 Rwyf yn oedd, yn cymdeithas rom 2021 maem i gael gyflymau i Gwylfaenedd baffwni. Rydw i ac yn ddigon i gael cyntiffus gynnig, maen nhw'n i'ch gyllwyn i gael cyffredinolcau ein hacağım, i gael cyffredinolcau ein hwn. Rhyw i'w gael cyffredinolcau ein hwn i gael cyffredinolcau yw unolid o'r cyffredinolcau gan gwybodol aelodau. Mae'r cyffredinolcau'r cyffredinolcau aelodau hyn yn perszyn, ond rydw i'r troch cynnwys i chi'n bwysig am hynod. I appreciate that. I thank the cabinet secretary and her officials for joining us today and I welcome Kate Forbes, cabinet secretary for finance and the economy, Colin Cook, director of economic development, Gary Gillespie, chief economist and Helena Gray, interim director of fair work, employability and skills from the Scottish Government. The purpose of today's evidence session is to consider policies and actions to promote economic recovery. Our evidence today will also inform the committee's input to the Scottish Government's budget for 2022-23. I would first of all like to invite Colin Beattie, who wishes to make a declaration of interest. This committee considers tourism as part of its remit. I would direct members to my register of interest, where I am vice-chair of the National Mining Museum of Scotland, which of course is a superb tourist destination. Thank you, Mr Beattie. I would now like to invite the cabinet secretary, Kate Forbes, to make a brief opening statement. Thank you, convener, and a very good morning to the committee. Can I apologise at the outset for not being able to join you in person? I can assure you that only Covid would keep me from the committee scrutiny in person and I'm sure the committee is quite relieved that I'm not with you in person this morning. Everless welcom the opportunity to give an update on the Scottish Government's plans to deliver economic recovery and also on the 10-year national strategy for economic transformation, which is due to be published in late autumn. I think that we are all agreed that Scotland's economy continues to face challenges as a result of the pandemic and those have been exacerbated by exit from the EU. Economic recovery quite clearly needs to be a joint endeavour and I look forward to working with the committee and taking on board the committee's suggestions on how we might do that as well as possible. I don't think that we can let those current challenges diminish our ambitions for a stronger, more sustainable and more inclusive economy that is pro-prosperity, pro-business and pro-jobs. Our most recent programme for government set out our plans to support recovery by investing in people, investing in places and investing in businesses so that we can grasp the opportunities that lie ahead. That includes more than £1 billion in 2021-22 for our national ambition for jobs and to equip our workforce with the skills for the future. We will also push forward with a just transition to net zero supporting innovation and new Scottish industries and hopefully getting the opportunity to showcase our strengths as Glasgow hosts the COP26 summit. I am clear that the 10-year national strategy for economic transformation must make the most of the huge potential that we have here in Scotland and align recovery with our ambitions for a wellbeing economy based on the principles of equality, sustainability, prosperity and resilience, which I am sure are principles that none of us would disagree with. That work is continuing at pace. It does lift our eyes beyond the immediate challenges that I recognise many businesses are still confronted with and look ahead to the longer term. The strategy will quite clearly transcend several problems and I hope that we will deliver the long-term structural change that we need not only to ensure recovery in the short term but also to harness our ambitions of delivering a fairer, greener, more progressive future. Because it does transcend multiple parliaments, I am sure that the committee will have a view in reflecting different party political positions. I look forward to a discussion about that. Can I ask a few questions about the 10-year strategy? You say that it is expected in autumn. Do you have any more details that you can share with the committee about when it is likely to be published? We have also received some correspondence around consultation. We did receive a letter from a transform and economy group that held a recent conference. They have some concerns about the—I understand that it was a four-week consultation in the summer, but there is a feeling that they haven't had enough engagement with the strategy. Can I ask once the strategy is produced, is there any further opportunities for engagement with the strategy or will it be presented as a done deal, as a strategy that people actually can't further comment on? It is a really important point. I have been clear that, because it is a 10-year strategy and because we all have an interest in economic recovery, we had a duty to engage as widely as possible. Firstly, we had the formal consultation that she referred to. Gallagherestwy might want to come in on some of the themes that emerged in that consultation if you are interested in that, but there was a lot of response to that. It is not the only way that we have been engaging, because we have also been engaging on a one-to-one basis with an extensive list of organisations, businesses and representatives of the third sector. We have had thematic groups that are taking evidence from different parts of society, different parts of our economy, and then running alongside all of that is the advisory council, which I hope the committee would accept, has quite a broad interest with representatives from rural and urban Scotland, from big business, small business, economic as well as industry leaders. I have certainly tried to make sure that the input to the strategy is as broad as possible. If any organisation would like to engage further, my officials are very happy to engage. We are open to taking any written submissions, even if it is not part of the formal consultation, taking written submissions and reflecting on those. Thank you. Mr Gallagherestwy, do you have anything to add to that or about the consultation that was carried out in the way in which people have been involved in the decisions that are being made? I am afraid that I do not think that we have Mr Gallagherestwy with us at the moment. This is one of the challenges of remote meetings. Good morning, Mr Gallagherestwy. Sorry, I did not realise that I had the ability to switch my own camera and microphone, so sorry about that. As Ms Forbes said, the consultation ran for approximately eight weeks. We received around 260 responses from the wider public sector, private sector, third sector, etc. Alongside that, we have been doing extensive engagement, industry leadership groups, enterprise agencies, regional partners, local authorities, etc., so we are really engaging across the piece. The emerging teams that we are coming back from the consultation, which we will provide an update to the committee with and, of course, when we publish the strategy around opportunities, net zero, circular economy, around place, how we can strengthen interventions across all of Scotland, around data and digital infrastructure, FTI, jobs, skills, governance and ideas about how to transform the economy from energy transition to data, digital and tech. Quite a wide-ranging set of recommendations and ideas coming back from that period, but the consultation continues at the moment and we are still engaging throughout the period up until the strategy is finalised. Can I ask, while you describe engagement and consultation, how are any tensions that come out of the engagement being resolved? Is that for the Government to decide? I mentioned that we had a paper from Transformer Economy who had a recent summit. They have views on how a transition to net zero should take place, but I would imagine that there are different positions within the business sector. Is it the role of Government to reach a consensus on the various positions that are coming forward? How is that done? Maybe I'll respond. Maybe I'll come back on that and Ms Forbes might want to come back in. I think that the paper that you referred to was a conference last week that Ms Slater participated in on behalf of the Government in relation to the focus on the national strategy for economic transformation. We are not at the outset net zero and the transition to that is central to everything that we do. In the sense that that issue of how you resolve tensions is done both within Government advisory council and ultimately by Cabinet and Parliament when the strategy is published and it's set out. Do we know the tensions and are there going to be differences in opinion around some of those issues? Ultimately, there will be differences in opinion across different areas, but that's for the Government and wider engagement to resolve. Ms Forbes, can I add an additional question? I'll move on to Fiona Hyslop. I also ask you to comment on the recent Audit Scotland report that raised issues around the difficulty in defining what was current Government spend and Covid spend and trying to track budgets on spending and that it was difficult to distinguish between funding streams. The short answer is that that's why we have an advisory council. I don't think that there is any doubt that there are some difficult choices to be made and we need only our inboxes as constituency and regional MSPs to know that there are differences of opinion about what we should do and what we should prioritise. At the end of the day, I think that we've got to base our response on the consultation and also on the debates and deliberations of the advisory council to come to a position and ultimately to make a act to prioritise for the long term because what we've seen internationally is that where countries decide on what their agenda is and then stick to it for a longer period of time, they see returns and they see changes and that's certainly what we would be keen to do. In terms of the financial position, I think that the Audit Scotland report highlights one of the challenges for us. Certainly what we've seen in my role as finance secretary over the last year is the UK Government less and less distinguishing between Covid funding and non-Covid funding for good reason, which is that a lot of our support is challenging to distinguish what has become businesses usual and what has become specific business support. I could refer you to the most recent announcement of £25 million for ventilation. In a sense, that is very specific to Covid-related but quite clearly businesses have had to adapt to what they are doing and it has become businesses as usual. I certainly want to be as fully transparent as possible. The most recent publication of the autumn budget revision updates the budget with the most recent consequential funding and we will continue to be transparent in terms of the funding coming to us. The one difficulty that I would add to this is that this year we don't have a budget guarantee. Last year, when the UK Government announced funding, it did so alongside a guarantee that the money would not reduce and this year our funding will only be confirmed at the main supplementary estimate, which is usually in February. Until February, we are dealing with estimates. That is not a complaint, it is just a fact that we are dealing with estimates. Those figures can go up or they can go down. Therefore, when it comes to our update to the budget revision, we clearly need to make sure that what we are putting in the budget revision to formally update the budget is based on as much fact as possible rather than on estimates so that that aids the Parliament's scrutiny of our budget position. I think that, briefly, all that Scotland is reflecting on what has been a very challenging budget situation, not in terms of the money that we have but just in terms of keeping track of what the UK Government has announced, what is still estimate and what has been confirmed as fact. I will now hand over to Fiona Hyslop, who will be followed by Jamie Hepburn. Good morning and good to see you all. My first question is to ask what your assessment is of the current economic situation facing Scotland, the immediate pressures but also what you see over the coming year and how are you going to reconcile the tension between your 10-year national transformation strategy and a budget that has a short-term pressure? If I may ask the cabinet secretary first, she may want to bring in Guy Gillespie as well. Lots of very good questions in there. In terms of just a brief reflection on where we are just now, there are two things that I would refer to. In terms of GDP and labour market, it has broadly tracked the rest of the UK over the Covid period. Our latest data on GDP shows that Scotland's GDP fell by 0.2 per cent in July 2021 but grew 3.4 per cent over the three months to July, which means that our GDP is 2.4 per cent below its pre-pandemic levels in February 2020. That broadly tracks the rest of the UK. It broadly reflects where the rest of the UK is. The same goes for our employment and unemployment. Employment 74.1 per cent, unemployment 4.3 per cent would be the rates in May to July 2021 and they continue to compare well with historical trends. I think that where I would have more concern right now is in terms of the outlook for businesses when it comes to cost inflation and labour market shortages. We know from an inflation perspective that UK inflation rose by 3.2 per cent in the 12 months to August and the Bank of England forecasted it to temporarily rise further to 4 per cent this year, which is obviously going to have an impact on businesses in particular. Alongside that, if we are well documented in the press, we are facing severe challenges when it comes to energy prices and the knock-on impact that that will have. Alongside that, on labour market shortages, where businesses are struggling to recruit, that is certainly coming through loud and clear anecdotally from businesses operating in multiple different sectors, from financial services all the way through to tourism. There is a reliance on not just HGV drivers but on all skills, including in-care homes. That is clearly going to add costs to businesses who are already struggling to keep their heads above water post-pandemic. That would be my brief summary of the situation. The budget highlights a critical point, which is that for the past few years we have only been able to budget from year to year because there has not been a spending review at a UK Government level. We were promised one last autumn but, for understandable reasons, that has been delayed. I am very hopeful that the spending review that was published by the UK Government alongside its budget will give us that multi-year outlook, which allows us to plan on a multi-year basis. Clearly, it will still allow us to plan on a budget—our budget—on a 10-year basis, but it will at least give us a three- to four-year outlook, which is a benefit to local government and businesses because they get that multi-year certainty. I do not know if you want Gary to come in. I will leave it to you, convener, to draw in anybody else on the outlook for the economy. Mr Gillespie, would you wish to comment on that question? Yes, I will just add a couple of brief comments to what the cabinet secretary said. In terms of output in the labour market, in a stronger position than what was forecast even in January, and the output side of things, even the fiscal commissioner suggesting output will return to pre-pandemic levels. Early next year, the Bank of England for the UK are suggesting that that could happen at the end of this year. That is a much stronger recovery than was envisaged and reflects the fact that both things opened up. There was a return to confidence in face-to-face services. People responded. In the labour market, furlough comes to an end later this week. Our data suggests that just over 3 per cent of private sector employees still own furlough in Scotland in September, but the evidence from HMRC and others is around over 90 per cent of people leaving furlough are going back into employment. As Ms Forbes said, what we have seen is a rising number of job vacancies of an order of magnitude close to the levels of unemployment. There is a mismatch in the labour market at the minute. That reflects wider factors relating to the loss of EU labour, the number of workers in the economy being down over the year. The position is much changed. The immediate challenges for businesses relate to the points that Ms Forbes made about input costs, supply chain issues around being able to get the right supplies on time to meet orders and demand. There is a different set of circumstances at the moment. One final thing in the context of the 10-year national strategy for economic change. The recovery from Covid and the impact that Covid has had over the past 18 months or so on the back of EU exit, on the back of changes to how people live and work. There is a lot of change within the economy at the moment. I think that that has been played out to multiple impacts at this time. My other question is really about the issue of pressures on business and what they are telling you that they will need in terms of support over the coming year. Clearly, energy wholesale prices, but other pressures that we have heard are going to have an impact on their capability to be successful. Particularly bearing in mind the employment pressures that we have just heard about, it is a case of re-skilling, up-skilling, etc. Your prospective current secretary on the employability support, particularly in the skills area, might be the short-term aspect as opposed to necessarily some of the other business requests that we have had in recent years because of Covid and Brexit and other issues. Your comments on that would be helpful. I think that that is probably the most important area of intervention right now because I have already talked about labour market shortages. In terms of job vacancies, latest figures for the week to 17 September show online job vacancies are 33 per cent higher than they were in February 2020. There are a lot of vacancies out there and it is ensuring that we line up those who are looking for work with the job vacancies that are available. However, having said that and to do that, one of the two of the most important interventions we have, which Fiona will know better than I do, are around national transition training funds because you are the one with the vision to establish these things. The national transition training fund and the youth guarantee, ensuring that young people in particular are lined up with work and there is certainly no shortage of work, but it is ensuring that they have the skills that they can acquire through the national transition training fund or through the young people's guarantee to make sure that they are into work. However, I have quite a stark comment to make, which is that even if everybody who is currently looking for work is in work, there would still be shortages. The bottom line is, and you are seeing the UK Government finally coming to a position of accepting that, that the bottom line is that as an economy we have valued enormously people who have come to this country to work. What we are seeing is that those people who might have considered coming here to work are no longer doing so. That might be because of high visa costs. It might be because they no longer feel welcome. There are all sorts of reasons why people are no longer coming to this country to work. At the end of the day, although the Scottish Government can go out and say that it is welcome that we really need them, that immigration has been the biggest problem in Scotland and not immigration and that we value people who choose to make their home here, we do not control the immigration policy. A number of businesses have come to me and I am sure that they are coming to you to ask for help and support on things such as waiving visa costs, which is not within the Scottish Government's control. Or they have asked for schemes that replicate the soft fruit pickers schemes in terms of allowing whether it is HGV drivers or others to come into this country and we do not have those levers. In direct answer to your question, there are two means of resolving this in supporting business. One is on the skilling agenda, which I have touched on. The second at the end of the day is that for a country of 5 million people we value the contribution made by those who have chosen to come to this country. Can I first apologise to Jamie Halcro-Johnston for changing his name and his political allegiance earlier? Thank you very much, convener. Good morning to the cabinet secretary and the committee. Just on the points that have just been made there, something that the cabinet secretary said, looking at the supply chain issues and that is something that the cabinet secretary has done. Does that mean that, looking towards the 2022-23 budget, there may be more of a focus on building resilience into our economy? We have talked about some of the perhaps opportunities, even from the issues that we are finding, actually doing more local sourcing using procurement to do that. Will there be more of a focus on building resilience, innovation and that kind of thing? I think that it is a really good question from the member. It is something that I am taking an active interest in. Around procurement you will be familiar with some of the limits on our procurement rules under procurement law, around things like local content, but it is an area that I am taking an active interest in. I would value the committee's views on how we might use procurement better to embed local resilience around things like local content, because there are some limits on what we can do under procurement law. If I take a step back from procurement and look at the wider point, I would agree that if our country has learned anything from the last two years, it is just how A, resilient our businesses already are, but B, how important it is to build on those strengths and ensure that we are more resilient. As you can imagine, writing a 10-year strategy is hugely challenging because you do not know what challenges might be around the corner. We certainly did not foresee the pandemic and I do not think that some of the challenges that we are currently facing were seen by the UK Government. Building in that sense of resilience is important. At the end of the day, I recognise that we are exposed to forces with the Scottish Government's control. I have already referenced the point about labour shortages. Urgent action needs to be taken, because the problem could be resolved with a fair deal of ease. If sex were taken around visas around immigration policy, I think that the UK Government has accepted that with its most recent announcement around HGV drivers. The question is whether that is too little, too late and whether that should have been done more quickly. Obviously, there are a number of areas where the Scottish Government does not have responsibility, but there will be areas that there can be improvements within the power of this Parliament. Hopefully, there will be a focus on that. Just in terms of the economic development agencies and Visit Scotland, there has been a huge focus for them on supporting businesses through the pandemic. As has rightly been pointed out, there will need to be a continued support going forward of some existing businesses and sectors. In terms of current budget and anticipated budget for 2022-23, where do you think the focus will be in terms of supporting existing businesses while also still providing support for those new businesses, new entrepreneurs going forward, which should be so important for economic recovery? Are you confident that they will have the support, the budget there, to do that? All those things will be considered very carefully in the run-up to the budget and on publication. Those enterprise agencies, and you also talked about Visit Scotland, and there are a number of other public bodies that have a really important role to play when it comes to economic development. They need the right support, because often the best support that they can provide is the wraparound guidance advice. If you think of a business that is trying to get into an export market, then Scottish Enterprise and SDI have the skills and the resources to help that business. It is often the fact that they need guidance and advice more than financial support, although we need to make sure that that financial support is available. You talked about resilience, so developing supply chains and ensuring that they are dealing with mitigating people and skills shortages will all be important. This year, we have invested a combined £347.8 million in our enterprise agencies, which was an uplift of almost 17 per cent. That reflects the need to support businesses. One of the challenges that we will face in next year's budget is that some of the support that we have previously given to enterprise agencies was in the form of financial transactions, which often allowed enterprise agencies to provide the right kind of support. The businesses that we are not looking for grants necessarily, but we are looking for short-term financial support. We have seen a significant reduction in FTs. The UK Government is moving away from providing FTs because of changes to its own housing supply programme. That means that our spending power will decrease because of the reduction in FTs. We will need to look at other ways of providing funding out of a very challenging budget. Just one last very quick question. The economy committee legacy report from the last session, which I was on the committee but not involved in that report, talked about how difficult it was to measure outcomes from some of the development agencies, particularly. I was wondering whether there had been any work done to improve our ability to work out basically what the bang for the buck is in terms of investment in other government agencies. It is an issue that I have raised in conversation and discussion with all the enterprise agencies since they first took post around measuring outcomes. They certainly have metrics that I can share with the committee that they will publish publicly on measuring their impact. Clearly, some of that performance is quite difficult to measure because in terms of businesses, often we look to how many jobs have been created, for example, where that might not be the best metric for a small business that is just starting out. I think that we need to be really careful with what metrics we apply on a blanket basis because it may distort what businesses are trying to do to be successful. That was a point that was brought out through Mark Logan's report on developing the tech industry, where he criticised the fact that we often look at job creation as a measure of success, not realising that for a small entrepreneur. Maybe the worst thing that you could be doing at the outset is trying to create multiple jobs instead of delivering growth first and then creating the jobs. I would be happy to share anything further with the committee after this conversation and certainly share what... Cabinet Secretary, we just missed the very end of that final sentence. I think that you were just offering to share further information with us regarding Scottish Enterprise. That's right. I can share what enterprise agencies already use in terms of metrics. That's great. I now pass over to Colin Smyth, followed by Michelle Thomson. Thank you, convener, and good morning to the panel. Can I continue on the issue of the role of the agencies? The cabinet secretary has just said that there are a lot of agencies who provide support and it's obviously five years since the skills and enterprise review. One of the issues that constantly still comes up a lot from business and evidence to this committee is the extent to which the business support landscape is still very cluttered. In fact, the FSB told the committee that the system is too complex. Cabinet Secretary, do you think that the skills and enterprise review and its implementation has done enough to declutter the landscape to give businesses that one-stop shop approach? If not, how will this be dealt with in the forthcoming economic strategy? Thanks very much. Clearly, the Enterprise and Skills Strategic Board has made a very strong start in trying to streamline what is available. Covid has complicated that quite substantially considering the number of new schemes and initiatives that were announced over the Covid period. The challenge for Opposition for both of us is to identify what needs to stop when something new starts. It's easy to call for new things and it's easy to announce and implement new things. It's much more difficult to stop things because you know that it will never be met with support or with accommodation. The challenge after Covid is to reflect on what has become perhaps even more complex for businesses to navigate and to streamline that. Some of those Covid supports have come on stream and then been turned off because they were no longer needed, but others are still available. I think that there is an action there for government working with the Enterprise and Skills Strategic Board to try and streamline further taking into account the complications that Covid has added. The message really from businesses isn't as much the number of different schemes as having that one-stop shop of places to go. No matter how many agencies are behind a single portal, businesses just want to go to one place to get that information. It clearly comes up a lot. What also comes up is the issue around awareness. FSB told the committee that their members felt that the main economic agency, Scottish Enterprise, was not visible enough during the pandemic. In fact, the quote that they gave us was, we were in the middle of the crisis, Scottish Enterprise was not there. Do you think that that's a fair reflection and why do you think they're saying that? Obviously, at the outset, we had to mobilise support very quickly and we mobilised support largely through local government. Local government have been a phenomenal partner when it comes to support because they've distributed financial support in ways that they never had done before. I think that there is a fair point in reflecting on the fact that local government ended up being our primary partner when it came to delivering support. I think that there's good reason for that because at the end of the day they know their local economy is better than anybody else. They were able to reach businesses that perhaps weren't on the radar of either the national or regional enterprise agencies. At the same time, Scottish Enterprise was absolutely critical in mobilising other forms of support. They were absolutely critical in using their personal relationships with key businesses, particularly key anchor businesses, which often play a big role in protecting local economies. I think that they played a critical role, even if they weren't playing local government's role of distributing support on the front line. Colin Cook wants to come in on any of that. Colin Cook manages our relationship with the enterprise agencies. Thank you, cabinet secretary. Just to add to that, I think that we very much recognise the charge that the landscape of business support remains cluttered. I think that the agencies themselves accept that. Although they have made some really good progress in terms of joint working since the original skills review, I think that they've made some really good progress in terms of the way in which they present their information through an amalgamated website, for example, all of them recognise that there is more to do. Within the context of the 10-year economic strategy, the cabinet secretary has been very clear to me that the key issue is going to be how we deliver this. That means that we need to redesign the support that we offer businesses from the perspective of the business itself and to really put ourselves into their shoes and to understand how they would like support delivered. We all have implications for the way in which our agencies work and the way in which they work together. I think that we've learnt a lot during Covid. I think that there's been a lot more direct engagement from the Scottish Government, for example, and we were talking about some of that earlier. But each of the enterprise agencies and Visit Scotland have shown up and they have done some extremely strong things. I think that what it has proved more than anything else is that the economic development landscape is an ecosystem, to coin a popular phrase. It includes public sector organisations, it includes government, it includes private sector organisation. The challenge that we have is to make sure that we create and leverage that system as a whole over the next few years to provide our companies and our entrepreneurs with the support that they need. Obviously, a key part of this is making businesses aware of what's actually out there, not necessarily that there are a range of agencies. Small businesses are simply getting on with the day job, they've got their head down, they don't know what's available, so what are the Scottish Government listening to what you've said and learning from the pandemic? What changes do the Scottish Government plan to make to raise awareness of what is available to businesses out there? In particular, about equality of awareness, because one of the issues that was raised with us is breaking down the barriers to businesses led by women in particular. So what are we doing to raise that whole issue about equality of awareness of what business support is actually out there? If three things immediately spring to mind and Colin Smyth, I don't in any way dispute your characterisation of the need to do this, just to make that clear, and I think doubly so after Covid. Firstly, small businesses do not care who's behind the portal, but it needs one portal that you know you can go to and get help. It's our business in the public sector to ensure that they get the right help, but if they put in the question they are going to be guided to the right people. That's what the portal is about. We try to find business support portal, which you'll probably be familiar with over the pandemic, and I think it needs to be something like that. Secondly, though, is making sure that the support is as local and as regional as possible. You will know, and I know, how successful the type of Scotland Enterprise Agency has been, and Highlands and Islands Enterprise Agency is when it comes to the localised regional support. There are other areas where the support is not as localised and as regionalised, and it was a conversation I had yesterday with Scottish Enterprise, which is how do you break down so that individuals know precisely who to go to in their local area for support from SE if it's not HIE and South Scotland? It would be the second thing. And then the third thing that we need to do is rationalise on all the parts of funding that is available. I think the Enterprise and Skills Board was trying to counter all the number of different parts, and I would really like to see that all condensed into one. So, if you need support for anything related to, for example, export markets, you know where to go. If you're trying to get help for digital, you know where to go, and you're not trying to weigh up five or ten different parts for digital, you know there is one place to go. So, those would be my three suggestions for things that need to be done, and we will certainly actively move to implementing that. I think it needs to go alongside the national strategy though, that our delivery is as simplified as our aims and objectives. Thank you. I'll move over to Michelle Thomson. Good morning Cabinet Secretary and everyone else. The situation around FTEs has already been mentioned earlier, and I think it's clear the concern that's being expressed with the changes in funding, but I just wanted to allow you to put on the record around any mitigations. How you plan to approach, given the Scottish Government's undoubted focus on supporting business and growing the economy. So it's just if you can give any further insights on how you're going to manage to mitigate the loss of FTEs going forward. It's difficult. I recorded my concern this time last year in advance of the budget because the UK spending review last year in 2020 only gave financial transactions budget for this coming year, so it means it's difficult to plan beyond that. The budget gave us a 66 per cent reduction in FTEs, which we've had to manage through quite rigorous prioritisation, and you will have seen the consequential headlines on that, where we haven't been able to fund things with a very limited pool of FTEs. The majority of FTE consequentials that might be helpful to say used to come from the UK Government's help to buy schemes. Those are expected to continue into next year, so they may continue to mean that we get consequentials from the FTEs, but that will not be confirmed until 27 October this year, the UK Government's budget. That's quite a reduction in one year. 66 per cent is quite a substantial reduction to manage in one year, and our FTEs have previously been used to fund the Scottish National Investment Bank, our housing programme, as well as some of the financial support provided through our enterprise agencies. It was tough to manage that substantial decline in one year, and we await to see what the UK Government might do around FTEs in their budget on 27 October. I'm just following on from that then, given the focus that's been around supporting capital investment for early stage businesses. How is it going to progress in terms of managing that with Scottish Enterprise and into the investment bank and so on? Where's that at the moment, if you could give some insights? It remains one of our priorities. I think about pre-announcing the strategy, the tenure strategy. It's going to be a substantial focus for the strategy, which is Scotland as an entrepreneurial nation. How do you ensure that there is the right kind of support for anybody in Scotland to start and to scale up a business? In Scotland, we have a lot of our economic growth coming from new and emerging businesses. If it's a focus in the tenure economic strategy, it will be a focus for Scottish Enterprise. Scottish Enterprise continues to provide that support. Clearly, there is an infrastructure that has built up, though, over the last few years from the private sector to support early businesses, too, where you've got Edge, Tom Hunter's Foundation providing support to try and help early businesses, young companies start. I think that just running alongside that, the Scottish National Investment Bank does have a role to play, and hopefully it's an expanding role to play in some of these early businesses, because I see SNP's responsibility as providing patient capital where it's too risky for the private sector. We have an obligation in the public sector to take on board some of that risk that the private sector won't go near. That's a difficult conversation in Parliament where we think of risk, how does the opposition deem risk, where it may lead to a loss of public sector funding, but it may also lead to some of the most successful businesses that we've ever seen. Is the public sector willing to take that risk and does Parliament think that it's right that the public sector should take that risk? Can I just ask a couple of questions about the financial transactions on the back of Michelle Thompson's questions? The Cabinet Secretary will know that Scottish Enterprise set out to the committee that they are facing a funding gap because of the consequences of her dropping financial transactions returns. If you can address the issue of the Scottish National Investment Bank, the assumption was that financial transactions is what would provide the sources of capital for SNP. Is the position on financial transactions to wait and see what the UK Government is going to decide, or is there an alternative plan being put in place for SNP who, on the forecast that was originally done, is challenging if the financial transactions continue to be reduced? I think that there is a big question at this year's budget in terms of FTs. I already said that the UK Government appears committed to continuing the help to buy scheme, so that gives us an element of reassurance around FTs continuing to some degree. We're also anticipating the UK Government publishing its multi-year spending review on 27 October, so that will give us a sense of what will come over the next three to four years. This year, we prioritised the Scottish National Investment Bank. The two priorities for our funding were business support, primarily through the Scottish National Investment Bank but also with some support for Scottish Enterprise and our housing programme. In short, if you don't fund a housing programme or SNP through FTs, you've got to do it through capital. Capital is also in short supply, largely because we also can't borrow substantial capital. Capital is, I'd much rather, used FTs. The short answer is that we will continue to prioritise FTs for the Scottish National Investment Bank and our commitment to capitalising the £1 billion remains undiminished. How I do that is, as it were, a headache for me in collaboration with the UK Government, but that commitment to ensure that the Scottish National Investment Bank has the funding that it needs is undiminished. I hope that this year's budget proves that commitment, where we have been unwavering in ensuring that the Scottish National Investment Bank has the support it needs to do its job. You spoke of some of the constraints in our ability to build resilience because of restrictions around procurement law and that kind of thing. Thinking about the programme for government's commitment around conditionality, to drive the changes that we need to see in zero, fair work and wellbeing, what are the barriers to ensuring the pace of change in those areas is fast enough and are we doing enough to ensure that we actually get the outcomes that we hope conditionality will deliver? The member refers to our commitment to strengthening conditionality further. There are specific targets. For example, by summer 2022, we have committed to introducing a requirement on public sector grant recipients to pay at least the living wage to all employees and to provide appropriate channels for effective workers' voice, like trade union recognition. That would be an example. I think that we need to strengthen our commitment to conditionality through engagement with unions, businesses and other stakeholders to consider how its effectiveness relies on its proportionality and in ensuring that we can measure real benefits for it. There is a real danger when you associate conditionality with outcomes that businesses cannot deliver. For example, if you were to say that you can only get a grant if you commit to creating 10 new jobs in your first year, it may be the wrong metric for the business and it is probably going to lead to an unsuccessful outcome. Paying the real living wage should be a given. It should be almost like a non-starter. It should be a basic expectation. You will have seen quite recently in the discussions around green ports or free ports where that has proven really difficult to deliver in collaboration with the UK Government, where we could not come to a compromise on the notion that businesses should be paying at least the real living wage. That meant that we have taken our own approach and the UK Government will do its thing. In short, we have a number of levers to try and deliver that. Conditionality is a key part of trying to ensure that we embed fair work across the country. Can I follow that up? Thanks for that answer. I hear your commitment to consult and to engage with trade unions. Can you say just a little bit more about that? There is a commitment to consult on applying conditionality to public funding, consulting businesses, including discussions around requirements for public disclosure on climate change and its impacts. Can I ask about the work that is on-going with workers and trade unions? Sometimes they are not better able, but they are closer to understanding those levers that we need to have access to and we need to be using. I personally engage with the trade unions on this very topic. Richard Lochhead leads on the work, and he has regular dialogue with the fair work convention. All of that fair work first approach is because we do not have employment powers. We have to think of different ways of doing that, and that means a lot more softer approaches. We are intending to launch a consultation in the coming weeks on what a leading fair work nation would look like to align with the aims of a just transition to a wellbeing economy. That consultation will invite responses from anybody who chooses to respond. A very wide consultation will inform a review of our existing fair work priorities, particularly in the context of Covid's impact on the labour market. There is a formal consultation, but there is also an extensive engagement on a one-to-one basis with trade unions, which I and Richard Lochhead and the First Minister are all active participants in. I want to ask about tourism. Cabinet Secretary, we are aware that tourism is important for the Scottish economy. It has been hit hard by the lack of international visitors. Earlier this year, it was announced that a new £25 million tourism recovery programme was being launched. Can you say how that funding was utilised to support Scottish tourism? Yes, I can. You are right in saying that it was a direct response to the tourism task force, which had a lot of industry leaders represented on it. That £25 million is phase 1 of the tourism recovery programme. It provided support, for example, for reskilling and retraining. It also provided support for marketing campaigns to try and increase footfall. There were a number of different elements to it, recognising that tourism and hospitality businesses more widely had been particularly hard hit. Alongside that, one of the biggest challenges that they have faced in recent months is the labour shortages. They were perhaps one of the first industries to be hit by it. We, in conjunction with them, launched a recruitment campaign that ran over the summer months, from 5 July to 18 August, with financial support from the Scottish Government, to try and bring more people into the industry. There were a number of different elements to that, but we have also been working alongside the tourism task force to look at what phase 2 of the support would be. We have implemented phase 1 with £25 million, but we are working with them to consider what phase 2 would look like. Are you able to say anything about phase 2 in relation to how you have a sustainable recovery in the medium to long term? I am happy to bring in Colin Cook, because he does a lot of work in this space. There has been a submission of various recovery proposals. We are looking at the best way of supporting phase 2 over the next two years. It is a bit of a longer term approach, so phase 1 was the immediate challenge that phase 2 would look more broadly. Colin Cook, do you want to speak more to that? I would love to, Cabinet Secretary. Work is going on between my team, Visit Scotland and various representatives of the Scottish tourism emergency recovery group to shape those phase 2 proposals. Although we are not yet in a position to commit to what they are going to be or the amount of financial support that they can be given, we are clearly looking to build on much of what was achieved in the first stage. The international demand building, putting Scotland back on the international tourist map, is a long term exercise. Supporting strategic tourism infrastructure development is a long term exercise. There are a number of things that address those questions about how you apply digital technology to the tourism industry and how you train and encourage people into the industry and convince people that this is a career with all the opportunities that those of us who work in it or work with it know that it has. These are long term initiatives. We are working with the tourism sector. We are trying to shape the phase 2 recovery proposals and hopefully soon we will be able to talk more about what they mean with the industry and with yourselves. My final point is that it was estimated that 6.5 million people took staycations in Scotland during the summer, making Scotland the third most popular destination in the UK. How will the Government build on that increase in domestic visitors? In the forthcoming budget, the 22-23 budget, are you able to indicate how you will support the sector, including investment, to address infrastructure pinch points? It is worth celebrating those figures, because we clearly in Scotland have significant strengths when it comes to our tourism and hospitality offering. Clearly, as the person who represents one of the best bits of Scotland, which saw a lot of visitors over the summer months, I can see how hard businesses have worked after a phenomenally challenging 18 months to be in a position where they have done so. I think that we need to build on that. I think that there are particular pinch points. We have a commitment, particularly in rural areas, to invest in infrastructure alongside what we are doing to support the businesses themselves. The rural tourism infrastructure fund is one of the most obvious examples of that. Rural areas that were not prepared and geared up to deal with the huge numbers that came have received financial support to put in place parking, toilets, expanding roads, parking places and things like that to relieve ingestion. We need to look at what support needs to be in urban areas to deal with some of the challenges of increased numbers, which is good for our economy. Colin Beattie Cabinet Secretary, this committee has been taking evidence in recent times about the challenges around the supply chain. We understand that that is a complex area, comprising not just domestic supply chains but international supply chains. We have also been looking at labour and skills shortages alongside that. We recognise that there are limits as to what the Scottish Government can do to fix the supply chains. What policy levers does the Scottish Government have in order to alleviate the issues of the supply chain and labour and skills shortages? How will those be reflected in the upcoming budget? Shor answer is that those will be reflected in the next budget, because those are some of the most pressing issues facing businesses and hampering potentially our economic recovery if we do not resolve it. What levers do we have? If I go through a number of levers, there are financial levers. Where businesses need financial support or where businesses require to make investment in supply chains, there are things that we can consider. Our budget is severely challenged and clearly resolving issues in one area that requires budget to be taken from another area. The financial efforts are quite limited when it comes to resolving supply chains or labour market shortages. The second thing—I have already referenced this—is making sure that the right people have the right skills for the right jobs. There is a short-term imperative through the national transition training fund to help those who are facing redundancy or who have recently left work to reskill, retrain for new jobs. There is a short term. There is a longer term, however, which is looking ahead over the next five to ten years, making sure that our higher and further education institutions are set up to be able to deliver those skills for the future. That is a longer term thing that will not fix the immediate challenge. The next lever that we have is procurement, where we need to incentivise the use of local supply chains to strengthen local supply chains. We are less dependent on uncertain supply chains elsewhere. That has limited benefit because we cannot avoid the fact that our supply chains are exposed to international fluctuations and international challenges. The last lever that we have is engagement with the UK Government, which is something that I take very seriously. I recognise my responsibility to engage with the chancellor and the new chief secretary to the treasury. As you can imagine over the past two weeks, I have had conversations and correspondence with the business secretary on the impact of rising energy costs alongside Michael Matheson when there was a crisis around a potential challenge around CO2, engaging with the UK Government, exchanging data on what is happening in Scotland and trying to help with the UK Government to come to a resolution on those issues. The biggest challenge for us right now in engaging with the UK Government is trying to put in place solutions to the labour market shortage. These issues have been emerging since probably June and July. I had very early conversations about labour market shortages when it was being raised by tourism and hospitality industries back in June. It has been a long time coming looking for a solution. The most recent announcement around a visa option for haulage is part of the solution, but I think that most people would agree that it is too little, too late, and haulage is not the only industry that is struggling with that. Helena Gray, who is also on the call, is working alongside business to develop a 10-point plan, looking at how we respond to those issues and where we have levers. I am sure that she would be happy to come in if the convener would wish that. I am also conscious that you perhaps want to keep moving on to other issues. Mr Beattie, do you want to hear from Mr Beattie? I think that it would be useful, yes. Please do. Thank you very much, cabinet secretary. Good morning, committee. To reiterate what the cabinet secretary has said, we are working collaboratively with businesses, industry representatives and others to understand the challenges that they are facing and to develop a shared action plan that focuses on the levers that we have available to us, but also on where action may be required on levers that are reserved to others as well. Cabinet secretary, you said that you were in close contact with the UK Government in relation to supply chain in particular. How fruitful have those discussions been? How useful have they been? Is there a result coming out of this that is going to benefit us? On some areas, we have seen a swift resolution, even if it is a temporary resolution. Last week, there were a number of discussions around the challenges around CO2, which, to give credit where it is due, have been resolved on a temporary basis, where there has not been a reduction in our CO2 supply. However, there are still very live issues around energy costs, which I think will continue to have an impact on prices, on supplies and on the ability to deliver to customers. Those issues have not been ultimately resolved. I think that we have seen some examples where there has been a swift resolution. Those are challenging issues, so I do not want to be overly critical. Where I would be much more critical is on labour market shortages, because labour market shortages are resolvable and are within the gift of the UK Government. Too often, it is an ideological position that has prevented a swift resolution than anything else. I think that there was a very emotive comment by a Polish lorry driver on the radio last week, who said that having felt unwelcome for a number of years, you cannot just turn the taps on now and assume that European citizens will come flooding back. Despite that, we are seeing shortages in care homes. We are seeing shortages in hospitality and tourism and in manufacturing bases. Right across the board, we are seeing shortages. That has been exacerbated by the pandemic, but there is no doubt that everybody has pretty much agreed that it has been significantly exacerbated by an immigration policy that has reduced the number of EU citizens working in this country. If it is brief, you can have a look at it. Let me just ask a very brief question if you could update on the measures to mitigate the Covid-19 labour market impact, particularly for young people. On the skills side, the young person's guarantee is continuing, led by Sandy Begby. We have been working to implement that to ensure that young people have access to jobs, to skilling or retraining. That is one of our primary economic levers in trying to help young people when it comes to the impact of the pandemic. Thank you very much. Alexander Brannad. Thank you, convener. Good morning, Cabinet Secretary. We have finally got the R100 programme for the North lot for constituents to look at. Disappointingly, initial feedback has not been positive. There are still numbers of errors that occurred on the previous lots, such as people say that they are connected when they are clearly not. Many say that the dates that are being given in 2026 is not particularly satisfactory. The contributions under the voucher schemes are insufficient, especially when they are being quoted previously, costs of near 100,000 in some cases for some groups of houses to be connected. That means that they will be unable to develop businesses and in some cases are now considering moving away. How many will be connected via the North lot and what is the review process of this initial roll-out that has been announced? Most importantly, where should we be directing constituents with their questions and to point out errors? I should obviously say at the outset that telecommunications has always been a reserved matter, so this is over and above in what the UK Government will be doing. The R100 programme is clearly getting this infrastructure into non-commercial areas at a time when the UK Government's gigabit programme, which tries to deliver a similar programme to R100, is still at its planning stage. We are already funding the full extension of full fibre in some of the hardest-to-reach communities anywhere in the UK. We are actually trying to work with the UK Government to secure a fair share of the £1.2 billion that they have announced through the project gigabit to push that coverage even further. Where we can go further, we absolutely will go further. To date, we have had 1,592 connections that have been delivered by the R100 central contract. There are 3,052 currently in build and 1,595 connections to be delivered by the R100 south contract. In terms of the north contract, which is specifically what you referenced, that build work has commenced as part of the R100 north contract. I would be very happy to provide the member with a breakdown of precisely what is intended through the north lot, through the central lot and through the south lot, understanding that if we can increase those numbers, we will absolutely increase those numbers. I am in conversation with Openreach on a regular basis to see how much further we can push those numbers. Thank you. Still on that question, you did answer the first part, and I am grateful for that in terms of the numbers. In terms of a review process for that roll-out, and most importantly, the R100 being within the Scottish Government's remit, where do we direct constituents, queries and errors? On that latter point, just as a fortnight ago or so, there is now provision online, and I am happy to share the link with the committee for the details for the R100 north lot in particular, for households to understand when and how they will be connected. I am sure that, if it has not already been shared, there are contact details, because my team regularly informs MSPs of progress. I would recommend that you use those contact details that are already being used to inform MSPs of progress or feedback. In terms of a review, I am assuming that you mean a review of the overall contract rather than a review of individuals. In terms of that review, I guess two points to that. One is that it is almost iterative, it is on-going. I have regular conversations with Openreach. We are continuing to try to push Openreach to go as far as possible. Where there has been a public sector spend, where they might be able to go further in terms of commercial links, and I am also in conversation with the UK Government in terms of getting a share of that £1.2 billion. In that sense, the review is on-going. We have a baseline, which is in the contract, but if I can push that further, I absolutely will push that further. I can assure the member, although it is probably not much consolation, that my constituents are as agitated and as exercised about whether or not they will get broadband as his probably are. I hear it on a regular basis in surgeries and, most recently, in the election campaign. Thank you, cabinet secretary. I have no doubt that she does hear that much appreciated. Connected to Paul Broadbrand, we have heard this week about poor rural healthcare provision. We have previously had the shortfall in the spending of the rural housing fund. We have issues with rural public transport issues. Again, I know that the cabinet secretary is well aware of all those issues, given her constituency. In the papers today, one of the largest sums mentioned by the Scottish National Investment Bank is the £50 million invested in a forestry fund. I know my own register of interest regarding forestry. Nearly ten times the next largest investment. I wonder how financing fund managers, speculating on carbon prices, leading to driving up rural land prices, in some cases creating a modern version of the clearances, seems counterproductive to supporting rural economies. My question is where is the understanding of a rural economy and where is the joined up solutions when we see measures like today, which are, like I say, a counterproductive? It is a really important question, because whether it is looking ten years down the line at economic strategy or whether it is looking next week into some of the businesses that are struggling, if all of Scotland cannot benefit and contribute, then we will not have succeeded. I strongly dispute the notion that if some of your urban centres are contributing and driving economic growth and your numbers nationally look good, then you have succeeded. The UK model depends on London and the south-east to fire the cylinders. In Scotland, we need to do differently. Rural areas are often at the risk of alienating some of the urban MSPs. Rural areas are often the most entrepreneurial. They provide a huge opportunity when it comes to pioneering solutions. You will have seen that in our commitment to helping some of our islands to become carbon neutral before anyone else. I think that there is an opportunity to do that, but that is all rhetoric, unless we build the infrastructure, unless we ensure that there is a skills plan and of course we do have a skills action plan for rural Scotland, unless that is in place and the financial support, then we will not achieve that. In short, I would say that it is important that we are reskilling, upskilling and providing opportunities to communities in rural Scotland. I think that the skills action plan does that. Secondly, we are making sure that there are opportunities for rural entrepreneurs. We have the rural entrepreneurial fund. Thirdly, we are investing in infrastructure. We have the infrastructure investment plan over the long term over the next few decades, which looks at investment in rural hospitals, investment in rural schools and investment in rural roads. All together, that provides an opportunity for rural Scotland. In terms of the point about the Scottish National Investment Bank, the member will know that it is operationally independent from ministers and therefore those decisions are taken by the bank for very good reason. The less political involvement there is in the bank's decisions, the better. Thank you. I do. Just a very quick question. Cabinet Secretary, you talked about rural infrastructure, you talked about roads and the like. One of the real issues is, I'm sure you'll be aware, is those from an island community, like myself, the lack of investment or the need for investment in new ferries within our island communities, like in the northern isles, but also on the west coast as well. What kind of hope can you give island communities that in the next budget and looking forward there's going to be some serious investment in terms of that ferry infrastructure? Three things. One is that I am absolutely determined that the current two vessels are completed that are currently in construction. I know that there's a lot of discussion around the future of the yard, but if I separate the yard just a moment from the vessels, those vessels have got to be completed. That is one of the most important issues on my agenda. Secondly, we are making progress on Calmax, I'm sorry, CMAL's procurement of new vessels with the announcement of the most recent two vessels. That pipeline therefore is starting. Beyond that, the third point I would make is that over £500 million has been committed to procuring additional vessels, particularly around the small vessels procurement programme, to bolster and to boost the fleet. I know how challenging it is right now for island communities. You and I both represent some of those island communities and, again, it's another issue that I see regularly in my inbox. Those would be my three points in terms of the need to resolve the issue and reflecting on the fact that it absolutely and urgently does need to be resolved. Before we close, can I return to the issue of the Scottish National Investment Bank? The Cabinet Secretary has given a firm commitment this morning to finance SNP, and you also in the recent response referred to their independence. Can I ask if a target rate of return has been set for the bank by the Government? Also, the Cabinet Secretary will be aware that a number of bonus incentive payments have been made in the initial months of the bank being established. Previously, the Government has said that there would be no annual financial target-based bonuses within the bank and there would be medium-to-long-term incentive schemes. Does the Cabinet Secretary have a view on the recent bonuses and payments that have been made in the short lifetime of the bank? To reiterate that point, I agree that it needs to be operationally independent. In terms of the two specific questions, as agreed during the passage of the bill, setting an overall target rate of return too soon could risk the target not being met. It is important that we recognise the bank's role when it comes to long-term capital investment. However, I am keeping that position under review. A meaningful target will be agreed or set once there is a sufficient level of activity on which we can report. Clearly, I would be happy to keep the committee updated on that point. The bank will seek a commercial return on every investment that it makes. The actual amount will vary depending on the risks and the type of investment. You have already seen in the past year or so the varying nature of investments that have been made. The bank is also required to deliver social, economic and environmental returns as well as financial returns and the investments that it makes. In terms of the more specific point around the bank's pay framework, the bank's board is ultimately responsible for the assessment criteria, appraisal and payments made under the bank's pay framework. It operates within our public sector pay policy with exceptions and adaptions, as approved by ministers in June last year. The framework has got to reflect the fact that the bank operates in the financial services sector, but it is also a public body. It is modelled to align with the approaches taken in other UK development banks. There will be no annual financial target-based bonuses within the bank. The chief executive and other staff instead are going to have access to long-term incentive schemes linked to the delivery of missions and objective-based targets. That ensures that an element of pay is linked to the bank achieving its public service mission without the creation of a bonus culture. That remains my position, certainly. I thank the cabinet secretary and the officials for attending this morning. We hope to see the cabinet secretary back in Parliament soon. We will now take a 500 break for the next panel. This is a UK Government bill introducing the House of Lords on 12 May, which changes the law on devolved matters. I would like to welcome Ivan McKee, Minister for Business, Trade, Tourism and Enterprise, who is joined by David McClelland, who is solicitor, and Richard Shearer, head of services trade policy, both of the Scottish Government. I would like to invite the minister to make a brief statement on the Scottish Government's position and then we will move to questions. Thank you very much, convener, and good morning. The committee is great to be here. I would like to thank the committee for inviting me to discuss this important legislative consent issue today. The principle of the recognition of professional qualifications is to allow suitably qualified people the chance to work in or trade with other countries. For Scotland, that means getting access to doctors, vets, nurses and engineers with skills gained in other countries that we need here, but it also enables our professionals to take up skill enhancing opportunities abroad or to export their services to other countries. To put this in context, doctors, nurses and vets qualified in other countries rely on MRPQ to be able to work here. In the latest data shows that international exports of professional, scientific and technical activities were worth £3.4 billion in 2018-20 per cent of total services and 10 per cent of total international exports. Within the EU, there is a formal system for the recognition of qualifications that was lost when the UK left the EU. As a responsible Government, the Scottish Government has worked with the UK Government and Scottish Parliament to amend legislation on MRPQ that was brought into UK law as a result of Brexit. The bill covers a number of important issues for regulators now that the UK is no longer in the EU. It seeks to provide all professional regulators with the power to enter into agreements with counterparts abroad, as some do not have that power. There are also powers for UK and devolved ministers to make regulations covering professions over which they can legislate. We know that a variety of UK-wide and devolved regulators have expressed concerns about the terms of the bill as relates to professional standards, and there is a risk that UK ministers might trade away existing high standards to secure free trade agreements. I understand that Bays have continued to engage with regulators across the UK, and I hope that they will seek to allay those fears through amendments to the bill. The committee will know that Scottish ministers felt that they could not recommend granting consent for this bill as it stands. The bill, as drafted, confers concurrent powers and devolved areas to both UK and Scottish ministers but without a requirement to seek consent before doing so. In addition, UK ministers could amend the supply regulations that were legitimately made here and supported by this Parliament. The issues around consent are relevant to a number of other UK Government bills, and I hope that the UK Government would take proper account of our legitimate concerns in this area. Scottish ministers have asked UK ministers to amend the bill to include a requirement for consent before acting in devolved areas. If, as we were told, UK ministers do not intend to act without agreement, then there is no problem. I am keen to work with Bays constructively, as long as Scotland is part of the UK, where we have shared interests. That includes the bill on MRPQ. I should also say that you are the first to have had in front of us to the committee, so we welcome your joining us here this morning, the first witness. You have outlined the reasons why the Government is not prepared to put forward a memorandum of consent at the moment. If an amendment was to be accepted and that issue was to be resolved, are you satisfied with the proposals that are in the bill? Would you think that it would resolve the issues that we have of recognising qualifications? I think so. From our perspective, that is clearly the main issue, the impingement on devolved responsibilities. Clearly, there are issues that have been raised by regulators that have concerns as well, but the main issue for us is round about the devolved aspects of that. We recognise that the asks from the regulators were supportive of many of those, and we are hopeful that the UK Government on those as well would move forward with appropriate amendments. Thank you for outlining the Government's position just now. You mentioned engagement with regulators just there, but are you aware of any concerns that either they or other stakeholders in Scotland have had about the provisions in this bill? Well, their concerns are largely understandable, and they will speak for themselves round about the potential downgrading of standards in pursuit of international trade deals. Clearly, that is something to be concerned about, and the UK Government being in a position to make changes there that the regulators weren't comfortable with. Jamie Halcro Johnston. Can I just ask what ongoing consultation or discussions there are with the UK Government, either at ministerial or official level? There's ongoing engagement at official level on a regular basis on this, and it's an issue that I've spoken with Jerry Grimstone, the relevant UK Government minister on as well, and written to him on this. So it's an area where we're hopeful that there will be movement, and there is ongoing discussion on this as on many, many other areas on a regular basis. So you think you're quite positive about the potential to get an amendment to this? I would like to think so, but I think it will really come down to what the UK Government reflects in the situation that we're in. Clearly, there have been other bills in this regard where the UK Government has sought to impinge on devolved matters that haven't concluded the way we'd like them to, but in this case I would be hopeful that they would recognise the importance of not impinging on devolved areas. In terms of the stakeholders that you mentioned earlier, are you keeping them in touch with those discussions, or are you relying on them having discussions with the UK Government in terms of potential amendments? They'll be having discussions separately, but we officials are engaging with those regulators on an on-going basis as well to understand their concerns, both for professional issues that I mentioned and how this impinges on devolved matters. Thank you. The minister has indicated where he would like the UK Government to make amendments. He might be aware that the Delegated, Priorits and Law Reform Committee did argue that there should be introduced a statutory requirement to consult with affected regulators in relation to international treaties. Is that something that the Government would support and be asking the UK Government to look at? Yes, our ask is that the requirement to seek consent is placed on the face of the bill in devolved matters. With regard to the broader issue of international trade, there's an on-going discussion with the UK Government on that over a lengthy period. We've published two years ago a perspective on how Scotland and other devolved administrations, the Government and the Parliament, should be involved in all aspects and all stages of pulling to international trade agreements. That's a long-standing position that we've had in that regard and that equally applies to professional qualifications. Minister, just a quick question. How does the Scottish Government envisage that the provisions of the bill would interplay with the relevant provisions in the Internal Market Act? Well, clearly the Internal Market Act gives the UK Government the ability to impinge and devolve areas, which is something we're deeply unhappy about. As we know, devolved is per retain, so the UK Government effectively can do as it wishes in that regard. The Internal Market Bill allows it to do that, but that doesn't mean it's a wise thing to do or something that's in the interests of Scotland for it to do so. Just following on from that point, have you had any indications that you could share for any possible or reasonable rationale as to why the UK Government wouldn't accept the amendment given your stated concerns about standards? Is there anything you could share? If they're saying that we have no intention of doing that, why not simply accept the amendment? Is there anything more you can offer around that? Your analysis is correct. A position is that if the UK Government has no desire to impinge on those areas, then they should make that clear by stating it on the face of the bill, and it's difficult to see why they wouldn't do that. But as I say, we continue those discussions and hope that their position will be changed to reflect that very logical position as you've outlined it there. Just very briefly, the Health and Social Care Committee of this Parliament has concerns and there are obviously live issues about recruitment and school and labour shortages, particularly in health and social care. Is this something that is not just dry and academic but very real in terms of the recruitment capability of the Scottish Government to recruit and retain high-skilled workers but also at the highest standards of the Scottish regulator? Yes, that's an important point. On the surface of it, MRPQ does not sound like the most exciting of subjects, but in reality, as I've indicated on so many levels in terms of the proportion of our trade that represents, that's an increasing proportion, the ability of Scottish professionals to work internationally, which is surely important for their aspirations and career development and business, of course. And as you've rightly said, the requirements for movement of professionally trained individuals to support better health and social care sector or a whole range of other sectors that might apply to it directly and pinches on our ability to be able to respond to situations. And as a devolved Government, clearly the responsibility for doing so is important that those powers remain within that devolved remit. Thank you. Can I just finally ask the Delegated Powers and Law Reform Committee also talked about clause 3 of the bill and compelling devolved regulates to charge fees? I mean, the approach would tend to be that you try to reduce barriers to people coming to work and support our economy and our public services. Do you have concerns? Have you had any discussions with devolved regulators about the proposal to charge fees? And could you explain, does the fee section include what level the fee would be set at, or would we have flexibility in... OK, thanks for the question. I'm not aware on the specifics of fee levels, and I think I might defer to one of the officials who may have more on the detail on that and any conversations I've had on the specifics of that with the devolved regulators. OK, thank you. I don't know who's best to come in on that. Richard Shearer, would you like to come in? Yes, thank you. Our understanding of the fee section is that it's not clear as to whether or not there will be an interaction with regulators in determining the charging of fees. But there are some regulators who have noted the fact that some of the changes that might be introduced from this bill might introduce costs that they don't currently have and how they would offset those costs. But the imposition, either of a fixed fee or the removal of the ability to charge fees, would be something that could be potentially concerning. We would expect, in the first instance, that regulators should be able to make autonomous decisions about fee charging, but they should be reasonable and reflect the service that's being provided. OK, thank you. I'll just follow up on that. You're right, convener. Obviously everything has been equal. I'm keen to remove those barriers to trade where they exist. Thank you, minister, and thank you to the minister and the officials for attending this morning. That brings this evidence session to a close. That concludes the public part of the meeting and we'll now move into private session.