 Fawr, chi'n gynnwys gwaith beth angen i gymhau ffran Burnham yn gyffredinol a gwahanol mewn dyn nhw i'n gwneud i gael i gael eistedd gyda'i gan到了 yn Gaelin siwr, nid o fwy ffredin a newid am yr un oedd yn fawr o phagoseddau'r dysgu. Mae'r bwysig oedd i gael eu scherfoddau, ac yn admiwch i ddweud wedi dysgu gael ei gael. Mae'n angen i gael ei ddweud o'r ffredinol, ac mae'n angen i gael eich ffredinol i'n gael eich ffredinol i gael i gael i'r ddweud. Felly, mae'n ddweud iwerdol i ddeifballurau sy'n ei ddymug i ddimu a bod yn fyrdd gael y bydd yn cael ei bod yn eu ddweud i fod yn 2017 o blyny. Felly, Rhyon Dynash, maedgar yn y cyfariad, yn Gwymorolion, eich dweud iawn o было bryd y bydd yn cael ei ddystiol. Efallai, yn teimlo o'r parwyr sy'n ei ddydd yn ei ddydd yn yr eich ddeiblog i ddydd bydd yn yr eich ddydd yn eich ddydd yn eu ddydd. Mae wedi bod yn ni i gweld y ddydd, fel mor Cyfriforwyr, bydd yn ei ddweud i bod yn ddargan economi ar hynny. Fsteadw member y bynnag gerch Ubix ha outcomeall Maori I rec� anybody to the meeting this morning. Jackson Callott has a short opening statement. That will be, thank you convener. Good morning colleagues, I come before you as a corporate body oong jo0 Having just assumed a responsibility... following the resignation of my colleague Alec Johnson for circumstances that you will understand. Based on the premise of the finance portfolio Leone would be for you about 10 days later presenting the Corporate Body Budget, but I thank you for the opportunity... Sorry? It was delightful to see you. Thank you for the opportunity to present details of the budget for 2017-18, this is the budget for the second year of the new session of the Parliament. You will have seen the letter from the Presiding Officer, setting out our budget submission for 17-18, that he makes reference to the successful programme of savings that was delivered by the SPCB over the previous parliamentary session. The programme achieved 10 per cent real-terms reductions in budgets and staff numbers from the 2010-11 baseline to 2015-16, whilst consistently delivering against our strategic plan and supporting demanding programmes of parliamentary business. This new session brings new challenges, and the corporate body has a duty to ensure that the parliament is properly resourced to meet its requirements. As a member and colleagues since 2007, I certainly detect a renewed energy in the Parliament in this new session. This is partly due to the infectious enthusiasm of so many new MSPs. We have a record 51 new or nearly new, as we used to say in the motor trade. Members elected in May this year, and indeed several are sitting opposite me this morning. Moreover, I sense that as we enter session 5, the Parliament has now really matured as an institution and continues to evolve, particularly as it assumes substantial new powers and taxation and welfare. We are already seeing evidence of this renewed energy in the volume of business, with significantly increased numbers of questions, motions and proposals from members' bills. I can see no reason at this stage to suggest that these increased levels will not be sustained throughout this session. Turning to the budget itself, the headline figures for total expenditure excluding non-cash items show an increase of £0.8 million from the 2016-17 budget and are £1.4 million higher than the indicative forecast provided to the Finance Committee in December last year. The increase from the previous indicative forecast is due to two specific items which fall outside the SPCB's control. Firstly, new statutory functions for the ombudsman, and secondly, project costs for system and marketing costs for the new lobbying register. Excluding those, the SPCB has set a budget for 2017-18, in line with its previous submission. With regard to pay, our budget submission is based on a continuation of the prudent pay restraint that we have shown previously. 2017-18 forms the second year of a two-year agreement negotiated with the trade unions on pay for SPCB staff, and the budget calculations incorporate the agreed uplift to pay scales in that pay deal. Schedule 3 in our budget submission includes an analysis of additional posts proposed in the parliamentary service, and we would be happy to expand on that in our evidence today. As reported to the Finance Committee in previous years, the Scottish parliamentary salary scheme now directly links MSP salaries to public sector pay rises in Scotland using the annual survey of hours and earnings published by ONS. Using that index, I can confirm that an increase of 1.8 per cent will be applied in April 2017. Other costs have provided analysis of other non-pay in various schedules, which form part of our budget submission, and I do not propose to repeat the information in my opening remarks. However, I would like to draw the committee's attention to the following two areas. Commissioners and Ombudsman, as members are aware, the SPCB is charged with the oversight of these bodies, and the Finance Committee has always taken a keen interest in this area of our budget. The proposed 2017-18 budget for office holders amounts to £9.6 million, representing a substantial increase of £1.3 million, or 15 per cent, on the approved 2015-16 budget. However, it is important to recognise that this is largely because new statutory functions have been transferred to the Ombudsman in respect of the social welfare fund and social work complaints. We welcome the involvement of other committees in scrutinising aspects of the various office holders that are not within our remate, a remit, for example. Next month, the Local Government, Communities Committee and the Health and Sport Committee will take evidence from the Ombudsman, and the Equalities and Human Rights Committee will take evidence from the Human Rights Commission. The SPC is proposing to set aside a £1 million contingency regarded as prudent for emergencies, anticipated potential costs that are not yet certain and emerging cost pressures. We consider that this will be tight in the current climate of uncertainty and is something less of a contingency than has applied previously. However, we have set this level to maintain the overall budget submission within the previous indicative forecast on a like-for-like basis. As set out in our submission, the SPCB is submitting its budget to the Finance Committee in advance of the publication of the draft Scottish budget on December 15, which is unusual. We will consider what this tells us of the pressures on future years budgets and will respond accordingly. However, in advance of that, we have provided an indicative forecast for 2017-18, based on the latest Office for Budget Responsibility estimate of CPI. Finally, I would like to place on record the corporate body's appreciation of the work done by the chief executive and his team in preparing the SPCB's 2017-18 budget submission. As a new member, I have been immediately struck by the professionalism of the senior staff that serve us in the Parliament. That concludes my opening remarks, convener. I hope that I have managed to convey a sense of the responsible approach that we have taken to setting the Parliament's budget. Both I and my colleagues are more than happy now to answer any of the questions that the committee may have. Thank you, Jackson Carlaw for that opening, and particularly the issue around the new energy of new and nearly new members. I hope that you will accept that some of those veterans have still got some fuel left in the tank, as far as that process is concerned. I am willing to be persuaded. The letter from the Presiding Officer states that in your budget for 2018 reflects the emerging demands arising as a result of the complex new powers, obviously the Scottish Parliament will have in the future. Can you say a bit more about how you have dealt with that in terms of how you have set your budget, particularly in the light of some of the work that has been led by John McCormack and the review that has been set by the Presiding Officer? Obviously, that may be where some of your contingency money lies for some of the issues that may emerge from that review. Actually, no. I do not think that the contingency does make provision for completely unforeseen contingencies that might arise out of the Presiding Officer's review, nor does it make any contingency that might arise out of anything relating to Brexit negotiations. I think that at this stage, these are just too tenuous for us to be able to make any meaningful suggestion. In addition, I think that any cost arising from these would probably spread beyond the immediate period ahead, and there would be an opportunity for us to reflect these in the next budget submission that we make. Paul? Yeah, what we have done just to sort of reinforce that point is, we have within the senior staff group a board constantly horizon scanning on the constitutional change and feeding down into operational areas. Specifically, for example, in relation to tax and welfare powers, where we have a bit of a sense about where they are going, we have put a bit of extra strength in convener. What we have not done is put speculative post-ins, so we are trying to proceed as we are going on. I am very confident that the budget that we are proposing for next year has got sufficient capacity in it to cope with the immediate demands, particularly around scrutinising the new fiscal regime and the emerging welfare powers. I think that you make an important point around the Presiding Officer's commission to reinforce Jackson Carlaw's point. We just do not know where that is going to take us, so what we have done is put funding in to support the process of the commission, and accepting that it is due to report next summer, and again to pick up the point Jackson made in his opening remarks in terms of next year's forecast. We would have to revisit that, and depending on how radical and substantial the recommendations of that commission were, we would obviously have to reflect that most likely in next year's budget and beyond. One of the items that Jackson Carlaw referred to himself on page 3 of the Presiding Officer's letter to us was the proposal for the 1617 office budget amounting to £9.4 million and increases 1.3 or 15 per cent on the approved budget for that area. I recognise that a lot of that area is dependent on the decisions that the Parliament takes, and in those circumstances the corporate body needs to reflect what the Parliament has decided. I wonder when the last time we had a review of commissioners on Omnus, this one took place. To ordinary individuals and the public, seeing that number at 15 per cent, would, given the pressures that we know are going to come in other areas of budget, might start to raise their eyebrows. I wonder when is the last time we had a review in that area, and is there any proposals to do a review in the near future? I will turn to Paul in a second. I accept the point that you make, convener. I know that there has been a previous review and Paul will be able to give the detail of that. Primarily, certainly, of the increase that we are anticipating in relation to this area, the vast majority of it this year is relating to the additional responsibilities that it has been determined that the ombudsman will carry. I think that you make a wider point of interest. Paul, would you like to… There was a review a number of years ago. A previous corporate body was very interested in a deeper rationalisation of the office holders. As a result of that, it is fair to say that the reform that did occur was somewhere between where the corporate body wanted to go and what was felt to be acceptable at the time. That, for example, led to the creation of the Ethical Standards Commission, bringing together public appointments and standards. There was some movement and, also off the back of that, an on-going piece of work about trying to rationalise accommodation and shared services. It certainly was the case. If the Finance Committee were interested to encourage that, certainly the corporate body in the past has been very interested in exploring, although it would require wider parliamentary agreement, whether there is any further could be done. That was something that the Finance Committee wished us to look at. I am pretty confident in saying that the corporate body would be more than happy to take that on and perhaps come back to the Finance Committee with some further thoughts. Thank you, convener, and good morning. I am interested in the contingency. Some people looking at it from outside the Parliament might say, why should we approve a budget that sets aside £1 million in contingency to give the proviso to dip into during the course of the year? I know that, obviously, we have set a contingency in previous years. Can you maybe give some examples of how the contingency has been used previously that would give some reassurance that this is value for money budgeting? Firstly, thank you, Mr Kelly. What I would say is that I think that there has been a greater reliance on providing for contingency within the budget in previous years, and this year's figure actually, to my mind, represents something less of a contingency than we have perhaps previously provided. I would say that looking at it and at the challenges that are coming forward, whilst the corporate body has sought at all times to bring forward a budget that is prudent and cautious, relying less or making less of a provision within the contingency is beginning to present its own challenges. Going forward, we have to be mindful that the headroom that is left within that contingency in each year is beginning to shrink, and I am not sure that, in the long run, that will be adequate. The contingency fund is used across a whole range of different areas. Derek, can you give examples of previous use of it? In the current year, it has been used for things like the PEO's commission on parliamentary reform, so that is a project that has come forward in the current year that was not envisaged in last year's budget submission. We have used it to support projects in other areas, particularly around the service yard project that we took forward last year. We were able to find funding from that from the contingency. In terms of next year's budget bid, we have quite a lot of potential costs that we have deliberately not budgeted in our line budgets on the property side and on the IT side, where we are re-tendering two very major contracts. We expect that we will probably have double running costs on those when the new contracts come in, but we have deliberately not budgeted for those double running costs in the line budgets, and I said that we will take that out of contingency. It is to meet things that we do not have definite figures to go with for next year's budget. On the projected income figures, I note that those are both for the budget bid and the forecast. Those are down on last year's income figures. Why is that the case, given that there has been quite a focus quite rightly from the Parliament in recent years on increasing commercial activities and obviously increasing income from that? There has been an increase in commercial activity. I do not think that we should overstate the benefit that accrues from that. The commercial events pilot is still very much one that is finding its feet. It has not yet made a profit or a meaningful contribution to the costs of the Parliament. The corporate bodies decided to extend it a bit further, because there is now some repeat business coming and there is the opportunity for it to contribute, but it will be at modest levels. The shop, as well, brings in additional income. We still subsidise the catering facilities, as you will be aware. There has been an effort to do that, but the contingency has to cover quite a wide range of additional things that arise. What we have done this year is to reduce the additional element that exists within the contingency, but I am concerned that it will start to come under some potential pressure if any really significant unforeseen events were to arise. Specifically, can you give an explanation as to why last year we had income of £262,000, and this year we are budgeting for income of £255,000, which is a drop in income? I should probably cover that. The income is effectively the turnover from the shop, and it is very much related to visitor numbers coming to the building. We have seen a general trend of reductions of visitor numbers over four or five years. In terms of the budget for this year of £262, our current year out-turn forecast is that it will come down to the level that is in next year's budget bid. We are seeing just the reduction of visitor numbers. I think that it is worth pointing out that visitor numbers and the income from the shop can sometimes be determined by events that are being held. You will recall the tapestry event that was in the entrance lobby, which generated huge visitor numbers and a very significant spike in the turnover of the shop in that year. The Parliament is obviously looking to see what other events can be held that would bring significant additional traffic into the Parliament that might then enhance the revenue within the shop, but it is dependent on visitor numbers and that led to a significant increase. I wanted to ask about the ombudsman. The ombudsman's budget is to go up by £1 million from £3.5 million to £4.5 million. That is not the 15 per cent increase, that is a 30 per cent increase. I understand that the ombudsman's statutory functions have increased because of the Scottish welfare fund, but has the workload of the ombudsman increased by 30 per cent? The total for the ombudsman represents an increase of £1 million. If the £1 million for the new functions was removed, the increase was only 3 per cent on the 2016-17 budgets. The majority of that is for staff costs due to the two-year pay award, which was agreed last year, the second year of that, and the healthy living initiative and staff progression elements that were incorporated within that award. That is where the majority of the increase actually comes from over and above the additional responsibilities. The additional responsibilities are not that significant, although the additional responsibilities are to hear complaints arising out of the administration of the Scottish welfare fund, which is a fund of about £35 million. Is the suggestion that that increase in statutory functions is leading to a 30 per cent increase in the business of the ombudsman? If it is not, what is the justification for increasing the budget of the ombudsman by that, not eye-catching but eye-watering figure? The increase will have been directly calculated as a result of the assessment of the additional responsibilities that the ombudsman now has and the way in which they will have to be properly met meeting the legislative requirements that arise. I would say that this represents a direct transfer of responsibilities from the Government to the ombudsman. It was negotiated on that basis, so they would expect to make a commensurate saving in their expenditure. This was a negotiation that took place, principally, between the ombudsman and the Government. We were content on the basis that the transfer was agreed at that level. We can expect to see in the Government's budget next week a saving of £1 million that is related to this increase, can we? You might wish to raise that. The serious point is that it was a direct transfer. I think that some other functions as well as the welfare fund is part of that. We thought that was an acceptable baseline transfer. If the Government was content to accept that, we felt that that was reasonable from our point of view. What we will do if this gives you some assurance, we will obviously monitor it. Now that we have accepted responsibility for that as the overall funders of the ombudsman, we will monitor that along with the ombudsman. That turns out to be more than is required. Obviously, that is something that we would report back. I think that it would be helpful to know what the increase in workload has been of the ombudsman as a result of the transfer of these powers and what additional staff resources the ombudsman has felt necessary to appoint to cope with that increased demand so that we can assess where this £1 million is going. I would be very happy if Jackson would drop you a note on that with a bit more detail. That would be helpful. Well, is that a supplementary or not, in that case? Thank you. I have two separate questions that I would like to ask. First is around the question of contingency and legal costs. Can you remind us what the total legal bill was in relation to the court action for the removal of the legal encampment on Parliament? What are the realistic prospects of any of that money being recovered? My recollection was about £100,000, but Paul again has got the actual figure in relation to that. In terms of contingency, there is no separate contingency for legal issues. I mean, just really to develop a little bit in response to Mr Kelly's point, the contingency is broadly a sum usually around half a million for pure emergencies, and that could be, for example, substantial court costs. It's the sort of thing that just can't be predicted. And others, which I think Derek Crowell answered, where we have an idea about what's coming, but we don't want to firmly budget for it, so that's that side of it. And any unexpected legal cost would come out of that, so there's no separate cost. It's not over yet, of course. In fact, I think next week we'll be back in court looking at two things. One is pursuing the matter of costs, which I'll come to a minute, and the other is because the Indicambas are seeking leave to appeal to the Supreme Court, and obviously we have to address that. The total costs to date, I think, are just over £100,000. And in terms of realistic prospects, the first hurdle we have to overcome is to persuade the court to allow us to seek the recovery of some of those expenses, and that is a matter, of course, for the court, but we are applying for that. Thereafter, if the court does grant that, and of course that is entirely a matter for the court, they will likely grant a proportion of that, that would be normally what would be expected. And we will just have to take a judgment, and one of my jobs in advising the corporate body is how realistic it is, and, of course, what one must never do is incur more money pursuing costs than might likely be recovered. But, you know, it is public money, and I think we have a responsibility at least to look seriously at whether that is possible, and that would be very much my starting point, and ultimately for the corporate body and myself to judge what is right, and I guess when we're up in front of you this time next year, we'd be able to give you an update as to how that has actually gone. Okay, thank you for that. That was a very helpful response. Just going back to what you said about the Supreme Court, presumably if there were to be an appeal to the Supreme Court, the legal cost to the corporate body could be very substantial if that case were to be pursued, and presumably that would be covered by the contingency that you've built into the account. That's a good example of the sort of cost we would have to cover from that sort of budget, yeah. Okay, thank you. My second question is on an unrelated issue that I've raised on previous occasions in relation to the remuneration of committee advisers, and I've felt for a long time that committee advisers in this Parliament are not sufficiently remunerated for the work that they do. I know there's been an increase in the daily rate fairly recently, I think, but the daily rate now for committee advisers is not much more than what was my hourly rate when I was in the legal profession, and that was 15 years ago, and it seems to me that the rate that we're paying committee advisers is not a proper reflection of their contribution. Is that something that the corporate body will consider? I'm happy to again ask Paul to answer that and to note the point that you make. Yes, I mean obviously not on your hourly rate as you were paid. It is an issue which has been raised over the years, and I think it's a fair point. I mean we have to balance two things. One of course is, you know, it's public money, you know, so my approach always is to get the most I can for the least amount of money, and there's a sort of supply and demand in there, and I think there is still a substantial, if you're looking at it from a pure market point of view, there's still a substantial supply of very high calibre advisers willing to work for that rate, and so on that grounds it's quite hard to justify unilaterally increasing the rate. We did, as you say, increase it modestly, I think, from 1.37 to 1.50 a day, and I do accept that as a modist in all the other things. I think that one of the benefits advisers get from it is, you know, the fact of having advised a parliamentary committee is a positive thing in terms of their CV, and that adds some value to it. So at the moment I think the corporate body would be reluctant to increase that, but it's something we keep under review, and if it were certainly the case that committees of the parliament who were there to serve felt that, for example, we were not getting the breadth and calibre of people we want, then I know the corporate body would look at that, but at the moment I think, given that we are able to secure good advice for that price, it's hard, I think, to justify increasing the day rate. Good morning. Obviously one of the controversial issues within the SPCB's budget is MSP pay. I'm more interested in the wider pay policy for other people working for the Scottish Parliament. Does that follow automatically in lockstep with Scottish Government pay policy? If there was to be a change in Scottish Government pay policy, how quickly would the Scottish Parliament adapt to fall in line with it? If, for example, there was a change mid-year, would that come out of contingencies or are these things built into the budget? Well, two points. First, the yes, this is the first time that the budget submission has been the method by which MSP pay has been confirmed. As you know, we decoupled ourselves from Westminster, which meant that the comparable pay rate previously was 87.5 per cent of that, which Westminster MPs earned. In the budget that we are looking at, our current year is 81 per cent, so it has represented a reduction, but yes, it will be 1.8 per cent for MSPs applied from April next year. The staff pay within the campus of the Parliament is the subject of a separate negotiation with the trade unions and the staff bodies. A two-year agreement was arrived at last year. It isn't, as I understand it, coupled to anything that relates to the Scottish Government. It is a negotiation that we enter into quite separately. The two-year arrangement was arrived at and there are links, as I mentioned in my opening remarks, in relation to the healthy living fund and the other aspects that were peripheral to that agreement, which are incorporated within this year's budget, too. I imagine that at the end of the two-year period a separate negotiation will be commenced again in relation to the next pay period thereafter, but it isn't to answer your question directly related to the employment pay within the Scottish Government. On our non-MSP staff, people working directly for the Parliament, are they enjoying a 1.8 per cent increase as well? I can answer. My answer to that would be about the same, actually. Yes, about the same. Across the board? Yeah. Okay, thank you. I just wanted to ask you about the modern apprenticeship programme. I note that in 2017-18 you are proposing £107,000 for the modern apprenticeship programme that young people age 16 to 24. That is down 20,000 or 21,000 from 128,000 to 16,17. I just wanted to ask why that particular reduction is proposed and is that something through other savings or underspend that could be looked at for additional expenditure? That is a reasonable question. Again, I think that I will invite Paul to answer that one. Yeah, we set out, obviously, something we are very proud of, actually, our modern apprenticeship programme. So, we set out to employ 20 modern apprentices, and the original plan was to point them in two tranches of 10, the first in 2015, and the second tranche in 2017. But actually, the quality was just phenomenally high, and I agreed that we would actually appoint 13 apprentices in the first tranche. They are mostly delighted to say that the vast majority of those have now actually secured their qualifications and their SVQs and are now very much in the job pool here in the Parliament, which is where we hope to keep them. Then, in next year, there is the tranche of seven. In a sense, the reduction just reflects the fact that we took the most disproportionate amount of funding up front. That is the funding for the apprenticeship programme itself, and then separately, of course, and Derek could maybe say more honestly if you wished, about then how the idea is that they and them become available to take up jobs in the Parliament, and then they, in a sense, are not funded through the apprenticeship programme but just become as part of the normal staff group, so that is all that reflects. In terms of the numbers, my current thinking is that we stick to the seven, so that gives us the total of 20. Clearly, we feel that it has been a hugely successful programme, and I would be very hopeful that, with the agreement of the corporate body, after the next tranche, we look again so that it becomes a rolling programme going forward, which will be part of the dependent on what we can afford, but it is actually much anything determined by what the needs of the organisation are. Although we do not guarantee jobs, it is very much my hope that anyone who succeeds in their apprenticeship is given the opportunity to work long-term in the Parliament. You have to keep those two things in mind. I wonder if I could ask about our investment plans for IT and bringing the Parliament more into the digital age. There has been a substantial investment so far that I would like to recognise and welcome in terms of technology and software for members and staff alike. I was thinking more about the Parliament's website and whether we could make that more multimedia-friendly or digital-friendly. For example, the official report is a fantastic resource, but it is all text. It tends to be very heavily text-oriented. Is there any intention to, perhaps, introduce a multimedia element to that, so that we can see video clips or contributions, perhaps? It helps the general population, but it also helps people with sight impairments, as well, and that would be a good thing to do. I mean, there has been an astonishing increase in digital application and usage across the whole Parliament. I was quite astonished at the reduction now in paper that the Parliament has achieved. It is way beyond the expected initial reduction target. That, of course, just reflects the fact that there are so many different digital devices and platforms being used across the Parliament in so many different ways. The budget for next year includes a significant increase in the IT support staff and placements, given all the different platforms that need to be maintained and managed going forward. There are also some expenditures that we have deferred in order to maintain the overall budget level, and some of those, I think, touch upon some of the areas that you have identified. As was explained to me, we will not just yet be able to enter in Willy Cofi and have all your greatest hits come up for the world to see at the press of a button, even if that is our ultimate objective. There are some additional ways in which we need to continue to look and modernise, but we are having to phase those as carefully as we can, given some of the immediate pressures that we have to ensure that we are maintaining the immediate IT estate. Of course, you will know that there is a lot of change on a rolling basis with members being introduced to new equipment. The only thing that I would add to that is that Sir Jackson is right that we have got a project in mind to link pictures and text, but that is one of those ones that is held. If the money becomes available, we might look at that again. However, we do have money firmly set aside to redevelop the website, because we are conscious that it has been quite some time since it was upgraded. I know that you have taken a long-term interest in that. I have been more than happy to give you—or did the whole committee—a more detailed note on that, but that is firmly in the plans. As Jackson said, we have the idea in mind to link pictures and text, but that is probably going to have to sit and wait for money to come available, probably not this year, but it might be next year. Would there be any plans to engage with the public about what they want from the Parliament's website, so that they can feed into what they would expect to see and hope to have in terms of that? That is a really helpful idea. I mean, what I will do if it is okay with you is that I will take that back to Alan Balhare, our head of BIT—that specific point—and more than happy to let you have a note. However, getting some kind of user feedback would seem to me a critical point in designing it going forward. I can also say, just as I also sit in the Scottish Parliamentary Reform Commission, that the ways in which the public can access and involve themselves in the Parliament through things such as the website are one of the things that are being discussed and considered there, too. It is a supplemental question on IT. Schedule 3 sets out a budget of approximately £2 million for next year for IT expenditure. What we are hearing from other businesses is that IT costs are substantially increasing partly because of the depreciation of sterling. IT costs hardware and software tend to be denominated in US dollars. Is this something that you are experiencing in terms of increasing cost for IT systems? Will you review this budget over the course of the next 12 or 18 months to ensure that any increased cost for ITs will be budgeted into this number? I am sure that the answer to the second point is yes, of course we will. This does actually represent a considerable additional increase in the increment of people who will be employed within the estate on IT maintenance development and future digital development and creation. It is actually quite significant. I thought that members are a bit like me. Some of the titles can appear to lay people not all together clear, but I have myself sought to have a proper explanation of what all of the different people will be doing. A lot of it is linked to all of the different platforms that we have. As to the actual acquisition costs of IT, if we have noticed any particular increase in them, I do not know Derek, have we? It has not come through yet. I think that a lot of the IT budget for the next year is revenue costs, it is staff costs, so it is stuff that is UK-based rather than buying equipment. Thank you. First of all, I have a couple of substantial questions, but just a couple of points before I go into that. Just to thank you for your answer on the advisers, I would struggle to see why we would spend more money on that if we did not have to, so what you said makes a lot of sense. Also, to echo what the convener said on commissioners, in particular, I heard your answer on ombudsman, but if you look at commissioners, a number of those are getting increases of 5, 6, 7 per cent, which does look substantial given where we are, just for the record. In terms of the substantial, clearly the biggest issue, the biggest spend item is staff. Just to say, as a new member to the Parliament, I have been delighted by the level of support that the staff provide, and that is very important to recognise. I note that you said that between 2010 and 2011 that there was a review carried out, and that resulted in a 10 per cent real-term saving, so I am assuming that that was a review of the processes, business, re-engineering and type of activity. Is there a plan to do that again? Clearly, there is always more that we can do, and that was a number of years ago. Secondly, the output of that work, is that available for us to review, just to understand what was done at that time and what processes were re-engineered to what effect? Paul will come in as well, but in terms of the general circumstances that obtained at the time, there was a feeling that the Scottish Parliament had itself to look carefully at its employment overhead. There was a reduction of 68 employees in the year 2010-11, which was a significant fall. It gradually started to increase again, and a number of the additional posts that we are looking at in the next year relate, for example, to the Scottish Government and the new register of lobbyists, which the Parliament has to put in place. Undertaking a full and comprehensive review on a regular basis is not something that you would do, it is something that we would do from time to time, and there would have to be a clear sense of what the outcome of that was going to be in terms of any major restructuring of the Parliament. The answer is yes. The corporate body is always, particularly where new posts are beginning to emerge, keen to ensure that they are justified, and that we are looking to see whether any of the other posts are posts that are always required. I know that Paul does that on an ongoing basis. I think that that is where I would be at the moment. You will recall that it was a crisis following the 2008-09 position. I felt the corporate body felt at the time that we had to do something really quite fundamental to get the head count and costs down. There is nothing published on that, but I am more than happy to see what I can do. For example, I did a pretty fundamental review of the senior management of the organisation at the time, and I am more than happy to drop you a bit more on that. However, there is always a cost to those things. In an organisation that is subject to fundamental reviews, there is a certain amount of stress and anxiety in the system, and so you have to weigh the two things up. At the moment, to reinforce the point that Jackson has just made, I think that it is about on-going, constantly striving for improvement, always looking for innovation. I think that is the model that we are in now, and we will go forward. Clearly, you know as well as I do, that we live in uncertain times and whether to be a further substantial change in our circumstances, and I felt that it required a more radical review than we would do the same again, but for the moment I think it is about just looking continuously to improve. However, if there is anything I have got from the 2008-09 period, I would be more than happy to share that with you. It is always a good idea to fix the roof when it is not raining, so I encourage you to strive for innovation where you can. The other big chunk that is in there that has not passed out is the £7 million running costs. Is there any kind of breakdown? It says that it is for services that you are buying in, etc. Is there any kind of rough overview as to what is in that? It is a lot of outsourced contracts. It covers things such as our IT support contract. It covers all the general advisers, porters, catering, cleaning. There is a lot of stuff in there that is typically stuff that we buy in, telephony goes through there. The IT support contract is the largest one. It might just be just a kind of next-level down-break, then a £7 million might be helpful. I would say that we have a forward look through our procurement strategy looking at these big contracts. Some of them, where we can, we can often share government-negotiated contracts, which represent good value for money. Where we do not think that is appropriate, we take a quite strategic look at how to bundle contracts, how to get the best value, and I think that over time it has often been a source of savings. Bear in mind that quality is important for the reasons that we say, but again, if you would like a bit more detail on that, I am sure that we can let you have a note. I have one final question, which is a very overview question. I know that I am conscious of the fact that we have quite a lot of new members in the committee. I am not sure what they may do, but I am not sure that everyone would be entirely aware of how you have requisitioned your resources in terms of how it works in the Scottish bloc. If you could just give us a quick resume of how that works, it would be very useful. I think that that one is for you. Yes, so there is an important constitutional point underlying the position, which is that the Parliament has, I think, the privilege and the responsibility that it makes its budget bid separate and before the Government, which is in a sense why we are here before you today. I think that recognises the fact that the Parliament in its funding must be entirely independent from Government, not that there has ever been any issue with the Government, but I think that it is constitutionally very important. I think that in case any of the colleagues on the table are wondering why we are here with our budget ahead of the Government, it is for that very reason. So whatever budget is ultimately agreed upon, proposed by the corporate body and hopefully agreed by the finance committee, that is netted off the Scottish bloc and what is left in the sense is what is available to the Government. So that is, I think, the important constitutional position that is enshrined in this Parliament, and I hope that that is helpful explanation to the members of the committee. I think that it probably is, some members are wanting entirely sure of it. Maybe it was an opening question rather than an ending question, but I got it on the record anyway. I thank the witnesses for coming along and giving us evidence today. Obviously you have committed to giving us a number of pieces of additional information and we look forward to receiving that. Given that we are a wee bit ahead of times here, colleagues, and our next witnesses are not due until 10.30. Can I suggest that we just amend the agenda slightly and move now into private and then come back into open session at 10.30 for our witnesses? In that case, I now move this session of the committee into private. At the same time, I thank the witnesses again for coming along this morning. Thank you. Colleagues, we are reconvened. The third item on today's agenda is to take evidence from the EY item club on the Scottish growth estimates. I welcome to the meeting Mark Gregory, who is the chief economist. Dewi Adams, the senior economic adviser in Duncan Whitehead, the lead economic advisory for Scotland. Welcome gentlemen. Members have received copies of the growth forecasts along with a spice paper and growth and forecasting, but before we move to questions from the committee, can I invite Mr Gregory and Mr Adams to provide a brief overview of their work in this area and give you up to five minutes if you want to take that in terms of where you are? I will go very quickly. Thank you for asking us to come in. The reason EY sponsors economic research is partly for our own interests in our business, but also to try and help to facilitate the debate between business and government on economic issues. Opportunities like this are very important to us. Literally, the one-minute version of item stands for independent treasury economic model. When Margaret Thatcher was Prime Minister, she made public sector information available to the private sector to use. A set of businesses came together and formed item to produce their own economic forecasts, uses the treasury model. EY has been the sponsor for about the last 25 or so years. It used to be Midland Bank. The process is that we have the treasury model, partly the OBR model, which we update. We then have a set of businesses that we ask for input on what they are seen in the economy. EY provides data, and Professor Peter Spencer, who is the senior advisor to the item club at the UK level, makes the final call on what assumptions we use in that model. That produces a UK forecast. We then, for a decade now, have produced a Scottish forecast. We also produce an Irish economic eye. For the last 18 months, we have produced a UK regions and cities forecast, which includes six or seven Scottish cities and all the major cities in the UK. As we get into the discussion, if we want to put Scotland into context, we can draw on some of that analysis as well. My role is to try and provide the UK framework around this. Dougie and Duncan are much close to the Scottish data. I will now let Dougie talk a bit more about what goes on there. It might be about how we do it and what we do. The current approach is to take the UK results, drive them through an industrial sector model of the UK, and then use that industry forecast at a UK level to create employment forecasts at the Scottish level. We then move back up using assumptions about productivity trends in different industries to the output figures and the GDP figures that we see. It is very much about industry disaggregated forecasts, aggregate GDP, consumers expenditure. We do not look at public revenues or public spending. We feel that we will have to develop over the longer term to meet the needs in Scotland, but it is not something that we do at the moment. In terms of our latest forecast, it is downbeat from where it was six months ago. A number of reasons for that are global trade. Growth has continued to disappoint at a global level. There are new uncertainties around domestic lay from Brexit and across the Atlantic in terms of how trade policy will evolve from here. The Scottish consumer has been very ablliant through this year, but the savings ratio in Scotland is now alarmingly low. There is not much puff left in the consumer for next year, especially as employment levels and employment rates have been falling. Therefore, we are coming up with a forecast of about 0.4 per cent for GDP growth next year. Although I must stress that, in terms of economic forecasting, the headlines are always about an individual number. In reality, we are talking about directions of travel and there are lots of uncertainties around how the details fall out. Perhaps economic models and forecasting are better as a basis for scenario work than for individual point numbers. That is a useful overview, particularly from the top level and how you bore it down into Scotland, so I am grateful for that. One of the issues that I wanted to raise at the beginning is the point forecasts. In terms of your forecasts and the point estimates, you make, are there any particular economic factors or drivers that your forecasts are particularly sensitive to? In the short term, one of the biggest uncertainties is around business investment. I think that most economists feel that the uncertainty around Brexit is likely to put a stall on investment spending until there is more clarity. The latest figures that we have for the UK for the third quarter are not that bad, but maybe that is driven by decisions that were taken before the referendum vote. Investment spending by businesses is a big uncertainty at the moment. On that, the latest OBR forecast, which came out in the autumn statement, for the UK has investment growing at over 2 per cent, whereas item thinks that the UK level will probably fall by 1 per cent next year. Does that range there? If you look across the forecast, we see that variability at the UK level and then obviously at the Scotland level. It is particularly relevant at the moment because if you go back nine months to forecast, people were looking for business investment to be one of the most buoyant elements of demand in the economy. I think that that is the big short-term uncertainty over business investment. Slightly longer term, there is the uncertainty around trade. Are we in the single market? Are we in the customs union? What would trading under WTO rules and regulations look like? That is not going to hit trade over the next 18 months or two years, although it may affect companies in terms of the amount of effort that they put into developing particular markets. Trade issues are perhaps looking out into 2018 and beyond for big uncertainties across the board. Longer term, there are issues that are particularly important for Scotland on labour supply. Scotland's working-age population is going to be falling about 0.2 per cent per annum as we get towards the end of this decade. We know that a number of sectors in Scotland are very reliant on migrant labour. Food processing, up to 30 per cent of the workforce, is from the European Union. Labour supply is an issue for Scotland longer term. Another uncertainty is on direct investment on how attitudes to investing in Scotland or the rest of the UK change because of Brexit. They are all very big uncertainties. It is not uncertainties that economic models are any good at sorting out. The economic models are fine. If you take some assumptions about how those uncertainties will play out, you can then develop scenarios. However, if you do not know how those issues are going to play out, it is pretty difficult to make confident forecasts. The message that I am taking from that is that no matter who the forecaster is at this stage, because of the level of uncertainties that exist as you describe them, there is a health warning on all forecasts at this stage because of that level of uncertainty. It is only trends that we can be looking at. No matter who is producing that forecast, everyone is facing that same uncertainty in trying to make these out, trying to define what will happen. If you look at the Bank of England forecasts, they provide what they call a fan chart, which is the range of the probability of the outcomes. Those ranges are wider at the moment as long as they have been producing them effectively for exactly that reason. It is always difficult. It is actually more difficult at the current time than probably in anyone's memory, I would say. Businesses are facing those exact same questions in their own scenario planning. It helps to illustrate the difficulties of making investment decisions in this type of environment, which we think throws sands into the way. It does not mean that business investment stops, it just puts sand in the wheels. How difficult does that make the Scottish Government's job in trying to set its budget next week? I will add something on the business investment, as Dougie says. It is highly volatile. It is encouraging to see that the Scottish Government is producing statistics on business investment for Scotland, and that has been a new bit of evidence that has come to the fore. At the end of the day, many of the macro models are a function of the quality of the data that goes into it and the thoughtfulness of the assumptions made. You are bringing that evidence to bear. It does help to enrich the discussions around what the uncertainties are and what the fan might be. It was the autumn statement last year where the commentators described the OBR as finding £27 billion behind the sofa for UK public finances, which they then lost and £35 billion more by the time of the budget in March. The ranges that have spread are very significant at a time when it is so volatile. Particularly in Scotland, where, as you get more and more control of the fiscal agenda, you have not got the kind of base to look back on. I would say that it probably does make it even harder in that context and somewhere where the system has been established for a longer period of time. I wanted to ask some questions around employment. Interested in your analysis shows differential rates in terms of men and women, particularly pinpointing the fact that there has been a drop since 2015 in the number of women in the workforce of £35,000. Are you interested in an explanation of that and how it is likely to pan out going forward? It is a mystery. If you think about the adverse forces of the Scottish economy in the last 18 months' oil price shock, a lot of oil-related jobs you think of being more male-oriented. You think about the rise in the women's pension age. Again, you would think that that would encourage women to hang into the labour market for longer. The date-on employment activity rate shows that women are, to some extent, exiting the labour market. That said, female employment is still at an aggregate level very high compared with past history. However, why we would have this very sharp rise up to 2015 and then quite a sharp fall off is a big mystery at the moment. It could be a quirk in the statistics, I do not know, but I cannot offer you a reason why I think it is happening. Is there anything to show that it is more sharp in certain sectors? I have not got the data on that. It is an interesting question. Perhaps local authority employment might be an issue, but I have not got any data to show that. Just looking at your table on annex 2 in terms of forecasting employment growth going forward by sector, in terms of education that looks, in terms of the bar chart, that is due to drop between 2016 and 2019 by around 5 per cent. Can you just confirm what the figure is and say how that would manifest itself? We have got education employment dropping from 2,000 and 3,000 in 2015 down to 197,000 in 2017. The public sector numbers in this for employment are driven by what we see happening at a UK level and are not modulated for what you might say were specific Scottish policies. That has been driven by what we see happening to spending levels at a UK level driving the Scottish forecast. What would you accept if the forecast is that we are going to see a drop in employment in the education sector? That is linked to the decline that you are seeing in growth and also presents a challenge in respect to yesterday's piece of statistics. If we want to see improvements in areas for example like science and maths, if we are reducing employment in those areas, then there is clearly a challenge there. There is no doubt that linking back to in the show remarks on productivity that education is something that is key not just for Scotland but for every western country if we are going to drive productivity growth that drives living standards. I would not make too much of those numbers except that they are portraying what the profile of spending and aggregate UK level looks like on education. It is implicit in the UK Government's spending programme that public services will improve productivity. There is effectively more with less, and that is one manifestation of that. Clearly, that is the challenge that is set out there. If that productivity is not realised, you potentially have the challenges that you talk about there. Good morning. I wonder if I could ask about your forecasts for GDP for 2016. Am I right in saying that you have downgraded your forecasts for 2016 three times? So, at the start of the year, you were forecasting 2.3 per cent growth. You then revised that down to 1.8, then to 1.2 and now you are at 0.7. Is that right? Yes, I think that that is broadly correct. There is a whole range of influences. The world economy has not grown as robustly as everybody expected or most forecasters expected 18 months or so ago. Trade growth has been lower, and that obviously has an effect through to the UK economy and through to the Scottish economy. The lingering effects of the oil price fall on Scotland have perhaps been more severe than we expected. Scotland has not done well in terms of its trade performance. Exports to the rest of the UK have been growing much more slowly than the rest of the UK GDP. That is probably down to composition effects as much as anything, but we have not got much buying from that buck. That has all been an influence, and then there are certainties thrown up by Brexit. I will just make the comment, though. It is quite a substantial revision since the start of the year. If you are forecasters, we would hope that you would be able to forecast what was coming and suggest that you have rather missed what was likely to be coming down the track. You had to make such substantial revisions downwards. I note that you are now forecasting GDP growth for 2016 as a whole at 0.7 per cent, but have we not already exceeded that in the first three quarters? We have only got data for the first two quarters. One of the issues that are looking at GDP is whether you look at the annual average against the annual average or you look at the profile as it runs through the year, so perhaps GDP in the fourth quarter of this year against GDP in the fourth quarter of last year. What we have seen in Scotland is that, in the data that we have got to the second quarter, the economy was gaining some momentum in the second quarter. We do not have any particular evidence for the third quarter yet except some employment data that looks pretty flat. The headline figures are annual average against annual average rather than final quarter against final quarter, so we have not exceeded the question. There is a comment on page 13 of your brief that GDP in Scotland grew by 0.7 per cent in the year to the end of June. What you seem to be saying is that, for the third and fourth quarters of 2016, there will be virtually zero growth. No, we are a good quarter of growth in the fourth quarter of last year, so that figure is Q2 2016 over Q2 2015, which is not the same as the annual average level against the annual average level. You are expecting very little growth to come through in the second part of 2016? Okay. Compared to other forecasters, you seem to have a pessimistic outlook. Why are you more pessimistic than others? I do not think that we are particularly more pessimistic than others looking at the Scottish economy. At the item level, we are more pessimistic than the OBR, but we are not miles away from what most private sector forecasters are saying. I do not think that we are particularly pessimistic. Unfortunately, over the past seven or eight years, pessimism has tended to be the site to err on. At the UK level, in January, we were forecasting 2.7 per cent GDP growth for the UK. We produced what I think was the first forecast after the referendum, where we were at 1.9 per cent, which was at that point above consensus. As people brought those forecasts out, we are still at 1.9 per cent for 2016 for the UK as a whole. I would guess that looking at the data, we are going to be 1.9 per cent to 2 per cent. I think that we will be pretty close to that. So, yes, we are below OBR, but I think that we are pretty in the range in terms of the UK level. I think that we have got some specific Scottish factors that are there. One thing that we have certainly seen over the last year is that we and others underestimated how the knock-on effects of oil. You can pick the oil sector, but I think that its impact on professional services and other sectors has been starker than we realised. I think that we are still trying to figure out exactly what the right adjustment there is. I have got your submission here, and I am on the page of Brexit and Scottish exports. So, you say in here that the HMRC dataset of regional trade statistics, a smaller proportion of Scottish manufactured exports went to the EU than was the case for the UK, and the respective figures for that were 41 per cent for Scotland, compared to 48 per cent for the UK as a whole. I am quite interested in those types of figures because I am on the economy committee as well, and we have had a number of expert witnesses that have been coming in over the last while. The availability of data that is specific to Scotland has been raised time and time again, so I am interested in your view on that. Also, there has been a suggestion of what is called the Rotterdam effect. I do not know if you are familiar with that term. In that case, as it applies to the UK, exports coming from Scotland might go to the UK, be counted as being exported into the UK, but be on route elsewhere. I would be interested to hear what your comments would be on that. I will start with exports and hand over to you for Scotland. I think the quality of export data is a concern for everyone. The ONS yesterday revised all of their trade data, and I think from memory it took half a per cent off the current account deficit in June, compared to what it was previously. ONS's trade statistics have actually not been quality assured in recent times because they have been so worried about them. There is an overall collection issue. Secondly, there is a question of services versus goods, and we can physically identify goods to some extent. Services trade data is very problematic. The OECD has done some work, but it is really not very good. When you try to disaggregate that to regions or the devolved administrations, you are into those problems. We have some knowledge of goods, not of services, but then, as you rightly say, many of those goods go to Rotterdam, and so we do not quite know where they go in the past. I think there is a whole set of overall challenges of export data that are going to be particularly problematic as we move forward and negotiating on trade where we may not even know really what our starting base is as a country, and then for Scotland specifically, Dougie. I think the data from the HMRC database, which is very detailed, but it just gives us one indicator in trying to work our way through what is, as you have described, a pretty murky picture. What we have simply tried to do here is to line up where Scotland has a high proportion of exports that appear to go to the EU with potential tariffs that could be faced if we ended up in a WTO type of Brexit. There is a lot of straw men being built in there, but it is one of the few kinds of, I hesitate to say, concrete bits of evidence. It is one of the few bits of circumstantial evidence that we have on Scottish exports to the EU by sector, and even within sectors, when you drill down to an even more disaggregated level, the types of tariffs that could be faced by goods that come into the same aggregate sector, say like chemicals, could be quite different. I think that the other side of trade, we are talking about exports, but imports are going to be a very important feature of the Brexit debate. If we take Jaguar Land Rover, for example, I would imagine that they run a trade deficit with Europe, they get a lot of their supplies from Europe, but they run a surplus with China, because that is one of their major export markets. When we are really trying to understand the sensitivities in trade, we have to understand supply chains, and the import side is at least as important. I think that there are a set of challenges there as well in trying to unpick that. It is going to be a really challenging area. If that is a murky area, I think that was a description. What do we need to do as a country to sort that, because that is obviously going to be hugely important for the future in terms of understanding what is going on in either the UK or the Scottish economy? What needs to be done? What do Governments organisations need to do to get this sorted? I think that we have statistical systems that are really quite good for industrial economies. It is easy to measure the number of pounds of smoke salmon that we produce or whatever. When it comes to services, we have bigger problems. It has got a lot more difficult because of the way supply chains now work around the world to measure what is going on where. Then there is the trade-off that is always there between the thirst for better data that would allow you to understand more things and the cost burdens you are putting on businesses that are already pressed with everything else that they have got to do. There may be big data. Electronic filings of tax returns every quarter and things like that will begin to help to cut that, but it is a difficult problem. It is not an advertisement for EY, but we have just published a report that Group Euro tunnel asked us to produce, which was really looking at the traffic through the channel tunnel, because although they understand their customers, they were not really sure of the exact details of that. It is a public report. We presented it to a group of MPs in the House of Commons. There are some interesting things in there. We surveyed 200 of their customers. The West Midlands is the biggest origin and destination of things that pass through the channel tunnel. It turns out that is parts of the car industry that we are operating on two-hour supply chains. If they do not get a delivery every two hours, they are people and factories that are not working. The second largest category was courier parcels, which is online shopping. People who offer online delivery within a day are very important. One thing that you could think of at least and not only be a partial solution but is that the Scottish ports and airports might want to think about some sampling in the short term just to help you as you are forming your view on what Brexit and the trade negotiations might look to get at least some picture of where the sensitivities are in Scotland. Our experience is that the operators of ports, airports and etc. will have really quite detailed knowledge of those operations and some of the challenges. That would be something that you might think about. It is worth pointing out that in the same piece of work we did pick up movement of fresh produce from Scotland to the continent with the channel tunnel being quite a vital link. Thank you, convener. On that very note, I represent the Highlands and Islands of Scotland. We have a very strong tourism sector and a very strong food and drink sector, as you say. I am interested in what you have noted about the concerns around free movement of people. I know anecdotally, when I was visiting Shetland a couple of weeks ago, there is fish processing plants for more than half of the staff at EU nationals. Shetland has very low unemployment rates and there are no local people looking for jobs. What would be the impact of a very hard Brexit with no free movement of people on sectors such as food and drink and tourism, which also has a huge number of EU nationals working in it? It is obviously a huge challenge. You might find that paradoxically there is more investment in kit that does stuff instead of people, but there are clearly huge limits to that, particularly in the tourism industry. The impact on costs, because you are trying to bring people in from rest of the UK or other parts of Scotland, but then you get into housing issues in Highlands. I suspect that one of the big effects is what we have seen in the US. You get a lot more illegal migration going on as people try to find ways to solve their particular business problems and take risks. There is also, I suppose, some concern about—there might be more complicated effects, as well as the free movement of people. Last year, we had a very strong near tourism-wise in the Highlands and Islands, probably because of the crash in Stirling. Obviously, there are impacts going on. Do you want to tell me a little bit about your thoughts about how that is going to pan out in the future? Next year, in tourism terms, it should be even better, because most of the models of tourism flows suggest that, while you get some immediate effect from a currency depreciation, the big effects actually take time to come through, particularly for far-travelled tourists. Tourism ought to be a bright spot through next year, but, at the same time, there is the other side of the depreciation that we have not talked about. It is likely to start reeling its head as we go into 2017, and that is increasing prices, but the depreciation is so large that I do not think that that is going to have an impact on the tourism sector particularly. The exchange rate is probably as significant as Brexit in itself in terms of what happens in the UK economy, so we have obviously had a significant devaluation. I think that there is an argument that the UK's current account was such that that devaluation was probably going to come at some time, and Brexit may have hastened that push. We did a survey of our clients in the UK, and 67 per cent think that Stirling will be back to the pre-referendum level within two years, which I would say certainly against the dollar looks optimistic, but what that might mean at the moment to your point is that, and Dougie's point, we've seen the short-term benefit of lower prices, but the question is, will businesses actually move to allocate capital to that export opportunity, which could be a way of driving productivity and growth, but equally, how will they look at the import side where costs will rise, and will we, for example, see people trying to substitute some of the imports that we currently have? The UK has been a great offshore of activity, will be some of that come back, so potentially there could be an opportunity wrapped up in that. Labour is obviously a different area, but it would be interesting to see if businesses respond to that, and that's why business investment is uncertain, but it's so critical because that now would be the opportunity to invest in those exchange rate related opportunities, both export and import, but if businesses don't see the exchange rate shift as a permanent one, then clearly that investment isn't going to happen for a while, so it will be an interesting dynamic, I think. I'm thinking even further ahead to how the whole Brexit Association might pan out. If there is an issue in terms of free movement of people, in terms of visitors coming to the UK, obviously the area that I represent is pretty concerned about the idea that European people might need to get visas to come and visit us in the Highlands and Islands, and food and drink being exported, what sort of trade tariffs there might be imposed on. We've got whisky, salmon as one of the biggest export products for Scotland. Could you give me some of your thoughts on that going forward, please? It's very speculative, unfortunately, because there are so many moving parts, you know, and I think in food and drink, and another option or another area is, for example, if we do start to sign trade deals for other countries, then potentially there are an opportunity for more imports in some categories. You know, the EU, the customs union, obviously to some extent protects food and drink that's within the EU and some of the highest external tariffs are obviously on dairy and other products. So, you know, I think you're right, there is a obviously risk around people, but there's risk around tariffs, but there's also risk on the non-tariff side in terms of being able to export, being able to get customs clearance quickly and prove the origin of those goods. So, one would imagine that in the worst case, it obviously is going to be, you know, a negative impact equally in the more, and the recent signalling suggests that all options are in play, that you might try and mitigate that. So, I think the range is, as we saw at almost the time of the referendum when, you know, obviously our profession took a bit of stick at that time, but, you know, the general view was with restrictive trade and migration. The net net would be that, I think amongst 80% of economists, GDP would be lower in the long run. So, it's kind of all to play for, but there are some definite risks out there. Adam Tomkins. Thank you for being here. I wanted to just to change focus a little bit from the least densely populated part of Scotland to the most densely populated part of Scotland, and to ask you a few questions about the very helpful but slightly depressing analysis at the end of your report on the city focus, and in particular on Glasgow, because that's the city where that I represent, but also because it's the city in Scotland with the first city deal. And to ask you about a couple of your remarks in the context of the city deal, so you write that Glasgow has experienced a 0.1% increase in employment that lags behind both Scotland and the UK as a whole, and indeed that over the period 2016-19 employment in Glasgow is likely to be flat. Now, the Glasgow city deal, which was signed a couple of years ago, it was the first to be signed in Scotland, was at the time it was signed the richest anywhere in the UK worth more than 1.1 billion to the local economy, and its purpose was to boost jobs in Glasgow, and by Glasgow I don't just mean the city, I mean the Glasgow and Clyde Valley region. Something like 28,000 jobs are supposed to be generated directly as a result of the city deal. Are we to read your paragraphs in this report on Glasgow as a reflection of the failure of the Glasgow city deal, given that job's growth is forecast by you to be so flat and so disappointing at the time that the city deal is in operation? Okay, so I think that the way to put that into context is the city deal was created at a time when macroeconomic conditions were expected to be more favourable, so I think what we're seeing now when we look at the employment outlook, if we look across the UK we think only London and the south-east are going to see employment creation in the next three years that actually employment is going to be falling and reasonably significantly in most parts of the UK, even say the north-west where, and Yorkshire where we talk about the northern powerhouse, so I think we have to look at employment from now going forward in terms of that macro environment, so I think it would be too big a step to say that we should challenge the benefits of the Glasgow city deal based on a different employment profile now than what we thought previously on that, and I think what you do see in Glasgow is still growth in services such as professional services, but with public sector spending continuing to be squeezed, you see job losses sort of mitigating some of that, so probably the macro context makes it hard now to evaluate the plan as was against that forecast, is that correct? Yes, absolutely. The only thing I'll add is I'm not extremely familiar with the actual detail of the programme project level activities of the Glasgow city deal, but it is over a 10-year period and obviously those programmes and projects should actually suit the macroeconomic and local economic environment that they're facing, so you would still actually hope that an injection of additional investment would actually be supportive, obviously within the context of what's happening in the broader economy, there might be job losses elsewhere for other reasons which is actually netting it out. One would indeed hope, but against what kind of criteria should we now measure the realism of this hope, given that, as you've just said, the macroeconomic circumstances are different from those in which the Glasgow city deal was signed, particularly given that we're not only talking about Glasgow city deal, we're talking about the growth of city deals throughout Scotland. I think every city in Scotland is to have a city deal and now we're talking about growth deals away from cities as well. How will we measure the success or otherwise of these city deals and growth deals if the measurements are different from those that were assumed at the time that the Glasgow city deal was signed two years ago? We've been talking with the Scottish Cities Alliance about how you might benchmark that performance, but to put that in context of the UK regions of cities, London grew on average 3.4 per cent a year over the last three years. We now forecast that it will grow at 1.9 per cent, so you can see that the macro effect hits everyone. I think the stronger you are, the more resilient you remain in the short term. When we look at short term outlook for cities, sector mix and the prospects for those sectors in the short term are a big driver of that. What I think might be the way to think about it is to think about some kind of benchmarking. For example, Manchester has been outperforming other cities in its region and it's obviously way further down the line in terms of its city deal, but if we look at Manchester's growth against what it was and also against its peers, we can probably start to derive some ratios as to what the growth effect looks to be relative to the investment that we've got and then think about taking that and looking again at the Scottish City deals in that context. Our discussions with the Scottish Cities Alliance have been not just looking at the Scottish Cities Relative to each other but trying to look at where policy has made a difference. The positive I'd take is that Manchester is outperforming and for me it does suggest that the devolution agenda across all of the cities and regions, there is an opportunity there to do something. Equally, it does take time and we really need to understand the dynamics of what drives that, how important is infrastructure, how important is skills and what's really the time period over which you might see a difference. That would be my sort of suggestion to think about trying to benchmark against some of the other deals which are now public and starting to develop across the UK. The other consideration is actually just the sector makeup of a particular city. If you look at some of the cities that are actually forecast in our city forecasts, they actually do quite well over the coming years. It's places like Reading which are very weighted towards professional services, IT, scientific sectors and those are the sectors that are actually forecast to do quite well across the UK. So I think it is important to actually look at each individual opportunity and see what the sector makeup is and how actually the macroeconomic environment is actually going to affect performance at the sector level. That's a good point. On our UK attractiveness survey last year West Scotland had a strong performance but what was I think most noticeable was in what I'd call the digital and knowledge industries both Glasgow and Edinburgh performed very strongly in terms of attracting FDI in those sectors and I think that would be another dimension of this benchmarking is are you in the sectors where growth and opportunity seems highest and then really try and challenge that as well because you don't just want growth but you want to think about the quality of growth as well as it creating a long-term platform and actually Scotland with its universities seems to be in a good position in that sense but clearly the city deals need to really unlock that potential going forward. Thank you very much, that's very helpful. Patrick Harvie, good morning. I wanted to follow up on some of the questions that James Kelly was exploring on employment by sector and then after that a question on forecasting more generally. I was a wee bit surprised at the description of the reaction to some of the impacts on gender inequality and employment as a mystery. Even in the context of the oil and gas industry and what's happened there, yes there are certain high value parts of that industry which employ more men than women but everything that we've heard all the way along is that it's the induced employment in the wider economy that's particularly vulnerable and it seems to me that that should have been expected. We're also looking at these sectors which suggest that these forecasts by sector which suggest that accommodation and food service will be the third biggest growth area and the areas such as education, health and social care will be amongst the hardest hit. Again we're looking at areas where women are more likely to be employed in those public services at a higher pay rate in the public sector than they would get for equivalent work in the private sector and a growth in particularly low paid jobs such as accommodation and food service. Isn't the picture that we're looking at if we take all of this together one of the likelihood of increasing stark inequalities not just of gender inequalities but of income inequalities in the Scottish economy and doesn't that need to be the principal driver of Scottish Government policy now that they're particularly reliant not just in achieving a social objective in reducing those inequalities but particularly reliant on income tax revenues? Yeah I mean I guess that the public sector effects you're talking about are well documented and but have been going on for a long time and yet we saw female employment rates and aggregate number of women with jobs in Scotland grow strongly until 2015 so maybe the oil effect on women is a bigger effect than we're judging but it doesn't quite feel right. I think we're living in a world where we have a major challenge on the equality agenda. We think of the way that technology is disrupting so many sectors, so many places where there were good jobs in the past but are going to have fewer jobs in the future albeit perhaps higher paid jobs. We have a major challenge to face in terms of how we distribute the gains from technology to a lesser extent globalisation around the population. I think that that's a well recognised problem across the west and in Scotland Scotland shares it with everybody else and I don't think there's any easy answers to it. Any other comments on that particularly I think Mark Gregory talked about education health and social care reductions in employment in the context of productivity. It seems slightly bizarre to use the same kind of definition of productivity in those areas where you know the same throughput with a lower labour input isn't an increase in productivity it's a reduction in the quality of service, a reduction in what you're trying to achieve. I was describing there very much the implied mathematical relationship which is we are going to do more with less from that. Doesn't it actually result in doing less with less? Well you know I think there's a debate about productivity more generally which is that we've defined productivity increasingly in terms of the cost side of the relationship whereas actually the value side of the relationship may prove to be more important and I can illustrate that. One of my clients is a financial services company and they found out that their sales force was spending 11% of their time selling and the reason was yes there was a lot of compliance they had to do but the company had outsourced its IT, its finance, its HR so actually the people who theoretically were there to create value were actually spending a lot of their time on activities which have reduced overall cost but weren't necessarily maximising their resources so I think we should be switching the productivity debate to where can we create value and sometimes that might mean spending more money in the short term because we're actually trying to get to a different output so you know I agree with you I think we have to be very careful when we look at productivity to be sure that we understand what the benefit is we're trying to get and what the kind of multiplier benefit might be of that so if we did find if we spent more on education or health we got better outcomes that might boost productivity at the macro level over time because we'd have healthier people able to work more or better educated people who want to see and will be able to produce more value if you like so I don't think that debate isn't in this but I think that should be where the productivity debate should be. I'm just kind of stepping back a bit when we're talking about the kind of equality and you know they're kind of inclusive agenda actually when growth is weakening it actually becomes more challenging to achieve that and you can see that on a regional basis in the item regional report where we have the impact of slower growth across the UK kind of propagating itself across the regions and actually you know some regions are actually more affected than others and the regions are actually showing the lowest growth are the ones that we're actually doing you know at least well before any of the recent revisions so I think you know that kind of challenge is now becoming even more of a challenge given the change in the macroeconomic context. Going back to work harder actually the tougher the economy gets it's actually you need to do more to rebalance the economy or to address inequality than you do almost in a growing economy when you've got a bit more resource to move around there. Well I mean there's another inequality paradox there it's it's long been the case that high paid people get paid more to make them work harder and low paid people get paid less to make them work harder but I wanted to ask another question just in more general terms about forecasting and about how you do what it is that you do. It's sometimes said that nobody really predicted the financial crash you know actually it's probably fairer to say that nobody mainstream dominant economic theory predicted the financial crash but you know a decade or so ago there were people who were probably using less maybe say fashionable economic models who did get the timing the causes on the extent of the financial crash right. What have you done to bring in a broader range of viewpoints and economic approaches in the time since then to try and ensure that we have a fuller range of understandings about the way that the economic discipline can be used to tell us something about where we are. Dougie was telling me this morning he did predict the crash but I'm going to check on his report on that subsequently because he didn't actually sell any of his share portfolio. Yeah there was certainly a weakness in macroeconomic models in their treatment of the financial sector and the vulnerabilities there and so I think models have tried to take account of the financial sector more but in the way things these kind of events come along I suspect that you know it's not the last crisis we should be looking to it's where the next one lies so I think there have been there's a new block in the model for for the financial sector and its influence through the economy and credit spreads and stuff like stuff like that that wasn't there so there has been some attempt to to fix that particular issue with with macroeconomic models but there's a lively debate about you know macroeconomics has never seemed a settled discipline. I often see it argued that there isn't a lively enough debate about macroeconomics and that you're not reading the right blogs. Well maybe I would appreciate any links but you know one of the cases that's made is that you know that the discipline involves people perhaps in the way that some other academic disciplines do essentially having to talk the same language to one another and reinforcing the dominance of a sort of centrist approach and not exploring other economic models which have become unfashionable but which can prove useful. Is that a fair criticism? I mean you know I think it is to some extent I think the profession got itself somewhat isolated and a little bit hung up on the mathematical sort of solution to almost every problem whereas you know we are trying to forecast in the UK how 65 million consumers will behave in their individual decisions and you imagine sociology and other disciplines might actually be able to to inform that to some extent. I think the problem you have is is then trying to represent that in a model that works at an aggregate level but you know I certainly think as Dougie said you know that these models give you indications of direction of travel. I'm not sure they do pick sort of break points in the trend. I think that's where there is a weakness that if there is a shock that is outside the bounds it's almost certain that we won't have captured that in the correct way. Marie, do I see you saying you had a supplementary in this area? I just wanted to clarify something. It's just on Patrick's earlier line of question about education and employment in education. Can I just clarify that I understood correctly that table that we're looking at on sectoral outlook, you said earlier that the public sector spend what it wasn't modulated for the Scottish situation and that it's... What might be in next week's budget for example? So that table basically reflects the situation of spending at Westminster and we can't really draw many conclusions about the Scottish situation from it. Okay, I just wanted to be clear on that. Thank you. I've got Dean and Willie. Thank you. Good morning. Your report highlights a number of concerns surrounding the recent and current performance of the Scottish economy. Page 17 to 19 highlights concerns such as falling international exports, flat GDP, rising economic connectivity and low job creation rates. Can you explain to us to extent possible are these caused by structural, long-term structural issues with the Scottish economy or to what extent are they caused by shorter term changes in commodity prices such as oil and chemicals because from a policy perspective we can try to address some of the structural issues but we don't really have a lot of control over the price of oil or the price of chemicals. I think that I've probably said it in a kind of cack-handed way that the export performance was partly driven by compositional effects. We know what the problems have been faced by the metals sector over the last year, chemicals, price pressures in particular in that sector, so a lot of the particular issues are short term cyclical ones and some of them are ones that will be helped greatly by a sterling depreciation. No doubt there are structural issues at work as well in terms of the make-up of the Scottish economy, but the Scottish economy is structurally much less vulnerable now than it was 30 or 40 years ago when it was very heavily dominated by capital goods production. Just to supplement on that, you mentioned earlier the increasing divergence between the performance of the Scottish economy and the rest of the UK. It's a similar question, but can you talk us through what the main drivers of that divergence is because it appears to be increasing to some extent? One big driver is population. Our population is growing. It's much bigger now than we expected it to be 10 years ago, but it's not growing as fast as particularly the southern part of the rest of the UK. That has an immediate knock-on to GDP growth. Our aggregate rate of productivity growth seems to be a bit lower than the average for the UK as a whole. Again, that probably comes down to sector composition and the very fast productivity growth that we've seen in some sectors in London, which is a unique situation. Those would be the two main things that I would point out. The public sector is a slightly bigger weight in the Scottish economy, and we know the pressures that it's been under, so that would be another contributor to that gap. In the short term, we've had the commodity price effects and the oil price effects. My final question relates to exports. 50 per cent of all exports in Scotland come from 50 companies, and on page 17 of your report you highlight declining international exports. Is there a structural issue in the Scottish economy that prevents more companies exporting? Is there a cultural issue? Have you seen any compelling reports or research as to why that's the case? Exporting is difficult. It's not an easy thing to do. If you're a medium-sized company, it's a big commitment of resource with uncertain pay-offs, so exporting is difficult. Some of the models of trade and exporting that have proved fruitful in recent years have been focusing on the quotient of leading sectoral companies that you have in your economy. You may have quite a large number of companies in a given sector, but only the real leaders are likely to be the ones that are exporting. It's a compositional effect at the industry level. If a business is a lifestyle business, I mean, I'm not saying that somebody wants to work one day a week, but if it's a business that doesn't want to take many risks, it can make a good return for its owners and for its employees, then the step to exporting can be a big risk. Just on that, and we've made this point certainly at the UK level with UKTIs as well as now DITs, we often focus on exports, whereas we should look at trade, and by that I mean the link to foreign direct investment, but also very much how those bilateral relationships evolve over time. I argue that Germany is an exemplar of that, which is that its trade with China is very much two-way, and over time you get leverage from that. I think that at the UK level, and I'm not familiar with the Scottish level, we haven't often linked the pieces of trade together. If you do go as a Scottish company and make an investment in a European country, that's over time likely to build relationships and create soft power, so actually your exports and your investment become linked in a different way there, so I think that will be probably increasing and important for all of us if the current Brexit process continues as it is and Scotland thinks about its role as a trading nation. With two thirds of world growth coming from the emerging markets, does that mean over time, over the short to medium longer term, most of our or more of our exports will go to those emerging markets? Yes and no. I think that opportunity is there, but it partly depends what you produce and where the opportunity is, and I think what we've seen, particularly in our foreign direct investment, is North America remains a very attractive market for Scottish producers, and we see the FDI coming in as well, so I think that it will be still balanced, and yes, there'll be some faster ground pieces, but what you produce may well play more in other markets. Related to the question from Dean, it's been striking me something that you said earlier, and it's related to what Dean has fallen upon. You said that in terms of your forecast that only in London in the south-east was employment forecast to grow. Obviously, the fiscal agreement that's being signed between the UK and the Scottish Governments, the relative tax take issue, becomes very significant for us. That was to be a factor in terms of the forecast that you have. There are real risks there for the Scottish economy, so I think that my question is what could, because both the Scottish and UK Governments are responsible for this year, so what could both do to help the Scottish budget in these circumstances? Maybe there's something you can answer today, but certainly it's going to be very important for us in the future in terms of the tax take for Scotland to understand what we can do from both Governments about how we can begin to impact on that. I think it's interesting to observe that in the autumn statement in the company OBR report that the anticipated take for income tax at the UK level has been falling. That's an issue that's happening at the UK level. If you're looking at, basically, where the weight of funds are being collected in Scotland, if that's in income tax, then that's obviously something to keep an eye at. Any suggestions that you have later to how we might address that would be helpful. I saw a very interesting article in the Financial Times last week that said that there had been a 25 per cent increase in the number of corporations as people tried to avoid paying income tax and moving it a different way. There are obviously significant dangers in there for the Scottish economy as well, because we have no control over that area. It's a comment to make. For example, we've talked about export data, but employment data is also very problematic. We don't really understand the self-employed economy in terms of what people earn in that, and how they contribute to the tax system. All of our labour data is largely sample-based, and the samples become, certainly, at the UK level, very small, relative to the increasing number of people who are self-employed. When you're thinking of employment taxes, for example, income taxes, that becomes quite a significant issue. If the interesting thing is that you change tax here, it might reduce your tax take and improve the treasuries position. It should be a bit perversive of us to do that. So understanding all those things is going to be important. I'm sorry. Thanks very much, convener. I wonder if I could ask you for some comparisons between the Scottish economy and the Irish economy mark. Your chief economist for the UK and Ireland, and you mentioned it in your opening remarks. According to your forecasts in the paper that you have given us, the GDP forecast for Scotland is about 0.4, the UK is about 0.8, but the Republic of Ireland is looking at 3.6, which is nine times higher than Scotland. Ireland has come from a particularly difficult place in terms of a banking crisis depopulation. In my view, it doesn't have the strength that Scotland's economy does have in food and drink and life sciences financial services. Why would their forecasts for growth be so much higher than Scotland's? You're right, and certainly whenever we produce our forecast for the Republic and I was reading in our latest one yesterday in draft, you have to start from some very strange numbers. Ireland was getting up to a reported 26 per cent growth in GDP earlier this year, which was driven by various classifications of leasing companies and some tax inversions, but we do think that Ireland is growing at a healthy rate and may have grown last year by 5, 6 per cent real, which is some of the bounce back from these things. I think that what Ireland has been very successful at is really developing its tech sector and its attractiveness to tech and life sciences. Actually, that isn't always its domestic capability, but it's been able to get inward investment from the US tech sector. I think if you look on the west coast, for example, so partly that slightly distorts the numbers because there's a lot of sort of products that come in that leave, which don't necessarily have a massive Irish input, but nevertheless contribute to GDP, but also Ireland has restructured its economy since the financial crisis. Companies did cut nominal wages, not just stop giving people pay rises, but they actually did take cost out of the labour supply and that competitiveness is now coming back. I suppose that we may also see people hedging their options in terms of whether they have operations in Ireland versus the mainland of the UK, given potentially one will be in the European Union in the longer run and one won't. I think that they have used tax policy very aggressively. I think that that's well documented in terms of having a very competitive exchange rate, but they have been successful at targeting certain sectors with FDI and that's provided a boost to the economy. I think that there's still our challenges with the banking sector that have to be worked out over time and probably property too, but Ireland has really worked hard at trying to change the nature of its economy in the last few years. In looking forward to a potential Brexit impact on Ireland, we are their biggest import destination. If they are looking at a situation in 2019 where the UK is out with the European Union, they are still in, but they are still forecasting a healthy, significant growth rate. Why would they have that huge differential between themselves and Scotland? I think that partly people may not yet be baking into those forecasts, but the brets impact it in the same way as we're assuming if not cake and eat it, but the kind of base case is some kind of reasonably smooth transition, which is only one of a range of possible scenarios. I think that is probably the most significant factor in that at this point. I think forecast for Ireland like the UK beyond 2019 are even more speculative than the normal, if you like, in that context. Thanks for coming to talk to us today. I want to talk about some stuff to do with exports and Brexit, but I will first clarify the point and answer to Arsh Denham's question. We talked about export statistics, so if I heard you right, what you are saying is that there is uncertainty around those statistics. In particular, if we are trying to understand where Scotland's exports go in terms of whether it is at the UK, Europe or the rest of the world, there is considerable uncertainty about what those numbers actually are. Looking through the report, we are talking about a WTO rate on beverages, for example, 20.7 per cent, so that would hit Scottish whisky exports potentially. Talking about WTO, and that has been talked about as an option, is it true to say that the UK at the moment, in its situation vis-à-vis the WTO, is that the deals that the UK has with non-EU countries through the WTO are effectively by virtue of their membership of the EU and not directly? Is anything in place at the moment between the UK and a non-EU country, by and large, would have to effectively be started from scratch again, so you would be back to square one? So the idea would be that, should the UK go down the WTO option, I saw Government ministers yesterday, I think, in the select committee talking about, or maybe it was experts, that we try and grandfather the relationship, so you take what we have now as our WTO tariffs schedule effectively through the EU and move that over. I think that the challenge is less on tariffs, it's on quotas, because often there's a set of quotas that sit with those tariffs and you obviously have to find out, agree with the EU how you divide those quotas, so that's probably the more challenging piece of that. Yeah, but I mean, that is a big, big assumption, because that's not the way businesses normally done when they're going off the road. Well, as I understand it, and you know, I was talking to Duncan earlier, trade is, the more you understand it, the more you don't understand it, as a kind of, you know, sort of someone who hasn't really spent their career doing that, but clearly you are subject to a challenge by any WTO member in that process, and they're obviously 160 or whatever, so there's clearly scope for someone who will see an arbitrage opportunity, so there is a risk there, for sure. And just a separate issue with regards to exports, you quote some balance of payments counter-account numbers in here, and the UK is a bit minus 5 per cent, plus I'll give a take a bit until it's a percentage of GDP on its current account. My understanding is that Scotland's got a positive balance of payments on the current account, would that be correct? I think it's hard to know, because of what we talked about earlier. Yeah, it's very hard to know, it's hard to know on the trade stats. I think that the trade stats in the national accounts are as good as anybody can do. Flows of profit payments, interest payments, all these things are kind of difficult to get a handle on, that affect the current account position, so I think it's difficult to know. I've seen some attempts at putting some numbers together, but... I'm sure there's nothing there that says this is more... I mean, you'd assume given offshore exports, given food and drank whisky exports, given financial services, given a whole bunch of sectors that it would be poised to be, you're saying there's nothing hard and fast? There's nothing hard and fast, and we've seen much faster import growth and export growth over the last year. Rest UK companies, foreign companies operating in Scotland, repatriate profits, pay interest and dividends, which affect the current account, so it's not just about trade, it's about other flows as well. In fact, the ONS put out a paper last week, I think since 2011, the UK current account has gone from, let's say, minus 3% to minus 6% of GDP, and most of that decline is due to a fall in the return on investment overseas, and I think our return on capital has gone from 8%, something to 5% on that. And I imagine potentially Scotland is disproportionately exposed to that because you've had a strong financial sector, so there's a good chance that actually you've got a disproportionate share of Britain's overseas investment, if you like. Okay, so the last question I've got, and this is a hard one, so... Oh, I'll not hear this. They're just a warm-up. This is clearly written in the context of Brexit and where we are today, given what's six months after the vote, et cetera, et cetera. If by, let's ignore how that process would happen, but if we woke up tomorrow and Brexit was off and you revised those numbers, how much better would they be? Good question. That's a good question. Well, we've talked about the uncertainties around business investment, we've talked about the uncertainties around trade and foreign direct investment. If those uncertainties were exed out, then I think you would see the numbers being quite a bit better. You know, at the UK level, I think we started off at 2.7% at the start of the year. We're now at 1.9%, probably, and if some of that decline was because the economy was slowing in the run-up to Brexit, which we won't get back, but there's probably 20% of that 1.9%, so maybe we would be at 2.3% for the UK, so I don't know if you can read that across the Scotland, but it feels like that's the kind of slowdown we've probably seen. But it is hard to call because we are, actually, to Patrick's point, we're trying to forecast intentions at this point, how people are reacting to a somewhat uncertain environment, so that's why it's so difficult, because people are not necessarily behaving as we think they should be yet. Sure, but I thought somebody was lifted. There's actually a harder question than even that question, is usually when an economy is hit by a shock, you have bad effects, but then over time it adjusts and it kind of catches a lot of the damage up. The issue now is what are the long-term effects of Brexit, how does it affect our labour supply, our investments spend and so on. You can make arguments on both sides, so the bigger question is what is the impact on the UK and Scotland's economic potential, and our economic potential has a big impact on what we'll raise in terms of taxes. And what we'll have available to vote to the good things that we all want. The other interesting thing, particularly we were talking earlier in the Scottish context, is the savings ratio is relatively as low as it's been, I think, in Scotland. Normally, in times of uncertainty, the savings ratio goes up. Actually, part of the reason for the slowing of the economy that people have been forecasting across the UK was we thought consumers would start saving more, but actually they've continued to spend. Scotland is at the almost extreme end of that, so maybe there's less upside in the sense that, as it stands, the Scottish consumer seems to be ignoring Brexit at this point, or they think the rainy day is going to be so wet that actually they're going to spend it now before it happens, so that's why trying to onflip that can be quite hard, I think. I wonder if there's other issues like the current account deficit, which has maybe been exposed to the Brexit process so far, whether, if Brexit was off, that issue would go away. I think that it would still be there, so I don't think that everything would reverse. I just wanted to ask you about exports and productivity and the forecasting in relation to Scottish Government targets. In 2014, Scottish Government said they wanted to increase exports by 50 per cent, value of Scottish exports by 50 per cent by 2017, and a target of being in the ranking in the top quartile for productivity against key OECD trading partners by 2017. Obviously, 2017 isn't that far away now. It was just to ask you how far or how close will we be to hitting those targets? Also, notwithstanding everything that you said about Brexit, would it be fair to say that those targets were challenging even before Brexit to be hit? Yeah, I mean, they're challenging targets, and one of the issues with a target that's put in value terms, you can have an industry that's really doing quite well in terms of volume of production, but if prices are crashing through the floor, as they have in some industries, you can't get the value up. You're selling plenty, but you're not getting much for it. The productivity issue that we have in Scotland, as we have in the rest of the UK, is a long period in which we've not seen aggregate productivity grow very much at all, and that may be because we've taken different choices. If we look across to France and Germany, which are often held up and are major economies within OECD, and are often held up as having high productivity, certainly if you look at France, they have high productivity, but they also have very high unemployment. We've got a different mix, and growing productivity fast has lots of good effects, but it can also have some negative effects for some people. The George Osborne set a target of £1 trillion of exports by 2020. If you look at the item forecasts, we think probably with the exchange rate boost, you may get to £700 billion by that time, so the UK is going to be some way off. There are several item club reports. We've done special reports on exports, and the conclusion is not particularly startling, but that you need to be selling the things that the fastest growing markets want to buy to actually really improve your export performance. I think that we've talked about very much on helping exporters' access markets, but there needs to be much more on the supply side of the economy around investment, both in the infrastructure to enable exporting generally, but the skills and the sort of push into the right sectors. I'm not sure that the UK as a whole has really ever had an integrated plan that would make that happen, so all of these targets are always going to be challenging unless there is much more push behind them. Thank you very much for coming along today. It's been a fascinating session. I've certainly learned a lot from that process. We've got HMRC next week, so I think you've probably teed quite a few questions up for us in terms of your responses today. Thank you very much, I now close this session of the committee.