 Good morning and welcome to the 22nd meeting of the Economy, Energy and Fair Work Committee for 2019. May I ask everyone to turn any electrical devices to silent? First of all, item 1 on the agenda is a decision by the committee to take items 3 and 4 in private. Are we agreed? Yes. Thank you. We now turn to item 2 on the agenda, which is the issue of BiFab and the offshore wind energy sector, as well as the Scottish supply chain. For this part of this morning's meeting, we have Derek Mackay, Cabinet Secretary for Finance, Economy and Fair Work, David Pratt, who is the head of planning and strategy at Marine Scotland, and Andrew Hogg, deputy director for energy industries at the Scottish Government. I will start by asking the cabinet secretary to make a brief opening statement. Thank you, convener, and I appreciate the committee's on-going interest in BiFab and the Scottish supply chain. I appreciate this opportunity to share with you some of the work that we have been doing. It is very mindful of the parliamentary debate that we had in May, which I think has helped to raise awareness of some of the actions. In terms of BiFab, we have tried to be as supportive as possible from the point of acquisition 14 months ago, trying to ensure a sustainable future for the company. I remain cautiously optimistic that contracts will be secured for BiFab, but we need to ensure that the benefits reach the wider supply chain of renewables in Scotland. I held an offshore wind summit on 2 May and emphasised the importance to the sector of utilising the Scottish supply chain and the build-out of projects and targeted that towards the developers and the tier 1 that it attended. Areas that we are exploring, and I touched on that in a parliamentary debate, to try to move that forward in terms of more supply chain work and more Scottish content. Areas that we are looking at using to incentivise better behaviour here include the Crown Estate and also how the Scottish Parliament reviews and approves decommissioning plans. From the summit, the sector and the industry themselves have made certain commitments around exploring collaboration and working more closely with supply chain, and that is why I am sure that the committee will be aware of the offshore wind industry council's announcement just yesterday about taking forward a four-month in-depth analysis of the capabilities of the fixed bond foundations market in the UK with a focus on the requirement of buyers. We are working with them, as they say, on the commitments that they have made to us, and I would intend to reconvene that summit and invite yourself or whatever representative of the committee that you deem appropriate to that next summit probably later in the year, because I recognise that we are on agreement that we want greater benefits to come to Scotland, the industrial benefits of the renewables sector that we have been so supportive of. Thank you, cabinet secretary. On your last point, I do not think that myself or a committee member was present at the first meeting. I think that the committee had requested that opportunity. I am happy to explain why I felt that that was not as helpful at that point, I think, as it now might be. It might be helpful to hear that explanation. At the summit to bring together the developers, I wanted to express to them very clearly the disappointment that the Scottish Government has felt around the lack of Scottish content, supply chain benefits and industrial benefits, particularly around fabrication from the support that we have given to renewables. I also wanted to do it in a way to try to drive good behaviour and best practice. The trade unions wished that summit to go ahead, of course, and I also wanted to involve the UK Government. I had a private call with Claire Perry. She is a UK energy minister, she committed to attending in the end and she could not attend, but sent officials. I wanted the summit to be a good strong place to have quite a frank conversation about our sense of disappointment and then get on to actions that could remedy the situation. I feel that I have absolutely made that point to the sector. I had been doing it individually, but I wanted to do it collectively with everyone in the room, including the trade unions who were represented at the summit. When we come to the next summit, we need to see what the actions are and what has been delivered. As I say, I am happy if the committee wishes to be represented at that, but I wanted the opportunity for me to be very direct with the sector, and that is what I have done. Maybe others will want to come back to that point. Can you tell us specifically what options the Scottish Government has been following to try to ensure that there is more benefit to the Scottish economy and more usage of Scottish firms in terms of the offshore wind sector? You mentioned that there were specifics that you discussed at that summit. Can you share some of the specifics with us of what the Scottish Government is doing? Since I came into post, we have been exploring possibilities, so a lot of people genuinely raise issues. Will the planning regime be used? Will no not to nail down guaranteed local supply chain content? Will the consenting regime be used? Will no what advice it can to nail down the supply chain benefits that we are trying to deliver? Then we have looked at the main driver for those companies, the subsidy CFD contract for difference, where that subsidy will drive behaviour and it might make or break schemes, but that would be for the UK Government to determine. Conditionality could be used, but that would be a decision for the UK Government. It has chosen not to deploy conditionality, which would guarantee supply chain content as part of those arrangements, those subsidy arrangements. I have not worked very hard with officials to turn over every stone to see how we could guarantee conditionality, because, frankly, waiting on a voluntary basis for companies to do the right thing has clearly not been successful. That is why you then have to look at whether the incentives are not working, what is the big stick, what is the conditionality that you can use within state aid and legally as well. That has been more difficult territory, so we will try to create a culture of expectation to deliver those supply chain benefits. There have been some commitments from companies in the past, whether they are legally enforceable or not. It is a separate question, but the two areas that I have explored that officials continue to work on are that I have raised at the summit as a challenge to the sector. Of course, we want better behaviour and more delivery before we can potentially deploy those new tools. However, the two new tools that we are looking at are, first of all, the crown estate. For development to happen in the seabed and the crown estate territory, it would require leasing, which is done on a commercial basis, but we are looking at ways to incentivise it. Ultimately, ministers would make an agent's decision if a lease was granted. Our judgment is as to what is appropriate. We are taking advice as to what would be the appropriate levers to try to ensure that we get more benefits from developers. As part of that, we could consider or we are exploring this. We could look at carbon footprint as an issue here as well in terms of crown estate. You say, why did you not do that years ago? Well, Cymru will be well aware that we did not have the evolution of crown estate years ago. It is a new power and a new area of authority. Therefore, we are exploring that to get the outcome that we desire. The second area is around decommissioning. This is something that Parliament considers. Where decommissioning plans are signed off and there is an element of guarantee or liability or assurance that we are all satisfied that a developer's decommissioning plans are satisfactory, there might also be room for opportunity in that. Because we sign it off to create that culture of expectations of what we are looking for for the sector to deliver overall to be considered as part of the value for money and everything else as we sign off decommissioning. That is two areas that we are actively exploring that would not have been able to be delivered for this current round of contract for difference but will give us an opportunity into the future. Those are signs of the Scottish Government having to explore really creatively devices to get what I think should have been delivered over the last number of years, as companies are just taking the lead and getting on with giving UK and Scottish companies the best possible chance to secure that onshore work for the offshore industry. I suppose that the final thing, convener, is to try to ensure that Scottish fabrication and Scottish manufacturing and Scottish industry is as competitive as possible. That is where some of the direct interventions, for example, are around the direct support to buy fab is important. However, if more companies are able to collaborate and share the good practice and build up their capacity, then the sector will be in an even stronger position. That was one of the commitments coming from the summit that tier 1 developers will assist supply chain companies to collaborate to develop the resource to be in a stronger position to then secure work, notwithstanding other issues that I suspect we will go over this morning. That is a key new leavers, convener. Just before we come on to questions from Andy Wightman, one witness that came to the committee, Bill Elkington, is the chairman and founder of JV Driver Group. He commented on the methyl yard not being world-class and needing improvements. It is owned by Scottish Enterprise. That was a specific example where the suggestion is that the facilities are not up to standard. Is that an area where the Scottish Government can assist or seek to improve matters? I believe that it is, convener, but the timing will have to be right for the reason that I will give now. I have heard that issue before about investment that can go into the yard. The issue with that site being Scottish Enterprise owned will have to be state aid compliance. If there is a financial investment in a yard, depending on the status at the time, what work might have been involved might come into conflict with state aid rules. If work is secured for the yard, for example, if Scottish Enterprise funded by Government or whoever had just invested in the yard, the company by far might have had to have paid it back and rent. I think that there is a financial fix that has to be agreed there so that we do not flout state aid rules. There is certainly a desire to invest in the yard, but it must be able to be done in a way that is state aid compliant. That will be around the timing of a ward of contracts and the security that the yard has. Officials can say more if you like, but there is not a lack of willing to invest in the yard. It is just at the point of time at which we can do it. It is absolutely critical that any investment is legal. There are on-going meetings in relation to investment in the yard. That might well find a way through that, but there is certainly a desire to invest in the yard. However, it is a question of timing and the point at which contracts are being given as not to give it an uncompetitive advantage that would then come into state aid territory. If you wish, more officials can add more to that. If they could, that would be helpful. I think that the cabinet secretary has covered the key points there. We meet regularly with what is called the Fife infrastructure group, which involves the local authority, the business, the enterprise agency that owns the NG Park Fife. We are in regular dialogue about different options for how investment can take place and what that investment might look like. However, as the cabinet secretary has suggested, timing is key and the securing of new work at that yard is also important. However, we are exploring all options and they are live discussions that are on-going just now. Can you give us any indication of how state aid rules affect that? For example, if we were to invest in one of the most urgent and impressive matters as a concrete slab at the yard to improve the conditions under foot, if we were to invest in that just now in the public sector, we would have to recover the vast majority of that investment back from the company in rent. That is a very difficult discussion to have at a time when the company is still trying to compete for a new business. That goes back to the point about timing. We could not just give it without any financial return. It has just been a direct subsidy, that is the point that Flouce stated. Is it not a bit circular? If you cannot provide the facilities for the company to compete, is it just that it is uncompetitive as a location? No, I do not think that that would be a critique. I think that if there would be an elegant solution if a company said that they want to award a contract and the only issue is the lack of concrete, then I am sure that there would be an easy fix there. If that was the critique, but it is not. I think that as soon as we have a vehicle to be able to invest in the yard, we will. I do not think that a company is saying that they are not securing work because of that lack of hard standing. However, I get the point that there is indeed a circular benefit the minute that they get a contract, then it will probably allow them to have the financial security that allows us to invest and then revisit the rent issue to make sure that there is no difficulty with stay aid, so there are certainly multiple benefits from securing a contract. We will come on to questions from Andy Wight. Thank you very much, cabinet secretary. You said that the offshore wind supply chain somewhat will be held, and another meeting will be held later in the year. Can you confirm that the actions that were agreed by the attendees will all have been completed by them? I can certainly speak on Scottish Governments. Yes. No. 2, the Scottish Government will continue to investigate the levers. Yes, absolutely. So, yes, we will have completed those investigations. The UK Government reviewing the CFD and supply chain plans? So, I cannot speak for the UK Government, and that is probably a good thing. However, I encourage them to revisit the CFD. They are reviewing it. It is not widely known that they are reviewing the contract for difference scheme, but there is a very blunt policy choice here. I am sitting out of the Scottish Government's position that we want supply chain benefits and we are going to do something about it with the new powers that we have and the window of opportunity that we have. Nothing else has worked, and we have tried exhaustively. However, the lever that could get conditionality and guaranteed local content in the supply chain would be from those who pay the subsidy to the UK Government through CFD. I did actually pose that question. Why not do it? The answer I have had is essentially cost over conditionality. There is a policy choice here. There is a view that it might be a bit more costly if you force the UK and therefore the Scottish supply chain content. Surely we agreed that that is still a price worth paying in terms of the benefits that will come to industry in the new renewable sector. However, it will be for the UK Government to review that decision, not the Scottish Government, but I encourage them to take that step. I have set out a new commitment, 60 per cent, by way of content. However, if you do not have any levers to deliver it, then it is pie in the sky. It is a commitment that will be meaningless. However, you will be pressing the UK Government to make as much progress as possible with the next summit. The representatives from the offshore wind sector are undertaking a strategic capability assessment of fabrication three to four months, so that should be complete, keeping an eye on them. Work was required to review conditions and processes for contracting and risk allocation, the offshore wind sector to explore and evaluate further. That is a little bit more porous in terms of timescales. That is up to them, of course. It is up to them. In calling the summit, I was setting out to the sector, well, here is what we are going to do and what do you have for us? Essentially, what is your contribution? How do you propose to change things? That was their suggestions. It does relate to the £100 million commitment around developing the supply chain. It sounds like a lot of money if it was in short order, but it is not impressive when you look at the overall scale of investment in the sector. It is not as impressive, but what I want to see is tangible improvements in actual work given to Scottish yards. That, for me, would be the testimony of success here. Have the Scottish Government done any assessment of the carbon emissions impact of building jackets for the EDF project in Indonesia? We have done, as critics have done, a tabletop exercise into that. I do not necessarily want to get too drawn into how many cars are equivalent. The basic point here is that it is not better for the work to be done as close to the site as possible. We agree to that. There certainly is an impact. If work was to be awarded elsewhere and then simply transported so far, there would be a carbon impact there, yes. Moving on to the Crown and State, you mentioned that you are exploring that. You managed the seabed on behalf of the Crown. I moved an amendment to scrap the Crown's rights to give ministers exclusive control, but that was ruled out of scope. Nevertheless, you have, through Crown and State Scotland, exclusive competence in managing that interest. You say that you are evaluating the scope there. What are the kind of boundaries of that scope? If I were to say that the scope for that is pretty limitless, you could do what you like there. You could refuse to lease land to a company that was not prepared to enter into legally binding commitments on supply chain. What would potentially be the problems with that approach? That was a very charged question. You have said what are the limits, but just in broad terms? No, I have just made an example. Is it the Crown and State Act? What are the issues at play? I think that we can be creative now. I have not brought the legal team with me, but David can speak for Marine Scotland. Whatever we do, of course, we have to work within the law. We obviously have to look ahead to what is a fair and proportionate approach to an issue. Because we have that competence now over Crown and State, we decide what is the level of leasing that we would think would be acceptable, what are the conditions that we would allow activities to be undertaken. Whatever we do, we will have to be proportionate within the law, not limitless, as Andy Wightman may suggest. We have competence, but what we are doing will be building that expectation around, yes, the economic benefits, yes, the environmental impacts. That is where the carbon point is very interesting, and the emissions point is very interesting, as how we build all that into our system. We will have some time to construct a regime that tries to drive that, but traditionally leasing arrangements have been over. What is the economic contribution? What is the fee? What is the arrangements? What is the term of a lease? I have been very clear as finance secretary, economy secretary, and I have engaged, of course, with the environment secretary who leads on Crown and State to say, look, we have no way of getting conditionality around those who are enjoying the benefits of the offshore renewable sector, those companies who are enjoying those benefits, who are getting those subsidies. We want them to be giving work to Scottish Yards. I am looking at ways, can that be a consideration as part of the considerations of Crown and State? We are exploring that at the moment to see whether we can produce a regime that is work that can be compliant and get those desired outcomes. No offshore renewables can go ahead without permission to anchor them on the seabed whether they are floating or not. Is it Crown and State that would require our consent? You have the possibility to offer a lease on full commercial terms with no strings attached or a reduced level lease with legally binding agreements on supply chain. I am trying to explore the degree of flexibility. It seems to me that you have a fair degree of flexibility as the managing agent for the landowner. We will have some flexibility, but if I launch something that is premature, I am only opening the Government up to a legal challenge and I am trying to resist that. Mr Wightman, I have a great deal of sympathy for when it comes to a legal challenge and I understand that I am trying not to open the Government up to a vulnerability here. What I am trying to do is to help to build a very strong and robust system to get the outcomes that we want to get using one of the few devices that we have when the much easier solution to this is through CFD, but I do not control that. Finally, you mentioned marine planning, which is not an option that you think is in play. On the face of it, that seems fairly self-evident. Planning consensors for the use of land are not about who will develop and how they shall develop and procure, but maybe it is my ignorance that I have just been through the planning bills. I should probably know that we did not focus much on marine planning. There are section 75 agreements in planning law. Do they not apply to or similar to marine planning? The section 75s apply only onshore. That has been a key issue with getting associated benefit from a development offshore. We have just heard a planning bill coming through Parliament. Why did we not use that as the option to extend section 75 agreements offshore? Again, I have no longer got responsibility for planning, but having been planning minister as Mr Wightman will know that planning designation is really about land use or sea use, if you like, in terms of marine. However, you would not be within planning to determine who got contracts, and that is what this is about. By all means, designate use of territory, zonal use, but it cannot specify the work to deliver that use and must go to that country, that yard or that workforce, and that is essentially what this debate is about. We have already touched on the area of question that I was going to ask about conditionality, and you have highlighted the issues that the Scottish Government is going to be doing in terms of decommissioning, crown estate licences, etc. If the UK Government is reviewing its contract for differences and Scottish taxpayers, through their utility bills, subsidise a lot of the CFD, what changes do you want to see to those contracts that would benefit the Scottish economy? I have tried to describe, convener, that a fundamental change would be to put conditionality around the supply chain content. There is an ambition there to do it. The UK Government will have to revisit the plan, how it gets there, so far in questioning the energy minister or me questioning UK civil servants who attended the summit. I was not much clearer on how you get to that target without the levers to pull, because it leaves us in the position that we are in right now, that we all share an ambition to get as much work as possible onshore from the offshore renewables sector, but because you cannot compel it, you cannot condition it, we are left at the mercy of the developers as to who gets the work. I do not really see that changing terribly, even with the interventions around collaboration and more competitive partnerships. That is all great, but is that the game changer? I do not think so. He who pays a piper calls the tune, and that is where I think the difference could be. If there was conditionality in contract for difference in that regime, I think there would be more guaranteed supply chain content. That is not saying that it would be an individual yard, it would be more to the nation, to the country. For us in Scotland, knowing where the opportunities exist, I think that that is what we would make the difference. It is a simple question of conditionality over cost, because yes, energy users are paying for that right now, but they are not getting the associated jobs that come along with that contribution. We heard from a GV driver group when we had a round table that in Canada, if there are these local benefit agreements and companies fail to deliver what they committed to, then they can be fined. In one example, they gave us up to £150 million. A company was fined for not delivering what they said in their contract bid. Is that something that you would encourage the UK Government to look at? I would encourage them to look at. They will obviously be working within EU and state law for the time being, for as long as possible as well. We have a very close relationship naturally with DF Barnes, the GV driver, in terms of the BiFab owners. We engage with them regularly. Of course, there is a different legal system in Canada than there is in Scotland and in the UK. We do not have some of the same devices that they have to ensure that those local community benefits, if we had, would be using them. I can ensure Mr MacDonald of that, but we do not have that ability to enforce that. That is a difference, but I would encourage the UK Government to look at that. I welcome the fact that you are looking at the Crown Estate route. I wonder when your official started looking at that as a potential way of providing conditionality into it. We got Crown Estate from last autumn. As it happens, the window of opportunity of new consents does not neatly fall upon that right now. Even if it was a great idea last autumn when we got devolution, there was no consenting where that would have been appropriate or relevant or timely. Timing is not the question with Crown Estates, not having had control over it before. We obviously could not have implemented it early in it. Would you be able to look at it and consider it and perhaps take legal advice with you? It was recommended in the Smith commission in 2014 and came part of the Scotland Act in 2016 and founded in 2017. Is it only recently that you have started looking at whether that could be a way of delivering it? That is right. It is only recently, off the back of the last couple of years, when a lot of commitments were made to Scotland and made to Scottish Government and others about supply chain benefits that would be coming to Scotland, they did not really materialise. I have been working very hard with officials to see what powers we have and what levers we have to just get conditionality here. If it is not going to happen by a voluntary basis, hoping that companies do the right thing by Scotland, then what levers can we pull? We have not been able to find any legal route to compel companies to invest in Scotland, which is ultimately what we are now exploring. Naturally, we would all say that it is self-evident that we should invest in Scotland and get quality work, and it is beneficial for us all. In the absence of a legal remedy, when all the advice that I have been given is that we could do it as part of contract for difference but we do not control that, that is UK Government. The one thing that could be a game changer here, we do not control, so I am exhausting the system to see what do we control that could be used competently and legally to get the same kind of outcome. Officials now have management of the Crown Estate, are exploring that and the decommissioning route, which considers many things. I am asking for the system to be considered to look at those value-for-money economic benefit environmental considerations as well. Why is all this important? Parliament and ministers decide ultimately, agents act and ministers name. Sometimes companies are telling us when it comes to giving work in Scotland, that it is difficult, Mr Mackay. Do you know what I am going to say to some of those companies when they want to get the contracts, develop in Scotland, but not give us the jobs? I am going to say that it is difficult. We have to create an environment in which our expectations are made clear. We should be coming and investing in Scotland, and that is why we are exploring the mechanisms to do it legally, of course, because we always want to act within the law. Would we not, Mr Johnson? I am sure that we would. Thank you very much, convener. Can you say something about the relationship with BiFab with the Government? As I understand it, there is a 28 per cent shareholding that may go up in the future. Does that mean that the Government has quite a lot of involvement or not a lot of involvement in the actual running of BiFab? We have involvement in, so far as, of course, we want the Yard to secure work. That is what we are striving to achieve. I support the employees at the Yard, the trade unions, in trying to get work. We are supporting the company in understanding their issues. Again, we are looking at the investment propositions for the Yards, but we have an interest in the stake in the company as well. We have clearly been working to try to raise the overall issue of Scottish content, supply chain benefits—that is overall for industry in Scotland—but the relationship that we have with BiFab with regular contact, regular political and official engagement. However, we do not take any managerial operational control naturally. It is about understanding the company, the needs of the company, the experience in Scotland and be supportive as possible. Of course, we have a commercially confidential agreement about the nature of our contribution that goes along with that. As reported to another committee in a confidential session for reasons that remain confidential, there is also the issue of where the Government can offer guarantees to companies that can help them to secure work. If there was such an arrangement with BiFab, that would be reported to the finance committee for their consideration. Convener, but that would be commercially confidential and not for open public session. Some shareholders in companies holding 28 per cent would be involved in the management of the company. Is that a choice? Is it because we have complete confidence in the board, BiFab, Driver and all the rest of it, that there is nothing that we can add to the management of the company? Or are there other reasons why there is no involvement in the management? Essentially, civil servants are good at policy in running the bureaucracy of the country, but not necessarily directly run or have much to add to the running of an industrial company, so to speak. We would not take operational control. There is a place at the board, but that is mainly its observer status, but political official engagement is on-going. We would not tell the company how to run its affairs, but we will watch very closely for public interest and the actions of the company to be assured that what they are doing is the right thing. We are alive to the decisions that they are making. It gives us a much deeper and forensic understanding of the experience of the company, but there has been no reason for us to try and manage the company. I was not in day-to-day management, but if I am picking up correctly, there is one seat on the board that is a representative observer of the Scottish Government. It is mainly acting as an observer rather than as a contributor to operational decisions. Yes, but you should be aware of major decisions that we are making. Can you tell us the suggestion that it could go up to 38 per cent? How does that happen or when would that happen? It is a bit like a potential drawdown of loen that the share in the company goes up by way of an equity arrangement, so it can go up as high as 38 per cent under the terms of the arrangement that we have with them. We have touched on state aid. In the course of taking evidence, we have had allegations that state aid rules appear to be getting flouted. Particularly in the case of Navantia, the Spanish state-owned company that outbid BiFab for the Concard and Wind Farm work, has the Scottish Government done any work in ascertaining whether that is in fact the case? It is not really for the Scottish Government to do that work, so to speak. Certainly, we should be aware of it and understand that it would not be the norm for one. We would not be the notifying body as the Scottish Government, one member state complaining about another member state. A trade union or a company that is probably more well informed of the circumstances could complain to the commission. If they felt that there was a state aid breach, they would be better positioned to do that, knowing the accusation that might be made, the detail, the finances, if there was reason to believe that that was true. It would not be for the Scottish Government to raise a complaint, therefore, to do that work. If it was felt that there was grounds for a complaint, it would be for a company to lodge that with the commission. Ultimately, the European Courts would determine that, but the commission in the first instance. Would an individual company really do that? Is there any case where that has happened in Scotland? I would have to check back with our lawyers to understand if that was the case, but it would not ordinarily be a Government raising that kind of action. I am not aware of the Scottish Government having done it for as long as I have been in the Government, but it would be for a company to pursue that rather than for us. Clearly, it puts BiFab in a difficult position. How can it compete in that sort of environment? If you extend it to the Scottish economy, is it happening elsewhere? Is there impact on the economy? Isn't it a quite an important issue? It is an important issue. I know that we all want a level playing field, and we want everyone to play by the rules. We certainly do. We often be mowing state-aid rules, but we abide by the rules and we want everyone else to abide by the rules as well. If a company feels as if they have that evidence, they should raise a complaint with the commission. A company that has been involved that can make the accusation and stack up the accusation with the evidence is far better placed than anyone else to raise the complaint with the commission. We are looking specifically at BiFab and the concerns about making it into a flourishing prosperous business. That is an issue that is specifically impacted on it, according to the company. Surely it puts them in a very difficult position, because even if they complain to the commission, it is going to take how many years before anything happens. Those things do tend to take a long time. Who knows where we are in terms of our position in the European Union by the time any case might have been heard and concluded? Mr Beattie is asking very good questions, but they are not really questions for the Scottish Government. They are questions for those who are making the accusations and believe that they have the evidence to challenge it. What I am trying to reassure committee of is that we abide by the rules. We want a level playing field. That is the case that we would make, but for those who are making the accusations, they would need to report it if they felt that it was credible enough, notwithstanding the pressures that go along with the judicial process. Given the allegations made by BiFab, are you satisfied that this is not a general concern in connection with business elsewhere within the Scottish economy? I have not seen evidence to suggest that this is a general issue in the Scottish economy, no. That is a direct answer to the question. Andy Wightman On your answer to the previous question, do you have a seat on the board? Do you own part of the company? Is it sure that it would be appropriate to ask the company to stack up what evidence it has and, if necessary, push for that complaint to be made as a shareholder? I have said when I have met the company what the legal routes are, but that is open to the company. You would need to ask BiFab why they choose not to pursue that route. It might be for the reasons that Colin Beattie has given about time and process, but it really is for the company to consider whether they want to pursue that action or not. I personally have not seen evidence that would give me personally confidence that there has been wrongdoing, but that is not to say that the company is wrong or does not have that evidence. That would not be for the Scottish Government to raise. It is for the company to raise if they believe, as per the comments that they have given to your committee, that there is wrongdoing and flouting of stated rules. My question is that you sit on the board. No, I do not sit on the board. No, the Scottish Government is represented on the board. You are represented on the board and could put that forward as an agenda item. No, the company would need to put that forward. I think that the shareholders and the directors of the company ultimately govern the company. I think that you would be better asking the company why they would not want to progress a legal challenge to the commission. I could spend years and energy on this, or I can do what I am doing, which is trying to secure them work. We are not inviting you to take the challenge. That is my question. That might be behind some of Mr Beattie's questions, but I am asking you whether you could use your fact that you have a seat on the board. To add a board meeting, ask the company what evidence it has to bring forward a paper to the next board meeting. I am happy to say again to the company that if you believe that you have evidence that there has been contravention and you wish to take that up by way of complaint to the commission, that is for the company to do. The Scottish Government should not be encouraging or discouraging that legal action. That would be for the company itself. I get that we are a shareholder. But a shareholder has a duty. Mr Lehmann, we are saying the same thing now. We are saying the same thing. We are both saying that if the company believes that they have evidence and they wish to take it further, they should. But that is for the company to decide. It goes back to what Mr Mason was asking about. Do we take a role in the operational and management decisions of the company? I said, no, we do not. We do not instruct the board where they are to understand what the company is doing or lead the board where they understand what the company is doing and understand the wider issues and the forensic issues. If the company wishes to raise a state aid complaint, that is entirely a matter for them. It would not be a management decision for us. But publicly, I am saying the same thing as you. If the company thinks that they have evidence, then they should raise a complaint. I think that if the Scottish Government is a shareholder in a private company, I would have thought that it has a duty to the taxpayer to raise it inside the company. I think that I have said publicly what I have said privately in terms of if they have evidence that they should raise it. However, there is something peculiar about a Government within a member state acting in a certain way of member state complaining about another member state. We are not the member state, we are Scotland within the member state. I am just saying that it is very subtle here, but we are saying the same thing. If there is evidence, the company should take it forward, raise a complaint, and surely justice will be done. From a slightly different angle, I am a bit surprised that Scottish Enterprise would not have a role in that, because their job is to try and get businesses to come here instead of another member state. I know that they have a lot of restrictions on how they can help a company because of the state aid rules. I would have thought that, just as they are trying to do the best for inward investors, they would also be keeping an eye on what other countries might be doing and whether they were on a borderline or pushing the rules. My question was that it was relatively easy to raise the question of state aid, because, for example, I have had ranger supporters raising the question of whether Celtic got state aid and the European Commission did follow that up, apparently. It did not seem to be very difficult to at least raise the question. Could Scottish Enterprise not have a role in that? I do not want to get into any of those complexities, but other than to say that I do not see the Scottish Government's enterprise agency as trying to act as a policing authority for European state aid rules—that is what the European authorities are for. I am happy to ask my official, if you wish, to say a bit more detail on the appropriateness of that action, as I have tried to describe it. I think that I will largely be adding more detail to what Mr McKay's point was. Effectively, Scottish Government and Scottish Enterprise and our enterprise agencies work very closely with the business and make sure that any aid or any support that we give is watertight from a state aid perspective. As committee will be aware, if we act in a way that was not in that case, it would not be the Government that the case would be against. The funds would be clawed back from the company. It is our first priority to ensure that everything that we are doing is compatible with the state aid requirements, and the knowledge and expertise in our enterprise agencies are important in helping us with that. For Scottish Government to advise the company to make a claim, it goes back to the point that our position is that we do not interfere in management decisions and do not interfere in operational decisions. We are there for the company to make our main role on the board as an observer, to ensure that information flows freely and to ensure that if the company has an ask of government that we can act quickly on it and respond as fast as we can. Although the process to make a state aid a complaint is relatively light-touched, there are well-documented procedures on the commission website about how any interested party—not just by-fab, but anybody across the EU that feels that their business has been affected by it—is well within their rights to raise a complaint. It still is a management decision because by-fab would have to devote management time, would have to devote resources to gather the intelligence, to gather the evidence and to make that case, and that is not for government to take that position. Possibly what seems slightly puzzling is that the position that seems to be adopted because I am not sure that other regional Governments in European countries would take the view that it is not something that is of interest to them if companies within their area are being affected potentially by that. So it does seem to me that it is something that the Scottish Government would have an interest in. You do not accept that. No, it has a different language. Do I have an interest in? Yes. Do I want to launch a complaint on behalf of another company in which we have a stake in? No. I suppose that the question is, what is the Scottish Government doing about it then? As I have described and said to the company, if they feel that they have the evidence that merits a complaint, they should raise that complaint with the Commission, ultimately it would be for the European authorities to decide. I personally haven't seen the evidence, and I referred to that earlier—the evidence that would suggest, that would conclude that there has been wrongdoing, but the company itself may hold that kind of open book information. The other point, Secretary of State, is that the law, including on state aid, in particular is fairly complex. It is not a question of it being clear necessarily, so one has to take an active interest in it and the interpretation of it and how it has applied, and surely that is something. I understand why you are pursuing the line of question and I hope that you can understand why I am protecting the interests of the Government here. If the outcome that we are trying to achieve is to ensure that we get more onshore supply chain benefits from the offshore work, then the more fruitful way to do that is around the channels that I have suggested. There is an interest in, clearly, the level playing field. I want that to be delivered, but the only way that can truly be tested if there is a complaint from a company, that will be down to the company. That is not for the Scottish Government. It will take an interest, absolutely, of course we will, but that is not for the Scottish Government to launch that complaint. As I said, the company will have more insight into open book and I think that you really need to, if you want to develop that further, I think that you really need to speak to the company about that. I cannot speak for them as to why, what information leads them to the conclusion that there isn't a level playing field and what they intend to do about it is legitimate questions and I would put that back to the company rather than trying to have me to speak for them if it is a matter of concern, which I can understand why it is. We will move on to questions from Jackie Baillie. Thank you very much, convener, and I am glad that the cabinet secretary recognises role on the same page in wanting BiFab to secure supply chain work from billion pound wind projects in Scotland. I welcome his change of heart by inviting a member of the committee to the next summit. We received communication from Tony Mackay, an economist based up in Inverness, and he informed the committee that global energy group at NIC had been more successful at winning new work than BiFab. He points to a lack of support from high and S.E. for the current underperformance of the supply chain. Do you agree with his assessment? If so, what do you think the wider supply chain can learn from the global energy group? No, I do not agree with that assessment overall, because when I have engaged with developers, if you want to boil it down, a lot of those companies say they give awards based on just cost. They just say that it is cost. They put cost that it is cheaper to do work elsewhere, for whatever reason. I would not say that it is down to a lack of entrepreneurship, or a lack of co-ordination, or indeed a lack of investment, although it will be self-fulfilling if investment comes and the capacity can improve and the pipeline of work will bring a whole host of benefits. When I have engaged with companies, as Jackie Baillie would expect, my energies have gone into engaging with developers and expressing the disappointment in Scotland, whilst companies have been getting concerns and enjoying the benefits of the subsidies. Scotland has not been getting the work that I have been expressing, and that disappointment and opportunity is when contracts have been placed and trying to raise expectations around what Scotland gets. The critique that I have had back is largely cost, largely it is cheaper to do work elsewhere, and we do not have to do it in the UK. We do not have to do it in Scotland, and they do not say the words that you cannot compel us, but they know that we have not been able to compel us for the reasons that we have discussed this morning, that there is no conditionality on those awards of subsidies. I would disagree that it is just about accused lack of support from an enterprise agency. The companies that I have engaged with have been able to say that it is about cost. Now, what I am saying is that some countries would be very hard to compete with, whether that is because of labour rates, wages and other matters of scale. However, we need to create as competitive and incentivised locations as possible within Scotland, and even when we have done that, we will still suffer on costs. That is one of the issues that buying fab, excuse me, has said that no matter how competitive they can be, that when it just comes to pure costs, they might not win, but on quality they can, and on local content absolutely they can. I think that there is a number of ways into that issue. I encourage the Scottish Enterprise Agency to be as creative, innovative and supportive as possible. Yes, I do. Of course, it is a mixed picture in Scotland. There have been successful yards and enterprises around renewables. Some of those are those who have been able to collaborate and create a shared capacity, wider expertise. Once you have a pipeline of work, it is easier to invest. You have a long-term future, you can invest, you can scale up the workforce, you can do more around research and development, and so on. Of course, there can be further support from the Enterprise Agencies, and I think that Global Energy Group is a good example of that. It is also true to say that different parts of the sector are targeting different parts of the market by fabs targeting fabrication. Some of the other companies are targeting manufacturing, servicing or location, so different companies are doing different things as well, which I think might explain some of the different experiences. I accept the cabinet secretary's wider points, but I simply note that the Scottish Government threw high, putting 1.8 million to the niggard, and you talked about conditionality. That is an area where the Scottish Government could apply conditions. Where I am going with this is that Global Energy Group boasted on its website that it was anti-trade union and had a non-unionised workforce. That was the Scottish Government's approach to support that in 2012. I am assuming that the Cabinet Secretary of State and the Scottish Government now would not support such an approach of a company that openly boasts of being anti-union. No, I would not encourage any company to be anti-union. It was to the agencies, the Highlands and Islands Enterprise and the Scottish Enterprise, and what they had been doing. I also was just going to ask you how they co-ordinate with other agencies in Scotland such as the Crown Estate, Skills Development Scotland, in terms of making sure that there are the right environment, skills, facilities, etc. To take advantage of offshore, should we be able to fully take advantage of it? So, there is a range of work that they do. Some of it is around expert support. They will assist with conferences, bringing together people with interests in the renewable sector. They will make connections of fund direct investment and what companies might be interested in doing, looking at exports as well. Of course, they do engage with each other, sectoral experts and wider account managed companies. There are successes around enterprise investment into companies working in renewables. There is a degree of co-operation and leadership that can be provided all within state aid rules. Fabrication appears to be a slightly more difficult territory, because of the nature of the business. Although some renewables companies have been able to expand, some operations have not been able to deliver for fabrication, but that is clear that we want to change. Across the sector in renewables and in energy, specifically, Scotland has a very strong reputation. That is why we are holding international conferences in Scotland. Scottish companies have a strong presence both here and abroad, but the niche area that we feel most sorely let down in my opinion feels like the onshore manufacturing industry jobs, particularly around fabrication. BiFab is a pretty good example of that sense of disappointment when we know that staff can do so much. We can scale up so quickly and deliver. There is new ownership of the company, the trade unions and the staff are engaged. I believe that the campaign is ready to go in terms of a pipeline of work, but Scottish Enterprise, Highlands and Islands and Enterprise and others are very active in that area. Given the potential for off-shore, some of the single fields of off-shore turbines—hundreds of turbines—are we in a position that we can cater for that? Not at the moment necessarily, but are there plans to make sure that we have got the fabrication yard, not just BiFab, but across my region, the Highlands and Islands. Have we got the skills or the plans to get the skills in place? What are the timescales on that? Obviously, I was just interested when the next group of licences are going to be put out. Are we going to be in that position when we are ready for that? Do you mean CFD licences for the Crown of State licences? I will come back to that. Just by way of detail, because you have given me enough time to find it, on the off-shore wind expert support programme, 172 companies have worked with the enterprise agencies since 2016. That shows the scale of companies. Three companies from that have secured contracts totaling £35 million in the last year alone. In the Highlands and Islands area, from March 2010 to May 2019, the enterprise invested more than £41.4 million towards energy-related infrastructure facilities across the Highlands and Islands, against a combined total investment of more than £192 million from private and public sources. That is a bit of detail that you were asking about in terms of enterprise agencies' engagement. In terms of capacity, with the best will in the world, even BiFab admit that they could not do all the work that could possibly be done in the off-shore sector onshore. They just want to fight and chance in enough work to build up their capacity again to increase that workforce, which has been down to about 80. At the moment, it is about 120 of a workforce. That could be scaled up very quickly, so we could scale up and get on with more contracts very quickly. Of course, in Scotland we have the capacity, we have the quality, we have the talented workforce, we have the yards and the infrastructure. Of course, it is on our shores, it is our waters, it is on our site, it is at environmental benefit of doing the work as closely as possible. For the next round of licensing, we are, so the new arrangements, hopefully, we will have in place, designed and in place in terms of the outcomes that we are trying to achieve will be in place for the next leasing round for Crown Estate Scotland, interestingly named. Sorry, which comes, which is when? I will ask David to come back to that and then contract for difference right now. You just said that the UK Government is looking at reviewing that right now, so the sooner that can be concluded the better. It takes you back to the policy choice. We will be choosing where possible for that local content. The UK Government needs to do the same. If we are both doing the same, think of the industrial benefits, think of the jobs, think of supply chain content that will be coming right across the whole of the UK and to Scotland if both of us are using that lever in the fashion that I am describing. David can cover the next round of Crown Estate leasing in Scotland. In terms of what will happen, the Scotland process will commence later this year, which will sit alongside a sexual plan from the Scottish Government identifying the areas. I suppose that one way to look at it is that we are still exploring the actual terms and conditions of the Crown Estate leasing, as the cabinet secretary has outlined. Once those terms and conditions are in place, we will be able to see how they will factor into the process and be considered as leases go from an exclusivity into a formal lease stage. If we are able to factor in the conditionality to boost the opportunities for domestic companies, how will Highlands and Islands Enterprise, Scottish Enterprise and all the other bodies that relate to that, be supercharged to meet that demand? If we are talking about one development having 200 turbines, that is a huge amount of work that the capacity probably is not there at the moment. How will we make sure that we are ready to meet that? Mr Johnson agrees that that would be a nice problem to have if we are being talking about the oversupply of work coming to Scottish Yards. How will we manage it? That would be a nice problem to have. It is the old Alex Ferguson problem of the best players to pick, but it is still a problem that has got to be addressed. I think that some of that work has already begun at the summit when the sector, because the summit was partly to say that we are now going to have to look at the big stick, because we have tried to incentivise you at what you bring into the table. I thought, what will the offer be from the sector? It was to explore co-ordination, it was to explore investing in the supply chain, to try and support better co-ordination. That is partly where the announcement of £100 million has come from. It was first trailed at that summit. I think that some of the work has already begun to try and collaborate, to try and build up that capacity. I will also remove yet another excuse as to why contracts have not been placed in domestic yards, because the sector will have a responsibility to allow for their improvement and stimulate their improvement. So, yes, we will work with Scottish Enterprise, we will work with the sector, and I think that if some of the developer's businesses more accurately co-ordinated with each other, they might say, could you do some of the work here, we can do some of the work, a bit more collaboration and partnership, but overall that would be good for the country, rather than just have individual companies vying for competition with each other. It is also a very specialist sector, so fabrication is different from service and is different from some of the construction. So we absolutely will explore all of that, but the first key big thing that we've got to do is to have that game changer moment in companies actually awarding contracts to Scotland. But I say again what I said at the start, it's very topical and very timely. I'm cautiously optimistic that BiFab will secure work. Thank you. Question from Andy Wightman. Thanks, convener. So, underpinning all our discussions this morning has been the presumption that these are multinational private companies that are the developers drawing in capital from a range of sources. But, of course, many of the companies that they're offering work to are themselves state-owned enterprises of other countries. The Government's proposed a publicly-owned energy company. We've got Sweden's Vattenfall, which is a state-owned company, operating offshore. Surely another option for the future, of course, is to explore the role of a state-owned company to be the developer, and then it would have almost limitless control over who to supply contracts to. Yeah, it's very interesting. I point indeed at Wood, and that's a point that I make to the companies, the developers. I point out that the Government is bound by the laws of our companies, but if a company chooses to put the right decision in terms of invest your work in a particular country, they can do it. They can make that decision. So I'm already using that argument. Whatever the status of the company, if they're getting consents in Scotland, they should be investing in industrial jobs in Scotland. As to future Scottish Government having a state-owned publicly-owned renewables company, that's a very interesting proposition that Mr Wightman has suggested to me. I'm not sure it would be up and running quickly enough to give contracts to BiFab, but it's a very interesting proposition. Well, it's your proposition. The Government is committed to establishing a publicly-owned energy company, but you are specifically talking about offshore renewables sector here, so we're talking about slightly different things. Well, as I understand it, we've had discussions in this committee on this question. The scope of that publicly-owned energy company is still very much under discussion, so I'm just inviting you to consider how its scope could embrace being a state-owned enterprise in the sector. Obviously, some plays down the line. Yeah, I'm happy to pass the comments on to the energy minister, who leads on this issue. All right. Thank you very much. If there are no further questions from committee members, thank you to the cabinet secretary. I'll now suspend the meeting and we'll move into private session.