 Welcome to the 19th meeting of the Economy, Energy and Fair Work Committee for 2019. The first item on the agenda is a decision by the committee to take items 4, 5 and 6 in private. Are we agreed? Thank you. The next item on the agenda is item 2, which relates to the Public Procurement, etc. Miscellaneous Amendment Scotland Regulations 2019, which is SSI 2019173. Those regulations make minor corrections to the transposition of EU directives, which regulate the award of concession and utilities contracts. Does any member have any substantive issues that they wish to raise, or are they content that the instrument comes into force? We are agreed then. We now turn to item 3 on the agenda, which is our session today on the Scottish National Investment Bank Bill. May I welcome our two witnesses today? First of all, Rob Hunter, who is director of strategy at the Development Bank of Wales, and also Kerry Sharp, who is director of Scottish Investment Bank at Scottish Enterprise. First of all, I want to ask the British Business Bank has been in operation for about five years, and I think that one of its goals is to change the structure of finance markets for smaller businesses in the UK. I am just wondering what the impact of its activity has been in Scotland and in Wales and whether or not the banks that you represent or are involved with have had much interaction or contact with the British Business Bank. Kerry Sharp, if you want to begin with some comments on that. We have a really good relationship with the British Business Bank. They undertake quite a number of different activities. Many of them are focused on Scotland as well as elsewhere in the UK. They are particularly active in Scotland in the start-up loans side and the enterprise finance guarantee, the bank debt guarantee scheme. We often engage with them on trying to understand the breadth and scale of their activity, but they record things slightly differently than we do, including capturing all the private sector leverage that they achieve through deployment of their funds, which makes it quite difficult for us to compare the numbers, but they are very active on those two instruments in particular. We think from the stats that we see that Scotland gets its fair share. They are also quite active in the VC investment side, so there are LPs in three of our largest VC funds in Scotland, panoramic and SAP being two of them. We continually work with them to see what else they can do and what further funds can be deployed in Scotland. I should have said that there is no need to press buttons or anything. The mic system will be operated by the sound desk, and if you want to come in and just indicate by raising your hand. I think that it is very similar in Wales. We have a very good work in relationship with the British Business Bank and, in fact, as devolved nations, we meet regularly with the British Business Bank and they give us an awful lot of time. I echo the comment that we have an issue with, if you like, the transparency of the information, and it is more to do with those systems than anything else, but it is mixed up. It is very difficult for us to compare apples with apples because they mix in the private sector leverage that they achieve on a deal in with their own investments, so it is very difficult to work out what it is that has actually gone into the region. According to the stats, just like Scotland, Wales is receiving its fair share. In addition to that, EFG and the start-up loans are very good. In Wales, for example, since start-up loans began, they have invested in the order of about £20 million across Wales in start-up loans. Those are very low-value loans. That kind of complements about the same amount that the development bank has invested in microfinance. When you look at the two together, there is very little, if any, overlap, and it has managed to deliver about £40 million of microfinance into businesses across Wales between us and the British Business Bank. In that case, I think that they are definitely a force for good. John Mason, I want to ask about the integration and how the Scottish Investment Bank will move over and explain a bit about that, although it might come on to Wales a bit later. Is it the case that the whole Scottish Investment Bank, Loc Stock and Barrel, will move over and become part of the Scottish National Investment Bank? The plans for the bank are very much to build on what exists in the market and integrate interventions and activities that exist across the public sector. There is still work on going as to exactly what will go into the bank, but it has been quite clear since the implementation plan that the Scottish Investment Bank activities will form part of the bank. That is not everything. The financial readiness service that we delivered just now will stay within Scottish Enterprise, because it is a company support activity and fits better with the wider Scottish Enterprise. It does not deploy any finance. The activities, the functions of the Scottish Investment Bank, the assets that have been invested or aligned to and also the people that are all expected to move into the bank. There is a lot of work under way just now, trying to work out exactly how and when that will happen and what further work we need to do. The plan is shortly after investing that all the items that are expected to go across will move across at that point. Would it be fair to say that the broad split is that, if it was advice or grant making, it would stay with Scottish Enterprise, but if it is loan or equity investment, it would move over to SNP? That is about right. Would the staff split in reflection of that and say that some staff would say and some staff would go? Within the Scottish Investment Bank, the vast majority of staff are on the financing side or support services thereof. There is a discreet team in the financial readiness service. That is about eight or nine people. In the DRCations, it is quite clear that those individuals will stay. Obviously, a lot of work needs to be done to dot the i's and cross the t's, but the working assumption is that all the rest of the staff will move across. The level of governance and accountability in Scottish Enterprise is an independent body at the moment, as would the SNP, but there are slightly different models. Would you anticipate any difference from a Government or a Parliament point of view to the level of oversight, or would that just be much the same, whether it is Scottish Enterprise or SNP? Of the SNP's activities when it moves into the new bank. Obviously, the Government and the bill will determine how the reporting and all the elements are delivered by the bank going forward, but we have a very strong governance and reporting culture, so I struggle to think that there will be too much else that we need to do. There is more work to be done on the ethics policy and the light for the bank going forward, which we will be directed by whatever requirements are needed. Our activities and their reporting functions will support what is required. I think that I have got colleagues wanting to come in with some of the measures. Can I ask you, Mr Hunter, am I right in saying that it was finance Wales that was the previous body and it has entirely moved over into the development bank of Wales? Yes, that was exactly the case. Of course, we kind of had an advantage that finance Wales was a PLC, so in effect it was set up. It had all the governance structures, it had all of the funds and then it transitioned into becoming the development bank of Wales. Right, and did that process go quite smoothly? It did, with an awful lot of preparation. I think that we were working towards the launch for two years and I think that one of the challenges when you are changing an entity that already exists into something new is that you really need to deliver something new when the time comes. So we had a build-up for about two years, raising new funds ready for the launch, ready for the announcements and also preparing the staff and preparing the culture of the organisation to be new and different. I think that we managed that across Wales, so it has been a fairly significant shift in the perception of what the organisation does and also the expectations on the organisation since we launched as a development bank. However, it did take an awful lot of work. Once you were wanting to do something new and therefore it was a new organisation, presumably there were some good things that you wanted to carry on and that has broadly been okay? Yes, it has. I think that one of the complexities of, in our case, the first access to finance review was in about 2012 and that then led to the feasibility study into the development bank. What happened within those reviews, there were very good ideas. There were things that we were being told that it would be great to launch a specific fund. For example, to increase microfinance across Wales would be one example or seed funding across Wales. Rather than waiting until we launched as a development bank, Finance Wales started that change probably in about 2013. The actual transition to the development bank did not happen sort of at midnight in October, whatever date it was in 2017. It was a transition that took place over a period of about four years and culminated in that change to a development bank. We had already done a significant shift before the launch date. A couple of questions on structures. What is the difference between the Scottish investment bank and the Scottish national investment bank other than the insertion of the word national? It will go quite a lot. As you are aware, as I have said in part of such enterprise at the moment, our focus is on early stage risk capital and lending up to £2 million, maybe up to £5 million. We also deliver the investment fund for the Scottish Government, which is a low-carbon focused mission-led fund. We deliver only an element of what the new Scottish National Investment Bank is going to be doing. It is going to be a separate legal entity with all that goes with that, which I know that you have talked about various times in the committee. The breadth and scale of the activities are quite significant compared to what we have done. I see it very much as building on the success that we have created to date, but doing a lot more for the economy and making a step change of both the capital available and the areas that the bank will be able to look at. Is there anything that the Scottish National Investment Bank has planned to do that that you cannot do? The scale of capital that the bank is going to deploy could not be deployed within the Scottish Enterprise. It would be too significant for the organisation. There are discussions under way around dispensations from Treasury, which the team working on it is hopeful that they will be forthcoming. If they are, that will be a significant change in the way that the bank is able to operate, which will be much more beneficial for the impact that it wants to make in the market. Okay. Mr Hunter, was the Welsh Development Bank or Finance Wales established by statute or not? Yes. It dates back to the WDA Act, the Welsh Development Agency Act in the 1970s, I think 1974 or something like that. That was the original act. That was updated by the Government of Wales Act 2006, which has provision for Finance Wales in that the formation of the development bank was not done through statute. That was just a branding, a change to the name and a change to the focus of the organisation if you like a change to the missions. The capitalisation of the bank is undertaken how? It is a very different model to the one that has been proposed for the Scottish National Investment Bank. To say that we are not capitalised, we are capitalised. Since launch, on the lead-up to launch, in the 18 months on the lead-up to launch, we achieved a commitment from Government to an additional about 154 million funds. Since the launch in October 2017, we have received commitments of a further 430 million of funding for the bank. Significant sums of money have been committed. The way it operates, we have about 15 funds and each individual fund, we go to Government with a business case for that fund. It is in the Treasury Model 5 business case, and that is approved by the department. The money is released to us through the life of the fund, so it is a different operating model. We do not have the autonomy to make that decision on our own as to how to deploy the money, but we have to do that through Government departments. I have to say that, for us, it has been working exceptionally well. Evidence to the committee suggests that, despite an increase in private capital in Scotland, there are investments still low and there is a lack of demand. If this is the case in Scotland, what are the factors that can inhibit demand? So, demand is always quite a difficult area. It is very clear from our understanding of the market that demand takes different forms, and often the problem that we see is having the right supply for the particular demand that exists at any point in time. Flexibility—I think that the bank being flexible in agile in its approach is going to be really important. Gaps do not stay the same, but they are changing all the time. The response that the bank is going to have to those gaps is going to be incredibly important. On the mission-led side, there will be a need to think far and wide as to what different supports and technologies and companies can be supported to achieve the mission that the bank is looking to deliver against for the Government. It is not going to be a case of one-size-fits-all. It is not going to be a case of that answer is over there. We are just investing that. That will all be fine. There will be different types of technologies, different responses and different innovation. The most important thing is to be close to the market, to be informed, to challenge what is there and to make sure that the companies are spoken to and that the responses can reflect what they really need and the projects and the companies and everybody else is going to be supported by the bank going forward. Do you believe that there is a lack of demand for patient capital in Scotland? I think that there is a need to make more of the demand viable and interested in raising funding. There are definitely gaps in the market. We are supporting some of them just now. Our valuation says that the role that we play is fundamental to the market and we cannot step out or it will not exist. There are gaps there. We need more demand. We need more demand stimulated. We need more support mechanisms to work with the companies to make sure that they are keen to take that next stage in their journey. The confidence in the market is going to be incredibly important. The bank has a strong role in that. Even just existing as an entity with the amount of capital that is being earmarked for it, being a trusted, transparent entity with strong ethics and working practices is going to create demand from companies to say that that is somebody that I want to work with. How will you stimulate that demand other than the fact that you have just said? Is it going to be through working with the development agencies or what? Absolutely. Without a doubt, the ecosystem and how it works together is going to be the most important part of the bank being able to deliver. What we do know is that supply in its own is not enough to your point. Your demand is clearly important. I see that the bank is leading on the supply side, but the enterprise agencies in particular and others in the market are leading on the demand side. With it, a lot of cross-working is going to be a need for the system to work well, for integrated support and services, for forums to be able to discuss how we move the market forward. Without a doubt, it sits across a number of different parties. Mr Hunter, I noticed that the development bank of Wales that was established in October 17 and its last full financial year in March 19 had investments of £80 million, 18 per cent higher than the year before, and the actual number of investments increased by 30 per cent to 420 across Wales. How do you manage demand and meet demand in Wales? The original targets for the organisation were set out in a business case that was produced in 2016. Our aim was to reach around £80 million of investment by 2022, so we have achieved that in the first two years of the bank. The demand across Wales comes from a number of different places. I know that within Scotland you have a challenge of £200 million a year that you want to invest across Scotland. I personally think that that is probably about the right level to be aiming at from the experience in Wales, but I probably echo what Kerry said in terms of the fact that the Scottish National Investment Bank needs to remain highly flexible in trying to meet the widest demands of the business, because you mentioned patient capital, for example. Now, two thirds of all of our funds can give access to patient capital in Wales, but that one third that does not do patient capital, it does short-term, sometimes fast-revolving funds, is also a critical part. It is a critical part of the ecosystem in Wales. Also, there are very important gaps that can deliver quite a lot of economic benefit as well as financial benefit. Where we have been very fortunate is that our remit is very wide. Once we formed, this is an amazing thing, but just the fact that we became a bank and that we were serious about being a bank has created a lot of demand and interest across Governments. We have been speaking to various Government departments. If I go back two years, I would not have guessed that one of our KPIs would have been the number of homes built in Wales, for example. That is driven through our residential property funds. A lot of the ideas are coming through Government departments. We are lucky enough that we have not been restricted or that we do not have anything that absolutely restricts us. The only piece of advice that I could probably give Scotland is to leave things as open as you possibly can and not close things down. An interesting one, if I could, is that it seems obvious when you are talking about a development bank that it should only lend to SMEs. I believe that we administer the help to buy Wales scheme on behalf of the Government, so we lend to individuals. However, we are just about to launch a self-build fund for people who build their own homes. It is very much aligned with lots of other interventions from Government to make it easy for people to pick up plots of the local authorities to designate a site. They call them plot shops and put the services in. An individual can go along and choose from a pattern book. They are then put on to a builder who is registered, so they know that they are going to get a good builder. We will provide, if you like, the bridging finance for the builder of the house, which will then be remortgaged out. That gives us the ability to do, because we can fund the builder—the small builder—through our small-owns funds. We can also fund the purchaser and work with local authorities and Government across Wales. We can actually generate an industry that does not currently flourish in the United Kingdom—it does abroad, but it does not in the United Kingdom. If we had a restriction that said that we cannot lend to individuals, we could not intervene in that case. All I would say is that until the banks launch, I do not think that you all really know what the capacity is, and we are still learning. I mean, I am in discussions literally with all Government departments in Wales. There are a lot of things where it would be inappropriate or inefficient to have the involvement of the development bank, but the fact is that when I walk into those discussions, nothing is off the table at that stage, and I think that that is a really important thing. My last point—in stimulating demand, how important is the microloans that the development bank always hands out to the sector in developing demand? I think that there are a number of reasons why I think that those are important. In your talk, you mentioned the 420 investments last year, and it will not be a surprise that an awful lot of those were delivered through microfinance. There is a thing about connecting the development bank—or the Scottish National Investment Bank, for that matter—to the people and showing that it is making a difference rather than, let us say, 20 large-scale investments a year, that is being spread across the nation and that businesses across the region can identify with what is going on and share in that success. I think that that is crucially important. One of the interesting things—I know that the British Business Bank has said this about ROIs and things like that—is that they are actually exceeding their target. Microfinance is the—I am not saying loss-making area—I am trying to think of a better way of putting it, but you are not going to get huge ROIs from providing microfinance. What we found in Wales is that the default rates are an awful lot less than we had originally modelled, which enables us to revolve those funds and invest more in those activities. I think that it is a crucial part for the bank. It really goes back to that point that there is not a single market gap. Market gaps, I believe, exist right across the spectrum from very, very small people who need a couple hundred pounds to buy a sewing machine or whatever it is, which gets them into business, right up to the large-scale, £5 million and £10 million investments, and right across sectors as well. Thank you, convener. Can I put my first couple of questions to Miss Sharp? I think that the Scottish European growth programme uptake was certainly slow, and I think that the submission to committee previously said that it was a new fund, it was different, it would take time to educate companies and investors. Could you maybe update us on progress in delivering that and other lessons that the SNP can learn from your experience? Sure, thank you for that. The Scottish European Growth Co-Investment programme, or SEGCP for short, is likely easier. It has been slower than we would have liked. We have now done three deals. The investment is about £1.53 million, and the leverage is £8.5 million. We are about to do two more deals. I hope that they might have been done for today, but not yet, but they are imminent. That should see us deploy around £1.7 million, leveraging another £5 million. There are a couple of deals that we nearly did. One of them is that the company managed to raise the level of funding that they needed and did not need our money, and another is that it is decided to go into a sales mode instead of a fundraising mode. We have about 120 odd inquiries in our books at the moment, and probably 30 or so of them are actively working on making introductions and supporting them with their business plan and their pitch and the like. It has certainly been slower than we would have liked, without a doubt. However, it was always a niche fund, and that was the objective. We only expected to support maybe five or six or seven companies a year. That said, what we have learned always takes longer with a new initiative, even when you think you have planned in, and enough to let it always take longer. Without a doubt Brexit has played quite a negative role in the uptake, both from the investor side. We are speaking to a lot of investors based across Europe, the relationships with the EIF, the European Investment Fund, and some investors are slightly nervous of where they are investing their money at the moment. Likewise, we are finding with some of the companies when we encourage them to speak to some of the European investors and, given the role of the EIF, it is causing them to think a little bit more. From the Scottish National Investment Bank point of view, it is back to the earlier comments around being clear on what the market gap is and being flexible in approach. One of the benefits of the way that this is set up is the relationship with the EIF and its fund managers, but that now is also downside, because it is quite particular. Therefore, there are deals and investors are not eligible, so having more flexibility in the instruments being delivered would be quite useful for the bank going forward. I will pick you up on a couple of points. You said that investment was uncertain because of Brexit. My understanding when it was announced in the programme for government was that the fund was set up to counter some of the impact of Brexit, so I am quite interested in what you had to say there. Could you remind us about the amount that you were expected to spend? If my memory is right, it was 10 million in year 1, another 10 million now, and that was just SC's contribution. The drawdown would have been much more significant, and we are very well short of that. That is correct. It was a 50 million commitment that we got from government that we then committed to the programme, so we are indeed well short of that. Back to your earlier point on Brexit, it was not set up to counter Brexit. It was a window of opportunity that we had. The relationship that we have with the EIF allowed us to access funding that is certainly available until we exit, whether it is available after that or not. We do not yet know that, so the proposition that we had was that it was a window of opportunity for us to be able to access this funding, which we knew the longer we delayed, the less opportunity to have that access available to us. We will see through the negotiations whether we can continue to access funding or not. My recollection is that it was announced as a package of measures in the programme for government that was designed to make the Scottish economy more resilient to Brexit, and that was the centrepiece of the announcement. I am slightly at odds with what you are saying. That is perhaps a measure of political spin rather than anything else. I would certainly not comment to that, but I do not recollect that statement at all, so I cannot say anything in my free time. You spoke a little bit earlier about the need for demand stimulation activities. Could you maybe elaborate on what activities need to be delivered on the demand side and whether there is sufficient capacity and resources in the enterprise agencies to do that? I mentioned the important role of the bank existing. Between all the players and the ecosystem, there is a need to join together to ensure that there is a stronger digital approach to allow easy access to companies and to projects in communities, making sure that the system is joined up as it can to ensure that there is no wrong door, that the customer journey is as smooth as possible, to make sure that when somebody approaches anybody in the public sector, they can find their way to wherever the funding might be. There is lots of work underway from the enterprise and skills review already, strategic boards are obviously leading on that. Some of this work is at play, but there is a need to make sure that those involved are also engaging in the same way with the bank. I know that there has been initial discussions to make sure that that is what happens. One of the outputs from a recent committee inquiry was the lack of joining in some areas between business gateway and Scottish enterprise. Is that something that is being actively considered, because that would be the first step for a company perhaps accessing funding? Yes. With larger organisations, it is always difficult to get that smooth as possible. Obviously, the structure of business gateway can make that slightly more challenging. Without a doubt, business gateway plays an important role in the ecosystem in the same way as other players do, so they need to ensure that it is joined up as possible. Alongside the rest of the ecosystem, I absolutely agree with. Certainly, our financial readiness team, who are the team that will stay within the Scottish Enterprise, provides the company's support. They work very strongly with business gateway. They are often found and can be one of their offices. They are getting closer to the companies and supporting the business gateway advisers with the financial readiness advice, which is growing in importance. That area of specialism is very much the linchpin between the wider enterprise business gateway type of support and the funding support that the banks provide. Thank you very much. I turn to Mr Hunter. One of the major transitions from finance Wales to the development bank of Wales was the commitment to work much more closely with public sector business support. Can you update the committee on how that is evolving and are there lessons for us to learn? I am conscious that we have a number of different enterprise agencies all with something to give in this space. I wonder whether we need to join that up more than is currently the case. The main provider of advice and support to businesses in Wales is Business Wales. There was a lot of discussion around how we could better integrate with them. We now have board representations, so we have one of our people on their board and they have one of their people. In fact, the person who leads it on our board is the observer. That was a first step. The second thing was a recognition that we wanted to hide the wiring as far as businesses are concerned. Instead of what tended to happen where a business might phone for what turned out to be commercial finance into business Wales and got battered around various departments and various individuals and ended up with us eventually, what happens now is that there is an automatic routing. In effect, one phone call in and we on both sides have a mutual arrangement to make sure that the service is completely joined up. Business Wales is hugely important to us and their representatives on the ground are an enormous source of leads for us, so it is very important that we do work seamlessly with them. Probably, like Scotland, there are lots of other players in the economy department as well who are co-ordinating other grant schemes or other areas of support. That has been another significant shift in about two weeks' time. It will be the first time, but we are having a full joint strategy session between the Department for Economy and all the aspects of that. There has been a change and a reorganisation this year of that department that is driving this and the Development Bank of Wales to see how we can assist them. As I said, when you are growing this thing, you do not know what is there until you start to discuss it, but with enormous pressure on capital budgets in Government, one of the things that we have been able to work with Government on is how they can stretch their grant schemes and make the best use of that Welsh pound, if you like. Historically, if you look at the way grants have been administered, there has been a binary decision. Should it be a grant or could we commercially support it? Actually, it is rarely binary. In the vast majority of cases, you do not need to give a 100 per cent grant. There is an element of whatever the intervention is, which is commercial and should be repaid. In the last year, we have launched three funds across two Government departments where we have a commercial element that sits right alongside Welsh Government grant schemes. For example, the property development grant, which is administered in the Department for Economy for Commercial Premises, has put £15 million of grant into a pot, and we have £40 million, which sits alongside that as a fund. We work the two together, so they administer the grants under their GBA scheme or whatever state aid cover that they have for the grant, and we do the commercial finance element. The results of that can be incredible, because some of those funds are quite fast revolving, so you might get two or three revolutions out of it. If you look at that grant money, £15 million is going in. If we revolve it two or three times, we might get £160 million of delivery across Wales for £15 million of grant, if you look at it that way. Those are innovative approaches, and this is about combining the thing genuinely together and seeing the bank as a solution right across Government. The three areas that I would like to explore a little bit. One is patient capital. We have touched on that already. DBW extended its loan repayments to 10 years, and that is viewed as a long overdue development. It led to quite an increase in demand for that type of patient capital among Welsh businesses. What does SIB currently do in terms of patient capital? I would say everything that we do is patient capital. The largest part that we deliver is the early stage equity investment. If you talk to anybody in that area, they will tell you have to be patient if you want to be in that area. The exit horizon timeline is around 10 to 12 years. We have a number of investments that are older than that. We are not required to force any exits. We are there to support the company, to support the growth of the company working alongside the private sector investors, so it is very much a patient approach. We launched a new loan scheme last December under the Scottish growth scheme. The repayment terms are round about 7 years, normally up to 7 years. That is the demand that we have in the market at the moment. We can be flexible in that. It is a pilot. We will absolutely be looking at whether there is a need for that to be longer. If there is, we will certainly look at that, so we do not see that as not patient. The energy investment fund, which I mentioned earlier, which is our fund, Folson Low Carbon, is very flexible. The team will tell you that they will be very patient. They will do a phenomenal role right from market making, developing the market, intensive financial readiness with community projects and wider low carbon projects, right through to structuring, investing or lending. The loans to the community projects are 10 to 15 years normally, sometimes more. The return is coming back to the community, the benefits are coming back, and the back of those are 25 years or so. It is overall a very patient approach. You seem to be mainly talking about loans. Do you do any equity investment in terms of patient terminal? The first bit of my comments was on our equity funds. The majority of our investments are equity, and the energy investment fund does debt and equity can have equal proportions of both. We are focused on equity as well as now starting to do more on the lending side. Do you believe that you are meeting the current needs for patient capital? We believe that we are playing a really strong fundamental role in the market, providing the level of patient capital that we are. I mentioned earlier about the real impact that the bank can make going forward. There is potential for a lot more patient capital to be provided. Scale-up capital, in particular, is something that we have been looking at, as I mentioned earlier, as a response to that at the moment. We feel that there is a need to look at doing more in that area. How much of a step change in the market is SNP going to make in terms of the patient capital that it is envisaged to provide? The focus of the bank in having the level of capital available to try to change the market dynamics and to identify additional gaps and changing gaps, evolving gaps, will be transformational to the economy. The challenge on the way that we operate just now is the amount of budget and funding that is available. The commitment that the Government has made can allow the bank team to look forward and to make different choices. One thing that we have identified from the investment fund is that we need to be ambitious and patient. We need to have a different approach when it is new technologies and emerging markets. The bank will be able to focus a lot of its attention and its funding on making substantial investments and changing the way in which our economy is. You say that SNP is taking the right approach to the market. Yes, I believe so. I want to move on to the target rate of return, which is always an interesting one. The financial target rate return will be set for the bank and finalised prior to the investing of the company. What is the target rate of return for SIB and DBW? We do not have a target rate of return at the moment. It has not been a requirement on us. We act commercially in all of our investments and we seek to maximise the return, but we do not need to select a portfolio or approach to achieve a certain target. What is your rate of return? There are lots of different ways of cutting it down. The exits that we have made have been very successful. Our return overall is around 29 per cent on the successful exits. When we also include the write-offs, which is an important part of looking at it in the round, it is around 9 per cent. If we also include our current portfolio, which is quite sizable, it is valued at over £300 million. If we look at that and bring that all together, then we are about to break even. What sort of percentage failure are you actually having on capital unemployed there? We will be around about 20 per cent. I will need to double-check that figure. We have had write-offs of £80 million since we started activities in 2003. That comes out about 20 per cent, but I will check that figure for you. Is that comparable with other institutions of a similar nature? It is very difficult to compare what we do to others, given that we fill gaps in the market. Through our regulatory finance deals, we are brought to us from the private sector. We are in the highest risk area, so there are not many people who are comparable to that. Certainly, we are very comfortable with the level of failure and write-off. I know that there are some that would say that it should be higher if you are making a difference in the market. Clearly, we are not keen to lose money. We are trying to make money, but we are certainly comfortable with what looks like just now. What about DBW? It is a very similar story. We do not have a set target ROI. I am quite pleased that we do not have a set target ROI. What we tend to do is negotiate a projected ROI on a case-by-case basis. As I said earlier, we create a business case for every single one of our funds. We negotiate with the Welsh Government on what sort of return they are looking for from that fund. Once the fund goes live, we manage that fund or the portfolio of investments of that fund to deliver the ROI that was agreed. When you aggregate all of that up, whether that comes to a positive ROI for an organisation or less, I am not sure how critical that really is. We are playing in that very difficult part of the market. If you have very high expectations of an ROI, then there is, I think, a great temptation to start to take on less risky, more market-facing investments, and then all you are doing is displacing the market. What we want to do is to crowd funders into Wales, not crowd existing funders out of Wales. The answer to the question is very similar. Our target ROI at the moment, when we are measuring it, is positive about 0.7 per cent. That is what it is forecast to be at this stage. However, as I said, that is not set in stone. The other thing that is important from our point of view, which may or may not be a difference, is that our operating costs are covered through the fees that we charge on the funds. We do not have any Government subsidy to our operating costs at all. We have to operate and stand on our own, if you like, as an organisation and fully cover our costs. That is also factored into those calculations. Do you think that it is the right thing for SNP to do to have a target rate of return right from day one? I think that that is probably the question for Government to decide upon. I am hearing from both of you that you do not have a target rate. I do not know whether that is a good thing or a bad thing. Certainly, from my point of view, we do not have a target rate of return, but we are targets to do lots of things. One of those things, for example, is increasing the size of the early stage risk capital market, which we have been very successful in doing. It has grown fourfold since 2012, and that is from our investment and the amount of leverage that we achieve in the market. There are lots of things that we are targeted to do. If you are targeted to deliver financial return, it does have consequences on how you will operate without a doubt. One of the benefits of the bank being the scale and breadth that it is planned to be is that there are going to be different ways to do different things. It is entirely possible for one part of the bank to have either a different target rate of return or no target rate of return, depending on what is set out to do. The challenge in the economy is the need for income to flow and for the Government's commitment not to be too long to the future, which is clearly why they are looking at a rate of return and one that they think is reasonable. It is clear that there are examples such as BBBs who have had one and exceeded it. It can be looked upon to work out the best way for the Scottish Government to put that into place. If you were pushed, what sort of target rate of return do you think SNP should be aiming for? Since you are pushing me, and since I am going to be part of the bank, I would say a low one, which would make life a little easier. I certainly think that the bank will have to be very realistic on that. I would certainly be looking at BBBs as to why they thought that return was appropriate and understanding their performance on it. I would certainly advise against a high one, because without a doubt that is going to be challenging to achieve and it will change behaviours. Given that the bank is around patient capital and the change that the ministers want to see in the economy, I think that they need to be careful and conscious of that when setting things that are going to determine how people operate day to day. Just continuing perhaps slightly down that road. Clearly SNP is perhaps going to have a high risk profile, as indeed does SIB. Given that risk profile, is the expected break-even timeline of 2023-24 realistic? I do not think that that is the break-even timeline. I think that that is the timeline for the operational costs to be covered, so self-funding rather than self-financing, which would be the kind of 10 years or so. I was talking about the operational costs. Actually, sorry, I am not saying that. No problem at all. We have covered our operational costs for a large number of years, and certainly I think that it is entirely possible for the bank to do that. Clearly, it will depend on what its costs end up being, given where they are set out to be proposed at the moment. Certainly, with our activities alone, plus a number of other activities that we know are going to move in, plus all the new things that the bank is going to do, I think that that is entirely achievable. How long did it take you to become self-funding in terms of operational costs? I do not have the answer to that, but we are staffing costs within Sib at the moment are around about £3.3 million. We have obviously grown over a number of years, given our activities have grown, and our income over the past five years is, on average, over £20 million. I cannot actually tell you when we covered our costs, but it was quite a long time ago. For DBW, you have already said that you cover your running costs from fees. How long did it take you to get to that point where you were covering your costs? It was quite an interesting one. When I started in the row, one of the first jobs I had to do was to co-ordinate the production of a financial model for the business, which brought all of the funds and all of the costs together and projected forward in effect how much funds we would need over the five-year period to generate enough fees to cover our costs. The figure came out at £154 million over the first five years. Interestingly, by the time we reached around June 2017, we had received commitments to all but £23 million of it. Because that figure was relatively small, I suppose, in the grand scheme of things, the minister at the time said, well, I am not signing the bank off until we have given you the commitment to the full amount. We actually had a commitment about a week before we launched for the final £23 million. In essence, at launch, that was when we stopped receiving any Government grant. It is a strange thing, and I think that this is where the demand question comes back. To be honest, raising £430 million in the two years since then of additional commitments to funds, we genuinely could not predict that. We thought that £154 million would have been a tough ask, to be honest, when we produced that first business case. However, that testament to the fact that, if it is done properly and if it is done with a sort of gravitas that you would want for such a national long-term institution, the amount of interest that it generates from other players generates its own demand, if you like. Looking forward, we are covered for at least the next seven or eight years, probably, in terms of our operating costs, just on our existing funds. Andy Wightman Thank you very much, convener. I am talking about costs. One of the things that we have been discussing is remuneration for the Scottish National Investment Bank. We have had mixed views. Some people feel that it should operate. A remuneration policy consists with what the financial sector does. Others take more of the view that it is a public body and should reflect public sector pay levels. What is the position in Wales? In answer to that question, I know that it sounds strange, but the answer is probably yes actually to both. If I go through our process for setting our salaries, we are not on civil service salaries. There is a very small element of the organisation that is on local government pensions, but that is down to less than 10 per cent now. That scheme has not been open to new people for about seven or eight years. We market test our salaries every three years independently. We use two benchmarks, both the financial services industry and the non-financial services industry. Certain specialists we have, particularly on the equity deal-doers side, because we are a fund manager effectively. We contract out some funds, but the vast majority we deliver ourselves. The pinch points for the higher salaries are going to be around the equity staff, so we look at those. The thing that we have recognised is that our salaries are pretty much in line. I come back to a comparison with Government in a minute, but our salaries are pretty attractive for the non-financial services people and the non-equity deal-doers. We have adjusted our salaries for the people who are doing equity, but one of the things that we recognise is that we cannot offer the kind of stellar bonuses that you can get if you are working in the private sector. It is a high risk, but it is a high return. One of the things that we recognise when we are attracting those people into the businesses is that we have to have a much wider and bigger offering. We are a great place to work. Our mission is to do great things and to improve the economy and the conditions of the people living in Wales, which is a great thing to get up in the morning and come to work to do. We offer a good work-life balance. Our targets are challenging, but they are not impossible to meet. In effect, what we are developing is an employer brand to get into the harder-to-reach areas. Our pay is also tempered by Government pay, so we have an independent review, but all of our pay awards have to be signed off by Welsh ministers. We have to make sure that we are paying sensible salary levels. It is interesting because, recently, I have been involved in a piece of work where we are doing a direct comparison between the pay in the development bank and the pay in the Government. When we compare pay to pay, the two big differences are that, if you are a Government employee, you get a final salary pension scheme. If you take the Welsh Government's figure, that figure is an average employer contribution across the piece last year of 23.6 per cent. We know that that has increased this year right across the entire public sector. It was being understated by 6 per cent, so the Treasury put another 6 per cent on, which actually means that you take a civil service employee's pay and then you add another 30 per cent on to it. With us, our employer contribution is around 10.8 per cent on average across the piece, and we will have an incentive scheme that is no more than 10 per cent of our total pay bill. So, when you compare like with like, the salaries are almost spooky, but they are almost identical in real terms when you look at the average pay per grade. The difference is how we divvy that up and how we put that out there within this sector to attract the right people in. People in the financial services sector are used to working in an incentive-based environment and working in an incentive-based environment when you are trying to deliver those funds. I think that that is a really useful tool. In effect, between Government and the private sector, I think that the gap between those two is a lot less than most people would think, and it is about how you deploy that money rather than the Compton. Very full answer. Are any of the policies that you have developed in that regard or any of the comparisons that you have done in the public domain or those internal? Those are internal. If there is anything that you can share with the committee, that would be useful, but I understand that there is probably not much. In terms of the Scottish Investment Bank, I presume that all the staff are Scottish Enterprise employees on public sector pay grades. Correct. We fully comply with the public sector pay. There is obviously a mix of staff within the Scottish Investment Bank, directorate a number of non-investment specialists as well as investment specialists. What we have in place that we negotiated a number of years ago is a particular allowance, which we can apply to an investment specialist to allow us to attract them in and to retain them. It is quite a specialist skillset to have, and there is no doubt that you need to have the right skills to be able to deploy those instruments. That is a benefit that we can deploy to particular members of staff. It is a role and post an individual specific. Moving on to the question of additionality, Mr Hunter, you talked about the risk of crowding out investors from Wales. I wonder how you ensure that they or have ensured in the past and continue to ensure that the funds that you are deploying are genuinely additional in terms of the investments that are available to businesses? We will always ask investing companies whether they have tried to access the market. That is a very simple test, which is right at the beginning. That is driven by the history of the organisation and its deployment of EU funds, where that is a condition in any event. We are very clear that we are not there to compete with the banks or the private sector. We have a very good work in relationship with the banks. Quite often, the banks will come to us with a deal. It is a deal that they would want to do. They believe that it is a strong business case. Quite often, the problem is that of security. They can only secure up to a certain amount of the loan. Quite often, that is based particularly in Wales on property values being low. They will come to us and say, look, we have a million-pound deal. We would be very happy to lend for 600,000 in, and we will step in behind them with 400,000 subordinated. That gets the deal off the ground. It works both ways. We will work that way and we will work from the bank to us and also for us to bring pridding deals forward to the bank. Kerry made a really interesting point. It is not a KPI that we can measure, but I wish we could. Another testament to that is, quite often, particularly on the bigger deal. You will find that on the patient capital stuff. The large-scale investments, perhaps £8 million or £10 million when you get into that sort of round, that you might get a company that comes to you. The business plan, the business proposal, is not really investor-ready. The teams will put enormous amounts of effort into getting this thing investor-ready. At that stage, they will rush off to an investor and they will do the deal away from it. We get a fair bit of that as well. It is a difficult one, because when you look at the economy of Wales, that is exactly what you want. We can then deploy the funds that we have been given elsewhere to grow the economy further. However, for those staff who are incentivised to target-driven, it can be a little bit upsetting. I am most interested in the question of mission-orientated finance. This is something that has been advocated by Mariana McChartier, who we spoke to a few weeks ago. It is in the bill that it is a part of the Scottish National Investment Bank. Purpose, do you have anything that you call mission-orientated finance? Or are you more of a conventional development bank? I would have to understand what was meant by the term mission-orientated. It is interesting that a lot of the funding proposals, a lot of the things that we are discussing with the Government, if you like, are right at the core of it. We are looking at what the Government's mission is. When we are walking in the room with the Government, I have had meetings on pretty much every aspect of Government that you can imagine from care homes, domiciliary care, all manner of different things—transportation, buses, trains, taxis—all sorts of stuff. We will not be able to assist in many of those things, but in certain instances we can. The way we position ourselves is that we are there to support the delivery of Government priorities. Where there is a commercial element to that delivery, we want to step in and do a good job in that area. I am not sure whether that is what is meant by mission-orientated finance. Mission-orientated finance is where the Government sets a long-term mission that is described in the bill, ascending a document describing the socio-economic challenges that the bank is to seek to address. For example, we are moving towards a low-carbon economy or upholding the human right to housing over typically long periods of time. That is what that is all about. In which case, I can say that that is very much the case. In fact, alongside our standard KPIs, by the end of this year we will be measuring ourselves against a supplementary set of KPIs, which includes carbon reduction, assistance to female entrepreneurs and a whole range of other KPIs that we have not traditionally captured in the past. Shifting the bank towards the longer-term vision in the goals of Government is absolutely on our agenda. New ones you will be reporting on? Yes, by the end of this year. We are not reporting on them at the moment. We have not in the past, we are developing a set that we will be reporting on through this financial year. Be a reporter available next summer. Do you have anything to say about the question of additionality in the Scottish Investment Bank? I think that you mentioned a client who would turn down your money because they had money elsewhere. Yes, through RAC, GCP. We are very much targeted towards additionality. Private sector leverage is one of the things that we record and that we try to maximise at every point possible. We are GAP funders. That is the role that we play in the market. The funding is not always available but also the time. Sometimes the time is of the essence and we can move very quickly with parties that we are close to some of our private sector partners. It is around different levels of additionality in the market. Virtually everything that we do is with co-investors or co-lenders, so we are not doing things on our own. In the main, the vast majority of that is brought to us by others who feel that they have a gap in the look to us to fund. Just now, we have very strong additionality and that is exactly how we expect the national investment bank to operate going forward as well. Who is identifying those gaps? The lenders or the client? Both. If the client cannot raise the funding that they need, they are either coming to us directly and asking us to try to help them to find someone to fund the business, which our financial readiness team did, as I mentioned earlier. Their role is to go and try to get funding from the private sector. That is their number one. They will try to do that and only when they cannot do that will they look towards calling them to see what else we can do to support them. However, where lenders or investors are looking to support businesses but they cannot provide the level of funding that the company needs, they will also come to us to co-invest or co-lend alongside them. Do you recognise the kind of reason that Mr Hunter gave for the private sector not lending, for example, when they do not have enough security? Would that be a typical instance where you would consider stepping in? Our debt fund is either level of security or it could be the length of term that they need or they cannot afford to start to repay it for a couple of years. We are very flexible in our moratoriums that will provide either interest or capital. It could be that just the future projections are racer than maybe some of the banks or others might be interested in. Again, the vast majority of what we do is the equity side where there the gap is usually just the level of capital investor is willing to put at risk. It is not enough for the deal to go ahead. We need our business to be properly capitalised. There is no point in investing in the business and there is not enough capital to get to the next value inflection point. Where there is not sufficient capital to be deployed, that is when our partners or our co-investors will come to us and ask us to invest in the deal alongside them. The implementation plan of the Scottish National Investment Bank says that when decisions on investments are being made, there needs to also be that broader approach of taking into account economic, social and environmental factors, as well as commercial ones. I wondered whether we could start by hearing about how the Scottish Investment Bank just now takes that approach or not. What attempts are made to have a balance between commercial factors and other aspects when measuring performance? We absolutely do. We look at it at lots of different levels. As I can briefly touch on the market from the risk capital side, it is something that we have been looking to grow for a number of years and quite successfully. It is now performing at the best region across the UK, Scotland is punching at or above its weight on the early stage side. That is something that we monitor closely, both on the side of the overall deal, but we also strip out the high deals of over 10 million outliers to see the underlying market to make sure that it is still healthy and that it is still healthy and still growing. That is one element that we look at. We also do evaluations, which, to the previous question, is really important from the point of view of the role that we play in the market. The evaluations are both qualitative and quantitative. They look to try and work out GVA impact in jobs and various other elements, which are obviously important for an economic development agency. They also speak to investors and companies and other market players to ask the questions about the role that we have played in the market, whether we have filled gaps, whether we have been additional and those sorts of things, and that allows us then to look at the success of the funds, whether they have delivered what we would like them to deliver in the market, whether there is improvements that we can make and whether they fit for purpose and whether any changes need to be made to make them more relevant and more useful to the market. The other level is the financial performance that we touched on earlier. We do not have a target rate of return, but we have to act commercially, so we are seeking to maximise returns that we can. It is important for us to monitor the income that we are bringing in from our exits and to do all that we can to try and maximise that. You have outlined how market factors and financial returns are evaluated. If anyone had to pick out randomly any investment decision made just now by the Scottish Investment Bank and asked about broader social factors or environmental impact, for example, would you be able to articulate a response to demonstrate that and explain how it was measured? I would not be able to do that in every single one. That is work in progress for us. For a number of years, we have been working closely to record some of the important factors, women-led businesses, for example, and ethnic minorities. We have had a couple of challenges in the GDRP that we are working through, but we are still developing an approach to that. Overall, it is one of the things that we are strongly focused on as a business. The Scottish Enterprise as a whole is very clear on the need to record the social factors, as well as environmental factors. We are putting in place the tools to allow us to do that consistently across all our different areas of activities and write down to either company basis or a project basis. Do you just now use anything like a balance score card? If you do not, would you consider that a good tool potentially for the Scottish National Investment Bank in terms of measuring that broader performance that is required? We do not produce it externally, but we do it internally. We have had an annual review previously, which sets out the factors on the portfolio and company basis—employees, levels and the like—but the overall market and the economic and the financial performance, we record internally an essentially a balance score card approach. That is very important for the bank to do that forward. It would not be sensible to focus on one of the elements and not the others. It is very important that there is a real focus across all the different factors that can make a change to the economy. I would be interested to hear about the experience with the development bank of Wales in terms of whether broader factors are taken into account in investment decisions and how they are therefore measured. The easiest example is probably—I talked about it earlier—where we are providing commercial finance alongside Welsh Government grant funding. Generally, the mix might be up to 20 per cent grant funding and 80 per cent commercial finance—two separate things but working in a very joined up way. We know with all of those in order to receive a government grant through the Minister's economic action plan that the companies have to sign up to a contract with government, which basically promotes decarbonising, offering fair wages and fair work and some other things. In fact, I have them here, so it is promotion of health, including a special emphasis on mental health skills and learning in the workplace, progress on reducing carbon footprint and fair work, as is defined by the Fair Work Board, so we can very clearly who does that, and growth potential, so there have to be businesses with growth potential. Those are specifically measured against those by the Welsh Government and therefore our commercial finance will flow in behind it. A separate part is developing funds that specifically address some of those issues. On the decarbonising space, there is an awful lot that we can do with modern methods of manufacture, for example, in supporting businesses in the supply chain to do more of that. Decarbonising the existing housing stock is a massive issue, and it will probably be just as big an issue in Scotland as it is in Wales. The statistic is that somewhere in the order of 85 per cent of all houses that will be built in 50 years time actually are built now. Therefore, if you do not decarbonise those, it is going to be a massive drag on efforts to move decarbonisation forward. We are in discussions with the housing department to see how we could intervene and create specific funds to accelerate that change across Wales. We are doing that at a number of different levels. In terms of taking the balance scoreboard approach, is that something that you would based on your experience support and recommend? Yes, yes, definitely. We have a bit like Kerry. We operate a balance scorecard from within the business where we are looking at from the customer perspective, from the finance perspective, delivery perspective, etc. We have that and we operate that on a day-to-day basis. In the context of what you are saying, it is more of a balance scorecard. You have financial returns, but what are the social economic returns? That is something we are developing this year as part of our KPI measurement, which has got to be in place this year to be reported on next year. Thank you very much indeed and welcome to the panelist. I am looking at the regional perspective. The DBW has four offices across Wales, and I know that the Scottish Government has been looking at the potential for physical location and physical locations. Consultation work is under way on that or they are considering options. If I could ask Rob Hunter what the benefits are or the pros and cons are in having those offices spread out across Wales and across the regions of Wales? I produced a few years ago a strategy for location across Wales, the Pan-Wales strategy, which is available on our website if you would want to see it. The minister was extremely keen and we were extremely keen that we would be a development bank for the whole of Wales. We were a Cardiff centric organisation with a few satellites outside of Cardiff. We have generated a HQ office in Wrexham, which will have someone in the order of about 52 to 55 staff. We are well on track to reach that target earlier than we had originally forecast. That is going really well. The mix between Wrexham and Cardiff is still going to be our biggest office physically, but the south-east of Wales is where the majority of the businesses are. If you look at the mix, it has been designed to ensure that we have a presence that is consistent with the business demography in that particular region. That will drive up investment levels and we are already seeing that in north Wales. We have an office in Clonathle which is in south-west Wales. We are also about to open a small office near Clendidino, which is in north-east Wales. We will have people on the ground. It is really, really important because, as the banks have retrenched and moved away, there is a thought that this is a new thing. The banks have retrenched and they are moving away and they are closing branches, so they are not as close to the businesses. The business decisions have been removed from those branches probably for a very long time. Most of the actual investment decisions are made remotely in a HQ somewhere. One of the USPs of our organisation is that we are a friendly face. We will have and we will continue to meet our clients face to face and build a relationship with them. I think that that is extremely important. We have 22 unitary authorities in Wales. One of the things that we noticed was that there were pockets of very low investment activity. What we did about three years ago, we set ourselves a target. It changes every year because the unitary authority in the bottom five will change each year. We have a specific target to increase the investment in the five lowest-performing local authority areas by 10 per cent in a year. Last year, combined on the five, we had growth of about 64-65 per cent, so that was really positive. Of course, that just raises the bar and then we have to do more next time. It is absolutely crucial that it is not, from our point of view in Wales, seen as a bank for Cardiff or a Cardiff-centric organisation. It is certainly not that. I think that we have got very good reach right across Wales. You are really testing my knowledge of the geography of Wales with the officers. It is interesting that, rather than focusing on where the businesses are and the demand is, you are looking to target those areas where the lowest demand needs to be increased? Yes, absolutely. I think that that is critical. It is very easy. Any target-driven organisation is not an intentional thing. When you set targets on anything, you can get good intended consequences and you can get unintended consequences. A non-intended consequence might be that the poorest-performing regions are left alone, and we cannot let that happen. We have to make sure that the reach of the organisation goes right across all of the boundaries. It really goes back. I know that there is a lot of talk about patient capital, but I think that it highlights the importance of doing those smaller value deals, because the people need to see that the national institution is actually real, and it is doing something in their area. The problem that you may have, if we were only doing large-scale patient capital, is the likelihood that we would be doing the vast majority of our deals in Cardiff or very close to the border with England and Wrexham. You would be pretty clear that, if you only had one office, that would limit your ability to impact? I genuinely believe that it would. It is a very strange thing. I have never realised it. I have been in Wales now for 15 years, but when I first went to Wales, I allowed myself about three hours to drive from south to north Wales, because I thought that, while it is 180 miles, that is about three hours. It is not. It is actually quite a journey. Wales has got the M4 coming across the bottom and the A55 coming across the top, and you have roads that are quite difficult to navigate to get from north to south. Therefore, to have all of your staff in south Wales would really make it feel very, very remote to the north. We have always had people based in north Wales, but I do not think that we have had them at the scale that we needed to really demonstrate that we are on the ground and we are doing business. I appreciate the issues that you raised having driven from Abergavie, any up to Betsi Cymru, not that long ago. On that basis, if you could give me your opinion and perhaps some carry shot, you could give me your thoughts as well about this idea of having more than one office and offices out and about across the regions of Scotland. Obviously, I represent the Highlands and Islands, so we can feel a long way away from lots of parts of Scotland. If I could get your thoughts on that. If you look at our footprint, we are going to have about 14 to 17 people down in Clandydd, south-west Wales, about 100, 110 in Cardiff, about 50 to 55 in Wrexham. For those areas that are further out, the thing is that it could be a development bank for the whole of east Wales, but it is not. It is a development bank for the whole of Wales. Therefore, we do have smaller satellite offices in Newtown and we are going to have them in Clandydd so we are covering off those areas that are right at the more extremes of the A55 across north Wales. Our staff generally, from both of those offices, Wrexham and Cardiff, can reach out and pretty much within an hour and a half get to most businesses in those regions, but we do have specific officers who cover any patches where there is a little bit of underrepresentation, if you like. At some point, there is the aim, the one bit that is missing is Aberystwyth, which is right in the middle of the two. When we create enough demand, we would be looking to base a small office there. Your suggestion would be to make sure that you have officers of footprints within wider areas. One of the lessons that we have learned, and I think that this is hugely important, we have put telepresence into our offices. The one thing that you do not want is for people to be travelling for three hours to go to a half an hour meeting. Having a state of the art, not necessarily the gold-plated stuff, but a state of the art telepresence and getting everyone to use it, once again it comes down to carbon footprint and making sure that we are making the best use of those individuals' time. We have put pretty much state of the art equipment in all of our main offices. I agree entirely with what Rob is saying. The Scottish Investment Bank is pan Scotland, so we operate across the whole of Scotland. We have staff based in all of SC's offices, which I remember is 12. We have three main hubs, Glasgow, Edinburgh and Bellshill, where most staff are, but people are far and wide. It is really important to be close to the businesses, advisers and the projects and communities that we are working with. We are very closely with High. In particular, we are well with the South Scotland Agency when it is up and running. We make sure that we are available from a finance point of view to interact with the companies in the kit mansion and other colleagues in High. I agree with Rob's point entirely on the technology that is required to a good standard, to allow you to have the web access or online conference calls or the light to make sure that we can be available consistently and continually. How would you see that change or would you see it improve? Clearly, the decisions to be made with the head office is going to be and where any actual offices will be based, but there is certainly the potential for co-location, for example, whether it is SC or High or others. There needs to be a cost-effective way to ensure that the staff are getting out and about. It is the same to Rob's point. There is no point to spend all your time in the car and the train getting somewhere, low-carbon, a side even just from a time point of view. Ideally, having staff based in different locations, clearly that has a different dimension to it from the point of view of managing staff and matrix structures and everything else. However, it is really important to ensure that the bank—I am sure that the Government would say the same thing, as Rob said, for Wales. The new Scottish National Investment Bank is for the whole of Scotland and it is important that the companies have full and available access to it. Just one point. It is also really important to encourage flexible working. The idea that we have very big offices and everyone goes to those big offices at 9 o'clock in the morning and comes home at 5 o'clock in the evening is changing dramatically. Therefore, what we do within the development bank is that we encourage people to work from home. We have people working from home for a reasonable amount of their time, based right across Wales. That is another resource that you can tap into. Once again, with excellent Skype connections through laptops, it is much easier now to communicate and stay in touch with people as they work in remotely. I want to ask Mr Counter a question on governance. You are a PLC. You are established in 2000, or your predecessor was. Have your objects changed since then, as they were in the corporation? They are pretty much as they were when they were incorporated at that time. I know that there is an ongoing debate as to whether the organisation should or shouldn't be a PLC. I would suggest that a PLC works in terms of it is a very much-in-known quantity. It has a very— If I can interrupt, I am not particularly interested in the PLC. I think that we are interested in the objects. Chapter 2 of the bill has the statutory objects for the Scottish National Investment Bank, which you probably had not had a time to look at. However, if you have any comments on those, I am certainly welcome them. The second question is—I am being encouraged to be brief, I apologise—who is the shareholder of the development bank of Wales? It is Welsh ministers, and I think that one shares is with our CEO. With your CEO? Yes, they are the majority. Thank you. You can submit additional comments and writing after the session, so I do not hesitate to do so. I think that that is all the time that we have now here, though, this morning. Thank you very much for coming in. I will suspend the meeting and move on to private session now. Thank you.