 Good morning, everyone, and welcome to the 22nd meeting of the Economy, Jobs and Fair Work Committee. May I remind everyone to turn any electrical devices they have to silent, or else turn them off, please? I have apologies from committee member Gordon MacDonald. At this stage, I'll invite our new member of committee, Jamie Halcro Johnston, to give a declaration of interest. Thank you very much. I refer members to my stated printed declaration of interest. Also, just to note that I'm a partner in the family farming business of Jamie Halcro Johnston and Sons. I'm also, at the moment, a shareholder in campaign house, which is currently being round up, and will probably be completed by the end of this month. Thank you. There's a decision on taking business in private. This is item 2 on the agenda. Is the committee content to take items 4 and 5 in private? Thank you. Now, may I welcome our witnesses this morning to looking from my left? We have Sandra Dunbar, who is the head of business improvement and internal audit, Highlands and Islands Enterprise, and from my right, Charlotte Wright, who is the chief executive. Welcome to both of you this morning, and we'll move into our evidence session. Members may ask to keep their questions short, sharp and to the point, and our two witnesses don't need to feel they must answer every question that is put to them, but to see who is the best place to answer these. Also, if there is anything that you feel would benefit from a follow-up written explanation, then that is an option open to you, and the committee would invite you to do that if you feel appropriate. The first question I would like to ask, and that is about this committee's scrutiny of performance and spending. What I want to ask is, would it not be more meaningful, from our point of view, if annual reports could be published earlier by yourselves? The question is, what stops the agencies from publishing their annual reports in, say, late August or early September? Why can these not be published sooner to give this committee more opportunity to look at them? Thank you for that question, and I think getting the cycle of that right does absolutely sound like a sensible suggestion. So, in terms of our own process of audit and preparation, it has generally been mid-September that our accounts are completed. We have had our audit opinion, but we haven't yet had the accounts laid before Parliament, hence the slight delay for us here. So, we can certainly take that away, convener, and see if there's something we can do to align our process working with Audit Scotland more closely with your own timetable. Actually, we now understand how that is going to work for you in terms of timing. I had had an additional question as well, as we had received some budget scrutiny from the Rural Economy and Connectivity Committee. So, I think we've had it confirmed that our budget scrutiny will be through yourselves, so that's good to know exactly which committee will be reporting that to. So, we'll take that on board, but Sandra, who's close to the process, might want to add something. Yes, well, I think we would look, and we are looking with Audit Scotland to try and accelerate as much as we can our accounts audit process, and I think we've been challenged to get that completed prior to the end of August. But we do try and issue some of our performance information as close to the year end as possible. So, aligned with our financial information, our performance information does get issued more timmiously, but we're happy to speak to Audit Scotland and our sponsor team about how we might accelerate. You say more timmiously when exactly is that? I think in terms of Audit Scotland, in terms of the annual performance information. Well, I was just referring back to what you had said about information that is published sooner than the annual report. You could report on our performance outturns in May of this year, so that's the actual achievements in terms of job numbers and turnover. So, that was reported in May this year. And that's what you were referring to, wasn't it? Yes, our operating performance, albeit it doesn't have our financial performance, because that depends on Audit Scotland concluding their audit of the accounts. Perhaps that you could follow up that answer in writing to the committee just to confirm the approach that you'll adopt on this issue. Thank you. I'll now turn to Jamie Halcro Johnston, who has some questions. Thank you very much. The Enterprise and Skills Review aims to develop a set of shared outcomes and better collaboration on intelligence between agencies. I was just wondering what evidence there is that agencies are beginning to agree on shared outcome targets. So, a couple of things maybe I could address there. So, firstly, we do make sure that the outcomes that we have and are reporting on at the moment do map on to the national performance outcomes. So, it's important that we make that connection between what we do and national performance outcomes. In terms of the work that is still progressing with the new strategic board, and a lot of this is being supported through Scottish Government and their proposed new analytic unit, which will be headed up by Gary Gillespie, chief economist, is looking at what the key indicators we need to track amongst the four agencies and business representatives who will make up that strategic board, which will really focus on the matters that issue there, which are about productivity, is the headline thing that we want to focus in on. What I'm really keen from a Highlands and Islands perspective is also to make sure that some of the activity outcomes and measures that are important to us, particularly our community work, are reflected in that whole basket of measures, so that the top-line strategic progress towards improving Scotland's place in terms of productivity is clearly the main focus at that strategic board level. We do need to ensure from Highlands point of view that the things that are part of our remit, particularly supporting communities, supporting social enterprises, play their part, probably around about the inclusive growth pillar within the economic strategy. In terms of that, you asked about evidence of that alignment, and certainly we work very closely with our colleagues here in Scottish Enterprise in terms of our reporting and, indeed, in areas like internationalisation, SDI does work with us and supports and contributes to our outcomes on international trade, exporting and inward investment. Okay. One of the things you mentioned there was the analytical unit and the new analytical unit. I was just wondering how you see that working, because I know it's been proposed by the Enterprise and Skills Review. I think we see this as a really good opportunity to bring together the work of the agencies but also to put that context on it in terms of those really important indicators. Some of the work that we've seen coming out of that today through the early stages of the shadow strategic board that's operating really show that that move towards the join-up is in place. I think it really offers an opportunity for us and certainly our own economics team to participate in that. Gary Glesby has indicated that they look for that kind of support from the relevant agencies so that we can work together in setting out what those new indicators are, how we track that performance and how, indeed, we report it through to the strategic board and also to our wider constituencies of interests, because, ultimately, what matters there is how we're judged by the communities and businesses we serve. When do you think you might be able to start reporting back on that? To start reporting back on that. Some of them will be long-term measures, but I guess some of those questions are perhaps better for Scottish Government. Richard Leonard. Thanks, convener. Could I take you back to some of the things that you've just been speaking about? In particular, the different presentation compared to Scottish Enterprise of your spending plans. First of all, could I just ask you to elaborate why you have got things like supporting businesses and social enterprise, strengthening communities, developing growth sectors and competitive region, which are quite distinctive areas and priorities compared to the overall Government economic strategy and the Scottish Enterprise assembly of targets. Those four priorities are the priorities that High has used for around about six years. However, hopefully, we made it clear in our submission if not we can provide some further information on how those four priorities actually contribute to the four eyes within the Government's economic strategy. Indeed, a number of them contribute to more than one of those four eyes. From High's perspective as well, as I was just bringing out in that earlier answer, the priority of strengthening communities is obviously a key foundation of what Highlands and Islands Enterprise does. It remains important to us that that comes across strongly in what we do and how we report. Given the outcomes of the Enterprise and Skills review and the comments that we received back about Highlands and Islands Enterprise and also the proposals for the new south of Scotland agency who are very interested in what we've done to strengthen communities remit, it is really important that that stands there as a key part of our activities. I mean, I really do understand your point in how we make sure that that maps back to the Government's economic strategy and how we can demonstrate that. If we take something like inclusive growth, there is a substantial amount of our activity and our strengthening communities measure particularly around place and productivity and people that contribute to the inclusive growth measure. However, there is activity that we do in relation to the competitive region and I'm thinking about our major investment in broadband which we'd also see as part of our inclusive growth approach because that's enabling people to access opportunities through the provision of broadband. So that mapping is there and if that hasn't come across clearly from our submission we can certainly provide more information on that for you. But could I follow up just by asking what assurances you have received either from the Cabinet Secretary or from the new chair of the strategic board that you will continue to work to those priorities rather than ones that might be centrally imposed by the strategic board? So the important context for us is the Government's economic strategy and it's my job and the role of our organisation to make sure that we perform and deliver to the Government's economic strategy. Those four priorities are our interpretation of how we can best present that economic strategy within our region taking account of the things that are important to us. So in terms of your questions about assurances so I suppose we have had that in relation to the confirmation of the continuing role and remit of Highlands Islands Enterprise as an outcome of that review. I haven't yet had an opportunity to speak to the newly appointed chair of the strategic board but I hope to do so fairly soon. So do you think you've won that argument or is it a continuing battle that you may have to fight? So I think we've had the confirmation both for us and for the communities and stakeholders that supported us during the review process that Highlands and Islands Enterprise remains with its board and its remit. So yes, I take that as absolute confirmation and affirmation of the role that we do and the way that we do it. Thanks, convener. I'm looking particularly at the... well, a table that we've got headed up Highlands and Islands Enterprise income sources, 1617 and 1718 which I think comes from the high operating plan and particularly the receipts. I mean, in one sense they're not huge figures but the capital receipts, 1617, 3.1 million down to 2 million and revenue receipts, 4.2 million down to 3.2 million. I'm not sure if they're kind of related to each other so could you just maybe give us a little background as to why these figures are down? Okay, so just to clarify, you're comparing our operating plan budget figures for 1617 with our budget plan figures for 1718. Yes. I should just make it clear if that's okay our director of finance wasn't able to join us as he had a cycling accident and is still in hospital with a punctured lung. Sandra has joined us with not loads of time to prepare but I'm sure we can answer the majority of your financial questions. Problem with that, the convener would be happy for you to write to the committee with more detail afterwards but see how we get on. That's fine. On that particular one you're right to make the relationship between capital receipts and the revenue receipts expectations. In terms of capital receipts the reduction between the operating plan budget for 1617 and the expectations for 1718 as a result of the fact that our capital receipts are purely or largely linked to our property portfolio and as our property portfolio has reduced over time because we've taken advantage of closing of some attractive properties over the years to increase our income our potential for further capital receipts has reduced and also as our portfolio has changed over time, the revenue by way of rental receipts has reduced over time as well so that those factors are purely related to our property portfolio and our investment portfolio that we hold in terms of property. Can you give us any indication of how much land you still hold or properties you still hold? Yes, in terms of our accounts currently we hold, I can just find a figure for you we have a net present value property portfolio of £41 million as at the end of March just past March 17. Is it part of your thinking that you know you would buy up land or properties maybe that weren't in great condition invest in them a bit and then sell them on again? No, our property portfolio is really a significant tool for us in terms of our economic development offering that we can provide to clients. Generally what we do is build property where we think there's an economic opportunity that might flow from that so we provide start-up facilities or in our Inverness campus for example some life science provision that can be accessible to life science clients and it's a really attractive investment opportunity or it's part of the package that we can offer as part of our investment attractiveness. Would you expect then to sell these at a profit or because you're attracting business that's not your top priority? Our top priority is to have our property portfolio available as a tool that we can offer to incentivise either an Inverness investment or Indigenous business to enable them to grow. If we have an opportunity to dispose, we would dispose at market value. I'm just going to add to that. There is a mix so sometimes all we need to do is acquire the land and service the land and then the private sector will come in and that would be our preferred option so it really depends on what the market conditions are and the markets operate across the highlands and islands can be different. For example, there is quite a considerable need for land and industrial premises in Elgin in Murray and our approach to that has actually been to support a private investor directly so that we are giving finance to that developer for them to take forward the development. If we can stimulate the private sector that's really the first route to do it where that can't happen or won't happen, we will go as far as building the buildings and fitting them out. That's great. Thanks so much. Gil Paterson. Just to the back of that question I noticed the biggest investment in the Highlands and Islands is the smelter plant in Fort William but there's an associated spending with regards to affordable housing. I think it's on the brownfield side to assist workers coming into the area. Is that part of this programming that you're talking about? Were you involved in that or the discussions or the assessments in any way? Yes, so the proposals by Liberty, the GFG group who now own the Lacabre smelter and associated to estates which is a very significant land holding across the West Highlands is a major industrial opportunity, probably the biggest opportunity for generations within the Highlands and Islands and you're absolutely right that the key constraining factor for those development opportunities is actually about attracting the talent and the workforce and to do that to provide the affordable housing. So there is actually a really good coordinated response in place to that development opportunity with colleagues from Scottish Government including housing and also Transport Scotland because there are major transport constraints on that part of the A82 as well and also in terms of skills development. So it's actually a really significant programme of activity that we're taking forward but you did absolutely put your finger on it in that affordable housing is already a problem in that area and is a concern to the local community who are very encouraged by the smelter having a great future now compared to the potential threat to it previously but are concerned about how the local community can respond to that opportunity and that the pressure on housing and transport is particularly acute. OK, thanks a lot. A follow-up from Dean Lockhart. This is another question on the budget process. Given that you get on an annual basis less than a year's notice of government allocation to you probably less than a year how does this enable you to plan for the long term? How does this enable you to plan three years in advance for example when you don't know what budget level is coming down the pipeline because it changes on an annual basis? For example, I see that spending on growth sectors was down 13 per cent last year. Does this budget process have an adverse impact on your ability to plan? There are a couple of mechanisms that we use within that planning process at the moment and I suppose to agree having been accustomed to that as the pattern of how we know about our budgets that we have developed tools of working around about that. One of the key things that we do is I suppose to prioritise the work with businesses and communities. We can do that at our own hands such as some of the property stuff that we've just talked about and if need be we can either accelerate or delay that so that acts as a break or not on how we use our budget depending on what's happening with business demand in the community as well. Additionally, we've discussed this with Audit Scotland in terms of the accounts process this year on that. Right, but I guess any reduction in budget would mean you have to prioritise certain projects which have been pre-baked into the pipeline, which on the downside some projects will have to be de-prioritised, in other words, not go ahead. So the prioritisation is a really important part of the process and again we have tools and techniques that we use for prioritising our approach and also about how we're making sure that we're looking through, we have an investment strategy approach so that we're making sure that we're using that investment strategy to target potentially other sources of income rather than using our grant and aid which can support the delivery of a project or ensuring that we use our own resources in the most effective way through whether it's grant or using it as loan or other ways of using that finance to lever the most out of it so that there are a number of ways that we can both prioritise the use of our money as well as prioritise which of the projects is the most important. We do have a saying in Highlands and Islands Enterprise that no good project will go unfunded. So if tomorrow something lands in my lap that wasn't expecting, which is a fantastic project, we will ensure that we review our prioritisation to make sure that that would happen. Sandra's team is quite close to that process, she might want to add something. Yes, we've got, as Sharon says, we've got a number of tools and techniques that we use including consideration of opportunity cost so that we can look at competing opportunities and the ability to flex between our own hand activity and our more direct assistance to businesses, communities and social enterprises is quite a powerful tool that we have and also our ability to be quite focused in terms of particularly accessing European funding and the opportunities that that supports us to drive some of our key priorities. So we're quite targeted in terms of our priorities and where we might source other sources of income to leverage against our grant need allocation. Just one final supplement if I may, can you provide me with an update on High's involvement under the financing companies under the Scottish growth scheme? Have you had discussions with business under your coverage area with regard to receiving funding under the growth scheme? Yes, we haven't had any to date through that. That's right, Sandra. That's no applications? Well, we've dealt with business demand through our own grant and aid and budgets. We haven't accessed the growth fund. Right, but as far as you are aware is funding available under the growth scheme too high? Sorry, we perhaps need to have information for you on that. Andy Wightman Thank you, convener. In a news release in May you indicated that you'd met or exceeded all of your targets in 2016-17. I note that in your operating plan for 2017-18 your targets remain much the same. Are you being ambitious enough in terms of the support that you provide and the outcomes you are seeking to achieve? Well, I'm going to answer that question by saying yes, because we are an ambitious organisation and we consider very carefully when setting those targets whether they are stretching enough. Indeed, what we did do was increase the job numbers in our fragile area so whilst the headline job target number has remained the same we are keen to make sure that the proportion of those jobs in our fragile areas is increased because that's an important focus. We've also introduced an additional measure this year so that we are tracking the average wage of the jobs that we support and that's important for a couple of reasons obviously making sure that we have a handle on what those wages are of jobs that we're supporting is important. All tracking that really is a proxy I suppose to productivity in that pushing wages up also encourages productivity overall. Specifically on that new target about average salary what are you intending to do to try and meet that target? I will say that that does present some challenges in some sectors because obviously you'll be aware really a difference between some of the higher paying sectors which influence that average number such as life sciences sector or technology advanced engineering where they tend to be high wage rates the most significant sectors in the highlands and islands are both tourism and food and drink where traditionally they are at the lower end of that wage level so we're working particularly with the food and drink industry and technology, product development and activity that will actually increase that productivity measure and therefore enable businesses to push up wage rates. This average salary for jobs supported as I understand it is calculated by totaling the earnings from jobs created or retained by high support divided by the total number of FTEs supported. It's not an average salary across so presumably that's easily manipulated by choosing who you will support. Our view on that is what we're focusing in on and we do this across our measures is that our target measures and our performance is directly attributed to the support that we provide. I mean we do track the average wages across the highlands and islands as well so when we report to our board we also have a tracking measure of average wages across indeed a sub regional level within the highlands and islands so it is important to us that we're seeing what's happening in the economy as a whole but our focus in how we target our resource is that we make sure that we can define the attribution between our support and what the outcome of that is i.e. hopefully those higher wages and target it that way specifically but we do track in terms of those economic indicators across the region what is happening with average wage across the peace and it does vary and there are places where that average wage is much below the national average wage and that's something we're very conscious of. Given that your job supported target for example is 1688 and the number of jobs in the highlands and islands I don't know how many it is but it's vastly more than that. I mean would it not be more appropriate to target your support at making sure that average wages right across the region increase? I suppose that's just about making sure that we make the best use of our resources so the leverage there we can make sure that where we're supporting an element of business that drives the job and just to pick up the number that you quoted there was actually our out turn for 1617 in terms of job supported rather than the target number. On a broader point and this is a general point for enterprise agencies obviously hounds an enterprise in its predecessor the highland board have been in existence now for over 50 years and achieved quite a bit but how confident are you that the work you do, the interventions you make are actually delivering the kinds of outcomes you seek in other words if high didn't exist what's the counterfactual in relationship to economic performance across the high region? Right so that's a big question so the good thing I guess about HIE and HIDB having been around for a long time that we have been able to track some of those longer term indicators and indeed our review is that some of those bold strategic decisions are really long term in terms of their game and the key headline figure that we would also always mention when asked about what difference have we made in this time the biggest impact is on the population of the highlands and islands so as you'll know in the 1960s people were leaving the highlands and islands in absolute droves and there was a real issue in terms of that population and I'm not sure that HIE can claim all of that success of the region but we do see that we have had a significant role in that and we do have evaluation and figures which support that population in the highlands and islands is rising not everywhere in our some areas that continue to give us concern and it's currently around 470,000 more importantly we undertake an attitude survey with young people and that last survey indicated a really significant difference in the attitudes of young people to the region whereas in previous surveys they had seen a lack of opportunity and I suppose demonstrated a lack of commitment to the region there is a real strong turnaround in people feeling both privileged and committed to the region but also seeing opportunities and also being keener to stay in the region and for us those are really long-term indicators of a region that has changed other big factors clearly the growth of Inverness as a city has made a big difference to the region and its growth has been considerable even over the last two decades if not going back as far as that 50 years so we do have some really long-term indicators and evaluation which would demonstrate that progress of the region and Hyde's role in it as well as some short-term studies as well so if there's anything that would be helpful to give you more detail I'm happy to share that with you Okay thank you one final question which is specifically related to developments in Cairn Gorm there's widespread concern by local businesses and communities about the management of the Cairn Gorm estate and the lease to natural retreats that's been brought into focus recently by demolition of the ski uplift facilities local businesses and communities have formed a campaign to take over the management of that estate you'll be aware of this controversy and I'm wondering whether you would consider reviewing this lease in the future of this area given the amount of concern there is about what's going on so I take very seriously the current issues that I've heard from a variety of groups within the community and wider stakeholders around about Cairn Gorm it's a really special place as you know and as guardians of that estate we have an interesting set of responsibilities around the environment and the particular set of designations that Cairn Gorm has about the ski area and our obligations around running the ski area and supporting that to a lease with the operator natural retreats some of those things are in conflict for some of our stakeholders so we have a number of people who will write to me regularly who are concerned about environment and a number of correspondents who will write to me regularly about skiing and we do need to ensure that we get the balance right between those two things in relation to the specific taking down of equipment in the ski area that equipment hadn't been used for over ten years and was beyond the state of being able to be reused and it's actually better for the environment that we took that equipment away in terms of the future of skiing on Cairn Gorm we are undertaking an uplift review to see what is the best most optimum ski uplift that we can have on the mountain and the potential future of further skiing in the keyst area which can also be accessed by surface lift and I do understand that parts of the community are really unhappy about what they're seeing and we need to be able to manage and balance that ultimately what is really important to us is that the operator natural retreats who are on 25-year lease and they're only a few years into that have a viable business or year round to be able to maintain skiing skiing is very important to the winter trade for the stress bay area and businesses quite rightly are concerned that that continues to be a successful ski area which draws people there in the winter there are challenges in terms of snow for all of the ski areas and we are looking across all of the ski centres to look at other options including potential of snow making facilities both at Kengorm and the other centres are interested in that as well we're working through our community assets team to support the community group who are expressed an interest in taking over the keyst area of the mountain and we will support them as we would any other community group to understand what the opportunity and challenge might be for them to take that forward whilst we also maintain our role as landlord and a landlord to natural retreats ski operator that's an important relationship for us too so and I understand that that's quite a balance of things to be able to manage Thank you Just on that last point what exactly has been done to redevelop infrastructure at the Kengorm? So maybe just to give a little bit of background if community members are not aware so that as the owners of Kengorm Mountain Highlandslands Enterprise undertook a full procurement process to find a new operator for the ski facilities we actually ran the ski company for a few years after the failure of the company that was operating it clearly and there were experts in running a ski resort so we wanted to get in an operator who could run that. As part of that procurement process what came out of that procurement process was the requirement for some investment in facilities in Kengorm that we would offer a £4 million loan for and that natural retreats have some plans which I think have been quite publicly to upgrade facilities in the restaurant put in place an artificial ski slope. These things are currently going through the planning process so they'll be the main investments in the ski area. Thank you. Ann Gil-Paterson In the answer to Dean Lockhart I just wondered if you could ask you the reasons for the reduction in 13% in the developing growth sector's budget over the last year and what impact that's actually had. Sorry, apologies for my delay in responding to that. That is a relation to development at the European Marine Energy Centre in Orkney where what we'd budgeted for was less than they were able to spend in that year. We then used the money from growth sectors and put that into other parts of the business so that we did spend the grant and aid budget overall. So there was a surplus by this, is that right? No so it wasn't required in the place where we'd originally budgeted for which was for development at the European Marine Energy Centre in Orkney so we used that elsewhere in our grant and aid spend. Sorry to just don't understand what was the reasoning for not using it did something happen? Occasionally when there's a large project that spend can be slower than anticipated by the applicant and that was the case here. John Mason again. Was to build a bit on some of the things Andy Wightman was asking about the 25,000, the new measure that you have for average salaries can you just explain a little bit more why that particular figure was chosen rather than, it was a round figure I suppose, rather than 20 or 30 or 26 or 27 or anything else and presumably there could have been other measures that you chose. Can you just explain again why you chose that one? The choice of tracking and measure itself in terms of average wage for our jobs supported was as I say to give us a form of proxy for productivity so that where we can see wage rises across activity then that indicates a move towards productivity overall. The choice of the number was to give us something which actually is a target for the region so 25,000 is above the average wage in the region at the moment so that that is a significant challenge to see that happen particularly as I was mentioning sectors like food and drink and tourism are so significant in the highlands and islands and their wage rates are lower and we have seen that to date in tracking the performance so far this year that we have seen some jobs supported coming in at significantly higher than that and there is a concern still for us which we are monitoring that some are coming in lower than that so the average is the target but we are also making sure that we are understanding what the range is across there in terms of jobs supported. In asking such a question that when it is foreign companies investing that they do pay higher wages but also they take more of the profit out of Scotland is that a factor or is that not something you are really looking at? Probably the biggest factor is actually the sector there so that I mentioned earlier sectors like life sciences or technology led sectors tend to have higher wage rates so within the highlands and islands to take an example LifeScan Scotland which is a Johnson & Johnson company who we supported during last year their wage rates are higher yes they are an American company in terms of the jobs that they have created the innovation and actually the support that they have given to the community through their corporate social responsibility has been quite significant we've also seen spin out companies coming out of Johnson & Johnson with people who have left there and started up other companies so overall and I think there is evidence there that strongly supports this that international companies who innovate and export actually make a very strong impact in both economic and social terms and would the range of wages be important? Say one company had I was trying to work out some figures quickly they paid one person 100,000 and then 15 people 20,000 and another company paid all 16 25,000 so the average would be the same is that a factor for you that was a bigger spread or? I think you're right and that is something that we look at so when we're supporting jobs we will get that breakdown of the full range of jobs that we're supporting in the wage levels because obviously that supports us to work out that average number and ideally we would want to see all wages hitting that threshold that we've set you do get both scenarios that you've described to be honest but we may have something where there is management level jobs which are perhaps attracting those more significant figures and then other jobs much at the lower end so sometimes there is a big range and sometimes they are tighter together it really depends on the business the scale of the business and the sector that they are in so there are a number of examples at both ends of the scale that you've illustrated there we've looked at the gender pay gap previously but is that an issue? We know that you've expressed interest in this in the past from this committee and we've submitted information to you that we are tracking that tracking also the gender bias in relation to both ownership and senior management roles across businesses and social enterprises where there is a difference we do find the Scottish Government when they were responding to our gender pay gap report talked about your business values ladder and they said enables HIE to measure the extent to which both account managed and non-account managed businesses and social enterprises demonstrate innovative workplace practices which reflect the Scottish business pledge elements could you tell us a little about this business values ladder? We've taken this approach in various areas we now have five ladders of progression and business values as one of the ones that we've introduced recently so that's really helpful with the ladder I'll have between five and seven rungs on it which will enable us to plot through our account managed or supported companies where they are in terms of that ladder of progression so whether there are early stages in relation to the kind of indicators that would support business values they're an absolute exemplar and what that enables us to do then is target our assistance particularly to ensure that movement of the ladder and progress that that way so we also use those ladders in innovation internationalisation and community capacity as well as we found them to add a qualitative aspect to our measurement framework That's great, thanks so much Richard Leonard It's a very quick supplementary Do you look at the wage ratio inside the companies that you're working with and that are receiving investment and other forms of support which reflects John Mason's point about the very top who earns 15 times more than the person at the lowest pay grade Do you look at that ratio is my first question The other quick supplementary you mentioned about ownership Do you discern any difference in things like equality of wage ratios in companies which are in the social economy maybe employee owned which I know you've been doing quite a bit of work on recently In relation to the ratio high to low we do track and what we're capturing is the wage rates of the jobs that we support so that can vary so if it's an extension to a manufacturing and production facility there may be a mix of jobs there so some of them might be hands on manufacturing an element of the management so it might not give the full answer to your question I suppose that's what I'm saying there that we might have the full picture for the full organisation same answer to the earlier question really that it will vary from business to business whether that's a significant ratio if it's a high volume, low value manufacturing process and you're probably going to see lower wage rates on the processing floor if you took something like saline processing for example with managerial jobs gulf there between both ends of the wage spectrum in some types of employment so where we can work with businesses to support movement and progression then that's absolutely what we will do and by tracking that we are trying to use our powers and our resourcing to leverage that as much as we can and introducing this new measure and perhaps it would be good to talk to you at the end of the year about that, the outcome of this is and see how successful this has been as a tracking measure for us that would be useful to come back and discuss that in more detail and I think the second part of your question was are the wage rates different within social enterprise and business and the answer is certainly within social enterprise and business there does tend to be a difference and usually in social enterprise those wage rates are going to be lower there tends to be less of the scale that we spoke about earlier in terms of high wages at the top and lower wages at the bottom I am making some generalisations here and just an employee ownership that can vary so there are some stand out employee ownership companies in the Highlands and Islands if you take something like Aquascott then they've got some fantastic wage rates within the company there thank you what from Jamie Halcro Johnston it's just on inclusive growth January actually I'm just wondering how you feel whether you can deliver that consistently across all the parts of the Highlands and Islands what might be whether there are areas that you've identified would be harder to deliver that and what the barriers might be to that your question goes to the heart of what we do in Highlands and Islands enterprise cos that's a really important fact to us and when we look at the economy of the Highlands and Islands we actually look at it as a set of smaller economies which operate, they do operate quite differently you know that from your own experience in Orkney it is different to mainland Scotland absolutely so we do need to make sure that we look at both the opportunities and the challenge our approach is about place based and capitalise on natural assets where they exist so the Orkney examples will be well known to you where work around the European Marine Energy Centre what's happened in in energy as a whole there is really significant and has actually pushed up wage rates bought international companies to Orkney there are also other aspects which are really successful and more indigenous growth through things like the jewellery sector which has established a great reputation for Orkney and also food and drink where we've seen things like crab very successful if you take somewhere like Western Isles there are still some difficulties and challenges in making sure that we see that inclusive growth happening right across the island chain because in a microcosm they have the challenge of a lot of jobs activity and people being pulled up to stone away we make sure we have an office in Benbecula and we support with give priority to supporting things in Barrow in the Uist where that is a more challenging opportunity so seeing the developments often led by the community like the Lock Boysdale development so 10 million pounds regeneration port of entry made a significant difference to the area Can I also just another pan regional organisation Highlands and Islands Enterprise how close do you work with them bringing younger people into the Highlands and Islands to study retaining younger people into their working lives and also helping I suppose to develop entrepreneurship and businesses and providing support like that The University of the Highlands and Islands is a critical partner for us and I think we see the progress is very much interlinked with theirs and before the UHI was a university if you'd asked we would have said that was the number one priority for the Highlands and Islands to ensure that that institution received university status because it's made a significant difference and its distributed model of using the colleges across the Highlands and Islands is absolutely right so there are still some things that are developing for the University of the Highlands and Islands and entrepreneurship is an area where we work with them but we also bring in world leaders such as MIT and Harvard to stimulate what we're doing and entrepreneurship and we are working with other universities we're delighted that we've got a campus of Glasgow School of Art in near forests for example so the University of the Highlands and Islands is the key regional university but where we can bring others in who can add value to UHI or bring something particular and again back to Orkney Harriet Watt have been in Stromnes for over 25 years obviously for a particular reason as well and very successful and we are now working with Orkney Isles Council through a joint venture to develop a new campus in Stromnes which will maximise that presence there for Harriet Watt and Robert Gordon are also interested in becoming part of that too UHI is critical but it's not the only route and where would you see the skills gaps for the Highlands and Islands at the moment and how can they be addressed so not only are there skills gaps but there's actually a people gap as well and when we meet with businesses and are as part of our board activities we'll have business breakfasts and engagements with businesses this will always be one of the top issues is actually attracting and retaining both people and then people with the right skills if I was categorising them broadly there is a challenge around digital skills that's not just an issue for the Highlands and Islands it's one that's pretty wide and also in pathways such as engineering as that actually feeds into so many of our key sectors all right if there are no further questions from committee members I think Dean Lockhart has a brief follow up final question can I ask how you set your performance targets because I believe you've met your targets for this current year the ministerial letter of guidance which sets out the strategic priorities is more a summary of government policy it doesn't actually set out targets so can you talk us through how you set your targets involving the government as well as the agency itself yes so obviously looking at what we've done in the previous year isn't an important part of that and what we'd call our pipeline of what, because the activity doesn't just happen in year it's being planned often for a number of years so that we can get a realistic feel of what we're likely to achieve in terms of some of those key indicators like jobs, turnover and the communities that we're working with and then we will stretch that it's part of our process with our high board as well so that I'll take a draft plan to them and challenge us on that and encourage us also to be ambitious so it's a process which looks at what we've done in the past what we're expecting to happen what the economic challenges are and working with our high board and sponsor team colleagues to set that at the right place so that is challenging and ambitious and does the government challenge the targets as well as part of that process? they have done in the past but not every year on what we've submitted this year okay, thank you well, thank you very much to both of our witnesses and I will suspend the session for five minutes for our next panel of witnesses thank you again for coming in thank you welcome again to the economy jobs and fair work committee welcome to our two further witnesses from Scottish Enterprise first of all John Scott who is the chief financial officer and Linda Hannah is the managing director of strategy and sectors so thank you for coming in today and I'd like to start by asking a question about the annual reports that you issue and I think you were both in the last session when I asked this question and the question is would it not be possible to issue annual reports earlier for the purposes of this committee so that we would have more opportunity to look at them in the framework of the budgets don't know which of you wants to come in on that yes, convener it certainly would be possible to do that we aim every year to have our accounts signed off by our board towards the end of June sometimes early July within going to the holiday period available as soon as recess is over to lay in Parliament and then available to the committee thereafter so knowing the requirement for that would be happy to do that the annual accounts are obviously quite a technical document not the best way to describe what we actually do sometimes but happy to do that and to annotate them in any way the committee would want hopefully the information that we gave forward to SPICE and the analysis of that so far for today's meeting perhaps some infographics would assist in making them attractive Jackie Baillie has a follow-up to that question it's a very small one because I checked back, you did do that in June I think in 2015 July last year why not this year maybe have to check where we're getting those dates from Jackie because it's normally at the beginning of September the dates that I've got was for our 15-16 accounts were laid on the 7th of October the year before that was the 8th of September so I know it's always early September they're available earlier because that's the date under Lina Wilson's signature so the point you were making is they signed off at the start of the summer they should be able to be laid at the start of the new parliamentary term why weren't they done this year really just because historically we have gone for early September we thought that fits well with the normal process it's not something that we generally talk about at our budget scrutiny but I'm happy to do that in the future we can do that as you quite rightly point out they're signed generally at the end of June sorry end of June sorry this is early September so I'm curious as to why they're not here now for this year we worked with our sponsor team on the date of laying those in Parliament we weren't aware there was a requirement to put them lay them in Parliament for this committee I'm confirming I'm happy to do that in the future the timing hasn't worked for us in that this year so we'll move on just to the Enterprise and Skills review I think Jamie Halcro Johnston want to ask a question about this Enterprise and Skills review aims to develop a set of shared outcomes of better collaboration and intelligence between agencies what evidence is there that agencies are beginning to agree on a shared set of outcome targets so thank you very much for your question so over the summer the partners have been particularly working and Charlotte I talked about that in the previous session in the shadow board the implementation board that's been working with not just the agencies but with our partners and James of commerce, the FSB and others really to provide the kind of foundations for the new strategic board part of that has been looking at a new measurement framework but part of that has also been looking at a plan for the new strategic board and how that's going to help drive that collaboration and further alignment across the agencies so in terms of your question about what evidence we're seeing so we're seeing very clearly a coming together around some key collaborative actions that will be recommended to the strategic board where the agencies will begin to publish that, show the things that we're working on how that's going to drive improvements in the economy particularly around the drivers of productivity so we've already been working together in the enterprise and skills review talked quite a lot about things that we do together but this is about really big actions that we think that we could be doing even more of so for example the work that we're doing already around the manufacturing action plan which is in programme for government and has been for a number of years some further work around that some further work around SFC and SDS around the skills alignment process there's talk about how they would do that there's actions around what we're doing around innovation so there's things in there where we've worked together around either what's come out of the phase 2 review report or also things that we know are needed in terms of looking at the economy and all of that work, certainly over the summer has been very much working together, having conversations about what the economy needs having conversations about where we can take things forward and then setting that out also how do you see the analytical unit working as proposed by the Enterprise and Schools review so we're, as again Charlie talked about we're all very pleased about having an analytical unit to add to the resource that we've already got being able to make sure that we can draw together the evidence from a number of sources partly from Scottish Government themselves certainly from the agencies we all share that already but this I think will help us to bring that together and analyse that and provide input to the strategic board and certainly to really think about where is the economy now, where are the performance gaps that we know we have and really to doing a bit of a deep dive around what those gaps in performance at the economy level are what are some of the areas that would make a big difference and that should help drive the strategic board conversations about where choices could be made in the future about what's making a difference about where best practice could be and I also think that that unit gives an opportunity to go wider in terms of that conversation with others who are experts in that area potentially academics Fraser of Allander, other universities other kind of think tanks that I think could be looking at that so there's an opportunity to do some things differently that unit is still getting set up that's led by Scottish Government by Gary Gillespie so what we're looking to do is make sure that we support that to happen Scottish Enterprise will be providing until it's up and running some resource to support that work to be done that analysis that gets done about the economy what makes a difference in where we need to focus and then once it's up and running we'll be very closely working with them around looking at not just the kind of macroeconomic data but then looking at practically what would that mean we would need to do how does that link to industry and to partners and making sure that that's directly linked to pragmatically what needs to happen on the ground A question I have is about the grant and aid now you can supplement your grant and aid budget by I think sale of investments charging rents, disposing of assets etc the 2016 to 2017 year did you meet your target in terms of supplementing your grant and aid money or what did you do about that aspect of your portfolio I suppose we could call it I'm happy to answer that we were more successful than we expected on the investment disposals the market picked up early on in that year so I think against the 31 million we were expecting in 1617 we our year end out turn for that was about nearly 39 million pounds we weren't quite so successful on the ambitious target on the property sales that was the kind of highest target that I think we'd ever set the team at the 40 million pound level at the end of the year it was 26.3 was the income that we got in on property sales so overall our supplementary income came down last year so therefore we balanced the out turn at the reduced level Was there a reason for the property sales figure being that much lower it's quite a difference isn't it yeah to be honest 40 million was quite an unusual year normally it has been around about the 20 million pound level but there were two large properties that increased that I think we can explain some of that in the notes we didn't get quite as much in for those ones as we expected but we got in the market rate that was available for those so that screwed it for this particular year where we're setting ourselves ambitious targets for next year as well I think the target for 1718 is about 23 million on the property sales we believe we'll be able to achieve that that's probably the normal level that's more representative right thank you and now Gil Paterson I understood that you were setting a lower target for the coming 2017-18 made on the back of your disappointment with property sales is that not? I would probably call it a more realistic target we don't have those two large properties or large value properties even within the 23 there are a couple of properties in there I think one about 6 million one about 9 million that we need to achieve at that level to achieve the 23 but we believe we'll be able to do that I think we're currently our marketing we're marketing round about 36 million pounds worth of properties to try and achieve the 23 million in actual sales we think that's a more realistic reasonable target for this year so it's based on past experience yeah it's the experience of what properties we've got and the expectations of the state of the marketplace at any point in time it is an ambitious target the 23 and the team are working very very hard to get that this year okay well following on from that can you indicate the value of the existing property and the details and how much property has been sold off in the last decade or so I can certainly give you the value I think in a year end account it'll be somewhere in the region of 140 million pounds for our property portfolio over and above that we have the Glasgow sign centre in there as well which I think is about 45 50 million pounds but that way we can't sell that in the same way obviously as the rest of the portfolio so it's about 140 million on the physical assets we've got a portfolio of investments as well as the convener pointed out that's now around about 267 million pounds in value we try and maximise as much as we can the returns from that although all of those investments are co-investments with other parties and we are generally the smaller investor in those so therefore we don't have as much control over the timing of those asset sales and disposals this year we've seen so far albeit we're about 6.5 million of income already on that side the market is very much dried up in that and we'll struggle to achieve the target that we've set ourselves for that for this year Is part of that portfolio also the shared investments is that part of that property also? The 267 million is financial investments so it generally shares some loans in there as well one or two big one-off loans but generally it shares through the co-investment fund or our venture fund that's been built up over the last 13-15 years I think it is we've been investing and we now obviously want to see a return on that to be maximised as much as we can I think you asked a question about maybe the last 10 years of sales I don't have the exact figures in front of me I'm sure I could find those out I think it has peaked probably about the £20-25 million level I don't think it's ever been at that level for some time generally between 10 and 15 Could you maybe indicate that to us but maybe not just the last decade to give us a fuller picture maybe from devolution what the the kind of figures are gives you an indicating a weird reform Those figures are in our annual accounts and are fairly clear in there so I should be able to look back on those and get you as far back as our records have on that come Okay, thanks a lot Thank you and Ash Denham Good morning I'm interested to know what proportion of your total income would be coming from the EU at the moment Yep I think our plans for 17-18 we are looking at EU funds excluding the investment bank we're looking at about £6.7 million and the EU figure specifically it's I think it's maybe around about 10 I don't have that specific figure for EU funds it's included within the other figures that's got in front of me but the the fund that the government has created has got European money on the back of it so we get around about 40% of all the income for the the main co-investment funds money from the government as well so it's probably about 10 to 12 million on the investment side and we were aiming for 6.7 million on the non-Scots investment bank funding Are you able to put that into percentages for me just even if it's just an estimate? If you take that to be say 20 million would be about 8% for something like that I'll stop my head the apologies if my arithmetic is wrong even if we just use that as a ballpoint a ballpark figure rather 8% is fairly significant so I'm just interested in what sort of planning has been going on behind the scenes in order to replace this gap in the funding going forward if the UK does leave the EU To be honest the work that's being done at the moment to try and maximize the funds that have been made available to us we've been working with the EU team and the government to try and make sure that we get as much of that before we leave the EU I don't know what's going to happen after that clearly we would look forward to some view as to what other funding streams there may be available within the UK at that time but I don't know what that would be I think it's too early to say on that one yet first OK, so do you think that that planning has been taking forward but maybe you've not been included in that or do you think it just hasn't been done yet? I'm not aware of what has or hasn't happened on that the government would probably better to answer that one then OK, thank you Thank you, Dean Lockhart Thank you to our guests for being here this morning a couple of questions on the budget process total income available to Scottish Enterprise last year declined by around £50 million and over the last 10 years has declined from £600 million to £290 million Can you talk us through what has been the main adverse impact in terms of enterprise development in Scotland as a result of that budget? In other words what was Scottish Enterprise doing 10 years ago with double the amount of money which you can no longer do now with half the level of budget The main element of that is that Scottish Enterprise used to run the national training programmes and back in 2008 I think it was they were separated out to Skills Development Scotland so that took about half our budget out at that time so that's by far the major reason for the decrease Ever since then we've been operating at a gross expenditure level of around about £300 to £320 million The reduction in the last year has been because of the reduction in our expectations on the additional income from the point that was raised earlier on Those were very ambitious targets I think in 1617 we were looking at a total in our operating plan of 341 but that was a significant increase on the previous years so our core level of expenditure has been more in the 300 to 320 most years since the 2008 period Thank you for that You provided very helpful notes in terms of the line items and the explanation as to why There was some movement in the line items What has been the main areas that you've had to cut back in the last year in terms of has it been innovation investment inclusive growth Can you talk us through where over the last year or the year to come where most of the decline will feature in terms of spending I'll try and do that As you might have seen from the notes some areas of the reduction have actually been because certain schemes have actually come to an end so I think the water scheme was a big contributor to that reduction in there If anything, what we've seen is an increase and quite a sharp increase in the demand for R&D and innovation funding which we see as a real success for us Not that long ago I think we're spending £6 million more than £9 million a year that we're up at about £20 million £22 million this year So the additional funding that was announced just in the last few days the £45 million over three years that is very very heartening to see that because that will help us increase even more the funding going towards the innovation and R&D work which we see is absolutely key I think we'll be up at somewhere in the region of £38 million for our core R&D funding and maybe about £45 million in total for that The demand on the R&D side has clearly put pressure on other parts of our business and if anything just over the last year it's moving the direct investment side of things that has had more of a reduction in it as we've been funding companies more through R&D support as opposed to direct investment that was probably the biggest reduction last year Right, so that would be the equity investment and loans like an item £545 So what does that mean? If I'm a business in Scotland looking for enterprise support can you talk us through what that means in practice in terms of investment is increasing on the sort of R&D side research and development but it's falling away in equity investments and loans what does that mean in terms of the form of a systems available for business I don't know if you want to cover some of that No problem, so in terms of the work on businesses that hasn't changed at all so our approach very much is to understand what is their ambition, what's their growth plan what do we need to do and bring to the table that's going to help them to take that forward and to make sure that we really understand what we can do that's going to make a difference to that so what we'll look at is their investment plans we'll look at where they've already looked for funding around that we'll look at what's going to help the business grow over the long term so in terms of their cash flow and their revenue how much of that's an equity play that they need to have R&D or other type of grant support that would support a specific type of project to be taken forward so we look at that in the round that's very much our approach to how we do holistic business growth so we still do that we haven't seen that change at all and we certainly haven't seen any kind of shift in our ability to be able to respond to those companies' needs around those things it's always a blend and it's always about making sure that we understand that in the appraisal of those projects that we look at that in the round so we're looking at when we're doing an investment are they also looking at R&D support for us and equally when we appraise an R&D grant particularly large ones we'll think about so what's the capacity in the company their management team and their cash flow to be able to support this and to be able then to kind of access the things that go around that just looking at the numbers spending on equity and loans is down 30 million but R&D is up 6 million on the year so obviously it's not fully offset so there's a gap somewhere in terms of enterprise support is that mainly on equity investments and loans is that where the shortfall is that's where the majority of the shortfall from one plan to the other is concerned I think I mentioned earlier on that the 1617 plan was at the 341 level that was the highest most ambitious level of plan that we had because we didn't achieve the additional funding from other sources to that level our actual outturn will be again somewhere in the region of 310 million for that year so putting our plan together for this year we really just took those more realistic figures to put into our plan so there won't be as much a real reduction in support to companies just a reduction in our ambition really from the planning cycle just one final question is through the current status of any funding available under the growth scheme the Scottish growth scheme is funding available for companies who apply for help under the growth scheme and what form does it take I'll try and start on that Linda Linda may want to come in on that one our main involvement in the Scottish growth scheme is through the very sharply titled Scottish European Growth Co-investment programme which we launched in June this year that has that's a £200 million fund that is available now to companies I'm not close enough to know exactly where we are with any companies accessing those funds yet but that is now available as part of the Scottish growth scheme umbrella brand from the government just to add a little bit to that so Scottish investment bank is obviously very closely involved in that and the work that they're doing their networks all their kind of contacts in a European setting is to make sure that that kind of awareness of that fund is being raised with fund managers to make sure that people know what's there the kind of things that it would be targeting and about generating enquiries and then looking at what that's coming through so Sibs is very actively involved in that we would expect that pipeline to start coming through and then we can certainly at a later date come back and give an update to this committee just around how is that working is that fitting with what's already in the market are we seeing any kind of patterns around particular sectors or particular companies because part of this was about raising ambition and particularly with that kind of scale of fund I think it would be helpful that we kind of once we've got that maybe kind of share that with you okay thank you just to confirm the European Co-Investment Programme that's equity investment and it is run by the private equity firms it's not the investment decisions are not made by Scottish Enterprise but they are made by the private equity companies individual investment decisions are made by the co-investors on that and the funding support comes from us clearly the criteria around about the type of companies that would be invested and we had an input into but the actual deals will be brought forward by the partners of the European Investment Fund I should like to say as far as the budget side of things is concerned the funding for that the 10 million this year that we will spend on that is above the plan that was published at the beginning of the year because that funding wasn't available at that time so our plan would be increased by 10 million this year 20 million next year and 20 million the year after that Gillene sorry I was just going to add one thing just in terms of Veen's point about we pushed hard about the criteria for that fund and those funds coming into Scotland meeting Scotland requirements particularly that point about ambitious companies internationally focused we know that's going to grow the economy it being about SMEs so the EU definition of SMEs we made sure that it was about that and about making sure that the type of projects that we're going to support is going to absolutely be what Scotland needs sorry Gillene Martyn because I was going to ask about the criteria because as you'll know one of the criticisms has been that there seems to have been in terms of account managed companies Scottish Enterprise missing out on a lot of the SMEs can you maybe expand on the criteria there you haven't mentioned anything around inclusive growth or any you were here when HIE were here talking about what their criteria was for support so this new fund here given what Mr Lockhart just elucidated from you about how these companies are chosen is there any focus on not just things like growth and bottom line but work practices and inclusive growth so in I don't have any more in terms of the criteria itself but we can get back to you on that but particularly in terms of those companies that we would work with I would expect that the companies that come through that fund would be companies known obviously to Scottish Enterprise so the wider support that we would expect to give to companies and the conversations that we would have with them that we know help them to be successful we would then be having those conversations with those companies as well excuse me so that example we don't just look at equity if we're looking at R&D in this case we would be having conversations with the company about how are they going to reach that ambition, that international what's going on in the rest of the company what other things could we be doing to support their workplace practices and about their innovation so I would expect that that to be part of that wider conversation we would have with the companies and the investment process with them around playing for funds everyone I would like to know more about the criteria and if that could be given to the committee so that we could look at that I would be grateful I'm happy to ask our SIP colleagues to send you the detail criteria I do actually have a couple of notes in here that they'll maybe add to what Linda was saying certainly the criteria is about it must be a commercially viable business established based in Scotland with growth and international ambition but it must also meet the EU definition of an SME the lesson 250 employees annual turnover no more than 50 million so it's purely about SME support the gross scheme that we've got there there are some restricted sectors in there retail estate property development banking insurance that type of thing we won't be getting that so it's the essentially the productive companies that are in the SME band that will be eligible for that support that will send you more detail when you've got that Jackie Baillie Can I just touch on that before I move on to other questions about exporting the Scottish Growth Fund was announced in 2016 it was announced because we need to urgently grow the economy as a consequence of Brexit and nobody would disagree with that is it the case that actually not one single grant or loan or whatever has been made to any company or any project so far our element of that is that scheme I'm not aware of any have been made yet Jackie again I can confirm when I speak to the Scottish Investment Bank colleagues back in the office but we did launch that in April this year so as Linda said we're working with those co-investment partners to make sure they're aware of that so I'm not aware of any at this point in time I think we wanted to succeed so actually giving the money away would be quite a good thing well I've got 10 million pounds on my budgets to use for that this year so hopefully that will happen on to exporting can I just clarify first before I ask you questions the five lines under internationalisation does that equate to the budget for Scottish Development international it talks about international services and support market development international marketing and research overseas premises and facility management and then staffing it's a good proxy for that I wouldn't say that we don't have a Scottish Development international budget they use all of those budget lines but that is very much the area that they're in there may be other teams are involved in some of that maybe through the marketing side of things but that's a good proxy for that Jackie okay it's just that there's no marketing elsewhere so I'm just assuming that that's it so taking that as the assumption if that's effectively the budget your business plan for 2015-18 that was referred to last year when you were before the committee suggested you anticipated 42 million for 16-17 and 43 million for 17-18 now what we have before us is 39 million and 40 million that's a few million short of what you anticipated is that correct I trust the figures that you're quoting to me there I don't have the 15-18 plan I've got the 16-17 figure in front of me okay I was quoting from Lena Wilson last year I'll take that as a good source okay on that basis so that the budget is down yet this is an area which the Scottish government in their programme for government said quite clearly both in 2016 and 2017 mattered in 2016 they talked about an additional 3.5 million for new investment hubs in London, Dublin and Brussels that was announced in 2016 it's been re-announced in 2017 can you tell me what new money you actually received for this I think the majority of the money for the investment hubs has been dealt with directly by government unless Linda Cretzman that there may be an element that we've got through there the biggest element of additional money we've got an internationalisation is for the doubling of the staff resources in Europe that we are under way recruiting at the moment that's an extra 20 posts I don't know the specific figure on that that's going to be again additional to our 1718 published budget figure because that's come in since the budget was published as well so that will be over and above that and that is fully funded in addition by the government we've got a guarantee on that so that money will come through this year okay so 20 to 40 which was doubling announced in 2016 hasn't yet taken place you're anticipating it will be completed as an action in 1718 it will be completed in 1718 I think it's by December Paul Lewis our colleague was reporting to the board just at the tail end of last month so we're well under way on that within anticipation that will be complete by the end of this calendar year 2016 was advanced notice rather than a proper announcement of something that would happen in the year you'd probably describe that better than me I'll assert that the other element was six pilots for local and regional export partnerships that was announced in 2016 it was re-announced in 2017 are any of these live? this is in addition to the chamber of commerce stuff that is accounted for separately are you responsible for any of these local regional partnerships? so as through the enterprise and skills review part of the work has been looking obviously at regional partnerships and there's obviously been work on going around the work for the chambers that you mentioned so as far as I'm aware the work is still on going to set up those local pilot the pilot export partnerships but what we can do is get you details of that so as far as they are on going I don't know specifically which ones are up and running but we will get you details of that I wonder having many moons ago been in government I worry about the pace of implementation there's two major things that Scottish government say are important to them yet we're heading to 1718 and not one bit of it has been implemented so far can I go back on the hubs and maybe just give you a little bit of supplementary I'm coming to the hubs I'm coming to the hubs if I could and then you could possibly answer that we had an announcement of an investment hub in Paris which is great we've had previously London Dublin Brussels 3.5 million now we're getting Berlin Brussels and Paris are you getting additional money to do that sorry do you want to answer on funding yep I'm not aware of the specifics of additional funding for that as I said earlier I thought the hubs were led funding wise directly from the government if I can confirm that when I can check up I'm not aware of that check so the hubs are led by Scottish government and they're all very different not least because those markets and geographies that they're in are very different and therefore the engagement that Scotland needs to have in them are different so the Dublin one very much was based on the government presence that was out there and as part of the expansion of our EU staff in STI we'll be putting a member of staff into Dublin to make sure that we follow through on the trade and investment opportunities so that's kind of one model the London model was a very different model we already had an established STI within London given how important London is to investment coming into the UK and then up to Scotland so we've built on that so the new Scotland house that is now open there's been a number of events there we've got a number of companies signed up as members now to that new kind of membership scheme that we've got there so that's up and running and been working very well and has also been used as a hub for collaboration particularly with Bays and others so going back to your question earlier about EU funding we're pushing really hard right now around UK government sources and about the new industrial strategy and a new fund so we're spending more time if you like with colleagues in London just to make sure we join those things up as well the Brussels model Scotland Europe, Scotland house that we've had in Brussels for a very long time we've taken the opportunity to look at what that needs to look like going forward what types of innovation and investment opportunities is Scotland going to pursue post Brexit and clearly beyond the funding element there's a lot of the work that we do in Brussels that's about engaging with partners, stakeholders best practice so one of the big projects we've got in EU funding this year around subsea capability particularly around energy around the vanguard initiative so not structural funds but a kind of a partnership project that very much came out of the partnership work we've done in Brussels so we've been working with the government about refreshing and refocusing the Brussels Scotland house and again in terms of that funding model because I'm deeply involved in that Scottish Enterprise because Scotland Europe is a subsidiary of ours we're partly supporting that financially and the government's doing other parts of that clearly Berlin is getting up and running and Paris will be new so they're all quite different but they're all collaborative and very much Scottish government led hubs because they own and lead them and we've come to the table as have other agencies what's the part that we can bring both financially and in terms of the people resource and the connections that we'll need to make in market but also back in Scotland to make them work One final question if I may can I turn you to foreign direct investment because there have clearly been some positive news in that regard but I think last year I asked Lena Wilson and she talked about big and hairy targets which was very new to me I have to say but can I ask you about the jobs that have been created through foreign direct investment because we are entering the final year of your three year target base I think the figure you had was to achieve 22 to 28,000 planned jobs through inward investment the reality is you've achieved about 14,800 we know from the last two quarters that the trend now appears to be downwards in terms of job numbers how much will you miss that target by of 22 to 28,000 As reported to our board last month we're still on track to achieve that at least the bottom of the range on that target we're not planning to miss that so the third year that we're in at the moment we expect to be able to achieve that that's very interesting do you go back and check the number of jobs that are actually generated or is this just an estimate because the last quarter showed a quite severe decline in the number of jobs that were created as a result yeah well we certainly evaluate the work that we do across the whole range of our business certainly there has been evaluations on the SDI side and I'm sure that that would look at the actual jobs created compared to the forecasts that are obviously announced when the announcements are made could you share that with the committee that's great thank you very much Julian Martin follow on from Jackie Baillie's line the questioning around internationalisation is obviously a key priority for yourselves, a key priority for the government as well last year when Scottish Enterprise we came in to say as there was talk you were commissioning analytical research into the how your programmes to target internationalisation were actually working and how effective they were and I'm just wondering if you have got anything to tell us about any evaluation that you've done on these programmes and when that's going to be released on what it might include in terms of an analysis of your programmes so thank you the evaluation for SDI has been done this year so we're just finalising that at the moment so we would be planning as we do for all our evaluations to publish that we just push that out there in terms of evaluations online so that's still being concluded just in terms of the finalisation of the analysis of that and as soon as we've got that we'll publish it but we'll also make sure that we share the headlines of that with the committee I don't have a date I do know it's quite soon because we're very close to the very end of that and certainly what that is beginning so we've been looking at the economic impact that's in it but also just in terms of the lessons learned but it will be very soon but I'll confirm the date I know you're probably not able to tell us anything around the conclusions of it obviously you want to leave that to its publication but can I ask you about the methodology that you've used and how and I suppose that general wider question about how Scottish Enterprise you have made an intervention whether it's a business support intervention or a financial intervention into a company how you assess the effectiveness of your particular intervention in the success or otherwise of that company so we do two things so at an individual company we'll agree something with a company so say we're going to help them with an R&D piece of work and we agree that there'll be a set of metrics on the funding so that could be jobs, it could be a piece of technical work that needs to be done so certain milestones that go around that we might agree that they're going to be working with the wider supply chain in the local area or wider so we'll agree that it's appropriate to that company a set of things that are appropriate and then what we'll have is a set of criteria around the drawdown of our funds that they need to meet in terms of being able to do that and we'll discuss with the company going at the pace they thought it would what other mitigating factors are getting in the way of that, what else could we be doing so at that individual company level we set that out and we measure that over time and that we take a view on what difference that's making with that company and we get the feedback from the company as well more broadly what we'd also do is evaluations which you've picked up in terms of SDI we've moved away some time a goal from doing individual it's going to say kind of service evaluations, what we tend to do is look at because so many things are interrelated as we've already talked about this morning so what we tend to do is look at for example that kind of SDI internationalisation evaluation we'll do an evaluation of account managed companies where we've put a suite of interventions and talk about all the things we've done in those companies what difference has that made and we lasted an account management evaluation in about 2012, 2013 and we're due to repeat that later this year so that gives us a much broader view of a sample of those companies so we don't go and ask all the companies but we do have in terms of methodology a robust sample of the companies that we work with, we make sure that that is it's going to say sliced and diced by size of companies, by sector by the types of things we've had so we make sure that that is robust enough for us to be able to draw conclusions from that it's just a sample of companies you don't put all the data from all your interventions into the mix for for example you're coming up with a report like the one I mentioned in my first question we'll use the data that we've got but if we're going to speak to companies in terms of that customer feedback that will tend to be as a sample of that as opposed to if it was 2,000 companies or 500 companies so it's a combination of things that we would do to make sure that we take that assessment and coming back to the analysis that we talked about are you going to be breaking down that analysis into individual programmes for example the Scott exporter programme and all that in particular things where you've actually had a specific targeted programme in how those have worked and how successful they've been where that's possible to do that then yes because it might be that companies had Scott exporter and something else so where it's possible to draw that line around that particular programme we'll draw that out if that's not possible then we wouldn't be able to do that there's one final question which is where but my part of the world in Aberdeenshire in the north east where we have got very highly skilled businesses with a lot of skilled people but I wonder what you can tell me in terms of how you've been analysing what you've done to intervene to help them to diversify it into other areas oil and gas yes so the industry of task force obviously has been operating for some time and the work that we've been doing particularly has not just been about jobs it's also been looking at the industry overall the opportunities of the industry that we've got today and tomorrow so particularly looking at resilience so where can companies diversify particularly supply chain companies into other markets so renewables would be an opportunity around that subsea particularly we've been doing a lot around the subsea opportunity for Scotland we've published a subsea action plan we're working with subsea UK on that so Scotland's share of that right now so the global market is about 50 billion Scotland has 7 billion above our weight as a country as that market grows projected to be about 150 140, 150 billion globally if we grow with that Scotland could significantly take advantage of that so we've been working with supply chain in terms of the companies who could move into that we've been putting in place things like the hyperbaric centre and the centre for flow fluid mechanics and flow measurement down in East Kilbride as well as working with the underwater centre in Fort William industry has the opportunity to be underpinned by some capability and then working with individual companies on the things that they need to do around that we've obviously invested a lot more around R&D and innovation in oil and gas companies it was a big pillar within the oil and gas strategy that was published in 2016 about helping that kind of shift and we've been doing a lot about making sure that we've brought forward a lot of oil and gas support innovation support for oil and gas companies we've been kind of fruition of that so over 800 companies have been supported around that diversification and leadership in oil and gas specifically and particularly 15.9 million of our support has gone into those companies around innovation and some of that kind of R&D work so we can get you further details of that if you're interested because clearly what we are looking at is the work that we've done where is the oil and gas industry now what else could we be doing and what else do we need to start to do we get behind that? I'm really interested in the analysis that you're doing on how that support has been targeted and where it's been successful particularly along the smaller companies and supply chain that have been very badly hit and to be able to diversify so I would welcome more analysis on that and fed back to the committee Delighted to share that and we can share some company examples just in terms of I sit on something called our single approval group that R&D, the larger R&D grants come through and there's been a number of oil and gas companies that have come through particularly around R&D investments that they're making to move into new markets and partly around diversification within Scotland and the North Sea but also into new export markets so there's a raft of things that we can share with you that would be quite helpful Just before we potentially move off the international theme I think we can't let it go by without recognising the work of our SDI colleagues in securing the over 7,800 jobs this year from inward investment activity with I think over 2,300 of those being high value jobs and I'm sure you're all well aware of the Ermsen Young attractiveness survey that now shows that Scotland is not on the retain that's top position outside London for inward investment projects but we're actually number one in the country for R&D projects and that's gone a long way to the increase in the budget that we've had to put forward to R&D but that has gone a long way to securing inward investment and achieving those figures Jimi Halkwood-Johnson Yes, it was just on Scott exporter in your submission you said it supported 1,578 companies with 48 in the Highlands and Islands region just wondering why there's such a large difference between the overall total in the Highlands and Islands region I'm sorry I don't know too much of the detail of the Scott exporter programme and why that difference might be there I'm not aware whether or not there's any other programmes that Highlands and Islands potentially run on a similar vein or not I could certainly work with our colleagues in Highlands and Islands to see what the reason for that is, Jimi but I'm not aware of that John Mason Thanks, convener on to the area of inclusive growth I think you said Mr Scott you didn't have the table in front of you which I've got which is the 2015-18 measures but I can quote from it to start with there's a new measure which says engage and support 800 to 1,050 companies to develop approaches to fair and progressive workplace practices which I think didn't apply in 2015-16-17 but has now come in in 2017-18 Can you tell us a little about that and what it means? It's a new measure like Highlands and Islands Enterprise we're talking about a tracking measure when we introduce something particularly activity based we do that as a tracking measure over a period of time partly just to understand that and also make sure that we learn from that so as you say it's a new measure this back out in 2015 this was one of the areas that we felt and we've been sticking with that kind of plan the ambition that we had for three years but we felt this was something that we needed to make sure that we reflected this year was an additional measure to demonstrate the work that we're doing so particularly what that looks at is in the work that we're doing with companies what are we doing to help them consider the fair work agenda so particularly what are they doing within their workplace so workplace practices around teams work what they might be doing around using employee ownership models if that's appropriate to that company we'll look at how they're using young people particularly the ScotGrad scheme which we run across Scotland we'll talk to them about their approaches around diversity and gender within that we'll talk to them about the business pledge and the practices that are within the business pledge so that we've got a sense of where that company is going to be used so there's a range of things that we're measuring and tracking this year just in terms of the adoption of those things how that's been taken up by companies the early signs it won't be about impact but the early signs about what difference that's making in those companies and also we're also looking at that alongside the work that we're doing in sectors so particularly in high employing low productivity sectors tourism food and drink construction what we've been working with is the industry setting out how they would want to start to shift some of the workplace practices that they've got so for example yesterday I was at the launch of the new construction innovation factory down in Lanarkshire and that's a big part of the construction industry responding to what they need to be doing around better collaboration off-site manufacturing and R&D but also creating an image that's going to bring in a talent of the workforce in the future and about being able to demonstrate what those opportunities would look like so the industries themselves we're encouraging them and supporting them to do things that they can take out to the industry they'll encourage those types of workplace practices as well That's very helpful and covers some of the issues I was going to ask about your actual wording in here is engage and support 800 to 1,050 companies and your answer just now you used words like talking to you and I accept that this is a very difficult area to measure but you can obviously engage in a set number of companies that's largely under your control are you able to measure or do you think it's going to be very long term the actual results of that the kind of outcome of that Yes, so I think what we can measure is the things that we do, you're absolutely right so we've helped 275 or so companies so far around workplace innovation 170 companies put a graduate into a company around the ScotGrad scheme so we know those kinds of numbers but your point is that making a difference so that is going to be a bit more longer term in terms of tracking the difference that's making in those companies and about getting a sense of how is that contributing to those wider outcomes either in terms of their ambitions around innovation or international but also just in terms of the type of workplace and about getting a sense of how we might measure that more some of that can be using existing mechanisms so investors and people based company surveys, there are already ways that companies do this so it's about getting a sense about how we might track that in the future those are not standards that we would push on companies but we would be wanting to talk to companies about as they're starting to do this how they're measuring that how they're measuring their own employee engagement to support them on that journey so if we took something specific like women in construction where presumably it's traditionally quite a male dominated sector a lot of things are going to have to change like family attitudes and peer pressure and a whole host of things so partly I wonder I'm sympathetic to you in a sense because I just wonder if you could ever measure Scottish enterprises impact on that picture because there's going to be so many things that will have to change along the way You're absolutely right so part of it's around the work that we do directly with companies which we can measure quite directly in terms of if we're supporting a construction company to introduce something we can get a sense of what they're doing but the industry is taking quite seriously that they do need to shift how the pottery industry how the industry is going to automate going forward with digital technology and about smart manufacturing to see big opportunities which will also be more attractive potentially to parts of the workforce that it hasn't been in the past so what they will be able to measure is what the uptake of that looks like what we will be able to do is make sure that Scotland we can measure how many young people are going into those apprentices going forward the types of apprentices that are being designed going forward and then about making sure the link into companies is seen so I think part of it's about encouraging some of that in place and then in the work that we do very directly so we put funding into that innovation factory that was announced yesterday so we believe that by putting that in place that that will encourage companies to be able to come and prototype and test and be able to see some of these things they're more likely to adopt it if they've seen that but what we then can track is the companies who are then starting to take that forward and what difference it makes under that heading inclusive growth and I can read it one of the headings is attract 22,000 to 28,000 planned jobs through inward investment and it didn't immediately strike me as to why that heading of attracting inward investment was under the inclusive growth heading can you explain what the connection is there the reason for it being in there is because that is about half of our RSA Regional Select of Assistance activity and it's the activity that is geared towards job creation I do get that they may not all be inclusive jobs in there but we felt that that contributed significantly towards the inclusive growth agenda so a couple of years ago when we put that plan together we thought that was the best place to put it I think as Charlotte said earlier on a lot of our activity the best activity that we've got contributes towards several if not all of the objectives that we've got so whether it's international activity investment activity or inclusive growth the best projects contribute to all of them and we felt that we wanted to recognise the element of that for the regional selective assistance work that was jobs related so would that mean from the inclusive perspective would that be mainly about people who are struggling financially poor people getting them into jobs and that's why it's inclusive Given its regional selective assistance it is targeted to areas that have got more requirement for those jobs that's only available in certain geographic areas in the country which goes some way towards the inclusive growth agenda I wouldn't say all of it is about individual jobs but certainly we try and encourage that in any of the RSA offers that we give out I think we've mentioned previously about the young workforce activity that we do that we encourage all our RSA applicants to implement and I believe that we still, every single one of them who we encourage to do that has got that as part of the plan towards the funding that we give to them So would you expect these 22 1000 jobs to have a higher proportion of women and ethnic minorities in them compared to the existing workforce or would it just reflect the existing workforce? I think it's more likely to reflect the existing pattern of the workforce so as Ian says, the focus we've got here is about so there's a place dimension to regional selective assistance, that's what the criteria is about so that's hopefully directs projects and jobs to areas where they're most needed there's then the work that we do with that individual company particularly if it's a new inward investor to Scotland or even a follow on investment about looking at the types of jobs that they're creating and about looking at the best opportunities about how those jobs can be built as Ian said, we introduced a new approach I think it was last year and all 150 or so projects that we've come through RSA since then we've asked them about would you like to sign up to invest in youth policy and part of that's about either if it's jobs they're creating or if it's about employing young people it could be about going into schools and talking about careers it could be about mentoring or coaching young people it could be about all sorts of things that they do about investing in youth in their community depending on where they are so that's been something that we've seen as being quite successful and companies buy into that in terms of that corporate social responsibility and also that it's their future workforce so they see the benefits of that as we've been taking forward that most of the people coming into those opportunities will probably reflect what the workforce looks like right now what we've been looking at in relation to gender is just about making sure that we are tracking those things going forward we didn't have those numbers in the past but we are now but also making sure that where we're talking to companies and some of those sectors is easier than others in terms of attracting particularly different diversity of the workforce industry to improve the perception of that industry if it's not particularly attractive understanding where flexible working practices would make a difference showing companies where other companies have done that and that that's kind of paid off so using that can appear to peer we're doing a lot more of that it will take time but we're hopeful that that's actually going to help us to do that and I think it's a job for us to do excuse me in terms of excuse me in terms of our job but it's also a job for the industry in terms of perceptions as well Okay, thank you Richard Leonard very much, convener, this session is principally about budgets and Linda Hanna you said earlier on the work we do hasn't changed at all but I wanted to challenge you on that there was an e-mail sent out at the start of this financial year by the director of the Scottish investment bank to operational staff in Scottish Enterprise We have insufficient budget, to me, and anticipated demand for everything we are being asked to consider under enhanced SIB. We therefore need to prioritise our funding and people resource, which will ultimately mean us investing in some companies and not others, even when they might be strong investment propositions. She went on to say, as funding this year is more constrained than today, we will continue to support the pipeline of new investment opportunities, gymmyglwyd cyfodol maen nhw'n meddiw i'r holl o blwyliaeth yn rhan wrth yr ysgrifunach. Mae ydym ni arall dyna gael glas i gyfysgol? Rhaid i gael ei gynhyrchu'r gilyniadau o'r peth o'r prorityn gynhyrchu'n lleol. Moedawn ychydig i prorityn i'w rhan o, ond mae o'r cydmaint gydagol, ac yn gweithio, fe yw'r sgwrdd yn gyfan ei gydagol yn holl. Mae'r ddwy achos ymlaen o'r prorityn gydagol, tiffas prioritisation on it. That's been helped during the year, obviously, with the additional funds for the new European investment fund programme, so that additional £10 million will now go towards the Scottish Investment Bank, as well as the further £20 million next year and the £20 million after that. It has been tough prioritisation, but I don't think there's anything wrong with that. It's public money that we're spending and we want to make sure that we get the best return for every pound that we spend. When I talked about, I think our approach is the same. I think our approach has always been about making sure that we get the most impact for the resources that we have available. I think that approach that we've had around looking at joining up equity or R&D or other kind of things that we do, that hasn't changed. Our approach has always been about understanding that company's plans, understanding where we can add the most value and about understanding where we can get the biggest impact. Just to qualify, that's what I meant when I said that. I don't think that has changed. I think that, as Ian said, we're seeing unprecedented demand, which is great. That means that, just in terms of the projects coming through in the economy right now, it's great to see, but what that does mean is that we need to make sure that we're prioritising where we're getting the most impact. I suppose that the question for us, as a committee, is, does that mean that Scotland is missing out on business growth opportunities, on job generation opportunities, because the capital finance isn't there? I would certainly say, as I'm sure that Lina has said to this committee in the past, if there were additional funds available, we would make very good use of those, Richard. We are looking into a 2018-19 budget year at the moment, and we're looking at a project list well in the excess of the funds that we expect to have available. I think somebody asked a question in the earlier session about the annualisation of the budgets. It would certainly be preferable if we could have budgets over a further period. I'm sure that the Government would want to do that as well, but that's not the situation at the moment. We will be prioritising into that year. Hopefully, as I say, the extra money that has come in from the R&D and innovation work, that will go a long way to helping some of the issues in there. I think next year there will be our business infrastructure activity that will probably take the toughest prioritisation on that, and we'll put every penny of the financial transactions money that we get from the Government towards the Scottish Investment Bank to make sure that we maintain as best we can the activity that they've got going forward. I'm glad that you mentioned the business R&D, because that's been under the spotlight a bit, hasn't it, with the announcement last week by the First Minister that there would be an extra £15 million a year over the next three years to make up a shortfall. Previously, there was concern that, for example, the practice of making upfront payments, which is especially important to SMEs, was being withdrawn, and that all payments were being held back until May 2018, so there would be no R&D assistance until May of next year. I mean, could you perhaps tell us today how things now stand in light of that additional funding? Does that now mean that companies can get upfront payments? Does that now mean that companies won't have to wait until May 2018? I think on the large R&D front, in fact, there's only one programme that I'm aware of in Scottish Enterprise, which is a smart programme that does have upfront funding. It has had in the past. There's actually been a recent internal audit review of an issue in there that was suggesting that we revisit that to make it more commensurate with the rest of the funding that we do, because every other programme that we've got, we will make offers and commitments to companies, but we expect them to start the project before, and we can check that there's activity happening on that before we pay our contribution towards that. There is budget pressures on that side of things, but it's not only for those reasons that we would be looking to review the payment profile on those smart grants. I don't think it's going to stop any projects going ahead. As far as the wider R&D side of things, I believe that the rescheduling of payments into next financial year, when we know we'll have the funds available for that, has always been done in discussion with the companies that have been involved in that. Again, I don't think it's slowing down or certainly not stopping any of the projects that are being affected by that. The companies, one or two, have not been able to do that, and we have agreed that we will pay within this financial year, but to try and manage those budgets, we had to try and move some of our expenditure out into next year. It was a budget-driven decision rather than a choice of best practice. On the R&D side, yes. On the smart side of things, a combination of both, to be honest. You're going to be monitoring that, because, again, the withdrawal of that facility may not show up necessarily. It seems to me anyway that you need to monitor demand and if people have been turned away or if people are making—this can potentially be an international choice that people are making about whether they invest in Scotland or whether they invest somewhere else, depending upon the tipping point of that R&D support being there. You're absolutely spot on with that. I think I mentioned earlier on the growth in the R&D-related inward investment. I think there's one live case. I don't know where it is, so I can't quote the name of the company at the moment, but we're very aware of that one company, and we've been doing everything that we can to manage our budgets to make sure that, if there is expenditure required this financial year in 2017-18, that will be made available, and I don't see a problem in doing that. However, we do need to manage those tight resources, and if that means that if we can push back some expenditure that doesn't impact on the projects, then that's what we've had to do. I believe that there's not one project that is not happening because of the management of our budgets at the moment. Okay, okay. Can I just ask one very quick final question on a different subject, and that's the creation of the South of Scotland Enterprise Board. Are you receiving additional funding in order to allow you to set that new structure up? I'll pick on that. I'm our lead executive team for the South of Scotland, so I know that one intimately. Scottish Enterprise are not being asked to set up the South of Scotland agency. We're one of several partners who will be involved in that. The funding for it will go directly from government from, whatever, two years since from now, I think it's 2019-20. We are working with our partners down there to try and put interim arrangements in place between now and then. The ambition is to have that in place by the end of this calendar year. We're working closely with partners on that at the moment. There is no additional funding coming from that. We may need to look at choices as to how we spend some of the funding that we've got down there. I think that's only right that we work with partners closer than we've done in the past to target, as Highlands and Islands do, maybe certain specific areas down there that hasn't been done in the past, and we're pleased to be able to do that. Are you anticipating any additional funding to help you do that over the next two to three years? Not at all. I'm not anticipating any funding for that. The only thing I'm anticipating on the budget side of things is in two years' time, clearly there'll be some reduction in our budget as that money is channeled directly to the South of Scotland agency. I have no idea what the scale of that would be, but we're not at that stage of discussion yet. A brief follow-up from Dean Lockhart. Very briefly. It's another question on the budget this time on staff costs. Looking at the spreadsheet, staff costs as a percentage of total income increased last year from 19.7 to, I think, 22.5%. Given the squeeze on budgets now and going forward, what steps are being taken to bring down staff costs going forward? I'm sure you're right on the percentages in there. I think you'll see on our overall running costs that there's actually a reduction of about £4.4 million that we looked at that hard. That was the first area that we looked at to try and compensate for some of the resource reduction that we got last year. I think it's about a 7.5% reduction. I think it was from about last December that we implemented a recruitment freeze to manage our staff costs down there. I think that the absolute numbers will be coming down, but I accept the point that, percentage-wise, we may not be able to bring them down as fast as the other areas of the business, given that they're a semi-fixed cost and with no redundancy policy, not that we would want to implement a programme like that. There's very little chance other than normal turnover, and our turnover rates have been pretty low over the last few years. Thank you. Thank you very much to our two witnesses for coming in today, and I will suspend the meeting and move into private session now.