible where there has been public sector spend and where it might be able to go further on commercial links. I am also in conversation with the UK Government about getting a share of the £1.2 billion that I referred to. In that sense, the review is on-going. We have a baseline, which is in the contract but, if I can push it further, I absolutely will do so.

This is probably not much consolation, but I assure the member that my constituents are as agitated and exercised as his probably are about whether they will get broadband. I hear about the issue regularly in surgeries, and I heard about it in the recent election campaign.

Thank you for that question. I agree that the bank needs to be operationally independent.

On the two specific questions, as agreed during the passage of the bill, setting an overall target rate of return too soon could risk the target not being met and I think it is important that we recognise the bank’s role when it comes to long-term capital investment. I am, however, keeping that position under review. A meaningful target will be agreed or set once there is a sufficient level of activity on which we can report. I am happy to keep the committee updated on that point.

The bank will obviously seek a commercial return on every investment that it makes. The actual amount will vary depending on the risks and the types of investments. You have already seen, in the last year or so, the varying nature of the investments that have been made. The bank is required to deliver social, economic and environmental returns, as well as financial returns, from the investments that it makes and that needs to be weighed up.

On the more specific point about the bank’s pay framework, clearly the bank’s board is ultimately responsible for the assessment criteria, appraisal and payments made under the bank’s pay framework. It operates within our public sector pay policy, with exceptions and adaptions as approved by ministers in June last year. The framework must reflect the fact that the bank operates in the financial services sector but is also a public body and it is modelled to align with the approaches taken in other UK development banks. There will be no annual financial target-based bonuses within the bank. The chief executive and other staff will instead have access to long-term incentive schemes linked to the delivery of missions and objective-based targets. That ensures that an element of pay is linked to the bank achieving its public service mission without the creation of a bonus culture. That remains my position.