 Rhaid i gael! Welcome to the 23rd meeting in 2014 of the economy, energy and tourism committee. Welcome to members, to the minister and to his officials. I welcome to people joining us in the gallery. Can I remind everyone please to turn of, or at least turn to silent or mobile phones and other electronic devices. We have apologies this morning from Margaret Mac Item 1 on the agenda. I can ask committee members if they are content to take item 7 in private. Item 2 on the agenda, we have a legislative consent memorandum in particular on the small business enterprise and employment bill. I would like to welcome to introduce this Fergus Ewing, who is the Minister for Energy, Enterprise and Tourism at the Scottish Government. He was joined this morning by colleagues David McPhee, who is head of business and energy unit, office of the chief economic advisor at Neil McLeod, principal legal officer, solicitors constitutional and civil law. Chris Boyland, who is head of strategic reform at the county in bankruptcy, and Elaine Drennan, head of employability, skills and lifelong learning analysis, educational and analytical services. Welcome to you all. Minister, would you like to introduce this, Elsie? Thank you very much, convener. Good morning, everyone. I'm grateful for today's opportunity to address the committee in respect of the motion lodged by the Cabinet Secretary for Finance, Employment and Sustainable Growth on 8 August. As you know, the UK Small Business Enterprise and Employment Bill was introduced in the House of Commons on 25 June and will shortly begin its Westminster committee stages. The bill aims to remove what are regarded as unnecessary impediments to business and includes a wide range of measures aimed at promoting economic growth. The majority of the provisions within the bill are reserved to the UK Parliament. What we are concerned with today are those provisions that fall within the devolved competence of this Parliament and which require a legislative consent motion to allow the UK Parliament to legislate for these matters. It will therefore concentrate specifically on the areas contained within this motion and will be happy to address any other queries outwith today's proceedings in writing should the committee so require. This LCM covers three areas, improving access to finance through the assignment or, as we say in Scotland, as a nation of receivables, secondly, sharing of information in relation to education and training, and thirdly, corporate insolvency. I'll briefly outline each of these three areas. Firstly, the ban on assignment of receivables. The ban on assignment of receivables measure, as is referred to in the UK Bill, ban on assignation of receivables in Scots law, is aimed at improving small businesses' access to finance by removing legal barriers that can prevent businesses from selling their invoices to a third party finance provider, thereby improving liquidity and cash flow for small business and increasing prospects of sustainability and growth. Viable businesses need access to finance for investment and growth. The committee recognised this in their published report earlier this year entitled Access to Finance and Alternative Financing Models. This change is aimed at delivering a positive impact by nullifying the impact of clauses in business contracts that prohibit a business from selling their invoices to a third party finance provider, and in doing so should directly benefit small businesses. This provision affects contract law, which is within the legislative competence of the Scottish Parliament and therefore requires Scottish Parliament's consent. Secondly, the sharing of information in relation to education and training. The second measure outlined in the LCM is in relation to extending the sharing of information about individuals for the purposes of assessing the effectiveness of training and education. Existing legislation enables the Scottish ministers, the Secretary of State and HMRC, to share information about benefits, tax and education for the purposes of assessing the effectiveness of the provision of training and further education for those over the age of 18. It specifically excludes information about higher education. This measure will enable these assessment functions to include people who are under the age of 18 to capture all school leavers, as well as those in higher education, and will allow us to identify wage and employment outcomes for those who have undertaken training or further or higher education in Scotland. As the measure affects the assessment of education and training services, it falls within devolved competence and requires the Scottish Parliament's consent. The third and final area, convener, is corporate insolvency. It aims to reduce complexity and improve the efficiency of insolvency processes, which will reduce costs of administering insolvency proceedings and potentially lead to higher returns for creditors. The UK Government believes that the whole package, not just the insolvency measures outlined in the LCM, will benefit creditors by an estimated £30 million per annum. While the actual benefits remain to be seen, the aim clearly chimes with the principle that this Government set out in the context of our bankruptcy and debt advice act to secure the best return for creditors by ensuring that the rights and needs of those in debt are balanced with the rights and needs of creditors and businesses. On that basis, we think that it is sensible that these measures should be extended to cover Scotland, given that these measures relate to devolved areas of corporate insolvency, receivership and the process of liquidation that fall within the legislative competence of the Scottish Parliament and therefore require legislative consent. The committee should also note that there may be a supplementary legislative consent motion convener brought before them at a later date on public sector exit payments. The bill includes a provision to ensure exit payments are recovered when high earners return to the same part of the public sector within 12 months of leaving. It was agreed that, due to the complexity of this measure and its late addition to the bill, both UK and Scottish Government officials would continue their discussions on the detail of the policy and the desirability of an LCM for this provision. If agreement is reached in the policy, we will lodge a supplementary LCM in due course. In conclusion, the Scottish Government is already creating a supportive business environment and has progressed a range of successful initiatives to deliver better regulation for all. In recognising that Scotland's businesses are the primary drivers of sustainable economic growth, we welcome policies that will complement our continuing programme to improve the performance of our businesses and make Scotland a more open and competitive place for companies to do business. Therefore, I ask the committee to support the draft legislative consent motion laid before it. Good morning. I want to clarify one of the comments that you made about selling on debt and, presumably, we are talking about invoice discounting. What are the provisions that are suggested in the new legislation? At present, we understand that, in some contracts that routinely would be imposed, perhaps by larger businesses on smaller businesses, there are contained in some of these contracts. We have examples that, if members are interested, we can share with you provisions that would prevent the small business from selling on to a third party any claim that they would have under the contract for money payable. We think that such an exclusion, such a ban on the assignation, the selling on of the right to extract payment to a debt, is not in the interest of business and that there is no justification for it and that it is simply a practice that some large businesses have got into because they can and because, as I am sure those of us who have had previous business experience will recall that big businesses tend to get their way, do not they? They tend to impose standard proforma conditions and, if you do not like it, your choice is to lump it or leave it. Therefore, I think that this is quite a good measure. I guess that there is probably a more technical explanation hidden in these notes in front of me, but I hope that that sort of punters version will suffice. Yeah, one other question I may. With regard to the recovery of exit payments for public servants, I am not sure what covenants there are in existence within the Scottish public sector to implement this. Is this a new provision, or do we already have within our management of the legislation that I thought there were some covenants that explicitly stated that people could not enter effectively the same service, roughly the same salary as they exited previously? Well, I would hesitate to generalise in such a wide area. I can certainly come back to the committee on that. Because we are not at the stage yet of knowing whether an LCM is required, we haven't, as yet, looked into issues such as the current—well, I have not, as yet, at any rate—looked into the perfectly legitimate question convener that Mr Brody raises as to what precisely is the current position. What I undertake to do, since he's raised a perfectly reasonable question, is to look into that matter and write to the committee formally on it irrespective of whether or not there is an LCM. Any other members have any points on what to raise? It does seem relatively uncontroversial, minister, and bringing forward some sensible reforms. In that case, can I ask the committee whether they are minded to recommend that the Parliament give its consent to the relevant provisions of the Small Business, Enterprise and Employment Bill set out in the LCM? Thank you, and our members are happy to delegate to the convener and clerk the production of a short factual report detailing the committee's considerations and arranging for its publication. Thank you. Right, we will now move on to item number three on the agenda. Well, a very short suspension, and I think we're having a change of officials. If we can reconvene, the minister has now been joined by Clare Orr, who is the Executive Director of Policy and Compliance. The county's in bankruptcy, Chris Boyland, is still with us, and we're also joined by Graham Fisher from the Scottish Government Legal and Directorate. Now, we have a raft of subordinate legislation to consider, minister. As you'll be aware, we have four positive instruments. We have the Bankruptcy and Debt Advice Scotland Act 2014, consequential provisions order 2014, in draft. The bankruptcy, money, advice and deduction from income, etc. Scotland regulations 2014, in draft. The common financial tool, etc. Scotland regulations 2014, in draft. And the debt arrangement scheme, Scotland amendment regulations 2014, in draft. We then, later, will be considering three negative instruments. The bankruptcy, Scotland regulations 2014, SSI 2014 slash 225. The bankruptcy, applications and decisions regulations 2014, SSI 2014 slash 226. And the bankruptcy fees, Scotland regulations 2014, SSI 2014, 227. Can I invite you, minister, if you would speak to and introduce these instruments? Yes, thank you, convener. I'll be brief as these are a complex set of instruments, and the committee has a lot to consider. The regulations before you today bring to life the provisions in the Bankruptcy and Debt Advice Scotland Act 2014. They form the next layer of our reforms. The most significant reforms, we believe, to bankruptcy in Scotland for a generation. And the four affirmative instruments you have been asked to consider will be invaluable in supporting measures including the single common financial tool for Scotland and mandatory money advice for all debtors. As announced during the passage of the bill, the first set, the common financial tool regulations, adopt the common financial statement published by the Money Advice Trust as the heart of the common tool method for setting a fair debtors contribution in Scotland. The next, the money advice and deduction from income ETC regulations fill in significant details about the role of money advisers and provide the forms for telling employers and others when deductions are made from income under the new provisions in the Act. The debt arrangement scheme regulations do two things. They make changes to the debt arrangement scheme to take account of the common financial tool and they extend the advantages of the scheme in making protected repayments to certain legal persons including partnerships. The consequential provisions order makes technical amendments to other legislation as a consequence of the 214 Act replacing income payment orders with debtor contribution orders and changes to the provisions on debtors discharge. I'd like to make two general points. The first is about timings and consultation. I have heard some stakeholder views that we have not consulted properly and have rushed through these regulations. I'm surprised to convene by some of these comments, particularly by ICAS. ICAS, for example, is the body that the accountant in bankruptcy has consulted with the most. They are represented on the CFT working group, the business DAS working group and the notes for guidance working group and they have seen every draft set of regulations that we have been able to share. My second point is about the guidance. There are three layers to a regulatory regime, primary legislation, secondary legislation and guidance. Each is perhaps as important as the other. Work on drafting the necessary guidance is well under way and I've heard some positive feedback on the collaborative way this is progressing. We will continue to work in partnership with stakeholders and listen to their concerns as we develop our guidance and operational processes. For example, we have again had representations from ICAS and R3 that it would be helpful to have external persons involved in the new review process. If this will best serve the interests of openness and transparency, then I will say right now that I'm happy to agree to this and to have a role for independent experts in the final review process that will be rolled out in April. I hope this demonstrates convener in conclusion that neither our minds nor our doors are closed to stakeholders' views. We will continue to engage and we will continue to listen. I am happy to take any questions and, because I should say of the nature of the complexity of some of the regulations, my officials stand ready to answer the really hard ones. Thank you minister. I know that members have got some questions that I want to ask about some issues of detail. Can I just, before we do that, pick up on the general observation that you made about consultation, because we have had, as a committee, submissions from ICAS, from R3, from the Law Society and from Step Change, Dead Charity Scotland, all of which have a common theme, expressing concern about the rapid production process of these regulations and the lack of proper consultation on the detail. I think that all of these submissions make similar points about the manner in which consultation was conducted. There were stakeholder events held but they felt that the opinions that were expressed by stakeholders had these and, despite the general support for those, they were not reflected in the regulations as finally drafted. There remain very detailed and specific concerns about some of the measures here. I heard what you had to say earlier, but do you not appreciate that there is quite a lot of concern amongst the stakeholders here about the manner in which this has been brought forward? Yes, of course. I do understand that stakeholders have concerns and we work extremely closely with them. I think that the committee is aware of that from our extensive working together over the past three years on these matters. We are always keen to consult, to share views, to listen at the end of the day, though we have to decide and we have to implement the acts of Parliament. We passed the law. It is there for a purpose. The common financial tool will end the disparity of having different measures of assessing how much debtors should pay by way of contributions to their income. It is ludicrous that we have in Scotland different systems for calculating contributions from income because, inevitably, by definition it leads to disparities and discrimination and therefore the policy of this Parliament conveners to get on with it and to implement a new system, which is fairer to debtors. That was manifest in the discussions in Parliament. However, I want to take each point in turn because I am not satisfied that there is any real substance in the criticisms that we have heard. I have gone to some lens to look at myself and study, personally, the precise criticisms that were made by the stakeholders, including step change, who carry out, I may say, a terrific amount of good work in Scotland, helping tens of thousands of debtors. Their views plainly come from the cold face of this work and deserve to be taken very seriously. Let me turn to some of the specifics. The IAB has consulted extensively in the development of these regulations. The IAB has convened working groups, the CFT working group, the business das working group, the notes for guidance working group. It is difficult to see how many more working groups you could possibly establish in such an area, but we have had bespoke working groups for each significant area of work. Also, the IAB has consulted with the Charities Regulator, the Scottish Civil Justice Council and the Scottish Court Service. The IAB has also shared drafts of some of the regulations with members of the working groups and made significant changes as a result of that engagement. I think that there are worse specific examples of the precise detail of which I have forgotten, but I am sure that, if members wish to know, we can demonstrate some of the changes. I alluded to one of them in my opening comments. The IAB also held a series of stakeholder events in Glasgow, there were two in Glasgow, one in Edinburgh and one in Inverness. It is important to note that attendees at these events were entirely free at those events, convener, to ask whatever they wanted. The stakeholder events did lead, I think, to significant influence in the drafting of our approach. I am happy to do my best to answer any points of detail, but the concerns expressed by the stakeholders are perhaps a factor of the reality that they are all concerned as we are to do our best for those in debt in Scotland and also to balance their interests with the rights of creditors. The ICAS, R3CAS, Step Change and others care a lot about what they do. We respect that, they have a vital role to play and we work very closely with them, treat their views with respect, but at the end of the day we, the Government, we must decide and we take the responsibility for that. I know that some members have questions, so I will start with Dennis Robertson and then bring in Richard Baker. Thank you, convener, and good morning, minister. Maybe just coming to Citizens Advice Scotland, one of their concerns, I think, was with regard to section 4 and with regard to those that provide money advice. Obviously, they are accredited, but there seems to be some concern around the gathering of certain information and whether or not they will be able to do what is asked of them in terms of gathering the information that will be retained maybe for two years, given the chaotic lifestyle of some of the people that they are actually charged to provide advice for. My understanding is that it is a mandatory requirement. If that is the case, do you not think that we are actually making it very difficult for them? Because if they are unable to do that, my understanding is that they could be suspended as money advisers and therefore that would have a significant impact on them as individuals, obviously, but perhaps on organisations too. Well, I think that there are two points. First, in relation to Cass's concerns that money advice and debtor contribution regulations give the IB powers to revoke or suspend the approval of a money adviser, I think that was the point that Mr Robertson, convener, finished with. To take that point first, the IB would not revoke an adviser's approved status without notification, representation and the right to review that in court. You will recall, I think, convener and other members, that one of the issues that we discussed in the process and the discussion on the bill was that there must be a right of appeal that they were concerned about some of the processes. I made the point that, in principle, there is always a right of appeal or review, and therefore the idea that there is a sort of overprescriptive or draconian power needs to take account of the fact that that is subject to a right of review. Secondly, in relation to the detail of the evidence, we have been perfectly clear all along that the regulations would be developed on the basis that money advisers should already be compliant with the existing requirements under the type 2 Scottish national standard for information advice providers. In particular, the requirement for advisers to, quotes, collect information from client social security tax credit sources, which enables an accurate multiple benefit tax credit check to be done manually or in computer and details kept on file. That being the case, there should not be any difficulties as the evidence gathering requirements are unlikely to change significantly from what is already a current practice. Regulations 3, 3 and 3, 4 provide for discretion in the consideration of income and expenditure. Regulation 3, 11 specifies that those using the common financial tool must have regard to guidance issued by the accountant in bankruptcy on matters relating to treatment of types of income and expenditure, how income and expenditure are to be verified by the money adviser and trustee, and the conduct of money advisers in carrying out their functions. There is discretion built in. The powers in relation to suspension are subject to a right of review, and they would not ever be exercised lightly. Of course they would not. Those are extremely serious matters. Some of those matters, I apologise, are extremely technical, but they have been considered in detail and I think dealt with in a satisfactory and fair fashion. From that minister, I think that I am gathering that you are satisfied with the procedure at the moment that is actually in place because of the requirements of gathering particular information, and obviously there are many routes available for that collection of information. However, it was just on the aspect of people's chaotic lifestyles sometimes, that there could potentially be still that problem of gathering that information. If it is a mandatory requirement, it does put the money adviser in quite a difficult position. Are you satisfied that there is enough flexibility in there to look at that and to say that everything possible has been done that could be done, so therefore we are satisfied? Yes, I am so satisfied. There is flexibility built in, and these are not new issues. You are quite correct, Mr Robertson is quite correct to argue that it can be extremely difficult to obtain evidence of income and expenditure from those who may have, for example, chaotic lifestyles. These are practical difficulties. Those involved in doing the work and money advisers are well acquainted with those difficulties. This has always been a practical matter that has to be dealt with, and it will continue to be dealt with with a degree of flexibility that is required. One of the questions that we raised was raised with the implications for compulsory money advice on the free money advice sector, and it was agreed that the Government would conduct research into that. I just wonder what has been the outcome of that research and how, given the flexibility and the complications of trying to collate information exactly how we intend to control the free money advice sector in the circumstances, what research has been done and what has been the outcome? Clarify the research into what exactly I am sorry. The impact of compulsory money advice centre on the free money advice sector. Will the accountant of bankruptcy am advised on behalf of the Scottish Government in conjunction with members of the money advice sector will develop a research framework that will allow the Scottish Government to monitor the impact of the new legislation? Once the findings of this research have been reviewed, the Scottish Government will consider whether any changes to the legislation or associated guidance is necessary. I thank you Minister for that, but you are saying that they will conduct research. I can only assume that this research has not been started and when the guidelines are issued in December that we may be missing that important factor. Well maybe I am misunderstanding the member's questioning but because we are six months away from the implementation of the new provisions by definition there cannot be any analysis of how it is performing. We are working extremely hard to prepare the way for the regulations that are before you today for the guidance that has been brought forward and will be shared with stakeholders as soon as possible, some of it later this month, but it is not yet in place. Obviously no assessment, no research can be carried out into how it operates, so that will be something that we will look at very carefully after the provisions come into force and the system comes into effect. I have every confidence that the accountant of bankruptcy will perform her functions in respect of the implementation of the bad-ass bill, as it is known in the street, just as effectively and competently as they perform all their other functions. We are extremely fortunate in Scotland to have in the accountant of bankruptcy a very highly motivated and effective group of public servants who do a terrific job in handling quite difficult and sensitive matters. I acknowledge the broad support there is to the general direction of policy in this area, but you mentioned the submission that we have had from ICAS. They say that they have taken part in the working groups, and it is welcome that you have established working groups, but the point of the matter is that they say that the comments that they have made through their consultation events and working groups have not been acknowledged or properly addressed by the Scottish Government in these regulations. They feel that the impact regulations would be to make the debt arrangement scheme a less attractive debt management solution, which would seem to me to be counted to where we should be going with general agreement in terms of the policy area. ICAS has recommended that we consider the rejection of all the regulations at this stage, but I am also looking at the submission from step change that you mentioned. Now, they, instead of asking for a more realistic timetable for implementation, for more consultation, what they say is proper consultation and detailed guidance, and not only within the working groups, but have also asked that amended regulations should be drafted if these proceed. Is that something that you would consider? Well, we think that it is important that these regulations are passed today, and that is why I am here. First of all, if I could just respond in relation to the general point that Mr Baker makes in relation to ICAS, and I think other stakeholders too, and it is simply not the case that the IB has ignored the views of the working group. In fact, the IB has made a number of substantive changes to the draft regulations on the basis of the working group's feedback. They have listened and they have responded, and these have included, and I have got eight specifics. I will share this note, which is eight specific examples, convener, but because I do not think that the time should be taken up, perhaps, with ultra-technical matters, but these are highly specific points that were put to the IB as criticisms by the stakeholders, and I can give you eight specific examples of changes that were put to the IB and adopted. I think that the general charge is not really valid, and the impact where we are not to pass these regulations today would mean that we would not be able to go on with providing the benefits of the changes that we need to make. The IB has worked extremely hard to provide as much time as possible for training and familiarisation of these changes before they are brought into effect, and specifically in terms of timing, the regulations were laid in August in order to give the sector early sight of them, convener. It is not always the case that the regulations are consulted upon in this way, but the fact that they have been brought forward, I would hope, would be taken as a sign of the good faith of everybody involved. The IB has allowed more than seven months between the laying of the regulations and they are coming into force. By comparison, in 2011, the DAS regulations came into effect only four months after they were laid, so these regulations are almost twice as long for the sector to familiarise themselves with the changes, many of which are of a sort of technical and clerical nature in respect of forms and so on, which are completed by email electronic means in any event, but seven months to prepare does seem to me to be a reasonable time to prepare. I therefore feel that perhaps they doth protest too much. The point that I am making is absolutely from my cast, if the regulations go through unaltered, it might make that arrangement a less attractive option. I assure you that that cannot be what the Scottish Government wants. What would really be the detriment in taking back the regulations now, taking on board these very practical concerns, which they say will make a very real difference to the scheme, and resubmitting them once these points have been taken on board, or is it the fact that you just do not agree any changes should be made, Minister? I was just consulting with officials here, and I might actually, with your permission, bring in Clare Orr, because I do not think that Mr Baker has actually specified precisely why I cast Think that DAS will not work or will not work effectively. Perhaps— Submission, to be fair, Minister. I mean, they have laid out a number of different concerns. Well, you have said what the basis of their argument is, but perhaps Clare Orr could do so, and say why we do not accept that. If that is the order, might help us to get to the nub of things. I think one of the issues was around about the five-year limit on the repayment of the debt, and we deemed that that was appropriate because bearing in mind that this is not an insolvency solution, there is a requirement to reach an agreement with creditors about what is reasonable, therefore it would be fair to set a limit on the time that was available for the repayment. I think that was probably the main issue. There was also an issue about all debts having to go into the debt payment programme, and this is an issue that we are actually changing for all of the debt arrangement schemes, which ensures that we do not create any unfair preference for any other creditor, so all of the debts are included. However, the caveat that we have made for that is that that would only be the case where the debt had been constituted as being due, therefore it did provide sufficient flexibility if there was an arrangement with suppliers, for example, for continuation of supply of stock, then that would continue to be possible because the debt would not have been called up as being due to be paid, and therefore that could be excluded. We think that we have addressed the main points, which I suggest make the scheme not an attractive option by making those changes. It is true to say as well that the current debt arrangement scheme was a very slow-starting solution. In the first couple of years of its operation, there were not significant numbers, but if you look now at the growth of that solution, there are over 4,500 applications per year. It has grown year on year, and that might be what we would expect to happen with this solution as well. Thank you very much for that answer. Finally, convener, clearly there is a disagreement here between ICAS and Ministers over the impact regulations, and they also, in their submission, which you must have had Minister, have concerns of what they call the inappropriate regulation money advisers, which relates the points which Mr Robertson made earlier. Can I just be clear that if these regulations proceed today, you do not have any intention to amend them further if you have consultation, as you said you would do, which is welcome, with stakeholders subsequently to these regulations being passed otherwise. You have no intention of bringing forth any amendments to regulations in the likes of any consultation. Obviously, we will keep matters closely under review, but we do believe that we have listened carefully to the individual points of stakeholders. I have a lot of detail here about individual points that ICAS has put, and the responses there, too. We do think that the regulations, as proposed, will do the job. I would remind Mr Baker that DAS is one of the most effective tools that there has been in the whole process of debt management, the process of encouraging the payment of debts by ordinary individuals, has been a great success story in Scotland, and I looked from my friend south of the border peering over Hadrian's wall with some envy about how well it has done. I should say that Mr Baker's party, when it was in administration, brought it in, and we have developed and worked on it to approve it. I think that about a decade of performance has seen it work extremely well. I do not think that there is any reason to suspect that the success of DAS will be impeded in any way by these regulations quite the opposite. The common financial tool will introduce fairness and consistency, something that has been lacking in the current system with a plethora of different options. I take Mr Baker's point very seriously. Of course, we will continue to listen carefully to ICAS. Of course, they will continue to serve on the various working groups that I have referred to and in bringing forward the guidance. The guidance convener, as you will know from the solvency work in the past, deals with nitty gritty practical points and always has done. In bringing forward the guidance and in adjusting the guidance, of course, we will listen extremely carefully to the opinions of ICAS and R3 on behalf of insolvency practitioners and predictioners in Scotland and rightly so. Good morning, minister. One of the things that the committee was very impressed with during our scrutiny of the bill was the inherent flexibility that is built into the common financial tool to take account of different circumstances. However, a point that has made both my step change and citizens advice Scotland is a concern that has maybe got some merit, and it is a concern that the common financial tool has sufficient flexibility to allow them to continue to encourage their clients to undertake an element of saving, to build up some small savings, to provide resilience for them and enable them to weather the kind of storms that they may have to do financially, but while still maintaining payments and so on. Can you reassure us that the common financial tool has that flexibility to allow them to encourage their clients to save a small amount and ensure good practice in that regard? Yes, I can. Mr McKenzie gets to the heart of matters, not for the first time. There is discretion and flexibility built in. I look very carefully at the step change criticisms. I obtained a detailed response from officials. I then obtained a supplementary response to a whole set of questions that I had about this specifically to identify precisely where that flexibility and latitude is built in. For the record, in relation to details of the evidence required, the regulations 3, 3 and 3, 4 provide specifically for discretion in the consideration of income and expenditure. Regulation 3, 11 specifies that those using the CFT must have regard to guidance issued by the accountant in bankruptcy in relation to prescriptiveness of triggers, which was a specific point raised both by step change and ICAS about the effect of Parat regulation 3, 2. The responses that regulation 3, 3 provides for expenditure, which exceeds trigger figures if satisfied expenditure is reasonable. Again, there are in the regulations convener—I have just given a few examples—specific provisions for latitude, flexibility and reasonableness. This is correct because it is quite impossible to have entirely prescriptive regulations that allow no flexibility because there are so many different situations that occur in real life out there. I am very pleased that Mr McKenzie has raised this important issue. I am satisfied that there are built into the regulations sufficient discretion, latitude and flexibility to allow money advisers to do their job properly and fairly. Above all, it is not us, the money advisers. ICAS, we are concerned about, is that people involved get treated fairly. That is the aim of the common financial tool to make sure that people are not required to pay more than is fair or reasonable, but they are required to pay a sufficient sum towards their debts as they are able to do according to their means. I believe that the regulations provide the necessary flexibility that is needed. Section 8 of the money advice and deduction from income regulations applies to deductions from debtors' earnings. Is it the case that the regulations allow for earning deductions after two payments without the requirement for the debtor to be informed in writing? Citizens advice and their submissions speak about an unexpected family death, for example, could involve funeral costs. For a debtor to end up without his or her knowledge with earning deductions, it does not seem characteristic of something that we want to be seen as a financial health service. If your earnings are reduced with an unexpected deduction and you have not been informed in writing, it could put you in a very serious position, which seems at odds with the drive to make this a financial health service. I think that we debated this, did we not, in the passage of the legislation as to what a reasonable system was. I thought that the solution that we came up with in the primary legislation was reasonable, but in terms of the specific provision, I am asking if Clare Orr could address the specific points that have been put here with permission. We are very happy to build into the guidance, the reinforcement of the safeguards that are in the legislation, which provide for that measure only to happen after there has been two missed payments. We looked at what is currently happening in protected trustees, where there is already the ability to deduct directly from earnings. What the practice is is that it is happening at the outset with the debtor's consent, and that suggests that the debtor finds it helpful for that arrangement to be put in place, because it means that they no longer then have to worry about making that on-going arrangement themselves. However, we do understand the point that Cass is making, and we are very happy to ensure that the guidance reflects appropriate procedures for that. I think that we will write to you on that, because it is a very fair point. I am concerned to make sure that we get it absolutely correct, as we will do, but to make sure that that is the case, we will write to you after we have made progress on the guidance. Just a very brief point, minister. With reference to the guidance, from my understanding of what you said this morning, that you will be taking on board some of the concerns that are still out there, and that will be reflected through continuing a working relationship with the various working groups. That will eventually be reflected in the guidance, taking on board what you can, from the concerns that have been raised. The flexibility that Mr Mackenzie was referencing to the financial tool, all that will be very implicit in the guidance. Yes, I can give you that assurance. I think that the general response is that a draft of the guidance document in relation to the common financial tool will be shared with stakeholders during this month, in October. I was just looking for the precise document that set out step changes concerns, which I think alluded to December as being the time when they would get sight of this, but in fact I queried that because I thought perhaps a little more notice would have been required and I was advised that a draft of the guidance document will be shared with the common financial tool working group of which step changes are made during this month. That will allow time for discussion. I will personally, because of my interest in making sure that we get the guidance correct, take a very close interest in this convener. I am very happy if members so wish to undertake to report back on the issues that members have raised in the course of today's proceedings, because we take them very seriously. However, there will be a lot of time for joint working in relation to the common financial tool, because it is absolutely essential that the guidance is correct. I apologise for my coughing interludes. Just associated with perhaps not a question for you, Minister, but for one of the officials, we are advised in the briefing that, in fact, we had part of the conversation in the bill, that the electronic application would reduce the administrative burden because the user would only visit pages appropriate to the individual customer based on whatever information was provided. The implications of the briefing we have is that there has not been sufficient time and resources for training before implementation. Is that the case? If so, how do we intend to recover the whole need for training as a catch-up? Well, the AIB has worked pretty hard to provide as much time as possible for training and familiarisation. I have alluded to the fact that the regulations were laid in August in order to allow the sector early sight of them. I have alluded to the fact that there will be seven months before they come into force. The AIB is developing a training programme which will include awareness sessions to be delivered at various locations across Scotland. The AIB will upload training videos and instructions on their website and they are building a training system which will be web-based and will allow users to log on from their offices or homes to try out the system. The AIB will be training business champions from amongst its own staff who will be able to visit individual offices to conduct training sessions if required. Therefore, the AIB is fairly well advanced in this matter. It is a perfectly legitimate concern, but I am satisfied that the AIB, in accordance with its customary practice, is focusing clearly and well on the necessity of providing the tools that are required for the practitioners to continue to do their job professionally. Can I maybe just ask, lastly, in relation to the negative instruments that we have before us minister, we had a report from the Delegated Powers and Law Reform Committee in relation to two of those instruments, the Bankruptcy Scotland Regulations 2014 SSI 2014 225 and the Bankruptcy Fees Scotland Regulations 2014 SSI 2014 stroke 227. In relation to both of those, there were a number of drafting errors drawn to our attention by the DPLR committee and failures to follow normal drafting practice. I wonder if you have any intention of resolving those errors, for example by bringing forward amended instruments in due course. I am happy to agree, as the Delegated Powers and Law Reform Committee asked on Tuesday, that we will make the further amendments to the Bankruptcy Scotland Regulations 2014 and Fees Regulations, which the committee asked for last week. I would stress that the DPLRC did not consider those points defective drafting, but noted that changes would provide better clarity and consistency, and no adverse consequences would have arisen from any of those points, but the necessary amendments to deal with those matters shall be brought forward. Okay, there are no other points to make. We can move on to the next item on the agenda. We move on to item 4, the formal debate on the affirmative instruments before us. I wonder if I could invite you, minister, if you would formally move the four instruments S4M11068, S4M11069, S4M11070 and S4M11071. Thank you, minister. Do any members wish to speak in relation to those motions? Thank you, convener. I would like, first of all, to say that in reading the written submissions from the various interested parties, I was struck that a number of the submissions were not dealing with those instruments that are in front of us today, but revisiting a number of issues that we dealt with in our scrutiny of the bill. Although it was good, I suppose, to be reminded of some of that scrutiny, I think that a lot of what they were concerned about is out with the scope of what we are talking about today. However, I do think that it is worth the committee reminding ourselves that our feelings about the bad-ass bill were benign. We felt that it was a good bill. It was well-disposed to debtors and to creditors, and the AIB, I think, have shown themselves to be well-disposed to debtors and creditors. I would like to just place on record my own thanks to AIB, because in dealing with some constituents' problems, I found AIB to be refreshingly helpful and predisposed towards helping debtors who were in difficult situations and exploring innovative ways of doing that. I am assured that AIB is well-disposed. That is not something that you get a proper sense of in some of the written submissions that we have received. I am particularly struck that the written submission for my cast seems to me to be a situation whereby they are looking into the shadows and seeing bogeymen and monsters, which may in fact not be there. I think that when I read these instruments, I do not really see any shadows. I see one or two perhaps grey areas, and I think that those grey areas will be resolved when the guidance is available. I am delighted that the minister is saying that, as I told him this morning, that that guidance will be available very shortly. I hope that that will put some of the fears to rest that we have heard from some of the respondents. I am very pleased by the minister's reassurances this morning. I think that there is an urgency. We need to get on and implement this sooner rather than later. I think not least because the UK Government, on related matters, seems to have moved very slowly, for instance, to deal with the matter of payday loans. It seems to me that, although it is eventually moving in the right direction, I hope that it has taken rather longer than any of us would have hoped to do that. I think that there is all the more reason that the Scottish Government gets on and implements those as soon as possible. I urge all members to vote in favour of the motion this morning. Let's get on and ease the burden on debtors and provide a better service also for creditors. I acknowledge the broad support for the overall policy direction in this very important area for helping people with serious money financial issues. The minister was quite right to praise the debt arrangement scheme. That is why I think that it is very important that we take seriously the views of ICAS, so, after all, we have great expertise in this area, which has a long history of working with the Scottish Government in this important area of legislation, which says that they fear that those proposals may make the debt arrangement scheme less attractive. I will take an intervention from Mr Mackenzie. Do you welcome, as I do, the proposed extension of the debt arrangement scheme to include small businesses, sole traders? Do you feel that that is a step in the right direction? The point of the matter is that ICAS have addressed those issues in their submission. They have highlighted a number of concerns about the regulations that have been brought before us. I think that we, as a committee, should take those very seriously. Indeed, a number of the issues that they bring forward are also brought forward by the Vice Scotland and the debt charity. I think that they must be listened to. My fundamental point is that I want to welcome the fact that the minister said that he will engage in further consultation in the event of those regulations going through. I know that he will do that. I hope that it is taken forward seriously and that people are not only consulted but listened to. The concerns that he has expressed are seriously addressed, but I fail to see, convener. I think that that is my fundamental point. What would have been lost actually? This is where I depart from Mr Mackenzie's point. In taking those regulations back at this point, we are drawing them now and actually going into further consultation, further dialogue, materially addressing those concerns. We do not have this level of concern brought to us in submissions at the committee at this point. I think that, from my point of view, that simply would have been a better way for the Scottish Government to proceed. Dennis Roberts. I am reassured by the statements that the minister gave earlier with reference to guidance and his assurance that he will be listening and continuing to listen and take on board submissions from all parties. As has been done, I believe, through this whole process and certainly when the committee was taking evidence, we looked at the issues thoroughly during that period of evidence. I am very content that the issues that are raised by Mr Baker can be dealt with through the guidance process. I am content that we have had that reassurance from the minister today. I wish to contribute. For my part, I have some sympathy with Mr Baker's point. Having read the submissions, there are some strong expressions of concern about the lack of consultation in relation to the preparation of the instruments and the way that they have been brought forward. I think that the minister should reflect on that. Minister, I invite you to respond, if you would. Thank you. I am grateful for the member's contributions in the debate and working together with the committee to scrutinise the legislation as an essential part of bringing it forward in the best way. I would reiterate that we will continue to consult in extremely detailed fashion with all the stakeholders. We place on record the fact that we respect the work that they all do and value that work. Therefore, we have changed the regulations in a number of ways, and I will specifically write to the committee to demonstrate that we have done so and a number of technical matters. We have consulted with the stakeholders, with the draft regulations, with three working groups. We will bring forward the guidance in draft. They will have seven months to consider it. Those seem to me to be the way that we should proceed with Government and a reasonable performance in relation to fairly technical matters. On the wider issues that have been raised by members, I am very grateful for Mr Mackenzie's remarks. I am sure that Rosemary will be pleased to hear them. I will make sure that she is made aware of them. Her staff, who do an excellent job, will receive recognition from Mr Mackenzie for the work that they do. I hope that the wider sector will also acknowledge the good work that the AIB do. I think that it is time that we move forward and recognise that these public servants are, as Mr Mackenzie rightly says, doing a very difficult job in highly sensitive cases in an effective way. Indeed, it is effective in terms of the financial operation of the accountant and bankruptcy. That is an example of sound and effective public administration. I am very grateful to Mr Mackenzie for those remarks. I think that, convener, the objections have been over-egged slightly by ICAS. I have to say that. We are, to some extent, revisiting arguments that were fully debated and discussed during the passage of the legislation. I do not think that that is why we are here today. I do not think that it serves any purpose. Be that as it may, we will continue to listen carefully to what they say and to respond as appropriate. The last thing I would say is that, over the period of the referendum, I had the opportunity to have fairly detailed meetings with the Citizens Advice Bureau. I am hugely impressed by the work that they do to help the people that have leased in society. The problems out there in relation to benefits are appalling. The delays are not as a result of any failure in the part of public officials in Scotland in administering. In particular, applications for benefits related to disability are utterly scandalous and causative of very real hardship. Therefore, these matters are not just words on a page technical matters but are extremely important for people who face enormous financial hardship, the like of which none of us in this room, I suspect, are familiar with, are extremely important matters. I am seriously concerned about the administration of benefits payments in Scotland. I am seriously concerned. It is frankly shambolic and the UK must take steps to deal with that. I just mentioned that because this is directly related to the issue of debt and it should be said. Finally, in relation to the purpose of the regulations and the legislation that we passed in 2014, we want to see a financial NHS in Scotland. That is why we are getting on with this. We want there to be a financial NHS so that young people in Scotland increasingly can be more effectively educated about how to manage their money, and they are not falling prey to the sharks involved in some of the excessive interest charged in money lending activities and payday loans, which, for far, far too long, were left almost entirely unregulated. Despite the fact that the very first debate that I did, Members' debate, was on payday loans in 2011, when Margaret Burgess brought her enormous experience to bear in this topic in 2011. It took three years for the obvious steps to be taken, and these have seriously exacerbated the problems that money advisers and citizens advice bureau face. They deal at the sharp end with hugely difficult cases. Many, many human tragedies underlie all these statistics. I am very pleased that we are doing something good today, convener, and I very much hope that Members will support these regulations. The first question is that motion S4M11068 be agreed to. Are we all agreed? Agree. No. There shall be a division. Those in favour of S4M11068, please show. One, two, three, four, five, six. Those against, please show. Any abstentions? Okay, so that is agreed. Second question is that motion S4M11069 be agreed to. Are we all agreed? Agreed. Okay, there will be a division. Those in favour, please show. Six, those against, please show. Abstentions? Okay, so that is agreed. Third question is that motion S4M11070 be agreed to. Are we all agreed? Agree. Okay, so that will be a division. Those in favour, please show. Six, those against, you know. Abstentions? Two. That is agreed. And the fourth question is that motion S4M11071 be agreed to. Are we all agreed? Agree. There will be a division. Those in favour, please show. Six, those against, and abstentions? That is agreed. Now, can I ask if the committee are content that the convener and clerk will produce a short factual report of the committee's decisions and the range to have it published? Agree. Thank you. Okay, now we may now move to item five, which is consideration of three negative instruments, the Bankruptcy Scotland Regulations 2014, SSI 2014-225, the Bankruptcy Applications and Decisions Regulations 2014, SSI 2014-226 and the Bankruptcy Fees Scotland Regulations 2014, SSI 2014-227. The minister previously indicated that action would be taken in relation to the drafting issues identified by the Delegated Powers and Law Reform Committee in relation to two of those instruments. Do members have any substantive issues that they want to raise other than that in relation to these, or are they content simply to note the instruments? Content. Content to note. Okay. Thank you very much. That concludes that item of business. I thank the minister and his officials for their attendance, and we will have a five minute suspension. If we can reconvene, I would like to welcome our next panel witnesses as we move on to draft budget scrutiny for 2015-2016. In fact, this is our first evidence session in relation to the draft budget. I welcome, joining us this morning, we have Ian McTaggart, who is general manager and company secretary at the Scottish Council for Development and Industry, James Withers, who is chief executive of Scottish Food and Drink, Stephen Boyd, assistant secretary of the Scottish Trade Union Congress, and Gary Clark, head of policy and public affairs, the Scottish Chamber of Commerce. Welcome to you all. We are slightly unusual place in relation to the draft budget scrutiny because the draft budget has not yet been published. However, I think that we are expecting that tomorrow. Just because of the way the timetables for parliamentary business have worked out, we are starting our scrutiny a little bit before the budget is published. I am grateful to you all for coming along this morning. I think that we will allow up to about 90 minutes for this session. If I can remind members if they would to keep their questions short and to the point, and answers as short and to the point as possible would allow us to get through the topics in the time available. Because we have a quite large panel this morning, I think that rather than people just ask their questions generally to all panel members it would be helpful if they could perhaps initially direct them to one member of the panel. If you want to come in in response to something asked to another panel member, if you just catch my eye and I will bring you in as best I can and as time allows. I wonder if I could just start and put a question to you all. I will maybe just start with Ian McTaggart and work away along. We have not yet seen the Scottish Government's budget, but it is being published tomorrow. From your own perspective and the view of the sector on interests that you represent, what are the key features that you would like to see in Mr Swinney's budget tomorrow? I would like to start with Ian McTaggart. Yes, thank you. I think that SCDI would be most interested in any measures that support sustainable economic growth in probably under three broad areas—measures that support greater innovation and R&D exploitation in the economy, including commercialisation of the research—the excellent research that we have from the university base in Scotland. The second area would be around productivity and skills. The third area would be infrastructure and connectivity, which is probably one area in which we feel a lot could be done to support greater connectedness within the economy and connectedness with the markets that we are trying to serve. Measures that support aviation services around road and rail links, connecting Aberdeen in a much better way to the rest of Scotland, and our links with the key London airports and the key international hubs around Europe. Those will be initial thoughts. I agree with what Ian McTaggart says, so I will not add anything in terms of cross-sectoral issues. From a food and drink perspective, the model that we have in operation in Scotland now is quite a neat one. Actually, I think that other countries are now starting to replicate where we have some good industry leadership within public sector alignment behind it. We have all the sectors of food and drink from whisky, red meat, salmon and seafood to bakery and dairy agreed on a single growth plan. We have a £16.5 billion target set for 2017, and we are clear on what the capability building areas are that we need to invest in. It would be similar issues that Ian outlines about innovation, collaboration and the skills agenda as well. From our perspective, market development is absolutely critical. We think that there is at least £1 billion of growth in food and drink for Scottish companies in the UK market and about £1.4 billion to be called international markets. The export agenda in particular is a transformational opportunity for food and drink. There is a new export plan in place and we have a partnership where an industry is putting some money on the table, which has been matched by SDI, and we are looking at ministerial support, which we have in principle for the delivery of that. There is quite a clear framework in terms of where we think that we need to invest money. I would say that a huge amount of investment has gone into food and drink capability building measures over the past few years and is paying off in terms of the growth that we have, so it is more of the same as our message. The SDC is a slightly different kind of organisation and we have a range of our interests covering the full gamut of what will be published tomorrow. I will try and confine myself to comments that this might be interested in and that I personally might know something about. I am happy to endorse the comments that Ian and James have already made. Clearly the funding of economic development in Scotland is much a priority for the SDCs as it is for those other organisations. I think that where we might have a particular perspective is maybe around about, you know, if you look at what is happening in the labour market at this moment in time, we see employment higher than we might have anticipated given what we have been through over the last few years, but we have seen a historically unprecedented collapse in real wages, so whatever the Scottish Government might be able to do through the budget to support wages in Scotland I think would be very helpful. I think it is interesting that two things, one, the white paper contained some very interesting proposals about the management of the labour market in Scotland. It will be interesting to see which of those the Scottish Government might want to pursue under the current devolution arrangements. Secondly, ourselves and the Scottish Government published the joint working together review a couple of months ago in August, which we see has been a very important development. A development that requires, I think, some funding through the budget to make the proposals work. I think we are talking probably very small sums in the grand scheme of things in terms of the Scottish budget, but if unions, employers and Government are going to work more closely together to support innovation, support higher productivity, then some budgets might be appropriate, I think, to implement there, so that would be our priority. Okay, thank you. I'm Gary Clark. Obviously, the central purpose of the Scottish Government is to support sustainable economic growth, and we would expect measures aimed towards that. I think that, importantly for us at a very important time in the economic recovery phase, we're looking at measures that will support business investment, we're looking at measures that will support business growth particularly. I think that there's a number of ways that the Government could tackle those, particularly supporting business-to-business connections both in terms of internationalisation and in terms of business support are key areas, tackling business costs. Obviously, business rates are one of the main taxes there. Obviously, there will be other taxes this time around in the budget. Supporting and continuing to support the investment that has taken place in our infrastructure, particularly transport infrastructure over the past few years. We won't see that continuing, we won't. I think that it's an opportunity for the Government to tackle. It's got a lot of the big ticket items under its belt. It's time to tackle some of the smaller areas that have very important impacts on particular local areas across Scotland. Okay, thank you. Just before I bring in Dennis Robertson, I just want to ask a follow-up question that I can. Both James Withers and Gary Clark mentioned internationalisation. That's an issue that the committee is very interested in. In fact, we've already signalled, we'll be starting an inquiry later in the year into internationalisation of Scottish business, how we grow the export market, how the Scottish Government and its agencies might assist with that. Thinking specifically about the budget, are there any specific budget measures that you would like to see that you think we'd assist with helping to internalise internationalisation of Scottish business? During my response or introductory comments, I think that focusing in on those key business to business connections, whether that's mutual support for businesses in Scotland or whether that's connecting Scotland directly with businesses overseas, making better use of both outward and inward trade missions and ensuring that, essentially, when you look at the figures, not enough Scottish businesses are exporting at the moment. One of the primary reasons that they give for that is that they don't believe that their goods or products are suitable or services for that matter are suitable for the export markets. We would certainly want to see more business connection within Scotland to help businesses to understand the full potential of what they have to offer and help them to make those first steps into exporting, because we believe that there's significant untapped potential within the business community in Scotland and, in particular, SMEs in that regard. More money towards business support and advice is what you're talking about? Certainly, it needs a higher priority than it probably has at the moment. Business to business support is, in terms of what our members tell us, often the best way of doing that, because that's how they learn by example. The key currency for the food and drink sector in terms of exporting is confidence. How can you build that confidence? We've looked at other countries that traditionally have been better than Scotland at exporting food and drink products. There are the likes of Ireland, New Zealand and Denmark. One of the key things they do is put what they call feet on the street on the ground in key local markets. We have an SDI network across 25, 27 countries around the world. One of the challenges that SDI has is that an individual might be based in a Tokyo office doing food and drink on a Monday, then his life sciences on Tuesday, advanced engineering on Wednesday. We've got a lot of generalists out there. They do a great job, but we need real specialism, so the plan that we've developed and put in place will put dedicated food and drink specialists on the ground in those key markets. That's what our competitive country has done for a long, long time. That's absolutely critical. It's a case of support of companies back home. Inward trade missions are really important and in some ways are just as valuable as the outward trade missions, but then it's really what industry needs to do for itself, and that's around the collaboration agenda and getting companies to work together. I certainly couldn't speak for other sectors, but in our sector we're starting to see a real transformation in that. The increased thinking about internationalisation very much changes companies' attitudes towards collaboration as well, so they cease to see the company around the corner as their competition and consider that actually it's a company on the other side of the world. Companies working together and sharing expertise and knowledge is going to be critical and any structure that can help facilitate that will be important, but for us it's about building real specialised market knowledge on the ground in key markets, and then us bringing that market knowledge back here. We're here to discuss and I would want to endorse that that's one of our key priorities and in terms of budget measures, anything in the business support and business growth trajectory that helps to introduce companies to internationalisation principles at the earliest stage would be welcome. Also measures to really create much enhanced collaboration between government and private sector in terms of pulling our resources, our knowledge and expertise. There's a lot of great work going on, it's not communicated as effectively as it might be, and if we collaborate even more intensely, as has happened in the food and drink sector between government and the industry, I think that there could be some real benefits, tangible benefits to the economy. I'll bring in Dennis Roberts next. Can I just remind members that we are here to do budget scrutiny so that we can try and tie our questions as best we can towards budget and financial issues? Thank you very much. Maybe Mr Withers first, some very impressive figures you were quoting at the very beginning in terms of the potential there in terms of sustainable economic growth. If we focus on the export market, we've seen a slight decline within the whisky sales, for instance, recently, because there's obviously other global pressures. How do you think that we can utilise, for instance, Scottish Enterprise or other factors and resource that so that we can turn around some of those other aspects that impinge on a successful export market in terms of Brand Scotland? That's primarily what we'll be trying to move. There's probably two elements to that for me, Dennis. One is around spreading our risk. The export figures for food and drink are fantastic and up 50-odd per cent since 2007, but they mask some real challenges. The numbers are dominated by whisky, but if you look at markets and food exports, 80 per cent of our business is in Europe. Europe's had a tough time last year in France and Spain, so we get disproportionately hit. The whisky model is where we want to be moving to, so they have about a third of their business in Europe, a quarter in Asia, a fifth in North America, and the rest spread beautifully across the rest of the world. If you look at our food exports alone, half of it is accounted for by just one sector seafood. We need to sell a broader range of products in a broader range of markets. How do we do that? It's partly about a joint industry and government investment in these key emerging markets, but it's also about using the platform that's been created by industries like whisky. They have a good foothold. Their selling point is really about quality, premium product, very simple ingredients with heritage and innovation. Those attributes work very well across other food and drink sectors, but they also work very well across tourism, across textiles, so it's developing that brand Scotland approach across a number of different markets that I think will be key. We'll always take short-term hits. The Chinese will decide to ban products that are a whim, but the key thing is making sure that we don't have too many eggs in too few baskets, which we have historically had, so spreading that risk will be key and then learning the models of the likes of whisky who have done that very well. That's what the analogy is used for in the food and drink sector with eggs and baskets. My name is Mick Tiger. In terms of the connectivity aspect, how do you feel that we can maybe try to resource some of the problems that we have? You mentioned Aberdeen, for instance. Aberdeen is a growth area. We're seeing the expansion of the airport, for instance, but as you're probably aware, as I said, it's growth within the harbour area as well, which is extremely important in terms of export market. The rail infrastructure from Aberdeen to enable some of those other opportunities is quite awful. How do you envisage that maybe the budget would be looking to try and resource in those areas, those challenges, to create more opportunities? It's certainly challenging when there are so many calls on the budget, but probably what we need to do is try to find consensus about the key priorities for the Scotland's economy and be able to accelerate some of the projects that we all know and have accepted are important to developing the economy. The higher speed links and better rolling stock that any commuters going up to Aberdeen will be aware of is something that it would be good if the budget could address how we accelerate, providing and delivering some of those outcomes. I do accept that it's not easy when there are competing demands up to the highlands, for example, and to the south-western borders, but we have to accept that connectivity is a major issue for business in many parts of Scotland. You mentioned rolling stock, but isn't it the infrastructure that's the problem? It is. That's the thing that we should focus on initially that will help to deliver the access. The other factors come after that. The challenges for the food and drink sector, Mr Withers, are going back again. We've got a team Scotland brand and obviously we're looking at exports, but in the domestic market, how do we support and bring people into that sector when there are other opportunities out there? If I was looking in the north-east, for instance, the opportunities for people working in the energy sector is far greater than maybe going into the food and drink sector because of the wage structure, etc. I'm sure that Mr Boyd might want to come in here at some point in terms of opportunities for people within the hospitality sector with the low wages. How do we address that? I think that it's absolutely a challenge. The old phrase that the teacher of mine once used, which is, work harder or else you'll end up in that food factory around the corner, and there's a bit of a perception around the food and drinks that you're one of your destinations. Unless you own it, that tends to help. It's not a destination of first choice, so you need to look at why that is the case. The reality is that, like many industries, the food industry needs world-class logistics experts, sustainability experts, we need Mandarin translators, high-level IT folk, as well as important production line jobs. Part of it is an issue that the industry itself needs to address about getting a perception about the sector being one of Scotland's best performing sectors and one that always does very well in difficult times, let alone in a growing economy. Part of it is about training. If we've been honest about it, we've not had a good enough culture in the food and drink industry investing in training and skills. That's starting to change now. There's a new national skills academy that's been set up to encourage companies to think hard about training and skills. In a tough year, the first thing you cut is not the training budget and the marketing budget. Actually, it's the very thing that you need to be investing in. There's now a skills academy set up to help companies to access the right training and to get training providers to tweak and change their offer to make sure that it's fit for food and drink. I'm seeing an increased interest in the food and drink industry. Is it where we want it to be? No, but I think that the culture is starting to change. It helps if the industry is successful, which it is at the moment. We don't necessarily need to put in money, though, do we, in terms of some of the resources to raise the awareness and opportunities? Surely we go one step further back and we take it to the schools and provide the opportunities there and raise that awareness for people to move perhaps into food and drink. Absolutely, I completely agree. There's a lot of good work that goes on. Part of the new curriculum has food much more embedded into day-to-day learning than ever was before. There's a number of different projects from seafood and schools, chef's and schools programme, Food and Drink Federation, Tasty Careers programme, so there's quite a lot of that work happening in schools. You're right, that doesn't take a huge amount, it doesn't take a slug of public sector funding. What it takes more and more of is the various industry bodies and public sector bodies that work in this area to work visibly together. I think that we've started to create that now. I wonder if Mr Boyle wants to comment on how we engage some of our younger people into some of the less attractive sectors. I guess that some of those less attractive sectors are the least well-paid as well. You've mentioned two sectors, hospitality and food and drink. I think that hospitality is just very difficult to be honest. I think that you have a sector there that's been operating for decades in a low-skill, low-wage, low productivity, low progression equilibrium. I don't know how you break out of that. It's very difficult. I think that in the first instance, it's more about where you set the regulator and floor in terms of wages. I think in a longer term, certainly, it would be incumbent on me as a trade unionist to say if we can extend collective bargain myth in that sector. I think not just wages will improve, but I think the quality of work, opportunities for progression, training opportunities would expand also. I think that food and drinks all together more different and interesting. I think you'd have to recognise that some elements of the sector, the employment is first class. When you look at the whisky industry, and there's been really interesting history of industrial relations in the whisky industry, and going back 15 years or so on our real move towards partnership approaches in the sector, and that's not just in distilling. I mean, some of the most interesting developments happened in those lower paid, lower-skill parts of the sector. If you look at the Azure's bottling plants, for instance, that work looked as if it was heading to other parts of the Azure supply chain abroad, but the unions in management worked very closely together, completely overhauled the way these plants were managed, the way people worked and derived massive benefits to productivity in the process, and retain jobs in Scotland that people thought 20 years ago were no longer going to be here. I mean, how do we move to extend that practice into other parts of food and drink? I think it's a major challenge for us all. I think you have to recognise particularly large parts of food production and food process in the supply chain pressures that are there, and the purchase and power of the supermarkets and their ability to drive a whole model is based around point value in the supermarket, and therefore driving out of the supply chain a lot of the capacity to invest in skills and reproduce those skills that the sector needs moving forward. I think that requires frankly a different approach to economic development in those sectors and one that will probably take a whole session of the committee to discuss in detail. Yes, and it was Mr Rathers, and it was specifically about food and drink, that he had mentioned the difficulties because of the economic difficulties, and yet the seafood sector is doing fairly well, but I think that if you take the farm salmon statistics out of that, the rest of that sector is perhaps not doing quite as well as you might imagine, and I'm particularly concerned for instance about the shellfish sector, and the fact that a lot of that sector stems from pretty small businesses, we know again that most of our exporting is as a result of the activities of a few big businesses. The shellfish sector very often is characterised by smaller businesses who are primarily exporting to France and Spain, and I wonder if you think there's anything that we could do to help overcome that problem. Yes, I do, and I think that that's where the collaborative piece comes in. The SMA structure is similar in food and drink as it is across most Scottish businesses, so 80 per cent of food and drink businesses in Scotland employ less than 10 people, so we are a nation of very, very small businesses. You're right, if you look at farm salmon production that's worth about £300 million in export, there's really only eight or so companies in that, whereas the initial fishery, shellfish and others are much more fragmented. So it's about collaborative approaches. Where can you get a cluster of companies working together to get into export markets? We've seen that working well in other sectors as a craft brewers group now, as a craft distillers group, our rapes hero producers have come together as a group to collectively do work, collectively invest in export salespeople supported by the public sector, and that's where that collaboration piece will be critical. There are real opportunities. The Tokyo seafood show was just a few weeks ago, shellfish representatives there as well, looking at getting into that market. The one advantage that smaller companies have with export markets is that for a lot of international buyers, small is beautiful. It's a great provenance story, they're interested in the family connections, it's not mass market, it's not mass brand, it's got a real provenance story, so whilst their routes to market are challenging and will need to be overcome with really smart collaboration, their opportunity to derive a premium in the marketplace will be greater action than some of the bigger brands. I mean, I absolutely agree with you about collaboration has been the way forward. I think one of the difficulties you find on the ground though is that those small businesses are, you know, they compete with each other quite aggressively, and you know, how do you promote that collaboration that's necessary to get out to these foreign markets and businesses that are so inherently competitive? Yeah, so my quick answer to that is use examples where it's worked well. So if we take salmon and ignore on the scale of the companies there, if you say there's eight or nine big salmon farming companies in Scotland fiercely competitive with each other, but they will collectively invest in getting into the market, they will collectively invest in raising awareness of Scottish salmon in the Chinese market, creates interest from buyers, after that they will compete fiercely full those contracts, but they will work collectively in developing a brand around Scottish salmon. The whisky industry have been smart in doing that as well. They have a whisky association that helps them get into individual markets, it protects the regulations, thereafter the individual companies of business will compete, but there's an area where they can work collectively. And in reality, if you're a shellfish producer in Scotland, your competition isn't the guy down the road, it is the guy on the other side of the world. And what our experience would be that the more companies get into international markets and start thinking internationally, the more they re-evaluate who the competition is. Very quickly, if you don't mind. I think it's just important, I think, to stress that all around the world companies in fierce competition with each other manage to collaborate in the kind of issues that James has just described. When your classic examples would be the Italian textiles and ceramic sectors in fierce competition, but also your very, very close collaboration where they have a mutual interest, so I think we've too often, across the UK, actually pursued a very particular competitive model, which kind of tends to look with scorn and collaboration, or I think we have to broaden our horizons and recognise that this is a way forward. I think the point I would make, and I'm very interested to hear feedback on that, is that the examples you used of good examples of collaboration, whisky industry, big companies, salmon farming, big companies, the particular problem seems to be amongst the smaller companies in the shellfish sector, for instance, and maybe it's a feature of small businesses that the same guy that's competing aggressively is also the guy within the structure of a small business who's expected to collaborate, whereas perhaps there's a separation of the roles within bigger business, I don't know, but I think there's a wall hanging fruit for us to pick here if we can solve those problems. That is a very interesting discussion. We're here to do budget scrutiny, and I'm slightly nervous that we're warming a little bit off that topic, but I'll let Mother Withers respond. I'll be telling us that you do a wonderful job next. I'll advise the point that I was going to make and try to make it sound as though it's connected to a budget discussion. There is investment going in, so there's a particular project called Market Driven Supply Change, a £1.6 million project funded by Scottish Enterprise and Scottish Government, which is about creating those new collaborative networks. There are good examples of where small companies are working together. Now, often, to get over the competitive tension, you don't do it within, say, the shellfish sector. If you take Aaron as an example, they have a brand called Taste of Aaron. They've brought 12 producers on that island together, brewery, whisky, jams, chutneys, oatcakes, cheeses, and they're now filling a container together because they couldn't fill a container individually on their own, and it would be very expensive, and those products are being served in the five-star hotels in Dubai. Some of that collaboration is about cross-sectoral stuff, because it's going to take a while to get over the fact that two shellfish guys are going to think they're competing with each other, so let's take shellfish with a craft beer, with artisan cheese and do that collective stuff. That's where the public sector can help, because the catalyst for collaboration often needs to be an honest broker, someone who doesn't have a vested interest coming from one of those particular companies, and that's where funding into things like this Market Driven Supply Chain project, which brings someone in to be the catalyst to bring them together. After that, they walk, and those companies have recognised the value of that collaboration, and that can be a really useful channel of investment. That's a great insight. I'm very grateful to you for that. Dennis Robertson, can I warmly welcome Mr McTaggart's comments about the importance of connectivity to Aberdeen in terms of the coming budget? I imagine that that reflects the importance of the oil and gas sector, which is obviously still performing very strongly. That's an area where we're talking about skills area. They identified skills gaps by industry, but I think there's more potential for people to find work if they're given the right skills. There was some debate earlier on in terms of whether that needs additional public sector funding, but of course the whole issue of skills investment has been quite the debate round that's been quite keen over, for example, for the education budgets in previous budget processes. Do you think that there isn't a strong case, in fact, for additional priority to be given in the coming budget for investment in skills and training? I think perhaps on measure of investment and again getting back to the issues of collaboration, raising the visibility of good practice that's already happening. Some of the collaborative measures that are under way to address skills problems in particular industries is something that would be worthwhile. As I said, I think that there is a lot of investment already under way. There's a lot of good practice going on. Not enough people know about it, so perhaps some of the effort should be directed towards really raising communication and visibility of good work so that other industries can consider how they can apply similar measures. I highlighted the success of the oil and gas industry, which is very strong in terms of exports, as well as the food and drink obviously, as Mr Withers was mentioning earlier. Our success in exports seems quite focused in those two areas, and it's not as strong as it seems to me across the economy as a whole. My next question is specifically for Mr Boyd, because in terms of manufacturing exports, those have declined in recent years. Do you think that there's anything in terms of the Scottish Government policy or, indeed, in terms of the coming budget decisions where the Scottish Government could do more to promote the manufacturing sector in particular, and have an aspiration to reverse the decline that we've seen in exports from a manufacturing sector? I think that when you're trying to assess the success of Scotland in manufactured exports, the Scottish Government, the Scottish budget and where it's spent, is not one of the primary factors. I think we'd have to be clear about that. I mean, I think there's a huge element of path dependence here. I mean, we are not, for decisions going back decades, we are not now making the stuff that the rest of the world wants to buy, particularly those emerging markets. Now, you could argue all day why that's a case and who's to blame for that, but that's where we are at this moment in time. I think there's been particular problems over the last few years as James. I think it was earlier on mentioned the eurozone as a hugely important export market. It's been very weak, so that has damaged Scotland's businesses or Scotland's export potential. I think we have to be clear that, even if we did more of what we're already doing, I would argue there's a lot of successful activity already happening regarding supporting Scotland's manufactured exports. Even if we did everything that I'd want the Scottish Government to do, as we say in the written submission, success might well be that you maintain manufactured exports at their current levels. You look at what's happening around the world. You look at great uncertainty in some of the very key markets. You look at great uncertainty in some of the big emerging markets. You look, as I say, at what we are currently making. You look at what the most successful countries in terms of export, and they're making at this moment in time. And Germany's been very clever, again for reasons going back decades, that it's now making the machine tools that China is using to build its economy, and that's why it's been so successful in that market. But Germany is also benefiting from what is, in effect, a de facto massively undervalued currency. You know, in things like the Stirling exchange rate regime is going to be far greater bearing in Scottish manufactured exports than Scottish Government policy. But to end on a positive note, over the last few months, sitting at various industry leadership groups at various conferences, you hear time and time again excellent examples of Scottish businesses that have received first-class support from Scottish Enterprise and SDI and grown their manufactured exports exponentially. So I guess the temptation here is always to be looking for new and different things that we can be doing. Maybe we just need to be embedding the good stuff that we're already doing and making sure that that's properly funded consistently going forward. Mark Ruskell To go back to an earlier topic that Mr McTaggart raised, I wanted to follow up on it. That was the nature of research and development and how we can expand that for the needs of the Scottish economy. You said that that would be one of your three areas that you picked out. I was just wondering if you could perhaps outline what sort of policy instruments you'd like to see in the budget that would bring about that kind of objective of expanding commercial research and development in Scotland? I know that a number of the universities in Scotland are doing excellent work themselves in terms of innovation hubs and clusters of innovation. That's maybe the kind of area where budget resources could be supplementing what's going on within the university sector. Again, it's coalescing around things that are happening, perhaps, but being a catalyst to supporting the longer-term aspirations of some of the work that's on-going. Why do you think that this is perhaps going into the bigger question territory? Why do you think that there has been that underperformance? Is it reasonable to expect Scottish budgets to be able to address that in a near-time horizon? I don't know if it's reasonable to expect because there's been a cultural dimension to it. Our views on innovation are perhaps quite late in the day in terms of international competitiveness, but nevertheless we know that we have the knowledge and the expertise to deliver leading-edge technology, leading-edge manufactured products to the world if we can get it right. I don't think that we can say that the budget principles would be able to resolve all of the expectations around that, but in terms of being supportive and being a catalyst to further work in that sphere in the R&D realm, I think that that's where it could be useful. Do other panellists have a view on research and development support in the budget? No. In that case, I will ask one further question then on an aspect of research and development and the export of research and development. It's all very well to talk about supporting universities to spin off commercially, and a lot of universities are doing that, and a lot of work has been done on that over the last decade and more. Scotland's companies have a lot of expertise in key areas, such as oil and gas, and yet our figures for commercial research and development are not very high. They are among the lowest in the OECD. Is there a problem with us exporting our expertise and winning research contracts abroad? Is that something as separate from what's happening with universities that we could help through budget measures? I don't really know the evidence that would support that kind of fragmentation that all our research expertise is being exported abroad. Our companies that have expertise, why aren't they winning research contracts from abroad, for example? We know from the business expenditure research and development statistics that Scotland is not winning commercial research. I assume that there is only so much that can be done within Scotland and based on our own market. Why is there not an export of that through the winning of contracts abroad and can we do anything about it? Or is that not an interpretation that you accept? I think that there may be an element in it in terms of the export figures for services from Scotland. That's obviously something that's being looked at in more detail year by year. Obviously, the higher education sector is one of the leading export sectors in terms of services. We have to look at where R&D sits within those figures, the kind of delineation of figures in export figures. It's certainly something that would be, I'm sure, worthwhile pursuing. To try and answer that question, I might go back to your previous one. Again, we're fundamentally back to an issue of industrial structure. We're not strong in R&D in tens of sectors. That simple truth isn't acknowledged often enough. I think we also take a much too narrow definition of innovation. I think that's changing, thankfully, but I think there were some of the things that I was discussing earlier on regarding innovative working practices, which have produced huge dividends in terms of productivity. Generally, it's been discussed as something very different from R&D. Actually, it's all very important innovation. It will help companies to become more competitive. I think that we also have to recognise that the financial structure across the UK is not kind to innovative companies. We know through research that innovation is penalised by banks of them when they're lending to firms. The same is being riskier, understandably, and they get a significant penalty because of that. When you're faced with that picture, where is the Scottish budget best spent? Is it best spent in trying to increase commercial R&D, or should the focus just been on sustaining public R&D or increasing public R&D whilst working very hard to make sure that that can be spun out as successfully as possible? You look at where the most innovative economies, what are their innovation systems like? We tend to look at the United States as a model of the success of adventure capitalism. All the enabling technologies in the Apple iPhone were originally publicly funded. The Google algorithm was originally publicly funded. We have to recognise and not be bashful or think about the crucial importance of public and supported R&D. Is your view then that if we continue to fund public R&D, then commercial will follow? That would be the aspiration. I don't think that we should be complacent that it would necessarily follow. I think that you have to be working very hard to make sure that the system as a whole public and private is working in tandem to make sure that ultimately we gain the commercial success. I have a couple of things to add to that. Your question about how we consider our R&D knowledge and our capability as an export opportunity is much more back to the question that was from Dennis earlier about Brand Scotland. You have individual sectors working really hard to get a coherent view of what the export opportunity is. We have tried to do it in food and drink, but tourism is doing it now. The next step is doing that cross-sectorally. If you looked at export strategy for life sciences, textiles, tourism and food and drink, you will find that they are very similar. Wedding that together is going to be part of it. When we are going on a trade mission, it is not a food and drink trade mission, it is a Scottish trade mission with companies that have an opportunity there. Back to your original point about what does the future of R&D look like from an injury perspective. I think that there is one comment in principle and then two budget related. One is that we still need to keep working on universities and redefining what success is. Very simplistically, success to me as an injury body is not a university getting an article published in a obscure management journal somewhere. It is actually a translation of knowledge into business impact and I think that there needs to be much more weight to put on funding for universities and academic institutions around business impact. I think that that is definitely improving, but I think that there is more to be done there. Two budget things. Investments in bridging the gap between business and universities. Again, it is too simplistic, but if we recognise the fact that often academics and businesses talk a different language and just accept that they often talk a different language, how do you bridge the gap between them? It is too simplistic, it is not always the case, but it is an issue still. Investments in things like interface, which act as a translation service effectively between universities who have solutions and businesses that never thought to ask academia for a solution and can translate how that solution is applicable to them. The second thing, I think that we need to think more carefully around investment in universities and the decision making process on that. The Scottish Funding Council ran a process recently, put £10 million on the table for the creation of innovation centres. Three fantastic proposals are going forward. Part of the challenge was that the only way that money can be routed and the decision taken is through universities, so they wanted it to be industry-led. The reality was that, at its worst, a lot of industries went into a room somewhere, decided what they wanted to do, and then the week before the deadline, phoned industry to get them signed up to what they wanted to do. How could you change that, actually give industry and maybe bodies like these great to say on the decision making of where that money goes, so actually industry could take a view as to whether this will really be relevant investment of money from an industry perspective. You would not want it totally industry-led, because often industry does not know what it does not know, so you need to redirect these better, but something that can change part of that guidance of where funding goes towards universities and what we spend our money on might make things a bit better. First comment, Mr Withers, is about teaching with Mandarin. I will just say watch this space. Before we beat ourselves up, the intrigue will be solved shortly. In Scotland, two years ago, I had a trade surplus of £2.9 billion. I could not want you to start beating ourselves up, but everything is terrible. I want to comment on the deficit of the rest of the UK, because we have passed that at this stage. I just want to link two questions to Ian McTargan and James Withers. Connectivity in terms of fast exports, how that impacts the company's cash flows, costs and so on. We had a situation recently when we had the macro crisis in Russia, and the opportunity to export to China. I have to say flying out of Prestvic, but the view of those that know better and exports in that particular industry suggested that that is not the way we do it. We will put it in containers and ship it down to wherever and it will take x number of weeks or days, much greater than if we flew them out in refrigerated to China. The market was there. Do we believe that we are doing enough? Can we do anything within the budget scope to generate an even greater incentive for companies to be a bit more flexible and organisations to be a bit more flexible in terms of addressing the rapid movement between various geographic markets for a particular product? I suppose that the quick answer is yes. Connectivity remains hugely important. A direct link between Scotland and Asia for Freight would be a big step forward. There are a number of operators looking around that, but the economics are really challenging. At the moment, one of the best things that has happened in terms of exports of products to Asia and the Middle East has been the Emirates connections from Glasgow. If any of you have been on that flight from Glasgow to Dubai, you are almost certainly sitting on top of an awful lot of seafood that is sitting in the hull going out at least two or three times a week. However, going through Dubai still adds hours and a direct connection to Hong Kong would potentially be useful. One of the challenges with products is ambient versus refrigerated versus chilled and also weight. If you are trying to get beer out to Asia, it is going to be difficult to do on a flight because of the weight. You are going to still be better at shipping that, and it is about shelf life as well. I think that there is more that we can do if your challenge is more about connectivity, but also being fleet of foot to take opportunities. I think that the answer is yes. I think that the macro situation was a difficult one for everyone to get the head around very quickly because it was suddenly closed and then looking for new outlets for £25 million worth of product very, very quickly. We maybe do not have the suite of options on the table in Scotland that we could do with in the future. As James has said, it is dealing with the economics of it. There have been attempts in the past, particularly in the food and drink sector, where there are opportunities for increasing volumes and getting scale, which would bring the economics back into the picture. We are trying to get clusters of companies that are perhaps approaching the same markets to collaborate and to be able to ship higher volumes at a more cost effective price and be saving money for the companies involved. It is a challenge, though. Can I just ask on that basis, do you believe that the Government economic agencies are doing enough to support that consolidation and attacking various market places based on that and shipping no directly out of Scotland? To be honest, I am not aware of a great amount of activity that is led by Government agencies doing that. I do not know if they see that as one of their priorities or whether the industry should be doing it themselves. I am not aware of any specific issues in terms of Government support in that regard, but I think that you are right to highlight the challenges that exist in terms of trying to get goods to market and the importance of connectivity more generally. If we are going to get more businesses exporting in Scotland, I think that there is a number of approaches. There is the personal approach to getting down businesses and dealing with businesses either collaboratively within Scotland or internationally and ensuring that they have the right links in place to allow them to get goods to market. There are issues over air transport, freight relocation of containers and so on, all of which present challenges. In terms of whether the Government can do something about it in terms of the budget, it can probably be afforded the higher priority, but I do not know what specific measures would necessarily need to happen in the case of this year's budget to allow that to take place. It was instructive that we got 42 minutes into this session before currency was mentioned. Obviously, that has an effect, but I wonder what Stephen has to say about Germany. Germany's export success—and it is not just down to currency—is that they have what they call the Mittelstadt, which focuses on companies that are encouraged by the Government to focus on one product and spread across as many markets as they can. Is there anything that the Government might do in the budget to encourage that type of activity for small exporters, for example, where the focus is not looking much more geographically as opposed to product and product diversity? We have been discussing the Mittelstadt with the First Minister, Mr Swinney, for a number of years now. We have looked at a range of issues that German companies tend to do better than their Scottish counterparts in the way that the German system, in terms of the priority that German firms give to working with the range of their stakeholders and the relationship between the firm and their funders, is all so different from what you have over here. Clearly, the priority placed on the educational skills training is fundamental to the productivity success of German firms. The exchange rate is very, very important in the euro that has been massive for Germany. I think you also have to cross off a number of issues that fundamentally are attributable to German cultures that we are never going to replicate here. We have been trying for an awful long time in relation to the relationship particularly to the educational skills training, when were the first? I showed us under the early Tony Blair governments trying to replicate the German educational skills system. We are all disastrous because fundamentally German employers feel an obligation to train young people in the way that Scottish employers don't. So, whilst I think it's extremely important that we look at Germany and other nations to see if we can learn from them, I'm kind of skeptical about the prospects for developing a Scotland, a Scottish middle stand in the near future. In terms of the Scottish budget, I find it very difficult to put my finger on specific funding mechanisms that will help quicken that journey towards a middle stand. I think most of what we already should be doing, we are doing, and I think we're doing it reasonably well. I think a lot of the work that's taking place under the industrial leadership groups, including James and Food and Drink, but also other sectors, is helping establish that kind of collaboration, helping improve relationships between different stakeholders, but it's necessarily long-term work here. I think it's very important that we stick to it, where it needs to be funded by the Government. I think that it's important that it's funded, but I think that we have to be realistic about moving towards a German model anytime soon. One last question. We had a round table recently talking about social enterprises, which are quite critical, I think, as far as the economy is concerned. There's a disparate means of funding these. Given the rapid growth of social enterprises and not just in the internal market, there are some of them that are now exploring knowledge, for example. Do you have any comment as to how the budget might address the growth and the potential of that particular sector? Again, I find it difficult to answer that general point. We've got a huge variety of social enterprises out there. My approach would essentially be that they should be supported in pretty much the same basis as private firms should. If there's going to be ultimately a payback to Scottish society or the economy, then they should be funded to do what they are trying to do. They're not going to be able to fund themselves. I think that trying to identify general mechanisms for all social enterprises is just tremendously difficult. Can I ask a follow-up question? Not in relation to that, but the previous question. I may start off with Gannag Clark on this. We hear a lot from the enterprise agencies when we take evidence from them about their support for account-managed companies. Is enough being done to support other enterprises who are not account-managed? I think that there's more that can be done in focusing in on those businesses. Obviously, chambers of commerce across Scotland are directly supporting businesses in a number of ways, partly with Government support. For example, Business Mentoring Scotland has engaged with over 8,000 businesses across Scotland to assist them in taking their business forward, growing their business. Last year's results, for example, achieved a GVA increase of about somewhere between £30 million for those businesses. That was just under 1,000 businesses last year. That's a successful model that is assisting individual businesses. It's also a model that's assisting a wide range of businesses because it is touching upon social enterprises that Chick has mentioned. It's not restricted to any particular type of business. It's very wide-ranging. In fact, I was speaking to one business fairly recently. It was a chap from Dumfries Farmer, who had invented this attachment for the top of a ladder, which held a can of paint. He thought that this was great. He put the idea around a few friends. He came to Business Mentoring. He got a mentor and put him in touch with someone that very day, with experience and internationalisation of a product that he is now exporting to Australia. It's a system that works. That system reaches a huge number of businesses. Certainly 8,000 businesses are we've engaged with through that one mentoring arm alone. There's room for that in the marketplace and there's room for that to extend in the marketplace, we would argue, because there's clearly demand for it. It's about businesses helping other businesses. That's something that you're doing as the chamber. Thinking about the budget, is there a gap there that's not currently being filmed? That project is supported by the budget through Scottish Enterprise. Clearly, if we had more resources to be able to provide that free mentoring at the point of service across the country, we would be able to engage more businesses in that. I think we really need to be careful to kill the notion that the networks engage with account managed companies and they don't engage with anybody else because there's too many people out there. Frankly, I believe that's the case. Just last week, I was at the Highland Economic Forum and Ty were presenting on the work they've been doing to engage small businesses round about social media. Fantastic work had been taking place. I understand it started in Cairngom's National Park but spread it to all parts of the Highlands and Islands, helping companies. Obviously, given their geographical location, being able to use social media well is tremendously important to them. This work had been taking place, I think, about 100 seminars last year. A huge variety of very small businesses and that work is really important. I think it's also really important to stress that Scotland has a very long tail of very small companies who lack, frankly, the capacity or the ambition to grow. It just wouldn't be appropriate for the networks to be spending time with these companies in a way that they do with account managed firms. I think that if we all could accept these simple truths, I think that the debate about the networks, what they do and how they might improve, because, of course, they can improve what they do, I think that it would be a much more matured and a much more effective discussion. Just two points I would add to that. One is around how we define who and what should be account managed. I think that you can have a framework around growth aspirations, turnover and all that, which makes sense. However, some of the real growth potential will come from part of that long tail that Stephen talks about through, again, sorry to say on the start record, collaboration. We're actually going to have a group of companies together who collectively can have a shared ambition with shared potential growth. We should think about how we can account manage that kind of collective as well as individual companies. I think that the second part is ensuring that companies that are account managed, those that are, and this is a responsibility that doesn't just suit with the enterprise agencies but with all supporting organisations, the four of us here, academic institutes, make sure that those account managed companies have a good broad view of support that's available, because there's a great support that we deliver through Scottish Enterprise, but there's a world of support that exists that is not delivered through them. Account managers are often the front face between the public sector and individual companies with growth aspirations having that broad view of the wider spectrum of support that exists beyond that just to deliver through enterprise companies would be important as well. What do you view of the account managers, the inverted commons consultants that advise these companies? The people who manage the major account managers generally have not mentors but consultants and advisers. How well do you think they're qualified? I mean don't individually qualified, but the qualification process is sufficient to ensure that we talk about exports and there's quite an expenditure which again comes back to the budget on that resource. Do you think they're geared? I mean it's a general question and if you can't answer it don't, but do you think that those people who are leading the charge are sufficiently aware for example of export markets? I think my short answer is yes. I think there is an issue about the use of consultants sometimes and I think where you might have a framework of consultants that could be drawn down by an enterprise agency to plug into a business sometimes a decision on which consultant to use can still be driven by price rather than quality. I don't think that that is a fundamental flaw in the system but I've seen examples where that has been the case before but genuinely I think the account managed system and there's food and drink, there's 200 account managed companies roughly, there are 20 now dedicated, roughly just about dedicated solely to food and drink account managers which helps then the understanding of that sector from that account manager is a really good framework. I think the long tail stuff, some of them as Stephen says, is a lack of ambition, lack of growth, well we'll leave them be but where industry, I think, industry bodies have to step up to the mark is helping support some of that long tail who ultimately have the pipeline for future account managed companies but I think the structure is pretty good. I do think there can be an issue around consultants though. It's just a couple of points, Mr Clark and Mr McTigart made. You've used the phrase challenge I think a few times now. I just want to use that challenge, the opportunity to try and look at ways that we approach those challenges for instance in the connectivity I mean we try and repair some of the aspects within the connectivity then you're creating jobs. I mean do you see us using the budget framework to try and address some of those challenges that you were mentioning as opportunities to drive obviously the economy forward? For every challenge there is an opportunity. But you didn't say so. I mean this is my point. We just heard of the challenges. For example, I mean in terms of connectivity, one issue that has been raised with us by the network is a very pertinent issue over recent weeks that the A9 north of Inverness, particularly Berrydale-Braise, which the Scottish Government has a plan in place to address over a number of years but is one of the key connecting factors to a very important part of our country and our economy and there's an opportunity in addressing that to really make the most of what Caithness has to offer because it has all the necessary bits in place it's got some very good businesses large and small operating internationally in that part of the world it's got it's part of the trunk road network it's got an airport it's got ports it's got a rail connection but each of these are extremely fragile and the road network especially so and if we're to support the growth in that area that that is happening and has the potential to to go further then yes there's an opportunity if we address you know that one small piece of road which probably costs less than 10 million pounds you could open up economic opportunity in that whole you know corner of Scotland okay thank you okay yes there are opportunities are there there are conflicting pressures on budgets obviously but we'd say that the operating environment that any business finds itself in can enhance or detract from those opportunities that it has as a business so those kind of infrastructural issues will to some extent dictate how competitive the companies can be in the geography that they find themselves in right thank you just to continue on that theme i think the focus the focus on growth to generate more growth can also be applied geographically in terms of the way that money is spent via the budget i'm a south of scotland msp and i am based in the south west which is not a high growth area compared to some of the other areas we've discussed today like the northeast so if your strategy is based on investing in growth what happens to parts of the country like the part that i'm based in which are not high growth at the moment for example you could you could improve the infrastructural links to the south west and you would you would be doing that in the hope that it would generate new growth in the future do you see that as a difficulty in the way things are structured at the moment i think that any any budget particularly any transport budget looking at connectivity across the country has you know it is clearly geared at delivering the the biggest bang for the buck that said i think there has been a very strong focus in recent years about filling in the the gaps in the central scotland networks whether that's electrification of the rail system or completion of the m8, m80, m74 etc which are really essential to making Scotland tick but i think the focus has to move on to the more regional aspects and you know Aberdeens already been mentioned i mean it is an economic hub and yet in terms of the rail network you've got single track lines connecting it to Edinburgh and Glasgow you've got a single track stretcher line as well and the connection to Inverness and Inverness is single track parts of the line as well to the central belt so there's infrastructure issues there and of course there's well known issues i've already alluded to certainly times day nine which is being addressed to Inverness over a long period of time but you know there's small pieces of work that could be done or relatively small pieces of work that could be done further north that would open up again the economies of those areas but looking at the south west i mean it's got clear strengths in terms of its tourism sector in particular and certainly connectivity would open up the potential for that tourist that area as a tourist destination in Scotland it's already very strong it could be a lot stronger if it was easier for people to access and i think there is that sort of spine of the them 74 going down and when you come off that going towards Dumfries and Galloway it's it's very difficult to access those areas so there could be improvements made in those areas that could develop the local economy but hither to yeah there's been a lot of necessary focus in the central belt i think there's an opportunity to spread that out. Would anyone else care to comment? I think this is more an issue of Scottish Government strategy than it is about how the networks got about their business and when at the moment we have a key sector led strategy that is pretty much blind i would argue to the spatial growth issues that you've described in your question and i think it ultimately will need to be supplemented by an approach that looks at the goods and services that are produced and consumed by everybody on a daily basis and how they are produced and disseminated and how through various ways of social franchising these goods and services might be able to be or the production of these goods and services might work better for local communities. If you want to hear more about this come to our conference next Wednesday there will be a major presentation on it but i think it's difficult to i think back to a meeting i was at in Cymru just about this time last year that came after the the collapse of the Scottish surface mining sector in the presentation on a new development strategy for East Ayrshire at that meeting was all predicated on how East Ayrshire might connect to Scotland's key sectors and how it might build more indigenous small businesses now to me that's doomed to failure because at some point you'll have to acknowledge well actually it doesn't have the assets to connect to Scotland's key sectors and secondly you'll be creating more small businesses to fail in what is a very weak local market so you have to look at things like utilities supermarkets retail banking the public sector these goods and services as i said it will always continue to be produced in that geographical area and see through the various social franchises on which they rely ways in which the quality of employment might be improved on those areas. On a related matter it's now a number of years since economic development funding was devolved to local authorities certainly in my part of the world there's a perception that the there's no more economic development funding as opposed to the fact that it's now managed by the council and do you think that that is working well or do you think there's improvements there that since you know they did away with local enterprise companies and give the money to the country? Yeah I think that's a perception that exists in many places across the country I think that said and you know as Steven has already mentioned earlier I think you know we would certainly have examples from our membership of companies who would say they've had very good general support from from Scottish Enterprise in that part of the world but but there's other companies who would say we don't feel touched at all by any investment being made at a national level in terms of business growth. I think it is a mixture of how you engage with those businesses I think you know you've got to look at the existing networks that are there whether that's a local authority network, chamber commerce network, you know any other business organisation that has a footprint in the Dumfries and Galloway area and look at look at those areas as potential ways which you can engage with businesses and ensure that they don't feel disenfranchised by what is in essence a change in accounting because I think there is still very much support available for these businesses and I have mentioned you know the business mentoring Scotland programme which is operated or funded by operated by Scottish Chamber of Commerce but funded by Scottish Enterprise and works very closely with Dumfries and Galloway and the example I made earlier about the attachment for carrying cans of paint was it was a local business in that area which is now operating globally so you know there are support mechanisms available it's a case of engaging the business community in that and finding the best route towards those businesses. In terms of the more general point about economic development funds being transferred to local authorities is that working well? I think there's areas of the country where our members have expressed satisfaction as areas of the country where members have expressed dissatisfaction with that so it's very much a mixed picture in our experience. Next would be my view too in the nature of dealing with you know 30 odd local authorities is there are some good examples in individual sectors and not so good examples in individual sectors the you know we tend to find in our set of what works is business led approach so it needs to be businesses locally thinking about actually what is their response to a national strategy of growth and it's then about industry leading and public sector aligning now where that doesn't happen you need a catalyst to make it work and often you have the right individual in a local authority are the catalyst for that and they really drive it and there's brilliant examples across a number of local authorities where that works where that isn't the case it's more difficult and it needs to be a business led approach forming local networks around particular sectors cross-sectorly potential which then drive the development of activity at a local level but I don't see and maybe I don't and you know the other three here can will have a greater sense of other sectors I don't see a big central belt issue with food and drink and that's partly because the nature of a lot of the production base a manufacturing base is in some of the most peripheral and remote parts of Scotland but maybe we're just in a a more diverse position than than other sectors or shall we recognize? I'll just come back in that very very briefly I think for those parts of the country where it's been expressed to us that the local authority system isn't working I think that's where almost exactly the opposite of what James has just said is happening where instead of an industry-led approach and a business-led approach you're finding a greater gravitation of not just the economic development service but every other service towards the local authority and the local authority is hoovering up contracts for delivering services to businesses and that's business is not happy with that in parts of the country so it's not so much the initial distribution it's the fact that some local authorities are just becoming too much of a controlling influence on a wide range of aspects locally. The answer is I don't really know I'm in a second or third the view that the experience has probably been mixed certainly heard there's some good examples around the country with these funds that have been used in conjunction with employability funds to improve kind of access to work or active employment market programs also heard some problems with long-standing local economic development programs that seem to fall in between two stools in terms of funding but again I think it's quite important to remember that although the sums that were devolved to local authorities might look substantial and nominal terms there were never sums that were going to be transformative in terms of the local economic development again I think we should recognise that. You might be interested in all speaking about Dumfries and Galloway that last year at the business and parliament conference I promised to go on the laggan zip wire and that will be happening next week. That's a farmer who's diversified and now has a laggan outdoor limited so I'll report back hopefully. I kind of wanted to go back to the discussion we had earlier on apprenticeships because we are constantly referring to Germany's success but there seems to be a bit of a almost an acceptance that we can't replicate that. Now I know you can't just pick and choose the bits of different economies that you'd like and try and stick it on to your own but you know obviously the Wood commission has reported and there's been a lot of talk about parity of esteem between academic and vocational routes and I think Stephen you suggested that as Scottish businesses just there's a sort of cultural resistance almost now or just maybe a lack of commitments taking on young people could we use the budget to incentivise that more I mean what do you think what do you think are the barriers because obviously there's huge benefits because we have far too many young people in low skilled low paid work you know it's simply going nowhere and that has all sorts of repercussions so what do you think we might do with the budget to boost apprenticeships and make them really meaningful and make sure that they lead on to something more meaningful? Can I just clarify what I said earlier on? I mean what I'm trying to get is I mean if you look at the American higher education system that's the best funded in the world because alumni feel the obligation to continue contributing to their university now that obligation is difficult to replicate in other jurisdictions similarly in Germany employers feel a cultural obligation strong obligation to train young people even if it might not be in their immediate immediate economic interests again whilst we can replicate the institutional frameworks etc replicating that cultural obligation has proved I would argue over sustained period of time now impossible to replicate in other jurisdictions including Scotland so it's not I'm not arguing I don't think we can learn we should never try to stop learning from what happens elsewhere but I think kind of thinking it became copy the institutional frameworks in Germany and you know some of the funding mechanisms and expecting that we will see similar outcomes I think is just not going to happen but that's that's where we are so absolutely within the context of where we are we should be looking at what we can do it I think it's under discussed at this moment time as the labour market recoverers just quite how stubbornly resistant to active labour market policy youth unemployment has been I think that's intimately related to the rapidly rising and again under discussed employment rate over the over 65 which I would argue is probably the most remarkable feature of the labour market in the last year the only age category to see their employment rate actually increase on their pre-recession high and that is having an immediate knock-on impact in terms of entry-level jobs to young people so yet I mean I think the wood commission is a very good bit of work if the Scottish government can find additional funds through the budget to support employer incentives which of course has always have to be linked to quality of job and job sustainability if it can do that then that's all to the good and it remains just as pressing I can say now as it did two or three years ago. Thank you. Would anyone else like to comment on that issue? Yeah I think I'd agree absolutely with Stephen that wood has got to be central in terms of the Scottish government's approach now to skills and I agree that you know business is certainly in terms of what the wood the challenge that wood has set out to businesses to get involved at an early stage in schools and a consistent level across the country is something that we would certainly encourage our members to take advantage of because we do have schemes operating in various parts of Scotland Renfisher and Ayrshire Spring to mind also Glasgow where there are great examples of businesses getting engaged very early on in the school curriculum ideally actually in primary school although I don't think we've gone that far yet in our examples but secondary school examples I mean in Renfisher every single secondary school is a member of the local chamber and the local chamber gets businesses in there and not only gets businesses into schools and young people out of schools into work placements but also gets teachers out of schools into work placements to find out a bit more about industry as well so there's great examples going on we would certainly encourage businesses to step up to the plate we want wood to be central to what the Scottish government is going to be doing in terms of skills both this year and into the future and it is about business taking its full share of responsibility in that. Can I maybe ask James Withers a question? We see young people far too often and they seem to be the majority of staff in certain fast food restaurants in this city and elsewhere. Are there opportunities for really quality apprenticeships within the food and drink industry? Yes, when we get to the committee the latest figures were the apprenticeship take-up is in food and drink but it's certainly gone through the roof compared to where it was and there's now a skills investment plan around food and drink in recognising that apprenticeship is part of the jigsaw you want in terms of future skills. Part of it is about education and interaction with schools, which Gannagess talks about. The apprenticeship scene in food and drink is good, it's not still where we want it to be, we still be more ambitious but it started to transform over the last few years but for us it's been about the part that apprenticeship plays amongst a wider skills agenda. Is there any particular area that young people are attracted to within your industry? I think the internationalisation side is definitely of real interest. I think one of the challenges we have is particularly we're looking at you know if you're interested in the salmon farming industry or agriculture example you're likely going to be in the middle of nowhere as far as your average apprentice would envisage so that it's all linked to services and costs and connectivity. Some of the work is quite seasonal as well but you know the areas of the sort of changing trends around sustainability, around innovation, logistics and the international piece is starting to generate greater interest in food and drink than there was a few years ago. Thank you, thank you. Do you want to go on that? I think we're all signed up to Wood commission as being core way of moving forward and supporting that if the Government can support that, that would be very welcome. I think there's lots of issues around giving visibility and prominence to good practice that's on going. I think we're probably all doing quite a lot with employers in terms of young person employment issues and apprenticeships. We are very engaged with Skills Development Scotland and the modern apprenticeship weeks that they have and the various initiatives coming up from that, signing up to the skills investment plans for key sectors as well but I do agree with other colleagues talking about interventions with young people at the earliest possible stage and one example is SCDI's network of young engineers and science clubs which involves 12,000 young boys and girls in schools around Scotland now and there's huge industry support for that. It is industry led recognising skills gaps and issues arising for industries in the future so it's trying to give young people vision and excitement about the potential of engineering technology and science disciplines applied to all kinds of industries including food and drink because we have a science on the menu programme which is looking at the science of food and that's really exciting, young people. The question mark is then how do we connect that up to industry opportunities but that's something that we hope all of this activity will result in very practical opportunities for apprenticeships. Thank you. Thank you, convener. Thank you. Just as Alison Johnstone has mentioned it can I remind members if they've not already done so to sign up for this year's business and parliament conference which will take place at the beginning of November. Right, I think we've reached the end of our session so can I on behalf of the committee thank you all gentlemen for coming along this morning and for your input which is very helpful to us in informing our budget scrutiny report. So thank you for coming and we'll have a short suspension.