 Gwelch i'r dryf, ddwygrau, a fyddwch gyda eu cynghlas yng nghymru yng ngheilwiol, ac mae'n gweithio ei gynnig cywlau yn ffair cofwyrd hyn aelod dechrau ffordd. Mae'n defnyddio i y gallwn iawn, gyda i gael ei ddemoligol, ac mae'n gweithio ei ddim byw. Mae'n gweithio ein typiadig gyda'i Delegates Sgwrth этогоwyrfoddy o'r cyflau i'r cyfrifod. y rhaid i siwglau y Llywodraethau 3 i 4 yn fwy yn gwneud, wrth i ac i. I turn to our enquir into Scotland's economic performance. This morning we have what we call a round table session, so it is slightly less formal than we have a panel of witnesses that we put questions to. Hopefully the questions in discussion will start to flow once we get going. We have a number of guests this morning. Perhaps I could just ask each of you to introduce yourselves, give us your name and very briefly introduce who you are, the organisation you represent. Before we get started with some questions from committee members, no need to operate the microphone system that will be operated by the sound desk for everyone. If you want to come in in the discussion to any point, simply raise your hand and I'll try and bring you in at an appropriate point. Thank you to all of our witnesses for coming in. Perhaps if you could give your name, your organisation, what the organisation does by way of introduction and I'll start with Louise Smith and we can move round the room from that point perhaps. My name is Louise Smith. I'm one of the Treasury FinTech envoys for Scotland and secondly I work for the Royal Bank of Scotland, largely in the retail bank, where I'm accountable for the transformation of the retail bank, particularly digital. Hello, I'm Chris Van Der Kyl. I'm a technology entrepreneur and here today as well I'm chairman of entrepreneurial Scotland and chairman of a number of technology companies in the games and data analytics space as well. Good morning, my name is Emile Stickland. I'm here from Thrive Digital, which is a e-commerce consultancy, but I'm also here representing a prospective institute for the Institute of e-commerce, which will hopefully have the goal of raising awareness and improving e-commerce across Scotland. My name is Pete Moeforth. I'm chief exec of INDES. We're a long-standing e-commerce business based in Glasgow and we look after and work with a large number of mostly SMEs here in Scotland selling products online through e-commerce. Hi, I'm Joshua Ryan-Sahart. I'm the skills lead at the data lab, which is one of the eight innovation centres, of course, sponsored by the Scottish Government. My role in particular is to help Scotland to grow and train as many data scientists or artificial intelligence experts as needed. Good morning. My name is Graeme Jones. I'm the CEO of Scottish Financial Enterprise. I'm a board director of FISAB. I'm also director of Scottish Investment Operations. I might start with a fairly general question for our guests. There's just to see what your comments are on how the Scottish economy has performed over the past 10 years, both generally and from the point of view of your own particular interest in your own sector in it. Not just looking to the past, but also looking to the future, what do you see as the key opportunities and risks facing Scotland? I think that I've read in the press about small business confidence being slightly down at the minute. Do you have any comments on that? Who would like to start off? Emile Strickland. In terms of e-commerce, it's quite difficult to tell how good Scotland or how well Scotland is doing in relation to the rest of the UK. The UK, we know, is one of the... I mean, per capita, it is the best performer globally. Number three in terms of total e-commerce retail sales, so it's punching well above its weight on an international scale. Anecdotal evidence suggests that this has not been replicated within Scotland, but I don't have any numbers. As far as I'm aware, they don't exist, but if you look at things like Google Trends, which obviously Google Trends indexes Google search volume across the internet, and if you look at various regions in the UK, the term e-commerce, and people who are searching for e-commerce are not looking to buy things, they're looking to engage in some way with e-commerce. London obviously indexed at 100, the higher search volume there, and gradually you move out and out and out and it dips and you get to Wales, which is around 70, and then the Midlands is quite strong, there are areas in Manchester and places like that, which are very good. Scotland, the lowest, I've seen it, is 30, so really the amount of search volume and interest in e-commerce as a subject is very much lower than the rest of the UK. Another piece of anecdotal evidence on this is if you look at Alibaba, which is the world's largest e-commerce company, and if you look at B2B traits, so Alibaba is, they do own B2C elements in China, but the majority of it is all B2B, and you can go and list your products, it's a bit like eBay for B2B, and if you look at the top countries for Scottish whisky, and this is in order, you get China, Germany, Japan, Thailand, Taiwan, UAE, England, United States, Hong Kong, Hungary and then Scotland, so we're quite a long way down selling our biggest export on the world's largest B2B export market, which although it's difficult to draw any firm conclusions on that, I would think that would stand us in pretty bad stead as a whole e-commerce country. Is there any way to improve that? Yeah, to begin to teach people and tell people about the opportunities because it's not difficult to set up, you know, the distilleries could be doing this direct and selling direct at a much higher margin. I mean, the two reasons for that is either other countries are exporting at a wholesale price and putting on Scottish whisky on to Alibaba, or it's fakes. So it's a brand protection. If there's a demand there, there should be a supply there, but also we're giving a big chunk of a major export to other countries because they're clearly able to sell it as a market for it. Just on that very point, how much of that reflects the fact that much of Scotch whisky is owned by large international companies and there is lack of headquarters function in Scotland? I mean, that I don't know the answer to, but considering that China and Germany are number one, I would think that a lot of the Chinese ones are fakes and probably a lot of the German ones are just the Germans are good at exporting and using Alibaba. I don't know the intricacies of the market, but from this kind of very simple evidence, and I understand it is simple, it would suggest that Scotland is not performing as well as it could do. I mean, this is just the search volume on the first few pages. So all the small distilleries, for example, that are still owned by Scottish companies and all the craft distilleries that are coming through on the back of the kind of gin boom, they could be listing globally and they could have access to a global market overnight, but there's no support for doing that. Graham Jones and Chris Van Der Kyle also wanted to come in. I guess what I would say is that the world has changed a lot in the last 10 years. Customers and customer expectations have changed a huge amount in the last 10 years. Probably faster, I would say, than in the previous, I've been working 40 years in banking financial services and the change in the last 10 years has been faster than the previous 30. In terms of our analysis around it, the downturn in the oil and gas industry has an enormous impact, much more deeply than just the surrounds of Aberdeen. It affects all those people who are involved in the supply chain, whether it's hotels, whether it's engineering companies based down here in Edinburgh, Glasgow or even in North Yorkshire. It's had an enormous impact. However, it's fair to say that the price of a barrel of Brent crude is coming back up again, which I think is good, so we're showing a bit of recovery there. No-one welcomes that more than we do. In terms of how does it impact on banking and FS, we are financial services. We serve the community, we serve customers at the day's end. We're very large businesses, but we serve end customers. One of the first things that happens when people come under a bit of economic pressures is that discretionary spend goes out the window, so people make the car, do another couple of years and don't renew the car. Rather than moving to a bigger house, they might say, well, we'll build an extension on the existing house we've got. They might not go on holiday. There's a whole raft of things that you do have been there myself, so I know what I'm talking about. There's things that you have to do to tighten the belt. That, of course, affects the economy enormously. At the moment just now, if you look at consumer-led growth in the UK economy, Bank of England would say that it's going to be around about 2 per cent, but it's a consumer-led economy. If there's anything that interrupts the ordinary customer, the ordinary man on the street, that has an impact. We also have a lower population growth combined with slightly lower productivity. We've made great inroads, by the way, in productivity most lately, but that's also a contributor. R&D businesses were 9 out of 12 in the percentage of our GDP that we spend on R&D, so that's something that we need to look at correcting. While the number of private sector enterprises is at a record high, we're still only 9th in the UK in terms of new business registrations, with only 50 new business registrations for 10,000 of the adult population in 2016 compared to a UK figure of 67. We need to do our bit to stimulate our young people to want to set up and go out in their own, and we'll talk about FinTech and that very exciting world of FinTech, which, in banking and FS, links into what my colleague over there was talking about with e-commerce. Levels on the business investment in the UK as a whole remain lower than many of our competitors elsewhere. However, with the recent announcement of the Scottish National Investment Bank, I think that that will be another lever, if you like, and button we can push and pull ourselves. That's just a banking and FS overview, but I hope that's helpful to everyone around the table. The 10-year horizon is an interesting one to look at from my perspective. Within the video game industry, 10 years ago, many of us in the SME side of video games development were looking with a lot of trepidation as to what was to come. It would seem that bigger corporations with ever bigger budgets were starting to dominate the industry, but the great news is that we were completely wrong. The last 10 years, because of democratisation of distribution through digital platforms effectively rather than through physical retail, we all bemoan the fact that the high street is shrinking and becoming less important. That's a terrible thing for us all. The flip side of that is that for small creative businesses, the distribution models being online have completely opened up a market rather than being completely restricted by large-scale distributors who would effectively decide what the public was going to buy by distribution alone. That led to, in the past 10 years, a plethora of enormous growth businesses being created, almost out of nothing. Scotland has significantly benefited in that. On the high end, a stone's throw from the Parliament here, we have what is reputed to be the most valuable video game property, the most valuable entertainment property in the world in Grand Theft Auto, which is being developed by Rockstar North. Who knows putting an exact figure on it, but the franchise value is certainly north of £7 billion or £8 billion, probably more than £10 billion now. That's principally created here in Scotland. Our own 4G studios, which I'm chairman, we've been fortunate enough to be the console partner for PlayStation, Nintendo and Microsoft formats for Minecraft. Minecraft is a franchise created by one individual in Sweden who, within five years of creating the franchise, sold it to Microsoft for $2.5 billion. It continues the most successful console development history on Xbox 360, being the one that developed in Scotland. It continues to be developed in Scotland today. Very recently, an independent, large-scale business in America acquired a small Edinburgh company called Cloudgen, a company called Epic, which happened to be 20 per cent owned by the Chinese giant Tencent, which is now approaching becoming the biggest video games company in the world with, I think, a market capitalisation of half a trillion dollars. If anyone has a knowledge of the video games industry, they are responsible for a game called Fortnite, which is reputed to be generating revenues of something like $100 million a month at the moment. That's from a standing start a few months ago. Those industries are accelerating to an order of magnitude above where they were 10 years ago. The opportunities for small businesses to enter are significant. We in Scotland have created some of those businesses. There's a venture capital-back business in Scotland called Outplay. Outplay is in the free-to-play mobile space, and it's seen significant growth with principal backing from Scottish investors. We've got a really bright outlook in that core video game sector, and what we need are more talented individuals to come in, both indigenously created. University of Abertau is obviously, Dundee is clearly shining like globally in terms of training and development of individuals for this sector, but the core of our STEM subjects in Scotland are delivering great people. Indeed, some of the skills that we don't have at the moment are more in what are called the live operations, how you not just develop the games but then how you publish them and how you engage your audience moving forward. They're marketing, digital marketing skills, discoverability skills, those kinds of things, and share very much in common with industries like e-commerce. More of that, and when I say more of it, I mean substantially more. I've just come back from our annual game developer conference in San Francisco and I've talked to a number of people interested in starting and supporting businesses here in Scotland, and the one question they asked is, are there enough people? Is it worth my while coming here? Will I find the people? Obviously, my immediate answer is, of course there are. The more nuanced answer is, of course there will be if we invest and we need to over-invest in this sector. We'll probably need to make some tough decisions not to invest elsewhere, but those are the skills and they're very transferable. Briefly, to add to that, our other two businesses in Scotland that we've started in the last 10 years, I won in television data analytics for a television advertising called TV Squared, who are here in Edinburgh. Over the past five years, TV Squared has grown from a startup idea to accompany operating globally with some of the biggest brand names in the world, analysing their television output. The other businesses just started in Dundee called Broker Insights, which operates in the commercial insurance space. Both of those businesses have one big thing in common—they couldn't have existed 10 years ago. 10 years ago, there really wasn't a platform like, for example, EWS, Amazon Web Services or cloud-based computing, in the way that it is today. That revolution has allowed people with amazing ideas but not enormous amounts of capital that need to be invested in hardware and infrastructure to realise those ideas and build businesses of tremendous growth and scale. Those businesses are incredibly close to success stories in Scotland, such as Sky Scanner and Fanjol, in terms of the market environment that's allowed them to grow. The market environment is there, it's now all about deployment of scale base. If there's any restriction to growth for those companies, it's a restriction of one of scale—not access to capital any more, not access to the right core idea generation talent, but the development and scale talent and scaling is our biggest challenge from here on in. What we'll do now is move on to some questions from Gordon MacDonald, followed by some from Kizia Dugdale, and try and bring in our other guests who may wish to bring in some comment on those aspects, as well as what Gordon MacDonald's going to come on to. Thank you very much, convener. Chris is very helpfully letting in some of the question that I always want to ask, which is what are the opportunities that you could see being replicated across the economy, and what would the challenges be in actually trying to select these key growth areas and replicating them? You've touched upon it, but what about other panel members? Where are the opportunities in your sector that could benefit the Scottish economy? Peter Moforth wanted to come in. In part, this is a direct answer to your question, but to start off, I just wanted to say a few little more background things about e-commerce. There's two people who have already mentioned the topic. If all those around the table were asked what are the top 20 or top 50 e-commerce businesses in Scotland, I think everybody would probably have a question mark. They wouldn't really know what those top e-commerce businesses were, companies that trade online and sell products and services through the internet. This is really surprising when, if you go and look at the most recent statistics from the ONS, it says that the total e-commerce turnover within the UK is £511 billion. Those aren't my numbers. You can go to Google and check them. For some reason, I spend a lot of time moving around within the UK. When I go down to England to do business, I find that the term e-commerce is used very frequently and regularly. Yet it's not a word that's in common usage within the Scottish business community, to the same extent. A few minutes ago, I looked on Adzuna, which is a website that pulls together all the jobs that are available across all sites within the UK. Just within London, about six minutes ago, there were 3126 e-commerce jobs available in London, and for the whole of Scotland, there were 114. That, in itself, speaks some interesting statistics about the degree of interest here and our understanding of the subject. What we can do about it, I think so much of this comes down to—I have to answer your question—so much of this is down to skills. A long time ago, I used to be a university lecturer, and I'm really embarrassed that, for something that is technically specialised as e-commerce, which is a very distinct subject, web design is different to web design, e-commerce marketing is different to digital marketing. It's a very specific topic. As of today, to the best of my knowledge, there isn't a single college or a single university anywhere in Scotland that runs a dedicated course on e-commerce, and that I find really surprising. We've been advertising jobs in my own company to recruit engineers within the area of e-commerce, and they're Hens Teeth. You cannot find them, you cannot recruit them. There is an absolute dearth of training, skills, knowledge, expertise here, and I think that if there's one thing that we need to focus on, then it's getting those skills, and it's not just specialist companies like us. One of the great things about e-commerce, I suspect even more so than FinTech, is that it directly applies to lots and lots of small companies, these SMEs. Lots of small SMEs can take very quickly and immediately, as I think Emily mentioned, can take advantage of e-commerce and sell on a global market. If they knew what—if they could get the people, to get the advice, to have the skills, to be able to create wealth, exports, jobs, but it's difficult to know how to get started, and it actually all comes back to a lack of skills. Emile mentioned that this fledgling organisation called the Institute of e-commerce has no funding and support. It's got the backing of the Scottish Chambers of Commerce, the backing of Scotland Food and Drink, the backing of Scotland IS, and about 20 companies, but this is all a token gesture unless we can mobilise a group support to say, okay, guys, let's try and do something about it. Skills shortage—is it just a skills shortage in Scotland, or is it something that affects most of Europe or the world, because there was a report that came out last year that said that there was something in the region of 150,000 ICT vacancies across Europe? E-commerce is a very specific niche subject. The skills are very specific to it. Personally, I feel that the higher education system has completely failed in being able to address it. The reasons behind that are interesting, in part because people don't know where to fit it. It doesn't fit naturally within the Government agency's models, and this is why—if you go to Skills—in the document that I sent out, you go to Skills Development Scotland type in e-commerce, nothing, which is shocking. I feel if you go to SDI's website again, there's nothing. How do we start? We've got an almost bootstrap. What is already a colossal industry in the UK as a whole is the third biggest player in e-commerce in the world. We used to be number one five years ago remarkably. We're now second fiddle to China and the United States, but within that, 99 per cent of all the e-commerce activity is in Greater London and the English Midlands. It means that, whilst the average Scot is just as likely to buy things, whether you're business to consumer or business to business—because most e-commerce is business to business—when we're buying stuff, we're replacing local Scottish companies who would have sold to us by companies down in England. Our e-balance of trade is considerably worse than our normal balance of trade, I suspect, if we have the statistics. Brian Saha wanted to make a comment and also Louise Smith before we come to questions from Kezia Dugdale. I just wanted to mention that, from the evidence that's already provided in this session, a lot of underpinning commonality is around data analytics and data science. A lot of the companies that we talk about are TV Squared as an analytics company, e-commerce is driven to a large extent by data analytics, fintech, financial services—it's a huge part of it. When you're talking about potential skill shortages, I think that that is one that has a global skill shortage. I would like to think that the work that we're doing at the data lab is trying to resolve that in some way. Just to give one example, our master's programme across 11 Scottish universities has grown from 40 to 160 within a few years and there's no difficulty in filling those places. The University of Edinburgh has one of the world's leading informatics departments and someone we should be very proud of, but it's providing people for the world. I think that when it comes to economic growth in the future, data analytics is going to be essential to that, but it's about creating the skills so that we can have clustered companies. To create clusters of economic growth, you need to have a broad base of skills. We're getting close to doing that, but we need to keep on investing in data analytics skills in particular. Just on that point that you were saying about creating clusters, Edinburgh has got an ambition to become one of the data capitals of Europe. We heard about the skills shortages in e-commerce, but is there particular issues in Edinburgh trying to achieve that ambition? I think that Edinburgh is in a very good position, not least because of the University of Edinburgh but also because of other universities and because of developments that SDS has been doing to try to boost cyber security, but also then data analytics at the college level. To meet that skill shortage, we can't just rely on universities. We also need to be getting people from school and into college to be doing a broad base of data level jobs and data management. I think that modern apprenticeship in data analytics is very important. I think that Edinburgh is very well positioned, but it needs to work with Glasgow as well across the central belt, which also has a lot of its expertise. You mentioned going back to school, but how early, because we're going to want those students coming through and being able to go into those courses at 16.18, how early do they need to be taking subjects that will feed them into that process? I think that it needs to start very early. You'll see from previous Royal Society reports on computing in schools that the UK was behind and I know that there's been a drop in computing teachers as well, so I think that there needs to be investment first of all in computing from primary school upwards, but also statistics and maths. Those are some key areas. I don't want to focus too much on data analytics, which I think is very important, but from what Chris mentioned earlier about creativity and the creative professions and the combination of creativity and technology is where some of Scotland's pre-existing strengths can be built on. The biggest gap at the moment at primary secondary school is perhaps computing, maybe statistics, but we don't want to diminish the great work that we're doing in creative learning as well. Just to add to the skill piece, because we're talking about how do we attract new talent in terms of whether that's working with schools and universities, particularly schools actually, and I know there are several examples of where we're creating co-clubs, where we're trying to get more people into those particular areas quicker, but actually it's also, we have a strong workforce here already, is how do we work with those people to redeploy them, upskill them and also help them to move into roles where today they're probably unknown. I just wanted to make a couple of points. Fundamentally, and I think that Chris raised it, angrily, it's now a customer-driven market. I think that with particularly FinTech providing more choice is a healthy one, but it also means from an organisation perspective whether those are large, existing organisations or new ones is, unless you've got a customer at the heart of that, it's not a sustainable model. We've already seen examples, strong examples, of where people are collaborating. Again, it's a simple strategy. I personally believe collaboration and partnership, whether that's on skills, talent, startups, people moving into Scotland, is absolutely critical for how we move forward. Thirdly, those are challenging how we work in terms of whether we're agile, innovative and fast enough. Some of those challenges are global, they're not unique here, but there is a clear and strong targeted focus on two or three areas that we, in Scotland, have an opportunity to really harness. I feel like I've heard from Scotland IS for several years now that Scotland has a digital skills gap, but it doesn't appear to get much better as each year goes by. I'm wondering what sort of fundamental shift we need to address that, what it looks like. Where are the feelings in the higher education sector? I think that you referenced that there have been problems to this point. Where are the problems within the enterprise and skills agencies in terms of their deliverability when it comes to that problem? If it's not about new Scots entering those careers or reskilling, as Louise has mentioned, that's a really key point, given that only 15% of Scottish SMEs are actually properly digitised at the moment, if we're having to look beyond Scotland's borders to track new skills, what impact does Brexit have? There's a nice easy question for you all. Graham Jones, would you like to come in on that? I'm delighted to go off first. First, I can just say, by the way, Chris, that everything that you said there really chimed with me. One of the things that would be great to do is if you and I can have a chat about how we can maybe come together on some of the stuff that we're doing in financial services, because I think that if you look at people who are looking for things like return to advice, how do you make it entertaining for them to track their pension funds and what their options are and so on and so forth? I can't think of a better person to come and speak to than yourself, but I'll must get back to the question. Again, I can only speak, Kezia, for banking and financial services, because I'm a modern line sector. We have great collaboration with SDS. Probably, I would speak to SDS once a week on average, and they form part of a network that we've called STAR, Skills, Training and Research. It's dedicated towards banking and financial services, but SDS is part of it. Scottish Enterprise is part of it. SDI is part of it. We work closely with it. At the moment, just now, we have enough computing science graduates and digitally skilled people coming in who are attracted to our biggest financial services brands. What I do really, it does chime with me, with what Peter Ewing was saying, is the difficulty, of course, is if they're being hoovered up, if you like, by the large brands, large successful brands, then the further, if you like, the smaller an enterprise that you are, the more difficult it becomes to recruit staff and you may have to pay if you like, over the odds to do that. From that point of view, what we're doing with Star Network is saying, how do you address these shortfalls? We have 11 universities, funnily enough, who are part of that, and these 11 universities work hand in glove with us. What we're trying to do is to match, if you like, our anticipated demand going forward with the types of graduates we'll require. We also have an unknown box, which is what Louise was alluding to. We also know that there's some stuff that will happen that nobody knows of at the moment, because, as you were saying to Chris 10 years ago, Minecraft and Grand Theft Auto couldn't have existed in the way that it does at the present moment in time. Certainly, at a banking and FS level, we're getting great support there. I think that there's still a lot more that we can do in fine-tuning what we're doing in terms of making sure that the children who are coming out of school are work-ready and go into apprenticeships if that's more suitable for them. Not everybody needs to go to university, so we want all those children to go in there, but they need to have the right STEM subjects. To the point that my colleague on my left was saying, we're really pitching in and working with the schools to make sure that the industry is being attractive to children who want to aspire to move into financial services. Reskilling, I'm totally with you on that one. The rate that the world is changing at, so in my 40 years when I started, there were no mobile telephones, there were no desktop PCs. If you wanted something tight, you went to the typing pool and asked very, very nicely, and the chief typist might type your dictophone tape. If I think of the change that I've gone through and the adaptations that I've had to be made, probably I've had maybe a stencil, but I'm still in good old fashioned banking and FS man, but I've probably had four careers. That's at the pace that was very much slower. Going forward, I agree with what everyone's saying there, but certainly from a banking and FS point of view, Kezia, we are very, we work very, very closely with the universities and with the Scottish Government institutions to make sure that we're matching that demand with supply. Joshua Ryan and then Chris Fender Kyle wanted to come in as well. I just want to, I suspect, with the question that you answered around the persistence of a digital skills gap. I think partially there's just global growth in digital jobs and, as I mentioned before, University of Edinburgh, other universities providing people for the world, not just for Scotland. I think there's some good things that are going on here. I think Co-Clan's a good example for both lifelong learning but also different routes. I think we have to do more in keeping people here. I think that's partially selling Scotland. One of the things we do and a lot of universities do in a lot of different places is make sure that they have a placement within a Scottish company so that they get that first step in the door and then they have a greater affinity. I think that developing a community of people so that they've got connections within Scotland so that they feel like they don't need to move is quite important. I think that life long learning, just to reiterate that, the majority of people who are working 20 years from now are working now. One of the key skills for the future has been to be adaptable and relearn. We need to have an infrastructure that enables people to keep on learning the skills that are required, in particular in technology. I don't think we do, not in the same way that it's developed at younger levels. I think that universities are changing so that they can provide more in-work training. You need to be able to offer a broad different range so that people are time-pork in access training, either online or elsewhere, but also people who are financially poorer. How can they access training 10, 15 years down the line? Things like the digital growth fund is an opportunity there. How can that be targeted to people in work? The final thing that you mentioned around Brexit is a risk because still around 50 per cent of the people on our courses are coming from Europe. There's a potential risk that we lose those, but it just refocuses us on making sure that, from every university, from every school, from every college, there's an opportunity for people to retrain quickly. We need to manage that risk by reinvesting in the pipeline towards university. Chris Van Der Kyle, Louise Smith and Emile Strickland. To echo and develop my colleagues' comments, I think that the statement that I keep reflecting on is the one that we've never lived in a period of change as fast as the one we live in now and it will never be this slow again. Everything that you've experienced in the past 40 years suddenly starts to compress and compress into the next five years or so. Kezia, to answer your question directly, there is an unlimited appetite for skills, the kind of skills that we are talking about, so we can never do enough because as much as we do, we'll just only attract more people even then. We'll complain and moan a bit that, oh goodness me, there's not enough people, but that's fine because growth will be going through the roof and we'll have an ever more unsustainable appetite for more great people if we skill them in the right way. That, to your point, is severely lacking. We're not, from the earliest stage, we're not building a confidence and a belief in our young people that this is something for them. If I hear once more up in Dundee, it's all right for you guys in the games and digital industries in Dundee. What are the rest of us that have been left behind in manufacturing? The answer is that you're left behind if you think that manufacturing in the way that was 30 years ago is ever going to come back. If you understand anyone in my view is capable of understanding the gradations of the skills that we're talking about here, there's no reason to leave anyone behind in our workforce, but if we continue to believe that training for an old economy is the right way to go, we'll consign ourselves to the backwaters of economic history. With that focus going forward, there's a brilliant point that was made by Joshua earlier about the combination of creativity and digital. Other countries, and we can all name them, can hothouse young people to be the best mathematicians that they can possibly be, or actually, in a very narrow field, brilliant data analysts, but the kind of minds that we traditionally have been brilliant in developing in Scotland that are lateral, that are multicultural, that are reaching across all sorts of divides brings the kind of unique nature to Scotland that's seen us lead the way in things like video games design and music and film and exporting some of that talent outside. We must continue to do that, and to your final point on the impact of Brexit, the confusing thing to me over the past few years has been an obsession with some kind of isolationism or even an obsession with Europe, because it's kind of irrelevant to us now a European culture or the UK. It's global. We need to make sure that there's access to every market that we can possibly access to, and I suppose that if there's an opportunity in the situation that we've found ourselves in now, it's making sure that we set ourselves up for success, that we're incredibly attractive, both inwardly and outwardly, and I think that that kind of migration cycle, we don't want to keep everybody to ourselves because if we keep everybody to ourselves, who will know what we're doing and who will understand what to bring back to Scotland, and at the same time, if we set our flag and set our stall out as being the place you come if you want to develop creative and technically advanced businesses and you'll find the best young talent coming through and you'll find a home that welcomes you to do that, we'll do brilliantly, pretty simple, and we need to take a not just a 10-year but sort of 30, 40, 50-year view of that and make those changes now, and we've not, we're playing at it. We sort of make great noises and actually great strategic insights into things like curriculum for excellence, then we underfund it and we wonder why it doesn't deliver. It's not because the strategy was wrong, it's because the implementation was atrocious and that's what we need to address and address it with the reality of if we want a growing economy, if we want to fund our services and an ever-growing and ageing population, we need to develop these core skills which will generate huge value for the country. Lewis Smith, Emill Strickland and I think Peter Mofforth would also like to come in. I just wanted to add four points to that and actually to them Chris has covered. I think you're right, we also need to talk about what does digital skill gap actually really mean anymore because even that's changed in today's world. We've talked about how you actually, even financial services, we work really closely now with the creative industries, we wouldn't have done that previously, so I think we've actually got to talk about this in a different way. What do we actually mean? What types of skills? We then talk about the technology and actually we're missing a whole section around, and you touched on it, Chris, around that human interface into technology. How do we create the right designs for customers to adapt and adopt quickly and also gain confidence and security in some of these new changes? How do you then maintain and operationalise some of these components? So I think there's a real opportunity for us to actually break down what do we mean by digital skills gap. So firstly people understand it and then create a targeted strategy to then constantly deliver against it. I think Chris is bang on. It's not a quick silver bullet around this is suddenly going to shift. This is a leadership challenge and we need to continue to drive against that strategy. My last point is around, and again Chris touched on it, confidence, belief and ambition. We need to help people adapt with confidence and with real ambition against those targeted strategies. That means it's consistent and we've got to be persistent about it. From my point of view, e-commerce probably differs slightly to some of the other industries around the table because there is a lack of public awareness in it. There are some fantastic case studies around data, some fantastic case studies certainly around the computer games industry within Scotland and also fintech, but where are the large e-commerce companies? Now they exist. There are companies doing amazing things. Over 100 million turnover retailers. There are small little retailers growing at 200-300% a year, but we don't hear about them. There's no one talking about them. Maybe it's because e-commerce is not a kind of hot topic in the same way, or maybe we just don't like those particular industries that they operate in. But I think the first step in how to make e-commerce better certainly is to raise the awareness and then of course there is training. I think community plays also a huge role in how we move forward as a kind of e-commerce country because if you go down to London, there are meet-ups. There are little groups of people that come together and just talk about e-commerce. They just go, hey, so we tried this thing and we got an improved conversion rate of 0.1% and it cost us a very small amount of money. Why don't you go away and try that for your business? That's how you begin to build on the skills that need to be put in place by training. You need a base level of skills, but the community helps that. I think part of the reason why computer games is so successful is there is that community. Certainly Fintech is incredibly successful because Edinburgh is a global financial hub, but we don't have that in e-commerce. I think if we don't begin to build that, we're in danger of seriously losing out. I mean, there's a statistic I read the other day. By 2040, 95% of all purchases will involve some form of e-commerce. That doesn't necessarily mean that everyone's going to be buying online, but there is a part in that consumer journey that has an interaction online through some form of e-commerce marketing. I think it's important that we build on that and that we're aware of it. In terms of how much impact Brexit is going to have, who knows, but there are a number of countries that we're already doing big amounts of trade with. The UK rather is doing big amounts of trade with online, and if you look at the US, 9% of US consumers are happy to buy UK products from UK websites and 6% of Chinese consumers. By and mind, the Chinese market is five times larger, the Chinese e-commerce market is five times larger than that of the UK. There are already these consumers out there. In fact, I'm aware, I was made aware by Peter of a company who is already selling like 85% of their business goes to mainland China in huge volumes, and they're growing at 200% a year. They can't keep up. No one knows about these companies, but it's happening, and we just need to champion that and build on what's there already. Thank you. Peter, more forth before we come to questions from John Mason. I think that Louise made a very good point about what exactly do we mean by a digital skills gap, because as an observer, I've seen a lot of things said about we need digital skills and things like that, but it's almost like it's a pervasive perfume that cuts, because let's face it, so many things in our lives at home and at work are digital these days. What is of particular interest to me is this very focused area around e-commerce for which there is no agenda, there's no agency that takes charge of it, there's no national plan strategy, there are no courses on it, and considering the size of it, because if you look at the numbers, e-commerce is very considerably bigger than fintech, and yet there isn't a single course out there on the subject. Maybe it's because it's not cool. Maybe my challenge to the politicians around the table is when did you last talk about e-commerce? Each of you ask yourself that question. When did you actually last bring up a question about it? I was invited along to the business in the Parliament events towards the end of last year, and we actually had a session on it. That was a fantastic activity, by the way, and it gave me good insight into what goes on here in the Scottish Parliament. It was really interesting that the politicians said that this isn't really a subject that we've spoken about. We don't talk about it. How often did people mention it? For something that's rather unfortunate that Emile and I, both from the e-commerce industry, were both guys, half the businesses that are e-commerce businesses in Scotland are led by women. It's a very equal opportunity business because people who run it can have a lot of flexibility if they're setting up a fashion business or something or whatever. There's a fantastic welding business in Glasgow run by a woman who's creating billions of pounds worth of online sales, but, as Emile said, nobody knows about this. For some reason, e-commerce is just not cool. Nobody talks about it. It's like Voldemort in Harry Potter. It's the biggest thing and nobody talks about it. You've mentioned twice about Scottish Enterprise. I'm looking at Scottish Enterprise's website. They're running workshops on practical steps to grow your business through e-commerce, benefits of e-commerce, boosts your e-commerce skills, best practice guidance, selecting targets in your markets, culture and language considerations, and there's a whole host of things that you can do. You're saying there's nothing on the website about Scottish Enterprise? I had looked at that last night. All of those courses are run either by staff at Scottish Enterprise or by a teaching company. Nobody actually from the industry is involved in the provision of those courses. This is like if you're going to be taught heart surgery, would you want to be taught by a teaching company or by somebody who'd actually done surgery in the subject? If you look at all the events that are run by Scottish Enterprise, there are a number of events that mention e-commerce, but for things like international trade, it's largely the culture that's going overseas, going on a trade event. It's different parts of the world. Those tend to dominate the events run by the agencies, whereas so much of modern trade has just done a click of a button. As Emil said, there are loads of companies that can sell directly into China with millions of pounds worth of turnover. They don't need to go on a trade mission to do it. You just list some products on Alibaba and off you go. That is certainly a good plug for e-commerce, but it may be that those involved need to try and engage a bit more with Scottish Enterprise to put that message across. Of course, part of you being here is, in fact, bringing that message in these comments to us here. I'd like to move on now to John Mason. Thank you very much, convener. Dr Mofforth touched on some of this. We're interested in business growth, but we're also interested in inclusive growth. I'm interested in your thoughts as to how your sectors are providing that, dealing with that or whether that's not an issue that's really on your agenda. The obvious one is that women have just been mentioned here. Clearly, amongst the witnesses today, it is largely male dominated, frankly, amongst the committee. It's also male dominated, although two of our colleagues are not here. Are your industries, your sectors, ones where the men make the big bucks and the women make the coffee, or is it inclusive? Who would like to answer that? Joshua Ryan, Saha. A quick start. From the data analytics community, is this still mostly male dominated and computing more broadly? I'll just quickly mention that the data lab is the CEO, is Gillian Dockty, and there's a gender balance across the organisation. When we think about future jobs, there is a risk that those who potentially don't benefit from data science or automation and that sort of thing are those from poorer backgrounds, different socioeconomic backgrounds, and also the roles that are typically likely to be replaced are going to be those mostly filled with women as well. I think that there's a challenge. I think that there's a lot of opportunity as well. So when we talk about automation, there's always this risk of, again, quite negative, and rightly so, there's risk for some people. There's actually a huge growth of jobs as well, and some of those we don't know what they are yet. What we do know is that we need to help those people who are in the socioeconomic backgrounds that are least likely to be able to fill those new high-skill jobs. The way that we're thinking about it both within the Edinburgh City region deal discussions, but also at the data lab and also our partners in SC and elsewhere, SDS in particular, is making sure that we get people at an earlier stage, as I've already previously mentioned, into those creative, technical skills early on. Again, if you are potentially at risk of maybe technology-related redundancy, how do you very quickly identify that risk and how do you put them through a lifelong training programme, which means that they can take advantage of those opportunities that are coming up as well? We need to make sure that we continue to invest in the new technological innovation, but also match that investment in making sure that the people who get into those roles are coming from the broad range of backgrounds. I'm Louise Smith, and Chris Van Bercow. So I probably should comment on this as a technology leader who's female, but I think that we need to be really clear about what we mean by this again. Most organisations have targeted strategies to get more representation in its broadest sense in senior levels in organisations. With my Royal Bank of Scotland hat-on, we're no different. We've got stretching targets in the right and new roles. We're doing well against those targets. We're already at 37 per cent in senior positions. With my FinTech hat-on and what we're seeing more of, a couple of things are around how do we engage schools, and we're doing specific areas. I've seen many different ones that Joshua has commented on a couple of them, where we're opening up what those new skills look like, whether that's through technology type of courses, whether that's through design, creative industries or what that may look like. I think that there's more targeted strategies now. I think that we need to do more. The second thing is, with an increase in infrastructure, we're also being able to access new talents. I'd like to make that more broader than gender, but people who need to work remotely, who do want to work at home but have the new skills that we've talked about, we can now access those people that we couldn't do before because I think that people will see less going to an office as the only way in which they can recruit and attract talent. I'm seeing more and more targeted strategies in this space. I think that we need to do a lot more. Again, I think that we need to be persistent on that strategy. Can I just follow up? You said, like RBS, that, as I understand it, they're a big organisation. They've got people within it who are deliberately trying to promote women and give women every opportunity. Is it harder for a small business, a startup, to have all that in place? I don't know whether it's harder or easier. I think that the challenges are different for larger organisations and smaller ones. I think that we need to talk about case studies more, we need to talk about stories more, whether that's in smaller organisations, some of the stuff that Joshua has talked about. I think that some people would probably argue that some of those are best kept secrets to want of a better degree. I think that in organisations we're seeing, in my organisation, we're seeing more and more of that. I don't know whether it's harder. I think that it's different challenges. We need to give access to those individuals, but I do think that we need to be really targeted about it rather than generic. My comments would really be around diversity challenge. I'd reflect back on a point to meet earlier about an unlimited appetite for talent. It would seem to be pure madness if one is looking to only be able to take a certain percentage of a population into our industry to in any way, either by design or by accident, artificially restrict or restrict the pool in which you're recruiting from. If there's 100 per cent of the population and I can only take 5 per cent of them in, I want 5 per cent of everybody. No matter where they come from, background, gender, sexual orientation or otherwise, it's missed opportunity along the way. Our industry was very interesting in that, very clearly in talking about the computer games industry, we came from a place where, in the 1980s, home computing was principally the domain of young males below the age of 16. The industry now has a lot of senior people like me who were exactly of that type, i.e., an absolute geek when I was a small child. We've struggled with it because we've been leaders of the pack and on it's gone. We've heard in this interesting microcosm an industry that looked very much populated by that audience. We've worked really hard over the past decade as we've realised very quickly that 50 per cent of our audience is female, that everyone plays computer games. If we're going to make games that appeal to everyone, we need a representation as wide as we possibly can. To that, we work pretty hard making sure that the environment works for everybody. The classic stereotypes of the early days were all about pinball machines, table tennis tables and everything. Sometimes other things are important to people in terms of work-life balance. I've seen a real transition in our industry and that's got to continue. Otherwise, we will miss some of the greatest talents that our industry could ever see because we don't create an environment that feels welcoming to them. All my colleagues in the industry, I think that we all agree and it's very high on the agenda. If you went to game developer conference last week again, inclusivity and encouragement of diversity are not just as a token because it absolutely impacts on what we do every single day. I would hope that we're seen as an industry that's open to anyone. I think that Jamie Halcro Johnston has a very brief follow-up. I'm tied into the inclusiveness idea. Obviously, trying to get more women involved in your sectors, trying to get perhaps opportunities for disabled people, but also the regional diversity, I represent the Highlands and Islands. One of the big barriers to e-commerce and doing more ordering online and developing online is the infrastructure. It's simply not there, the broadband infrastructure. I was wondering how that can play a role, how important that would be to getting that right in the future, whether it's in the Highlands and Islands where broadband speeds are very low or even other areas where they may be not big enough to meet modern requirements. The broadband is a national disgrace. I would call in a committee that it's happily call out BT open reach as a national disgrace. They do not deliver what they say they're going to deliver when they say they're going to deliver it. I'm sure they would come here and argue that I'm completely wrong, but we should not, in 2018, be able to listen to the statement that you just made that there are poor bandwidth areas in Scotland, anywhere in Scotland. My understanding is that one of the bright lights and shining lights of the last economic downturn was that, for the first time in our immediate history, there was not a mini Highland clearance. People attribute that down to the fact that some communities and a lot of communities had great broadband, so people were able to contribute. Actually, some made a positive choice. This was a time to get out of main population centres, and everyone that I know that's in my kind of industry, the first thing they look at is what's the speed in the property that I'm going to look at, what's the speed in the area, and the areas that they simply will not move to because of that. We've talked about addressing, we are addressing, I know that the Scottish Government has put in place extra funding, but it's still not enough. A measurement measured in megabits isn't enough. It's gigabits of infrastructure. True infrastructure needs to be everywhere if we're going to follow on this promise of Scotland being accessible to all these opportunities. Otherwise, you simply can't exist in this situation. We're not delivering the right way and we're not delivering for the future, effectively, I would say. We're trying hard to do it, but we need to do more and quicker. The money that went into the Queensferry crossing, in my view, would have had a far bigger economic impact going into digital infrastructure and might be controversial for those that commute from Fife. Perhaps briefly Graham Jones will come in and then move on to questions from Colin Beattie. Yes, I will be brief. I would just like to say that somebody who actually grew up in Dingwall in Russia, I really deeply understand the Highlands and I'm passionate about the Highlands and I totally agree with yourself, Chris. There are some incredibly talented able people that are up there who choose to live up there because of fantastic quality of life. You tend to be creative if you don't have the powerful broadband, certainly from a fintech point of view, you're not at the races. I think that if I felt a sense of urgency about anything, it's about how do you get that piped up and sorted out PDQ. I'm 100 per cent behind you on that, Chris, and, likewise, Louise. We've touched very briefly on the fact that new startups in Scotland are lower than in the rest of the UK. What do you see as maybe the top two barriers against small companies starting up in Scotland? In your sector, of course. As chairman of entrepreneurial Scotland, our ambition is to make Scotland the most entrepreneurial society in the world. We truly believe that that can be done. That's a society in which no one sees a barrier to pursuing a great idea. Sometimes it will be a business, sometimes it will be a great idea in teaching. It doesn't matter. It's that mindset of we can do this and let's get on with it. The biggest barrier is still some form of peer support. In the most entrepreneurial societies in the world that we look at, people do things because they know that the person next door has done it, or someone in their family has done it, and they need that reinforcement. When you've got a gap of no exemplars to follow, there is a place for organisations such as Scottish Enterprise, such as Business Gateway, such as local councils, but generally the business community to get involved and spread that message through early stage organisations such as Young Enterprise, et cetera. We just need to keep playing that message through. The great news is that from the 1990s, when I started out, there was a bit of entrepreneurial support. Today, there are fantastic entrepreneurial support networks for people wanting to start businesses. There are great second, third, fourth generation business angels and entrepreneurs that are there to help to provide capital. I would challenge people who say that it's very difficult. It should be quite difficult to raise money and to move things forward. It shouldn't be easy, but there's no barrier to it anymore. It's there. The biggest challenge for us is making sure that people can find the routes to do that. There's variability within the Scottish Enterprise Network undoubtedly. There are unbelievably brilliant people in there who have supported our businesses over the past 20 years, so we know who to go to and who the A-players are. Unfortunately, there are people who don't quite reach that mark. Sometimes businesses fall into a trap of being past from pillar to post with no real strong advice to take an earlier point. You need people who are practitioners, not just people who are lifetime Scottish Enterprise employees, and the good people who do it in Scottish Enterprise know how to connect those dots. The bigger challenge for Scotland now—we're starting to get beyond the startup challenge—whether metrics tell us differently or not, we really are—is scaling up. Some great insights would be had from things like Sky Scanner of late. The great Welsh-born Silicon Valley entrepreneur, Michael Moritz, who ended up as a major investor in Sky Scanner, went within two years from saying, I'll never really invest in teams outside Silicon Valley because they're on my doorstep and we know they're the best people in the world. Under Gareth Williams' leadership, Sky Scanner is probably the best team I've ever seen in a digital startup and I can't wait to find more opportunities where they've come from. The world suddenly is starting to look at Scotland, an international capital that is looking quite tightly at it. The difference between us and the Scandinavian countries, who are similar demographics but outperform us in startups and scale-ups especially, is a real joined-up culture from government to education to the private sector, who are promoting things like Slash. There's a big, massive inward investment conference that you would call it around high-tech in Helsinki that is just blowing the roof off in terms of bringing opportunities to Finland. We have some great success in Edinburgh here with EIE, which is driven out of Edinburgh informatics, but we don't take it seriously enough. We really don't put our shoulder behind the wheel and support it to the scale that other countries are doing. Nacent infrastructure is there, but yet again, we're probably not fully committed. We leach money into other things that are never going to return for us. This is the gold rush. This is where we should be investing our time and effort and money. I'll try to be entrepreneurial and perhaps bring in some others. Amel Strickland, Louise Smith and I think Joshua Ryan-Saha and Graham Jones also wanted to come in on this, so we'll start with email. In terms of e-commerce startups, again, it comes down to this level of awareness. I think that if you have a country or even an area of industry that is heavily aware of the opportunities, then people are more likely to look into and look at those opportunities. I think the fact that Scotland is indexed around 30 for a search term when other areas of the UK are much, much higher, particularly places which perhaps are not traditionally thought of as great tradits. If you look at Scotland's trade history compared to somewhere like Wales, you would hope that Scotland would be performing much better in the latest trends in international trade. Having that awareness there will encourage people to get involved much, much more because it's not difficult. There are loads of case studies from all over the UK. There's a company called Victorian Plumbing. Victorian Plumbing was started by a guy, I think it was about 15 years ago. He was working in Tesco, stacking shelves, and he wanted to start a business. His goal was to buy a Ferrari. That's what he really wanted to do. He started importing mobile phone cases from China and selling them on eBay. He grew it to the point at which he could afford his Ferrari. He then sold that business. He then had to unfortunately sell his Ferrari to finance a warehouse so that he could import plumbing equipment and sinks and basins and things. Today Victorian Plumbing is north of 100 million turnover in 15 years from selling mobile phone parts on eBay. There is a natural progression if you're a startup, if you can spot a niche, but you need to be aware of these niches. There does need to be education around it and there does need to be that support. Recently, we ran a workshop with Scottish Edge. Scottish Edge has some amazing small companies, startups, pre-turn-over startups. They're all really interested in learning how to do it, but they don't have access to that knowledge. I know there is stuff through Scottish Enterprise. I know there is stuff through Business Gateway, but it's not provided by people who have actually done it. I don't want to hate on Business Gateway or Scottish Enterprise because I do think they provide an amazing service. I'm particularly interested in international e-commerce and particularly interested in how we can increase exports. I'm just looking at statistics here that was something done by Boston Consulting Group. It says, for every £1 spent online to import goods, £2.80 is exported. This is in e-commerce and the opposite of true is true of the offline economy, which exports 90 pence for every pound imported. We're exporting three times as much online, but the UK rather is exporting three times as much online as we're importing. I think that's a really important part. When looking at the Scottish Enterprise International example, the two areas that held a lot of focus were letters of credit, which aren't really used in e-commerce terribly much. I've certainly never used one. The other one was translation. If you're not a practitioner, the obvious thing to do if you want to trade overseas is to translate your website, your packaging, all these things. You go, well that's obvious, that will increase sales 100%. If anyone in it practising it knows that often the inverse is true. There are a number of reasons why people purchase overseas, but one of them is that they trust UK goods. If you look at all of the statistics of trade and particularly with language, on average translation of a website leads to about a 2% increase in sales. Unless you're turning over huge amounts of money, the cost of those translations are never going to be brought back to the company. What do you have to turn over? I'm 10 million, 20 million. That's hurting startups that's not helping them. It's just one example of how knowing the right steps, like if you're a small company, get your stuff on Amazon, get your stuff on eBay immediately because then you can show that there's a market for your product and it's having that knowledge. Having someone say, look it's all right, just get your product on eBay. eBay's not full of fake Rolexes anymore. Just go and put it on there and this is how you do it. Gives people confidence. If you're thinking of starting up a company, I was thinking of starting up a company. My main thing is I can make the product, I know about that, but how do I sell it? I don't want to give up my job to have no money trying to sell this product. Get it online. See if there's a market for it. Right. Thank you. I'm afraid time is against this. I don't want to dampen anyone's enthusiasm here and it's good to see this amongst our guests today. Perhaps I'm fairly briefly from Louise, Joshua and Graham and then we'll move on to some questions from Andy Wightman, Louise Smith. Yes, sure. I'll just make a couple of brief points. In terms of financial services and fintech, we're seeing more and more accelerators, whether that's entrepreneur accelerators. We're also seeing fintech accelerators. Thinking from a Royal Bank of Scotland perspective, we've supported 3,000 entrepreneurs just in the last three years where they've raised around £250 million worth of capital to support them. So there's lots of places now that we're seeing within the industry where people can get coaching, mentoring, access to infrastructure and capabilities. To answer your specific question around what the top two barriers are, one of them I agree with Chris, it's how do we actually help people understand the support, the routes and the paths beyond start-up into high-scale up and growth areas and how do you continue that support through probably one of the more trickier periods. So I think that's one of them. I think the second one is, and I know we're starting to get to use Chris's phrase, our shoulder behind this, we need to make it easier for those organisations, particularly within FS, to be able to partner and work with and collaborate with the industry. I know there's lots of commitments we're working on, a process in which we can help people through those supplier procurement types of processes that have traditionally been a problem for people, but we need to do that quicker and faster. So I think those are the two areas that we can actually and are within our gift to actually start to address. I'll be very brief. I think just backing what Chris said earlier on, when it comes to Scottish economic performance, scale-up I think is perhaps even more important than start-ups at the moment. The reason being is when, I think it was a Nesta report, looked at job growth, there's two ways that a small country can really do that. One is where you have medium or small companies that can grow quite rapidly and you've seen that with Skyscanner and various other companies, and the other is where you attract new companies to potentially base themselves here. I think, again, both those things potentially rely on having a good skills base in technology and creativity and that sort of thing. I'll get very briefly all of that. What I would say is perhaps an early run on the board quick win is actually just really communicating what is out there. It's very, very difficult if you're a start-up, because we all have our own networks and connections to figure out where do we go, where do I go, how do I get the help. I've just written down the ones that I meet with Cando, Scotland, Entrepreneurial, Spark, Entrepreneurial Scotland, Social Investment Scotland. It's just about to stand up a £50 million fund Scottish Edge. All of it is fantastic. As you say, Chris, compared with when I came out of school, it's transformational what's there, but we just need to get it out there in a simple format, so our youngsters, whether they're in school, coming out of school or a second careerist, just know what support and the help is there. Turn now to Andy Wightman. Thanks very much, convener. Just a couple of brief questions. As Graham mentioned, at the outset of the Scottish National Investment Bank proposals, we've heard from people in this inquiry that getting hold of debt finance is not so much a problem, but getting hold of patient capital and equity is. I just wonder if anyone's got any particular views on what they might be looking for for the Scottish National Investment Bank to grow and support the sectors that you're working in. Secondly, from other small countries like Denmark or other sub-state regions like the Lender in Germany, what ideas have you got as to how we can support growth in the sectors that you're working in, what do other countries do well that we could learn from? I'll start very briefly. I think that you're absolutely spot on with what you said, Andy, in terms of patient capital. I think that with SNIB, I think that the potential that we've identified, and I've been working, we've submitted a consultation paper to them early on last, or should I say, late last year, back to fintech. There's a point, and I'll bring in probably Chris and Louise on the back of this if I may, but there's a point comes when you're starting up a fintech and the ones that are successful, where you just need an investor that's going to stay with you for a period of time, maybe two years or something like that, so that you can refine your product, you can get your product organised, you can get it to market. That is where you do need some patient capital before traditional forms of financial then kick in and pick you up. I think that from a banking financial services standpoint, that would be the sector of the market in particular. We would see SNIB being very helpful, but, as I say, I'll be defer to Chris and Louise on that. Peter Mofforth would like to comment on that. One practical step that could be taken is to do e-commerce feasibility testing for anybody who wants to do it. You don't have to guess about whether an e-commerce business is going to be successful or not. There's a huge amount using analytical approaches, looking at search volumes, market trends, and all of the parameters that define whether a company is going to be successful in e-commerce is open to measurement using big data, AI techniques, machine learning, and so on. That's something that, if that were offered as a service through an investment bank, that could produce a really valuable thing to reduce the risk, to know that you're going to be backing winners. It's a very simple thing and that could be done here and now. I'm Chris Van der Cael. To pick up on Scottish National Investment Bank, one comment that I would first make is that I know that this has been a source of much confusion to many people, but the current Scottish Investment Bank SIB, which is within Scottish Enterprise, has been hugely successful in partnering with patient capital in Scotland. It's a great model that we shouldn't lose, and I know that it's not the intention, but the team there has partnered, for example, with many of the Scottish private investors in TV Squared, which I believe will be a fabulous outcome for everyone. The model is quite simply that someone else leads patient capital, comes in, an SIB and a long-term trusted partner, who then give a lot of stability into the investment. That's been a great model and we should continue it. To me, the Scottish National Investment Bank model is the consultation that's just come out. If it focuses and if it makes big material plays into sectoral change, it will be successful. If it ends up—and I hate to say this in this room, but it's slightly trying to keep everybody in the Parliament happy and every personal agenda and local challenge, it will not be successful. It needs to focus on certain things and I'm not going to say—it would be obvious to the things that I would think it should focus on, but there will be a number of strategies. Within the consultation paper, it talks about that, but then one can interpret it as why that could go so wide and broad. It will have no impact. To me, in terms of this idea of patient capital, there is a huge opportunity here and I think it's a brilliant idea, but it will only deliver if those behind and those responsible for directing Scottish National Investment Bank make some pretty tough choices and go for whatever the core growth sectors are rather than trying to plug gaps that everybody jumps on a hobby horse in place of. Any ideas on what we can learn from other countries? It's a dominant conversation, but I can give you one that I remember as clear as day, in the late 1990s, Scotland received a learning visit from the Israeli equivalent of Scottish Enterprise, and I remember listening to the chief executive talk about their strategy. At that point, Scottish Enterprise had a slightly larger budget than it does today, and at that point of a country that has a population of very similar scale to Scotland, they spent exactly the same budget that a Scottish Enterprise did, but only in high-growth, principally technology-based businesses and support for those who were a Scottish Enterprise. Under Robert Crawford, at that point, I had to balance between infrastructure and training. At that point, I just made an answer to the previous question. I diversified out of existence, and if it had focused on the way that the Israelis had done, we may well have the second-largest source of NASDAQ-listed companies in the world behind North America, as they do. And Louis Smith wanted to come in on this. I was just going to reinforce Chris's point. It is absolutely critical. If you look at any of even the European players—Israel—I was actually going to use Israel, even India now, in terms of where its focus is—an Asia pack, we are seeing targeted areas of focus in growth strategies not going for everything. That means tough decision making, and then once those decisions are made, it is how we then stick to them. I do not think that any more complex than picking those areas and then a strong and clearly delivered strategy to continue to push for them. You can pick all of those areas and you can actually start to see those ones or twos that emerge as areas that are focused on Israel's fairly obvious India. Again, we are seeing huge amounts of disruption and growth in wallet but also credit risk decisioning. How do we continue to stick behind those decisions? Emile Strickland. Mine is more of a kind of cultural learning as opposed to an actual strategy. If you look at the kind of Californian model, there is much more encouragement for the kind of creative destruction. So you are funded and then if you are not successful, you die, but you have an opportunity to try again. And then you can die and you try again and this kind of shampaterian model has proved to be very successful. I do not think that that is mirrored in Scotland. It is a kind of one-shot and if you fail, not true in all cases, but it is more of a one-shot and if you fail, you are not able to raise finance in the same way again. Do you want to say that to get it on the record? Yes, my comment is, and this from the country that brought you, Robert The Bruce. I think that's probably our time up, so we'll finish on that comment. Thank you very much to all of our guests for coming in today. I'll suspend the meeting so we can change over to our next panel of witnesses. Good morning again and welcome to our second session with another witnesses round table this morning. I think that most of our witnesses were in during the last session, so I've seen how things operate. No need to press the buttons in the desk in front of you. The sound desk will operate the mic system. If you want to come in, simply indicate by raising your hand and I'll try to bring you in as and when we can. We'll try and keep committee members' questions brief to allow our witnesses to speak a bit more. I'll just start with our guests, perhaps a few. We just give us your name, organisation and a very brief introduction to what you do. We'll start with Stephen Good and move round the table from there. Thank you. My name is Stephen Good. I am chief exec of the Construction Scotland Innovation Centre. We were in Scotland's eight innovation centres helping to drive growth and economic impact, social impact across the construction industry in Scotland. Mark Baxter, managing director of Gallowford Tri Investments, and now recently Facilities Management Business. We do a lot of infrastructure work across Scotland and the UK. Good morning. I'm Alasdor Whaley. I'm chairman and chief executive of a company called CCG in construction in Scotland, predominantly in Scotland. I'm glad to be here and help to contribute. I'm Donald McCaskill. I'm the chief executive of Scottish Care. That's the representative body of social care providers in the independent sector. That is non-statutory providers, charitable and for profit. I'm working mainly in older people's care and support. I'm Annie Gunnar Logan. I'm the director of CCPS, which is the coalition of care and support providers in Scotland. Very similar job to Donald's organisation with the difference that our membership is only non-profit, voluntary or third sector providers. Our range of activity goes right across the spectrum of social care, so children and families, community care, adults, older people, homelessness, criminal justice, you name it. Very good. Thank you very much. I'll open with a fairly general question, which you may wish to adapt or consider in the context of your own particular sector. If you can give comment on the Scottish economy, how it's performed over the last 10 years, how you see it moving forward generally and also in relation to your particular sector. Who would like to start off with that? Annie Gunnar Logan. Over the last 20 years, the voluntary sector's market share of social care, if you like, has grown exponentially. It's unrecognisable from where it was. In the last 10 years, not so much, I would say. Our membership has a combined annual income in Scotland of about £1.1 billion. Around about three quarters of that is from the public purse and the rest is from other charitable income, fundraising, legacies, big lottery, grant making trusts and so on. That hasn't changed enormously in the last 10 years, but growth has been quite modest in the last 10 years. That's the combined effect of public service expenditure restraint, linked with austerity. It's also an effect of public procurement reform in Scotland in particular, which has focused very much on driving down unit costs and getting better value for money. Our membership and the voluntary sector more generally have pulled off the feet that are often talked about, but seldom seen, which is doing more for less. That's where we've got to now. Where we're at at the moment is a bit of a crossroads, because what lies before us is increasing public service and public expenditure restraint. That's the narrative that we hear. I think that the particular circumstances for the voluntary sector in social care are a bit different from some of your other witnesses, because what we are dealing with is what we would call a monopsony purchaser market. There is one purchaser and that is the public sector, usually through local authorities, health and social care partnerships. In the voluntary sector, there's not a great deal of what I would call private funders. I think that it's slightly different for Donald's world. We're at a bit of a crossroads now, because social care is all about people. In our sector, up to 85 per cent of the cost of any non-residential service is going to be workforce costs direct or indirect. We've driven down the unit cost of care now to the point at which the Scottish Government had to come riding to the rescue a couple of years ago with a commitment to pay the living wage in care because we were descending very much to a minimum wage industry. I know that that's of interest to this committee because you also have fair work in your title. I'd kind of stop there because I know we'll get into the discussion, but let's just kind of setting out a broad picture for you. Thank you. Dr MacAskill. I agree completely with everything that Annie's just said. One of the reasons that both Annie and I welcomed the opportunity to come to this committee is that too often social care is seen as a detriment, as a drain, and the language that we use around social care is not around innovation and entrepreneurship. However, the reality is that, particularly in small organisations, there is an astonishing degree of creativity and innovation happening up and down the country. We recognise that the contribution of social care to the wider Scottish economy is something in the region of several billion pounds, and our paper and submission highlights research that is on-going on that matter at the moment. All too often, that is not the narrative that we hear, so we talk about how we can reduce costs and how we can limit the amount of resources that the state spends on social care that is predominantly public financed. However, we contribute a huge degree. One in 13 Scots works in social care. We have a contribution through enabling individuals to go out to work because a family member is being supported. We also have systems in Scotland that enable individuals to live independently and to maximise their own potential. We would like to see in the next 10 years a re-emphasising of what we mean by Scotland's economy. It is not just the fiscal, the technological economy, it is that social economy that enables Scotland to be a different place to live and to work in. From that perspective, although there may be a retraction in terms of the amount of fiscal expenditure, there is opportunity to expand our social care economy. Mark MacDonald apologised. That will probably come across pretty negatively, but you will be reading some of the press about the industry that I am in at the moment. The industry is not in a very good place. I would like to adapt the question slightly in terms of where we find ourselves at the moment. The UK-wide infrastructure industry did about £80 billion of turnover last year and lost collectively £1 billion. That is not sustainable. The last three large Scottish infrastructure contracts have been an unmitigated disaster for the contractors involved. We need to move forward from that. There are a number of threats looming for our industry going forward, Brexit being the biggest one. It is one thing that we can probably be sure of as there will be labour migration away from our industry. That is a big threat for Scotland in that what will happen is that the contractors will use the resource that they have and pull in, so the extremities—we work in some pretty rural locations and just built a fairly sizable school in Shetland—the extremities will suffer. I am seeing a number of threats here. I think that there is a job on for Scotland to market itself as a place to do business and a place to do these works. I see the threats to us as an economy more than the opportunities at the moment. Big international contractors will not come if we are not attractive enough. That is the reality that I am living at the moment. I am just wondering about the unmitigated disasters that you referred to. What do you mean by that? Financially and commercially, the M8, the Aberdeen bypass and the bridge have not been a success for the contractors involved. You can see that Carillian has gone to the wall, not solely in the back of that project, and Lagan is also struggling. The contract styles and types that we are signing move too much risk to one side where the risks are not possibly understood or known. We need to move towards a more partnering contractual basis. NEC type 3 contracts, target cost tree and burstable, the idea of fixed price lump sum with uncertainties and large infra projects have not worked for the last three. From the public sector, we have a bargain there, so that is great, but that is not sustainable. I am just wondering about the Brexit that you mentioned, but in terms of procurement, that will make it possible to approach such projects differently in the future. I think that there are already options open for us, and what we have tended to do in the past is look at 70 per cent price, 30 per cent quality. We can, under the regimes that we have got at the moment, still look to 100 per cent quality, zero per cent price at the extreme or other forms of contracts. There are options open to us at the moment. There might be more options open up under the Brexit piece, but that remains to be seen. We have a slightly different take on Mark. We are an indigenous Scottish business, and some of the frameworks that we have been successful in gaining entry to has given us a direct route. There is still some improvement in the manner in which the frameworks move on. However, the aspect of open tendering in our very small market—we are a business of £130 million, so we are not grandiose in the £1 billion area, but we find that being in Scotland, having engagement directly with frameworks, has assisted us. I know that we are going to go on and talk about skills and training, and I can give very good statistics about what we have done as an indigenous business. We know that there are some aspects of the Brexit and what have you, but we believe that, in terms of social housing and the investment with the Scottish Government in that area, it has certainly helped us as a business to sustain and, in fact, grow. We have now got 700 employees on our books, and that has all been a result of performance. We know that there have been some difficulties in some of the bigger projects that Mark has just described, but the environment that we are in is less troublesome, and there is a more compassionate manner in which we do business, certainly in my experience, over the past three or four years. I echo Alasdor's comments and perhaps not quite as glass half empty as Mark has approached it. The Innovation Centre was born in 2014, so we have been here relatively short period of time, but in that time, the engagement, particularly with SMEs, micro-businesses within construction, which makes up the vast majority, over 95 per cent of the businesses are. They have a huge appetite for innovation and for doing things differently and for change, and they tap into a network now, including the Innovation Centre network in its widest sense, that did not exist in 2007. If you go back, as Annie says, 10 years before that, there is an interesting comparison in terms of how we have just listened to a lot of people talking about the digital side of things and technology. Google was formed in 1998 and the construction industry wrote a report called Rethinking Construction by Egan in 1998. If you look at the difference in those two industries, as they have developed over the past 20 years, I think that the construction industry in Scotland's best years are more definitely ahead of it, and I think that we are in a really interesting place now in terms of the opportunities that exist moving forward. All right. Annie Gunnar-Long wants to come back with a comment, then we will move to questions from Gordon MacDonald. Annie. Thanks, convener. It was just two something that Mark said resonates with me, and that is about the sustainability of public contracts, in particular. This is a very significant issue in social care for our sector. Every year, we do what we call a business resilience survey. We used to call it the provider optimism survey, and we had to stop calling it that. It is now called the business resilience survey. It is along the same lines as the CBI just tracking trends. In 2016 and 2017, the proportion of our members that had walked away from a contract and withdrawn was 20 per cent. Last year, that went up to 33 per cent, so we've got a third of providers who are now saying, I can't do this anymore, this is not sustainable. The same survey told us that 60 per cent of our members had declined to tender when an opportunity arrived just because the numbers don't add up. There's a bit of a resonance for me there about the future sustainability of public contracts in particular. We're not talking about private purchasing here. Gordon MacDonald. One of the issues that we've discussed in previous weeks is productivity. We know that productivity has improved in Scotland from 94 per cent of the UK rate in 2004 to 99 per cent in 2016. However, we heard from the previous panel that the pace of change is increasing all the time. I wonder how you see the technological change and automation impacting on your own sectors. One of the challenges for social care is that technology comes with a cost, which involves implementation, design and training, and equipping a workforce. Annie has already alluded to the reality that both for her members and our members in a sustainability survey just a couple of months ago, many of them are worried about actually being able to continue to deliver the service. Are we going to have enough workers to engage in social care at a very basic level? The space for innovation is very cramped and very limited, not least if public contracts are ripping out between 12 and 15 per cent of allocated costs for training and learning and development. Training people to do the job is basically what most providers, whether in the charitable voluntary or private sector, are just about managing to do. Some are not managing to do it. However, many see technical innovation as a real potential, so technology that enables you to map an individual in their own home to see whether or not she or he is becoming more frail because of the way in which they use the kettle, the way in which they move, the frequency in which they put their lights on. We see real potential for that and there are many instances in which technology enabled care, which has been developed in Scotland, has been exported elsewhere. The problem is that we need to use that in appropriate balance. Technology cannot be used as a cheap mechanism to remove human presence. For me, ultimately, with a palliative care background, I think about the most crucial human relationship that is towards the end of life. I would value and can see the place for technology in enabling my pain management, but at that point, as in so many points of social care, we are about human beings, we are about human touch and human presence, so technology can certainly enable presence, but it cannot replace it. I think that Alasdair Wiley. Another point of our business is that we invested about £10 million about eight years ago in a production line for off-site manufacture. The construction industry in Scotland has about 80 per cent of the houses built in Scotland, our timber-framed construction. We went beyond that. We invested in a technology that was imported from Germany, I must admit, and close panel construction. That has enhanced our ability to increase efficiencies. It has also enabled us to be much more competitive. In fact, we are now considering—not considering—we will be putting in a second shift. We currently employ about 50 in our off-site manufacturing base in Canbassline. I am talking to our managing director tomorrow meeting. We have now put together a proposal for shift working, so we are going to keep our 50 on our first shift. We are going to duplicate that by key operators being introduced on a short-term basis for the second shift, and that second shift will be in place by September. The technology that we have grasped has enabled us to perform better. I know that one of my colleagues is involved in the off-site solutions. Again, that is an amalgamation of timber kit constructors in Scotland. That group is together as lobbying the Parliament for more support. We went much beyond that. We have got the state-of-the-art production facility, because we knew that off-site manufacture back then was going to promote us and be the right place to be now and in the future. However, what we have now got is research and development. We have now got to look at that. We know that people will catch up on us, so we need not to sit rest in our laurels. We need to look at the future and how we can develop what we have got. So much so, the company that we bought this stuff is a company called Vyman. We have had the production guy in our factory two weeks ago who is looking at how we can improve our output with the equipment that we have got and additions that are currently on the market that we can interface with our current production line. A few years ago, I was very fortunate to visit CCGs premises at Canvaslang. I was very impressed by what you guys were doing on-site. I think that you built the Athletes village for the Commonwealth Games. Traditionally, construction in recent years has had low growth and low exports, but the UK Government announced in the autumn that it will prioritise the use of off-site manufacturing and have highlighted the Department of Transport, Department of Health, Department of Education, Ministry of Justice and Ministry of Defence that there should be a presumption in favour of off-site construction by 2019 for capital programmes. How is Scottish construction currently set up in order to exploit that opportunity to give us a bit of growth and to give us more employment opportunities? And how is the Innovation Centre—if we can hear from Alasdair First now and Stephen—how could the Innovation Centre help with that? Forgive me, I might be a wee bit insular and faroq, on my outlook. What we want to do is believe that there is a market in Scotland for us. That business that I am referring to just now turned over a modest £10 million. We see that being increased next year to £13.5 million. We see that being Scotland. What we need to do is embed the second shift. We need to ensure that the capacity and the efficiency of that capacity can serve as that market. We did have some penetration down south about four years ago, and we took a bit of a nosebleed, which was not good. However, I read all these statistics going on. I know that there is potential down there, but the way I work our business is a fact. We make it right. The foundations are solid. Once we have got it right, once we improve efficiencies, once we have got a second shift in and everybody is reading from the same hym sheet, then we can decide whether or not. However, it is good to know that there is that investment down south. We see that being a market that is in our vision, but not currently. We want to make sure that we embed what we see being the good things in construction and then move forward from there. I would add to that that there are companies such as CCG that have invested significantly in the future technology training skills using digital solutions to deliver construction output. They are not alone, but they are one of the leaders by some significant margin. The job of things such as Offsite Solutions Scotland that we facilitate on behalf of the 10 companies that are involved in it is really to give them that platform to go and explore the bigger opportunities that might exist. Alistair is right that there is a huge amount to be said in the athletes village, which is a case in point where local companies delivered a hugely successful solution in terms of the housing piece there. That consortium, I suppose, was part of the forerunner in some respects to Offsite Solutions Scotland, where there are now 10 companies leading offsite manufacturers at different scales within their development. Some produce no more than 10 or 15 houses a year, but they are using very highly offsite solutions. Some CCGs such as Stuart Millan and Robertson group that produce thousands of houses a year homes across the UK. Where there is a huge opportunity is picking up on things such as the industrial strategy challenge fund and the sector deal for construction that has done two things, hopefully by smart design. One is to put a significant amount of money on the table to pump prime innovation in the construction industry, but the other thing is to satisfy, and it picks up on a point that Mark made around the procurement sort of piece, is that that in itself will not fundamentally change the construction industry. Given that, if in Scotland alone 60 per cent of the construction activity is public sector client led, public sector clients therefore have a huge opportunity to drive innovation within the industry. A smart client is ultimately the best thing for the industry to respond to, and if departments within the UK Government are feeling confident enough and the evidence appears to support what they are trying to do enough to put their weight behind a presumption favour of offsite manufacturing and all the digital construction activity that supports that, that is a good sign that the Scottish Government to satisfy the point that Alistair made about what we can do with the indigenous Scottish companies here that are world leading, frankly, in terms of the timber engineer, and everybody thinks that it's Germany and Scandinavia in Austria, it's here, it's companies like CCG and others that are doing it. There's a huge opportunity to align those policy decisions, the procurement side of things, around how that stimulates for an industry that operates particularly low margins often, how it can invest in innovation and our Indian skills. I just wanted to bring Mark back, so I think in on that point I'll come back to Gordon and go to Kezia Dugdale. Even touched on a couple of the points I was going to make, one of the challenges we've got as an industry is the margins we operate on, so turning around and saying I'll invest £10 million in a technology that may or may not pay off, that's £1 billion worth of turnover to make that investment just on the sort of margins we work at the bottom line. We have seen some advances, so BIM's a good one, an intelligent client promoting BIM and so business model, building modelling, so we know exactly what we're building, makes buildability better and improves health and safety as well. But if you walked around a site this year and had walked around a similar site 20 years ago, short of hard hats on and glasses on, it's people on the end of shovels building these buildings, so we've not moved on as an industry and it's a big frustration for me where is the big leap in our industry going to come from to make us sustainable. Modular, if you're building the same thing again and again, there's definitely opportunity there. When you're building bespoke asset again and again, then that's more difficult. I think there's a government could press modular in areas like schools. We've tried to with limited success councils see it as forcing a single product down their throat. I see it as being more efficient and being able to give public sector more asset for the same buck. So if we could press that sort of agenda for more consistency, we'd see more sustainability, we'd see a better product, we'd see less defects. There's a number of benefits from that. In terms of, you're saying that the industry hasn't moved on in recent years, in terms of procurement, is there anything that the client can change within procurement to encourage innovation, not just in the construction sector but also in the care sector as well, is there anything that can be changed within procurement? Yes, I can answer that. Direct appointment. Just on the point that I don't want to go against what Mark is saying, we built the highest CLT construction in Scotland. We've finished it, we've just finished it, it's handed over next Tuesday, seven-story high at Yoka. We're no frightened to take the leap. It's a 10 million as well. If I thought I was going to make money out of 10 million, I wouldn't have put it in. I had a belief that we could do it on a similar basis. We had the idea that we were supported by Napier to do a project for CLT, the commercialisation of home-grown timber in Scotland. We had to back off because legal and general homes were going to invest 55 million. We bought our premises out at Eurocentral, 130,000 square feet. We've since let it to Lidl, but that was bought in a desire to promote CLT on top of the close panel. We're no lacking innovation, not a bit. You know all you need to know. The point that I made earlier was that we're not going to get down to England unless we know that that is a fertile place to be. Once we are confirmed that that's going to be that case, we'll put the posse out and see what's done there. Annie Gunnar-Logan. I think that there's huge potential for tech in our sector. The concern that we have is that commissioning authorities will see tech as a replacement for people rather than as an enhancement of the service. If we could get that right, we'd be able to get on a bit further. Everything that Dawn said about replacing the human contact of social care, that's what makes it effective. Just giving someone a button to push instead of a support worker to talk to, that would take us further back rather than further forward. In terms of streamlining organisational processes, the potential for tech is massive. Given what I said about the sustainability of public contracts, organisations are now returning very modest or no operating services, so they don't have the R&D investment capacity themselves to do that. They're either borrowing or they're looking for grants to do that. The potential for the kind of efficiencies that you're talking about and productivity gains is there, but it's where you get the investment. Going back to what Donald said at the beginning, social care is so often seen as a cost rather than an investment. Part of the great delight, if I may say so, of speaking to an economy committee about this, is to try and turn that round. Normally Donald and I, at our home, are to the health and sport committee here and local government committee to a lesser extent, so it's quite good to bust out of those confines because that is where we are seen as a cost to the public purse rather than a contributor to the economy of Scotland. I think that that's where this kind of discussion is really, really helpful. Just very quickly, I think that we've also got to recognise that technology is not neutral, so unfortunately in social care a lot of technology has been used as a contract monitoring mechanism and is having a very detrimental effect. There's a particular piece of software that I will not name that is utilised to track whether a worker is where he or she should be, and if that worker either isn't there for a particular period of time, that worker and the organisation is not paid. There are real fair work issues around the use of technology in the social care workplace, which I think that the committee should be aware of. In terms of the question around procurement, both Annie and the organisation on our own have for long campaigned for us to change the way in which we buy and commission care. We need to embed what we have in Scotland, which is a very solid piece of statutory guidance on procurement, which is based around the person, human rights and orientation and emphasising the voice of the individual in the purchase of care. We're not abiding by that in most of our contracting mechanisms, which tend to, and increasingly in austerity, are seeking the lowest cost, not necessarily the highest quality. First of all, how would you rate the quality of support that you get from enterprise agencies or skills agencies? Donald, you mentioned earlier that much of the cost of training is borne by your members rather than something that the state carries. Secondly, looking forward, how big a deal or how hard is the end of the free movement of labour to your respective sectors? Alasdair Wiley. I guess that we as a business have 32 trainee managers, and we've got 71 apprentices. The whole idea there was that we did get support. We run through all the colleges that are available, Napier University and Caledonian University, so we're well supported there. If you have got the desire to create a DNA within your organisation, a culture within your organisation, it should not necessarily stop at the elements of finance. We do not get covered for all the apprentices that we employ, but we need to replenish the industry. I was very fortunate as a young man to enter an industry that was sustainable. I'm very aware of that. My duty now is to make sure that it's perpetrated beyond that. Therefore, we don't look at it as what we get for support. We have all the colleges, and I asked my HNR people yesterday when I was coming, who are the good performers, and they couldn't rate them. They could not rate them. They couldn't just make any disparity between what the performance was and about 10 colleges that we work with, and then the two universities, Caledonian and Napier. From that point of view, we believe that, although financial support does not maybe square up, there are greater benefits to us as an organisation going forward. We went to the market years ago and tried to entice people of quality to our business. We found out pretty readily that we had to grow our own, and that is really what we have been doing now for the last, what probably, 10 years. Last year, we took on 25 apprentices, and fairly recently, trainee managers, we took on about seven, and that supports what we want to do as a business moving forward. That's how we see the hierarchy. What we've got to do as a business, we've got to make sure that we engage with that group to ensure that they see a flow moving forward, that there's no a dead end, that it's not about what do I do beyond that. Fairly recently, we took on some very small projects through East Ayrshire Council on, again, a framework. My managing director approached me and said, look, there's some of them that are very small, you know, 20 units. I said that it's ideal to give stepping stones for our management trainees, and it's worked out that way. From that point of view, we've got no criticism about support that we get. We have the fortunate position of working across 13 universities and, fairly soon, almost every college in Scotland to support that pipeline, but actually going a little bit further upstream, I suppose, into primary schools as well, to sometimes dispel that myth that construction often is viewed a bit as an industry of last resort and not an industry of choice. That covers all the different aspects of how attractive the industry is to women coming into work, how attractive that industry is to kids generally who, coming back to the previous point about technology and digital, what are the opportunities that construction industry can offer in that skill sense? I think that it fuels a little bit to us, certainly, that construction is on a bit of a cusp of a digital revolution, and that's a good thing if we want to attract the talent in the future right across Scotland to work in that industry, which will need to support the investment that businesses are making in apprenticeships and graduates and right across the whole piece in terms of growing talent as well within businesses. That part also touched on that part about culture and that for an innovation centre that supports businesses around products and processes innovation, that's obvious, but actually a big part is that around that business innovation, it's the culture, how do you develop businesses that people want to go and work for because they're passionate about what that brand is trying to achieve and develop and grow with that business and that's hugely important. There is, I think, the reality, and again as an innovation centre it's not unusual for us to be probably a little bit further ahead in terms of the technology we are aware of, the opportunities that the industry has on its horizon, but the training that exists is certainly more focused on the traditional skills at the moment, but there is a huge shift, a huge move, a huge awareness and we're working with a lot of the colleges and universities around the area of augmented reality, virtual reality, off-site manufacturing, robotics, all those different areas where there's an opportunity for industry to capitalise on what that technology can do to support the growth in industry, not replacing skills for replacing skills sake, but actually creating higher value jobs within industry, creating environments that are possibly more attractive, if your perception is construction industries pushing a wheelbarrow around a muddy building site, that will turn a lot of people off from this industry, so if we can showcase this industry as being vibrant and dynamic and technical and digital from that point of view, then the skills, the talent coming through from primary school all the way through will recognise this industry as a huge industry with a vast array of opportunities, whether it's in the professional side, the operational side, and that can only be a good thing, and I think a lot of the colleges, universities and through working with programmes like DYW, there is a huge realisation that construction has that variety to offer, it just takes a number of different things that are already in play to be perhaps joined up. Dr McCaskill and then Mark Macksthrough. One of the phrases that I keep hearing and really resent is the phrase, it's just caring, it's not very skillful. To care is an immensely skillful activity and if that stereotypical view might have been valid 30, 40 years ago, it's certainly not valid now. The average care worker is engaging in highly skilled professional activity, take for instance palliative and end-of-life, the 56,000 people who will die in Scotland this year, the majority of them will be supported by a social care worker towards the end of their life, and yet we do not have a distinctive priority in commissioning contracts to enable those individuals to be properly skilled just as an example, so we need to in social care challenge the presumption that we're not talking about a highly skilled professional walk of life. Secondly, I would love Scottish Enterprise to have a dedicated team that considers the contribution of Scottish Care, that would be a different, of social care in Scotland, because if social care is going to contribute, as we think it already does, then we need to see it as something worthy of investment, of growth and opportunity, and we don't have that. Lastly, the Brexit question, Scottish Care has already presented evidence to both this committee and to the Health and Sport Committee of our significant concerns about the potential impact of the inflexibility of inward migration and, more worryingly, the already drain of individuals leaving social care and, particularly, social care nursing in Scotland. We are potentially facing a very, very real challenge. On the one hand, we do not sufficiently reward individuals, even with the Scottish living wage, for a highly skilled job, and on the other hand, we're seeing people who do choose to work in the sector being uninvited because of what is happening elsewhere. Mark, thanks. Something that Stephen said and then melted with a comment that I made earlier, which I think referred to your second point of question. We have to work tremendously hard as an industry to outwardly look attractive, I think, in a world where you can join the tech sector and do clever things on your PC, etc., etc. So we have to work tremendously hard. I don't think that as an industry we're particularly tied up on that. We look at our own requirements for that year and visit the colleges that are local to our different offices and the universities, etc. So I think that we could be more tied up on that. I do see, as I said earlier, with Brexit come, that's going to become more of a challenge and I think that's acute for Scotland, given where we sit in the whole piece. I just wanted to echo what Donald said. I do think that we've got a bit of a public image problem in social care because it's seen as a very low-skills, low-grade area of activity and nothing could be further from the truth. The skills that are required by the workforce in our membership is really about supporting and challenging people to control their own lives and make their own decisions. It's not just coming in and doing things that people can't do for themselves. It's changed out of all recognition, really, as a skillset. What I wanted to raise in the context of this question isn't so much about the skills at the front line but its leadership skills, which I think is a huge issue in our sector now, because, as I said earlier on, we're not looking here at a boom time where the skills are around seeing opportunities for growth and going for it. The leadership skills we need are about change and transformation. Certainly in the voluntary sector, there's a bit of a cultural attitude to the voluntary sector. Sometimes the real skills are somewhere else, not in our sector, but when you consider the journey that some of our organisations have been on and the real reserve that's there of leadership skills, the public and the private sector have got quite a lot to learn from us. On this question, I just wanted to make sure that I put this on to the agenda. That's the impact of the apprenticeship levy in our sector. You'll know that this is a 3 per cent jobs tax, in effect, on any organisation that has a payroll of over 3 million. Unlike our colleagues south of the border, there is no direct line of sight between the money that you put in to the apprenticeship levy and how you're then able to extract that in terms of skills development and apprenticeships and so on. I really do think that that's an issue. We're going to go and see Jamie Hepburn about that quite soon because that's a very significant problem. It just is another cost to an organisation that, as Kezia said, is training budgets in our sector already under very significant pressure, and this is yet another cost on top of that. Brexit is obviously a workforce issue. It's less so in our healthcare and support in some ways. Our membership is looking at up to 4 per cent of its workforce being EU nationals, who's status is now questionable. I think that in Donald's sector it's much, much bigger than that. NHS is where the real Brexit issues are, I think. The following from that is, if you have a reduced working-size population and the pressures on your sector are going to increase indirectly anyway, my follow-up question is more specifically about who—this is for the care professionals. Apologies to my construction colleagues, but I think that the points are well made in that sector. Who pays for the innovation and the change that you are seeking to drive in your respective industries? I remember three or four years ago, Change Funds, where Derek Rgar, if you were a private sector entity, you could go to Scottish Enterprise to try something new, or there would be some sort of angel funding to experiment with a new way of doing things. How does that work in your respective sectors? Does it exist? Is it something that you pay for entirely yourself and are the pressures on that even greater because of the wider cost pressures that you face? It's a mixed bag, really. Some of our members have had really good support from business gateway, from enterprise agencies and some of them not. Generally, the attitude seems to be that if you were setting up a plumbing company in Glasgow and you were going to employ 25 people locally, then you would find the local authority would be rolling out the red carpet for you, would be referring you to all kinds of support. If you're going to set up a care service and employ 25 people, we go back to, oh, you're directed to social work and you are therefore at a cost. So it is a mixed bag, but the Change Funds were really, really interesting in social care because the voluntary sector took them and ran with them and did some really great innovative staff. Then the Change Funds came to an end after three years and they all closed down again. There was no real sustained attempt to get those mainstreamed. By and large, I would say that most organisations, when it comes to R&D innovation, they're having to fall back on their own resources mostly. The return of the Change Funds would be welcome? It would be welcome, but as long as they were handled differently and not seen as a three-year thing to do something interesting that may or may not then be taken forward, because that's what we don't want that again, really. To add an agree with Annie, one of the differences between the independent sector is that we're significantly dominated by SMEs, so small organisations, who, yes, have the potential to be more entrepreneurial and come up with innovative solutions, but when there are real workforce pressures, 9 out of 10 struggling to find front-line workers, that capacity to be innovative and entrepreneurial gets pushed. It would be welcome for a particular focus on innovation in social care, which was adequately resourced and funded, and which was supported. Listening to the earlier contributions, there needs to be an ability that we don't have in social care that, if you introduce an innovation and it doesn't work, then that has a very immediate effect on individuals and on their care and support. We, in many senses, have to approach risk around innovation in a very different way. My earlier plea wasn't tongue-in-cheek. It would be really good if organisations like Skills Development Scotland, Scottish Enterprise and Business Gateway began to focus on social care and didn't just see us as the cost or as something unworthy of intervention. One of the things that annoys my members is that we know that contracts are being handed back all the time. Annie has already referred to this. Whenever there is a failure because of a contract in social care, we don't get a ministerial task force set up even if there are five times the number of workers impacted in our local community, particularly in rural communities. We need to change the language, alter the dialogue and see social care as worthy of intervention and enterprise as any other walk of life in Scotland. Very briefly, from Kizya Dugdale then on to questions from John Mason. Thank you, Donald. That's an excellent point, but my final question was for our construction colleagues just to even up a little bit. Mark, earlier, your words were that the M8, the Aberdeen-Western peripheral route and the new fourth crossing were all unmitigated disasters for the private sector. It could be interpreted from that that they were a huge success for the public sector and I just thought that you might want to offer something for the official record about the consequence of continued unmitigated disasters like this on the private sector's capacity to do these major public infrastructure projects. Okay, I'm not sure that... Public sector got more asset for its money than it paid for. That's a good deal, but long term that's not sustainable because Carolian went bust. If we all keep going bust and we've got 43,000 people unemployed and the cost of Carolian on UK PLC, I would imagine outweighs the benefit that we got from these off-market prices. Is that the public sector's fault or is that a question for your industry? I think no. I think there's the dual fault there. Private sector shouldn't have taken these contracts on at the prices that they took them on and my company, as you know, were involved in one of those projects. The contract form is what I don't think is sustainable going forward and we won't be doing these again. We are already on record the same, we will not do that contract form again. Large infrastructure on fixed price lump sum, we will not do going forward. The risks and the rewards don't tally up. So private sector stupid, public sector done well on these contracts, but that is not sustainable as an industry going forward. I'm just conscious of times. Are you saying that when your companies looked at the contracts that were offered to them, you didn't do due diligence on it and identify whether you had a profit element of the contract before you signed up to it? I think that it was absolutely not. I think that people got it wrong. They got wrong what they thought they were taking on and the risks they thought they were taking on and trying to manage those risks across a time period is not sustainable going forward. You'll find a number of people saying the same thing about these contract types. There are contract types that we can operate where there's dual benefit. So NEC type 3, target price, Gainshire Payne share, all of which doesn't involve pushing all the risk across to one side and all the pain across to one side. Equally, if you push all the risk in all the pain across to one side and the money across to one side and these risks and pains don't manifest, you've not got a very good deal. Equally, in the next one, the people looking at price and other trams, for instance, may look at some of the things that have been going on and say, here are the prices you're going to get public sector and you may not get a good deal there. I just don't think that that's a very good balance. Super profits and super losses don't make a great deal of sense to me. Shouldn't we go into it? With 2020 hindsight, you've done a good job. Here's a fair profit. We're delighted with what we've got and a profit. Again, a pain share mechanism would deliver that. I'd like to move on now to questions from John Mason. Thanks very much, convener. As a committee, we're looking at business growth, economy growth, all of that side of things. That's maybe what we've concentrated on so far, but we're also looking at inclusive growth. Ms Gunnar Logan mentioned that earlier on as well. Traditionally, looking at the two main sectors that we've got here, construction and the care side, if we want to grow the economy and help businesses and make traffic move faster, then we would spend our extra money on roads and railways and bridges and those kinds of things. However, on the other hand, that will mainly help men, will it not, because the construction industry is full of men. Whereas, if we have some extra money to spend on trying to help women, that would make more sense in the care sector, because I understand that most of your employees are women. Is that a dichotomy? Is that a choice that we have to make as a public sector, or is it not as simple as that? I think that Steven Goodie, do you want to come in and start on that one? Well, let's see if you could start and then come to any Gunnar Logan industrial and classical perhaps. I think that inclusive growth, I suppose, in a construction context is delivered. We have an industry that operates across the whole country, it operates with the opportunity to work at a whole variety of different levels in the industry, so it is not exclusive in that sense, I would suggest. I think that it does as an industry have a culture problem. The industry is doing a lot of work at the moment to try and address a lot of those challenges around diversity broadly, but gender diversity particularly. I know that we at the Innovation Centre are supporting at the moment four key projects with sub-sectors of industry, industry leadership groups and with individual organisations to try and put in place mechanisms. I think that a lot of industries, a lot of businesses perhaps fall into that trap of, we have always done it this way, so we will continue to do it this way. Our audience is predominantly male if it is operations functions on site and businesses have not evolved enough to be able to provide flexibility, to be able to provide the working arrangements that often suit the wider kind of diversity issues. From that point of view, there is a lot of things that the industry is prepared to do, and from the evidence that we are involved in with certain organisations is actually tackling now, but that is not to suggest that it is anywhere near. We have tackled a lot of those deep-seated historic challenges, but in the broader sense of inclusive growth, if we as an industry can create opportunities where society as a whole benefits, I think that that is one of the opportunities that the construction industry has in plentiful supply, because it does operate as an underpinning industry for most other sectors, most other opportunities require some element of construction, whether it is building hospitals or carers. Do you think that the move on innovation, like constructing things more inside rather than outside, is that looking like it might attract more women into the industry or might it? From my perspective as a man, I think that it probably might be better to ask one of the women, but I do know. My point would be, I suppose, that, well, I'll give you an example, so Ray O'Rourke, who runs Lang O'Rourke organisation, launched our innovation centre, and he took a slightly different tact on that, I suppose, is that with the move towards pre-manufacture, assembly, off-site manufacturing, working in factory environments to produce building components that are then assembled on site, that gives great opportunities for anybody to work, you know, not necessarily in a high vis vest and a hard hat, but to work in a lab, quote, sort of approach. You know, it's delivering technical solutions often, and that creates opportunities right across, you know, opportunities for women and men working within the construction industry. But we work with a lot of women within operational roles, leadership roles that work in exactly the same environment that all the men work in on construction sites, up scaffolding and horizontal interning, and Kezia's points exactly right there, or equally waterproof. So, yeah, I don't think, I think there is a, I think perhaps it's the perception that construction is a male industry, it's perhaps not as flexible, it's not as accommodating often when women are perceived often as being the ones that take on a lot of other functions, and from my own personal perspective, you know, our organisation is a small team of 14, but we are 65 per cent female in a variety of different leadership and operational roles within our organisation. Okay, thank you, I think that's too early. We'll come to Annie Gunnar Logan and Dr McCaskill perhaps. Well, yes, caring support has got a very large majority of women working in it, I mean particularly at the front line, I think. So, the question of inclusive growth for me isn't just about your capacity as an employer, it's the service that you're providing and how that enables inclusive growth in a wider sense, because actually, by providing care and support to individuals, you are actually freeing up family members to enter the labour market, which they otherwise wouldn't do. So, interestingly, the childcare expansion was sold very much on that premise, you know, by expanding childcare on the state, then that enables women to go back into work. We don't seem to apply that same kind of thinking to other areas of care and support, whereas actually, you know, if, say, the voluntary sector evaporated tomorrow, then you would get an awful lot of women opting back out of the labour market, because they'd have to be looking after their own family members. So, I've never kind of quite understood why it's a different narrative for the expansion of childcare than it might be for the expansion of older people's care, for example. And a number of the services that our members provide are actually about trying to get people with challenges in their lives back into the workforce. I mean, you know, the people who are supported by our members are not an inert group, you know, they have addiction problems, they have learning disabilities, they have mental health issues, which fluctuate, and actually part of the care and support task is to support them back into work. So, the inclusive growth is actually the nature of the service that we're providing, not just about us as employers. Can you suggest that if it was a better paid sector, that in itself would attract more men in? Is that a stereotype or is that not fair? Well, it would attract more people in full stop. I mean, the recruitment problems that we've got at the moment are acute, and I'll tell you a story that I heard last week, actually, from the director of one of our successful mental health support organisations. She secured her first post as a support worker in 1992, and her salary at that time was £14,000. Right, it's 26 years ago, I think, if I'm doing my sums right. She's now director, and she's seen the care industry, if you want to call it that, develop. So, 26 years later, the support workers doing the same job that she was doing in the same kind of organisation are now earning £17,000. So, that's what's happened in social care. The tiny, tiny increase over 26 years from £14,000 to £17,000 for a front-line support worker will tell its own story about inclusivity, I think, and will also tell its story about why we're having the kinds of recruitment problems that we're having. I mean, that particular individual was able to buy a fixed price flat in Delmeney Street around the corner without going to the bank of mum and dad, because, actually, in 1992, £14,000 was a really good salary. It's a really good salary, and that was the kind of value that we placed on employees in our sector at that time, not so much now, I would say. What Annie has said, I think, we have to reinterpret what we mean by inclusive growth and what we mean by an inclusive economy. It's not just a tick box exercise. We have to challenge. I have appeared before this committee talking about gender segregation within the care sector, so it's by no accident that we have 86 per cent of the workforce women who are underpaid and frequently societally undervalued. If one in 13 Scots, if that was a workforce dominated by men, I bet you we wouldn't be thinking that we were doing people a favour by paying them the Scottish living wage. It's about the stereotypical gender-segregated negative attitudes that we have to care as a contributor to society. Everything that Annie said, inclusion is about enabling people to be full citizens, to contribute if they have disabilities, if they have mental health challenges or, in my context, if they happen to have a number against their age, which is over 65. We have to, if we are thinking about an inclusive Scotland in the years to come, think about what we are doing to enable older workers as well. Many of those in social care are over 45 and female. They will be working for 20, 30, maybe even 40 years contributing to the economy and the wellbeing of society, but do they get that recognition? Not now, I hope so in the future. If we put more money into care and less into building bridges and roads, the argument would be—I'm not saying this is my argument—that the economy as a whole would suffer. How would you counter that? We have a growing body of evidence, both in this country and elsewhere, that the contributive element, the gross benefit and value provided by social care far outweighs the pounds that you spend. Annie has already referenced that if you support somebody to enable them to return to work, or if you support an individual to enable them to have knowledge that their child or their mum and dad are being cared for, they are able to contribute to the wider economy. Social care has tremendous potential to be an asset to Scotland to reduce our indebtedness, but we have to change the language and we have to change our mindset and see social care as something that will contribute rather than which will drain. There is a draft report that is coming out next month that this committee will be very interested and I am not able to bring it to you because it is not my report. It is a piece of work that has been led by the Scottish Social Services Council and it is very specifically aiming to quantify the economic contribution of social care in Scotland in terms of income, expenditure, employment and so on. I have seen a draft and I think that the numbers will surprise you in terms of what you are talking about, you know, with the relative value of contributions, but I am sorry that I cannot give that to you because it is not published yet. It might be useful if you were to forward that on to us when it does come out. Yes, we will do. I will have a word with the clerks about that. Yes, thank you. I would like to move on now to questions from Colin Beattie. Thank you. In a previous evidence session, Jim McCall highlighted that banks had a very important role in providing support to Scotland's SMEs, mainly, you know, obviously, financial and advice as well. That, of course, was before the financial crisis. Post-financial crisis, how supportive would you say that the banking sector is nowadays? Alasdair Wiley. Colin, from our point of view, and I heard it previously and I know Jim McCall, the banks are not supportive. We are a relatively medium-sized business. We internally finance it, so we cash support our businesses. Certainly, from anecdotal evidence, I am aware of that getting money out of the banks is extremely difficult and the extent of security that they require, particularly in small organisations, where you maybe do not have the asset to throw up to the bank. From that point of view, if anything that can be simulated by the Scottish Government to make that move, we heard about the Scottish Investment Bank and various things. Unfortunately, I am not fully updated with that type of thing, because, as I said, we internally finance our projects moving forward. Certainly, for the growth of Scotland, I would be one that would support that no end about some way that liquidity could be eased for some of the smaller start-up businesses to progress. Mark Maxley. Less of a challenge for us is a PLC, but what we are going to see is a real challenge for the SMEs from the banks. At the back of some of the issues that we have talked about in the construction sector specifically, some of the SMEs are getting letters of credit and bonding requirements. I think that there is something that you, as a Government, can do there when you are putting projects out. Do not immediately say, I need a bond for this project or I need a letter of credit or I need this level of support, because the SMEs will struggle to get some of that, I believe, going forward. Is there any direct evidence of that? We are seeing anecdotal evidence at the moment, particularly in the insurance sector, that the banks in the insurance sector and the bond providers have all taken a bit of a step back to see what the outfall of, in particular, Caryllian is, in terms of the knock-on effects on the SMEs, less effect up here, I think, than down in England, because Caryllian did less up here. However, we are certainly seeing the big insurers taking a bit of a breath with reference to the sector in general. I think that that will have a trickle down. Dr McCaskill. Just very quickly, in terms of social care, social care could not be delivered in Scotland, certainly in the independent sector, if it was not for constructive and positive relationships with the banking sector. They have maintained and they have developed over the period of austerity, but we have also to recognise that it is extremely challenging and difficult for a small SME, particularly in home care, to raise sufficient revenue in order to set up and to develop because of the insufficiency of continuous funding, the lack of contracts that offer sustainability and a mechanism that makes a contract compliance almost impossible to adhere to. We could do a lot more in terms of the way in which we commission and contract social care to enable what is generally an open and positive desire to invest in social care from the banks, particularly those that are based in Scotland. We could do a lot more than we currently do. Stephen Goode. I would add that we have done some work fairly recently with the team that supports SMEs across Scotland with Bank of Scotland. They are actively keen to explore what other assets exist within Scotland that they can highlight to the businesses that they engage with that are looking for support and finance potentially. I agree with previous points that it is a different world now from pre-2007. The support does not always have to come in the form of bank financing. The support could come through expertise, through a lot of guidance, support, access as our innovation centre has been involved in delivering and launching last September a facility where industry can come and take the risks in a safe environment in some respects. It can fail often, regularly sometimes, to make sure that it is refining, optimising and developing things. That sometimes is hugely valuable. The investment that the public sector has put into nearly £2.5 million worth of equipment that industry can then come and use either through projects or at a very low-page-a-go sort of model gives them access that previously was prohibitive. An SME could not go and invest in the sort of equipment that Alasdor described previously at CCG. Without having that certainty that there is a supply chain there that is going to want it, industry now has some of those accesses to equipment. The Scottish National Investment Bank has a huge opportunity to step into those areas where, again talking from a kind of innovation perspective, the decisions on funding may be slightly riskier or perceived a slightly riskier from a traditional banking sector. That is where, in the forerunner to the investment bank around the building Scotland fund that was committed to within the budget pre-Christmas, is a great example of where we are very focused around housing, very focused around infrastructure delivery and buildings. That fund can get put to great use with those companies that are keen to invest, innovate and develop their digital skills, but they cannot get the finance to do it through traditional means. There is real opportunity there if tackled properly and critically with an element of flexibility and dynamism to the model. I heard previous evidence sessions where it is that flexibility and dynamism that is required across all the different support mechanisms that often sometimes does not feel like it is there. That is critical and crucial. Right, Andy Wightman. Yeah, just a few questions arising out of the discussions so far. From the care sector's point of view, Donald, you have answered this in part, I suppose, but perhaps if you want to do it, add anything to this. How can the care sector be seen as an investment rather than a cost? What are the key arguments? Do you want to address that first in a couple of them? I think that we have touched on some of them. We need to alter the contracting and commissioning model to enable a degree of continuity that enhances sustainability and the desire to invest both externally but also the desire to innovate, to grow, to change. We recognise that demand is only going to go in one way. Audit Scotland two years ago said that, at the current rate, we would need to increase expenditure on social care in Scotland between 18 and 24 per cent unless we alter the way in which we are doing things. We are doing so and we are innovating and we are reforming social care. However, that will not reduce what we would estimate the requirement to increase expenditure of roughly around 12 to 14 per cent, which is why, before Christmas elsewhere, I called on for an investment of £1 billion over three years in social care. That degree of continuity, that degree of affirmation in the sector would go a long way to addressing our primary challenge at the moment, which is workforce. It is still possible to be better remunerated in other sectors, whether those be retail or hospitality, than it is in the highly skilled and the demanded and regulated environment such as social care. Our key platforms are a continuity, sustainable workforce, which can only be achieved by a reformation of the way in which we commission care. If we do those two things alone and Annie might want to add some more, then we will significantly address the fact that social care is still seen as a drain and not as a contributor. It involves those two key elements. There are 200,000 people in Scotland employed in social care, but that is not a negligible number. If you link just the raw numbers to the fair work agenda and what those individuals would be able to contribute to the economy if they were earning less than the bare minimum, that is one argument. However, I would come back to what I said before about the nature of the service that we are offering here. Supporting people, not just the people who are supported directly by our organisations and our support workers, but supporting the people who would otherwise have to care for them if those services did not exist and would have to leave the workforce. I am sure that you could get some very interesting evidence from carers organisations about the value that is placed on unpaid care and how those link up. When was the last time that we were faced with such an increase in demand ahead of us and perceived this as a disaster? The way that care is going, the numbers of people, the demographics, everything will tell you that the demand is going that way and the investment is going the other way. How that makes economic sense, you tell me, because I just can't see it. Moving on from what you have said, and this relates to both sectors, what role can social enterprise and particularly co-operatives play in this? I mean, I was speaking to someone running a co-operative care organisation in London, very successful, a lot of engagement, a completely different procurement model. In construction, for example, we have much higher levels of self-procurement across Europe. In Germany, for example, we have technologies such as Passive Foose, which are driven by clients and customers being in control of the process of procuring housing, which is very different from the speculative model that we have here. Are there ways that we can do business that put the customer or the client, whatever you want to call them, more at the centre of the business and therefore drive up services, investment and innovation? Yes, and this Parliament legislated for it in 2013. It was called the Social Care Self-Directed Sport Act Scotland Rackets, et cetera. Precisely what that was about was about pressing the power in the hands of the individuals who rely on the care and support that they receive. Not necessarily in terms of direct payments where you take the money and you become the employer, and people found that quite challenging. There are a number of different options that you can have, but the clues in the title are self-directed support. For us, that would bust out of this really uncomfortable position that we are in in the social care market, which is that it is a monopsony. We only have one purchaser, and the purchaser is the public sector. If they find someone who can do it cheaper, they will take that contract and all of those people and all of your staff and tupy them over somewhere else, and then that is all gone. That is the public authority making the decision on behalf of the supported people about who will support them. The self-directed support act is about busting through that, giving some power, some choice and control to individuals. I am not sure if it has come across your radar, but the Audit Scotland produced a report recently on self-directed support, which was quite—what was the word we would use—critical about the extent to which local authorities have grasped that and run with it. Obviously, if you are giving power to someone else, it means that you have to give it up, and I think that that has been quite challenging. That, Andy, is precisely the agenda that we are on here. I think that our members would love it if they were actually selling to individual customers and that those people were in control. A couple of our organisations have pretty much converted their entire client base to individual service funds and direct payments, and they are finding that that is more sustainable and more stable, but it gives them that relationship with the individual, which is absolutely critical to the support relationship. Yes, there is a way to do it. We have already legislated for it, and we just need a great big bonfire underneath it, in my opinion. Our written evidence highlights the self-directed support act and the fact that its implementation has been an unmitigated failure, particularly for older people. The idea of micro-enterprise of creative small producers, which are local, are at the heart of that legislation, and we have largely failed. However, there are some success stories, so two of our members are worker co-operatives and lead. Bolliskin, just outside Inverness, is a great example of a local community identifying a need around social care being supported by a larger provider in order to innovate and do things differently, but it can only be achieved if we properly implement the self-directed support act. It is not in the best interests of some statutory authorities in Scotland to loosen the power of the realm that gives people control rather than keeps control in the centre, wherever that centre is. It is not in my home. Alasdair Weinlew, you wanted to come in on that. To answer Andy, to try and keep the end up of the construction side of things, certainly there has been great innovation in respect of the environment in which people, householders, utilise the product that is produced. You talked about passive house, Andy, and there are aspects of the new value of properties nowadays, the environment of properties, the room-space of properties. I believe that the home feeling is greater with householders that we have and we are ostensibly social housing, but we know that our designers are paying particular attention to the long-term benefits that that housing can provide to the environment of the householder generally. Mark Baxter, you wanted to come in. Mark Baxter Just a brief point on touches across the construction sector, care sector and investability. We have been working on a project for some time now. Between two budget holders and something that this committee could look at would be how the budgets interact, so a wee bit detail on the project. One of the budget holders are the NHS trust and the other budget holder are the local authority. We can all agree that having someone in a, forgive me if I get my nomenclature wrong, I am old fashioned in that way, a care home is better than an acute bed, but because the two budgets sit in different places, somebody sitting in a care home bed is taking up local authority money, they might actually prefer them sitting in the acute bed. First round this table, that does not make a great deal of sense, it is not the correct investment case, it is not the right care for the person and in the construction sector means I am not building a project. The committee could look at the interaction between the different budget holders and what represents best value for money for us is an investable case. We have been banging our heads against the wall because we cannot unlock these two pieces and it makes an eminently sensible piece where people come into the system at one end, low end care and perhaps progress up the system to acute care or can come in after an episode to acute care and progress down that same site and system and everything is on one site, I would say, with all the right care levels and care packages in place. We think that is eminently investable, we think that is sensible and we cannot unlock it. Once I have a final question for you, Mark, you were talking about financing infrastructure from your point of view, the unmitigated disaster that has been these three major contracts. You have talked about a number of models that we could look at. Can I suggest, because I think that you have a background in PPP that one of the reasons why there might have been a backlash and perhaps contracts are being awarded that, on fairly perhaps benefit the private sector, the public sector rather is because the public sector has gone off PPPs, because that was very good for the private sector. Have we been through 30 or 40 years of swings and roundabouts on that? I think that that has spawned. The PPP sector in the very early days took on risks that it did not understand and made a whole heap load of money. It is the other side of your same coin. The famous example is the Fersacharley prison, a way back in the, I will say, 90s, I am guessing, where the private sector made a massive amount of money refinancing something that was essentially off the Government balance sheet. There is a great example of a private sector winning a whole heap of money. Now, what has happened is that we have slowly bolted the doors and recognised the risks. We have now got to the point where the CSOR has gone so far the other way that the risks have stacked on the other side. We understand them pretty well. It is a pretty mature market now. It is not a very politically acceptable term, but we have other terms that we can use. It is still a mechanism that we can use to put asset on ground for the public sector with the right mix of risks and rewards. I will give you an example, Andy, about collaborative working. I will not name the projects, but I will give you a description of the projects. One side was an open tender project of a value of about £13 million, not major, but from our point of view, a big project. The other side was a collaborative involvement that we had up front with an organisation that wanted to trust us. It was a direct appointment and we engaged with that company. The open tender project was overvalued. Over an open tender, the client could not afford it. On the other side, we got it within the budget restraints that they had and in the timeline that they had. I will quote you afterwards. I will give you the name of the projects afterwards. We went back to the open tender project. The client engaged with us because it was a similar engagement than the consolidated project and our team worked in value engineering to get the open tender project online with their budget requirements. However, that was six months later than what they had agreed to put that on site. I go back to what I said much earlier. If there is direct appointment with the right people, you can work within the restraints as long as it is collaborative, and we all have a win-win attitude. I am kissing me to a point earlier, and it picks up exactly on Alasdor's point, which hits the nail right on the head, that there are not many other industries that manage to disconnect design, manufacture, assembly and then management of buildings, as well as construction seems to do. That is driven very much by the procurement relationship at the beginning. I am an architect of profession, so when you work with a client to design a building and you put your best efforts into designing the best building that they want, by the time you engage with the team that is going to assemble that, you are so close to the point at which the risk is transferred to them. They have no real involvement or have had no real involvement far enough up the stream to add value and look at, if you want to see a lot of what we are ultimately talking about here around what does the future look like in terms of this industry's productivity and efficiency, a lot of it links into how you take that process, change it completely so that you have got earlier contractor engagement, a much more manufacturing approach to the solution that you end up with. Whether that is a hospital or a school or a house, you can approach it in a completely different way if you have got the teams that know how to deliver it engaged in the conversation right at the beginning. Going back to that point of what 2007 looked like, it looked like an environment where there was a huge amount of partnering going on and then the world fell off a cliff and clients wanted not best value but cheapest cost. That, for me, is the salient point. There is a huge opportunity moving forward from this point with all the various different moves. You have got a national manufacturing institute for Scotland that is coming that probably does not think construction is a manufacturing industry, but construction is a manufacturing industry. It will be as it moves forward and embraces digital technologies and tackles things in a completely different way. That will only be ultimately delivered to its best value if you tackle that issue of procurement. I have just pointed out that different project approaches with the same client can have quite different outcomes depending on the early level of engagement that you have with the teams that have got the expertise to deliver these solutions. Ernie Gunnar-Logan and Mark Baxon, I see our times almost gone, so these are perhaps the final two contributions. Again, what Stephen was saying resonates with me very strongly in social care because, for me, bog standard competitive tendering in care is bust. It is bust the system, it has got us to where we are now. In care, it is difficult to do it because it is so hard to identify quality as part of a paper exercise. It is impossible, I would say, and because the end user is left out, it is the buyer-supplier relationship that is about the public purchaser and the voluntary sector supplier and where the hell is the end user in any of that. For me, exactly what the colleague there is talking about, the collaborative commissioning and partnering, has to be the future. We cannot have this. Here is my pre-specified 80-page thing that I want now. How cheaply can you lot deliver it? Will you please fight each other to death for the privilege thereof? That is a bust model. We cannot do that any more. I think exactly what the colleague was saying about construction applies in care as well. If we really want to grow this sector, that is the way to do it. Mark Baxon could agree more sensible terms and conditions and early contractor involvement in a partnering model. One of the models that we are using that is working very well, she says that the hub model is working very well because that involves the contractor early on and you get together with the client in detail. I think that you can avoid a tremendous amount of cost and get good value for money through models that involve the contractor early on. All right. Thank you very much to all of our guests. That concludes this section meeting, so I will suspend the meeting and we will move into private session. Thank you to all of our witnesses for coming in today.