 Good morning to everyone and welcome to the eighth meeting of the economy, jobs and fair work committee of 2018. May I remind everyone to turn electrical devices to silence so that they don't interfere with proceedings or the work of the committee? We have apologies from committee member Gillian Martin. The first item on the agenda is a decision by the committee to take item 3 in private, or we all agreed. We have three witnesses who have braved our weather to come in this morning. I would like to welcome the three of them to come and speak to us about our Inquiry Scotland's economic performance. First of all, Alastair Sim, director of the University of Scotland. Sandy Finlayson, who is the chair of Converge Challenge and Professor Ferdinand von Ponziński, who is the principal at Robert Gordon University. Welcome to all three of you. If I might start just with a fairly general question to each of you and don't feel you need to all answer every question but see how the questions in the discussion flow, how do you see the Scottish economy as having performed over the last 10 years? I'm thinking in particular about innovation and development. Who would like to go first on that? Sandy Finlayson. I think that it's difficult to look at the Scottish economy as such. I think that we have different regional economies. I think that we've now got a very, very effective tech ecosystem. You've probably heard that expression here in Edinburgh. It's very well connected and joined up. It's not as good as Cambridge, but it's not bad. It could be a lot better. I don't think that it works nearly so well in Glasgow and perhaps not in Aberdeen, but Professor Brindginski would have a better view of that than I do. We've got very, very effective business angel syndicates here in Edinburgh, which is very supportive of start-up companies. To give you one example of that, there's a group called the Archangel. Since they started in 1992, they've been responsible for creating about three and a half thousand graduate-level jobs, but I don't see that happening to the same extent in the other university cities in terms of the output of our academic institutions. I think that there's probably much more we've got to do. Without going as far as Massachusetts to look at the performance of MIT and Harvard, I'm always impressed by the Cambridge miracle. Cambridge University has been so successful at creating high-value employment in Cambridge that it has negative unemployment in Cambridge. I could go on about this for a long time, but I should probably let the others have a shot. I'm here now in Scotland for seven years. I came from Dublin at that point where I'd spent the previous 10 years as president of Dublin City University. While it's always dangerous to make comparisons between different countries, I did have some observations in arriving in Scotland. The system that I was used to in Ireland had a very high level of integration between universities on the one hand and, I suppose, the key economic levers on the other, whether those were in industry or whether those were in government agencies. I found in Scotland that universities were expected to be service providers to initiatives that came from elsewhere, whereas in Ireland I'd been used to partnership arrangements. The reason why I'm mentioning all of that is because the experience of Ireland in the years while I was there could be quite interesting in a comparison with Scotland. The focus then was, in particular, on two things, on start-ups that had high knowledge value, particularly in high technology value, and on high value foreign direct investment. That particular emphasis on creating an innovation economy through the nurturing of an innovation ecosystem allowed Ireland to step out of the recession that it slipped into, which Ireland was particularly badly affected by, very early because it had a vibrant exporting economy that was largely focused around high value knowledge intensive innovation-driven initiatives that were usually partnerships between industry and universities. In Scotland, we probably still have some way to go in that but are going in the right direction, not yet quite where I felt I was when I left Ireland. However, we're going in the right direction. The innovation centres that were created by the agencies, government agencies in Scotland are definitely moving in the right direction. I think that there probably needs to be a higher level of investment and activities of that kind than so far. The key driver of success is going to be to create a much higher level of industry R&D. Scottish academic research is good and will compare with anywhere in the world. Industry R&D does not. The industries of the future are not going to be called centres. They're not going to be fairly low-level manufacturing. We're going to be knowledge-intensive, innovation-driven industries. For that, we need to have a much greater link between universities and industry to ensure that the industry moves up the value chain to a greater extent than has been the case. Obviously, there needs to be a huge focus on skills. I think that we know all of that. We're moving in the right direction but there needs to be a higher pace and I suspect more money still. The UK industrial strategy may help not a little bit but there are a number of things that we need to do in Scotland specifically. I think that we're going in the right direction. We've got a way to go. I think that we're getting there. We have seen things move along. When I look at the statistics, we've got Scottish universities now doing business with over 21,000 Scottish businesses a year. We've got graduates coming through who have now had entrepreneurship and that range of employability skills built into a curriculum that I hope will help to drive economic growth. We've got an increasing rate of universities creating spin-out companies and getting their intellectual property out there so that other companies can use them. What I would describe as a virtuous cycle is that we've got enough of a barret of innovative companies, particularly at the SME scale, who are hungry for the ideas that they can co-create with universities. I'm struck by the fact that universities are interacting at the moment with more companies than Scottish Enterprise are because they have had such a big focus on the high growth companies. One of my hopes, from the Scottish Government's creation of this new strategic board under enterprise and skills review, is that we can through universities, through the enterprise networks drill around further into helping more companies at the SME scale to become enterprising and innovative and call on the ideas that we're developing at university. Good, thank you. I'll move to a question from Jamie Halcro Johnston. Why do you think it is that there are many businesses that are still unaware of the opportunities to partner with local university or other universities and why do you think that that is and what more can be done to raise that awareness? Ferdinand will probably be able to answer that from direct experience of the institution, but looking at that at the national level, it is probably largely the nature of our SME economy. I mean, there are many excellent SMEs, excellent family businesses that are doing a good job but aren't in that space of really thinking what is the next process, what's the next product, how do we do something that's really market changing. Somehow, I wish I knew the answer, how we need to be stimulating a wider range of companies to be thinking like that. I think there are things that are really working quite well on that. For instance, interface is working extremely well at matching up companies with university expertise. Basically, if you phone up interface and say, I've got a problem where I think I need some expertise possibly from university to help me solve it, they will work hard to find the right person in the right university across Scotland who can help you and quite often what they will then do is say, actually, that's not the problem. You could be reconceptionalising, you're thinking about growth and product and process development differently, and you do start to create that virtuous cycle of long-term engagement between an enterprise and an institution, and it does tend to be those longer-term relationships that really get a bit of momentum behind them and change the business quite fundamentally. Other universities are doing great jobs like Dundee's got a fantastic incubator centre for new businesses. I think that the wiring that is used in the international space station was developed through that, for instance. There are great examples. I think that universities feel that they're doing a lot to create this space for interaction with business but that we still sit in the bottom quartile for business investment and research and development. There is some catalyst needed and I wish I could give you the easy answer to what it is. Just picking up on that, I agree with everything that Alasdair has just said. There are two elements with this. One is the one that Alasdair mentioned, which is SMEs often don't have the resources and the people to pursue innovation opportunities and sometimes don't realise that that's going to be worthwhile or feel that if they did it, they would be wasting a resource that is for them scarce. There is another element to this as well. If you look at the experience of other countries, there's a lot of other countries now. Innovation builds up around two types of clusters, one of which is a higher education cluster. You tend to have the most innovation intensive areas around universities, but they also require at least some element of existing business R&D. One of the problems that we have in Scotland is that there is a very low level, particularly in the large companies. To give an example, there's a lot of work being spun out, for example, out of our neighbours in Aberdeen, University of Aberdeen, particularly in around life sciences opportunities. Either there are companies being spun out or intellectual property is being exploited commercially, licensed usually. The problem with that is that the value that that is being created by that will almost certainly end up somewhere other than in Scotland. If you take the life sciences sector, there is very little life sciences R&D, industry R&D going on. If you've got a particular discovery, the likelihood is that it will end up somewhere in Massachusetts or elsewhere, and if you spin out a company in 10 years, it probably won't be there or rather it will have been acquired. Even if it's successful, particularly if it's successful, it will have been acquired by some multinational company. Whatever potential value is in that is now being exploited in Asia or America or in the continent of Europe. We need to ensure that there is the link between industry and universities that Alasdair is referred to, but it really needs to be a priority to have some high-level industry R&D. That can be helped also by a particular focus on how we pursue foreign direct investment to ensure that there is, for example, a biopharma company in Scotland doing significant levels of R&D. I think that other colleagues will probably cover more on that. My slightly general question was basically what are the key opportunities and risks facing Scotland's economy over the next 10 years as we look forward? Brexit. I've come to the conclusion that Brexit is a little bit like the archers. It's been on forever. It's on every day. It's the same tidal cast of characters. Nothing much ever seems to happen if people either love it or hate it. More seriously, in this sector that I'm involved in, the general will give you more accurate statistics than I can, but a significant number of our academics and students come from European countries. I recently chaired a presentation about Brexit for entrepreneurs. There were chief executives of five technology companies on the panel. They were employing between 25 and 40 people. Each of them, about a third of their employees, came from Europe. That is an issue. A third of our venture capital originates from European investment fund. Just to maintain our existing flow of venture capital, that will need to be replaced because that source of capital is already drying up. Your new initiative for the Scottish National Investment Bank is probably a very good starting point. If I may make a plea to the committee, please, when it gets operational, it should be a provider of equity rather than a provider of debt. There's plenty of debt in the clearing banks. Access to capital is the thing that we need. Scotland trails quite badly behind the rest of the UK in terms of access to capital for innovative new companies. There's an interesting statistic that is perhaps pertinent to your deliberations in the patient capital review document, which was published by the UK Government last year. It looked at a cohort of companies over a 15-year period. Over that period, those companies that had taken in external equity, venture capital, had created nearly half of the jobs created by all the companies. Nearly half of the jobs created by all the companies were created by one in 200.05 per cent. Finding ways to get more ambitious companies is very important. To your specific point, one of the big issues bluntly is lack of ambition. If people can make a comfortable living just by doing stuff and doing what they're doing without going and taking the risk to expand a business, not a lot of people here are comfortable just to do that. Lack of ambition, I think, is an issue. Has the environment changed, though people aren't prepared to take those risks? Yeah, it's changing. I think that there's a lot to do with storytelling. You go to London, you'll crack your slush into entrepreneurs everywhere who have cashed out their companies once twice or three times and are happy to share their experiences. There are not enough people up here sharing those experiences. I absolutely agree with what Sandy has said. I think that there are for me two key risks that probably dominate in Scotland, one of which is Brexit, which probably we don't need to talk much about, but it is a huge risk. It's a reputation risk and it's not just in Europe. Maybe it's worth just saying that at a recent visit that I had in America, I ended up talking by complete coincidence to a senior official of the National Science Foundation, which is the key science funding body in the United States, who was telling me in conversation that their view was that one of the consequences of Brexit was that the UK would lose research leadership in Europe and that it would go to Germany. There are reputation issues, but not just in Europe, but elsewhere in China had similar experiences. We need to be aware of that. The other one is just building also on what Sandy said. I think that we don't have enough people who want to be entrepreneurs in Scotland. There are a number of reasons behind that, one of which is how we run our education system and in particular how within that context we put role models forward. That sometimes is caused incidentally by social ambition of parents who think that the best place to put their children is in the professions, whether it's lawyers or doctors, accountants and so on. Of course, we need all of those. I'm a lawyer myself. Tend to take the view that we don't need any more lawyers, but at the same time, this is not our urgent need to have more in the professions. We need to have people who want to be entrepreneurs. Too often, the people who are driving the BMWs or something in more disadvantaged areas are often drug dealers. I don't mean to exaggerate that, but we need to give young people a sense that going into business and doing something creative in business is a really exciting prospect. It's something that should be encouraged, whether it's through families, schools, careers guidance and so on. We need more entrepreneurs. When should that be starting? That needs to start at primary school level, because many of the formative influences take place there. The biggest risk that people have already said is that we become an inward-looking, unambitious nation in the economy. I hope that we won't. The indications are that we're probably heading in the other direction. I think that the biggest opportunity is to make sure that we are a high-growth, high-skills economy. The indicators of demand in the economy and what levels of skill are being demanded by employers are very much that the growth of demand is at the highest-skills levels and at the medium and lower-skills levels that you see less growth or decline in demand. To me, as an indicator, we are at least the sum sign where we are on that path towards becoming more and more of an outward-looking, high-skills, innovative economy. We really need to keep a consistent focus on that lest we settle back into something that feels like a more comfortable decline. I should perhaps say something about role as chair of converged challenge. It's a violent trade, non-executive role, but I found it immensely invigorating. We've been doing our business plan for 2019 to 2021, and I've had the opportunity to go around all of Scotland's 19 higher education institutions with Olga Kuzlova, the director. I've been really impressed by the size and scale of our universities. I just hadn't appreciated just how big they were and how much is going on. The people we come across, the people who get involved in the programme, started only six or seven years ago, and I think that there are only 60 companies applying in the first round. This year, we expect about 250 applications. The best of those companies will be real businesses. That's all very exciting, but as soon as the companies are created, they've got an immediate problem with access to capital, and it's much more difficult than it needs to be up here. To give you a flavour of that, I'm always intrigued by the difference between Oxford and Cambridge. Why has Cambridge been so successful? They talk about the Cambridge miracle, whereas Oxford trails it, trails behind. Two years ago, they put Oxford Science's innovations together with 582 million to back Oxford spin-outs. Last year, surprise, surprise, Oxford University did 50 spin-outs and put 46 million into them. Those are companies that give it 10 years. Some of those will be great businesses. It takes a long, long time, but, with the Converg Challenge programme, we are at least trying to create the right mindset in the student community, but we need much more capital to get those companies to succeed. John Mason Thank you very much, convener. My main question is, how does Scotland compare to other countries in relation to innovation and R&D and what we can learn from them? My sub-question is, I'm thinking, can we measure R&D and innovation? I've seen figures like—as has been mentioned today—industrial research and development is not great. Is that based on how much industry spends or how much we spend on that? I can buy a meal for £15, someone else buys a meal for £10. It doesn't prove that my meal was better, because it was more expensive. Is there another way of measuring all of this other than just how much money we spend on it? I think that it is genuinely worthwhile looking at the comparisons of what you pin, but you're absolutely right that you could also look at what you get out of. If you look at what we put in Britain generally, we're putting less into research and development than a lot of the competitor economies. I think that, from figures from the industrial strategy, we're hovering around 1.8 per cent of GDP going into research and development. The really fast-growing economies like Korea or Israel or even Switzerland are putting upwards of 3.5 per cent into research and development. That does just genuinely show in creating that cycle of innovation-driven economic growth. We can also demonstrate efficiency. We are behind the USA in the proportion of money that we invest in research and development. If you look at measures of impact, how often our research is being cited, how it is creating a change of idea, you will see that we have an extraordinarily strong rating for impact. I think that there is an ambition to go further. The UK industrial strategy is really clear on this. We really are wanting to grow up to the OECD average for investment in research and development, both from government sources and from business sources. I think that that strategy is clear that that is catalytic on creating this virtuous cycle of really innovative innovation-led high economic growth. The UK Government is looking to put an extra £2 billion a year into research and innovation by 2021. We are finding it quite a challenge in Scotland to keep up with that level of resourcing, with the overall constraints on Scottish budgets. We find that what we are putting into research infrastructure and into knowledge exchange activities is not able to keep up with the levels of ambition that are being displayed in England. You have to look at inputs and outputs. Both are important. I think that we are a very efficient user of the inputs in Britain. I think that we can demonstrate that. However, we are constrained in relation to some of our international competitors, because we hover below or around the OECD average for investment when the fast-growing economies are being a bit more ambitious than that. I think that the use of the word expression research and development research to me implies blue-sky research, and investors will not back that. They will back development, but more importantly, I think that to succeed in business, it is all about innovation. Quick Fit is just as basic a company as you can get, because it sells tyres. However, at the end of the day, it completely disrupted its supply chain. It was an immensely innovative company and it ended up being sold to four corporates of America for a billion pounds. Its successful innovation is absolutely key. That might not necessarily cost a lot of money, it is just having bright ideas. Can it be measured then? I have a small or part of a big engineering company in my constituency, and they do something fairly basic, such as cleaning coal-fired power stations. I have been in there and the engineers on the ground are finding new ways of doing things, which I would call innovation. I am not sure that anyone measures that anywhere. There are different ways of assessing innovation. Generally speaking, when we talk about R&D and innovation, it is, as Alistair was suggesting, an input-driven calculation. Measuring the output is difficult because it can be caused by a number of different things, including R&D and innovation. Of course, you are quite right in saying that innovation comes in different ways at different levels. Probably until people got a bit sick of it, one of the most successful innovation-driven models in one particular industry was Ryanair. Initially, it was a really low-tech innovation-driven system, which was disruptive. Michael O'Leary, the chief executive of Ryanair, was one of my students. I do not necessarily pretend that it was me who taught him what he later went on to practice. He told me once that when he took over Ryanair, the first meeting that he had with his senior executives was to say that they all had to write down on a piece of paper, 10 things other than planes and passengers that were indispensable to the airline industry. Then the rest of the meeting was, how can we get rid of each of these 10 things? That is a model of disruption, in the consequence of which we may not always like, but which can be really successful, as it was in the case of Ryanair. It is not always high-tech, it is not always science-driven. On the other hand, you can chart the relationship between countries that have made major investments, both through the state and through the private sector, in R&D and their economic performance on the other. There is a very clear relationship between that. Alasdair mentioned Israel and Korea, for example. They are very good examples of that. The country that I came from, Ireland, is another good example of that. Although you cannot say that £1 million that is put into innovation will produce x pounds in output, you can draw a direct line between investment that is put into R&D on the one hand and economic success of the countries where it has been done on the other. The business side, does it have to be a bigger company that does the R&D because they can afford that? In Scotland, given the particular structure of the economy and the predominance of SMEs, you would say no. You would say that it is equally important for SMEs to move up the value chain, but it is sometimes more difficult to persuade them to do so because of things that we said earlier, such as resources and manpower and so on. Facilitating that and again funding it becomes really important in order to bring about that success, but that is as important. I think that if you look at universities' activities with companies, a lot of it is in that SME space where, for instance, Queen Margaret University is working with a lot of food companies. Just really on the practicalities of actually we can change a product, we can change the ingredients, we can change the packaging and it is going to give you a product that becomes exportable because it has a longer travel life or it is going to be more appealing to markets that you have not thought about. A lot of what I am talking about is creation of the virtuous cycle. Is at that level a really practical innovation? Can we make a product different? Can we market it differently in ways that it really is going to create growth for the company? Professor, you made reference to the life sciences and pharma industry earlier. I have heard the statistic that it is about five times cheaper for small research companies to do the research for big pharma than for them to do it in-house. There is a well-established trend for big pharma just to go and buy up small life sciences companies who are primarily doing research to create a product, so that businesses are not getting into the market as such. Their business is to create something really interesting and then sell that. There is a fascinating example in Edinburgh recently that there are two Indian students at Edinburgh University who set up a company called Two Big Years, which has something to do with virtual reality. Instead of getting financed, somebody said, why don't you just go and sell it to Facebook, so they did? That is a good example again, because the risk that we run in this is that it is sold to Facebook and goes off to California or somewhere. We need to have companies in Scotland who are capable of buying up ideas and intellectual properties so that it does not all travel away. Jackie Baillie I wonder whether I could follow up John Mason's points. I think that all three of you in different ways have said that innovation is the future, particularly successful innovation, because we cannot compete as a low-skill economy. John Mason started to tease out what we do to encourage SMEs, because, given the construction of the Scottish economy, we are talking about it being predominantly SMEs. My sense is that it is hard enough to get the high-end companies to do innovation. I am not convinced beyond the kind of one or two notable examples that you give that we have actually bedded that down in SMEs. I wonder whether I could push you a bit further on what you think we need to do and what you think the Government perhaps needs to do to assist. John Mason Perhaps we were chatting earlier about the housing industry. I think that it is shameful that there are 150,000 families in Scotland on housing waiting lists. It would be such an easy problem to solve that. I think that there was something called the Sullivan report back in 2013, which provided that all our new houses in Scotland were supposed to be carbon neutral by 2016. Somewhere along the line, the housing industry has managed to get that particular can down the road, and I think that they are building houses the way they have always done it. I will ask Professor Pratinski to talk about RGU and their expertise. It would be so easy to solve that problem. I am sure that I saw on the other day that the Scottish Government was releasing a whole lot of land for new farms. If you can release land for new farms, you can release land for house building. That would solve a big part of the problem, but could you perhaps say a few words about your particular expertise in creating houses? I cannot understand why house builders are building houses and selling them as an outfit for purpose in the modern world, but they do it because they can get away with it. RGU has a particular expertise in that area. John Mason We have the Scotland School of Architecture and Built Environment, and one of the key areas of expertise that they have developed is environmentally efficient housing and the new forms of construction and finishing of housing. We have done some experiments with that and we have partnered with some construction companies to work on that. Nevertheless, as Sandy is indicating, the interest in the construction industry is not what it should be because it is easier and cheaper to do what has always been done, or at least that is how it appears to them. It is probably not cheaper. To pick up your question more generally, there is a major evangelising task that needs to be done here. Most things, if they are to be successful, need to be funded and organised. It does not necessarily always have to be done by Government. For example, we are going to do an open day for SMEs a little bit later this year, where we will invite them, specifically not just in a general invitation, but to link them with people who work in the university who might have particular forms of innovation that will support the type of SME that we are inviting in. I think that that kind of initiative is being done by other universities as well, and that will help. However, the response that you often get in such circumstances is that I can absolutely see that this could be really helpful to me. This could change the business, but I do not have the money and I do not have the time to work on this. So, I think that there need to be programmes that will support SMEs that will give them, for example, the opportunity. Often, what they have to do is to employ someone who will help to implement the idea. We need to put them in a position where they move beyond interests, which they often will already have, to a belief that this can actually be done without hitting their bottom line while they are doing it. That is the key driver that we need to get right. I think that that is all true. What else would help? Again, coming back to what the enterprise and skills review can achieve, if we can get an ecosystem where our enterprise agencies are working more deeply with a wider range of SMEs, I think that it would be helpful. Also, what enterprise agencies are really consistently referring SMEs on to universities if they are actually a place that can help that particular SME with its particular business ideal? I think that there is room for growth in that. I think that the skills that we develop among our graduates are going to be really crucial to driving growth and innovation. Over the past few years, universities have been putting a lot of work into defining and delivering graduate attributes very much about developing a wide range of employability skills for graduates, making sure that you are a good team worker, a good analyst, making sure that you have an exposure to work-related learning in your degree course, and that you are developing an entrepreneurial mindset so that, even if you do not immediately go on and create a business, you are at least going into a business with the idea of how you can take ownership of proposing improvements. Taking up Ferdinand's point that getting somebody into a business is important—for instance, using knowledge transfer partnerships to get a new graduate funded into a business who can just go in there. With that challenge to its eye being done this way and the experience of other approaches, let's think about those. Scale-up. I think that we need to be really thinking about how we create the circumstances where we are investing in scale-up and creating a mentorship and guidance that will help businesses to scale-up. I think that our business schools can help with that. I know that the University of Just Clyde is now running a programme for SMEs that is achieving that million-pound turnover and getting SME leaders into a really intensive 10-month programme with business mentors. Think about how you can take that step change on further. Enver Napier is doing something similar—it is tailored—very much for SME leaders in the tourism sector. I think that there are examples out there, but somehow we have to get them to that critical mass that really is generating its own momentum towards being a really high-growth, high-skills economy. That is a very interesting point in relation to that. One of the cul-de-sacs that we can go down sometimes is this entrepreneurship innovation scene. Overall, we talk about unicorns and the pursuit of the next Microsoft. We should not be doing that. That is a waste. What we need is not to hope that we will create the next Google. Maybe we will, but that is not how we should drive our policy. We need to make sure that companies are able to scale in a realistic way and that that creates the kind of volume of business that we need. I think that people sometimes tackle that in the wrong way. There is not enough money out there yet. I have looked at an operation here in Edinburgh offering scale-up opportunities for SMEs, but there is no money. They are providing advice to some extent to facilities, desk space and stuff like that, but no money. The reality is that if we want that to succeed, we need to fund it. We are about to start in collaboration with Opportunity North East in Aberdeen, which is the private sector-driven local development body. We are about to create an entrepreneurship academy and an accelerator programme within that. It is going to be really important to be able to fund that. We will be able to do that in the initial phase, but we need to look at how that can be sustainable at the longer term. If I may just briefly add to that, it is really important that the university's interaction with business is essentially a loss-making enterprise for a public good, which is why this needs to be at least in part publicly funded. I think that we are quite challenged on that front. I mean that I refer to the levels of ambition in England, but in Scotland, by contrast, the funding that the funding council is able to allocate to knowledge exchange activities has gone down—well, it went down from £17 million in 2014-15 to £12 million in 2017-18. Now, it has started to grow again, but I think that if we are ambitious about really creating this virtuous cycle, then I do think that this is one of the priorities that we need to be looking for in future spending reviews to up our investment in. We have that infrastructure of knowledge exchange professionals, incubator facilities and all the rest that enable us to be a catalytic influence in creating an innovative economy. My university is putting £4.5 million over the next three years into an accelerator programme. There is not a penny coming from public money for that, and there ought to be. The implementation plan for the new Scottish National Investment Bank was just published at the end of last week. I understand that it needs legislation to make it become a reality, but the implementation plan certainly reads as if that is a given. They are talking about investing, I think, putting £175 million a year into it for the first two years, and then, after about £200 million a year with, I am speaking from memory, but I think that it is about £85 million a year on top of that for infrastructure projects, which would include housing. Those are some of the money that are big enough to make a real difference. Again, I stress the importance of making sure that that money is invested as equity and not as debt. The banks can do the debt bit. It looks as if it is modelled quite similarly to the British Business Bank, which has been very successful through its enterprise capital fund programme, and that has been a huge part of creating the knowledge economy, particularly in the golden triangle of London, Oxford and Cambridge. I should just say thank you for that initiative. Obviously, we have explored a lot of different angles on research and development and innovation and so on, so maybe I can just ask you a very direct and simple one. Obviously, the university sector is very important in Scotland. It is one of our key strengths, but we have touched before about the question of Scotland lagging behind in business on D. If we compare us to other countries that are doing better than we are, what is the difference? What are they doing that we are not doing and is it something that we can transplant here? Maybe I can say a little bit about my Irish experience on this one because I think that Ireland has done this better so far. The Irish Government took a view in the mid-to-late 1990s that, to sustain the economy into the future, it needed to attract high value foreign direct investment, which would be R&D intensive, and that it needed to do something about the development of indigenous enterprises and that it needed to do something about skills. So, there was a three-pronged approach to this. All of that was needed to be funded. At the time, which was about 1997, the Irish Government decided that it would put over the following five years, would put £500 million into those objectives. A key to it was that all of the initiatives that were taken had to be partnerships between industry and universities. No money would be made available unless there was an established partnership and it was clear how that partnership was going to work and what the outputs would be. To sustain that, they also established a major body, which was Science Foundation Ireland. They brought over a senior official from the National Science Foundation America to establish that, Bill Harris, who has been here incidentally to offer some guidance to the Government here. The establishment of Science Foundation Ireland, together with the more general funding that was made available for these purposes, succeeded in having high-value investment brought in. For the start, you had all the digital companies, so you had Apple, you had Google—actually, I helped to bring Google into Ireland—and Microsoft. All of whom were doing high-value R&D, as well as production in the country. The emphasis then shifted to life sciences, so some of the major companies, Wyeth as it was at the time, Pfizer and others, were persuaded again to locate R&D in Ireland. The impact of that was that when innovation was being spun out of universities, there was someone in Ireland to buy it, which meant that the value stayed in the country. All of that meant that, when the recession hit Ireland just over 10 years ago, it was very bad at first. Within about two years, the export economy was booming again. The domestic economy and consumption and demand were still low. That really was the secret of success. Ireland now, as you probably know, is the highest GDP growth in the EU, and almost doubled that of the UK. It came out quickly. If you compare that with Greece or Portugal or others, it was quite a different trajectory. I would say that it is not a bad example of the size of the economy—it is roughly the same as Scotland—and the size of the workforce is roughly the same. There are examples of key similarities that one could build on. That is one model that is interesting to hear about. Are there other models that have been successful? Just in the Irish one, the enterprise agencies at Enterprise Ireland is one of the most active and largest early stage investors in Europe, so that is a big part of it as well. I was interested to see a report that came out from one of the local IP companies the other day, indicating that the number of patent filings in each of Norway and Denmark is nearly twice the number of patent filings in this country. There is no direct correlation between a patent filing and commercial activity, but, nevertheless, I thought that that was interesting. Do we have any information on other models? Israel is often quoted. It is possible that it is so successful because it lives in a state of existential threat from its neighbours. It spends a vast amount, particularly on technology and communications. Technology is related to their defence of one country or another, and there are something like 70 Israeli companies listed in Nasdaq, and they get vast amounts of American capital. Is it possible that Israeli companies are not really comparable to us in terms of R&D and so on? Are there other examples in Europe, apart from Ireland, that we can look at? If we look at Germany—obviously, we are looking at a very different size of economy—I am intrigued that Germany is one of the world's most successful exporting economies. I think that it is number three in terms of value and possibly number one in terms of export surplus. It has managed to achieve that because, despite the fact that it is in the European Union, it does not seem to have held back its export strengths. It is probably because it makes really good stuff that people want to buy. The success of R&D and skills. Germany has a very different approach to education and training from us. We are now, again, moving in the right direction with the new framework of apprenticeships, but Germany, of course, has had this for generations as a very sophisticated model, and it is built on quality. If you are trained in Germany—I give my other bit of personal background, I am a German by birth and before I actually went to university, I did a German apprenticeship—the focus on quality that is drummed into you as part of that is that Germany will succeed only if its products and services are better than anyone else's. That has been built into the psyche of the country. Germany is a different economy, it is much larger, it has a different background, but there are elements in particular around training and skills in which we can learn a lot from Germany. I think that your point about being world-class is critically important. We are living in a great global economy, and it is not good enough just to do some of the works in Scotland. You have to be thinking about how can I be best in the world at this, and we are just not good enough at developing that mindset. It is a general observation, I know, but ambition, and we need more ambition and we need to understand that it is important to succeed not just here in Scotland but in the global economy. If you are looking at small nations, look at Singapore, which is absolutely ruthless, attracting the top talent from around the world. In a way that we talk about in Scotland as well, if you are going to be really great at looking at dynamic, you have to be attracting talent from around the world, you have to be open, and it is going to be a challenge both Brexit but a challenge that we keep emphasising. It also invests in really fundamental research, because I think that they know that their economy is going to depend on the constant generation of new ideas. The investment in fundamental research is what I would express as a trunk from which the branches of more applied research then grow that you can translate into industrially applicable ideas. When you start off at the beginning of an idea, whether it is in life sciences or engineering or whatever, you may not necessarily know what its application will be. That may not be apparent until 10, 15 years later, but if you do not do that fundamental research, you are never going to get that absolute excellence in research innovation from universities that then translates into industrial growth. Just briefly to finish up, there is obviously a huge amount of knowledge and talent within our universities. How does the public sector make the best use of that to better equip people in Scotland with the skills to be able to innovate? There is a wonderful new initiative that was launched about a year ago called SIFTECH. SIFTECH is an initiative to improve the delivery of digital government services. The first programme, I think, was run just maybe a year ago, and what they did was to get nine Scottish Government agencies to come up with a problem that could be solved. The key, the really ingenious thing about it was that it was a solution that could be delivered for less than the procurement figure, which I think is about £150,000. They then had a competition and they got 90 applicants to look at those nine different problems. They got nine finalists and the nine finalists were then put into code base for three months. I think that they were funded for a three-month period. Each Government agency had a problem solved. It created nine new companies—or maybe not quite as many as that, but in principle the intention was to create nine new companies. Each one of them had a launch contract from the Scottish Government, which could then be separately funded and could go and create a business. Everybody has heard of FINTECH, but the expression GOVTECH is not so well known. I read a report recently suggesting that, in 2015, FINTECH was worth about £5 billion in terms of annual investment, and GOVTECH was also running about £5 billion. That is something that is developing very quickly, but FINTECH is where it is. The report suggests that, by 2025, annual investment in GOVTECH could be running as much as £20 million a year. It is potentially enormous. I sat in a panel with a lady from the UK cabinet office, and she said that here in Scotland, because of this particular CIFTECH initiative, we are leading the way in the UK and possibly in Europe. It is a really exciting thing, so that is something else where we could be doing much more of that. I want to talk about the role of the state. There has been quite a lot of conversation about the entrepreneurial state recently. You have all talked about the role of the public sector in providing investment and, probably, capital through the Scottish National Investment Bank. What is your view on the outcome of the enterprise and skills review? What does it intend to do? We heard last week from the new chair of the review about some of their early thinking. Much of that seems to revolve around the need to get greater alignment, but she said that, at the end of the day, each of those agencies—the funding council, the two enterprise agencies and the third one—to be created essentially take their guidance from Government as to what they should do. Government tells those bodies what the priorities are. Do you think that, broadly speaking, the public sector in the enterprise world has been delivering? Do you think that the new board can make any significant difference to achieve the kind of fundamental changes that we need? Yes, I think that it can. It got off to a bit of a rocky start in its origins. From our point of view, the funding council is important. It has a challenge function to Government as well as to the sector. The whole conversation about how do you create growth in Scotland has to be a conversation rather than a direction. The strategic board possibly gives a space to have that creative conversation, where you have people who are creatively and supportively challenging Government, challenging the agency's challenging business to say that things here could be done better. What would I like the strategic board to do to help? I think that, first of all, taking a really nuanced view on how do we develop skills for disruptive economy, I think that as we look at what we want the economy to be in 10, 20 years time, we know what is going to be an economy that is going to have jobs that we don't yet conceive, we know what is going to be more into the circular economy. I think that we need to move away from mechanistic skills, planning models and think broadly, not just for graduates but across the whole development and workforce. How are we developing people who have got the wide range of skills that are going to help them to invent and reinvent their contribution in a fast-moving economy? How are we going to enable people at various stages in their working lives to come back, whether it is to university, college or whatever, to reboot their skills so that they are contributing to an economy that is changing fast? I think that there is room for a strategic board to be creative in a way that perhaps Skills Development Scotland has only been starting to reach towards in its under its own steam. I think that I would like the strategic board to have a really strong view about what are the anchor institutions that really drive economic growth and social cohesion across Scotland. Obviously, from my point of view, universities are a huge part of that anchor, not just for investment but because we create jobs and opportunities in those communities. I think that the vision for economic growth really has to be driven, among other things, by a vision for making our places continually better. I think that the strategic board needs to concentrate on research excellence. As I have already said with a Singapore example, unless you are fundamentally enabling Scotland to have research excellence, you are never going to grow the stuff that translates into business innovation. I think that it needs to look at how we support SMEs better through the enterprise networks and universities to create that virtual cycle of innovation and how we support scale-up better. I think that picking up on Ferdinand's points and stepping back in thinking about how we better connect with the international economy and how we better lever in investment opportunities, which is not bad. Outside of the south-east of England, we are the best part of the UK for levering in investment. Let's not undersell ourselves, but there is room to grow that further and to grow our international identification as a place for investment and opportunity further. Broadly, I would say that those are things that I would like the strategic board to be concentrating on. Is it all of the technology companies that I come across are screaming out for employees and they cannot find techies anywhere? That seems to be a really big problem at the moment across the country. It is maybe worth saying that Alasdair referred to it. There is a big debate going on now about skills and what we really mean when we talk about skills and what that requires. There is obviously an interaction between different agencies, whether it is the funding council and Skills Development Scotland and so on, and probably getting clarity on what the national skills strategy needs to be and who needs to do what to achieve it is one of the priorities for us at the moment. I would say that given that we have now a strategic board overseeing all these agencies, that should be a key driver before it does. Thank you very much. That is useful. You mentioned that it should be easy to solve the housing problem. From some of the work that has been done at Robert Gordon's and elsewhere, technically speaking, it is not a problem at all. The business model seems to still be the speculative volume house building industry that does not deliver the kind of housing model. I was looking at what Mrs May is doing in England at the moment to do with planning. I think that there is a really, really big issue in the planning system and it is very negative. I was—oh, not the fact—I used to be a lawyer as well, Ferdinand. There is a key strategic housing development in Fife that I was working on 15 years ago and it is still not a planning consent. That, to me, is inexcusable. It is not the builders fault because the builders have been pouring money at it year after year after year, with professional fees and got nothing for it. The point that I was going to make was that the housing industry seems to be now very, very much concentrated in a small number of very large house builders, whereas before the housing crash, most of the houses, I think, were built by much wider ranges of smaller builders and they have been wiped out by the financial crash. I think that sorting out the planning system could be done relatively quickly. Getting more of the smaller builders back into business is another thing that needs to be done. Then, if the Scottish National Investment Bank had funds available, infrastructure funding available to help some of those builders with equity, not with debt, that would help. The mortgage market—we don't have enough time to talk about the mortgage market as well—seems to me that, if one was looking at social housing, we have £1 trillion under management in Scotland. A lot of that money is pension fund money. Housing ought to be quite a good bet for pension fund money. I would have thought that it was not quite secure as Government bonds but producing a higher rate of returning Government bonds. If we take all of those bits and pieces together and get a group of really bright people in a room to do some brainstorming, I am sure that there is a solution to that one. Can I just also mention the technical solutions? One of the things that I have excited me recently was the construction Scotland innovation centre. It has got a new factory that is testing out new ways of building houses so that you are doing it efficiently, and you are doing it at high-quality, low-carbon. Essentially, where you move the whole business model from putting bricks and mortar up on site for months to making high-precision components in a factory that you can take to the site and assemble so that you have a nice, snag-free, low-carbon house in a much shorter timescale. Through that, which is a university, industry and collaboration, you can start to find your way not just to the structural solutions but also the technical solutions that help to enable the construction faster of better housing. Okay, thanks very much. Sandy wants to feed into the planning bill that is going through Parliament tonight. I would be very welcome. Just a final question on spin-off companies and spin-outs. I think that we have had mixed messages on this. I think that what you have been saying this morning is that, broadly speaking, we are not doing too bad, but Professor Bronzinski said that it was not good that they were all gobbled up fairly quickly and sold out. Again, we have had mixed messages on that as well. Some people are saying that the proceeds of sale are being reinvested and people are continuing to innovate and build new companies on the back of previous ones that they did here. Although the company might be sold abroad, that does not mean that the people that sold it are not going. Do you have anything to say about the spin-outs and what we can do to increase the number and resilience of them? One of the things to note about spin-outs is that, for most of them, the value that they have is in the intellectual property that they hold. There are different ways of commercialising intellectual property. It does not have to be spin-out. It could be licensing of the intellectual property or other methods. There are two elements to this. One is that, if I am looking at this as a university head, my key objective is to maximise value for the university and, to some extent, for the state, meaning that I want to try and ensure that, if we have a discovery, that discovery is commercialised and that commercialisation reflects the input that has been put into it and so on. I probably will worry in my university capacity a little bit less about where exactly that ends up, because to the university it does not make a whole lot of difference in the end as long as we get a return for the investment. From a national point of view, there is an additional element to this, which is that we need to try and ensure that the intellectual property, as it makes its way into value, creates that value to the greatest possible extent here, because the university, the taxpayer is invested in it, and so on. Spin-outs are good, so there is no mixed message around that. I think that universities should be doing that. Scottish universities have been remarkably good at that, so there is a positive message around that. The ecosystem that the spin-outs move into needs to encourage as much of the value as possible to be retained here. There are a number of things that need to be done to achieve that, but one of the key drivers is that you have got to work. Who is going to buy that in the end? The chances are as great as they can be that that buyer will actually be here, so that the further exploitation of that particular discovery benefits the economy here to the greatest extent. If you have a company that spin-outs out, and it is bought by Bristol Myersquip or someone, and offered goes to America or wherever, there is still some value, so it is not that we have lost out completely, but it is not maximised. We need to try and get to a state where we can benefit more from it. I might take a slightly different position from my university colleagues here. We have been involved in countless university spin-outs over the years from, I think, all of Scotland's universities. I think that there is a big difference in the experience of the universities in dealing with spin-outs. Particularly with the whole vexed and thorny issue of IP, I think that Cambridge has been more successful than Oxford over the years, partly because it is a bit more anarchic and it just lets the IP go. It gets something for it, but it is much less interested, whereas Oxford tries to control the whole much more to control the whole thing. I think that those universities that take a relatively open view on the release of IP are likely to do—they are going to do more deals and they will do better out of it at the end of the day. Do you agree with that? I agree with that completely. I think that universities often control their IP far too tightly and are damaging themselves by doing so, so I do not disagree with that at all. I just want to add one thing, which is that spin-outs are important, but if spin-outs are in the tens or the hundreds, they are not the fundamental component of the university interaction with businesses. If you look at the numbers of interactions, continuing professional development with Scottish companies is over 3,000 companies a year, and consultancy with Scottish companies is over 16,000 companies a year. Spin-outs are an important component, but we need to cherish a much richer ecosystem of university interaction with businesses and build from that. I agree with that. Of course, they have a much longer burn than the one that has been generally speaking, depending on what sector it is. I should say that we noticed that I am aware of my conversion challenge that the University of Scotland has on its website—I think that I am right in saying Alistair—an ambition or an aspiration to increase the number of student start-ups that is distinct from spin-outs by 25 per cent. I know that Edinburgh has privately got a target to double the number of student start-ups this year. Thanks, convener. That leads on from the last point about spin-outs. I guess I want to start with a more philosophical question and then get on to the issue of skills. To what extent is it the core business of universities to drive economic growth? Alistair, you had a phrase earlier, which really hit with me. You said that innovation is a loss-making exercise for the public good. To me, universities exist to drive academic excellence, to promote quality teaching and learning. To what extent is driving economic growth now the core business of universities? I think that our core business is to be good citizens. If, as very large charitable enterprises in the Scottish economy, we wish to contribute our full contribution to common good, which I think is a shared objective among not just university leaders but the university community more widely, that is something that we achieve by contributing to economic growth, by contributing to social inclusion, by contributing to making our places the sort of place where you want to live and make your life and family. I think that we have a breadth of contribution. I do think that contributing to inclusive economic growth is absolutely fundamental to our role as good citizens in this country. I would agree with that. All universities have to work very carefully to ensure that we are using our resources in a way that meets the expectations of those who have funded us and that benefits society as a whole. Our core business is teaching and research. We undertake that in a way that maximises the quality and outputs from that. Universities are now recognised globally as being key drivers of economic development. We cannot ignore that and should not. That takes a number of forms. It may be that we need to and we would all want to support, in this case, Scotland's national economic objectives. In the case of individual universities, taking my own example, I feel that we have a particular obligation to support the development of the north-east of Scotland, to ensure that the regional economy benefits from what we do. That goes down into areas such as economic and urban regeneration, where we can make and have made major contributions. We want to be good citizens. We want to do what we can to support national objectives. We do that through our core business, but we also ensure that whatever positive influence we can have, that we exercise that. All of our universities have been sorting out our long-term plans for a converged challenge. I have been really impressed to find out that every single one of our universities has got one or more centres of excellence where they are best in the world and best in Europe, but they are something that they do. Our T university, for example, has the best gaming faculty in Europe, and one of the top 10 in the world is computer games. UHI has widely dispersed videoconferencing facilities of any university in Europe, and it also has excellence in nursing, which I did not know. Every one of our universities is aiming to be the very best that it can be in its disciplines. They have to do that for the simple reason that they need students and they are not going to get students unless they are really good at what they do. At the same time, they are all very aware that those who graduate have to get jobs, and setting up companies or becoming self-employed is going to be a bigger and bigger feature of tomorrow's workplace. They are all becoming much, much more aware of the importance of entrepreneurship. Can we take that into just how diverse our universities are? I am conscious that there are some universities in Scotland who perhaps get 80 per cent of their money from private sources and just 20 per cent from the public sector, where the balance is flipped for other institutions in the country. There is a different approach to the degree to which you focus on innovation depending on the institution. Separately, within that, we have talked a lot about Scotland's growth sectors today—life sciences, chemistry, informatics, financial technology, whatever that might be. However, the degree to which you get enterprise-based teaching or the skills to innovate depends on the subject that you are studying. For example, I have been in the chemistry department of Edinburgh University where going on to work in business is right at the heart of what you are taught. There is so much excellence around spin-outs and they have a great record of producing companies from within that department. It is surely not the case that that is happening within the English literature department or, indeed, politics or art subjects in general. Can you talk us around to what extent are the core entrepreneurial skills as standard across all university subjects? Or is it not just the case that we are good at this when it comes to Scotland's growth industries and not very good at all in the vast majority of university subjects? I will let my chief colleague speak to that in detail, but in one sentence I keep hearing that we need more people learning the STEM subject rather than the humanities from a business perspective. Obviously, STEM subjects are very important, but all subjects that universities teach can make a significant contribution. The nature of that contribution will vary depending on the subject. You mentioned art, for example. In my university, we have a great school of art. One of its key initiatives has been to involve itself in urban regeneration in Aberdeen. It has also linked with other parts of the university in order to, for example, do things in design, which has a great commercial opportunity. We live in an era of growing into disciplinarity. Most students did whatever their subject was and knew relatively little about anything else. These days, we are encouraging both students and faculty to engage much more across disciplinary boundaries. Therefore, you will find that, even where there are commercial opportunities that need to be pursued, those will not necessarily just come from within chemistry or engineering or whatever the subject might be. We are now encouraging this kind of interaction, which adds great value. I do not see myself in a position where I am leading a university, where I think that some of my subject areas are nationally important and others are not. I think that they just make different contributions. Also, by encouraging collaboration between disciplines, that contribution can be enhanced considerably. When we heard evidence last week from the enterprise agencies, I think that it was Scottish Enterprise that told us that, in China, enterprise skills are core modular subjects across all curriculum. Is that something that you are looking at in your own institution? Is that something that you would like the Government to dictate to you as institutions? Who makes that decision and to what degree are we achieving it? I think that, probably in fairness, we generally won't answer yes to any question that says would you like the Government to dictate that. Having said that, in the case of my university, yes, we are about to introduce an entrepreneurship module that every student of the university will take, regardless of what they are learning. That will come on stream later this year in the autumn. I am not suggesting that everyone should necessarily do that, but I think that it is increasingly desirable to make sure that students, whatever it is that they are studying, have an opportunity to look at how they can make use of that, not just for themselves but for a wider public good. I think that there is something that you have to let each university find its own way of expressing that. I genuinely would be reluctant to say that there should be a dictat that says that you have to do that, because there may be different ways of achieving similar results. We need to look at that kind of initiative. Very briefly, one of the things that is now really integrated in the curriculum is learning in a way that helps you to develop the skills that will enable you to succeed in the workforce. If you look at humanities and social sciences now, social sciences have always been quantitative. There is much more quantitative discipline now in humanities as well. There is also much more emphasis on development of teamwork as you are tackling your subject. In my generation, you are pretty much given a book and a library card, but now if you go into university library, you will find that it is principally configured as spaces for students to come together and work collaboratively on exercises and, as Ferdinand says quite often, in an interdisciplinary way on exercises, because that is important to developing skills that employers say they value. When you look at what employers are wanting, the data that we have from CBI and from graduate careers advisers is that 90 per cent are wanting those wide range of attributes of being successful in the workforce and about 80 per cent aren't that bothered about your subject discipline. They are actually wanting you to be a rounded person who can come in and contribute quickly to the business. I think that we are on the case in making sure that the experience of students is now one that is increasingly whatever your subject preparing you for the changing demands of the workplace. I can just push you on that idea if the Government said tomorrow that we would like all Scottish universities to have a mandatory module on business skills, how would your institutions respond and what would you say? The problem with mandatory is that, from the student perspective, as soon as you make something mandatory, it is a terrible turn-off. Do that with basic maths skills, basic English skills, why not basic business skills? I will just give you my personal honest view, which is that rather than making everyone do something that you may feel is discontinuous to the subject of what you are interested in, I think that the more subtle approach that is more often applied is to build in work-related learning, for instance, problems that have been contributed by companies into the curriculum. Rather than taking someone offline and saying, that is your subject, this is entrepreneurship, you are saying through your subject your learning the disciplines that will stand you good stead in the workplace. I think that there are different ways of doing this. I will probably start worrying when anyone says mandatory to me. My mission is for Conferished Challenge. Every Scottish student should be aware of what we do in Conferished Challenge, which we now build as the leading Pan-Scotland entrepreneurship development programmes. We are very keen that every student should be aware of what we do. They can access the website and see what starting a company is all about. There are stories in the website about alumni companies and so on and so forth. We are trying to do that with the staff of five people. We will get some way to go, but we are doing what we can. Now to questions from Dean Lockhart. As it happens, the pen that I have today is from the Roslyn Institute, home of Dolly the Sheep. It is not a Lib Dem pen, judging by the colour. Looking at how universities are funded, can I ask about the incentive available and the reward for a focus on innovation? Is there an additional funding pot available to universities depending on the level of innovation that is produced by the university? A related question is on commercialisation of innovation. I get the point that when the university sells or monetises innovation, you are looking to maximise the return for the institution, how can we encourage or what steps can we take to try to keep that innovation in Scotland? What policy steps could we take to try to keep that innovation in Scotland? I appreciate that it is largely a commercial question if there is a higher bidder from China, Japan or elsewhere than an institution with an obligation to increase its return, might sell it outside of Scotland. Is there anything other countries do to try to keep innovation within their country? I know about Roslyn Institute and Roslyn Technologies from professional perspective, so I cannot talk to anything about the detail, but in terms of what is in the public domain, a company called Roslyn Technologies was set up, which has the exclusive rights to commercialise what is coming out of the Roslyn Institute, and that was financed by a large amount of money coming from a financial institution. It was so excited about it that it went out and said, how do you fund up to do it? If it works, there will be more money from that source, undoubtedly, and I think that it is a very interesting initiative. On the funding stream, we have a university innovation fund from the Scottish Funding Council that is scheduled to commit £13.5 million in 2018-19 to support knowledge exchange professionals and knowledge exchange facilities in universities. It is welcome. It is driven by metrics in the sense that universities feed back metrics on their interaction with business every year, and that drives the allocation. However, it is a pretty small bear, particularly when you compare it to the UK Government's ambition for England of putting £250 million a year into their higher education innovation fund. Times are tight, but we would be ambitious for that funding stream to grow so that we can do more activity with business. The other thing that is really important is the research excellence grant from the funding council around £260 million a year, which supports our research staff and infrastructure and enables us to go out there and bid for research contracts on a basis of whom we have to go out and do consultancy for business. Again, that has managed to be protected in real terms, which is an achievement. However, we do not have the resources in Scotland at the moment or are not seeing the consequentials to higher education at the moment. That would enable us to match the English scale of ambition where they are looking to put £2 billion a year extra into research and innovation by 2021. I am picking up your question about how we can keep the discovery here. One of the key things the state agencies can do is to have a much more targeted programme of foreign direct investment. We are looking for high value knowledge intensive investment. I was used to doing that in Ireland and took part in a lot of trade missions to achieve that. It was very successful. By doing that, you would then create a buyer in the country. That would make a difference. I think that there is much more that we could do by getting the public sector to trade with the SME sector. I know that there is a requirement in America for public sector bodies to purchase a percentage of about 20 or 30 per cent from the SME sector. I think that there may be some sort of requirement in this country, but I suspect that it is observed and breached rather than the observance. I am talking to a chap at the moment who has one of the most amazing medical things that I have ever seen. It is all to do with protein beam therapy for cancer. He cannot get any engagement with the NHS whatsoever, none. They do not think that it works. Well, it has been working fine in other countries for many years, and there is a very real risk that it will go to the far east, because he cannot get engagement here. That is one example that I could give you others. Thank you very much. That is all we have time for today. I would like to thank our guests very much for coming in, and I will now suspend the session.