 Dyma i gwych, dwi'n bwysig sydd o'r 14th gwaith o gyffredinol gynhwll yn ymgynghwil ac aeulessaeth i gyfscolwyddiol 2019. Rwy'n bwysig o'i gwych gyffredinol ger trunio ddeinol Llockhart, gyda nhw'r wneud cyffredinol gyda'r ddogfai sydd arleisio i lwynt. Yr eich ymgynghoriad yw'r cyf cyffredinol ryw iawn, am gyfeil ei chwn i gweithio pwylo fyddion 7 i 8 i gwyll keyboard. Yn dangos, dwy'n dweud. We now come to item 2 on the agenda, and this relates to the Companies Act 2006, Scottish Public Sector companies to be audited by the Auditor General for Scotland, Order 2019, which is in draft form before the committee, and I welcome, Joe Fitzpatrick, Minister for Public Health, Sport and Wellbeing, Nadine Murphy, Paul Ingram and Elaine Black, who are here with him. I invite the minister to make his opening statement on the instrument. Y dyn nhw yw'r bywyd yn eu pwn i'r gweithio'r ddaf yn ystod yn cael tîm yn ymgyrch, ond rydyn ni'n hoffaeth gwaith yn ymgyrch gyda'r record i'w ddraeth, i'w ddyn nhw'n diolch i'r rôl. Mae Llyfrgell Ffondol o'r Prydd, oedd y unrhyw i'r unrhyw gwaith yn cyfrifio cyfreithio cyfrifio cyfrifio cyfrifio cyfrifio cyfrifio cyfrifio cyfrifio cyfrifio cyfrifio cyfrifio ac Llanx andations thats made a commitment to maintain the ILF in Scotland and the established ILF waste of the 11 of July 2015 The funding is used by recipients to service services that offer them the flexibility that they would otherwise have to live in their own home, you take up employment or education and to help reduce social isolation. The agreement has been reached communication services to distribute packages ofILF supports to existing measurements of the ILEF fund living in Northern Ireland on behalf of the Northern Ireland Executive. ILEF Scotland was established in 2015 as a company limited by guarantee and wholly owned by the Scottish ministers. That was to meet the very tight time frame for delivery and to ensure that payments were protected. At that time, ILEF Scotland appointed its own external auditor and its annual accounts have been audited under the commercial sector audit requirements set out under the Companies Act 2006. In June 2018, ILEF Scotland was established as a new, devolved Scottish public body and has the classification of executive non-departmental public body. NDPBs follow an executive model framework, which requires that external auditing is provided by Auditor General for Scotland. The Auditor General for Scotland is a statutory auditor whose services are outlined in the Public Finance and Accountability Scotland Act 2000. It is accountable to the Scottish Parliament and has several statutory powers to assist the auditing process. It is therefore desirable that ILEF Scotland to be on the same footing as other statutory NDPBs for auditing and accounting purposes. To that end, the purpose of the order is to extend the Auditor General for Scotland to provide external audit services to ILEF Scotland. In seeking the change, we have consulted with the Scottish Government legal directorate, senior staff from the Auditor General for Scotland's office and ILEF Scotland. In terms of the detail of the order being considered today, the Companies Act 2006, Scottish public sector companies to be audited by the Auditor General for Scotland Order 2019, will subject ILEF Scotland to the following pieces of legislation. First, section 1226 of the Companies Act 2006, which allows Auditor General for Scotland to be appointed as a statutory external auditor, and section 483 of the Companies Act 2006, which allows ILEF Scotland to be specified as a body subject to the Auditor General for Scotland's auditing powers. We would be happy to take any questions on the order. Do committee members have any questions on the order, Andy Wightman? Yes, thanks, convener. The Delegated Powers and Law Reform Committee have drawn attention to the fact that the order does not follow proper drafting practice in terms of a territorial designation. The Government's response, basically, is that this does not matter because ILEF Scotland is clear what it does. Nevertheless, it seems that proper drafting practice is a good thing, regardless of whether it actually matters. It complicates scrutiny of legislation if proper drafting practice is not followed, and we then have to follow through to see whether it does matter. Whereas, if proper drafting practice was carried out in the first place, we would not have to do that. What is your response? Obviously, the matter was raised by the Delegated Powers Committee, and I think that they were satisfied with the response that they received from the Government. Nadine, do you want to add a little bit more? The Scottish Government is of the view that the order extends to the whole of the UK as a matter of Scott's law. That reflects the general UK-wide extent of the enabling powers set out under section 483 of the Companies Act 2006, under which the present draft order is drafted. In line with drafting practice, a provision dealing with extent is therefore not required. This position is supported in the Scottish statutory instrument drafting manual, which states that an instrument will have the same extent as the power under which it is made. To include a provision on extent in these circumstances could therefore be criticised as unnecessary. This was a criticism of the construction contract Scotland order 2011. Subordinate legislation that contains no express proposition about its own extent is presumed to have the same extent as the parent act. It is also useful to note that similar orders have already been made by Scottish ministers under the enabling powers of UK acts of parliament, which also have UK-wide extent. This can be demonstrated by the Proceeds of Crime Act 2002, disclosure of information to and by the Lord Advocate and Scottish Ministers amendment order 2014. More notably, it can be demonstrated by the Companies Act 2006, Scottish Public Sector companies to be audited by the Auditor General for Scotland order 2008, which was made using the same enabling powers as the draft order currently before the committee. This 2008 order forms a precedent for legislation made under section 483 of the Companies Act 2006. I follow all that. I take it that there is a difference of opinion between the Scottish Government and Parliament as to whether proper drafting practice has been followed, because you are basically arguing that the statutory instrument manual suggests that it is not required. Delegated powers committee said that there was a failure. There is a difference of opinion, is that fair? That is fair. Our draft is supported by the manual and it is supported by precedent, in fact, with the same parent act as before the committee now. I think that the minister wants to come back on that. That was very briefly. It is obviously not unusual for there to be differences of opinion, but nonetheless the Government fully appreciates the work that Delegate Powers Committee does in raising such issues so that we can just make sure that we have got things absolutely right. John Mason, can you clarify why we are doing this just now, rather than last year, next year or some other time? Obviously, that could not be brought forward until the change of function to an NDPB, so it has just had to come after that. That was actually the first opportunity? That would be effectively the first opportunity. If there are no further questions from committee members, I will move now to item 3 in the agenda, which is the formal debate on the motion to approve the affirmative instrument that we have just considered. I would invite the minister to formally move the motion. I move that the Economy, Energy and Fair Work Committee recommends that the Companies Act 2006, the Scottish public sector companies to be audited by the Auditor General for Scotland order 2019 draft be approved. Does any member wish to speak in the debate on the motion? If not, I will put the question. The question is that motion S5M-17063 be agreed to. Are we all agreed? Yes. Thank you. That is agreed and the result will be recorded and I would invite the committee to agree that I and the clerk produce a short factual report of the committee's decision and arrange for that to be published. Does the committee agree to that? Yes. At this point, I will suspend the meeting. Thank you to the minister and officials. We move now to item 4 on the committee's agenda for this morning, our inquiry into construction and Scotland's economy. I would welcome today Dirk Mackay, Cabinet Secretary for Finance, Economy and Fair Work, and with him he has Scott Bell, who is the head of procurement development and the construction review division, and Elizabeth Stark, who is the head of the manufacturing and construction in the Scottish Government. First of all, I will ask a couple of questions about some issues that have arisen before the committee in the course of the inquiry. The first of those relates to the measurement of economic performance of the sector. I understand that the Scottish Government has recently adjusted the methodology relating to construction output and GDP due to anomalies that appear to be impacting Scotland's economic performance figures. Some witnesses on the committee made comment on that. For example, Dr Stewart McIntyre said that, while accepting progress had been made, indicated that the methodology is not yet perfect. I wonder if the cabinet secretary could update us on progress in terms of further adjusting the methodology. Sure. That is a good question. Incidentally, I had a short opening statement and a long opening statement thinking that you would prefer the short opening statement. I will not give any opening statement at all. I will go straight to your questions, which is your prerogative. Cabinet secretary, my apologies. It is fine. I am happy to get straight to questions if that is what you wish. Well, perhaps we could have a compromise if you make a brief opening statement and then come to my question. Would that be an agreeable way of proceeding? I will give an even shorter opening statement than I had intended. Just as I am very grateful for the opportunity to discuss construction with you, I think that it is a very timely piece of work as we shape actions going forward. Knowing how important it is to Scotland's economy to the workforce and to our wider objectives as a nation is about a short opening statement that I can manage. That is totally not what I was intending to say, convener. Turning to your question, ask two economists for a forecaster or an opinion, and you will get at least two opinions that will not necessarily be the same forecaster or the same figures. It is fair to say that we have a deeper understanding over the statistics in relation to GDP growth, economy and particularly construction. There has been that requirement for further work, realignment and adjustment. That is what changed the GDP stats over the period of the last few years. There is no suggestion that it was anything other than trying to understand what is counted and what is not. ONS has been over that at a UK level and ONS is now doing work at a regional and, for us, Scottish level to understand those GDP statistics. It is more a question of what you are choosing to count and what is not counted. My understanding that some months back, when that adjustment was made last year, it was largely around renewables as it related to construction. Of course, economists can give further information, but the statistics have been sharpened up. Essentially, as you will be familiar with, what the GDP stats showed is that there is less economic growth in relation to construction in previous years and more in recent years to summarise. Moving on to the question of retentions, you will again be aware that the committee has had some evidence on that. I think that there is retention research that has been commissioned by the Scottish Government. Do you at any stage have an indication of the direction of travel that the Scottish Government is thinking of going on this? Some suggested the complete abolition of retentions. Is there any indication that you can give at this stage on that subject? Not yet, but I can certainly explain some of the thinking that we have right now. I hear some of that opinion, some would like complete abolition but others actually see a role. It is probably a balance. Retentions is not the only tool in the box, so to speak, because it may be one of the mechanisms that we have to have quality assurance. Of course, we do not want a position where either the public or the private sector, but in the public sector, where we are commissioning work, we are not assured that the project is complete to a satisfaction and we have very little recourse to that contractor. There may still be a role going forward, but it must never be for a cash flow situation for those contracting the works. It should be for that quality assurance purpose of being assured that there are still levers that can be deployed to ensure that essentially what we have paid for is what has been delivered. Research has been undertaken and I think that that report is being compiled. Once that is concluded, I think that it can inform our opinion as well as the evidence that you have harvested to see what opinion on it is. I am open minded as to the future use, but it has to be one of the many tools that can be used to ensure that we get value for money and a satisfactory conclusion to contracts that we have undertaken. No conclusions yet, convener, but I am happy to look at the evidence. Thank you very much. John Mason. I was really just briefly to follow on from what the convener was asking me in one of the other options, as well as the idea of project bank accounts. Again, we have mixed evidence frankly about that. It was positive that the level had been reduced, but there was some feeling that bigger companies benefit a bit more from it and, further down the supply chain, tier 3 and 4 and so on, do not benefit so much from it. I think that there was the argument that, effectively, that takes money out of everybody's pocket because it is sitting somewhere else. How do you feel about project bank accounts going forward? Again, it is a balance on the whole that they are perceived to be a good thing. We have lowered the thresholds so that there can be more access to them. Arguably, the biggest beneficiaries are SMEs that run through the supply chain and the subcontractors that can get access to what they are due more quickly. That is how they have come about. We see a benefit to them. We are not making it mandatory for every contract, although we have reduced the threshold so that they can be deployed happy for officials to go into further details around the thresholds. On the whole, there is more consensus that they have been more welcome, rather than being disliked, particularly for those further down the supply chain. I should say that a further tool is around performance bonds in addition to retentions, in addition to project bank accounts. Performance bonds can be used by those procuring the work to have assurance around delivery. That is a different financial intervention that might work for others. As I said, there is more than one tool here to try to ensure that there is that cash flow. I think that what we are all trying to do is to ensure that the resources are flowing through the system so that there is proper payment for work being done, as opposed to people being able to retain cash for the wrong purposes, which in the end turns great difficulties for business, particularly the SMEs. I am sure of what Mr Mason is striving at. Do you think that thresholds are at the right level just now? They have been moved, but they could be moved further. That is the mandatory threshold, but I think that we could explore whether we could do more through choice, where there may be agreement. We could be more flexible around the threshold, so we could move the thresholds further than where they have already been. It feels pretty optimum right now, but what I am saying is that if those further down a level of contract wish to deploy them, I would see that as a positive thing. Cabinet Secretary, I would like to look at access to finance. Evidence indicates that, especially for SME construction firms, there is an increasing barrier to access to finance. First echelon lenders, the banks and so on, seem to have more or less withdrawn from lending to the construction market, which forces, particularly, the SMEs into specialist lenders. Second, third echelon lenders, and sometimes even private equity and challenger banks. All of that is, as we have heard, much more expensive than the traditional routes. Are you satisfied that the current access to finance for SMEs is sustainable or adequate? I think that there is more we can do, and there is more we must do, and that includes the financial products that the Government has. In terms of banks and lenders, specifically, I was just at FISAB yesterday. Of course, the financial services advisory board, the First Minister, was in attendance as well, and I have established with FISAB a banking and economy forum, which I think is very useful when taking the interests of the economy and government to the banks and financial services direct. I often hear that mismatch between those seeking lending facilities saying that they cannot get the resources that they need, and then I meet the banks who say that there is plenty capital and that we are very obliging. Maybe there is a balance between what both are saying. In terms of Government's intervention, I am happy to take that evidence to the banking and economy forum sector-specific with case examples, if that is appropriate as well. In the economic action plan that I launched on my appointment as economy secretary in addition to my financial role, there are very clear actions around stimulating the economy, the financial products and the construction sector as well. Why I said that there is more that we can do. I think that there is more that we can do around the national investment bank, but as a precursor to that, there is the Building Scotland fund, and there are also existing resources that I think could be maximised, the Scottish gross scheme, for example, and is arguably underutilised by the sector. Part of that is making sure that it is properly promoted, and part of it might be to understand that there are some barriers to why it has not been accessed in the way that it could. I think that there is more that can be done with the banks, the wider economy and even with Government enterprise programmes. I am very happy to look at that to see how we can further support it. That said, in relation to the Building Scotland fund, even though it has taken some time, as you would expect to set up the due diligence and the mechanisms for it, absolutely more is now coming through the pipeline and I welcome that. I was actually going to touch on the BSF, which was launched in 2018, and my understanding is that, to date, something like £80 million of the £150 million has been allocated. Looking at the pipeline of projects and so on, is the demand at the uptake in line with what you are expecting? Is it on track? Why? I did not set out a target as such, although for the Building Scotland fund, we have made £150 million available. I can work back to some other figures that, in the pipeline of what is interested, there are £400 million of potential projects in the pipeline. Contracts of £53 million over the next two years have been signed, and right now £64 million has been allocated. That is three different figures that reflect what has been signed, what the anticipation is as it stands right now, but the figure of what could be in scope is £400 million of potential projects. Of course, not all of those will happen, but I think that, with that greater awareness that we have now, the Ivan McKee Minister was out in Livingstone last week for the Building Scotland fund element there. There are a number of housebuilders that are engaging with it. They might not have had access to finance from government before, so I think that there is far more interest and that is good. It is that kind of critical mass, that body heat now, as a sector is talking about it. That is a good thing, that is self-promotion, isn't it, which will ensure that that finance can then leverage in additional private sector finance to stimulate the economy, house building particularly, and thereby construction sectors. That is all welcome, so I do expect the resources to be fully used, yes. Just to clarify, there was an announcement about £30 million coming to the funding 1800 private rented premises. Is that included in the £400 million or what has already been signed up? I would not imagine that it is already signed up, but I do not think that that fall. I do not think that. What I would like to come back and do, if you wish, is what is agreed at the moment. I could maybe give a bit more of a scope around what is in the pipeline. You can see how that has been broken down. It is very welcome. It is a precursor to the bank, and I can give you more information on the nature of those different categories. It is very fluid to say that there is more interest coming in at the moment, and that is a good thing. You also mentioned the Scottish National Investment Bank, which is going to be funded by the Government in 2 billion over 10 years. There is evidence that it is not enough to replace the current European investment bank levels of investment in Scotland. If that funding goes away, what is your view on how we would make that up? That is a very good question. The first answer is let us try and ensure that that funding does not go away, that we avert the EIB from stopping further investments in Scotland and, for that matter, the UK. Of course, that relates to the wider political positioning of what happens with Brexit and what happens with the arrangements post-Brexit. If Brexit happens, there is an even bigger idea, let us avert Brexit completely, and the question does not arise. It would be true to say that if the EIB does choose not to invest in Scotland any more, it is one of those areas where the Scottish Government cannot mitigate fully the impact of Brexit and that possible outcome. That EIB resources is integral and additional. If they do not invest, we will be doing everything that we can to stimulate that infrastructure investment through the national investment bank. It relates to a wider point that, in the circumstances of Brexit, the onus is really on the UK Government to ensure that there is no detriment to Scotland's public finances and no detriment to Scotland's economy. If they proceed in that fashion of Brexit, particularly no deal, Brexit will do everything that we can to get extra finance in leverage, but it will be incredibly challenging. That is an act of self-harm if the EIB is not continuing investment into Scotland. Angela Constance I was pleased to learn of the £2 million in loans that will be available to help to develop the trade park in Livingstone, but this morning I want to ask you a few questions related to skills and workforce development. Productivity is important in the context of workforce development, and I will go back to the issue at the beginning of your evidence with regard to statistics. The committee heard some disturbing evidence that productivity in the construction industry had flatlined since 1945. We then heard evidence from Professor John McLaren that told us that, although productivity is extremely important, we do not have a good handle on it. I wondered what work was currently on improving the measurement of productivity, given its importance to the economy. A member of another committee said that we are judged by what we measure as to how important we think something is. Angela Constance is well aware of how important housing is, so that is the building of units and the job's economic benefit that goes along with it as well, but we will be able to do more with the same resources if we have that drive on productivity. A lot of the work is around skills and how we are moving that agenda forward, understanding health and safety as well. However, innovation and ensuring that innovation can deliver enhancement and productivity as well. Overall, over the period of devolution, we have had more progress generally on productivity than any other part of the UK over the period in devolution. However, in terms of measurement, we need further work on that to analyse it. Equally, not just the measurement, which is a key part of the question, but to take forward productivity so that we can have more units from the same resources, so that we can enhance skills and digital design, which is very important, and transition to low-carbon economy. We need better data at the same time as we are investing in enhancing productivity and ensuring that the sector can take that forward with us. I am happy to look at what further work we can do around measuring productivity. I dare say that it is largely around surveys and other forms of assessment rather than detailed understanding. I wondered if there were any specific thoughts within Government about how we could improve the measurement of productivity, because that would appear to me to be important if we were able to measure it robustly. We would then know whether it was improving or not, or to what extent, in what sector, and we could therefore have a more informed platform about how to improve or continue to improve productivity. I am happy to consider that further. I will probably engage with the sector more on what it indicates. Often, with the stats around productivity, it is data sets that are changing, so I am happy to give that further thought. I do not think that we need a further measurement to appreciate the point that we know that we need to do more about productivity, but I equally get the point about how and what we are measuring. I am very determined that we will get on with the areas that we know has and would make a difference, particularly in relation to construction. That will be around collaboration, innovation and how we are intervening in relation to our infrastructure spend directly, so I am happy to take that up. We are all well aware that improving diversity in the world of work should include construction. There is a strong economic case for that. The cabinet secretary shares concerns that women only account for 12 per cent of the construction industry workforce. What could we do to look into the future to help to improve that, given that there are some concerns around the lack of progress around the Scottish funding council and Skills Development Scotland in terms of its targets around the gender action plan, in terms of getting more young women into construction-related courses? That is an excellent question, and it speaks to the challenge that we have. As well as the skills agencies that have the action plans, they put an expectation on training providers to specifically target progress on representing the diversity of our nation into trades. One of the biggest challenges that we have is encouraging the trade organisations and the contractors and the businesses themselves to ensure that we have the employment and the recruitment that reflects wider society and gender is absolutely key. That figure is unacceptable. The progress that we have made includes foundation apprenticeships, particularly in relation to gender, but it is not good enough. We can have the promotional campaigns where we have icons and we are trying to address the image of construction in the sector, but some of them are about not just who is coming through the training programmes but who is actually being recruited. I think that the relationship with the trade organisations themselves and the sector and employment practices will be important. There is a gender action plan. There is a diversity drive, but I absolutely think that there is more to do. I have touched on gender because there is that imbalance, but there is also an age profile that is worthy of consideration. I am reflecting on some of the perceptions that some of the schemes that we have are age-restricted when they are not. The composition of some people coming through the age composition demographics is older than you might think. It is worth a further look at knowing the challenges that we have with our economy with record low unemployment, which is a good thing. However, the availability of the skills, talent and people pipeline is that we need to make sure that we are not excluding people because of age or gender. That will come in to play with the retraining partnership. Retraining is not just about young people coming through the education system, but people of any age wishing to change profession, trade or sector to get to where the skills gap is. I think that there is a lot in that question. There are the actual plans. There are the expectations, but progress is too slow. That comes from a background as Angela Constance knows well, where the political party to which we belong has made choices around taking positive action specifically around gender. I think that the sector will have to take a long, hard look at how it makes further progress on the diversity and representation of the population and the workforce. I appreciate that some of the more specific aspects of the skills intervention will be outwith Mr Mackay's portfolio. Given that there is a cross-government commitment to target young people and to do everything that we can across government bases to support young people on their journey into work, I would never ever want to see the Government take their foot off the pedal on it. I wonder if picking up in his earlier comment whether more could be done in terms of older people—I hesitate to say older people because people tend to be talking about over 25s in apprenticeships. See she who is well over 45s. However, if there were more opportunities for slightly older people to return to the labour market via apprenticeships, would that not be important, particularly for women returners and particularly into the traditional trades? Yes, I think that the point is very well made that with the circumstances that I have described of potentially shrinking working-age population, changing demography, the skill shortages that we have, the transition in nature of our economy. For all those reasons, absolutely, we have to look at the age issue as well as the gender issue and, of course, ethnic minorities as well. However, yes, I think that some people are deterred from even making approaches around apprenticeships because they assume that it is for a young person and their definition of young changes, depending on what age you are, I suppose. He says that it is 41. Jackie Baillie is objecting that she is 42. We have to look at how we are presenting the apprenticeship opportunities and the retraining partnership will be critical and ensuring that those opportunities are open to as many people as possible. Specifically, in relation to housing, there is a short-life working group to look at that issue of workforce supply, skills and talents specifically for housing, short-life working group. As soon as that work is complete, I am happy to come back to committee. I accept the point that it is much wider than housing, it is much wider than construction, it is about the entire economy. I am not going to get involved, despite being in a strong position in this age-related banter, which is totally inappropriate, of course. As the cabinet secretary will be aware, in one of the evidence sessions that we had from construction leaders, we were told that they had real concern that the Government was going to miss its targets on new homes. On a visit to Edinburgh College, one of the more concerning issues that was raised was not only is there a skilled shortage in some of those skills areas, those disciplines, but actually a deficit, so the shortages are getting more extreme. Given homes for Scotland's reduced supply of skilled workforce is still one of the binding constrictions on increasing housing output in Scotland, could you tell me specifically within your remit what more can be done both in increasing the number of young people and others going into this sector, but also to ensure that our planning is better going forward to meet needs within housing, within construction, but widen that, too? I appreciate the question. I am sure that Jamie Halcro Johnston will forgive me if I could say the first thing that we can do. If this is about the number of people to have a positive approach to migration, does it make a difference? Of course it does, because it is about the supply of people, so I am trying to encourage people to come to Scotland. I think that I would need to object to the premise of the question that we will not meet our housing targets. All the information that I have seen is that we will meet our housing targets, and there is a lot of investment so to do, but that is not taken away from the point that I agree that there is a skill shortage and there is a concern around the issue of skills going forward. I have to say that it is the number one issue raised by business when I meet business. More than tax, more than what other people would expect, but the number one issue that is raised with me is the supply of skilled, talented people with the appropriate skills for today's needs and going into the future as well. Digital, I know that the economy committee would be interested in that, but digital is another area where we have to be very focused on ensuring that we have the appropriate skills. In all that, we are trying to ensure that the enterprise education and skills system is giving business and industry what they need, so that is the appropriate qualifications. That is easy routes into those qualifications, particularly in construction and vocational learning, working with colleges particularly. I was visiting the city of Glasgow college just the other week and they were showing me how they are calibrating their system as well to support what the economy needs. It is about the number of people coming through the system. If we were touching upon earlier, it is not just age but the ability to retrain. We are setting up a retraining and essentially re-skilling partnership with the business community and that will be really welcome. Creditisation is something that has been described to me as really important. That is when people are learning but they are getting the professional accreditation at the same time in work learning and in learning works really important. That is good for retaining people in a particular sector, whilst they are being educated and have that work experience as well. I think that there is quite a lot in trying to ensure that there are more people coming through the pipeline. However, if we are to achieve our ambitions for the country, which is to deliver that which we have already set out to do, and further than that, as the First Minister has outlined, raise the level of infrastructure spend as well to more internationally competitive levels, then we need the people to do the work. That will require the transitioning of the demography and the gender of the workforce as well as the quantum number of people. That is why we are just discussing more women, older people and ethnic minorities, all coming into the construction sector, which will be so important. That is a range of interventions to support the sector. One of the other areas of evidence that we heard was that some of the training courses that were being offered via the apprenticeship levy were not meeting the needs of industry. So, could he tell me what areas of concern he is aware of with him and what can be done? I think that it is a fair point. People often bemoan the apprenticeship levy. I do it too, because educational establishments have to pay it as well. Even if their primary function is to provide training, they pay the apprenticeship levy as well. Jamie Halcro Johnston will be well aware of course that it is a UK Government levy that was imposed without our engagement or consultation. Essentially, the funding that is secured largely from the UK Government was substituting funding that was already in the formula that came to Scotland. However, what we have tried to do is to make sure that the funding systems are different north and south of the border. North of the border has in part invested in the educational and training opportunities that we were building. We can show how that quantum of money has been spent on education and training and trying to support industry in the workforce. For the rest of the UK Government's interests, they have decided to do something different with their funding. I think that it is fair to say that they were starting from a lower base. They were behind us in terms of apprenticeships, in terms of training and the opportunities that we had around modern apprenticeships. However, when I hear businesses critique the apprenticeship levy, partly my answer is to say what are your needs from the Scottish enterprise and skills system and how can we meet those needs with the resources that we have. Some of them then want to work with the educational institutions to help to design the kind of pipeline or courses that work for them. I want to give you an example of a partnership that is working well. It was in West College Scotland, where a company was doing rendering work, external works to properties. It was a dozen or maybe 16 people. Weren't all young people guaranteed employment, taken through college and those people were guaranteed a job. It was very interesting in the mix of rather than just saying, can we have our money back from the apprenticeship levy, can the college give us a course, we give a job, a person going through that is guaranteed work and education at the same time, everyone was a winner from that. I suppose that is my point that the enterprise and skills system has to be agile enough to say to business and industry what do you need to deliver, what do you need for your economic growth, what will give people sustainable, purposeful, meaningful employment, while delivering the skills for a country? I was testing that out yesterday at FISAB, the financial services advisory board, where we will be looking at their sector and the pipeline of jobs and people that they will need as well. There are some great big announcements across the country right now, 2,500 Barclays jobs at Glasgow, KPMG 400 jobs. When you are creating the jobs, they want to make sure that the skilled workforce is in place, same for construction companies, that if the financial products aren't there, if the routes to getting the workforce you need aren't there, my door is open, so are the skills and education ministers as well, to make sure that we are delivering the kind of courses, the kind of routes that can help to deliver that skilled, talented workforce where opportunities aren't lost. We need to make sure that, of course, the funding council and how we fund these opportunities is focused on the outcomes, not just the inputs of how many bums and seats, but how can we ensure that the whole system is calibrated to address the skills shortage that I think is a fair point to make. It all relates to the apprenticeship levy, which fundamentally was the question. Rather than just saying to a company, there's your apprenticeship levy money back, there's your money back. What we are saying is that your investing in Scotland's education and skills system lets make it work for you because you're paying for it, and that's the relationship that I'm trying to secure. I think that many of them recognise that. I think that the concern is that they don't feel that they're doing that, but thank you for your answer on that. Just one last question very quickly. About a year ago, I asked the First Minister about how small businesses particularly were able to access the apprenticeship support because of the numbers of apprenticeships in small businesses. Accessing and bringing on apprenticeships was found to be difficult, and there seem to be barriers to it. Can you tell me what's been done in that period to improve access to apprentices for small business, making it easier for them to get involved with taking on apprentices? Relation of course to the apprenticeship levy is the larger businesses who pay the levy, of course, at UK tax, and that's points understood, but the only way we can grow our economy at the pace that we want to is support those small and medium-sized enterprises. I suppose that's partly my point, that if we were just giving people their money back, it wouldn't be serving the economy well. The enterprise and skills and education system absolutely has to be delivering for all businesses, no matter how big or how small. The way that small businesses can get into this is that they can approach either developing young workforce arrangements or colleges direct. I ask college principals when I meet them, as I did last week. Are you well engaged with the local business community? Do they know how to engage with you in terms of the courses that are required for your economy? As it happens, the anecdotal case that I just gave you in West college Scotland was one where it was a small business. It was growing, it had captured a piece of the market and it had a relationship with Skills Development Scotland and the college, and it built the product that was right for them. That concern that FSB had a year ago that they shouldn't have now is what you're suggesting? If they still have that concern, I absolutely want to address it, and that means making sure that we've got the access to the opportunities that are there right. It's fair to say that the skills and apprenticeship landscape for businesses can still be quite complex. Where do you go to? Where's the one point of entry? You might have to explore what qualifications are appropriate for your business and what the opportunities are appropriate for your business, and then separately the funding stream as well. I'm actually not complacent in this and saying, oh, it's all fixed now and you'll get a totally different answer. I'm saying, I think that we've made a lot of progress, but my aspiration is that I want it to be as easy as possible for that business to get access to the education and the training skills system so that we can absolutely optimise opportunities for that business and for the people going through the education system. If there's more work to be done, I'm happy to pick that up, especially in relation to construction, but it is something where I think the strategic board is helping because we're bringing together both that private sector knowledge, the skills and enterprise agencies in the way that this committee has asked us to do. I know that the cabinet secretary's press team is very good, so I'm assuming that he will have seen the herald article by Ian McConnell this morning. On that basis, Ian's article tells us that the number of construction firms in Scotland in critical distress in the first quarter of the year is up a stunning 560 per cent compared to last year. What do you think is going on, cabinet secretary? I haven't seen the article, but that is as I was preparing for committee, of course, convener. If the question was if there are construction firms in distress, that's the essence of the point. As we are very welcome and positive economic indicators right now, I hope that we could all welcome record low unemployment at 3.3 per cent and welcome in terms of GDP growth that, in many quarters, our performance is outperforming the UK. Form direct investment, second only to London, exports up, but specifically in relation to construction. Some of the issues will be around the skills shortages. Some of the issues will be around the Brexit uncertainty that there is at the moment. That will be a feature across the UK right now. The committee itself has picked up on access to finance, and then there will be the relationship within the construction sector itself. As I said, there are very welcome economic indicators right now, but there is no doubt about it that there is a subdued nature to the economy right now. Some of the issues that the committee is exploring can help us to understand what is going on in the construction sector and what more we can do to support them. A further line within all of that is probably access to finance. If it is the quantum, the number of companies that are in stress, what I have heard from some construction companies is when they are not being paid that becomes their biggest challenge for work that they have done. That is slagily not the public sector, but it might be other private sector contractors in the fashion that they are engaging with each other. It does not explain the huge difference between Scotland and the rest of the United Kingdom. In the rest of the United Kingdom, the firms, the construction firms in critical distress in the first quarter increased by 17 per cent. Ours is 560 per cent, so it is not just a question if I could respectfully say to the cabinet secretary of the economy being subdued. I think that we are in an emergency situation, and it is not explained by Brexit because that, of course, has an impact across the whole of the UK. Well, convener, I did say that I have not seen the article, so I can only speak from the question that has been put to me rather than the content of the article. I do speak to construction firms and I do speak to the Scottish industry, and I am speaking to the facts that we have covered. Even on the GDP stats, we know that there have been times when construction in Scotland has continued, when it has not continued in the rest of the United Kingdom. As far as the Scottish Government's part in construction and spending on infrastructure, there have been many years, and Jackie Baillie will agree with this point, I am sure, where we chose to invest in infrastructure construction of our country when the UK Government did not. I think that that has led to further economic growth. I think that it has led to stronger infrastructure investments. I have seen commentary elsewhere about mega projects that are called such as the Queensfrey crossing, but there is also something else about the wider infrastructure of our country, maintaining what we have got as well. I think that there is a lot in how we use our resources to support the construction sector, to support infrastructure, housing is a key target for the Government. In the wider economic role, we have it to support businesses, but at small, medium and large businesses as well. The financial models that we have been able to put in place has allowed construction to be delivered where it otherwise would not have happened. Of course, I am happy to look at any of the issues that may have been identified as to why companies are feeling in any way vulnerable or exposed at the moment, but I am afraid that it is true to say from the construction firms that I have met that work is being deferred because of Brexit. That is the point that I was making in that regard. We would be enjoying greater economic growth right now. They would be able to do more work right now. They tell me if we did not have the uncertainty of Brexit. The issues to why some companies may collapse, particularly the small and medium-sized enterprise companies have touched on the construction firms. Sometimes it is down to not being paid by others in a timely fashion. I suspect that that is a subject that will probably come back to. I contrast the 560 per cent increase in fragility and vulnerability by construction firms in Scotland compared to 17 per cent in the rest of the UK who also experienced Brexit. There is something going on there that we absolutely need to understand, because that points to the future. I am happy to share the article with you. Robin Crawford, who led the 2013 procurement construction review, told the committee that it is slightly depressing that every single one of those issues was raised in the review of the Scottish public sector procurement in construction report. Six years on, it is disappointing that so little progress has been made in tackling many of those issues. Can the cabinet secretary explain the lack of implementation of the review's recommendations? I have asked for an update on all of the recommendations from that review. I am not sure whether that has been shared at all. I am happy to share that information with the committee, because I would not accept the charge that there has not been progress. I have looked at substantial progress. I am sure that the committee in its fair mind will appreciate that it is not all recommendations just for government. Some of the recommendations are for the sector themselves. The onus is on all of us to collaborate, but having looked at the recommendations, I think that there was only one recommendation that was not accepted from the review itself, and that was around the appointment of a construction champion advisor. I was not in this role at the time, but I think that some of the debate, there are two options here. One is that you have a champion and advisor to government and others to the construction sector more widely, but for others they wanted a regulator. I think that the regulator is quite difficult, because there are adjudication processes and legal processes that are a number of ways into the disputes that people can have in the construction sector. I am not convinced that we need a national regulator. I think that they might just end up capturing all those issues that have existing routes for them to be resolved, but what I am not closed-minded to is a construction advisor, because I think that that might help this point about what are the recommendations, how are they being implemented, how are they being taken forward, who is the go-to person to do that, other than, of course, the responsible ministers. I am not closed-minded to a national construction advisor, but many people got caught up thinking that that would be a new regulator, which I do not think is right. I am open-minded to that one recommendation, one recommendation that was not taken forward by the Scottish Government. Maybe it is my mild and mannered approach that Jackie Baillie shares about the issue to be not mind us, but I am happy to share evidence on how we have made progress and moved many of those issues on from the initial report. That would certainly be helpful, and I like your open-mindedness. It was, of course, the First Minister and our previous guys that rejected that recommendation, so I welcome that new thinking. However, I am slightly confused because what you are saying is at odds with what people who were involved in the review and the implementation said. We had Mr Bruce Dixon from BAM. He sat on the review and he sat on the implementation group. He believed that the review arrived at the right recommendations, but the Scottish Government simply did not implement them. Now, why is there such a difference in opinion between the table that you are going to share with us and his view? In terms of the construction adviser, or all of the recommendations? No, all of the recommendations. All of the recommendations. Six years on, we are still talking about companies in critical distress. The review pointed to what you are required to do. It just looks as if it has not been done or it has been done too slowly. I am happy to go through the 67, which I think became 68. Jackie Baillie says, why haven't we made progress? I offer a line-by-line explanation on progress, and Jackie Baillie quite rightly probably says not now, which is why I am happy to share that information. The one area, and to be clear, I am of similar minds to the First Minister of Scotland on that issue. We didn't reject the recommendation. We said it merited further consideration. What I am saying is that I am quite open-minded to it. I see how it might be able to take forward some of the recommendations, where we have implemented the letter of what we were asked to do, but what I am saying is that it needs further projection that it is being done. That might partly explain the perception of some that recommendations have not been taken forward when I would argue that they have and I am happy to share that information, so that the committee is equipped with that evidence. Thank you very much. No doubt, cabinet secretary, you can share that information with us in a mild mannered manner. We will now have a brief mild mannered follow-up from Gordon MacDonald before coming to questions from John Mason. Thank you very much, convener. I appreciate that you haven't seen the herald clipping this morning regarding the 560 per cent increase that Jackie Baillie was referring to. Just to be clear, it is an increase of five companies last year to 33 companies this year out of 20,000 enterprises working in construction. I just wanted to ask if what your view was on the 17 per cent for the UK, would that possibly be because they had more companies in critical distress last year than this year? That might well be the explanation, convener. I think that you will find that I am quite loath to cite an article that I haven't read and then challenge statistics that I haven't seen, and then to make it up as I go along as not the way that I would present evidence to committee. I am happy to look at that information. I would never, for a minute, accuse Jackie Baillie of using colourful language or selective quoting of statistics to make a point and try to trick me up. I would never make such an accusation or charge to Jackie Baillie, but Gordon MacDonald's further explanation of the statistics is quite illuminating. I am happy to look at the detail, convener, and then come back to you. Well, if we could leave that there. John Mason, for now, about it. To continue the theme of procurement, we had quite a lot of evidence, some of which kind of conflicted. There was some criticism that the public sector generally, not just government, tends to go for the lowest cost as compared to best value in our members of councillor. I know that you were in a similar boat. We did sometimes look at best value and didn't take the lowest cost, but I can imagine, too, that if we paid more for, say, the Aberdeen western peripheral route than the lowest cost, Opposition MSPs might be queuing up to criticise the Government for that. How do you think we get this balance between getting the lowest cost, which is apparently a good thing for the public purse, but getting best value over the length of a contract? I think that the basic premise is right. You shouldn't just pick the lowest cost as the golden rule. I suppose that if there's a different characterisation, it's maybe maximum value. What gets you maximum value? That can be to the wider economy, to the local benefits, community benefits, as well as the value for money for the tender that you might be looking at at that point in time. It would be the wrong conclusion to think that Government or public services are told to go just for the lowest cost. Absolutely not. It has to be all those wider considerations. I've personally visited the Government's procurement staff, heads of procurement, across the public sector. I'm clear what's in the public finance manual, as well. There's a balance of considerations to take into account when weighing up contract awards. It's not just the cheapest, it's all those wider considerations. Maximum value is a very interesting way to look at it, because that considers more than just the cost, more than just who is the cheapest. It's all those other considerations that can come into play. Do you think that that is happening at the moment? I'm not just saying for Government, because everybody is under financial pressure. Are councils, are the Government, are Transport Scotland looking at maximum or best value, or are they really under pressure to take the lowest cost? No, I don't think that they are under pressure just to always take the lowest cost, because anyone who has worked in procurement will know that if you just look at cost and nothing else, it might be more expensive in the long run. If you haven't looked at the other costs, there is a duty upon the public sector to look at the wider benefits of your procurement, the power of procurement of £11 billion in the Scottish public sector. If we need to further evangelise that point, we will do it. However, I have personally visited heads of procurement across Scottish public life and the Government's own procurement team to make that very point. The power of our spend is more than just the cheapest contract award. It is that maximum value, that maximum contribution to our economy. Do it all within the law. Of course, it has to be within the law. State aid rules or whatever the rules will be into the future, but don't just look at cost. I can't be any clearer than that, convener. Following on from that, we also had evidence that some of the big contractors are coming in with bids that are really unrealistically low in order to survive and continue their business. The margins are so tight that they know that once they win the tender, they have to cut costs for their subcontractors and all that. I am not suggesting that the public sector pays over the odds, but do you think that bids get thrown out because they are unrealistically low at times? Or should they be? If a bid was not credible and the procuring authority was not satisfied—and, of course, due diligence, it was not satisfied that it was credible—yes, it can take that into account. Officials can maybe give you more of the analysis further, but where there is bad or illegal practice, that would be challenged, where it is not a credible bit. Some of the criteria—this comes back to some of the issues that you can take a different view about—is the financial coherence of a bid that is important. It might not always be the lowest cost, but the financial coherence of a bid is important. Of course, we are in a bid position where someone is deliberately going for cut-price contracting only to realise that they will be renegotiating all their way through delivery because of the initial bid. There are checks and balances in place, so maybe Scott Bell can give you further detail on that internal process. From a legislative point of view, as the committee will know, our legislation does not allow for people to use lowest-cost bid. It is a recognised procurement route, but we specifically disallow that approach. That is not to say that using the most economic advantageous tender approach can result in the lowest bid winning. We are working—this is recent exchanges with Construction Scotland at an official level—how do we work with both industry and contracting authorities to remove the issue of unsustainable pricing? Unsustainable pricing is where we really need to focus. We have mechanisms to remove bidders where contracting authorities feel that those are unsustainable. Do all contracting authorities do that all the time? I cannot answer that question, because ultimately they are making some of their local decisions locally. However, the legislation is clear that we do not allow lowest-cost, but as the only measure, and we can allow people to exclude unsustainable-looking bids. We have also legislated for whole-life cost to be used in the analysis of tenders as well, so it is not just the cost of producing the building. I will give an example. With Aberdeen Western peripheral route, Carillion went down because of that, but it might appear to be that one of the factors was that long term bids were unsustainable for a range of projects and did not survive. In that case, the public sector did quite well because the other partners had to pick up the pieces. I would suggest that it is not a sustainable model because we cannot expect them to keep doing that again and again, and they have made that pretty clear here. Are you sure that a particular bid might be sustainable, but the contractors that we are going to, which tends to be quite a small number, are maybe not sustainable companies? To answer Mr Mason's question, the convener is reserved in terms of understanding some of the competition law here between companies or auditors or some of that practice. It is hard for us to regulate. All we can do is judge the bids that are coming to us within the law. That regulation of business is for UK Government. I want to speak here and now about an individual contract, especially one that might be subject to challenge, but I think that I can talk about a model that a company may have used. Carylian, as an example, said that it would lead to failure, while it did, clearly in Carylian's case, the business model that they had pursued generally. Of course, it recognised that Scotland's exposure was less than over the rest of the UK, just because the number of projects that Carylian happened to have in Scotland compared to the rest of the UK. I understand that there are 400 projects across the rest of the UK, as opposed to eight in Scotland. I would just say that by way of number, rather than any other point. The specific nature of a large company who is pursuing public sector work might be good for their turnover, but the question in all of that is who carries risk. Where is the proper apportionment of risk in contracting? From the taxpayer's point of view and from the Government's point of view, we want projects to be complete with maximum value to the economy. In every sense, who is benefiting from work? What is the nature of the work? How does it contribute to the nation's infrastructure? Is it helping us to deliver a low-carbon economy? Can the company that is doing the work and its subcontractors actually deliver and in turn help to grow the economy through their success? I think that there are better models out there as to how that can be delivered than the one that Carylian has chosen to deploy. As I say, what lies behind it all is who carries the risk. There is a difference between old-style PFI, where the profits lay there from the current point of work, or indeed what may come next, but at the bottom of all that is who carries the risk. It cannot be the case that the public sector carries all the risk and the private sector carries all the profit. I do not think that anyone suggests it. I think that on some of those cases— Mr Mason, I know that you were not suggesting that. I was just getting it off my chest. That is fine. Right, well, maybe we will leave it at that, that is fine, thanks. Andy Wightman Thanks, convener. Following on from John Mason's question, Bruce Dixon from Bam Scotland and indeed others were talking to us about the very tight profit margins. In fact, Bruce Dixon talked about suicide bids, in fact, where contractors are coming in with intentionally low costs. None of the evidence was provided to lie behind that. However, there was fairly consistent evidence that came forward from the industry, from private companies, that the very tight profit margins are not sustainable. They were interested in looking at new methods of procurement, framework contracts, longer-term supply pipelines and that kind of thing to deliver. I think that the very thing that you were arguing for, which is best value all round—you said that there were better models out there. How much thinking is the Scottish Government giving to how we can procure in the public sector anyway? We cannot tell the private sector how it does procurement. Capital projects provide industry with a little bit more stability and do not force it into the kind of behaviour that was being described to us. We are putting a lot of thought into it. We will engage with the leadership forum with Construction Scotland. We are establishing an infrastructure commission, although that will be more advising what is the infrastructure that the country needs. SFT is done work around whole-life investment and whole-life contract. Right now, we are looking at what construction framework would look like for Scotland, so that is where the best practice is. People can be on our frameworks where they deliver that good practice, that best practice. We have obviously also got the business pledge for those SMEs, not just all big companies. Part of the premise of the question is that some companies are engaging in behaviour that engage the companies because they are bidding for work knowing that it is a price that they cannot sustain. That is bad practice, unless, to the extent that they are making so much revenue elsewhere, they are just carrying a loss. It would be very interesting to see the perspective if they were setting out to make a loss at the outset in terms of competition in that regard. There is a lot of thinking as to what the models will be going forward. That will encourage good practice in the private sector as well, but half of all the construction spend in Scotland is coming from the public sector, so it is a big issue for us. If we get it right, we will be getting it right through our leadership for the majority of construction spend in Scotland. On the financial model, it goes back to what I was saying to Mr Mason. It is about risk, that is the point here. Some companies are taking a risk on the basis of pursuing turnover than necessarily profit in the hope that maybe adjudication or renegotiation or whatever it happens to be can address some of their financial risk going forward. I do not want to get off to the best possible footing, but as to how we encourage best behaviour. If we create a framework that you can only get on it through the best practice and that good practice and that compliance with it, then I think that that would be a good way to drive behaviour as well as the other areas that I have touched upon, which is guidance and modelling. As I said, those are the behaviours of the past. Old school PFI in the early days did mean that the private sector took the profit, but the risk stayed with the public sector. That has changed. How potentially you share risk is quite important to some of the models going forward. Wales right now is looking at a mutual investment model as to some of their infrastructure spend. We are very interested in that because it is compliant with ONS classification and could provide a further way of revenue finance for future infrastructure spend. That might be one of the ways in which we can help to deliver the ambition of the national infrastructure mission, which is today's infrastructure spend. I think that all of that shall help that practice that has been identified. However, the failure of very well-publicised companies who have engaged in this behaviour has said that that model does not work. You mentioned a new framework. Is that something that you have shared with the committee? I am not clear what you are talking about. No, you have never asked me before, but you have asked me now. What I am saying is that we are working on what a construction framework would look like, that to get on that framework, here is what compliance looks like, here is what good behaviour looks like. It can then speak to some of the other things that we have been exploring this morning. What we can do within the law that encourages the best possible behaviours could then get you on a framework that can then do work as something that we are exploring. If you have not heard it before, I am engaging openly with you now. It can be now that I am very interested in it to see how it can challenge some of those behaviours. Given that we are coming to the end of our inquiry, would you be in a position to share some of your thinking right now? I mean not today, but in writing this week so that we can have some sense of what your thinking is before we produce a report? It is actually a question of what comes first, convener. I am even more than happy to take your critique and advice and recommendations to help shape the framework. Rather than me saying what I am because I am not prejudiced in the outcome, I am happy to take what you produce as a committee and give it due consideration as to how it can help shape that framework, because I think that that is quite useful in turning what the committee has found through its evidence, the recommendations that you make into some government action, so I am genuinely trying to be helpful here. However, my thinking is that if we can create a framework for construction in Scotland within the law that can champion good behaviours, get better compliance and some of the things that we need to be done, then I think that that is a great way forward to tackle some of the issues that have been raised this morning. We leave it with you, but if there is anything that you wish to share with us imminently about the broad scope of that thinking, then feel free to do so, but if you don't, that's fine. I will happily write back to the committee with my current thinking, but my offer is to you to help shape it. Absolutely, good. Right, chickens and eggs. You mentioned the infrastructure commission. There was some criticism of the way in which support for the construction sector, the national planning framework, and this was a comment really from the Royal Town Planning Institute that the national planning framework doesn't really talk to the infrastructure investment plan to city region deals, to regional transport partnerships, and that there's a disconnect in terms of joining up how we plan infrastructure. We now also have the infrastructure commission in place. Given what I've just been talking about in terms of the scale of procurement and the needs of industry to be able to innovate and plan going forward, do you have any plans to try and join up some of the things that I've mentioned in the national planning framework, for example the infrastructure investment plan, which tend to still, I think, be perceived by people to be developed in a rather silo method? I think it's a fair question, having been local government minister, planning minister, transport minister, now finance and economy cabinet secretary, I see how these different key documents and processes stand in their own right, but they have to come together, but they serve different purposes. The infrastructure investment plan is ultimately about the Government's own investment into infrastructure, the national planning framework, three, I was the minister at that time, we'll then, once planning policy is resolved, move into national planning framework four, so that's the spatial plan for the country, that's the planning framework, and that covers private sector investment as much as public sector investment, so that's different from the infrastructure investment plan and the infrastructure commission, of course, will set out what infrastructure we need as a country. So there's good reasons for each of them to have the remits that they do, there's different engagement processes for each of them, ultimately it does all come back to parliament and to government, as it should be. So I think they should drive each other, of course they should have that interrelationship and they should have the focus on what we're trying to deliver for the country and I think that they do, I think it's got stronger, I think it's got far stronger. Last time I conducted national planning framework three, I did the review of Scottish planning policy at the same time because I thought that made sense, that the spatial plan spoke to planning policies as it was going through national planning framework as top of the planning hierarchy, so again they will all need to work together, that government cohesion will be important, national cohesion will be important. What I've convened within cabinet is a gathering of ministers with an interest in the economy, so that includes economy ministers, it includes Deputy First Minister and of course it includes the community secretary who of course works with the plan of minister. I think that we will bring all of this together, they serve the same purpose, deliver the government's purpose, but they have to drive each other and I think that the way that all of them will be taken forward will be, I think, far more aligned than was the case before, having a very in-depth knowledge of all of them and that then will drive forward our infrastructure investment. So it's important that we accept the challenge, we get the independent advice but we actually get on with it and each of those different absolutely fundamental work streams do speak to each other and the ministers have to be engaged in our cohesive plan and I've seen no evidence of the disjoint but I want to see us collaborate to make sure that we can deliver all of them in a cohesive fashion and I say that's partly why I've brought ministers together with that focus on the economy. Okay thanks and on a related topic of joining things up, the Scottish Government in January 29 published an assessment of housing land audits and there was some significant weaknesses found in them as useful documents. Do you have any plans to change how the housing land audit system works? I think that this is more a matter for ultimately local government that delivers it and the planning minister who oversees it. I think that there has been further research in this and that will aid to the planning bill and planning policy but it's more a question of the planning minister and local government who deliver it. There's a good example of joining things up though, I mean construction of housing is an important part of the construction industry and yet there are significant weaknesses that have been identified in the land audits in order to be able to deliver that so it's not within your portfolio but it is a good example of the kind of thing I think that you want to join up. I agree with you but I suppose what I'm saying is you asked what plans I had and I'm pointing out ministerial responsibility and local government delivery that was all. I am supportive. It's a key question, yes I am supportive. You could maybe ask the relevant minister and maybe come back to us to see if there has been any thinking about how to follow up the weaknesses in that regard given your role as someone who wants to join things up. I'm more than happy to ask other ministers to answer for their brief and I'm aware there's been research and I'm in agreement that there's useful role here as to any view to change it. I think that there's been consideration as I say through the planning bill and it's for local government to implement so I'll certainly take that up and pass to the planning minister. Okay thanks. You mentioned a number of times this morning about innovation and we know that Scottish construction has for decades suffered from low investment in innovation research and development and technology. What difference has the creation of the construction Scotland innovation centre back in 2014 made to the sector? It's my understanding that the chief executive should have shared the statistics and some of the reports and performance and maybe even more importantly future plans with you as well. I think on the whole that collaboration at bringing together the sector rather than just have companies and institutions doing their own thing and isolation bringing people together is what could give Scotland the competitive edge around innovation, around the transition to the low-carbon economy, meeting very rigorous standards, use of products, that skills issue, but bringing together those stakeholders and a focus on research and development is very welcome. Rather than just keep doing what we've always done or delivering houses or trades the way they've always been done, innovate what will what will champion the technology, the talent and the trades progress is welcome. So the key difference is that we're collaborating more, we're bringing the sector together more rather than allow them to invent and isolation, just to share that. Of course we have innovation centres and a number of themes in Scotland, but there's no doubt about it that innovation is a way to drive performance going forward and rather than be left behind, we're trying to stay ahead of the curve. So I think that's ensured that we are building good cross company joint working and I'll also put in a stronger position for attracting UK funding as well such as from sector deals and industrial strategy money where I've met with Greg Clark, the business secretary. His diary was a wee bit freer before Brexit negotiations I have to say but we have discussed these kind of things in terms of innovation going forward where Scotland has been punching well above its weight. We've heard this morning about the tight margins that a lot of construction companies are working on and given that 91 per cent of construction companies are either sole traders or of less than 10 employees, how could we support or encourage companies to invest in innovation given the tight margins and the vast majority of them are very small companies? I think that there's a lot in that question, convener. Some of it is around if we had control over some of the tax reliefs, it can actually support further investment in research and development. That said, Government funding and Government agencies can help, but asking companies, some of whom are just tread in water to invest in research and development, they might not see it as the immediate value to them, but it is. Actually overall in the economy, we've got record amounts in business enterprise, research and development since records began. That's not speaking specifically to construction, but I know that the economy making committee has wider interests as well, but overall Scotland, more has been spent in Scotland on record on enterprise, research and development than any other point we've had these records. That will make a difference. Government can assist through Scottish Enterprise, Highlands and Islands Enterprise. There is funding support there to do some of that, but through the innovation centres, the collaboration is really important. We will have the National Manufacturing Institute for Scotland as well, so through our finance, support and collaboration, through the Scottish Manufacturing Institute as well, there are a range of ways that we can help companies innovate and try to enhance their own productivity. The number of ways in which we can help and support companies to do that and to say that there is a physical location as well around the innovation hub. You mentioned about the construction framework, is there going to be any reference to innovation within the construction framework? Now you are pre-empting what might be in my yet undetermined construction framework, but it was a nice try. When we look at the Scottish Business Pledge and we set out the criteria to meet it, there are a range of things that we think are really important. We do think that innovation is really important, but I wouldn't want a company to be excluded just because they are not innovating. They might be doing many other good things, but you wouldn't say, well, you are not allowed to do work for us because you are not innovating as well, but they might be doing other good work. I wouldn't use that as terms to exclude a company, but do we want to encourage more innovation research and development? Absolutely. Do we want to make it easy as possible for a company to do that? Absolutely. The future, for example, is far more digital in technology than decades ago, and the pace of change is so much automation, machine learning, artificial intelligence and all that. The roles are changing, construction sites are changing, and it is not immeasurably now as well, so there is a role for all of that, but I wouldn't use it to exclude a company. I have a final question to round up then. Cabinet Secretary, how do you see construction Scotland fitting into all of this? I think that it is a good question. I have met the leadership. There is a leadership forum that is meeting more regularly with civil servants. As they take up some of the work that they have been charged with, I think that further engagement with them will be real important, not just to meet them as representatives themselves, but it has to be cascading information, support streams to the whole sector and then coming back to us. I think that a closer relationship will be very helpful. Crucially, we will have the Infrastructure Commission, which will provide that advice to the Government about our infrastructure needs as a country, as well as a number of other matters that have been raised at the committee. I imagine through your evidence that you want me to explore further, and I can do that with the construction Scotland representing as an umbrella organisation in the sector. Maybe Andy Wightman would like to press you a bit more on specific points on that. I am just interested in them. We were told by Construction Scotland that since the publication of the strategy, there has been formal engagement meetings with the Scottish Government led by the procurement directorate. Could you say just a little bit more about the character of those meetings and what they are designed to achieve? In particular, how engagement with industry is taking place beyond the larger companies, the small sole traders that Gordon MacDonald talked about? In terms of ministerial representation, as Mr Wightman— I was hoping to hear from— You did not want to hear from them? No, I am quite keen to hear something about the character of those meetings. If I can just say first that my engagement is not just with Construction Scotland, it is with construction companies, it is with the wider business community, it is with, as is described, the Big Six representative organisation in relation to Scotland's economy. There will be a national economic forum this week, so I have regular engagement with business and industry leaders as have the civil servants and other ministers that support my portfolio. In terms of the nature of the meetings that have been exclusively with civil servants, it is right to ask the civil servants to tell you the nature of those meetings. We have had a number of engagements with both Construction Scotland and Industry Leadership group members, but more broadly than that, as well, to ensure that we are working with Construction Scotland in a way that they engage broadly with the industry. It is not just about large prime contractors, but we are spending quite a bit of time with them looking at a number of factors where representatives from quite small businesses are involved in that as well. We are really looking at those meetings not just to focus on procurement, although 50 per cent of industry turnover and public procurement is clearly important, but we are also working closely with colleagues in the economic development directorate and other directorates across the Scottish Government to bring that whole-of-government sense to the communication and the relationship with industry. On the same basis, we are looking to Construction Scotland to ensure that it has got its membership and reach across the whole industry. The meetings have been very positive so far. They show a clear willingness to work together in a more constructive manner. Indeed, there are very supportive ideas coming from industry in terms of potential frameworks to support industry more broadly. We are using that as a sounding board for that, particularly as we focus on SMEs across Scotland and not just the large firms. Just a small point. I mean, are the minutes of formal meetings published? I presume that they are taken, obviously, by the way. We produced to allow, I guess, some good discussion within those. We captured the key discussion points. We have had two meetings in a formal sense on that, and we have captured the discussion points. I am happy to share those, obviously, with the committee, and we can look to how we actually put those in the public domain on a regular basis. I am aware that there is a UK construction sector deal. How much engagement has the Scottish Government had with that and the benefits that might be obtained for construction in Scotland? I would say that on all of the sector deals engagement, because a led by UK Government, engagement with the devolved administrations and the Scottish Government is not where it should be, usually. Sometimes it is an afterthought rather than involving us from the start. The missed opportunity from that is that we could harness and capture a lot of the things that could be said that would probably improve an augment sector deal. For the construction sector deal specifically, we were involved very late in the date. As it happens, there is nothing that we would really object to. I am not producing critique of it, but I just think that it would be better practice to the UK Government if they involved us with the sector deals well in advance of their publication, because that would then surely be more beneficial to shape them going forward. They are generally led by the business secretary that I touched upon earlier, Greg Clark, who I have a good working relationship with the UK cabinet minister. As he said, the UK Government is a wee bit preoccupied at the moment, and I think that Scotland can do very well from the sector deals, from the industrial strategy funding that comes from the sector deals. We are trying to calibrate it so that we do max aligns, the resources that can come from that. Although I have no major objections to the sector deal, there could be much deeper engagement with Scotland and the Scottish Government. What would that do? It would mean deeper and greater engagement with the sector as well, because it would not be just the Government. It would then be what we understand and the needs of the sector also. Construction is not the worst of the sector deals, but there could have been better involvement. By way of positives, I have to say that, in my travels around the country, there are great construction firms, brilliant buildings and other infrastructure across the country. Some are so good that the proud tradition of Scottish engineering and design remains that some of those companies, to name but one, projects across the globe have been delivered from Scotland, where they are exporting their talent and expertise to be celebrated. We still have a lot to offer the world in terms of construction and engineering, design and actually delivering wonderful projects. It is right that we explore the issues that we have explored today, but not lose for a moment sight of the fact that there are many wonderful projects being delivered around the globe by Scottish companies. Thank you very much, cabinet secretary. I will suspend the meeting now for a change-over of officials to move on to item 5 on the agenda. We now move to item 5 on the agenda, and the cabinet secretary has been joined by Lewis Hedge, who is the head of regulations, standards and conformity for the Scottish Government, so welcome to you. Item 5 relates to the common frameworks in the committee's scrutiny role after the leaving of the EU. I will, on this occasion, invite the cabinet secretary to make a short opening statement. Very grateful, convener, that it will be a short statement. In essence, the Scottish Government has made it clear that we are not opposed to common frameworks, but we will only agree common UK frameworks where they are in Scotland's interests. No firm conclusions have been drawn on the need to establish a common framework for any area within my portfolio. In addition to wider internal market considerations, there are six potential frameworks within my portfolio, services, MRPQ, public procurement, late payment—commercial transactions, recognition of insolvency proceedings in EU member states and statistics. Mr Wheelhouse has indicated that he will be happy to keep the committee informed of progress in ministerial discussions on energy and EU exit as they progress in equally Mr Russell. The appropriate cabinet secretary is happy to offer further information or appear as, if you wish, on the wider issue of the Scottish Government, UK Government relations and taking forward the common frameworks. Are there any questions from committee members, Andy Wightman? As the finance committee has demonstrated in its work, this is a brand new area for UK legislatures and governments and devolved administrations. I have a general question about process, about how this all happens. We have identified common frameworks as legislative common frameworks that require legislation, and therefore there is clearly a role for legislatures on that. Ones that do not require legislation, which are essentially about memorandums of understanding or agreements between Governments across the UK. This all seems to be a rather ad hoc process at the moment, where people are trying to identify what might be legislative and trying to identify what is not legislative. The number of common frameworks appears to be something that has been identified by the UK Government. I think that 111 is the number that we have been told. My question is a very general one. Do you, as a senior member of government, to forget for a moment your particular portfolio responsibilities in this area, but as a senior member of the Scottish Government, do you think that there needs to be changes to the Scotland act in order to better provide a legislative framework for delivering both legislative and non-legislative common frameworks? Is that something that you have discussed? Since I have been asked for a wider Government opinion rather than my portfolio opinion, I think that the simple answer to this is independence actually, because I was asked, convener, but the complexity of finding a way through this is something that Mr Russell, as the appropriate Cabinet Secretary, can take forward. To try and find a way through this, I have tried to be quite focused just on those areas that, of course, are within my portfolio. However, it is complex, and it is ad hoc, and it is essentially to try to protect the interests for our part, the interests of the people of Scotland and that which is already devolved to make sure that whatever we are doing is in the interests of the people of Scotland. However, it is very complex. Leading on from that then, to protect the interests of the people of Scotland, and that is your Government's job, and that is right. It does therefore mean that you will be taking forward approaches in your areas, possibly in a different way than other ministers take forward ideas for common frameworks in, say, for example, the environment portfolio or in agriculture. When it comes to making sure that those frameworks work and they are operational, and they deliver what they are meant to be delivering, surely there is going to be weaknesses if there is not an agreed approach to how we do all of them. I understand the point that has been made, but that is why Michael Russell, as I tried to express in my brief opening statement, has overall responsibility for this engagement with the UK Government, because it is true to say that when the Scottish Government engages with the UK Government, behaviours vary from department to department, they do. Whitehall departments vary. Some areas, even in relation to the Brexit negotiations, have been more forthcoming by sharing information than others, so they are better performers than others, whether that is Treasury, Rural or however business. The point that I would make is that by way of process within the Scottish Government, it will be Michael Russell that oversees this. The infrastructure is intergovernmental arrangements in place, which is being reviewed by the UK Government. My engagement with Treasury is being reviewed in relation to finance ministers' quadrattral. We do not have a quadrattral because we do not have a functioning Northern Ireland Government right now. There is infrastructure in place to try and deal with intergovernmental issues, and Michael Russell will lead on the common frameworks. Where it affects an individual cabinet secretary's responsibility, clearly we are engaged, but we are trying to put some structure around a process that is clearly not going to be in place in day one of exit of the European Union, if that happens and if that happens in the fashion that the UK Government currently appears to desire. However, we are doing our best to try and make this work in interest to the people, but it will not compromise devolution, although we recognise that in some areas it will be good to have that UK-wide co-operation, for example, MRPQ, the mutual recognition of professional qualifications, for example. There is a reason to make sure that, as the committee has previously considered when we considered the statutory instrument, why that should be taken forward in the event of an audio exit. That is helpful. Take the services director, for example. In your letter you say that official level discussions are continuing on the potential for a common framework in this area. Without getting into the substance of what that might look like, discussions are continuing. You said that Mike Russell is overall co-ordinating all of that. Can I just be clear that if you complete your work and you determine, for example, a common framework for the sake of argument would be, would it be useful? Would it be the case that you or the Government will not seek to implement that until a common approach has been agreed to all common frameworks? I think that we would have to do both, but we are assured that the common frameworks, as we want them to progress, is agreed by the Scottish Government collectively. We are happy with the process, but, of course, individually it works for those specific policy interests. I am now absolutely speculating on the premise of the question, but we are not even at the stage where I have been presenting to ministers what a common framework would look like, because you are not getting into the policy detail because of where we are in the Brexit negotiations. All of that is on the basis that there is that continued Brexit outcome. We would want to achieve both, to speculate, of course. Cabinet Secretary, is it the case that the lead body in driving all of that forward in relation to the 111 common frameworks that have to be established is the joint ministerial committee on European negotiations? That is ultimately where the negotiations are at for the politics. On how the Scottish Government's interests are pursued on that body, is it just Mr Russell that attends those meetings, or is his presence supplemented with other ministers as appropriate? Yes. Other ministers as appropriate can join Mr Russell, yes. And where are we at that joint ministerial level in terms of agreeing a way forward that is mutually respectful to the various Governments involved? Is there any agreement as yet about the processes by which ministers will communicate and seek to come to an agreement? Or what happens if ministers cannot agree? It is an excellent question and probably one better for Michael Russell because he is there more regularly but what he has reported back to Cabinet will come as no surprise that it has been pretty unsatisfactory so far that it is well understood that Scotland has been sidelined. We have not found the political interventions, the political platforms to be particularly fruitful for Scotland's interests, but we have acknowledged in my letter to committee that some of the officials working and trying to prepare for this, trying to progress common frameworks, has been more fruitful in trying to take work streams forward. None of that is predetermined. We have set out in my opening statement at the broad position that the Government has taken, but no, the existing infrastructure has not worked well in terms of recognising Scotland to say the least and over the course of the weekend. I understand that the UK Government is reflecting further on that, so let's see what that produces, not just in relation to frameworks but more widely Scotland's position. Assuming that intergovernmental framework and relationships between ministers to ministers can be sorted out, do you have a view on how Parliament and this committee, in relation to the common frameworks that will fall within your portfolio, and how, indeed, Civic Scotland should be informed and involved in the decision-making processes? There are no firm proposals yet, clearly, because that would be premature. However, if we are progressing with common frameworks, there should be engagement with Civic Scotland and Parliament. Mr Russell has said so to the Finance and Constitution Committee and other policy committees, such as the Economy Committee, as appropriate. There should be engagement going forward, so that there is openness and transparency in what we take forward. In terms of the common frameworks that fall within your portfolio, do you think that there are any potential common frameworks that are missing, and do you agree with the UK Government's framework analysis, both in terms of the subject areas and the type of common framework that is proposed? In some of that, there is an understanding that that UK-wide framework would be helpful. I touch on mutual recognition of professional qualifications, as an example. It is self-evident why that might be helpful. There are other areas in dispute, because it is the UK Government that has decided what was in scope and essentially what was not. We are in dispute with the UK Government, which includes status for state aid and data sharing. All of the other areas will be subject to what does a common framework look like, what is the detail, what is it that the UK Government thinks that it wants us to agree. When we approach all that, we will want to make sure that that which is devolved is absolutely protected. It does not interfere with Scotland's interests. If we can find a way through a common framework justification and benefit to Scotland, we will work our way through that. There is not total harmony right now. There are areas that are in dispute. Even those areas where we think that there might be a benefit, the devil will be in the detail, will it not? We can come to that when we say the detail. There are still more questions than answers. You said that the detail has worked out between department officials, is it not? We depend on each policy, so some might be more straightforward than others. For example, the mutual recognition of professional qualifications might be an area where we can make a lot of progress. There might be another area that is more difficult in terms of the policy understanding of what both Governments are trying to achieve, and we might be in conflict. How do we get into that policy when you shine as presented to ministers? We won't know, but we will try and work our way through that, with arrangements that thus far have been unsatisfactory, as I say, at the political level around those issues. However, there has been intensive work by officials to try and find a way forward. We will move to item 6 on the agenda. I think that this is a new set of individuals, so we will allow you to depart in harmony on this occasion, Cabinet Secretary. Thank you for coming in. I will suspend briefly. Item 6 on the agenda is simply the freedom of establishment and free movement of services EU exit regulations 2019. The committee has been asked to consider a notification from the Scottish Government relating to this instrument under EU law, EU nationals of the right to establish a business in any other member's state. However, if the UK leaves the EU in a no-deal scenario, the European Communities Act 2018 will be repealed but the rights will be saved in domestic law by section 4 of the European Union Withdrawal Act 2018. The UK and Scottish Governments have determined that the rights to be retained in domestic law should be regulated by this proposed SI. The committee agreed to seek further information on the regulations and the responses contained in the papers. Is the committee content for those issues to be dealt with by statutory instrument laid at Westminster? As the committee is content, I will write to the cabinet secretary to notify him of the committee's decision, and I will now suspend the meeting, and we will move to private session.