 Good morning and welcome to the 17th meeting of the Economy, Energy and Fair Work Committee for 2019. I would ask everyone in the gallery to turn all devices to silent if they are still on. We have item 1 on the agenda as a decision by the committee to take items 3, 4, 5 and 6 in private. Are we agreed? Yes. Thank you. We turn now to item 2 on the agenda, which is our consideration of the Scottish National Investment Bank Bill. For our first panel, we have today Professor Lynn Cadenhead, who is the chair of Women's Enterprise Scotland. Welcome to you. Then Linda Hannah, who is managing director of Scottish Economic Development at Scottish Enterprise. Welcome to you again. Finally, David Alexander is the chief executive and co-founder of Mydex CIC. Welcome to you. Good morning. Just for those who may not have given evidence before, the sound desk will operate the mic, so there is no need to press any buttons, and if you want to come in, simply indicate with your hand if you are wanting to come in on a question as the discussion develops. Perhaps I could start with a question about some of the submissions that we received and the view expressed in them that the broad mandate set out by the bill in the bank's main and insurly objects fails to enshrine either the Scottish Government's vision for the bank as set out in its implementation plan or the socio-economic and environmental objectives that were expected from the consultation process. I am just wondering if the witnesses would share that view expressed by some of those who responded to the consultation paper, or are they satisfied with the objects as set out, or do they think that they are somewhat vague and open to interpretation? David Alexander? We think that there is a missed opportunity in the objects at this point in time. The vision was very clearly set out, and, unfortunately, as you see in many walks of life, sometimes plans and vision are not implemented, so you missed the opportunity. I think that the objects need to be tightened and made more explicit about what it is intending, otherwise I think that it leaves it open to failure to achieve its mission and its vision. I have got some thoughts on what that should say if the committee would be interested. Do you want to give us an indication of what those objects are? Any witness can write into the committee if you want to add to evidence afterwards. I think that it is very straightforward. The main object of the bank should be to provide capital, including long-term patient capital, to enterprises supporting and enabling the achievement of the mission set by the ministers to achieve sustainable, inclusive and social economic benefits. At the moment, I do not think that it is doing that. I do not think that it is saying that. I do not think that it is supporting that. What we mean by patient capital is equity investments as well as loans. There is enough commercial loan market out there at the moment, but we are talking about significant infrastructure investments both in the digital economy and the physical economy as well. The Scottish National Investment Bank is a massive opportunity to underpin and support that, but it is not there in the bill at the moment. Are there other panel members who have comments on this? I would say that there is a general sense within the early stage investment community that there is a little lack of clarity at this point in time in terms of what the bank is proposing to do. We are particularly concerned about the bank's ability to give funding for females in business, having a focused opportunity in funding for female entrepreneurs. We are in discussions with people in the Scottish National Investment Bank at the moment, and they are very open and willing to receive further conversations, but there is a little bit of work to do there. Linda Hanna? Yes, just to add to that, convener. I think that, certainly from our perspective on what the bank has been set up to do in terms of what is required in the economy right now, we can see that that is going to add to what needs to be done, and certainly in terms of the objects that are there in terms of inclusive and economic sustainable growth. The focus on being able to look at getting more finance into the system, we believe, is absolutely needed and is going to help to achieve some of the ambitions that we have in the economy. We think that, certainly in terms of the way that is set out, it does give a clarity on that, but there is also some flexibility in terms of over a long period of time in which the bank is going to be set up to be able to attune that to the needs of the economy, as it is required. I will move on now to Dean Lockhart. Thank you, convener, and good morning to the panel. My first question is in relation to the demand for the finance to be provided by the bank. We have seen from other policy initiatives, for example the Scottish growth scheme, that there was not sufficient demand from business in Scotland to uptake the finance. I would like to get the panel's views on whether there is enough underlying demand in the economy for a significant level of finance to be provided by the bank. Secondly, perhaps for Linda Hannah, what steps will Scottish Enterprise take? What different approach will Scottish Enterprise take to stimulate that additional demand in the economy? I think that there is an overwhelming demand in the market for the Scottish National Investment Bank and Finance. The issue is that, at the moment, as it is currently envisaged, it is not the right type of finance. We need patient capital. That is not five years' loans underpinned by a commercial rate of interest. It is long-term equity investment, long-term loans, convertible loan notes that can take equity, that can deliver back to the Scottish National Investment Bank significant returns through dividends. We are a community interest company. We have been around 12 years. We have pretty much funded ourselves through social investment. We have tried to raise capital for what we deal with, which is infrastructure projects to try and improve public service, remove formfilling, ensure inclusion and work with people. It is incredibly challenging. Scottish Governments led the way on these programmes to try and improve a lot of the Scottish citizens and improve public services. CivTech is a really good example of the can-do challenge, etc. They are really positive initiatives in Scotland, but the type of funding that we need to equip the whole of Scotland with the infrastructure necessary to remove formfilling and to remove risk from delivering public services and strip out 45 to 90 per cent of the operating costs of delivering it is not there because everybody wants to lend you money for three to five years. Nobody wants to make investments or provide patient capital, proper patient capital. If you constitute the bank correctly and offer that sort of funding, you will have an overwhelming demand. People who want to pay it back, we are a CIC. We want to make returns and deliver dividends back. We are not asking for a handout, we are just running infrastructure projects and trying to change the way the economy works. Absolutely. I agree with David. There is significant demand for finance. In fact, when we talk to female entrepreneurs, barriers in terms of access to finances, that is the most significant problem that they face. It is the type of finance. It is the patient capital. It is also looking at developing different kinds of opportunities for funding that are more appropriate for female-led businesses, for example looking at loans that have childcare breaks in them and also opportunities to overcome the problems in terms of having to grant security against any loans. Putting a family home down in security is a step too far for a female entrepreneur, so it is looking at the type of money that is available. All our research shows there is significant demand from female-led businesses and significant ambition in terms of wanting to grow. From a Scottish Enterprise perspective, we do see demand. We run the Scottish Investment Bank and, in terms of the portfolio that we have, we are seeing fairly healthy pipeline coming forward for the different funds that we currently have, both in terms of loans and equity. As part of the SEGCP, the Scottish European Co-Investment Fund that we run, that has had a slower start. We know that switching to new things on, particularly at a scale, can be more challenging. Given that it is about patient capital, I think that it is about learning from that. What does that look like? We have done three deals now through that scheme, and that is telling us that there is a market for that, but we need to make sure that we switch that on. We believe that the bank is ambitious but achievable. We believe that it is what the economy needs, and that additional £200 million over 10 years will absolutely give the opportunity to look at different routes to funding, as Lynne and David have said, but we also need to make sure that we think about how we switch on parts of the market that the current product offering may not be serving in the way that it needs to in the future. For the Scottish Enterprise, what we see the opportunity to the bank is not just about the £200 million, and I know that that is what everybody often talks about, but it is a moment in time that we see that as a catalyst. The system is already working on the back of the Enterprise and Skills review to look at how the system is working more effectively, how does the ecosystem work, not just in the public sector but with the private sector and social enterprises in the third sector. That is an opportunity as a catalyst to use the Scottish National Investment Bank coming on stream and to look at how the whole system works and then drive demand in that way. I am happy to give some further examples of how we are already looking at stimulating demand and we are looking to do that in the future, if that would be helpful this morning or to consent that in. Actually, you anticipated my next question. The evidence that we have heard from the bank is that they will not act as the originator of funding opportunities, they will provide the funding and it will be up for other agencies to stimulate demand and find businesses for financing, which largely will fall to Scottish Enterprise and others. I guess that your question anticipated my question, which was, what reforms will Scottish Enterprise make to stimulate extra funding and will you need more staff and will you need a higher budget to achieve that? In terms of the work that we have been looking at, we are working very closely with our colleagues in the Government who are setting up Scottish National Investment Bank, and I should say that up front, a very close working relationship around setting up of the bank and how the transition is very much a team approach in terms of how we are doing that, not only with SE but with other partners, and I can see that. The work that we are doing is looking at what is it going to take around developing that pipeline. Some things that we are already putting in place, if I give an example around the work that we are doing in manufacturing. Scottish Enterprise, on behalf of the Government, we have been leading the work around the manufacturing action plan that the First Minister launched a number of years ago. National Manufacturing Institute will be coming on stream, but what we have also in the process of doing is setting up the Advanced Manufacturing Challenge Fund, which will be helping regionally to provide facilities and capability for businesses to be able to take advantage of new kind of techniques around manufacturing, what would that look like, and what we believe that that will do then is that as businesses get ready, it will derive demand then to where is the finance going to be, either for the capital investment, taking on people or what would that look like. So as an example, there are things that are going to be in place that we will be investing in and then working with those businesses to then derive demand towards the bank and help them get ready. Financial readiness scheme that we already operate will stay with Scottish Enterprise. 50 per cent of what comes through that comes from the work that we do with companies, 50 per cent comes through other routes through business gateway, through our website, etc. So what we are looking to do is to make sure that that financial readiness work that we do is even more fit for purpose in terms of using online services, in terms of making sure that that is in the places where the businesses will be, so making sure that that is on the ground in regions and in the cities in terms of the work that we need to be doing. Of course we will be working very closely with the South of Scotland and Highlands and Islands Enterprise about making sure that we do that. So that demand piece around how do we work with businesses that we currently do, how do we switch on other businesses and make sure that the support is there to help them get ready? We are absolutely committed to doing that. That might take more resource, we do not know that yet, but we are working our way through that. We are also looking at how we make sure that for all of our staff that that whole kind of sales force, if you like, of all of the people we have working with partners and with businesses have got that kind of commercial mindset about what would a good deal look like to make sure that it is driven towards Scottish National Investment Bank to do the transaction that they know what that deal would look like. So those are a number of things that we are looking to do and I have got other examples as well, but I do not want to dig up too much of the committee's thing. I think that we can do that. I want to just come back in briefly. I completely support what has been said, but I would also make an absolutely fundamental point. Clarity that the private sector includes third sector includes community interest companies and social enterprises who may want to be able to apply for investment funding, notwithstanding the point that I made earlier about patient capital. The minute you make it clear that the private sector is not just commercial companies there for profit, but mission led organisations, organisations that are trying to deliver services that need financing, you will see a massive increase of demand and there are umpteen bodies in Scotland, social enterprise Scotland, Scottish Council of Voluntary Organisations, any number of organisations that the minute they realise that the Scottish National Investment Bank can support the member's organisations, you will see an increase of demand and I would suggest that that will increase the demand for resource to process those applications and the information about how to apply, but at the moment it's completely ambiguous. It talks commercial, it talks private sector and we've heard on the evidence on the 14th of May that there's some ambiguity and people are not sure if community interest companies like ourselves who are asset and mission locked but we're also limited by shares could apply and we see this as a massive opportunity in clarifying the purpose and mission of the bank. Just one final question for Linda Hanna if I may and thank you for your answer. It seems to me and other witnesses have said that there will be an expanded role for the enterprise agencies to play here in delivering funding opportunities to the bank. I was interested in your comment that this might result in more staffing. What about budget? Do you expect to see Scottish Enterprise's budget increase in the years ahead to accommodate this higher workload? So we haven't looked at that. In terms of that far ahead, we're just about to launch our strategic framework for this year in a business plan and we've set out what our plans are. We haven't yet had those conversations, we're still working through what the kind of future would look like and be happy to come back to this committee and talk about that once we're clearer about what those things would look like. Jamie Halcro Johnston, briefly and then Jackie Baillie. One of the areas that has been suggested that the new bank could have more of a role is providing business support and advice that is currently provided by Scottish Enterprise and also by Highlands and Islands Enterprise. I was just wondering how you feel that regional knowledge, particularly for my area of the Highlands and Islands, will be maintained within the bank if some of those responsibilities have been taken over by them. We certainly see that that is a system and if that is going to add the additional benefit to the economy then it absolutely has to be an ecosystem working and both the implementation plan and the conversations that we've had with the Government and the SNP team absolutely underline that. That includes South Scotland, Highlands and Islands Enterprise and others that are actors in that space as well, so it's not just about us. The work around the enterprise and skills review to create a differential entry point and the services that go around access to the services that we see and we've been talking to colleagues in SNP would very much be able to take advantage of that. We don't see this as something that's going to, as I would say, move stuff around that doesn't actually add additional benefit. The agency is particularly very good on the ground at working with businesses, very good at working with customers and it's not a kind of a hand-off process. It's about making sure that we understand those companies' needs, what wraparound support they need. Part of that will come from the Scottish National Investment Bank but that won't be the only support they need and certainly all of our evaluation in the time that CIP has sat within Scottish Enterprise tells us that it's the package of support that matters. It's often the kind of combination of things they do and the sequencing of that that matters. That customer experience is incredibly important and we all recognise that. I would expect that to continue. I would expect us to be working hand in glove because we have to be because the lines need to be short for the customer around how they navigate through the system and it needs to be seamless in that sense. From that perspective, I am confident just in terms of the conversations that we are having. It is about joining that up. The implementation plan talks about making sure that those business support services are integrated in that way and about making sure that we can use the expertise in the bank, which will be very deep around equity and loan and financial instruments. The business support advice that we have will be very deep in our capability and it's how we join those things up. What you're suggesting is that you're confident that that won't be diminished and that possibly it could even be enhanced. One of the things that we had with the business support inquiry was whether the enterprise body and, say, local authority business gateway were co-ordinated. Are you confident that that co-ordination would be better there than it has perhaps been in other instances? I appreciate that that's not Highlands and Islands isn't your area, but— I'm an optimist. I'm confident that a combination of things is happening right now, so I know that you're scrutinising the SNP bill today, but I think that there's a combination of things going on in Scotland that are important. On the back of the enterprise and skills review, the work that is being done with business gateways, Scottish Enterprise High and others, the work of the strategic board, is looking to rationalise and simplify, is looking to make sure that the access is better, is looking to use digital technology in a different way. What I'm saying is that a combination of those things coming together will be really important and that it's not just about the whole system working and what we are working very hard—all of us, I don't just mean Scottish Enterprise—to do is to make that real. I'm confident because I see a reality in the expectations of Scottish Government of those things, of the people like me and my colleagues and other agencies to make that work. I think that it's that that will help to make sure that that continues to make sure that we can deliver both the business services that business needs and then connect that into new instruments like SNP. You're already looking at ways to evaluate that going forward and how that relationship is working. I'm not aware that we've put an evaluation in place yet to do all that. Just very briefly, perhaps, from David Alexander. I'm conscious of time that a number of committee members would like to come in. I certainly send a lot more information on this, but I would be deeply concerned. We already see, from the analysis that we do, working on the front line with 14 clusters across Scotland, at least five to six overlapping initiatives in each local cluster. Many of the same organisations involved. That is where the targeted advice and support should be made available and be delivered consistently. Yes, integrate with the SNP, but I would be very worried about trying to centralise that kind of support. Yes, there's got to be contact points joining the dots. Otherwise, we've got this Venn diagram on steroids of everybody all trying to provide advice. I think it's a real risk because each of the communities we work in is different. They've got similar themes, Community Empowerment Act, local implementation plans, health and social care partnerships, integrated joint boards, constant turmoil and change. It's the only constant we find out there. What we're trying to do is help transform that. If another initiative means it's got to go to the centre, I think you'll have a problem. Right, I've come to Jackie Baillie now. I think I'll appropriate the phrase Venn diagram on steroids. I quite like that, convener. I turn us back to something that David Alexander raised earlier, and this suggestion that was contained in the financial memorandum of lending solely to the private sector. My view is that that is certainly against the spirit of the implementation plan. I wonder whether the panel believes that restricting spending in that way and not having it open to the third sectoral community enterprise is perhaps a little short-sighted. I absolutely agree with that statement. What's different about a community interest company? We're limited by shares. We decided to be mission and asset lot because we want to deliver transformation and change in how services are delivered and how citizens are empowered. We need capital to make that happen. We're delivering services. We work across public sector, private sector and third sector, but we need funding. Why are we any different? Why should a community interest company, because it's decided to commit itself to a social purpose, be treated differently than somebody who says, I'm only here to make money for my shareholders and that will be my profit imperative? We see it all the time startups that look fantastic. There's so much money for startups that get put in and they get trade sailed off to a big commercial American organisation. There's no economic growth. There's no societal growth, no employment growth. As much as that is needed and we want the economy of growth here, we need to be supporting the third sector that's delivering significant chunks of public services, delivering significant support to the Scottish population and is growing the economy. Social enterprises like community interest companies are designed specifically to help to deal with intractable complex issues, which need long-term commitment. I agree with David. For example, Women's Enterprise Scotland, we're a community interest company. You'll find that a lot of the enabling and supporting organisations that are helping our entrepreneurs and companies to grow are social enterprises, community interest companies and strategic funding and investment should be made available to them as well. From a current perspective, we currently do investment into private limited companies, and we do that in a range of things through the different schemes that we have. It is something to be explored in terms of what does the word private mean, because sometimes private means different things. Private could just mean that it's not a public sector, so private could mean a range of things. I think that it's worth exploring what it looks like. We already do community-based projects as part of the different schemes that we operate on behalf of the Scottish Government. That's not currently spelt out and my understanding for the reason for the restriction is that the bank is initially only going to be resourced by financial transaction money. Clearly, if we are to take that wider approach, the expectation is that the Government would put in other sources of funding that aren't restricted in the same way. I'm assuming that to be the case. Can I tease out the commercial side? David Alexander answered my next question already, but the wording within the financial memorandum talks about, and the bill states that the objective is to fund commercial activities. I think that terminology might be the issue here. There are many projects that have a societal or environmental benefit that aren't necessarily for profit, which is implied by the term commercial activities. Do you want to see a tightening up of the language so that we can ensure that the broadest scope possible is taken? That's the definition of commercial in one world means one thing, commercial in another world. I'll put it in a simple example. If by removing the need for form filling for citizens in Scotland in accessing public services could save 45% of the transaction cost of a public service and therefore release money into frontline staff delivery, that's a commercial business case, isn't it? It means you can do more with less. At the moment, those things are not even being considered, but the vision of the bank was to help improve society and the economy. We are constantly looking at removing friction, risk, effort and cost from transactions and services provided. We are a community interest company committed to doing that, with a commitment to reinvest 65% of any surplus that we make in that social purpose in powering the people of Scotland. I would ask people to think that commercial is about making things better, faster, cheaper, more efficient and fairer. That's the mission. That's helpful. I ask the other witnesses a slightly different question, because if we want that kind of broader scope, therefore the limitation on borrowing posed by financial transaction money becomes unduly restrictive, do you think that the bank should be able to issue bonds or public shares, or should it only be able to borrow from Scottish ministers? That's a matter for the Scottish Government in setting up the Scottish National Investment Bank. I think that there's a broader piece just in terms of going back to the system, so I think that the Scottish National Investment Bank is part of the system, and we need to think about it in that context. In the context of some of the using financial transactions or loans that might be less commercial in terms of the long term, I think that there's an opportunity still to look at where does that sit best in the system and what's the best way for us to be doing that going forward. That's part of the conversations that we will certainly be having with the Scottish National Investment Bank going forward. I suppose that ultimately this is all a matter for the Scottish Government, but what I'm asking is if you were to give them professional advice, would you encourage them to leave it open so that they can issue bonds and public shares? It's not a matter that I would give advice on. It's not my kind of deep expertise. I wouldn't feel appropriately qualified to comment on that either. I would like to say that they should not. Absolutely. The whole mission, vision and purpose of this bank is to improve Scotland. The minute you open it up to publicly traded shares and bonds being issued into the private sector market, you end up with the group thing to the financial services sector who are only wanting a return for their shareholders at commercial rates. They've got billions of pounds of opportunities to do that elsewhere. This is an opportunity to set out a vision for how Scotland can be treated, and there are other points in the bill about state aid. There are many exceptions within state aid rules that allow the bank to exist and operate and move beyond. It's only 2021 that that restriction applies. After that you've got many other choices that you want to do. This could be a self-funding bank. If it gets it right, does equity investment, does long-term loans, it will build up its own asset base. I know it's only £2 billion at the moment, and you say only £2 billion as if it's nothing, but it's a vast sum of money applied in the right way judiciously to solve complex issues. Instead of just funding the private sector, I think it would be a brilliant mission for it to have. Be different is what I would challenge the bank. Be different. If I could just have a supplementary on that one to start with. Do you not think there'd be a lot of ordinary people in Scotland who would like to put some of their savings into the Scottish National Investment Bank because they would feel it was good for the economy? I think that's a fabulous idea. We've seen national savings initiatives on many cases. If people got a guaranteed rate of return that was not as variable as it is in the private sector, I think there's a reason. There's a good opportunity there, but that's different. Right, so if you're not against all-out savings, saying I want to support the improvement of this country and I'm happy to support the Scottish National Investment Bank that's got a very clear mission and purpose to do just that, it's going to feed back into my community, it's going to improve my infrastructure and it's going to remove friction risk effort and costs for my life. That was just to clarify that particular point, that's fine. My main point was in question of the advisory group, which has been, we've had various concerns or evidence given to us or submissions made to us at least about the advisory group. I think that some people feel it could get too involved in the actual running of the bank, if the link is too close, other people feel it's going to be too far away and maybe it should have a very fixed representation, should there be trade union people on it, should there be people from different regions on it, all that kind of thing. So I'm interested in your general feelings about the advisory group and where you see that going. Anybody? Mr Alexander? Look at me. I think there's a risk of groupthink. I think you're drawing from too narrow a pool of people. A lot of them seem to be money people. I think you need representations and citizen groups. We work in Glasgow. They've got citizen activists. It's not as terrifying as it might sound. They are really incredibly informed about the life in their communities and I think each of the clusters has got citizen panels. I think people could come and represent. I think you've got organisations like Social Enterprise Scotland that are doing an awful lot of good work that could contribute to it. I think it's not wholly a financial advisory group. It's about mission and purpose and that's the other area where we need transparency and accountability for the bank. At the moment, it feels a little bit too arm's length in the Scottish Government that the goals and objectives have to be measurable and the advisory group could also hold the governance committee of the bank to order on that matter as well. So I think people are looking at outcomes and impact should be on that group as well. I mean, if I'm understanding you correctly, you said that there's a danger groupthink and the advisory group is drawn from too narrow a range of people. Is there something in the bill or something in the financial memorandum that makes you think that? I don't think that the mission, the measurements and the accountability is strong enough for the bank to report back to ministers. I think that the advisory group has got a danger of drawing from too narrow a field of people. So why? Because they're going to look at it as a financial institution and not as a much broader institution that is meant to be delivering the mission and vision of the bank on behalf of the Scottish ministers and on behalf of the Scottish people. Someone's got to hold it to account and performance must be linked to achievement of the vision and the mission. It very much depends on the role of the group and the makeup of the group. If you're looking at the bank as having its chair and its chief executive and its non-executive directors at the moment, I would be seeing the advisory group as drawing intelligence from the community, bringing diversity of thought through the makeup of the people that are on that board, and in particular obviously diversity of thought from a gendered basis, but diversity of thought from a social background basis as well, an age demographic. It really depends on what you want the role of the advisory group to do and how it's constituted and how it's governed. If the chair of the advisory group was also on the board of the bank, would that make it too closer relationship? Would that lead to a conflict of interest? I would say that it probably does because it's simply an advisory group and it's there to give advice and it's up to the board whether or not it takes that advice. Ms Hannah, do you want to say anything? I think that the advisory group is really important in the context. This is a long-term play, so at least 10 years. The missions are still to be identified over time what they're going to look like. The advisory group has a real opportunity to bring that kind of diversity of thinking and different people on that over time, so you can get people coming in and out of that, I think, as the bank is moving. The governance is the governance, but the advisory group is able to bring some independent thought, some real depth of expertise, some research and where thinking is happening elsewhere. That can flex with where the bank is going, separate from the governance side. I think that it's quite an important part of the construct of the bank and about being able to use that in terms of reflecting progress that will come back in terms of the strategic framework and how the bank is doing, but also progress in terms of where the bank is wanting to go in the economy. OK, that's helpful, thanks so much. If I can move on to a different subject, which is some of the financial implications, we've had, again, different evidence. For example, how quickly we would expect the bank to break even. If we're talking about patient capital, that suggests quite a long time, but the suggestion is that the bank should break even fairly quickly, and I think that the Royal Society of Edinburgh were uneasy about that. Also, some of the costs involved. Someone else will look at remuneration, so I don't want to touch on that, but just the general costs of the bank, and then also I think that the Scottish Government is going to have a sponsorship unit which will link to the bank and that's going to be a million a year. Again, there's been some suggestion that's a bit too much, so have you got an overall feeling as to the costs that are being projected? Are they too high, too low or are they realistic? I think that there is a risk always with any new institution being formed, a duplication of effort and overlap, and I would commend the Parliament to look at other service providers that already exist that could perform many of the functions of the bank in Scotland today. Rather than create a whole new institution, it's actually thinking of it very much as a virtual organisation. That is very much the way of the world at this point in time, and I think that using existing service providers that are in Scotland to underpin many of the operational delivery components would be a good thing. We've got Social Enterprise Scotland and any number of other bodies could be delivering some of the back office services potentially. My big worry is that the timescale over which a return on investment must be made and it to be self-sustaining is completely unrealistic, and it will drive it down the path of commercial loan making and try to compete with the commercial market. This is meant to be different, and I think that we should be committing ourselves to a long-term programme that ultimately delivers money back into the Scottish economy and the Scottish Government, and it becomes self-funding, but it's not going to happen overnight. Could you put a timescale on what is realistic? I think that if it was breakeven in 15 years, you'd be happy. I know that might be blasphemous, but in reality it should be delivering returns within 15 years. Do you think that it would be possible for the politicians just to sit in here for 10 years? That's two parliamentary terms. I know how terrifying that is in political and economic terms, but it's meant to be the Scottish National Investment Bank. If you look at the multi-billion-pound investments that are made in infrastructure, no-one asks the question, does it pay it back in three years or five years? We are talking about a Scottish National Investment Bank. It's meant to transform the economy, it's meant to transform civil society. That will not happen overnight. We're constantly faced with people trying to rewire the building with the power still switched on. That's the transformation that is under way, and it will not get done in three years. We've got endless reports, haven't we? We see all the time with our cluster profiles, millions and millions of pounds put into reports describing the problem, and nothing is put into implementation. You're on to the next plan, or the landscape review, or the next project to review why the last one didn't succeed. We've just got to change our time horizons here. Okay, that's very helpful. Thank you, Professor Giddonhead. I would say that the projections to break even within a couple of years are wildly ambitious. If I look at, for example, when we're working with early stage companies, we usually take their projections and say that it's going to take you twice as long, you're going to cost twice as much, and you're going to make half as much money. The same kind of sensitivity analysis can be pretty much applied to anything that's new. Again, if you look at average time to exit from a start-up company where funds will be returned, you're probably looking at seven years. If the bank is going to be investing in high-risk, you know, high-innovation companies as well, you're not going to start to get returns for a significant period of time. I do think that it's wildly ambitious. If you look at funding for, say, venture capital funds, they tend to work on a kind of two-and-twenty process, so a two per cent management fee and a 20 per cent carry. Again, when I look at the costs that are involved with this— So a 20 per cent carry, can you just explain? Sort of benefit, interest, money that comes back to the people in the fund when they exit from the opportunities. If you look at the costs that are involved here, I get it, and I think they're pretty hefty. Okay. Ms Hannah, do you want to say anything on this? No. No, that's fine. Could I just add one thing? I run a community interest company limited by shares. We're on a 30-year mission we're 12 years in. Who's helping me on that mission to improve public service, improve the lives of people? But your board doesn't wait until after 30 years to ask if you've failed or succeeded, do they? No, we're constantly looking out at the progress we make, and some years we do incredibly well and other years we have to fund it. It's a transformation programme. We're working with local authorities, the private sector and its transformation programmes, and we constantly come up against people not facing the reality of what transformation of services looks like. Okay, but I think that's how far I'm going to have to draw that hot tag because I think other people want to ask questions. Go ahead, MacDonald. We've already touched upon this morning about whether the PLC route is the right vehicle for the new Scottish National Investment Bank. However, we've also received evidence from the Scottish Council for Development Industry, which says that it will allow the bank to raise capital from a range of public and private sources and that the articles of association will protect the ownership of the bank. The STUC says that being established as a public limited company wholly owned by ministers ensures that the bank is publicly owned and privatisation would require primary legislation. Why do you think that another model would be better than the PLC? Well, I think it's a slightly weird question. I personally believe that a community interest company model would be appropriate for the bank. That is an asset and mission locked bank. There's nothing to stop a community interest company becoming a PLC, but it's still a CIC, so I've got a more fundamental point to make about why you need a CIC structure, which is asset and mission locked. You've got to protect the mission of the bank. A PLC that slides into public ownership, even with a Parliament that has to vote on it, will drive it down a market forces route, which is an illusion. That's not market forces supply. This is meant to be an important lever in the government's approach to improving Scotland, improving the economy and improving society. I think that if you have a mission locked bank, then it protects it for the future. Also, you've got a massive benefit in a CIC. It has to reinvest 65% of any surplus it makes in its mission, which builds up the capital base it needs to continue investing. If you intend to float it off and sell it to somebody else at some other point in time, if you float it off as a CIC as a PLC, which is included in the community interest company regulations, it will protect that mission lock, which means the only people that will invest in it, who are people who are committed to the vision, the worst thing, the travesty, would be if this Scottish National Investment Bank ended up as another privately owned bank as it slipped down the side and started being measured by purely commercial measures. Is there any evidence that that could happen? We've already got development banks of Scotland, we've got the development bank of Wales, which has been established for nearly 20 years. We've got the British Business Bank, both of them are PLCs. Why have they not went down the CIC route? My personal view is that the understanding of what a community interest company has been very low, the regulations have not been in place as long as a PLC. A PLC is a legal form that a community interest company can have. I would say that Scotland has got an opportunity to support the kick structure and to have a plan to make it to a PLC. It's just a double protection for the mission and the assets of the bank. That's all I'm advocating. If you want to make it a PLC, but make it a CIC PLC, then it's all available off the shelf in terms of conditions, articles of association, so I'm just advocating that you think differently about the asset and mission lock. My understanding, although I've not looked at it, is that the team looked very deeply at different models. You've mentioned, too, that there are other models in particularly Europe that they looked at. They weighed those factors up in terms of what the bank is there to do and what would be the best construct for that. Fundamentally, it's about it being publicly accountable about being commercial and being able to generate a portfolio, and every green portfolio is a combination of those things, but the research that they did certainly led them to believe that direct line to ministers was the right model to do that. I'm a big fan of not reinventing the wheel. I'm a big fan of looking at what has happened in other countries. As you say, it's been a model that's been adopted in a number of other countries, and there are ways and means to write protections into articles to ensure that the bank delivers on what it's supposed to do. On balance, we would be saying that the PLC approaches the right one. First, I want to follow up on a question that John Mason asked about the advisory group, which is recommended in the implementation plan, but it's not provided for in the bill. To the extent that you think that an advisory group is a good idea, do you think that it should be enshrined in the bill? Or do you not have no view? I think that it should be enshrined in the articles of association of the bank. Putting it in the bill seems to separate it from the bank's existence, and I think that the role of the advisory group should be defined as part of the articles of association of the bank. So that the purpose of the advisory group is to advise ministers, though it's not? Yeah, but I absolutely think that it has to have a relationship with the bank, and therefore the bank has to acknowledge its existence, it cannot ignore it, it has to support its endeavours, it has to be transparent to support it, and therefore if you put it in the bill because that's to make it official and legal part of the minister's support network, but I also think that it needs to be embedded in the articles of association. Otherwise, the bank has the opportunity to go, well, it's not really anything to do with us. The feedback from people is that the advisory group will be really important for the ministers and because it is of such importance, probably it should be in the bill. On the question of the mission, Marianne Mathur-Katter gave us evidence last week and she was quite clear that the mission should be more central to the objects of the bank. The object is set out in section 2 of the bill as it is, but the mission is talked about in section 11 and the mission is something that ministers will set. Any changes to the object would be subject to parliamentary approval, but the setting of the mission or any changes to the mission is not subject to any parliamentary procedure at all. First of all, do you think that the mission should be more central to the objects in section 2? Secondly, do you think that the missions that are set should be subject to parliamentary scrutiny? On the first question, more tightly associated with the objects, absolutely, as I said earlier, I think that it feels like it's being lost. I think that the bill needs to absolutely embed in the objects the mission of the bank and make it crystal clear. I'm not talking about the mission of the bank. I'm talking about mission-oriented finance. The various missions are set from time to time. I'm absolutely convinced that they should be in the objects as being an implicit part of the purpose of the bank. On to the second matter, as long as there is adequate parliamentary time given to the discussion of the mission, then there is an opportunity for real debate to happen about what the mission should be, and there would have to be an opportunity for it to survive Parliament, given the gentlemen's point earlier about return on investment and timescales. I think that if the bank is going to be dealing with intractable issues and supporting finance, I think that it needs proper debate. Once those decisions are made, they have to transcend Parliament. That may not please ministers, but I do think that there is accountability for the mission, and otherwise it may end up becoming a bit of a football. I would think that it needs to be debated in Parliament. In terms of the bill, in terms of the operational matters, I think that the missions are set out in there. I think that that sets out what the bank is intending to do and gives flexibility just in terms of how those missions might turn into a change over time and how they are going to be reported to the Parliament. My question, however, is that the only obligation on ministers when they are setting the mission under section 11 is to lay them before Parliament. There is no scope for any debate. Parliament does not have to vote on them or anything like that. My question is, should Parliament have a statutory role in scrutinising and approving the missions or not? I do not have a view on that. I do not have a view on that. Mr Alexander, you talk about, in your evidence, you say that the bill makes no requirement for the bank to ever report to ministers on how effective or efficient it has been in achieving the missions. The only provision is for the bank to report to ministers on how it intends to achieve the mission, and then you say that all missions need to be rectified. Could you elaborate a little bit on that? Yes. If you specified what the mission of the bank is and the performance of whether it be loans or equity, there is a whole set of business plan assumptions. I do not know any public, private or third sector organisation that does not have a scorecard that does not report on its progress against its plans and demonstrates accountability against delivering what it said it would deliver. We all know that no plan survives implementation, but there is acceptable tolerances. If the mission of the bank is well laid out and the performance measures and key performance indicators are there, it should be possible to report against those, and the board and governing body of the bank should be held accountable for the performance against those. I am just wondering whether you make a very specific point about the missions. We have provisioned the bill for reporting on missions in section 12. There may be some vagueness there, but I grant you that. There is section 13 on reporting on investment performance, section 14 on review of performance, and the bank will have to provide annual reports and accounts. Is there a specific thing that needs to be rectified? Value, transformation, mission achievement—did we get there? Were the assumptions that we made and the money that we invested? Did it have an impact? Is the economy better? These are indirect impacts. It is not purely the loan book that got us a load of interest that we hold equity in a business. Should that be included? Are the planning assumptions that were made about why we are supporting an organisation to improve the Scottish economy, to improve society? They are indirect measures and the bank has to take responsibility for looking at those. There has to be a way of measuring impact and value. Section 14 means that every five years a person has to be appointed to carry out a review, which would include a review of performance, which would include the banks, objects and mission statement. Are you just wanting some greater clarity on the specific missions in terms of the performance? I think that there needs to be a set of key performance indicators against the missions that the bank is responsible for tracking against. If we are investing in these areas to improve the economy, society or remove friction or whatever the mission of the bank is meant to support, what are those key performance indicators looking like over time? I do not think that it is acceptable to kick it off into a five-year review. I think that the five-year review should look at the trends that are going on, but I think that the measures are not there. I wonder if the panel, just for interest, if you were tasked with setting a mission for the bank under section 11, can you give an example of the kind of mission that you would set? Obviously, when it is around the low-carbon economy and climate change, it is something that we have been building quite a lot in Scotland collectively. There is an opportunity in terms of what is happening now, in terms of the global marketplace, the policy environment and a number of the capabilities that we have, companies, universities and other things that we could build on in terms of lifting that and accelerating it. I want to surprise you to hear me say about inclusive growth. I think that we have to look back at some of the start statistics at the moment in terms of female-led businesses. If you look at business gateway, there is a 50-50 gender balance of women starting up businesses. As they move through the growth pipeline, that moves down to about 20 per cent. As they move into account-managed companies at Scottish Enterprise, the number of female-led businesses is around about 3.6 per cent. I know that there has been some more work that has been done on that, and the figures have improved, but whatever way you look at it, the statistics that we have for female-led businesses in Scotland are shockingly poor. Additionally, a very harsh statistic is that £1 in every pound of venture capital investment goes to female-led businesses in the UK, £1 in every pound. The bank has a significant opportunity to be able to transform funding opportunities for female-led businesses. Mine is far more Monday. I am sorry, I completely support the point that the lady has made, but I would like to remove the need for form-filling in Scotland. I would like to equip every single citizen in Scotland with the ability to prove who they are, prove what they are entitled to and never have to fill in a form again. You can do that in Estonia, can you? Not quite. You are dependent on the state. I would like them to be independent, and that is about personal data infrastructure. Moving on to my second line of questioning, which is about equalities. Professor Kidenhead, you just raised the question of women entrepreneurs. Equalities are not mentioned in the bill. We have had evidence from closed the gap and engender that the equality impact assessment is really not up to scratch. Now, the equality impact assessment is a document that the Government has to produce, but it is not formally part of the documents that have to be laid in front of Parliament in relation to the bill itself. To what extent do you think that the bank should have a mission to overcome inequality in its broader sense in Scotland? I believe that it is essential to create a balanced society with diversity of thought, allowing everybody to be able to participate and contribute to economic growth. Closing the gap and engender have done a thorough analysis of the EQIA, and I broadly accept all its recommendations. It needs to be enshrined in the bill. That is really important. Where do you think that it might be best enshrined in the bill in terms of the objects, performance or mission? Can we come back with further thoughts on that? I will come back with further thoughts on that. We need to ensure that there are relevant KPIs and that, coming back to what David was talking about, this is really all related to an annual impact report, reviewing it and looking at the trends over time. We desperately need a gendered enterprise index in Scotland to be able to track the statistics and look at the data so that we can see on-going trends. The bank is one of the ways that we can be helping with that. Any other thoughts? I would ask you to consider the definition of equality for whom and for what. I think that it is set out in the Equality Act. Yes, I understand that, but I think that there is not equality of access. Many people we know that are working in the third sector are women and people from all different sorts of minorities who are trying to set up social enterprises to do good. They will not have equal access in the current legislation for this bank because it is not supporting third sector and social enterprise. Assuming that we can clarify that definition, equality of access to what the bank represents will be a good thing. I am putting it at a much broader level. If you broaden the access to what the bank can offer and you broaden it, it will support a more diverse population of people because not everybody is trying to do a high-tech start-up or a start-up that they want to flip to Google. There are a lot of people trying to transform services in this country that are more socially driven and need funding and support. The bank is going to be a public body and it will be accountable to taxpayers and it will have the evidence value for money. It will also be working in the financial sector. Financial sector salaries tend to be fairly good, in some cases fairly extravagant. Submissions that we have had to the committee on salary levels, wages and how it is going to be determined have varied quite a bit as to opinions. We obviously have to get the right people or that is not going to succeed, but does the right people equate to high salaries? I think that there is a flawed assumption that everybody is motivated by money. I have certainly worked in corporate life and had a very good lifestyle, but I got to a point in my life where the lifetime of experience had decided that I needed to do something more. If you specify the talents and skills and the attitude of the person that you are looking for, you will find people with the necessary skills and ability to be part of the bank that are not being dragged out of the financial services sector and have got to be treated like gods. I really think that what you have to start with is the mission and the role and do a search on that basis. You will find young and old talented people who want more and want to do something different, but they have the skills that you need. I would counsel against my watering salaries and bonus schemes and actually make a really positive statement about run the Scottish National Investment Bank for the people of Scotland, by the people of Scotland and actually insist on talent, but make it plain that you are not paying my watering pay. So we are relying on a degree of altruism in the market? No, it is not altruism, it is personal motivation. What drives people? Not everybody is driven by money. I have done a lifetime coaching work with people and I can tell you there is a moment when people have just had enough of that and there is only so much they can have. It is an illusion, the sort of masters of the universe finance sector model where everyone has got to be paid absolutely tons of money to turn up. You have got some fantastic public servants out there who are not paid eye watering amounts of money doing fantastic work, people in the third sector. You can find the talent and Scotland has got a lot to offer these people, so make your case for coming and doing something important, you will find them. Do the rest of the panel have a view? So I think it will be important to lay out exactly who is the bank, what is it for, what skills and expertise are going to be required and like all financial services institutions there is quite a lot of change going on just in terms of what that looks like, so I think there will be a range of skills that the bank will need to employ to be able to do that and some of that will be about delivering services and products and channels to market in a very different way than traditionally I think banks have done that. We see that already happening in the financial services sector and I think SNP will be no different, so I think there will be a range of people from different backgrounds and skillsets. I think it is important to set out what skillsets are required and then part of it is also then the values of the bank and attracting culturally the right people, so in terms of public good. I do think certainly our experience in Scottish Investment Bank, the people that we attract have those deep specialist skills but they definitely are motivated about working in terms of a legacy for the economy and the difference that they make as well as obviously the kind of individual transactions that they do, so I think it is about looking, setting that out in the right way, recruiting in the right way and bringing on to those people. We've certainly found a way to do that within the public sector and as David said, there are other examples I think where that can be achieved. Would you agree that given the desire certainly on the panels part for lending to also incorporate the third sector, would you agree that that is a particular skill that not all financial experts have? For example, looking at most balance sheets of third sector organisations, they are not exactly bankable on the face of it, so we agree that we need to identify specialists in that field to be able to adequately cope with that. I think that it is people who genuinely understand what patient capital looks like and what the mission and purpose of the bank is. We've also seen in the social investment sector, which is effectively recycling dormant bank accounts largely through big society capital, that they're taking commercial rates of return on loans for a short term, three and five years. They're not performing the role the Scottish National Investment Bank could provide, so even the people in the social investment space don't get it in terms of what the mission is, so you do need people that are able to look over the time horizon, that extends beyond the Parliament, that extends beyond normal commercial loan rates and actually look at the basic fabric of an organisation, its mission and purpose, and provide it with the type of patient capital that lets it execute its mission. Just moving on to ethical investments, which is an important thing for any bank to deal with these days. Many investment banks and large pension funds have lending exclusions. It could be tobacco, for example, investing in tobacco companies. It could be anything that investment that increases greenhouse gases or something that impacts negatively on biodiversity and the ecosystem. There's all sorts of formulas that you can bring in. Should the Bank go down that line, should the National Investment Bank go down that line, should it be able to cater for that? I'm not answering as my debts because it's not really our department, but common sense is how I'd look at it. If the purpose of the Scottish National Investment Bank is to improve the economy and improve society, then anything that doesn't do that should not be invested in. But who will decide? Well, I think that that is part of the lack of clarity at this point in time. Why would you support things that reduce public health? You would have to have evidence. But isn't that the Scottish ministers to set the mission and say that we do not want to support anything that reduces public health? Isn't it that level? I think that you would have to be very careful to keep it from becoming just a broad good idea to do that. You would have to specify particularly the types of investment that would be acceptable and those that wouldn't be acceptable if you're going to go down that line. Is that where they should be going? Well, I don't know any investment bank or any kind of VC that doesn't have a portfolio rulebook that says we only invest in certain things. If you're in the VC market, it's what makes us the most money of the fastest possible time and the biggest return. The Scottish National Investment Bank is that we want to improve. If you want to put a block on certain investments, I think that it's entirely within the remit of the ministers to do so. I don't know whether it goes into the bill. I'm just giving you a personal opinion here, but why would you back anything that made things worse? Obviously, the ethical approach is the right way to go. You can take guidance from other organisations. It will be hard to define that closely at the early stages, but we all have to accept that some things we won't be able to do right at the start and we have to have a bit of flexibility in terms of how the bank and what it does evolves over time. Ethical is very much the way to go. We also see from a number of organisations that are investing into other funds that they are particularly asking for diversity and inclusion plans nowadays before they will invest in funds. Aside from the ethics, there are diversity and inclusion plans that are important. What I can say is that, from the Scottish Investment Bank, because we already run a portfolio, we look at ethical considerations, diversity, inclusive growth and progressive workplace practices of the companies that we are investing in or organisations. We also look at, depending on the fund, what some of the restricted sectors are and what some of the ethical considerations are and carrying out diligence on that basis. That already exists because clearly we are part of the economic development landscape, as SNP will be. I would expect that those funds will be moving to SNP, so that practice, we would anticipate, will continue. There are a number of very important work streams that need to be done well. We have appointment of board members, strategic framework, ethical statement, for example, but we know that the timetable is pretty tight, so if the legislation passes, the bank has to be fully operational by 2020. I wondered if the panel had a view on whether, given the tight timescales, the detailed work could be done in a quality way and whether that was achievable or not. As a person running many programmes and doing complex programmes over many years, I can tell you that co-ordination and communication are the two key components of success. The timescales are not unreasonable, but you would have to accept that you are delivering incrementally over that period of time and it requires really tight tracking. That means that everybody is involved has to have a common set of objectives. There is a concept called objectives by key results that everybody is linked to. If that type of model is approved and people are linked directly to those and that nobody is working as an island or a stovepipe, you can get there, but it will be challenging. A lot of public sector programmes and public service programmes fall by the wayside because we get too involved in the structures and the processes and not the outcomes. I think that it needs really strong programme management by somebody committed to the mission as opposed to somebody who has been paid a large amount of money to be a programme manager. It is all about how you set it up. From my perspective, it is tight but doable. The key thing is to get the recruitment of the board under way as fast as you possibly can. Recruiting the right chairman and the right chief executive and the right non-executive directors around that if you get that team, they will drive everything else. For me, the recruitment of the board is essential to be done quickly. Professor, did you say chairman? I did. To strike that. At this point in time, I think that with where we are and what we can see and certainly I suppose that I am privileged around some of the work that is going on behind the scenes, I think that there are lots of people working on this in terms of the programme of work. Dave is going to talk about programme management, but people are really being committed to the mission of what we are actually seeking to do. I think that it is achievable, but it is going to require us to make sure that we keep focused on delivering those things at the right time. Final question. Do you think that the bill does enough to ensure the bank's durability and survival across political cycles? No. I have already explained that I think that it should be a kick. I think that it has got an ability to fund itself. I think that the Parliament should be involved in debating specific missions. I think that this is one of those commitments that should be made that lasts many Parliaments. It is not a science experiment, is it? It is a fundamental theory of change about how you improve Scotland. It is audacious and exciting, but it needs protecting. I think that if the bill lays out what it is seeking to do, the Parliament will not back that or not. In that sense, I think that this is about making sure that the bill sets out what we are seeking to do. We have then talked about all the other things that will come back to ministers and set out in terms of reporting the strategic framework and what the bank is doing. It is those things that will demonstrate what it is doing on the ground, and that is what will be enduring for the economy of Scotland. At the end of the day, it will be judged on its results. I suppose that Professor Gould be a chairwoman or a chairman depending on what the person thinks the position ought to be called or who they are. I do not think that we have prescribed language here in that sense, but Andy Wightman will move on. I just wanted to follow up a point that Linda Hannah made about the Scottish Investment Bank. Is it a little unclear the extent to which the funds that are devoted to that will be rolled into the Scottish National Investment Bank? It seems to me that there are two very separate things. On your website, you talk about the companies that the Scottish Investment Bank invest in. We invest alongside private sector investors into early stage and expanding companies with high-growth potential that will deliver economic impact to Scotland. Clearly, there will be some companies that meet that definition that the SNIB might fund, but, for example, as I understand it, the Scottish Investment Bank has invested in the Isle of Harris distillery. I do not think that the Scottish National Investment Bank would be investing in the alcohol industry. Those are very different things that are on the long-term patient capital and your current investment bank that is about high-growth companies. The current investment bank has a range of products that we serve Scotland with in terms of those different stages, some of which are direct, some of which are co-invested, as you have said, some of which we seek to crowd in other funding by supporting things. All those funds will transfer into the Scottish National Investment Bank and, therefore, those mechanisms will continue to exist going forward. You support an alcohol distillery, for example. I cannot see alcohol distilleries being central to the mission of the Scottish National Investment Bank. If all those funds are rolled into the Scottish National Investment Bank, there will be some loss of the support that is provided to commercial activities. I cannot comment on why the Scottish National Investment Bank is such a company, so I cannot comment on particular cases, but I think that what we certainly look at is, in that case, a company, in this case a distillery, the benefits that it brings to the local community, the jobs that it creates, the investment that is required and the funds that we have brought to the table to enable that to happen. It will be for the Scottish National Investment Bank once those funds transfer over to look at how they manage that portfolio going forward. Do you recognise that there are two very different propositions, an early start, high growth distillery and the kind of projects that are mission-orientated that are envisaged for the Scottish National Investment Bank? The Scottish National Investment Bank will do both. The mission-based funding in terms of what it is looking to seek to do in the economy but also support to growth companies early stage and later stage. Increasingly, I think that just in terms of the scale of the funding that might be required around companies as they are looking to seek more funding and some of the challenges that have been around that, I think that we would expect that the Scottish National Investment Bank will do more in that space. You do not see anything that the Scottish Investment Bank is doing at the moment that could not potentially be done by the Scottish National Investment Bank then? I think that where those are commercial deals, I would expect that those will be done by the Scottish National Investment Bank. I confirm that you do not think that alcohol is inherently a bad thing to invest in. There are a huge number of jobs, a huge amount of exports and we absolutely should continue to invest in the alcohol industry. Would that be your feeling? The distillery industry is really important to Scotland. It is a big part of our exports, it is a big part of our employment base, it is a big part of the innovation that we have in Scotland. The Scottish Enterprise supports that as does the Scottish Investment Bank. We support that in terms of the products that we have in Scotland and we support the companies that are part of that. We also need a little bit more clarity about what the bank will be investing in and the quantum of investment that it will be doing. For example, I hear indications that the bank will not invest anything less than a million into a particular company. However, if we look at the business base in Scotland, 77 per cent of the 98 per cent of the SMEs are micro-businesses under 10 employees. They are not looking for a million-pound investment. How are we going to fund the different stages of the business growth journey of earlier-stage businesses, where sometimes the amount of capital that they need is maybe 25,000, which is completely transformational for them? They might not be looking for a million, so I think that we need a little bit more clarity around this area. Perhaps we will get into discussions about whether whisky is good for the health of the nation or not. I think that we are out of time. Thank you very much to our panel for coming in today. I will suspend the session briefly to allow changeover of witnesses. Thank you. Welcome back, and we continue looking at the Scottish National Investment Bank. We have with us now Matt Lancashire, director of policy and public affairs at SEDI. Welcome to you. Flora Hamilton, director of financial services CBI, and again welcome. Last but not least, Helen Martin, assistant general secretary of the Scottish trade union congress. Welcome to you as well. If I could just start with a question that I put to the last panel and see what your views are on this, a lot of the submissions that we received were of the view that the broad mandate set out by the bill on the bank's main end and silvery objects failed to enshrine either the Scottish Government's version of the vision for the bank that is set out in its implementation plan or, indeed, the socio-economic and environmental objectives that were expected by some from the consultation process. Are you satisfied with the objects and would you categorise them as a bit vague, open to interpretation as some have, or do you think that they are fine as they stand? Who would like to go first? I think that we would like to see more of the ethical and social ethos coming through in the objects of the bank. Object 1 talks about promoting our sustaining economic development or employment in Scotland. It does not seem like a big change to fair work in Scotland, or even quality employment in Scotland, which gives more of a sense of the need for it not just to be about jobs but to be about the right sort of jobs and the fair work approach that the Scottish Government has been developing and working on. I think that it is right to see the ethical commitment put up front as an end in itself, otherwise you can get bogged down in very narrowly defined economic objectives that feel to see that wider social benefit that is required, and that was a core reason for developing the bank in the first place. I do also wonder about the balance of the mission-orientated approach and where the missions fit in to the core ethos of the bank. It was not clear to me the status that those missions would have if they were additional to the core focus or if they were the core focus in and of themselves. I guess that the question in my head was, can you invest in things that do not fit the missions because they fit wider economic growth priorities or is it about delivering the missions? That was not clear from what I looked at. I would add to that comment that it is absolutely crystal clear to look at the vision of the bank as a catalyst for private investment to achieve growth in the Scottish economy. The objects need to clarify the three roles of the investment bank, which are investment across early-stage investment for scale-up companies, and the mission-led long-term patient capital investment that needs to tackle the societal challenges in Scotland. The objects need to cover all those. That focus and flexibility and wide scope is what we would say is key to deliver that growth in the Scottish economy. I agree with what Moses has said previously. The three objectives of the bank remain quite clear and distinct, which is to remove barriers to patient capital equity finance in terms of eventually capital. That has to be one of the purposes of the bank to support increasing productivity and the relatively low levels of innovation and R&D and investment. That R&D and investment is connected to ethical or low-carbon or environmental aspects of innovation, which is fantastic. However, we cannot just look exclusively at those types of investments as well as broad industries and sectors across many different organisations that also need long-patient capital to increase productivity. It is all going to be linked back to that. We talked about outcomes in the last session, but one of the outcomes is increasing our low levels of productivity. Could we sit here and say that that will just be done through investing in low-carbon, healthy ageing and whatever the other mission? I forget the last mission of the bank, but the fourth one I would like to add to that, probably what we will come on to later, is around the fourth industrial revolution in terms of where is the investment across sectors in terms of data, in terms of robotics, in terms of software engineering and all the different aspects that are upon our economy, upon our global economy right now? Where could we add an extra mission that encompasses a range of sectors on the fourth industrial revolution that will lead us to increasing productivity, innovation and so on? I am a little bit unclear from Flora Hamilton your answer to the convener about what you see as the main purpose of the bank, because the bill provides that the main object of the bank shall be set out in its articles of association and that main object is giving financial assistance to commercial activities for the purpose of promoting or sustaining economic development or employment in Scotland. As things stand at the moment, that is what is proposed to be the main object of the bank. If that passes into law, that has to be the main object. Do you agree with that object or do you think that it should be phrased differently? No, we would agree—CBI members would agree with that object. What I am trying to clarify is the different roles that will fall off from that object in that where the bank's activities could be placed, as laid out in the implementation plan, is that by focusing to tackle the productivity challenges in the Scottish economy, you need to look at three distinct buckets of activity, funding going in to entrepreneurial businesses at start-up stage, funding going in to scale up those mid-tier businesses where real economic growth lies, and then you will have your long-term demand for patient capital to go into those projects that are sitting within the specific missions that have been outlined for the bank. There are three missions that have been identified around the Scottish Scotland becoming carbon neutral by 2045. That is a distinct potential mission that has been outlined. Clearly, there is a Government target set against that. That is about the long-term missions. They are quite distinctive from what you need to do—the investment that needs to go into scale-up growth. We had in the previous session an example of Scottish investment in Scottish whisky. That is about going in to fund growth, where jobs and prosperity lie in communities across Scotland. Are we seeing a distinct difference in those three roles of the bank? Okay, that is of some assistance. I think that Mary Anna Matzucato last week in evidence to us stressed the fact that, of course, one of the main roles of national investment banks is to be able to provide patient capital to innovation—for example, innovation that will often not be funded by the private sector—and innovation that, in the years to come, is often relied on by the private sector. I am wondering about the word commercial activities. Given financial assistance to commercial activities, does the term commercial activities fully express the full potential of the Scottish National Investment Bank? Given that some of the things that have been invested in by the state in the past, the kind of technologies were never ever commercial for years and years and years and years until one day the private sector began to turn them into commercial opportunities? I think that that just talks to the heart of the tension of the bill. I think that there is within this entire project an element of tension about what is the long-term aspiration in terms of patient capital and what is the short-term requirement in terms of supporting growth companies and innovation in society. I think that we are building it in this contradiction in some ways in how the bank is functioned in a whole variety of ways, and that would be one of our key concerns. For example, it says that it must become self-financing in 10 years. That means that you will have to have growth returns within the medium term in five years in order to secure that kind of long-term health of the bank going forward to provide patient capital. My question would be, how do you ensure that the patient capital elements of the bill are getting the same kind of attention as that first order requirement to invest in things that are producing returns to meet the financial requirements that are led down for the bank to begin with to operate? That is one of the elements that, for us, is concerning about how that is being set up. The issue that you raised about focusing on things that are commercial, things that provide those returns, things that look promising and give you something to write in your five-year report back to Parliament about the success of the bank, to a certain degree that acts as a break on doing what the bank is supposed to do, which is to correct the market failure that exists and the sort of disincentives that other banks have in supporting those long-term, slow growth things that are not obviously beneficial in economic terms but unlock greater economic opportunities for the Scottish economy in the long term. That is the purpose of it. Unfortunately, as much as the EAMs in the implementation plan are things that we could get behind and as much as we support the Scottish National Investment Bank, I do think that there are elements of this bill where that just has not been fully thought through and fully bottomed out yet at this point. I think that it is really important to take into consideration the importance of the bank being able to crowd in investment. That is how you are going to tackle the need for long-term patient capital to tackle some of those mission-led investments that are required in the Scottish economy is by the crowding in, by the Scottish National Investment Bank, acting as the cornerstone investment in a big long-term project. It will attract in private investment. There are parts of the Scottish economy that cannot attract in that private investment as it stands on its own. Do you have some examples of that? I do not have any examples to hand, but I can certainly provide you with some of those. However, if you have a cornerstone investment coming from a national investment bank, you will attract in that private capital. I guess that a good example would be some of the urban regeneration programmes that have happened across the UK, where you have UK headquartered investors such as legal and general or Hermes investment management going into places such as Cardiff and Leeds and King's Cross, and they go in and provide the cornerstone investment, and then they will attract in Australian pension funds or Canadian pension funds. That is what you do. You can bring in those private institutional investors that will give you that long-term growth. Their pension funds need long-term investments that give them steady reliable income in the long term. They are not looking to make a return on their investment in the short term. That is why I come back to this very clear distinction. It may seem complicated, but the bank is going to have to meet a number of different requirements in the short, mid-term and long-term. It is looking to service the Scottish economy in its short-term, medium-term and long-term. Therefore, it will need that complexity within its objects. Just to add to the floor more so than I think, it is about that crowning and funding and examples of that in terms of Germany and the KFW operating mechanisms in that way, as well as the Japanese finance corporation that have run similar institutions. There are global examples of where national investment banks or something similar have been used as a cornerstone to pull public finance but also private sector investment together in terms of long-term patient capital. Surely, that is the objective of long-term patient capital, and the bank is that it makes a return on investment not just for the bank but for the Scottish economy, Scottish society as a whole, or else what is the point? That is the point in terms of where it needs to head in the long-term and in the future. I think that successful national investment banks like the KFW and I know that the Scottish National Investment Bank will be nowhere near the same size as the KFW and what they can do is that it supports and drives innovation by correcting market failures and creating new markets. Surely, that is the objective of the national investment bank, to create these new markets for Scotland that keeps our economy competitive and keeps us exporting through the new trading nations strategy and pushes our economy forward so that we can all enjoy that inclusive growth that we so wish to drive forward to. Examples of that have been transformative technologies in inventions, in nanotechnology, telecommunications and renewable energy that investment banks have put long-term patient capital in around the globe. That is where we need to drive that commercial activity. Okay, just two small questions to finish off. Firstly, under section 11 on the setting of the missions, the missions are to be set by ministers in a document that describes the socio-economic challenges that the bank seeks to address. That is the provision made in the bill for the setting of the missions. Do you think that those missions should be subject to parliamentary scrutiny and approval? That is the first question. Secondly, do you think that the membership of the bank should be restricted to Scottish ministers or do you think that there should be a role, for example, for local authorities to have membership of the bank as well, as is the case with KFW? The first question is about the missions. Scottish ministers are to set the missions of the bank in a document describing the socio-economic challenges that the bank seeks to address. There is no provision in there for Parliament to scrutinise and debate and to approve those missions. There is provision in section 2 for the Parliament to have to approve any changes in the bank's objects and articles of association. That has to be done. There is no provision for Parliament to have any say whatsoever in what those missions are. I am just wondering, do you think that Parliament should have a role in, for example, approving by resolution of Parliament the mission? The second question is about membership, a different question. I think that it has been stated that the Scottish Government will not have a role in internal governance or day-to-day operational decision making of the bank itself. That has been emphasised before. Where we have emphasised is the importance of operational independence of the bank being enshrined in legislation. What we are talking about is the setting of the missions for the bank by its sole shareholder Scottish ministers. The advisory group will give advice to the Scottish ministers on those missions. Should Parliament have a role in debating and approving those missions, or should Parliament have no role at all? We do not have a position on that at SCDI, but I am trying to give you a broader answer. We have a view. We absolutely think that Parliament should have a role. That is about £2 billion of public money. That is about supporting the strategic direction of the Scottish economy and supporting the type of growth that we want to see in the economy, which should be inclusive, promote fair work and deliver a low-carbon future. It is important that there is a proper democratic oversight of the missions that the bank is set to go away and work on. Just debating the missions is the absolute minimum that the Scottish Parliament should be doing. I think that there is something about how the bank has been set up very narrowly to only invest in the private sector. When you put a mission in that says that we want to see a low-carbon future, sending a bank off to only invest in the private sector to get that low-carbon future might lead you in a certain direction about how infrastructure is developed or how infrastructure is provided across the country, because that money can only flow to the private sector in a way that is perhaps not what Parliament necessarily would have wanted to do if it had been left to its own devices. I wonder if there needs to be slightly more oversight of some of the decisions that might flow from this just because of the very narrow drawing of what the bank is able to do. On your second question on whether there should be a role for local authorities, I think that absolutely there should be. I think that it is right that one of the things that we are really very interested in in this element is where is the community voice within this bank. Scottish ministers play a vital role and it is good to see them as shareholders, but putting in that wider community perspective of local authorities would be a good start. I do not think that it is the beginning or the end of the conversation, but I think that that would help to broaden out the perspective of what the bank would be tasked to do and how the missions would be delivered, and I think that that would be useful. Do you have any views on whether the shareholders should be extended beyond Scottish ministers or are left just as Scottish ministers? I think that we supported that Scottish ministers will set the strategic direction of the bank, so that in itself answers the question for me there. There should be the sole shareholder. The Scottish Government should be the sole shareholder and the bank. Yes. In your view, it should. I think that we have got clear enough answers to those questions. Now I will turn to Dean Lockhart. I would like to come back briefly to the question of stimulating demand in the economy for the additional financing, because we are seeing a much larger scale of financing that is going to be available. If you look at the Scottish growth scheme, for example, there was insufficient demand from business to take up funding from that scheme. We have spoken to the bank, and the bank does not see its own role as being the originator, or it does not see its role in identifying the businesses to finance. The bank will rely on existing enterprise agencies for that job. Do the existing enterprise agencies therefore have to significantly change the way they operate in order to find the businesses to access that finance? What would they significantly need to operationally change is probably not one question that I should answer. Maybe the chief execs and chairs of the enterprise agencies might give a better answer. Yes, absolutely. If there is a case of stimulating demand and there have been issues in other programmes and other initiatives before, it makes sense that the agency should work with partners, both from business member organisations to academia, where you will find a lot of this innovative thinking and knowledge happening, but also not forgetting regional approaches as well in terms of regional economic groups that can support driving that demand and activity. There is some argument that they will need to probably put more focus on that, how they do that, I suppose, is entirely up to them in terms of their thinking. If we do want this to be a success, it will be based on how many people want to drive through, identify and ultimately fund the innovations in a patient capsule needed and across a range of business activities. Demand is massively important for it. We are at a very critical time in terms of demand for growth finance. Business investment is currently at an all-time low right across the UK with the uncertainty of Brexit hanging over us. It will be critical for the bank to work with the enterprise agencies to map out what their roles to collaborate fully and to understand where the stimulus for demand can come. It will be very important to do very detailed segmentation analysis of where demand and lie. I think that one of our previous experts on the panel was talking about the very low level of ambition for growth in SMEs across Scotland. There is a very, very high percentage of firms that have no ambition to grow. What is critical is to work around a cluster structure. Clusters bring together organisations where you can, as well as attracting private investment, help to stimulate demand by having peer experience of particular type of finance delivering, where you can share success and you have entrepreneurs and entrepreneurs getting together and showing these success stories and by going through that cluster approach you can start to stimulate demand. There are distinct ways in doing it, but first of all you need to identify where there is ambition for growth and then where there is opportunity for growth and try to build that ambition around it to stimulate that demand. Given where we are in times of heightened geopolitical risk, we will have to work very hard to collaborate and stimulate demand. I agree with that. One of the missions was a place-based mission. If you think about it from that point of view, you might need to do quite a lot of work to stimulate demand in a coherent and holistic way across a community. That might mean working with a whole range of partners from the enterprise agency's local authorities, which again gives way to why having local authorities as shareholders within the bank is an important thing. It is important to work with civic society organisations and trade unions in that respect. To see that as part of the wider social partnership model that we are trying to create here is not simply about driving growth within small SMAs, but about driving shared prosperity within communities. It is about trying to develop that shared stake within society that we do not have a lot of. The bank could provide a bit of, because it brings money and it brings an opportunity for investment, it brings something to coalesce around in a wider way for other stakeholders. The other question that I had was in corporate governance. We have heard that the Scottish ministers can change the mission of the bank without any parliamentary oversight or discussion. That is also the case. The Scottish ministers do not need to consult or get agreement by the board of directors or the advisory board. There is no qualification there. Based on your experience of other forms of corporate governance, do you think that unfettered power of Scottish ministers is a sensible allocation of responsibility? No, it is not. There are other examples of Scottish ministers having some oversight and then other layers of governance underneath that, for example in the university sector. What we find is that there needs to be some checks and balances within the system. The role of Parliament is crucial. Parliament is a really important democratic institution. It should have the right to consider, amend and vote on the missions of the bank. There should also be some element of consultation with the advisory group, if you are not going to consult them, and with the Governors within the bank. The role of the advisory group is absolutely critical and advising back in. The board will be accountable to the Scottish Government for the delivery of the bank. The advisory group has to be comprised of a very broad spectrum and has to be the independent, clear and transparent monitoring of the performance of the bank and how it is delivering against a very set of tangible and measurable KPIs. That has absolutely got to be clear. However, the advisory group really has got to come across a wide perspective from across the Scottish economy and Scottish society. You have got to have business representation on there, you have got to have representation for the financial services world, you need your universities, you need your respect to Scottish think tanks, you need to have your initiatives such as Scottish Enterprise. Those all need to be on there, advising there. The CBI would also advise to look for international expertise. There is plenty to look to other international investment banks, particularly those within the EU. That is something that the Scottish Government can tap into and make that advisory board work and deliver for the Scottish Government. I agree on the importance of the advisory board and we are on record as emphasising the need for the operational independence of the bank. That is critical to be enshrined in legislation and respected by all parties once the institution is established and operational. If you want it to last long term, that is one of the most critical routes that whoever is in power is enshrined. Anyone doing what they want with the investment bank moving forward, which is critical to itself, needs to be able to offer loans, make investments, agree joint ventures, create substituaries, align with agreed investment strategies and risk strategies without further approval for ministers. That is how you will make us a success of the bank. I want to brief area to explore with you. That is the financial memorandum that said that the bank will lend solely to the private sector. Some witnesses have obviously said that that was quite narrow and restrictive. I wonder whether you think that it should be a much more open approach lending to the third sector, community enterprises and so on. I start with Helen Martin, who is nodding vigorously. I find that a very restrictive provision when you overlay the missions that the bank has. One of the things that the implementation plan talks about is about transport infrastructure and the development of low-carbon transport infrastructure to be specific. You take, for example, charge points of electric vehicles—that was the example used in the implementation plan—and those are primarily developed at present by the public sector and are held in the public sector. If you are tasking an investment bank to go away and develop low-carbon electric vehicle infrastructure and then saying that you can only do it by investing in the private sector, then you are changing dramatically the model that currently exists and you are bringing in market forces into what will be a key part of infrastructure that will underpin our economy going forward. Equally, it is a very cluttered landscape transport at the minute and there is a lot of different types of providers. You are creating a situation where you would be saying, okay, you can support first bus to develop low-carbon buses but you couldn't support Lothian buses. You are supporting Circo to develop their ferries in a low-carbon way but you can't support CalMac. There is a whole range of contradictions within that mission and the kind of limiting the public sector. Then it is difficult to draw the line of where the public sector begins and ends as well. You have, for example, a company like BiFab, which is a strategic asset in the low-carbon economy, but the Scottish Government is a shareholder, so could this investment bank invest in BiHab or could it not? Equally, you have something like the Springburn rail depot, for example, which is currently on the threat and which could do with investment to electrify the line to secure the future of that portfolio, but it would probably be for either ScotRail or for Network Rail that that investment would be done, so it is currently in private hands, but it would be put to the public if that investment was done, so would the Scottish Investment Bank be in a position to make that investment for the benefit of the public sector or not? Those are the sorts of questions that I think putting a rule like that in for the bank creates a lot of unnecessary questions about how you can invest, when you can invest, who you can work with, how you can draw the capital in. For example, universities in the CBI submission talked a lot about the need to work with universities, but universities are public sector, are they not? They incubate a lot of businesses as well, start-up businesses and high-growth potential businesses, perhaps. Are you saying that the Scottish National Investment Bank cannot work with those businesses because they are also associated with the university? It is not clear to me. Perhaps some of those questions could be sorted out and we could provide clearer guidance, but the way that it is constructed at the minute does raise serious question marks for how the bank will work and how it will achieve the strategic missions that we are giving it as well. I think that Helen Rae raises some very valid points. I think that what we are touching upon here is some of the structural issues around the setting up of the bank. There are implications under EU state aid rules, there are implications under fiscal rules, government fiscal rules, so that is what you are touching on here. I think that the CBI calls for the widest possible scope to be given to the National Investment Bank in order for it to achieve its objectives, so it is essentially looking around how you can stretch what is private investment and where it touches on it. It is a very complex landscape, but it is going to be one of the challenges that the bank will face. It is not impinging on those rules as to how it is funding because it impacts on how it goes and raises its capital. I am not sure that that is the case, but I will come back to you in a second, Matt Lancashire. I think that it goes back to needing further clarity on what the bank and certain sectors it can invest in, whether that is private, public or a range of different sectors, and what does ethical mean as well. That is where the bill lacks real clarity right now, and that needs to be offered some clarity before it becomes fully operational. In the broadest sense, I do not just want to take public sector, but it is a massive part of our economy, a massive part of our society, so we have to take a look at it. There is plenty of innovation that happens across the public sector that could be commercialised in terms of any ways, different sectors and forms, so it would make sense for that opportunity to widen the scope out to public sector organisations, but we have not had the clarity in the bill yet to make a call on that as such to move that discussion forward. It does worry about the universities, because they are playing a massive part in our R&D, an innovation structure in Scotland. Where is their involvement? How do they progress forward their innovations? We all know that they are great at coming up with ideas and such, but we are not the best at commercialising those ideas, so where is the connection with the investment bank and the R&D knowledge that is coming out of universities as well, and they are part of the public sector. Again, I just think that part of the bill needs more clarity, so we can all make a more considered response to the question, Jackie. That is very helpful. The reason I come back to state aid is that it is never in my knowledge that a community enterprise is being funded as a matter of state aid, so I think that it is principally because the Government is only capitalising it at the beginning with financial transaction money. That is a choice that they are making. They could choose to provide additional capital so that they have increased borrowing limits for themselves that would give that wider scope much more prominence and allow the kind of innovation-based roundabout universities to be funded to. It is about how you bring that together and how you channel the funding in a particular way. The advisory group has been mentioned already and some of you have made comments about it. Can I just ask you how you see the relationship between the advisory group and the board of the bank? Would it be good or bad, for example, to have a person, for example, the chair of the advisory group on the board? The governance of the bank is very important. As Matt Wightley said earlier, the bank is going to be independent of government, it is going to be given its missions that, hopefully, will be democratically decided, and then it is going to go away and work on that. I want to see the bank's governing body being well designed that it has good governance principles at its heart. For me, good governance principles means that you would have representatives of wider interests within that structure. From our point of view, we would see the case for worker seats on the board for that purpose, but I would also think that it would be appropriate to have someone from the wider advisory council sitting on the board, because it gives that broader perspective. It could therefore reflect the wider discussion that the advisory group has had, which would have a mixture of civic society, organisations, businesses, universities and the sorts of people that have already been mentioned, trade unions, again, in their broader role. You do not think that that would compromise the advisory group if they were partly involved in decision making? No. This is a question that we get put a lot in trade union land because we debate it endlessly, should trade unions be involved in sitting on boards and being involved in the decision making when they are potentially challenging the decisions of the employer. We have decided, at this point, that it is worth being involved in that decision making and having that clear ability to shape and participate in truly, as an equal in those decisions. It is a much, much different relationship than just simply offering someone advice. It was not hugely clear whether you were offering advice from the advisory group to the minister or to the board of governors. The advisory group should be for both. Having a member of the advisory group on the board along with a worker seat would be a really important way of bringing that wider perspective in. Before I bring the other two in, the suggestion was made in the previous panel that the articles of association should mention the advisory group, which is not on the bill, but the preference of at least one witness was that it should be in the articles of association, so maybe you could just comment if you think that that is where it should be as well. I think that it would make good sense that it does sit in the articles of association. We have not debated that in detail at the CBI, but having listened to the previous session, it would make good sense. If the advisory board is to have a role of feeding back in, giving independent monitoring and advice into Scottish Government, then it would make sense for it to sit in the articles of association and to be identified as fulfilling that role. We have not debated at length whether the members of the advisory board could also sit on the main board. I would advise that there is a look at international practice in this and what other regulated bodies are doing to look to see whether that is appropriate and to understand the two distinct roles of the advisory group and the board. It would be probably to have a look at how other regulated bodies in the UK are tackling that. I am not going to comment whether someone is going to sit on the board or not, but I am going to comment on what the perception of the advisory group is. I think that that can play a part in greater people than I am deciding that. The advisory group has been set up to provide intelligence, analysis of emerging and future trends, challenges and opportunities in society, the labour market, the wider economy to abide on the creation or amended missions of the bank and, most crucially, to identify growth sectors that require patient capital. It is meant to be an independent advisory group, so take that from that, what you will. You are advising where to reverse, and all of a sudden you are making the decision on where to reverse that. I get that point, and Ms Martin has… Do you want to come in again, Ms Martin? Yes, so I just wanted to add on a further point about the bill article association issue. I think that it would be appropriate to put it into the bill. There is precedence for that. The SQA, for example, has a board structure and an advisory group structure, which you could look to as a model. On that particular structure, the member of the board chairs the advisory group, and it is seen that way round, if you know what I mean. That is a helpful example, thanks. The convener is chasing me to ask my questions quickly, so I better move on. The other area that I wanted to touch on was the financial side of things. Capitalisation. I think that most of our witnesses have said that they feel that the £2 billion is a reasonable level, but if any of you think that it is not, please tell me. The other area would be around costs and how quickly the bank should break even. The previous panel seemed to think that it was a little bit quick to do that by 2022-23, that kind of level, and some of the costs that have been linked in the financial memorandum, so, if possible, brief points or answers on that. Ms Hamilton, any thoughts? It looks incredibly tight, but possibly doable, but what is very important is for there to be a level of patience and a level of understanding that this is for a long, this is for a mid to long-term investment to drive growth in the Scottish economy. Therefore, it is not going to be a quick fix and it is not going to quickly get to balancing out on its costs. Presumably, we cannot just keep pouring revenue expenditure into the bank. There is a very good model to look at in the UK to look at the British Business Bank and how that has been set up. There are good models to look at. There cannot be a burden on the Scottish finances, but there needs to be an understanding that it will take some years for the bank to get up and to be able to come and meet its costs and deliver a return on investment, because part of its function is on mission-led long-term patient capital. It cannot be over-reliant on the other two roles, which are the scale-up and the start-up financing. If you push it in that direction, that will temper the nature of the bank, so patience will be required. However, it is ambitious but possibly doable. Okay. Mr Lancashire, politicians should be more patient than they usually are. Well, I can always call for that. I think that, to billion, we welcome that. It is a good effort. It is 1.3 per cent of GDP in comparison to other countries. That is higher than they put into their investment banks, admittedly, if they have much bigger economies and more money to invest. I think that where our concern lies in that is that that 1.3 per cent of GDP will not be reached to 2030. If the economic change is here now and the vision that we all want to transform the economy in the next couple of years, that might be difficult to achieve before 2030. I think that just looking at that a little bit might be helpful. I think that their scale and speed are required quickly. On the two trials in 2023-24, everyone keeps saying that it is tight, so I will say that it is tight, but that is actually reliant on people. I think that we heard in the other session that people have got to be mission-orientated and altruistic towards the mission. However, there is a war on talent in financial services, hence why the wages are through the roof and why we struggle in terms of different financial services companies getting the talent that they need in Scotland. A close look at what the talent expertise is needed up to 2023-24 to make the operational bank move forward is quite critical, because, as I said, there is a global war on financial services. I think that someone else will ask about remuneration, so we will come back to that one. I echo the point about the patient finance. That is really important and needs more consideration, because right now, as the bank is created, the balance is very much towards the shorter-term elements. The other question is whether there is a way to leverage in more money, primarily just to allow you to invest in different things. It goes back to the point about it being restricted to the private sector only because of the transaction card. The panel will have heard from earlier discussion that organisations such as Engender and Close the Gap have some rather substantial concerns about the equality impact assessment. I wondered whether any of the panel members here just now had any concerns about the quality impact assessment. Ms Barton? It was not extensive, so I think that there was an element of more thinking perhaps required. I think that there was a lot of ground covered in it in some ways, because it started to talk about the need to put in fair work and fair work first, which we really welcome and we think is absolutely essential. It also talked about the need to follow the human rights guidance principles, for business, which I think are really, really important as well. It did raise a lot of questions for me, particularly around human rights guidance principles, about where the expertise would come for the bank in that respect, because that is quite a technical and important piece of legislation that could be used to create effect to follow the ethical mission, if there was a good understanding of what it really meant to make those guidance principles. Ms Martin, do you have any concerns about equality not being written into the face of the bill at all? Yes, I think that that goes back to my first answer around the objects of the bill. Having that sense of the wider mission around equality and support for communities and the wrong ethical investment is an element of this that is hugely important. It fits well with the missions and would complement the missions that the bank has, but it would be easily lost if it takes quite a short-term high-growth approach within its work. I wonder if other members of the panel had any views about the equality impact assessment and whether or not it was treated as a tick-box exercise. We have not engaged with CBI members on that, but I would like to point out that the CBI is calls on business to make diversity and inclusion across all areas of its organisation. We have plenty of examples of where active diversity and inclusion policies will deliver real economic impact. We have all seen very recently the Rose Review looking at the lack of access to funding for female entrepreneurs across the UK, and one of the experts earlier gave a viewpoint on that. The bank could act on some of the recommended initiatives that are coming out of the Rose Review focusing in on female entrepreneurs. As the statistics on funding that is getting to female entrepreneurs and female growth businesses is quite shockingly low, the bank could have a very important role in addressing that. By addressing that, we will also find further growth in the Scottish economy. Mr Lancashire, do you have anything to add or can we move on? Just very briefly, and it is similar to CBI. We champion diversity and inclusivity across all banking governance and operational structures, and we would move to support that being included as part of its operational standards and moving forward with that diversity and inclusivity across its staff make-up, across its board, across its advisory group will only lead to better investment decisions that certainly lead to a more inclusive society for Scotland. The committee has mixed views regarding remuneration policy. On the one hand, some people point to the fact that the bank will have to operate in the financial services sector. On the other hand, people point to the fact that this would be a public body and needs to be accountable to taxpayers for money. I would like to ask each member of the panel their views on what the specifics around the remuneration policy should be. I am happy to say that one of the points of the CBI is that it feels very strongly about the fact that the bank should be collaborating very closely with the British Business Bank for a number of different reasons. That is one area where collaboration could deliver and help the Scottish National Investment Bank to develop a successful people policy. The British Business Bank has benefited and has managed to attract the right talent to make that bank a success and deliver back to the UK Government. That is probably something where they would be able to give very good tailored advice in that area. The level of salaries in the British Business Bank is what, roughly, has that caused any—have there been any, for example, accusations of eye-watering salaries? No, there has been none that we are aware of. I am ensuring that the bank is a great place to work, has a strong identity, has a good sense of mission and will support attracting talent within and beyond Scotland. That is critically important. However, remuneration for senior leadership staff should be closely linked to the bank's performance. That is critical, too, in terms of fair works, pay for hard works and your achieve your targets. You should be justly rewarded for that, as in any role and job. The critical point is that we need to strike a delicate balance between empowering the bank to attract talent through big wages, bonuses and so on, and retaining public trust in the bank. That perception says that there is a critical line there, what is too far and what is not. We want to get the right people, we want the right talent, we want the bank to be successful. That is going to take decent remuneration packages, particularly when we are after leading economists, leading financial experts, etc., to be part of that bank as well. How do we achieve that but still remain and have public trust after all the banking discussions over the past 10 years around remuneration, salary packages and bonuses, etc. We are clear that it will have to apply public sector pay policy because it is a public sector institution. It is not reasonable to carve it out as a special case because financiers are somehow more important than other types of civil servants who do excellent jobs. I would add that fair remuneration is something that every employee should get, not just the senior leadership team. However, if there is a problem with applying public sector pay policy and attracting talent, that is probably a wider question for the basis of public sector pay policy as a whole, rather than necessarily simply making a case for the Scottish National Investment Bank to have a different approach, which I think would put in jeopardy public trust in the organisation, particularly given the issues in the banking sector, more widely. A couple of the panellists have mentioned the word ethical and investment. Major investment banks and a lot of pension funds have lending exclusions, usually around about investment into tobacco, which is a typical one. Maybe greenhouse gas emissions or if the investment impacts negatively on biodiversity and ecosystem. Do you think that the investment bank should follow an ethical lending policy? If so, what would it be? CBI members do not have a list of lending inclusions that they would advise to the Scottish National Investment Bank. However, investments in start-up or scale-up growth activities of the bank should not run contrary to the activities of the bank that fall under its mission-led patient capital investment work. I think that what is important is that the bank is driven by sustainable growth. This is a very, very emerging important area coming into the financial services policy landscape. It is coming from the saver, the investment community, where they are looking for their investments to be in parts of the economy, which can satisfy environmental factors, social factors and good governance factors. Within the FS sector, the big push at the moment is to find ESG investments. There is a lot of work going on at the UK and at the European level to look at how we can work towards sustainable investment. They are investments that will be resilient and deliver in the long term. The pressure will come from the savers. The pressure will come from people who want their pensions to go into sustainable investments. I think that it is looking in that wider landscape. Therefore, the Scottish National Investment Bank will have to think about its own sustainable investment policy. I think that this is linked back to the missions as such and ensuring that those are legitimate on of high societal importance. I think that that is already there in terms of that we have focused on low-carbon, on healthy ageing in the missions and on inclusive growth as a free main driver's mission. All those are ethical as such. There is a very much copy KFW approach, which is around climate change, globalisation and so on. Therefore, there is a very model already there in terms of moving to a similar standard that other European countries are using as part of their banks. What we have also said, we think that we are lacking an ethical mission around the fourth industrial revolution and what that means for people, jobs and the economy. How do we bring together all our different expertise and knowledge around the fourth industrial revolution to make this a real giant sector for the Scottish economy in things like automation, robotics, artificial intelligence, big data, nanotechnology and biotechnology? I think that that is a crucial mission that we are missing. I go back to what I said earlier, I think that it was to Jackie's question. What is ethical? We need further clarity in the bill of what ethical is. What sectors are excluded and not before we can make any comment on how you do something as ethical? Do you believe that definition should be within the bill itself? I am not suggesting that it should be within the bill, but it needs to be defined at some point along the line for people to make a decision as to whether they agree with that standpoint or not. At the moment, there is a lack of clarity around what is ethical, what sector should we invest in or be allowed to invest in as the bank itself. At the moment, that is not clarified, so I think that there is a bit of work around what that potential is. I think that this is really important to get into the heart of what the role of the bank is. I think that I would agree very strongly with Flora's comment about the idea that the bank should not be investing with its left hand in a way that undermines the missions of its right hand. Those missions have, to a certain degree, particularly around a low-carbon future. They give you a sense of some of the exclusions that you might have within your investment portfolio, and it makes sense that that would be mainstreamed through the entire ethos of the bank. The missions overlap and there is some thought into how they work together, so how do you create a proper place-based approach in a similar way? Equally, within the equality impact assessment, there was a commitment to fair work first and the principles of fair work first. Mainstreaming that kind of fair work commitment throughout the bank is really important, which is about creating quality and employment for workers across the economy. That is something that should be at the heart of everything that the bank does. Equally, if you take the vein of the guiding principles for human rights, that is another way of thinking about ethical investment that is already within some of the documentation around the bank. There is a lot of building blocks already there. It is just about putting the strategy around that and understanding what that means if you are going to do it in a strategic and sustainable and coherent holistic way. Do you not invest in an oil and gas company who, at this moment, is delivering carbon as such into the environment when they come up with a solution for a low-carbon technology that reduces carbon in the environment? How do you judge that? What is the ethical could you exclude that because there is a big oil and gas company or not? I think that we need clarity on what that means. That is a dangerous step to take when we start to exclude businesses that might be transitioning or doing different things that need that investment and can really push our economy forward. While it is absolutely low-carbon, net zero, et cetera, does that mean that we cannot invest in mature industries and sectors that are looking to transition with the technologies and invasions that they have? I think that we need to be really careful about that in terms of the role of the investment bank. I thank you very much to our panel for coming in today. I am afraid that that is all the time we have. If you want to write in further with further thoughts on some of the issues raised then please do feel free to do so to the committee. I will suspend the meeting and we will move into private sessions.