 Good morning, ladies and gentlemen. Welcome to the fifth meeting in 2016 of the Economy, Energy and Tourism Committee. Can I welcome members? Can I welcome our witnesses who will come to it in a moment and welcome visitors in the gallery? Can I remind everyone please to turn off or at least turn to silent all mobile phones and other electronic devices so that they don't interfere with the committee's work? We have apologies this morning from the deputy convener Dennis Roberson. We also have apologies from Patrick Harvie, who has to be at the Rural Affairs Committee but hopes to join us shortly. Item 1 on the agenda. Can I ask if members are content that we consider our session for legacy paper in private at future meetings? That's great. Thank you. Item 2, we are taking evidence on the issue of employee-owned businesses and cooperatives. I'd like to thank our witnesses for attending. Earlier this morning, we had an informal session presented by Sarah Dees from Cooperative Development Scotland. Thank you for that, Sarah. Setting out some background to the session that we're now having. The history to this is that it follows on from some work that the committee did in our inquiry into work, wages and wellbeing, where we published a report a few weeks ago. As we did that work, we received quite a lot of evidence suggesting that models where there was a higher level of employee participation in the business were good for productivity, they were good for the broader success of the business as well, clearly as improving the employee experience. That was the area that we felt probably deserved a bit more scrutiny. We had a roundtable session last week on the question of social enterprises, which I think was quite a success. This morning, we're looking at the question of cooperatives and employee-owned businesses, which I would stress are not the same thing, although clearly there are parallels. Before we get into the discussion, I think that it would be helpful if we just went round the table and we all introduced ourselves. If you're here as a witness, if you just say who you are and where you're from and perhaps just a little bit about the organisation that you represent, that would be helpful in terms of setting the scene. My name is Murdo Fraser. I'm the convener of the committee and I'm an MSP for Mid Scotland and Fife, and I'm over to check. I'm an independent role on the John Lewis board, which is bringing democratic vitality to John Lewis, given its ownership structure and humanity to commerce. I'm also here as chair of the Employee Ownership Association. Gordon MacDonald, MSP, for Edinburgh Pentlands. Nick Kunzburg, chairman of Scotland Fife, which is an employee-owned company and also an ambassador for Cooperative Development Scotland. I also wear a hat as chairman of Social Investment Scotland, so I'm involved in the social enterprise debate as well. Dr Lyle MSP, central region. Karen Pickering, Page Park Architects. We're an employee-owned business. We've been employee-owned business for two years and we have 52 employees. Lewis MacDonald, MSP, representing North East Scotland. I'm Andrew Pendleton. I'm an academic based at the University of Durham. I've been doing research on employee ownership and employee share ownership for perhaps rather longer than I care to remember. I'm currently doing a major survey of employee-owned firms in the UK. Sarah Dees, I lead Cooperative Development Scotland, which is the arm of Scottish Enterprise, working in partnership with Halins and Arlands Enterprise that promotes business growth through cooperative and employee ownership models. John Lamont, MSP, Glasgow Pollock. Callum Currie, chairman of Port Pantwick Harbour Community Benefit Society, small community down the west coast of Scotland. We've just purchased a harbour. Kelly McIntyre, programme manager for community share Scotland. We are a support and advice service that has been funded for a three-year period by Big Lottery and Carnegie to provide support and advice to community groups and organisations to help them through the process of setting up community benefit societies, as well as looking into the community shares model mechanism for funding projects and enterprises that they may be taking on on a community level, be that of place or interest. Joan McAlpine, MSP for the south of Scotland and member of the committee. I'm Natalie Agnew. I'm the managing director of Muckle Media, a PR agency, and also the director of the We agency, which is a co-operative that we've set up between a PR agency, a design agency and a website development company. Joanna Jure-Gibb, director and founding member of Screen Facilities Scotland and business manager of our time limited physical special effects company. Screen Facilities Scotland is one of the consortium cooperative models here this morning championing the growth and aspiration of the facilities and service companies in the film and television production sector in Scotland. We currently have 25 members and we're growing, and our members are vital to Scotland's production infrastructure. Our member companies range from those who are sole operators to those with 100 plus staff servicing the practical and logistical needs of film, television and commercial production, as well as those of games industry, museums and live events. I thank you very much. As a matter of interest, the committee did an inquiry last year into the creative industries and we're doing a follow-up session on that next week, so that might be of interest. That and SFS has submitted a written evidence and we'll submit for next week's meeting as well. Thank you. Then we have the official report for there to note everything you say and our team of clerks to assist. We're going to run this until about 12 noon. It would be helpful if people making points could do that as succinctly as possible, because there's quite a number of you around the table. I will chair the session. If you want to contribute, just catch my eye. I will bring you in as best I can. It would be helpful if somebody raises a point or asks a question and you have a particularly strong view that we want to hear from you, particularly if you particularly agree with something that's been said or even more so if you particularly disagree with something that's been said. Just catch my eye and I'll bring you in. You don't need incidentally to touch any of the equipment that will all be operated remotely. I wonder if I could maybe just start off and maybe I can direct this to some of the witnesses who are here from organisations that have been set up on an employee ownership or co-operative model. Give us a flavour of why you felt that model was the right way to go as opposed to perhaps a more traditional business model and what you feel the benefits of that have been. We were informally working together. There's three members of the wee agency, as I mentioned earlier, a PR agency, a design agency and a web development company, and we're all very complementary to each other. We were working on a number of projects informally together, but we faced a number of issues, things like contracts, who's ultimately responsible for making sure that we deliver something for the end client, where does the buck stop, who's the point of contact, who's looking after the admin. It was quite fortunate, really, that we got to test our relationship by working together informally. We found out about co-operative development Scotland and approached them to explore the options of setting up a fourth entity, which we would each be members of. It really made a lot of sense to us. It's helped us from a business development point of view, so we'll all go out and meet people and be pitching different elements of a business that aren't necessarily our own. We're looking at the bigger goal of helping others to grow, but it's all very much based on commercially making money as individual businesses and collectively as the wee agency. How important to you in terms of setting up the advice that you got from previous? It was really superb. We were provided with one-to-one support. We had a strategy session where we all sat together and explored the different options that were open to us and agreed whether that was the right approach to take. We had completely free legal support that let us set up our co-operative, make sure that everything was watertight. We had a lot of support with coming up with a member's agreement. Again, who's responsible for what? What are we all committing to? We've actually had an interesting time where one of the members was bought out by a bigger company. We had different options at that stage because of the strength of the member's agreement around, do we want to work with a new company? Do we want to vote them out and bring somebody else in? It's all gone really well and it's been a positive experience. We've had a lot more structure in place than we probably would have gone and got ourselves if we'd just been doing it on our own. So lots of direction, particularly at a strategic level of where do we want to get to and what do we need to consider. Who else would like to? The John Lewis partnership has been going in its retail form since 1864. Our founding member was John Lewis Sr, who started a shop on Oxford Street in pretty much the same place as we trade at the moment in London. He had two sons, one trained as a barrister, the other one stayed in the business. The story goes that John Speed and Lewis, who was the founder of the John Lewis partnership employee-owned model that we have today, fell off his horse in Regent's Park, spent two years recuperating from a punctured lung and it was in that period of time that he reflected on how unfair it was that the family, his brother, his father and himself took home more than the employees that worked for them at the time in the shop in Oxford Street. They were silk merchants. They were one of the most successful silk merchants on Oxford Street. So he came up with this model, which wasn't pure altruism. It was about trying to develop a business that commercially was more successful than his competitors. In order to do that, one of the things he felt was a key enabler was to try and ensure that employees, partners as they were eventually to be called in our business, had a stake in the business and therefore felt both emotionally and financially engaged and committed to trying to make the business a real success. He had lots of arguments with his father to try and get this idea across him because his father just did not agree with it. So Edwardian England, this wasn't the sort of thing, done thing. Eventually he managed to strong arm some money out of his father and walk down the King's Road so the story goes and bought Peter Jones, which is on Sloan Square. It was a Welsh Hatter's shop at the time that wasn't doing very well. It was put up for sale. So he bought it and his father allowed him to run a different sort of model in that shop whilst he worked in the main shop in Oxford Street. So he said, you can go and do your mad ideas in that bucket of a shop in Chelsea, as he called it, but you have to do a full day's work here in the family business. So he set up effectively the early part of the John Lewis partnership as an employee-owned business way back then. He said to his employees that he had in Peter Jones that, if you make a profit, then I will share the profit with you. That was his sort of first motivating position to them. Five years later, he was making a profit. He introduced profit sharing, which is in existence today. So the first or second week of March, depending on when we announce our profits, is a very, very exciting moment for the 90,000 partners that work in the John Lewis partnership. Nobody knows what the bonus figure is going to be apart from the partnership board, and it's announced by distributing brown envelopes that have a little disc inside them, which have the percentage number on because everyone receives the same percentage of their pay, which was deemed, by the founder, to be the fairest way of acknowledging someone's contribution to the business. We choose different partners on bonus day to open that envelope and to bring to life, if you like, part of what the employee ownership meant for us. It was then 10 years later that he put into place the first trust, because we're a trust-owned employee-owned business, in 1929. Then it took right the way through until 1950, with speed and working in the business, developing his ideas through the constitution of the John Lewis partnership, which has got seven principles in it. He wanted to leave a legacy where no one forgot why he set the business up and how he set it up. Our first principle, which is often quoted within John Lewis, is really quite important in our business life, which is the partnership's ultimate purpose, is the happiness of all its members through their worthwhile and satisfying employment in a successful business. The partnership is owned in trust for its members, as they share the responsibilities of ownership, as well as its rewards of profit, knowledge and power. Effectively, from 1929, speed and then grew the business. He acquired a whole bunch of self-reach provincial shops just before and just after the Second World War, when self-reaches weren't doing that well. He acquired a grocer, which was owned by a Mr Waiter, Mr Rose and Mr Taylor, that when it was brought into the business, Mr Taylor left and Mr Waiter, Mr Rose continued running the business and it turned into Waitrose. He had seven shops in Scotland. We developed all sorts of things. Our formal democracy, our knowledge sharing through a weekly publication called The Gazette, and lots of benefits that flow from being a co-owned business. We were quite inspired by the John Lewis model. It was about four years ago that our partners decided that they would go down the employee-owned business route. Our initial partnership structure was for partners who had a very traditional business model in our architects practice. It was set up 35 years ago. The partners decided that they were looking for a succession plan, but they wanted a succession plan that would keep the culture of the business because we were a very creative business. We took two years to get the employee-owned business set up. We went through quite a lot of discussions. Co-operative Scotland helped us with that, which was great. We really included quite a lot of our employees in that process. We realised that it was the right way for us to go. We have only been an employee-owned business for two years, but we have found that it has improved the ethos of the practice. The culture has not changed, but the way that we all work now is a holistic model in which we all contribute to decisions. We have a Board of Trustees, so the shares cannot be sold, but we have a very level structure. All our junior architects are on our finance committee and on different operations committees. We all contribute to the direction of the business. We are architects, so we are not actually business people. It was quite difficult for us when we first started out on this journey to understand how to run a business. The four partners did it by instinct, but what we have found over the past two years is that we have learned more about business. When we first started out on that route, there were 35 of us and there are now 52 of us. We found that our younger architects are wanting to stay with our practice and not jump ship and go to different architects firms, because they can see a future in the business. It is a business that is going to continue. It is not going to be bought over by a big multinational company. We are very much a Scottish business. We are able to retain our staff and our talent because of that. Within our business model now, we are able to innovate and investigate different avenues of architecture that we probably would not have done in the traditional partnership. We have a graphics team that decided to investigate more of the graphics side of our design company and also an interior team that we did not have previously. There is opportunity for people within the business to say, can I experiment in this direction? Also like the John Lewis model, we have profit share, which is great. We do that thing at the end of the year because our financial year is at the end of November. We give our bonuses at Christmas time, which is an extra incentive for staff. We do not give a percentage, we give maybe two weeks wages or depending on the year. Obviously, we have only been running for two years. That could change each year, but it really is based on the profits that we have made. We also keep a little bit of that profit share for charitable works. We have quite a number of our architects who have interest in helping communities abroad. We send our architects out and they help to build housing in communities that need that or soup kitchens in Africa. There is a whole range of charitable ventures that we support as well. I just think from a personal point of view, when you know that you own part of the business, you work so much harder. When partners were owning the business, we just worked for them, which is fine. They were great partners, but to work for yourself really does incentivise you and even things like, oh, should I print out these drawings or maybe I shouldn't print them because I'm paying for these prints. It's little things like that which really help in your day-to-day running of how you work. Also, our clients, when we said that we were becoming an employee of your own business, they were quite impressed by that because they thought, wow, this company cares for employees. Maybe they'll care more about our project and our staff. I think that's helped us get more business. The fact that we've actually, in two years, increased our staff by so many shows that we are getting more clients and more work through them. I think that the employee-owned business model has really helped with that. I wonder if I could say a little bit about our employee ownership survey. The survey is conducted by myself and my colleague Andrew Robinson of the University of Leeds. What we're aiming to do is look at the whole population of employee-owned firms in the UK. We currently estimate that there's about 250 firms who meet our definition of employee ownership and we've got just under half of those in the survey. Most of the witnesses here from employee-owned firms have contributed to the survey. Our current estimate is that about 240,000 people are employed in employee-owned businesses, which would be about 0.8% of employment in the UK. One of the things that comes out from the survey is that employee ownership comes about in different contexts and for different reasons. We find that about a third of cases come about through business succession. A strong motive is to protect the company from falling into the hands of competitors. We find that about a quarter are motives similar to those of the last speaker, where a partnership is seeking to widen its ownership to a broader number of people. We have about 15% from privatisation and 23% from startups and divestment and a very, very small percentage indeed, 1% or 2% arising from business failure. In terms of sectors, we find about 20% in manufacturing, getting on 50% in professional and business services and then about somewhere between 15 and 20% in what you might call personal services, which are often ex-public services. We don't currently have anybody in transport or in hotel and catering. The transport one is quite interesting because if you were doing this inquiry in the early 90s, transport would have been the dominant group of firms that were employee owned firms when the bus industry was privatised. It's a little bit drier than the stories that my colleagues are able to tell, but I hope that gives you a portrait of the sector as a whole. I'm quite keen to hear from the others. I haven't contributed, Joanna and Callum, to get your stories and how you arrived at the models that you're at. As a consortium co-operative screen facility, something was reborn out of, in some ways, a lot of threats to our sector, where the companies were perhaps feeling isolated or that there were issues affecting their business that they couldn't tackle singly and also that those companies perhaps were not engaging with policy setters, decision makers and so on, in such a way that the correct routes to funding could be achieved and the support to the sector could be guaranteed. By pulling together under the model, it allowed for us to, in the first instance, start to address that weakness. I'm a firm believer, as is SFS, that you need to get your own house in order to move forward and make progress within your sector. The model that was offered by CDS, which we came across through the CDS prize, seemed to be so efficient one to get under way, but that was quite compelling. Had we started to get involved in legal ventures, joint ventures and things like that, I don't think that we would have got off the ground. However, with the model that was presented and with all the background and support that CDS gave us in order to become established, that set us off on a swift course where we very quickly started to achieve a number of the goals that we wanted to achieve. We were also quite quickly able to plug in collaboratively with Creative Scotland, which is our main public body for the creative sectors, Scottish Enterprise and SDI. As a group, we have benefited from being able to present our case more formally, more rounded out with lots of different viewpoints, but in a way that's distilled so that those who are having to make a decision, can they support us, can they give us funds, can we join in with some activity that they're already doing, quicker, more effective decisions can be made. Just as a couple of examples, from the diplomacy advocacy type side, we are now involved in a lot of the sexual scrutiny that's going on in the film business, which doesn't need to be touched upon because you'll have your own committee for that. We have been supported by Creative Scotland to engage with UK Screen, which allows us to have a combined voice within Westminster through that vehicle so that it keeps our foothold quite loudly in both ends of the country. We have worked with Scottish Development International to go to international trade events like IBC and next month we are going to go to the Games Development Conference in California. Those mechanisms were already existing, but the member companies that we had didn't know that they were there perhaps or didn't know how to engage with them effectively and didn't know how, even if they did, how they might be able to afford to go, so that we can get into a position of shared cost or grant support to achieve those end goals for the member companies. Finally, when it comes to business, one of the really compelling arguments for the model was when I first went to a presentation about the model, it described it as the daisy situation, where you have the consortium in the middle and the member companies are all on the outside like petals, so each company remains distinct and you don't compromise its brand, you don't compromise who they are, what they do, but this model in the middle allows any combination of those petals to pull together to then try to generate more work for either just those companies that are targeting that work or for the wider membership. When you are on location for film and television or commercial or whatever, it is an enormous collaborative effort. Turning up now on projects where member companies have already had collaborative communication with the client and then we're all turning up delivering very disparate and just different services, but doing that and especially to the international clients, they can then see that landing in Scotland to make a project of whatever nature is joined up, is cohesive, is professional, it has the services that they want, so that's where we would look to drive business growth for the member companies and so an intangible project turnover results as well. There are, of course, a number of areas that we still need to address, a number of sexual weaknesses that we're working on, but the model that we are part of has allowed us to plug in in a much more effective and professional business-like manner in my view. Callum, from the point of view of Port Patrick Harbour, how did you arrive at the model that you used? In Port Patrick, prior to being the Port Patrick Harbour Community Benefit Society, there was a charity in place before us, the Port Patrick Trust, that was a company limited by guarantee with charitable status. They tried to purchase Port Patrick Harbour prior to us and actually got into rather severe difficulty financially. Consequently, when the whole community of the village actually found out the real underlying terms of that, they decided to move on from that and form the Community Benefit Society. We engaged the third sector, they came in and advised us and led us on to Community Share Scotland, where they've obviously advised us and we had to actually build a new model community benefit society that would gain charitable status with Oscar, that didn't exist that model at the time. So that has been very successful, we went on and we raised £100,000 in just about three weeks by selling community shares. We had a very large oversubscription, a lot of interest in it, it's been very successful. The avenues of finance weren't open to us previously with the old model. It's fair to say, had we not been able to form that Community Benefit Society, gain in the charitable status and moving on to the Community Share, that Port Patrick would have lost its harbour and it would have been an absolute disaster. But now we have a good bright future, 560 member shareholders, all fully involved, all want to see it go the right way. We're now in the process of taking a harbour, which to be fair hasn't really seen much change from the mid 1800s. It's got one water spicket and that's it. But we're now looking to engage, we're embracing the Community Empowerment Act, we have a small strip of land behind our harbour, which we're looking to take over from the local council, it's a bit of wasteland to them. But to us it's very valuable in as much as it's going to allow us to put in the facilities that we want for toilets and showers for the modern sailor. We don't want to spoil the charm of the old harbour, we want to keep the skyline, so rather than build up, we would like to build into this hill and basically keep it nice and charming as it should be. I think that that pretty much covers us. As a matter of interest, in terms of your community shares that you sold, who was able to buy them? Was it people living in a particular geographic area, or were they more widely sold? Anybody in the planet earth, and they did. They did, right, so it wasn't just purely people living in the port battle? No, Germany, Bermuda, Canada, all over, but we probably sold them, over a third would be locals in the actual area. We're all in a small population, just about 550. We had about another third would have went to extended family, or people that, for example, people I grew up with have moved away and most likely have come back, and the other third would be people who just had a genuine interest in helping a small community, whether it be the came and holiday and loved the place because it's picturesque. So you raised £100,000 more or less, so have you had raised more money subsequent to that, or has that been enough to do the things that you want to do? No, that's been enough. The amount of money we had to raise to actually secure the harbour into local ownership was £75,000. It was identified by co-operatives that with our business plan we could raise a further 25, which would take us up to 100, and that would be used to try and help us to kickstart the regeneration, because the harbour really has not seen anything since the mid-1800s. We are now actively planning to try and put in facilities, we're going to chase after grant funding and obviously engage more services. Great, thank you. Kelly. Although Port Patrick did have the wealth of investment from all over the world, there are many different ways by which community groups can choose to write their rules, which are similar to constitutional documents, but that's what they're called within the society sector, to either say that they will accept investment from anywhere and everywhere, or working within certain parameters to ensure that they can access certain funding or certain legislation. They can then also have a constraint put in place, saying that such is the case with Calmery and the Coltibragan Camp 21 self-catering heritage accommodation, where they said that 60 per cent of investors had to come from the local area and they dictated what that was. So it's a very robust, yet nimble model of the community benefit society in order to attract investment and to either keep that sort of control in a certain area if that's what's required or if it's a community of interests, bring that in from further field and kind of shore that up as well. So it's a very, very useful way of operating and can be done and utilised in many ways. Thank you. Okay, we welcome Patrick Harvie to the committee. Good morning. I think that if I picked you up correctly, you said that when you took over the business, you had no experience of managing or running the business. I'm just wondering what kind of support you had at that time in order to go over that hump and also what support in terms of how did you finance the takeover of it? The other thing that I wanted to ask Calum was the community share model. There seems to be quite a good appetite out there for it. Certainly, in my constituency, the Harlaw Hydro scheme was actually oversubscribed as well, but how would you have filled the funding gap if you hadn't been oversubscribed? Was there enough support out there to make that gap? So that's my two points. How we funded the buy out of the partners, we're still paying them at the moment. So we agreed a financial value for the business and then what we've agreed is over five years a portion of the profits would be paid to the partners to pay for that buy out. So we didn't really have to raise funds initially, but obviously we're making money as we're running the business and that was a very kind of gentle way of the partners getting the value for the practice and I was being able to afford it. During the recession, actually, we had a very bad experience with the banks. I don't know if I'm allowed to say this, but there was a time when we actually didn't get a salary. We had to say to the staff, we can't pay you and the banks were just not going to give us any more money. So I think that made the partners realise we've got to find a business model that means that we don't have to rely on the banks. So luckily with the one that recession is now over, so the construction industry is much more buoyant, we've been able to build a buffer. So we hopefully will never have to go back to the banks again and say, can you increase our overdraft because of that really bad experience? So that was how we financed the employee-owned purchase of the business. How we then learned how to manage the business, well, because we started the process I suppose four years ago, we did actually employ a business coach, I know that sounds probably a bit American and a bit corporate, and he was a private business coach, he actually was quite expensive, but he was invaluable in actually explaining to us how to run the business from an operational point of view. So we're just used to building buildings and designing buildings whereas he told us how to organise the structure of the business and we kind of devolved all the responsibilities. So in the past it was the partners that decided everything. What we felt for the employee-owned business route is that we would all share the responsibility that there wouldn't be just the board of directors that would make all the decisions that we would have different groups where decisions about the business and the way forward of the business could be discussed and debated. So it was really an evolution, so that's taken four years. I think because of that we have changed a lot in four years but you've not really noticed that change and we've learned a lot about business. I think we must have learned something because we are quite profitable now and we're employing more members of staff and our geographical reach as well of our architecture is widening, so that model is working for us. We actually developed our own business model, we didn't just take a business model out of a textbook, we evolved our own business model and we've actually got a little document which every new member of staff we give them the document and they kind of then read that and understand these different layers of management. Calum, do you want to add to the question about funding? For us in our community it's fair to say that the former trust that was in place had got itself into financial difficulty as I explained before and there was no real avenues left open for that, that's where the community benefit society comes in for us. In the short term the agreement that trust had actually entered into had led to a default where the actual harbour would have been repossessed within a very short period of time, obviously quite ugly scene. But Community Share Scotland brought in Social Investment Scotland and they provided us with a temporary bridge and finance of the £75,000. That was conditional obviously to that we were going to raise a community share. We had good feedback that there would be a fairly strong appetite for it. I think it's fair to say that to come from where it did and do as good as it did, it clearly proves that it's a model that not only can work for us but definitely can work for other people. The fact that you don't have to be local to the area and that you can be basically anywhere on planet earth and by, it works very well as much as we used to think that we had a small community, but we don't. We're actually quite a big community worldwide because it's quite a diverse world now and why someone who lives in Barbados wants a share in Port Patrick Harbour. Guess what? He comes in holiday and he just likes it and he wants to support it. That's the diversity that that model has offered to our group and I think that lots of other groups should be lucky enough to take it on. I'd like to return to the points that both Karen and Kelly have made about the variety of structures that can be set up. There is not one structure that fits all and indeed one can write one's own rules literally as one wants. I'd like to go back for a moment to the John Lewis model. It's very straightforward. There is one owner, which is the trust. There is also a model that says every individual will have a share. There is also a model that is a hybrid whereby you have a trust and you have individuals. In the case of Scotland Fife, the employee benefit trust has 93 per cent. The employees, all 100 of them, have 7 per cent. I think that there's something quite I would almost say almost romantic about the idea that employees can buy shares in the company rather than just be given them or just have a right through the trust model. In Scotland Fife, what we did was to say, first of all, all employees will be shareholders and we started by giving them £500 each worth of shares. Then we go down the profit share model as well and we have a profit share scheme and we say that half of that will be paid in shares. We then have a savings investment scheme whereby people can, under the legislation, buy up to £3,600 worth of shares a year out of their weekly or monthly pay, which has the benefit that you then do not pay national insurance or PAYE on that so that your £3,600 only costs you, depending on your tax rate, something like £2,500, £2.7,000. There is then the possibility also to award partnership shares in line with whatever scheme you care to devolve. According to our results, if we have very good results, we will give to those who are buying additional shares under the legislation. You can give up to two shares for each share that is bought, which means that somebody on an annual basis, if a company is doing well, could acquire up to around £10,000 worth of shares per year at a net cost of about £2,600, £2,700. If you then assume that the company is going to perform in line with the employee-owned company norms of four and five percent productivity a year, you would hope to see the share price increasing and over a period of 10, 20, 30 years, which may be the period in which people are working in the company. That can become a significant equity pot. How we sold it to the employees was that we said, look, you have a national pension, which is not going to see you through life. You have a company pension and we also were going to sort that out because we had an db and a dc scheme and we brought them much closer together. However, as a result of this, you will also have an equity pot, which could be many tens of thousands and even over £100,000 if all works well. It was on that basis that we sold the whole scheme. The final point that I want to make is that we must not get carried away by employee ownership. It is not the magic bullet. You have to do all the other managerial things, whether it is innovation or what have you, but it is a phenomenally rich facilitation process, which I commend a whole series of people to. Having been in Downport, Patrick, just a few months ago, I still do not know how you fill that harbour with just one spicket. On the point that Nick has just made, I had a similar circumstance with a company in Fife. While financial ownership was important, people who left the company would require to sell their shares back to the company for what will effectively add to their pension. However, more than just the financial side, there is the involvement of the employees in the development of processes or products. Perhaps I will ask Sarah initially. I asked the question this morning when I talked about the seminar conference with collaborative futures last week. In looking at a film that covers six companies in Germany, which indicated full ownership, financial and managerial decision making, what involvement have you found? What encouragement is there on that side of the ownership, not just on shares? That is it. In terms of employee ownership, our service is one of raising awareness, because the market failure is the lack of understanding of the model. In raising awareness, we are sharing the type of stories that we have heard here today in terms of how it works. In terms of the support for those who then transition into employee ownership, our role is to provide that initial advice and undertake feasibility studies, and support the implementation. After that, most importantly, as you are highlighting, our focus needs to be on how you embed the culture of employee ownership. We do that in a number of different ways. There is a growing number of employee-owned businesses, so learning from each other is a key aspect of that. The Employer Ownership Association has established regional groups across the UK—we were one of the first in Scotland—and that is allowing peer support between employee-owned businesses, not just at a leadership level, but right throughout the business. That is one of the dynamics of employee ownership, because everybody is an owner, so you get some really vibrant learning and sharing experience. There are private sector consultancies that are specialist in this area, and many employee-owned businesses draw upon their expertise. In terms of the public sector, Scottish Enterprise and Holland's Narlands Enterprise, we have a wide range of services that are focused on leadership and organisational development, progressive workplace practices are very much part of those, and they play two roles. From my perspective, they are raising awareness of the type of model and providing support for businesses to enhance their employee engagement, which is clearly important to all businesses, but it is an absolute key ingredient to what makes employee ownership work. I want to ask Simon, who is a large company, an individual who runs a small company. How do you achieve that employee involvement in decision making? From a John Lewis perspective, it starts with a very strong governance approach and then flows through. We have what we would describe as formal democratic governance arrangements and informal arrangements. The formal ones take the form of three governing authorities within John Lewis. When the founder handed the business over to us, he set up the first governing authority as the chairman. The chairman in our business is the chief executive and chairman, so he effectively has decision making rights over anything that he or she wants in the organisation. In order to temper that level of power, the founder put in place two other governing authorities. One of them is the partnership council. This is a member body of 80 members who are elected from across the 90,000 partners in our organisation. They are elected by the people who work in the organisation to represent them for a three-year term. It is our internal Parliament. That body meets the chairman at least twice a year—they meet more frequently, but at least twice a year—for what we call the holding to account session. The holding to account session is just after the full-year results and the half-year results, where, clearly, our owners are very keen to understand how our business is performed under the leadership of people who, like the chairman, are leading the organisation. They vote on his leadership, and if two thirds of them were to vote against the chairman, he would be removed from office immediately, and a new chairman would be found. He holds his power lightly. The third governing authority that we have is the partnership board. A traditional board in many contexts is chaired by the chairman. He appoints five members that sit on the board by virtue of their executive position within the organisation, but the partnership council, as the other governing authority, elect five members to sit on the board, and they could be anybody that works in our organisation. You have power held in a balanced way. You could argue that the chairman being the casting vote individual with the five and five balanced equally could take a casting vote that decided in the way that was not in favour of maybe the elected representatives, but then he has held to account twice a year. He always holds his power very lightly. That is the formal governance arrangements that sit within our business. It is very much like any other organisation. The power of the line manager and leadership in an organisation is so critical to make sure that employees feel both engaged, empowered, motivated, have a sense of purpose, a sense of wellbeing. What I find in the employee-owned sector is that it is more consistently delivered. Our informal networks are effectively our line managers wanting to make sure that the way in which they deliver an ownership model in John Lewis is enhanced because they know that they are effectively an extension of the chairman. So, when the chairman stands for his account session, he knows that he is being held accountable not just for what he has done, but for what all of the line managers that effectively are an extension of him have done in the line of their duty with their partners. There is a very informal, but important element to our governance structure, as well as a very formal governance part of it, which influences the way in which it all operates. We have gone to the smaller company. We have something else that we want to contribute on the same point. Nick, do you want to come in? Yes. If I gave the impression that it was all about finances, I am sorry. In our structure, we have an employee-elected director with full rights to all knowledge that is one out of a board of six. There is monthly access to management, where the chief executive talks to everybody. We have on-going training and that is really important, training in terms of understanding of company issues, as well. We have reduced the terms for directors from three years, which is the norm, to two years. Every two years, each director is up for re-election by an AGM at which all employees are present. The argument says, yes, but the trust is in control, so it is in the power of the trustees. We have chosen and Jackie in the public gallery knows about the long debate that we had about how to balance the trustees, but, effectively, the trustees, if they find that 100 people out of 100 say that they do not want, that they do not like, that they do not want to re-elect a director, they would be very foolish to say, well, actually, you guys do not know what you are talking about and we think that they should continue. There is genuine democracy from that point of view. On to what has been said already with some more statistics, the research from the UK and the USA over many years has suggested that if your employee-owned company is going to be effective, that it is very important that the employees have a strong sense of ownership. The two factors which influence that sense of ownership most strongly is one, a sense of involvement in decision making, and secondly, that people do get some financial outcome in terms of profit share. The second point briefly, following up from Nick's point, looking at cases where employee ownership has come about through business succession, about 40% have an employee, one or more employee directors on the board, and about a third have what you might call an employee shareholder council, a bit like the partnership board at John Lewis. Finally, on training, I think training is a particularly important aspect of employee ownership. There are all sorts of incentives that mean that employee-owned firms can devote more resources to training. We find in the survey that 83% of employee-owned firms say they devote more resources to training than otherwise, comparable firms. You can see why training is more likely to happen because from the individual employee point of view, they are getting a promise from the company that if they invest their body and soul, as it were, and their development in the company, they will get some payoff from it. Equally, from the company point of view, taking into account that employee turnover tends to be lower in employee-owned companies, they can devote resources to training with a greater security that employees who have been trained aren't going to then disappear off to a competitor. There's a virtuous circle that promotes and facilitates high levels of training in employee-owned firms. Kelly, you were keen to come with us. I was just going to say that although community organisations are enterprises when we talk about community share offers and community benefit societies, and like all of these employee-owned organisations, they are very much held to account and engagement is mission critical to that onus. Four strands will be a strong business plan, and anyone will know this as well as Callum, but also very good governance and very, very good engagement, and then an offer that is put out on the table. Those people then choose to invest and become member owners. Now, what we see through statistics with some of our consortium partners, which include DTAS, Development Trust Association Scotland, Rocket Science, but in this case, the community shares unit down south, which is UK-wide, are the statistics, but we've seen them proven in our eight-year offers here, is that over 34 per cent of those members who are member investors turn up for AGMs, which many enterprises, community or otherwise, would be very excited to see. We also see that over 32 per cent then go on to volunteer their time or skills after the share offers completed versus that early-stage excitement where all the froth is happening and then you make it happen and then it trickles out the way it's an on-going process. We see very similar trends, but on a smaller community level, but what that does is it has a carry-on effect and then that moves and expands out the way for more innovative things to happen both in communities and in the business world that those people are part of. Just as an example from the consortium cooperative point of view, our member companies, the structure is kept very flat. The voting system is one member-one vote. The activities that we do range very widely in the amount of effort and collaboration that is required to achieve them. In order to try not to have large meetings trying to push through certain things that we need to do, we have the wider membership group and then we have a working group. The working group is pulled from the wider membership group. Within those groups, there are companies, so there are pools of experience and talent that can ebb and flow depending on what is on the table that needs to be sorted out, whether it is on the promotion or advocacy level or whether it is on business development or whether it is on production tendering. There is a large pool of people to pull from. We put them into the middle and we have a working group, but none of it is exclusive. If you are on the working group for this particular period of time, nobody else can come. At any point, any member can come to a working group meeting. What we are trying to do is to make it a smaller group to push things forward, because otherwise we would not want to get into a situation in which it was too unwieldy to make decisions. That working group turns over every year. We are just listening to Kelly about her attendance records. Our AGMs are held annually and we get almost 100 per cent attendance. We typically get at least one person per company coming to the AGMs. At that point, that is the point where people can then say, I have had a quiet time on SFS last year because I was too busy working this year. I need to get stuck in because it is a particular issue that I want to get involved with and come and volunteer the services for that year in the working group. It is very fluid and flexible because every single one of our companies is working in a sector that is unpredictable. The level of work is extremely unpredictable and variable and geographically dispersed. I cannot expect my members to turn up if they are working in Northern Scotland or London or abroad. As a model, it is completely different from the employee-owned model that has been described, but it works very well for what we are trying to achieve. It is very similar to that with community shares and community benefits societies, where it is completely democratic and one-member-one vote. No matter how much you have invested, everyone has an equal say, and then the committee is elected from there very much the case. I think that Gordon Lewis-McDonald was the one who was going to come in next. Thank you very much. I have a couple of lines of questioning related, which I would like to explore. First of all, Port Patrick is clearly less well than some of my colleagues in the committee, but I would be interested to know whether, at root before the trust, which clearly was an issue, whether you had a willing seller or an unwilling seller. I guess that the wider question coming from that is how far the development of community benefits societies can support community rights, for example, a community right to buy, in certain instances where assets are being neglected or not properly used. Whether that is close to the model that you have developed in Port Patrick and whether it is a wider application that could be supported across Scotland. Well, to touch on the seller, the harbour was previously in private hands for many years. It was actually prior to the trust attempting to purchase it was actually a property investor based in Jersey, who really did not have much care in our community, I can assure you on that. However, moving on from that, the model of the community benefits society offered to us options and flexibility that we certainly did not have before. I think that it is fair to say that touching on the governance that we are talking about with trustees and their responsibilities, having seen this in action for real, we had an EGM of that trust where 160 of the community turned up and politely asked eight trustees to vacate the building upon hearing what they had basically done. You could not write it. We inherited a negative situation where they had committed to pay £350,000 for something which they had not even had valued and subsequently stands valued at £75,000 today. That shows you the negativity that we had to overcome the community did not have the full consultation prior to that and they did not know until that EGM and I think their actions speak clearly for themselves, but we took the positive reign and we had to explore any option that was available. I think it is fair to say that after quite an exhaustive search there was one that stood out as pretty much standalone and that was the community benefit society. The support that we got from the whole of the third sector, but especially community share Scotland and co-operatives, was absolutely second to none and I would seriously have to commend them because without their help, who knows what would be happening in my village. About the community right to buy and land reform and asset transfer, pipeline that is happening now with the new community empowerment act and the land reform bill, is that the Scottish Government has had the foresight to include community benefit societies as legitimate governance bodies through which these legislative avenues can be now taken. Previously it was only as you will know yourselves. The company is limited by guarantee. Now groups like Port Patrick can enact the legislation to their benefit and that will make quite an exciting and engaging offering for groups across Scotland. I think that we will see a lot coming through the pipeline once the guidance comes through. We are already seeing a lot through the pipeline but it really leverages in when you can show that you have a community bead of place or interest, particularly a place in this circumstance, with 500 members strong. However, many from the local community, it really does help to leverage movement with those who might not be so keen to sell and sometimes you don't have to enact the legislation because they can see that there is a real community desire and need and it will be kept in trusteeship for the wider long term but then you still have the legislation that has been brought up to date and is very useful and now we can include community benefit societies. The other area, and that's very interesting and very useful and I can think at least of one set of constituents with whom I will discuss your experience because it's very relevant indeed. In the other area that I was interested to explore was around situations of business failure and I take the point that Andrew made that business failure is a small proportion of the total employee-owned business and I also completely accept the point that employee ownership should not be for unsuccessful companies, it should be for companies that can grow and prosper. However, again looking at recent experience in Scotland, the steel industry is in deep trouble and I know in France when something similar happened the law there gave the employees a first right of refusal and in that case they set up a successful steel business arising from that. So I'd be interested in the context of the legislative position here and particularly co-operative development in Scotland and the enterprise agencies. Whether and in what ways co-operative development in Scotland is drawn in by government and by the enterprise agencies when facing a failing business and people's jobs at risk and whether an employee right to buy, like a community right to buy might strengthen the position of people in those circumstances. The employee right to buy puts the employee ownership model on the radar and that's an attraction. However, there has to be a viable business, it goes right back to the commerciality of the business. What employee ownership offers is clearly that motivation, that engagement that may, in difficult circumstances, enable a business to reinvent itself and to become commercially viable again. However, there has to be a market, there has to be trading circumstances that allow the business in whatever model to survive. At the moment, for example, with Tapa Steel or with Young Seafood in Fraserborough, when the government sets up a task force, what's your role? Are you formally consulted or are you actively engaged to discuss options with ministers and with the enterprise agencies? Being part of Scottish Enterprise and Hans and Arns Enterprise, that brings the model to the table. Although I may not have a place at that table, my colleagues would draw me in if there was an opportunity that we could help to take forward. The PACE team is also another arm clearly that would draw us in as appropriate. Would it be fair to ask you, is it your experience in the last, in recent months, where a number of these task forces have been set up in the event of businesses being in trouble? Have you been drawn in and has your input had any consequences, had any positive outputs in any of these recent cases? Yes, we've certainly been on the radar and I've spoken to colleagues, they've known that we're ready to respond if they felt that the model could be a solution. In some of the cases that you're relating to there, it hasn't progressed to that, but certainly there's the willingness and expertise available to be drawn in if it was felt appropriate. That's very helpful. I wonder if other witnesses have an answer. I think that Joan had a full-up and then Simon was able to comment, so I'll start with Joan. Yes, thanks very much. Notwithstanding the situation that Lewis has outlined when there is a crisis, if we're talking about when there's not a crisis and businesses are viable, part of Scotland I represent because businesses tend to be smaller, they would tend to go through business gateway as their first port of call. To what extent do you liaise with business gateway and how confident are you that business gateway is pointing potential employee-owned businesses to the different models that are available and that you're promoting? Is it being promoted enough through business gateway? Our model is to be a small core team that works through other people to get that multiply effect. We've obviously related to Scottish Enterprise and Hans-Anne's Enterprise, but business gateway is absolutely part of the engine to draw our services to the attention of businesses. We provide training, awareness raising and training to front-line advisers. We, in two of the local authorities, Glasgow and Edinburgh, have co-operative councils, so they're absolutely committed to the co-operative enterprise model. We're working very intensely with those business gateway teams to ensure that they have an understanding of the models and control upon us when required. What about other parts of the country? In a sense, other parts of the country, like rural areas, have seen the success of Port Patrick. There's even more of a place that could have a transformative effect on a community. Have you done any kind of surveys that give you an indication as to how on-board business gateway is in communities around the country? There's 32 local authorities and the associated business gateways. We aim, as far as we can, to ensure that everybody understands our services. It's a challenge, but we're here and we try and get as much traction as we can to ensure that the front-line advisers within the gateways and also in the other professions. Professional advisers are always the counters of bankers and are very much aware of our services because quite often they're the trusted adviser that a business might draw upon. I think that the conversations that we're having are around a movement. It's a movement that is well-known in some areas and is less well-known in other areas. Sometimes some of the totemic stories that you hear about successes are really helpful in just bringing to life exactly what we mean by it. The model of employee ownership is an unusual one. It's still, in terms of the research that we've done, about 5 per cent of the UK's GDP. It's relatively small, but it's growing, and it's growing at about 10 per cent a year. One of the things that's very important is some political commitment, making sure that we've got awareness amongst professional advisers, so when options are being put on the table for businesses, when they are considering a crossroads potentially in their future, that they've got options that they can consider which cover all sorts of models, including employee ownership. Whether it's tax advisers, legal advisers or accountants, we have to make sure that their knowledge is as good as it can be and that their confidence in talking about the model is as good as it can be, because very often they don't mention it because they're not confident, and if they're not confident, they won't go there. There are undoubtedly some missed opportunities when that happens. Moments like this, and I applaud the Scottish Government for doing this sort of event, are really important in the sort of movement and trying to make sure that people really get behind it and understand it. It's not the only way of doing business, but it is a really important way of adding to a sort of a plural economy and making sure that there is diversity and a real rich tapestry in the way in which we orchestrate everything that we do. I would like to build on the notion that employee-owned businesses are always successful, because they're not always successful, and sometimes they do come up against challenges and difficulties. I think that one of the things that we've experienced in the members of the Employee Ownership Association, for example, is that members, when they face difficulties, have the opportunity, they have the benefit of being able to take decisions for the longer term. They're not being driven by the short-term needs of shareholders breathing down their neck. They are in it for the long term. Sometimes those longer term decisions, which can sometimes be counter-intuitive, are the right decisions to keep a business in operation. We've heard, for example, about one organisation that had difficulties that didn't pay their people. John Lewis has had a similar example where bonus wasn't paid, and people actually gave a week's worth of salary back just after the Second World War when things were difficult. You have the ability to make counter-intuitive decisions and to involve people in it. I'll come back to my first point, which is that this is about a movement, and it's about as many people as possible understanding it, so people have the choice to be able to go into it if they feel it's right for them. It won't be right for everybody, but it's such a shame that people don't know the choices there when they do come up against a crossroads, because sometimes this choice is the right one for them, and it might just be the lifeline that they need. I should just say for the record that this is not a Scottish Government event, it's a Scottish Parliament event. The two are easily confused. Thank you. Before we leave this point, I think that it's quite an interesting point that Lewis Macdonald raised about business failure being a catalyst for change and how realistic that is. Is it realistic to expect an event of a business going to an administration that employ ownership is in a route out of that? I would endorse what Sarah Dees has said. There has to be a commercial case, and usually the problem is the lack of cash and employ ownership unless you have an extended community, as in Port Patrick, where you can produce a pile of cash, but it has to be matched by a business plan in which people believe in and are going to undertake. Otherwise, one is trading with a false prospectus, and I actually think that in most cases, unless there has been some really crassly bad management, that if a company is going bust, there are probably quite good reasons why that company is going bust. As I said earlier, employ ownership is not a magic bullet. There has to be a lot more to be developed. I would just add, in the case of Scotland Fife, which is in a very difficult industry, we are not surviving just because of employ ownership. We are surviving because of a huge effort that has been made to change the business model and to embed innovation at the core of the company. Those who have visited the company will have seen what is done there, but both of them have been necessary. I am very conscious that one of the many Scottish Government task forces that I sit on is the Fife task force that dealt to deal with the failures in Tullis Russell. Tullis Russell was, of course, an exemplar of employ ownership, so it is not always a panacea. It is an impossible situation to be in. John, I think that you were next. Thanks very much. Excuse me. There is a case where it is not business failure but market failure. For example, in late Helen Hiddie in MSP, a young woman set up a nursery co-operative in London. That was not because there was not need, but because nobody ever thought that she should provide that kind of service in that kind of way. I am interested in how we have some rigour around the opportunities around co-operatives, particularly community co-operatives, because I think that community co-operatives create economic opportunity, social opportunity and regenerate areas. Initially, co-operative development in Scotland, when it was established, was put inside Scottish Enterprise, because it was seen as much as economic issues. It was not just about hugging communities, it was regenerating them. I was interested to know whether Serah thinks that it is now time to review the role of co-operative development in Scotland to ensure that there is that rigour and that we perhaps do take in organising. For example, housing was deliberately excluded because community Scotland existed as an advocate. Now, there is not that kind of agency that is arguing for social housing in a co-operative model. I think that the co-operative model in housing is rather fallen by the wayside. There have been fantastic examples of them. I wonder if you have a view on that. To what extent there is a Government level across portfolios that are responsible for advocating co-operatives? Again, I know that people who want to establish, for example, renewable co-operatives, such as wind power, have not somehow found it difficult to access grants and so on. Do you think that that was a further issue? Yes, I will pick each of those in turn. I will focus sitting in SEN High. We must remember that SEN High has a community remit as well. It is very much focused on enterprise in all its forms, including in community enterprise. Recognising the potential of the community shares model and recognising that we are, as any business says, resource constrained, but the potential was so significant that I, myself and the Development Trust Association Scotland came together. We seeded the idea of community share Scotland a couple of years ago. Community share Scotland is funded by the Big Lottery and by the Carnegie Foundation. It is a three-year initiative. It is halfway through that three-year period. The question that we will now be facing, I said from the steering group before that initiative, is what happens next. There is a growing demand and need for support in relation to community co-operatives and community share offers. That is an issue that we will face into at the steering group and with our partner organisations. In terms of housing, that is not our core expertise. Your right to join in relation to it has not been a focus for us in recent years. We would need to be considered in relation to what would be the best organisation in Scotland to front that. Where does the specialist's expertise bed into it? Those do not need to be one and the same, but it is about how you access the right skills for the need at the time. In terms of renewable energy, we work closely with local energy Scotland and the care scheme. We provide joint-up support for any renewable energy project, similarly with community broadband Scotland in relation to broadband. Those initiatives, which are clearly policy priorities for Scottish Government, were embedded through our partner organisations in providing the specialist's expertise. I wonder how we can be more proactive. In housing, for example, it is not just about housing co-operatives being taken over from local council housing. You can have housing co-operatives that meet the challenges for young people who are currently renting and before they are ready to go on to own. I do not know where that initiative would now come from. I wonder whether that was something that could be looked at. Sometimes co-operatives are defined out because they do not fit properly and therefore do not necessarily get access. That is some of that around the expertise of civil servants. That would be the kind of thing that you could look at in a review. If you have looked at it, the Welsh Government has had a co-operative commission on whether there are any lessons from there. For us, particularly around the points that were made earlier, supporting land reform initiatives around co-operatives in land reform and taking forward the community empowerment so that it becomes very real in the local communities. We were very engaged with the Welsh co-operative centre and worked closely with it in sharing learning and expertise. We input to the commission at the time that it was taking evidence. We continue to have an on-going relationship with it. I think that there are benefits from the Welsh and Scottish perspective on learning together in terms of housing. That really comes back to what the CDS remit is. Housing was explicitly excluded at the time of setting up co-operative development in Scotland. That is an issue that needs to be considered outside the forum. On the community renewable schemes that Joan was talking about, those fit into the definition of social enterprise. Social investment Scotland does a lot of work in the renewable sector in partnership with other players. If there is a concern about where to go for funding, look to social investment Scotland. I would like to come back on the issue of company failure. It usually happens pretty quickly. The one thing that we need when setting up an employee ownership project is time. It takes a lot of time and a lot of thought. That in itself is a big distraction for management, which might be having to cope with that market failure at the same time. The combination of the two is actually pretty dire. I would not be arguing. It annoys me if people perceive co-operatives as a place of last resort when nothing else works because they can be incredibly important, particularly in rural or urban areas where there has been a lack of regeneration in creating opportunities for people. I understand that, but I think that there is some slightly different where a community co-operative is identifying need and a model to deliver it, which the market would not serve. Kelly McDarragil, come in. I just backed to market failure was one of the points that came up. If you are talking about employee ownership, both time is incredibly important but also the robust business model behind it. If it is failing because there is not a commercially viable role for that to exist, you might look at that on a community level because you do not need the same profit margins for something to give us a very important and vital service to a community led regeneration to have a community enterprise be successful. That is something to think about if community ownership is not the right option or perhaps a combined way of thinking about it. A lot of times we see these things where vital services or vital vehicles for employment for communities are failing but that is doing so because we are looking at that as a commercially viable where some level needs to make quite a large amount of profit. On a community scale, that profit margin does not have to be anywhere near that size and yet has an amazing impact on the area as well as the industry. I just wanted to make that point. In terms of housing and how we think about all the other ways that we can engage the co-operative model towards filling in services are desperately important. I know that we look at that through co-operatives and community enterprises but you also have the community ownership support service that is helping to make these transitions for groups that could potentially look into how groups could do the transfer from a local authority but could also help a group to spontaneously do it on their own. It might be something worth considering. That is funded by the Scottish Government. The conversation about housing is quite topical because some of you may have seen the news this morning that there was this older women's group called OUCH which has just set up its own social housing on the basis that 60 per cent of 75-year-old women-plus tend to be on their own either through the fact that they have lived longer than their spouses or they are in divorce. This group did not want to rely on the care home system. They wanted their own social housing so they are setting something up very similar to that. I see that the co-housing network of which their part has got three representatives in Scotland, so Viverium in Fife, Pennington Co-housing in Glasgow and Caldee's Eco Village in Perthshire. There are some examples of that which are already live in Scotland. I was keen to just put a bit of an overview of some of the benefits that we have achieved from being a privately owned co-operative, which could be applied to the housing sector, it could be applied to any sector really, but maybe to prevent the stage of market failure by encouraging people to work together more. Joan was talking earlier about SMEs and maybe rural areas. There are probably huge opportunities there to go much further in supporting, particularly SMEs, to work together for common good, but from a profit point of view. Some of the more measurable benefits that we have experienced have obviously been the economy of scale. The wee agency has three businesses under one roof, sharing overheads, sharing office space, some of our back office functions and working together on marketing, so going out to win new business. In turn, that has brought in hundreds of thousands of pounds of additional revenue into our businesses, which has helped us to create jobs in Scotland. We have had a great benefit from being a bigger team than our three smaller independent companies. We have strengthened our boards, so we have a board of five very experienced people from the different backgrounds and sectors. From a client point of view, agencies previously might have had to bring in 10 different agencies to deliver a job that we can do under one roof, so we are delivering efficiency there as well. We have a lot of flexibility to look at the market, particularly around technology, and to make sure that we are always adapting. There are some less measurable benefits, so Karen was talking about winning business due to being employee owned. We find the same thing being a co-operative, as we have tendered for business. People have chosen us and some of their feedback has been that they really like our ethos and the fact that we are bringing a number of strengths into one place and strong in three areas rather than being good at one thing and tagging the other elements on. We find creativity and innovation have increased just by having diverse people sitting in the boardroom. Equally, that can be a challenge as well. We have three businesses with quite headstrong people who run those businesses having to come together and co-operate and collaborate, but we have worked that out and that all goes very well. I guess that one challenge to share with the group that we have found and we are always working on is that, as a co-operative, we have two different priorities. We have your own business and co-operative. We find it quite difficult sometimes to juggle what the priority is, but we find all of the time and other things that we invest into driving forward the wee agency really brings huge dividends and probably at a greater scale than if we were spending that time on one business. I was not going to ask Andrew if there was any information about what the average size of an employee-owned business is or the ideal size. Putting John Lewis to one side, but it is 90,000 employees, is there another employee-owned business that is of the size of John Lewis in the UK? Secondly, why is that if there is not another business the same size as John Lewis? Secondly, is the employee-owned business size, should that model be more aimed at companies such as Park Architects with 52 employees or Scotland's 5 to 100 employees, how does it currently sit in the current economic climate? Employee-owned firms are found in all size categories. The largest is John Lewis, as you rightly say. There is a small number of other large companies, nothing like the scale of John Lewis, but nevertheless substantial. Arup for instance, 100% owned by a trust. It is nevertheless true that the bulk of firms tend to be concentrated in the SME category up to about 250 employees. I think that by and large it is probably easier to organise a transition for firms that are smaller rather than giant. Just to give you some figures from the survey, the average size of firms that created during, employee-owned firms created during business succession is about 80. Those created during privatisation are 640, but I would caution there is a lot of diversity within those figures. Is there any reason why we do not have another business of the size of John Lewis using this model? That is a big question. One can see the profound difficulties in organising a transition of, let us say, another large retail firm, be it Sainsbury's or Tesco's or whatever. The amount of capital that would have to be raised to buy out significant institutional investors would be quite a challenge. I think that, just as a final point, a key issue here is the view of the owner or owners. In the case of John Lewis, Spendon Lewis had a clear idea about what he wanted to do and found the means to do it. The problem with most large firms, certainly listed firms of course, is that there is a large number of owners and they have potentially a variety of objectives. Trying to co-ordinate them to get together and to go for employee ownership you can see is profoundly challenging. Just very briefly, clearly the one organisation that I do not think we mentioned at all this morning is the cooperative group Scottish Cooperative Society and the other cooperative society. I wonder if any of those with an overview would want to comment on where they fit into the bigger picture that we have been talking about today. I do not want to jump over Lewis's question that was responding to what Andrew was saying. We will just comment on your point and maybe look at others' chance to think about the co-op. I think that I am right in saying that a long time ago in Scotland we did have another retailer who had an employee share ownership scheme and that was House of Fraser, which set up quite an innovative scheme in the 80s. I cannot remember all the exact details but I do believe that scheme came to an end through an internal decision that did involve buying back all the shares and regaining all the control within a board. There might be something within that model of old which then changed back to private ownership and no employee share states at all that could inform where we could change or adapt or move forward with the model in today's world. Most of the major retailers have employee share ownership schemes such as Tesco, Sainsbury's, Marks and Spencer's but, of course, they only account for a very small proportion of the total equity. There are some other retail and wholesalers that have substantial employee ownership but they are nevertheless considerably smaller than John Lewis. I am sorry, but I am just going to point out that the co-operative group and Scotmid, because although their retail and retail model is a membership model, because they have a democratic accountability, people can become a member of the co-op and then become involved in that way. I am not sure what schemes they then have around employees but it is obviously a recognised co-operative but it is slightly different kind. Just in response to that, there are probably two answers to the question about scale. The first is something to do with time. The fact that John Lewis has been going for 150 years is going to be part and parcel of the fact that our scale has grown over time. I would not see the lack of massive scale like 90,000 being a limiter at all, it is probably just time. The other is just quickly looking at the employee ownership membership site, just trying to draw my memory banks on who is out there. CH2M, who are an engineering firm, they have got 25,000 employees. They are responsible for the contract at the moment, which is doing Crossrail in London and other big schemes of that sort. There are some other big players out there and I have just touched on one. I would not want anyone to think that there is not scale already in operation but time will obviously be a key factor. I am conscious that we are getting towards the end of our time. There is one issue that I want to finish with if we can and get some views. That is in relation to public policy and what more can be done. We have had a very good discussion and we have had a lot of talk around the advantages of co-operative modelling of employee ownership. I was very taken in Andrew's submission. You talked a bit about some of the policy changes at the UK level that came in in the past few years under the coalition Government that pushed the agenda forward and made it easier to go down that route. We have also heard a lot about co-operative development in Scotland and the work that is being done through the Scottish Government's agency to try and promote this. My question is, what more can or should we be doing at this stage in terms of public policy to try and promote these ideas? Andrew, do you have a view? I do have a view. You refer to the 2014 legislation, which provides very significant tax benefits for selling 50 per cent or more of a company to an employee ownership trust. I think the people think the power of this is that because it's such a great benefit that any professional adviser called into advice on a business succession will be negligent if they didn't mention this as a possibility to their client. In terms of where we go next, and I'm sort of speaking from an English perspective here, I think the policy framework now is very supportive. What we need to develop further is the infrastructure to provide the support to enable conversions to take place. I think that Scotland is instructive here in terms of numbers of employee-owned firms. Scotland punches a little bit above its weight, as it were, in the UK. My suspicion is that that's probably something to do with the fact that there is an infrastructure within Scottish Enterprise that is there to provide that kind of infrastructure of advice, information, networking and so on. We have that in England in a more informal way through bodies such as the Employee Ownership Association. In parts of the employee-owned sector such as the mutual sector where there's been a lot of infrastructural support. In general terms, I think the way forward is more infrastructural support within government to provide advice, provide networks, provide information. I've just got one thing on policy. As I've mentioned earlier on, we're looking at using the community empowerment to take over a piece of council land at the back of a harbour, which will allow us to obviously provide services. When we approached the council that was done for East and Galloway Regional Council, we explained what we wanted to do. They weren't quite aware of whether there was a policy in place for that act and consequently came back and said that it was going to be some amount of time before they would be able to engage the process. For us, that put a big stopper on any progress on what we're going to do plan-wise for our project. In further consultation with them, they have actually, to give them their juice, they've came back and said that we will pass this land over to you. You've basically paid our legal fees and you can have it. It's less consideration situation, but it's just a highlight that the act was there but the policy wasn't. The guys were going. We don't really know what way to handle this. From our side of the fence, it was a bit bewilder. To touch on one other thing that I didn't touch on earlier on, our harbour, it's not just about the harbour, it's about the whole village. It links in for the social benefit of the village. The charitable objectives will be in the future, we predict, within about five years. We'll start to have enough surplus to support our infrastructure and supporting other social needs in the village. It's also supporting the local economy and as much as all the local businesses are behind us. The businesses support employment in the area and it all comes together. For us, our village is built around the harbour. The harbour is also one of the gateways to bring people in. That's where, for us, the social benefits are pretty overarching from this model. Right now, we're working with over 55 groups to support them through the process of designing, exploring and issuing community share offers in creating community benefits societies to create real, tangible, community-led regeneration and innovation and enterprise within Scotland. That's at the very lower end of the scale and on the very higher end you've got the employee ownership models and the consortium models. With our situation, by the time the guidance comes out and we have even more people coming through the pipeline, our programme will be coming to a close. I think that this is similar to many of the infrastructural support bodies. We'll be facing a similar sort of depth of need and we need to get things in place so that we know that we have the support available to those groups at the time when it's most needed. It's needed now but it's going to be even more so needed in a year's time when that guidance comes out. I think that it'll be the same situation for co-operative development Scotland and other groups as people start to explore how they can best use this new legislation that's available to them. Given that market failure is in awareness of co-operative models in all their forms, you may wish to consider how they're introduced within the education system. There is a small organisation called the Co-operative Education Trust Scotland that has been working alongside schools in helping to increase the awareness and understanding of co-operative models. As people then transition into further or higher education and business schools, you may wish to consider how the variety of models are presented to students. Okay. Natalie, no, no, no. You were looking in my direction, that was all. Anything else of you on any other policy changes? I just support what Andrew has said, really, just in terms of trying to see whether we could get a level playing field for employer-owned businesses by ensuring that tax reliefs are in place for business owners that are wanting to transition with more than 51 per cent. There are reliefs in place for employees that work in employer-owned businesses as well. And then awareness raising, which is what I've mentioned previously. On that point, I wonder if I might just for MSPs and around two documents, which would just be a takeaway to give you a sense of what plan on a page might you want to take away to understand what part of the sector is all about. We can get those from you at the end. Okay. Well, I think if there are no other points, I think that it is a good point to bring the meeting to a close. Can I, on behalf of the committee members, thank all our witnesses for coming along this morning? It's been an extremely interesting and useful session, and we will now need to go away and consider where we take this next. So thank you all, and at this point we will suspend and go into private session. Thank you.