Chamber and committees

It is worth celebrating those figures, because it is clear that we have significant strengths in our tourism and hospitality offering in Scotland. I represent one of the best bits of Scotland, which saw a lot of visitors over the summer months, and I can see how hard businesses have worked after a phenomenally challenging 18 months to be in a position to welcome people. We need to build on that.

There are particular pinch points. We have a commitment to invest in infrastructure alongside what we are doing to support businesses themselves, particularly in rural areas. The rural tourism infrastructure fund is among the most obvious examples of that. Rural areas that were not prepared and geared up to deal with the huge numbers that came have received financial support to put in place parking places and toilets and to expand roads, for example, to relieve congestion. We need to look at what support is needed in urban areas as well to deal with the challenges of increased numbers, which are good for our economy.

There are a number of measures. On the skills side, the young persons guarantee is continuing. Led by Sandy Begbie, we have been working to implement the guarantee to ensure that young people have access to jobs and to upskilling or retraining. That is one of our primary economic levers in trying to help young people with the impact of the pandemic.

Good morning. At the outset, I apologise for not being able to join the committee in person. I can assure you that only Covid would keep me from an in-person session of committee scrutiny—I am sure that members are quite relieved that I am not with you in person. Nevertheless, I welcome the opportunity to give an update on the Scottish Government’s plans to deliver economic recovery, and on the 10-year national strategy for economic transformation, which is due to be published in late autumn.

I think that we all agree that Scotland’s economy continues to face challenges as a result of the pandemic. Those challenges have been exacerbated by exit from the European Union. Economic recovery clearly needs to be a joint endeavour, and I look forward to working with the committee and to taking on board your suggestions on how we might do that as well as possible.

I do not think that we can let those current challenges diminish our ambitions for a stronger, more sustainable and more inclusive economy that is pro-prosperity, pro-business and pro-jobs. Our most recent programme for government set out our plans to support recovery by investing in people, places and businesses so that we can grasp the opportunities that lie ahead. That includes more than £1 billion in 2021-22 for our national ambition for jobs and to equip our workforce with the skills for the future. We will also push forward with a just transition to net zero, supporting innovation and new Scottish industries and, I hope, getting the opportunity to showcase our strengths as Glasgow hosts the 26th United Nations climate change conference of the parties—COP26.

I am clear that the national strategy for economic transformation must make the most of our huge potential in Scotland to align recovery with our ambitions for a wellbeing economy that is based on the principles of equality, sustainability, prosperity and resilience. I am sure that those are principles that none of us would disagree with.

That work is continuing at pace. It lifts our eyes beyond the immediate challenges, which I recognise many businesses are still confronted with, and looks ahead to the longer term. The strategy will transcend multiple parliamentary sessions and will deliver the long-term structural change that we need, not only to ensure recovery in the short term but to harness our ambition of delivering a fairer, greener and more progressive future. Because the strategy transcends multiple parliamentary sessions, I am sure that the committee will have a view, reflecting different party-political positions, which I look forward to discussing.

You raise an important point. I have been clear that, because it is a 10-year strategy, and because we all have an interest in economic recovery, we have a duty to engage as widely as possible. We had the formal consultation that you have referred to. Gary Gillespie may want to comment on some of the themes that have emerged from the consultation, if you are interested, but there was a lot of response to it.

However, that is not the only way in which we have been engaging. We have also been engaging one to one with an extensive list of organisations, including businesses and third sector representatives. We have thematic groups that are taking evidence from different parts of society and our economy.

Running alongside all of that is the advisory council, which I hope the committee would accept has quite a broad interest through its representatives from rural and urban Scotland, big business and small business, as well as economists and industry leaders.

I have certainly tried to make sure that input to the strategy has been as broad as possible. If any organisation would like to engage further, my officials and I would be very happy to engage. Even if they are not part of the formal consultation, we are open to taking any written submissions and reflecting on those.

There are lots of very good points in there. I will give a brief reflection on where we are now and refer to two things. One is gross domestic product and the second is the labour market, which broadly track the position in rest of the UK over the Covid period.

Our latest data on GDP shows that Scottish GDP fell by 0.2 per cent in July 2021 but grew 3.4 per cent over the three months to July. That means that our GDP is 2.4 per cent below the pre-pandemic level in February 2020. That broadly tracks the position in the rest of the UK—it broadly reflects where the rest of the UK is. The same goes for our rates of employment and unemployment: the employment rate is 74.1 per cent, and the unemployment rate is 4.3 per cent. Those are the rates for May to July 2021, and they continue to compare well with historical trends.

I have more concern about the outlook for businesses in relation to cost inflation and labour market shortages. We know that UK inflation rose by 3.2 per cent in the 12 months to August. The Bank of England forecast that it would temporarily rise further to 4 per cent this year, which will have an impact on businesses in particular. Alongside that, it has been well documented in the press that we are facing severe challenges with energy prices and the knock-on impact of that.

There are also labour market shortages, with businesses struggling to recruit. That is certainly coming through loud and clear from businesses in multiple sectors—from financial services all the way through to tourism—in which there is a reliance on not just heavy goods vehicle drivers but all skills, including care homes. Those shortages will add costs to businesses that are already struggling to keep their head above water post pandemic. That is my very brief summary of the situation.

On the budget, you highlight the critical point that, for the past few years, we have been able to budget only from year to year because there has not been a spending review at the UK Government level. We were promised one last autumn but, for understandable reasons, it was delayed. I am very hopeful that the spending review that the UK Government is publishing will, alongside its budget, give us the multiyear outlook that allows us to plan. That will not allow us to plan a 10-year budget, but it will at least give us a three to four-year outlook, which will be of benefit to local government. It will also be of benefit to businesses because they will get that multiyear certainty.

I do not know whether you want Gary Gillespie to come in, convener. I will leave it to you to bring in others on the outlook for the economy.

Skills is probably the most important area of intervention right now. I have already talked about labour market shortages; the latest figures for the week to 17 September show that online job vacancies are 33 per cent higher than they were in February 2020. There are a lot of vacancies out there. We need to ensure that we line up the people who are looking for work with the available job vacancies. Two of the most important interventions that we have—which Fiona Hyslop will know better than I do because she had the vision to establish them—are the national transition training fund and the youth guarantee, which ensures that young persons in particular are lined up with work. There is no shortage of work, but we must ensure that people acquire skills through the national transition training fund or the young people’s guarantee in order to ensure that they get into work.

I have quite a stark comment to make. Even if everybody who is currently looking for work was working there would be shortages. The bottom line is—we see that the UK Government is accepting this—that we have, as an economy, valued enormously people who have come to this country to work. People who might previously have considered coming here to work are no longer doing so, which might be because of high visa costs or because they no longer feel welcome. There are all sorts of reasons why people are no longer coming to this country to work. At the end of the day, although the Scottish Government can say that they are welcome and that we really need them, emigration from, not immigration into, Scotland has been the big problem. We value the people who choose to make their homes here, but we do not control immigration policy.

A number of businesses have come to me—I am sure that they are coming to other members, as well—to ask for help and support on waiving of visa costs, for example, which is not within the Scottish Government’s control. They have asked for schemes that replicate the soft-fruit pickers scheme that would allow heavy goods vehicle drivers and others to come into this country, but we do not have such levers.

In direct answer to the question, I say that there are two means of resolving the matter and supporting business. One is the skills agenda, which I have touched on, and the second is that, as a country of 5 million people, we value the contribution that is made by people who choose to come to this country.

At the outset, we had to mobilise support very quickly, and we mobilised support largely through local government. Local government has been a phenomenal partner when it comes to support, because it has distributed financial support in ways that it never has done before. I think it is fair to reflect on the fact that local government ended up being our primary partner in delivering support.

There is good reason for that. At the end of the day, it knows its local economies better than anybody else and it was able to reach businesses that perhaps were not on the radar of either the national or the regional enterprise agencies. At the same time, however, Scottish Enterprise was absolutely critical in mobilising other forms of support. It was absolutely critical in using its personal relationships with key businesses—particularly key anchor businesses, which often play a big role in protecting local economies. I think that Scottish Enterprise did play a critical role, even if it was not playing local government’s role of distributing support on the front line.

Colin Cook manages our relationship with the enterprise agencies. Do you want to come in on any of that, Colin?

That remains one of our priorities. Without pre-announcing the 10-year strategy, I can say that a substantial focus of the strategy will be on Scotland as an entrepreneurial nation and on ensuring that there is the right kind of support for anybody in Scotland to start and to scale up a business so that a lot of our economic growth comes from new and emerging businesses.

If that is a focus in the 10-year economic strategy, it will be a focus for Scottish Enterprise, which continues to provide that support. Over the past few years, an infrastructure has also been built up whereby the private sector supports early-stage businesses, too. For example, Scottish EDGE and Tom Hunter’s foundation are providing support to help early-stage businesses and young companies to start.

Running alongside that, the Scottish National Investment Bank has a role to play, and I hope that it will have an expanding role to play in some of those early-stage businesses, because I see the SNIB’s responsibility as being to provide patient capital where it is too risky for the private sector to do that. I think that we have an obligation, in the public sector, to take on some of the risk that the private sector will not go near, but it is a difficult conversation to have in Parliament. What do we think of risk? How does the Opposition deem risk when it may lead to a loss of public sector funding? It might also lead to some of the most successful businesses that we have ever seen. Is the public sector willing to take that risk, and does Parliament think that it is right that the public sector takes that risk?

Telecommunications has always been a reserved matter, so what we are doing is over and above what the UK Government is doing. The R100 programme is getting infrastructure into non-commercial areas at a time when the UK Government’s gigabit programme, which tries to deliver a programme similar to R100, is still at its planning stage. We are already funding the full extension of full fibre in some of the hardest-to-reach communities anywhere in the UK. We are trying to work with the UK Government to secure a fair share of the £1.2 billion that it has announced through project gigabit to push that coverage even further. Where we can go further, we absolutely will do so.

To date, 1,592 connections have been delivered by the R100 central contract. There are 3,052 currently in build and 1,595 connections to be delivered by the R100 south contract. You specifically referred to the north contract. The build work has commenced as part of the R100 north contract. I am happy to provide the member with a breakdown of precisely what is intended for the north lot, the central lot and the south lot, although members should understand that, if we can increase the numbers, we will do so. I am in regular conversation with Openreach to see how much further we can push the numbers.

I will make three points. The first is that I am determined that the two vessels that are currently being constructed will be completed. There is a lot of discussion about the future of the yard but, if for just a moment I can separate the yard from the vessels, those vessels must be completed. That is one of the most important issues on my agenda.

Secondly, we are making progress on Caledonian Maritime Assets Limited’s procurement of new vessels with the announcement of the most recent two vessels. That pipeline, therefore, is starting.

My third point is that over £500 million has been committed to procuring additional vessels, particularly around the small vessels replacement programme, to bolster and boost the fleet. I know how challenging it is right now for island communities. You and I both represent some of those island communities; this, too, is an issue that I see regularly in my inbox.

Those are my three points reflecting on the fact that the ferries issue absolutely and urgently needs to be resolved.