Knowledge Economy

– in the Scottish Parliament at 2:39 pm on 9th February 2000.

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Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament 2:39 pm, 9th February 2000

The next item of business is motion S1M-508, in the name of Nicol Stephen, on the knowledge economy, and amendments to that motion.

It would be helpful if members who wish to take part in the debate would press their buttons now, so that we can assess how many wish to speak.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat 3:15 pm, 9th February 2000

Scotland's economic future depends on the knowledge of its people. That sounds simple, but it is worth repeating: Scotland's success depends on the knowledge of each and every one of us, and especially on the knowledge of young people—each and every student and each and every child.

There have been major changes in Scotland over the past 50 years, from a reliance on heavy manufacturing, with industries such as shipbuilding, to the new industries such as electronics and biotechnology. The scale of that change can be underscored by one statistic: in 1997, electronics accounted for more than half of Scottish manufacturing exports. That dramatic pace of change will not slow; indeed, it will intensify. Product cycle times have moved from years to months to weeks. Companies that traditionally developed a handful of new products a year now have an average of more than one a week. Those are the new global realities that we have to contend with; in that environment, Scotland's economic future depends on our ability to change—to change enough, and to change fast enough.

Much has been made of the importance of vision, but vision is the starting point. On its own, it is not enough. We also have to deliver, and in doing so, fierce willpower means more than fine words. Fierce willpower is what we as a nation show. On vision above all other issues, it is crucial, now more than ever, to work together in partnership, if I may use a good political slogan. That is not as trite or simple as it sometimes sounds.

If Ford, Seat and Volkswagen can collaborate to produce their new people carrier, and if Mr Jobs of Apple and Mr Gates of Microsoft can announce a strategic alliance, surely we—all of us in this chamber, all parties and all of us in business, industry, government, universities, schools and colleges in Scotland—can set aside differences and unite on this matter.

To be competitive, Scotland needs to make the most of its science and research base: the creativity, skills and ingenuity of its work force and the entrepreneurial flair of its businesses. In the future, the main source of value and competitive advantage will be human and intellectual capital. The scale of the challenge and of that shift is huge.

We should consider the hundreds of thousands of graduates being produced each year in emerging economies such as Russia, India, China and Brazil. Even if we assume that only a tiny fraction of those individuals are brilliant, talented people, which is probably a grave, hugely complacent underestimate, we still have massive and increasing global competition.

In the future, we will not compete on low-skill, low-margin, high-volume production. Where we can compete is in talent, creativity, innovation and passion. To succeed, we must break away from the norm and change the way in which we do things. We must focus as never before on the skills, learning and knowledge of every person in Scotland. That was the thinking behind the creation of the enterprise and lifelong learning department: to bring together enterprise and industry and our universities and colleges with lifelong learning.

We are not coming to this cold, nor are we working in isolation, but the new Parliament, the new department and the Enterprise and Lifelong Learning Committee—and, indeed, this debate—all emphasise that we must still do much more.

The task force established last year by Lord Macdonald of Tradeston has highlighted such issues as the interface between our academic institutions and industry and the greater commercialisation of research. The UK Government has also stressed the significance of the knowledge economy with new initiatives such as the new tax credit for research and development by small and medium-sized enterprises.

A new urgency and momentum is crucial, however. On 17 January, Henry McLeish announced the membership of the new knowledge economy task force. Its first meeting took place on 26 January, and we expect an initial report by April of this year.

The knowledge economy cuts across usual departmental lines; it is a classic cross-cutting, joined-up-government issue. Other groups, such as digital Scotland, the science strategy group and the manufacturing strategy group, are closely involved. I give the assurance that co-operation and co-ordination between those groups are an important priority. The same applies to co-operation with our colleagues in Wales—where interesting things are happening today—Northern Ireland and the UK Government. I welcome the fact that the first joint ministerial committee on the knowledge economy is to meet next week, here in Edinburgh. That is significant.

The issue is not simply, or even mainly, one of big government. The greatest potential lies with our small and medium-sized businesses, which must be our priority. We have set ourselves the target of starting 100,000 new businesses over the next 10 years, and we must increase our business birth rate. The knowledge economy is already helping to drive a surge of new businesses and new jobs.

Over the past few years, there has been a step change in the quantity and quality of commercialisation activity right across Scotland. Companies such as Kymata are working with technology spun out from the University of Glasgow; Remedios in Aberdeen and Cyclacel Ltd in Dundee have developed similar links. A range of new initiatives is reinforcing the drive for greater commercialisation. A bid under the science enterprise challenge for a centre for enterprise in Scotland has secured £4 million of new funding. That will help to bring an entrepreneurial culture to staff and students in our universities and colleges; it will help to bring new entrepreneurs and entrepreneurship into the centre of academic life. Last October, Henry McLeish launched the £11 million proof of concept funding. Working with Scottish Enterprise's cluster teams, we will use that money to help universities and research institutes throughout Scotland to bring new products and processes to the marketplace.

Partnership was also evident in the launch on 31 January of the Technology Ventures Scotland initiative to promote and accelerate the commercialisation of science and technology. John McLelland, formerly a senior manager with IBM and Digital and now the chief executive of 3Com International, has agreed to be chairman of that important new body.

Mention of John McLelland and high technology leads me to the issue of the digital revolution and the importance of e-commerce. E-commerce is transforming the global economy and has huge implications for a nation such as Scotland. We talk about being on the geographical periphery of Europe, but I have often wondered about that. Who would have chosen to put a company such as Boeing or Microsoft in Seattle? However, the impact of e-commerce is even more dramatic than that. Who here can tell me where operates from? From north America, yes—but from which city?

Photo of John Swinney John Swinney Scottish National Party

I must turn down the minister's tempting offer to us to tell him where is located. Is he aware of the press speculation about the way in which localities of Scotland have been consumed by internet predators? If a website were to be registered in the village of Weem in my constituency under the name, an enormous surcharge would have to be paid to an internet company. Does the minister think that that is an acceptable use of the internet, or do we need to do something to protect the genuine community-based organisations that could be created in our localities?

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

I am aware of that and have heard the stories in the media, one of which suggested that the ending may soon be overtaken by new endings for internet addresses, so that the person who has bought up all those location addresses may have wasted money. However, some individuals have made millions out of a single internet address. That shows the added value focused on the industry and the importance of business opportunities through the internet. It helps to underscore the point that I was making—with the right approach to the internet, opportunities can be seized from any location.

Photo of David Mundell David Mundell Conservative

Does the minister share my concern that only 8 per cent of small and medium-sized businesses in Scotland are currently trading on the internet? Does he agree with some commentators that the Scottish Executive and the UK Government in general could do more to encourage that by using electronic procurement more?

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

I was coming to that; I agree that we must do more. I think that David Mundell's statistic comes from the 1999 Scottish Enterprise benchmarking study, which showed that, while our larger companies are keeping pace with international competition, smaller companies are lagging behind. That is why Henry McLeish will be launching an e-commerce strategy for Scotland later this month. Members of the Enterprise and Lifelong Learning Committee have already seen an early draft of the strategy. We are determined to put Scotland at the forefront of the e-commerce revolution and we realise that small and medium-sized companies are a priority.

Photo of Johann Lamont Johann Lamont Labour

Is the minister aware of, or would he be willing to investigate, some of the proposals for bringing a social inclusion perspective to developing e-commerce, so that it is not left to those who want to make a fast buck, with no trace of benefit to anyone else? Will he look at the potential for a public sector body committed to software development—the expensive part—so that we could all share software for free or at low cost? That would have the spin-off of harnessing all the talents of all the people in our communities.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

We would of course be delighted to look at those proposals. We want to consider a range of new initiatives. The internet, fortunately, is very much about the individual; because of its devolved structure, it places local communities and initiatives at an advantage. Freeware and shareware are already part of the culture of the industry.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

I must move on, as I am rapidly running out of time—I apologise.

Work is already being done. Thanks to the private sector and Scottish Enterprise working together, Scotland now has an internet exchange, which will provide the high bandwidth at low cost that is essential for Scottish companies. It is the sort of infrastructure investment that has driven the expansion of high-tech companies in places such as Palo Alto in California.

We have a huge advantage in the multinational electronics and communication companies that are already based in Scotland and in our world-class universities and colleges.

Government also has a vital role to play. The Executive has established a digital Scotland ministerial committee and task force to look at digital technologies and their effect on government. As part of that, the Minister for Finance, Jack McConnell, recently announced the establishment of a procurement supervisory board to oversee procurement strategy across the Scottish Executive. It spends around £500 million on a wide range of goods and services and I am pleased to announce that the board has been asked to set a date by which the Executive's purchasing and procurement transactions will be switched to e-commerce. I hope that that target date will be not only achievable but ambitious. As a small nation, we should be able to set ambitious targets and to be more flexible and fleet of foot.

I can think of no one measure that the Government could take that could do more to encourage small businesses to benefit from the internet. Government in Scotland is determined to play its part in kick-starting the e-commerce revolution.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

I still want to open up the debate so, because of time pressures, I will have to proceed.

The knowledge economy is not only about electronics, e-commerce and the internet. The 21st century may be dominated by other industries, such as biotechnology, in the same way that the latter half of the 20th century was dominated by the IBMs, the Apples and the Microsofts. With biotechnology companies such as PPL

Therapeutics—the creators of Dolly the sheep—and Cyclacel Ltd in Dundee, Scotland is already recognised as a world leader. The launch by Scottish Enterprise of the biotechnology cluster group is of huge significance but, whatever new industries emerge in this new century, it will be crucial to them all to have the right people with the right skills and training.

A lifelong job will no longer be possible, but lifelong learning will be. A great deal is being done by the Executive: a Scottish university for industry will be created later this year; a national grid for learning will link our education system and libraries in a broad-band network; we are funding 42,000 additional places in further and higher education; £50 million extra each year is being injected into student support; we are doubling the number of modern apprenticeships to 20,000; and 100,000 new individual learning accounts are due to be established in Scotland by 2002.

As I said at the beginning of my speech, ministers in the Scottish Executive have a vision of Scotland as a modern, dynamic and prosperous knowledge-based economy. We want Scotland to be more enterprising, more innovative, more competitive, better educated and better prepared for the future. I am confident that, working together in this chamber and, more important, with those beyond it, we can deliver.

I move,

That the Parliament recognises that our future prosperity depends upon success in taking up the challenges and opportunities of the knowledge economy and that the building of a knowledge economy, which has as its hallmarks lifelong learning, knowledge, skills, innovation, enterprise and social justice for all, is essential to a modern and more prosperous Scotland.

Photo of John Swinney John Swinney Scottish National Party 3:32 pm, 9th February 2000

The minister concluded his remarks by talking about the need for us to work together. I have to tell him that, earlier today, the leader of his party and I worked closely together, both of us benefiting from new technology. Mr Wallace started it all off by showing me a pager message that he had received, which advised me that Alun Michael had just resigned as First Secretary of the National Assembly for Wales. Shortly after that, I reciprocated with more good news from my pager, which was that the Scottish Grand Committee has been recalled to Westminster for 29 February. That led to a cumulative raising of the level of happiness and joy of those of us who are Westminster MPs as well as MSPs.

Photo of Jim Wallace Jim Wallace Liberal Democrat

Does Mr Swinney think that it would be appropriate for the Scottish Grand Committee to meet every leap day, and that he should restrict himself to those meetings?

Photo of John Swinney John Swinney Scottish National Party

That would be far too ambitious a meeting programme for the future of the Scottish Grand Committee.

We agree with much of what Nicol Stephen said, and we share much common ground. I would like to emphasise the fact—I have made this point on a number of occasions—that we support the creation of an enterprise and lifelong learning department, because it signifies clearly the inextricable link with the skills and lifelong learning environment that there must be at the heart of economic and enterprise development. We welcome that development.

If this debate had taken place at the other end of George IV Bridge in the debating chamber of Edinburgh University Union 10 or 15 years ago, when I had more hair—the number of years increases every time that I mention that—and we were debating the motion "This house believes the knowledge economy to be a good thing," I suspect that we would all have been on the same side of the argument. We all believe that the knowledge economy is a good thing, but this debate is about probing to see how far along the road to developing the knowledge economy we are, and how effective the mechanisms and measures implemented by the Government have been in guaranteeing that we are in a position to realise some of the ambitions to which the minister referred.

Photo of David Mundell David Mundell Conservative

Does the member agree that one of the other purposes of this debate is to get a shared definition of the knowledge economy? One of the problems that we face in Scotland is that, although the phrase "knowledge economy" is bandied about, there is not necessarily a shared understanding of what it means.

Photo of John Swinney John Swinney Scottish National Party

If I were a conspiracy theorist, I would suspect that Mr Mundell had been looking through my finely crafted speech and had discovered that I was about to say that the Scottish Parliament information centre had provided us in one of its papers with a definition of the knowledge economy. Not being a conspiracy theorist, I do not imagine that that is the case, but I will come on to his point.

Not for the first time, the information centre has provided us with an interesting briefing document. The briefing includes a definition of the knowledge economy from a 1998 Department of Trade and Industry paper, which states:

"Authors have tried to describe aspects of the changes affecting modern economies in different ways. Terms such as de-industrialisation, globalisation, the information age, the digital or weightless economy all capture elements of what we observe. The knowledge driven economy is a more general phenomenon, encompassing the exploitation and use of knowledge in all production and service activities, not just those sometimes classified as high-tech or knowledge intensive."

I want to develop the idea of the

"use of knowledge in all production and service activities" as the theme of my comments today, because it goes to the heart of David Mundell's question to the minister about SMEs' awareness of and participation in trading on the internet. It also goes to the heart of Johann Lamont's point about how more community-based organisations could find a focus for many of their activities through a publicly driven initiative to capture some of the energy that is undoubtedly going into e-commerce—she made an interesting point, about which a lot more could be said.

My central contention is that we must ensure that we can translate that definition of the knowledge economy—and all that it means—into a reality at the heart of all of Scotland's business and commercial activity as well as at the heart of the personal and learning environment in which individuals participate.

To do that, the Government's preparations for the process must be coherent. The minister and I have clashed on this point in the past. I do not take the view that the Government must do everything—I would never suggest that that is the case—but, if we want to engineer a change in our economic base, the Government must do something pretty decisive and show sharp leadership.

I am afraid, therefore, that I must return to some of the things that I have said in previous debates on manufacturing, the Scottish university for industry and the modernisation of the Scottish economy. I do not see much coherence in the Government's approach to the exercise.

When I quoted from the DTI paper, I wanted to illustrate the fact that its definition of the knowledge economy suggested that preparations had to encompass all aspects of the Government's work. In many ways, the Government appears to be taking a plethora of approaches, whether to the digital Scotland task force or to other initiatives on competitiveness or technology.

I hope that the minister will be able to reassure us that the Government's work will be drawn together, because some of Mr McLeish's answers to questions from David Mundell—whose thunder I do not want to steal—suggest that some of the links between aspects of Government activity are entirely dependent on individuals' membership of task forces, which is not a robust way in which to develop cohesive policy.

We must be aware of the scale of the task that we must undertake to adjust to an all-encompassing knowledge economy that affects all production and service activities. The remit of the knowledge economy task force, which was referred to earlier, covers four main areas: encouraging commercialisation, academic incentives, clusters and the science enterprise challenge.

I would contend that the initiative has to be much broader than that. It has to touch on the small business community, because—although I welcome the aspiration of the Government to carry out much of its purchasing on the internet—the very nature of the companies that participate in internet trading means that 92 per cent of Scotland's SMEs will be excluded. I do not think that that is a welcome consequence of what is a noble aspiration on the part of the Government. We must ask how we can extend the initiative to include the small business community and how we can truly involve that community in the knowledge economy.

I suspect that, if the initiative were taken into a lot of small and medium-sized companies, they would be pretty sceptical about what was being offered. Because they are busy doing other things, they are sceptical about a lot of important things to do with business development and skills training. The knowledge economy would be even more remote than that.

I was struck by a statement made by the Minister for Communities, Wendy Alexander, on 4 February, in which she gave some startling figures. She said that only 4 per cent of families in council flats have access to the internet from home. That statistic reveals a lot about social inclusion, or social exclusion. If the knowledge economy is to be all encompassing and is to draw in a range of individuals in our communities, we need to be reassured that the Government's knowledge economy task force has as its objective a much wider participation.

Not for the first time, I return to the issue of performance measurement. It is important that we know whether we are getting there or not. At the Enterprise and Lifelong Learning Committee this morning, we had a very interesting discussion with Dr Andrew Goudie, the chief economic adviser of the Scottish Executive, who talked about the framework for economic development in Scotland. He touched on the way in which we can measure the effectiveness of the measures that we introduce. To guarantee that we are aware of the progress that we are making towards the goals that the Government has set, we need to have a robust framework for performance measurement in the knowledge economy.

The final part of our amendment talks about competitiveness. We must ensure that the Scottish economy can develop as many competitive advantages as it can. Arguments about geography that have frequently been used to illustrate the weakness of the Scottish economy and our isolation from progress should be rendered redundant by the type of communications technology and processes that we are talking about today. However, because of the nature of the arrangements that determine what the Executive is responsible for and what the departments of the United Kingdom Government are responsible for, I worry about the ability of the Scottish Executive to make its voice heard on competitiveness issues in order to deliver a competitive advantage for the Scottish economy. That touches on the way in which we expect the Scotland Office to represent our views on competitiveness. I hope that the minister will have something to say on that subject.

There is much to be welcomed in the knowledge economy, and much to be welcomed in what the Government is doing, but I fear that things are not as coherent as we require—and are not working as fast or with as much scope and penetration as we require—to guarantee that we deliver a competitive advantage for the Scottish economy.

I move amendment S1M-508.2, to insert at end:

"and calls upon the Scottish Executive to put in place a coherent strategy to ensure that areas of common interest between separate taskforces and Executive departments are properly co-ordinated and focused, to introduce a framework to measure effectively the performance of the Scottish economy in adapting to the challenges of the Knowledge Economy and to ensure that the Knowledge Economy is not placed at any competitive disadvantage."

Photo of David Mundell David Mundell Conservative 3:44 pm, 9th February 2000

Before I begin, I would like to declare an interest in British Telecommunications. I declared that interest when I lodged the amendment.

Presiding Officer, I am excited, but not necessarily by what the minister or Mr Swinney said. I am excited by the possibilities that exist for Scotland if we are able to take advantage of the globalisation of the world economy, and to create centres of excellence and knowledge-based and skill-based jobs.

I am sure that if we were having this debate in a few short months' time, we would be talking about a wise economy.

Just as e-working and e-business have come and gone, so will k-working, k-business and k-everything come and go.

As someone said to me recently: e is dead; k lives; w is tomorrow. Tomorrow's w will be wisdom, because knowledge in itself is of no value if it cannot be applied in a way that adds value. Buzz words are meaningless unless we understand them. I have no doubt that we lack a clear and shared understanding of what a knowledge economy means—we must move towards a shared definition.

Nicol Stephen mentioned the pace of change. People now talk about e-time. What they mean is the amount of change in two or three months is equivalent to what used to take two or three years. The Egg internet banking service is often cited as an example of that because it went from idea to implementation in 50 days. That is the time scale of the world in which we live and the world that we want to influence through the creation of the right micro-economic conditions in Scotland.

Everything the Executive and its agencies do must be done quicker. The Scottish Executive must develop what the UK Cabinet Office described as fleetness of foot—I do not see that at the moment.

The knowledge economy task force has been set up, but will it report and have its proposals implemented within 50 days? If the minister were willing to give that commitment I would have a lot more confidence in the setting up of such a task force. I fear that the pace at which the Executive is proceeding is too slow—we need e-time. Conventional time scales should be thrown out of the window. That would mean embarking on fundamental changes in the way in which the Scottish Executive works.

I am concerned about the amount of resources that are being allocated to this task. More than two weeks ago I asked the Scottish Executive, in a written question, how many people it had working on supporting e-commerce. According to the UK Cabinet Office—and as the minister has confirmed—e-commerce lies at the heart of

"building a modern, knowledge-driven, economy in the UK."

I have had no reply to my question. There are two possible explanations for that—one is that so many people are involved in supporting e-commerce that it is taking this long to count them. I fear that the more likely answer is that there are so few that the response will have to be padded out with mention of people working in various agencies and initiatives across Scotland.

If the minister is serious about building a knowledge economy, he cannot do it with two people in the Scottish Executive working on e-commerce. I do not know how many people the Scottish Executive has working on the many—some very laudable—social and cultural initiatives that we hear about in the Parliament, but we must understand that those initiatives are dependent on our economic success. Achieving that success must be our priority.

Dare I say that this Executive's approach to the knowledge economy is too conservative? I do not mean conservative in Labour's conventional way, which is to nick our policies and present them as its own; I mean that there is no evidence of radicalism or a willingness to be radical. Is not it time to commit to going beyond conventional thinking, institutions and structures? If the knowledge economy task force produces conclusions that challenge the status quo in Scotland, will the Executive give a commitment to follow them through?

Such development is not part of some nice to-do list—restructuring our economy is not merely a box to be ticked. It needs a revolution and a commitment to deliver it against vested interests and conventional wisdom.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

I am grateful to David Mundell for giving way—I did not want to interrupt his revolutionary zeal.

Will Mr Mundell outline the Conservative party's position on the role of the public sector in the knowledge economy? He says that the Executive should be fleet of foot, but what—specifically—should the public sector do to speed the process up?

Photo of David Mundell David Mundell Conservative

The public sector should modernise. I want the Scottish Executive to produce truly modern government at local, national and UK level, but I do not see enough evidence of that.

Photo of Elaine Thomson Elaine Thomson Labour

Is Mr Mundell aware of the development of policy on modernisation of government, for which Jack McConnell is responsible? The aim of that development is to do exactly what David Mundell has described.

Photo of David Mundell David Mundell Conservative

I welcome that sort of initiative, but it must be judged on delivery. I was interested to hear Wendy Alexander, at the launch of a link-up of voluntary agencies to the internet, say how difficult it is to achieve goals within current Scottish Executive mechanisms. Modernisation of the Scottish Executive is long overdue and we will judge members of the Executive on how and when they deliver that.

Earlier, I talked about excitement. The Scottish Executive and its agencies must get everyone excited. The UK Cabinet Office report on e-commerce says that

"a sustained sense of excitement about the opportunities" of e-commerce and the knowledge economy in general must be created. Unfortunately, that has not been done. Today, we are debating another rather bland motion. When we debated digital Scotland in November, we had the longest, dullest motion that has yet been lodged in this Parliament.

We must create a buzz and it must start with the First Minister. It must include Nicol Stephen's department, the entire Scottish Executive, the Cabinet, the deputy ministers, all the Executive agencies and the Parliament. We must get that buzz to create momentum and keep that momentum going. To do that we need leadership, but I do not see that leadership at the moment.

The Scottish Executive is failing to deliver on the fundamental point that is identified in the Cabinet Office report, which is

"to galvanise and co-ordinate Government action."

Government action is unco-ordinated. There is a fundamental lack of clarity about the responsibilities of the UK Government and the Scottish Executive; those must be resolved immediately.

Mr McLeish has suggested that there will be links between the groups that have been set up, but surely that is not an example of doing things in a joined-up way. The lack of a joined-up, galvanised and coherent approach by the Executive is the antithesis of a knowledge or wisdom-based economy.

We need a vision and the minister says that there is one. The vision, however, needs to be set out clearly and we need a strategy to achieve it. Moving forward in the global economy, as someone once said, is like trying to eat an elephant—one cannot do it all in one go. Otherwise, one ends up like the Executive, nibbling here and nibbling there. Let us break the elephant down into bite-sized chunks—into targets and measurable achievements. Most important, let us start doing that now. E-time is running out and we do not want Scotland to be left in an e-time warp.

I move amendment S1M-508.1, to insert at end:

"and that this will only be achieved by the urgent establishment of a clear vision for the Scottish Economy and a strategy to achieve it."

Photo of George Reid George Reid Scottish National Party

I call Allan Wilson. As Mr Wilson is occupying the Liberal Democrat slot by agreement, he will have up to eight minutes.

Photo of Allan Wilson Allan Wilson Labour 3:54 pm, 9th February 2000

First, I must declare an interest as secretary and director of the Radio City Association, a charitable company that is involved in the wider social agenda of promoting lifelong learning.

As the minister has outlined, there are myriad initiatives in this field. The Enterprise and Lifelong Learning Committee, of which I am pleased to be a member, has embarked on an inquiry into the effectiveness and simplification of the delivery of local economic services. As John Swinney has said, the consultation document on the Scottish framework for economic development was launched only last month.

As part of an enterprise case study, I visited Renfrewshire with my colleague Nick Johnston. We met people from a selection of local businesses and asked them about their preparedness for the onset of e-commerce and the knowledge economy.

The representatives of small and medium enterprises who were present responded to the question with relative hostility, seeing it as irrelevant to their particular interests as business support to the manufacturing and service sectors. Only when I raised the supplementary issue of future procurement by e-commerce—which other members have mentioned—did their attitude change; there was grudging recognition that that might indeed have something to do with them.

I tell that tale, as I did at the Enterprise and Lifelong Learning Committee, to illustrate the fact that the knowledge economy that we debate today is not the preserve of IT manufacturers or software engineers, or of other high-tech or knowledge-intensive industries. A knowledge-driven economy incorporates the use of knowledge in all production and service activities. It involves adding value to production processes of small-scale, west of Scotland engineering factories as well as to those of National Semiconductor or IBM.

As the minister said, Scotland's economic performance depends on our competitiveness. To improve our long-term rate of growth, we must build on the skills and creativity of the work force. We cannot, and should not, depend on an outdated philosophy of competing with a low-cost, low-skill work force. That was the essence of Reaganomics and of the Thatcherite philosophy that dominated the economic agenda of the 1980s. Those policies failed Scotland and its people. Building a knowledge-based economy will begin to redress some of those imbalances.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

From a Liberal-Labour perspective, what role does Mr Allan Wilson see in this for the Government's economic support mechanisms, such as regional selective assistance and other types of investment support? Those mechanisms are based entirely on jobs and take no cognisance whatever of value-added mechanisms or the knowledge base. How will that role change?

Photo of Allan Wilson Allan Wilson Labour

That point is exercising the minds of the ministers concerned, who are reviewing the effectiveness of RSA and RSA priority plus. I am sure that a statement on that will follow shortly.

We must promote our innovative businesses and encourage others to follow their lead in developing science and technology ideas. That applies to businesses of all types: large and small; manufacturing and services; low-tech and high-tech; urban and rural. We need to channel their knowledge, skills and creativity into improving products and services and increasing profits.

Scottish new Labour is driving forward the knowledge economy within the Scottish Executive to encourage the transformation of ideas into successful businesses. We also support the establishment of a Scottish institute of enterprise by 2001.

The Scottish economy needs a continuing stream of new scientific and technological discoveries to be turned into world-beating products and processes. The minister referred to the £11 million of extra funding for the proof of concept fund, which was established to turn scientific discoveries into wealth-creating products and processes, and to create the innovation that will help to fuel the vibrant knowledge economy that the Scottish Executive has pledged to create. That realised one of the principal recommendations of the knowledge economy task force, which was established to encourage academic entrepreneurialism and to facilitate the transformation of valuable ideas to the early stages of commercialisation.

Our business and further education institutions must also continue to develop dynamic working partnerships that help businesses to turn ideas into commercial success. Government alone cannot create the knowledge economy—businesses must focus their skills and creativity to improve their products and services and to help achieve growth.

Photo of David Davidson David Davidson Conservative

Apart from doing the Liberal bit, Mr Wilson commented on a Scottish new Labour policy. As we are talking about commercialisation, perhaps Mr Wilson might enlighten us about Scottish new Labour's approach to regulation. We do not want our burgeoning flow of business to be over-regulated. While we must have safeguards on board for the consumer and so on, I would like to be assured by Scottish new Labour, through Mr Wilson, that there will not be thousands and thousands of regulations—as we have seen from Westminster—that will stifle creativity and business.

Photo of Allan Wilson Allan Wilson Labour

Obviously, I do not agree with Mr Davidson's basic premise. Scottish new Labour has always been committed to fairness in the workplace and to finding a balance between the interests of the employer and the employee. The Tories have never recognised that balance, or the fact that protecting the employee's interests is in the long-term interests of the employer.

The foundations to which I referred are a prerequisite of the creation of an entrepreneurial culture that encourages the growth of new businesses and of changed attitudes to wealth creation and risk taking. That promotion of entrepreneurship as a generator of growth and jobs must start in our schools and continue throughout our lives. Starting a business should be a realistic and desirable option for everyone in Scotland. We need a social and business culture that supports the taking of risks and welcomes the rewards that risks bring. To achieve that, we must work to change the nature of the relationships between Government, business and the enterprise network and renew our focus on integrating investment in training, employment and skills. That investment has to be tailored to the demands of the new economy.

Scotland is comparatively well placed in terms of developing the technological know-how that is central to the knowledge economy. Our universities produce 21 per cent of Britain's post-graduate degrees in computer science, and 11 per cent of all British graduating students in engineering and technology.

An excellent example of Scotland's position in this area is Cadence in Livingston, which the Enterprise and Lifelong Learning Committee visited. That £30 million project is founded on a partnership between academia and business. The company impressed on us that it was the ability of the Scottish higher education institutions to tailor their academic curriculums to match the company's needs that made Scotland more attractive to it than Ireland, and that resulted in that inward investment coming here.

I will deal with the point about social inclusion and the knowledge economy that Johann Lamont made before she left. The economic climate has never been better for levelling out economic disparities. High employment levels, low and stable inflation, the lowest level of unemployment by historical and international standards for a generation and low long-term interest rates provide a solid and reliable platform for further modernisation of our economy.

Most important, we must fight the digital divide, which reflects the wide gap between the information haves and have nots. Increasingly, what we earn will reflect what we have learned. Less well-off families face serious disadvantages in terms of access to computers and the internet. That will impact on their job prospects unless we change the situation.

John Swinney mentioned a statistic about computer ownership in families. Another statistic is that only 12 per cent of families in council flats have a computer, compared with 50 per cent of households in high-income areas. The minister announced £23 million to provide wider access to information technology training in those especially disadvantaged areas and to fund new learning centres across Scotland. Those initiatives, allied to our plans for the national grid for learning—which should see computers in every class—are crucial to our social inclusion strategy and to the building of a knowledge economy. The two things are indivisible.

The creation of a knowledge economy is our most effective weapon of social policy and economic policy.

Photo of Patricia Ferguson Patricia Ferguson Labour

We now move to the open section of the debate. Members will have four minutes for their speeches.

Photo of Fiona McLeod Fiona McLeod Scottish National Party 4:03 pm, 9th February 2000

We have spent a lot of time listening to members trying to define the knowledge economy and talking about the digital divide in Scotland. To make progress on those issues, we have to create a knowledge society. From that will flow the knowledge economy and everything that follows from it.

I must reiterate John Swinney's comments about the lack of coherence and integration in the Government's approach. We have digital task forces, knowledge economy task forces, management task forces and so on. We have to create a coherent strategy to ensure that Scotland becomes a knowledge society that has a knowledge economy.

What concerns me about the Government's approach is the over-emphasis on the technology of the future. We should put people first because, while people think, machines only do. Thought will take us into the knowledge society and the knowledge economy.

How do we create thinking people? How do we create the skilled work force necessary for the knowledge economy? The 1997 Organisation for Economic Co-operation and Development international adult literacy survey puts 20 per cent of Scots at level 1 for literacy—the lowest level possible—yet, at the same time, funding and support for the improvement of adult literacy has been cut. From 1992 to 1998, there was a 40 per cent drop in the number of adults who participated in basic adult education courses. We must consider what the Government is doing to promote literacy and skills.

While participation in basic adult literacy courses is dropping, education departments are under threat; not necessarily the school education department, but the education department that helps with literacy skills and community education. My local authority, East Dunbartonshire Council, is contemplating doing away with community education to make up a 15 per cent budget overspend.

We must start to say that lifelong learning begins in school and does not start at 16. We should be equipping our children with transferable, adaptable skills: the skills that are embodied in information-handling techniques, but there is no statutory provision for a department of a school—a library service—that can teach that. We have heard mention of the national grid for learning. At the moment, eight local authorities in Scotland are not ready even to take up the information and communications technology training that is about to start in April. A quarter of Scotland's local authorities are unprepared—for infrastructural or visionary reasons—to start to train their librarians and teachers to skill the pupils for the future. That means that up to 50 secondary schools in Scotland are unable to start on the national grid for learning.

We must also talk about up-skilling adults now. How many of Scotland's small or medium enterprises have been consulted on releasing staff to access the Scottish learning network that we have heard so much about? In the debate on the Scottish university for industry, £4 million was pledged for learning centres, yet in Scotland we work the longest hours in Europe. When will people have the time to go to the learning centre to re-skill and up-skill to become the work force of the knowledge economy?

Wendy Alexander is fighting the digital divide. We have heard that millions of pounds of lottery money has been allocated for cyber cafés and so on, but many do not provide the support services that would allow folk to use them. Wendy was quoted recently as saying that the "best digital initiatives" are at the Log-In Café at Barrhead, near my home, and the Middlefield Learning House in Aberdeen, but neither provides crèche facilities for women who want to use the facilities to up-skill themselves.

I will finish by referring Nicol Stephen to his own words on 4 February, at the first of our annual Grampian chair lectures in public policy. He said:

"Scotland cannot compete in the modern marketplace with a low-cost and low-skilled workforce."

We have yet to find out how the Government is going to tackle that problem effectively.

Photo of Elaine Murray Elaine Murray Labour 4:05 pm, 9th February 2000

The concept, in the Scottish Enterprise network strategy, of the knowledge economy is that it will increasingly be based on new ideas, software, services and relationships, and less on products, with the result that the distinction between manufacturing and services will become harder to make. I find it a difficult concept to get my head round.

The cluster strategy reflects a growing recognition that different players in each sector in Scotland—whether producers, employees, businesses or research institutions—need to work co-operatively, sharing information and knowledge, to compete at an international level. In some cases, it will be necessary to bring together the various parts of a previously fragmented and unco-ordinated industry. The Scottish economy must learn how to make the most of what Scottish industry does best.

It is frequently stated that Scotland has a world-class research base. We have already heard that some sectors are showing considerable success in turning good science into jobs and prosperity. Successes in biotechnology, the pharmaceutical sector, semiconductors, opto-electronics and information technology spring to mind. The food and drink sector, which provides 17 per cent of the manufacturing jobs in Scotland and is of considerable importance in the south-west of Scotland, is another sector that has the potential for consolidation and expansion through the application and development of indigenous science.

However, we must address the fact that there are barriers to the commercialisation of science and consider ways in which they can be overcome. Perhaps I should declare an interest, as I was a food scientist and my partner still is. Compared with the rest of the UK, Scottish firms have a poor record in research and development, accounting for 0.6 per cent of gross domestic product. Often, companies from other countries develop the technology and processes that utilise the research done in Scottish universities and research institutes, which means that those countries benefit from the employment and prosperity that is created.

There are problems associated with the fact that performance in universities and research institutes is normally measured by the number of publications that appear in quality scientific journals. Because research that is commercially sensitive or patentable cannot be published in that way, the institution does not get any credit for that work, which can affect its funding. Core funding is generally project-based, and is not awarded specifically for commercialisation or industrial support. That can cause conflicting pressures on researchers' time.

The professional assessment of the work of academic departments must be similarly examined, to give due consideration to research with commercial applications. Such research might be blue-sky research or, equally important, near-market or process-related research. Process-related research is perhaps particularly applicable to the food and drink sector, where there is obviously considerable public resistance to very novel types of food—we need only think of the GM debate—but research into the processing of existing foodstuffs might result in considerable added value.

Because of a general shortage of experience in commercialisation in the scientific community, mentoring is necessary. That would be most appropriately performed by other scientists, not necessarily from the same discipline, who have already been involved in successful commercialisation. There must be a mechanism that allows scientists involved in the process to be recognised, as researchers who turn inventions into jobs or help others to do so are obviously not able to sustain the level of their publishable work.

We must recognise that commercialisation takes time and that instant results and successes should not be expected. Initial targets on job creation should not be over-optimistic; they must be achievable in the short term and sustainable in the long term.

Last week, at the Royal Society of Edinburgh, I attended a meeting on commercialisation at which there was a real enthusiasm for the development of this part of the knowledge economy in Scotland's universities and research institutes. We must listen to what those communities are saying about barriers to progress and consider how Government action can help to reduce such barriers to ensure that Scotland, her people and her communities benefit fully from the employment and prosperity that might be created.

Photo of Nick Johnston Nick Johnston Conservative 4:12 pm, 9th February 2000

In supporting Mr Mundell's amendment, I want to add to the alphabet. David Mundell mentioned the w word; I will introduce the i word. Albert Einstein said:

"Imagination is more important than knowledge".

This is not the first time I have accused the Executive of a lack of imagination, although I was pleased to hear the minister mention training in the latter part of his speech, as it forms the focus of my speech.

Everyone, from the cradle to the grave, is part of the knowledge economy. My local undertaker has now joined the web, which means that we can order our funeral over the internet. We live, work and play using knowledge. Technical knowledge has allowed Scotland to be the European centre for computer design and construction, and centres of knowledge allow our young people to become market leaders in many fields in academia and industry.

It is good that we recognise that our economy is dominated by telecommunications and e-commerce. The driving force behind the knowledge economy must be training. For the population to take continued advantage of and develop the knowledge economy, it must have access to information on such training.

It is my assertion—and the assertion of several college principals whom I recently consulted—that the provision of knowledge is unbalanced. Full-time education in university provides knowledge without experience; colleges provide knowledge with some experience; and adult training schemes provide knowledge and experience, but their purpose is more to generate business for the providers than to fulfil the skill needs of the business community. Providers of knowledge should follow industry's requirements rather than just put clients on seats. If we are to invest in knowledge training, it needs to be relevant to local economies rather than a Government wish list.

It is evident that successful implementation of ICT developments depends on skilled, motivated staff who have been given clear direction. Comprehensive training for all college staff will require considerable investment, in addition to the funding that was allocated to ICT development in the comprehensive spending review. The result will be colleges that can properly contribute to the Government's plan to foster a learning society and staff who can help students to gain the maximum benefit from emerging technology.

I was interested to hear Allan Wilson's speech. Perhaps the debate should be widened to include the available funds. Perhaps the universities' stranglehold on available funds does not help the knowledge economy. Too many resources are aimed at the young; we must move the emphasis to education in later life. Rather than creating more university places and processing many students whose knowledge and qualifications are not relevant to the world at large, we should develop colleges that work closer with businesses to supply the knowledge that those businesses require.

Perhaps the debate should be widened still further to ask where our education system is going. The Enterprise and Lifelong Learning Committee received a submission from the Inverness and Nairn, Badenoch and Strathspey Education Business Partnership. It said that at no time does the Government

"refer to the needs of local employers and the skills that they may need to develop their businesses."

Education from primary level upwards is failing our nation.

It is imperative that training organisations develop people's ideas as well as provide training on machines and equipment. Training should follow actual rather than imagined market requirements. Far too many people complete courses with meaningless certificates.

We need skill surveys across Scotland to focus on regional and local skill needs, and on the co-ordination of employees' and employers' groups to identify the business rather than the educational agenda. The knowledge economy should be demand led rather than supply led.

I support David Mundell's amendment.

Photo of Duncan McNeil Duncan McNeil Labour 4:17 pm, 9th February 2000

I am never one to miss an opportunity to present my constituency and its people in a positive light. I would like to take a couple of themes from the minister: the need for change and partnership in human resources. On Monday, I met a shipyard worker—not an undertaker—who is now a highly trained nurse in a new intensive care unit in the local hospital. My favourite story is about the shipyard labourer who teaches computer studies at James Watt College of Further and Higher Education. There is even a boilermaker in the Scottish Parliament.

Because of the highly flexible nature of the community and work force of Inverclyde, we continue to attract new investment. Derelict shipyards have been turned into mortgage centres and jobs and opportunities have replaced unemployment and degeneration. Although I present that positively, I cannot say that we entered into that process freely as those changes were caused by the collapse of traditional industry.

We need to create the conditions in which we can overcome the fear of change. How do we escape the trauma and avoid some of the disasters? How do we retain and expand our businesses? How do we convince employers and employees that they have a common agenda and that, to succeed, they need to create a business environment together that allows continual change and allows people and companies to upgrade their skills, increase their productivity and improve quality? How do we overcome the fear of change, which is very real in people's minds?

I have experience of partnership agreements, which offer a model. I assure members that partnership agreements—some may say they are just sugary words—work and deliver results. Partnership agreements between employers and unions have achieved many of the goals that I have described by establishing a learning environment at the workplace. How do we encourage that practice?

The Employment Relations Act 1999 established a partnership fund. How is it being used in Scotland? The Advisory, Conciliation and Arbitration Service in Scotland already does a lot of good work encouraging partnerships and learning agreements in the workplace. How is it doing? What are its plans for the future? How can we call on its expertise? How can we confirm the work it is doing and establish it in that role? Rather than resolving disputes, how do we give it a more creative and positive role for the work force?

Do we require co-ordination to oversee work-based training, to ensure standards and to ensure access is maintained throughout Scotland? Finally, can we ensure that education and training does not end at the point of employment and that the right to work-based training is extended beyond 16 and 17-year-olds?

Photo of Margo MacDonald Margo MacDonald Independent 4:21 pm, 9th February 2000

I am happy to associate myself with almost every word the boilermaker who spoke before me said. I am glad that he said it, because my first thought, on reading the terms of today's motion, was, "Why?" It is not exactly what could be called a crowd puller—it is more like a time filler. It is a tribute to some of the folk in here today that we have managed to talk some sense, based on a nonsensical motion. It was a wee bit like ministerial motherhood and electronic apple pie.

Much of what we have come to call the knowledge economy is cloaked in an impenetrable, obscure language. We talk about social inclusion—this makes people feel right outside the loop. Let us try to use language that people can relate to their everyday lives.

I interpret the knowledge economy as meaning that most of the big money in the international market is now to be made from the sale of software designed to carry out or assist almost any traditional manufacturing or service work imaginable, rather than the construction of manufactured things, even if they are computers and telephones. So, we had better do everything we can through our various education channels to encourage Scots to use new technology. As others over here have said before me: dead obvious.

As some of us used to say, what about the workers? What about the people who do not sit in front of a computer screen designing a software package for a medium-sized chain store group's stock control? What about the people whose part in the knowledge economy is to use the software package to order the goods from whoever makes them, to stock the warehouse, to deliver the goods to the shop, to stock the shelves, to attract the customers and to sell the goods? Where do they fit into the knowledge economy?

Lothian is perhaps the most successful part of the Scottish economy. People who work here can earn enough money to spend in the shops, the restaurants and so on, that make this a terrific city to live in. However, in the main they are not software designers. They work in shops, restaurants and small factories. They work in the caring services and the bureaucracies that glue a modern society together. How do we apply the precepts of the knowledge economy to how those people do their jobs?

As a result of innovations in applied medical knowledge, people who work at normal jobs now live longer. That in itself produces the potential for economic growth—they need more, therefore they consume more. However, they also need more medical and support services in their old age. How do we ensure that the profit from all that knowledge and the economic growth that it produces is not consumed by the cost of looking after elderly people?

That is where the knowledge economy begins to mean something to the people it is meant to serve: the workers. A motion such as this tends to obscure the simple truth that economic systems, and even task forces like the ones set up by the minister, are meant to serve human needs. They are not meant to bend people's lives to suit the marketplace. I was surprised to hear my colleague, Allan Wilson, say that we have to bend our skills to the needs of the economy. We must suit our skills to the needs of the economy—people's skills should not be bent to capitalist means.

This morning, the Enterprise and Lifelong Learning Committee heard evidence from Dr Andrew Goudie, who discussed the units of civil servants who are employed to stimulate the knowledge economy. He did not tell us what the measurement of their success would be. He did not say when we will know whether those units have stimulated the knowledge economy.

David Mundell referred to the lack of clarity. I could not agree more. The knowledge economy means something only if it is part of an attitude and a programme for lifelong learning—another misunderstood catchphrase. Lifelong learning is not just about having our technical colleges and senior schools able to adapt their teaching programmes at the drop of a hat to provide a training course for people made redundant from businesses such as Continental Tyres. I can see Nick Johnston being upset about that. Lifelong learning is about much more than that. It is about encouraging people to learn things, using new technology and old technology, such as libraries, books and teachers. That is how the economy will prosper. That is how the shop workers, the taxi drivers and the city guides in Edinburgh will have learned how to make visiting Scotland a great experience.

I have one last point to make, with the workers in mind. Will the minister tell us whether any college in Scotland has yet introduced a course in e-commerce?

Photo of George Lyon George Lyon Liberal Democrat 4:26 pm, 9th February 2000

In terms of motherhood and apple pie, I have some sympathy with the views expressed by Margo MacDonald. Nevertheless, whether we like it or not, the knowledge economy is very important to the future of Scotland. If anyone doubts the worldwide revolution that is currently taking place, they have only to look at the performance of the dotcom shares on the NASDAQ stock exchange. Multi-million companies are being created before they have even made a profit. That is what is happening in America. The Time Warner and America Online merger demonstrates the power of the knowledge economy. It is essential that Scotland is not left behind.

As Margo rightly said, we must ask what the knowledge economy means for the ordinary people living and working in Scotland. The food industry is a good example. The raw material involved in processed food has a value that is only a tenth of the retail price in the supermarket. The rest of the cost is added value: knowledge, marketing and packaging.

What will the effect of the knowledge economy be on rural Scotland? I believe that knowledge-based businesses and e-commerce bring equality of opportunity to rural Scotland for the first time. That is very important. All the barriers to normal business, such as remoteness and distance from markets—

Photo of David Davidson David Davidson Conservative

Mr Lyon mentioned the rural economy and how we can do everything through e-commerce. Will he tell us how the rural economy can use the knowledge economy to address the problem of high fuel charges for rural areas?

Photo of George Lyon George Lyon Liberal Democrat

If the member had waited a moment, he would have found that I was just coming to that.

The major barriers to businesses operating in remote areas are high fuel costs, high transport costs—and, in the case of island areas, ferry fares—and lack of local markets. However, knowledge-based businesses cause such barriers to disappear. Rural areas are immediately on a footing with urban areas. That is important to the development of the rural economy.

Rural Scotland has real advantages to offer in developing e-commerce businesses. It is much nicer to stay, live and work in rural Scotland, away from the stresses of city life. Rural Scotland has a lower cost structure for housing, building and general service provision.

In my constituency, a small firm opened up about three years ago. The firm is run by a couple who moved up from Cambridge to Carradale, which is on the Kintyre peninsula. Their company is called Map Maker and it produces software for large-scale digital mapping. It is doing very well and markets its product through the internet. The company has relocated to a small village such as Carradale because the barriers usually associated with business do not apply.

Highlands and Islands Enterprise and British Telecommunications have invested nearly £20 million in wiring over the past few years, to allow rural Scotland and the Highlands and Islands to take advantage of new, knowledge-based industries. The University of the Highlands and Islands and the opening of Argyll College will go a long way to help people to develop the right skills to take advantage of the opportunities offered by the knowledge economy.

However, I say to the minister that more must be done. Gaps still exist in the communications network and, most important, real initiatives are needed to ensure that the knowledge economy is taken up in rural Scotland. Current initiatives seem to be focused on the central belt—we want those initiatives to be widened out, so that rural Scotland can take advantage of this new type of business.

Photo of Maureen Macmillan Maureen Macmillan Labour 4:31 pm, 9th February 2000

George Lyon has stolen a bit of my thunder, as I also want to talk about the impact of the knowledge economy on the Highlands and Islands.

The knowledge economy has become important for the future of the Highlands and Islands. The principles laid down in the Executive's motion today—lifelong learning, knowledge, skills, innovation, enterprise and social justice—are fundamental to a prosperous future for the Highlands and Islands. I believe that we are on the way to achieving that future.

As Allan Wilson said, the economic situation in Scotland provides an excellent opportunity to increase investment, to increase access to education and to encourage business start-ups. We must not waste that opportunity. However, different parts of Scotland have different needs.

Even within the Highlands and Islands, a strategy for Inverness is not a solution for remote areas.

Some general themes are particularly appropriate for the Highlands and other rural areas. First, access to education is important. George Lyon mentioned the University of the Highlands and Islands, the establishment of which is a major step forward. Young people in the Highlands and Islands no longer necessarily face the prospect of having to leave home to go to university, and communities no longer necessarily face the prospect of their young people leaving and, in many cases, never coming back. The loss of the young people used to blight the Highlands.

However, universities are not just for young people. The UHI network encourages older people to go to university, perhaps for the first time, to learn new skills, which helps to revitalise the areas in which they live. The majority of UHI students are mature students, who access further and higher education courses through the information technology network, which links colleges from Argyll to Shetland. The knowledge and skills that people acquire will revitalise local economies in Mull, Tiree, Shetland, Skye or wherever, because they will stimulate the business start-ups and they will give people ideas about what they can do and how they can diversify.

Access to ICT is vital for the Highlands. Knowledge of IT is going to be crucial for shrinking distances within the Highlands and for marketing the Highlands to the wider world.

Photo of Margo MacDonald Margo MacDonald Independent

Everything that Maureen Macmillan said is absolutely true. The people who established the UHI are to be congratulated on providing that access.

A third of people who are employed have never had any further education since they left full-time school education. From Maureen Macmillan's point of view, as a teacher who worked in the Highlands, what is the missing link in persuading them to take advantage of this new technology?

Photo of Maureen Macmillan Maureen Macmillan Labour

That is happening already. Ten per cent of the working population on Barra is accessing further education through learning centres. That approach works particularly well in small communities.

People must want to learn to change, to access education and to improve their job prospects, and we must encourage them. I agree with Margo MacDonald on that point. Those of us who live in rural areas must diversify from traditional industries into high-tech industries. We must access new technology through schools, community centres, libraries and post offices, and, as other members have said today, the technological revolution must not be socially exclusive. People must be supported if they are to be confident in using the new technology.

It is a question of changing the nature of work in the Highlands. We are attracting new kinds of businesses, from biomedical research and development and pharmaceuticals to call centres, and I believe that Dr Jim Hunter of Highlands and Islands Enterprise was absolutely right to say that a diversified economy is the Highlands and Islands' best weapon.

In the inner Moray firth, BARMAC has laid off the work force as contracts have come to an end, but it is also taking on board the knowledge economy. Its school for welders, in co-operation with Highland Council and HIE, is staying open to keep welding skills up to date for when the next upturn comes. That is part of the knowledge economy. In Easter Ross, the immediate reaction to the BARMAC rundown was to secure an access point for Inverness College in the area, where the work force could get information about the courses available.

Photo of Mary Scanlon Mary Scanlon Conservative

Does Maureen Macmillan appreciate my concern that, in the financial recovery plan for Inverness College to deal with its £4.5 million deficit, the college is considering closing the outreach college in Fort William?

Photo of Maureen Macmillan Maureen Macmillan Labour

I believe that that matter is being addressed by Henry McLeish.

I want to close with an example of the knowledge, skill and hard work going on in the Highlands—Inverness Caledonian Thistle.

Photo of Patricia Ferguson Patricia Ferguson Labour

I will make no comment on that contribution to the knowledge economy.

We now come to the first of the winding-up speeches.

Photo of Elaine Thomson Elaine Thomson Labour 4:36 pm, 9th February 2000

This is a very important debate, because the successful development of a knowledge economy will be vital to Scotland's prosperity in the 21 st century. It requires a clear vision for Scotland's economy and people.

We know that our future prosperity will depend on a highly skilled, highly educated work force, which can exploit the knowledge industries of today and those emerging tomorrow. Industries will depend less on the production of goods and much more on people providing services. We want a high-skill, high-wage economy, and to move away for ever from the poverty of vision of the previous Government, which thought that competing with the developing world with a low-skill and low-wage economy was the way to make Scotland thrive.

We have a Government with the vision and foresight to understand that the future will depend on Scotland's people, and on the skills and knowledge of those people. It is vital to value them, and to nurture their skills. The way forward is by engendering a permanent learning culture, in which the school years are only the start of a lifetime of learning. That learning must continue from school into higher and further education and work. We know that we live in a global economy that is evolving at breakneck speed. We are truly in a second industrial revolution, a technological revolution, and to succeed in the global market, we need to exploit what has always been one of Scotland's strongest assets: her people.

After decades of Tory policies, Scotland compares poorly with her international competitors in areas such as workplace training. We must close the skills gap. We now have a Government which is putting in place the building blocks to stimulate and encourage people to engage in the new learning culture; to nurture a work force that is constantly developing and updating its skills, so that it can not only cope with change, but lead. We must enthuse Scotland's work force, giving them a desire for learning. Once people have acquired the skills and knowledge that they require for a career, it can last them decades.

The half-life of learning for any profession is constantly shortening. In seven years, much of a general practitioner's knowledge, for example, is out of date. For an information technology consultant, it is even shorter: two years. As an ex-IT consultant, I understand that only too clearly. Permanent knowledge acquisition and retraining are facts of life, and that will become true for many people, which is why the whole raft of policies being put in place is essential. They will allow all Scotland's population to learn, grow and succeed in the new knowledge economy of the 21st century.

We must start in schools with the national grid for learning. We must invest in technology, so that schools are well equipped. We must teach and develop entrepreneurial skills in the schools. We must encourage ever more students to move into higher and further education. We must encourage whole communities to develop learning strategies and to set up learning centres in workplaces. We must go ahead with the Scottish university for industry, to ensure that employers and employees can find the right training at the right time. Soon individual learning accounts will be rolled out. I believe that they will be an important way of addressing the skills gap.

In all sorts of industries, future success will depend on innovation and being able to compete globally. That means the development of a flexible, educated, skilled and learning work force.

In the north-east, for instance, the continued prosperity of the oil and gas service companies will depend less on fabrication workers and more on highly skilled professionals, working on cutting-edge technology that allows skills, products and services to be sold globally. Increasingly, that will be true for large segments of the economy.

That means having the right kind of vision and the right kind of policies. I believe that the minister and I, along with other speakers, have described those policies this afternoon. They will allow Scotland to move forward and to succeed.

Photo of David Davidson David Davidson Conservative 4:41 pm, 9th February 2000

Unlike my colleague David Mundell, who was excited earlier on, I have failed to be excited by the minister's comments. I thought that today would not be about a litany of the past successes of technological improvement in workplace training in Scotland—which are welcome—but about where the Executive is leading us and what this Parliament will do to kick-start the Executive into positive action.

Earlier, John Swinney, David Mundell and others talked about a lack of definition. I was staggered that the minister referred to the SPICe entry, instead of producing a definition that the Executive has bought into. If the Executive still has an open mind on this, I hope that it will build its model around coherence—a word that has been used often today. We need a clearer idea of what the Executive thinks it is talking about, and to ensure that the Executive gets some vim and vigour into this debate. That would encourage people to move forward, rather than to look back.

Today we are talking about knowledge, skill and the opportunity to access those. I understand the social concerns that people have expressed today, but we need to link knowledge and the skill to apply it. Knowledge is not enough; there must be the ability to apply it. When we go on our rounds, we are often told by industry that it is being neglected by the basic school system. Some school leavers are almost unemployable because of their lack of basic skill in the three Rs and inability to communicate. The knowledge economy starts in schools and homes.

The Executive has not given any indication of how it intends to promote awareness of business and commerce in schools and those education authority areas where they are hardly mentioned. This is where the issue of social justice that was raised by Johann Lamont, Margo MacDonald and Maureen Macmillan comes in. Social justice is about our young people and our unemployed gaining access to high-quality education and training that is appropriate to their needs. I heartily concur with what Margo MacDonald said about training having to be suitable for the job that people want to do. Not everybody will be a high-flier, nor do we want that. There are important service sector jobs for which people need only the appropriate skills.

Photo of Margo MacDonald Margo MacDonald Independent

David Davidson has described the objective. Does he agree that part of the strategy for achieving it is to persuade employers in Scotland that many people who are earning low wages and doing not very highly skilled jobs would benefit from lifelong learning? The Executive must show us how it intends to overcome that handicap.

Photo of David Davidson David Davidson Conservative

I agree. We want to see well-focused, proper training that is accessible to all. It must be accessible particularly in the workplace and in rural Scotland, not just in the cities and central belt.

Will the Deputy Minister for Enterprise and Lifelong Learning assure us that the knowledge economy task force will not just review the value of existing institutions and consider what might be bolted on to them, but have the power to redesign and even abolish some of those institutions if necessary? Will it have a role in looking at the plethora of initiatives with which all the research documents are laden, to try to give a sense of focus that the public can identify?

We are talking about what is available in Scotland. Well, who knows? Does the minister agree that the Arizona model of a guidebook to what is happening in the knowledge economy would be useful? It would of course have to be updated virtually weekly; it could be an e-document.

We have heard today about the uneven spread of quality in the sector and that the fast rate of change means we have to speed up. In the digital Scotland debate I suggested to Peter Peacock that Government is going to have to kick-start itself and get up to the speed of business. Today's debate has not been a really vital debate, with people getting up and saying, "Let us do something." That is the role of the Executive, I am afraid.

I had hoped to be able to praise the Deputy Minister for Enterprise and Lifelong Learning as the Baldrick of new Labour in Scotland, not for his standard of hygiene or dress but because he had delivered a cunning plan. Sadly, I feel that he does not measure up to that accolade, but I may reconsider after his closing remarks. I encourage him and his colleagues to come forward with positive suggestions—not a vision but an action plan. We need it now.

Photo of Fergus Ewing Fergus Ewing Scottish National Party 4:47 pm, 9th February 2000

I cannot go quite as far back as Baldrick, but I want to refer to a curious auction that took place in 1865 in Cleveland, Ohio between two partners in an oil refinery. One, Mr Maurice Clark, wanted to dissolve the firm and the other agreed. They decided to have an auction between themselves. Mr Clark started the bidding at $500 and lost at $72,500 when he said: "I can go no higher. The business is yours, John." That is how John D Rockefeller became the sole owner of Standard Oil, the biggest company that the world has known, at least until Microsoft.

I mention that because whether we are talking about the knowledge economy or not, solutions and progress will come from the efforts of individuals in Scotland. I am thinking not only of leading entrepreneurs such as Brian Souter, Michelle Mone and Vera and Gerald Weisfeld, or the hundreds and thousands of other leading entrepreneurs, but about everyone who plays a part in the knowledge economy in Scotland, especially those who have a less substantial return.

I offer a positive suggestion to Mr McLeish—who seems to be leaving but will no doubt soon return. Because those at the cutting edge of e-commerce tend to be of like mind it would be sensible to house new developments under the one roof. They can exchange ideas; they have the same mental approach, skills and knowledge-driven approach. I know of one or two potential developments on that line in the north of Scotland.

I agree with George Lyon and Maureen Macmillan that the potential of the knowledge economy for the Highlands and Islands may be greater than anywhere else. Let us not forget that not all knowledge economies can operate divorced from the impact of high transport costs and high fuel costs, and the difficulty of getting from the islands, in particular, to, for example, London. I hope that in his summing-up the minister will address some of those issues. In the Highlands and Islands, we want to hear an announcement, albeit a belated one, about what has happened to the campaign to restore a London Heathrow link.

Nicol Stephen referred to social inclusion. I would like to quote from an Executive press release of 4 February, because it affects people directly. Talking about the number of households that have computers, it said that

"only 12 per cent of households in 'families in council flats' do, compared with 50 per cent of households in 'high income' areas."

When it came to the internet, only 4 per cent—only one in 25—of households in council flats in Scotland had access to the internet. I mention that because I know that everybody in this chamber will be concerned about that information from the Lib-Lab Government.

If we are to include everybody, as Nicol Stephen suggested—and we all agree with that—such statistics must be taken on board. It is impossible to learn the piano unless one has access to a piano, and it is impossible to get involved with e-commerce unless one can develop computer skills and one has access to the internet. I take those matters to be self-evident, and not of a party political nature.

Moving on to the knowledge economy and the new deal, I fear that once again, as far as social inclusion is concerned, there is difficulty in extending the benefits of the knowledge economy to those who do not have employment. A research report by the University of Edinburgh indicated that 75 per cent of young people in Scotland leave the jobs found for them by the new deal within six months. Only 6.7 per cent of Scottish businesses have signed up to the new deal. Young people do not receive the minimum wage on the new deal. From January 1998 to July 1999, only 24 per cent of people on the new deal found jobs, which is 17,000 short of the target of 25,000. Much more needs to be done.

With regard to the knowledge economy and exports, in my constituency one of the leading companies is A I Welders Ltd. The strength of sterling affects it severely, as it affects every other exporting business, and puts it at a competitive disadvantage.

Our amendment focuses on the need to ensure that, as for all other businesses, businesses in the knowledge economy do not suffer a competitive disadvantage. Of course, businesses in the knowledge economy will, by and large, operate from business premises. Curiously, those that do not do not contribute to local government finance; only the individuals who work for them do. That anomaly should be looked at, although an immediate solution is not apparent, other than to point out that the business rate is an antiquated form of tax in a knowledge economy.

All businesses in the Highlands, and throughout Scotland, will face a severe competitive disadvantage over the coming five years, because of the Minister for Finance's decision on 8 December that the business rate in Scotland should be 10.1 per cent higher than that for business properties of identical value south of the border. I notice that the author of that tax, Jack McConnell, is with us, and I welcome him. I put it to him that in a letter that I have seen, dated 22 December, the Scottish Council Development and Industry described that tax as a retrograde step, and something that places Scotland at a competitive disadvantage.

In conclusion, I suggest, as was argued by John Swinney, that there is a danger of a lack of cohesion. Perhaps we should have had this debate after the knowledge economy task force's report is released in April, rather than in February, just after it has been appointed. I hope that Inverness, through the use of skills such as those used yesterday evening, has given a lead in the knowledge economy, as Maureen Macmillan mentioned. Incidentally, I was happy to sign Maureen's motion, as I was to sign Mary Scanlon and Jamie Stone's motions. I hope that Maureen will sign mine, which invites us all to encourage Inverness to achieve further success by gaining city status befitting of a premier location for Scottish football.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat 4:55 pm, 9th February 2000

Much has been said about excitement during the debate. We should start by emphasising that this whole area—the development of e-commerce, the convergence of computing and telecommunications and the merging of the computer with TV and the mobile telephone—is an exciting one, and that Scotland is at the heart of it.

There are new initiatives and there is new momentum. Project Alba, on which Edinburgh, Glasgow, Strathclyde and Heriot-Watt universities work together, was spoken about during the debate. There are also companies such as Cadence, Micro Linear and Epson that have come to Scotland because they believe that it will be at the centre of the next generation of microchips.

In the Scotland of tomorrow, there are new products and services, which will suck consumers off the streets into shops or on to the internet. It is an exciting time for Scotland. We have an interesting future, which we must embrace, through e-commerce and the internet, or we will fast fall behind.

"More must be done" was a common theme in the debate. That is true and obvious. The fact that more must be done is the reason for the debate. But what is John Swinney saying about our target for shifting purchasing in the Scottish Executive to the internet? Is he saying that we should not shift to e-commerce, because, as he said, it would exclude 92 per cent of Scotland's companies? We want to include 100 per cent of our small and medium companies in the opportunity provided by the internet. We do not want a Luddite approach. We must be progressive. What is Mr Swinney saying?

Photo of John Swinney John Swinney Scottish National Party

I will happily confirm what I am saying. The minister should not put words like Luddite into my mouth. My point is that the minister must face up to the fact that if he wants procurement to move in that direction, he must put in place the transitional mechanisms that will encourage those small and medium enterprises that are currently disengaged from the Government's strategy to take part, so that he can provide the inclusive economy that his Labour colleagues quite rightly demand. What are those transitional mechanisms?

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

I notice that John Swinney did not answer the question. Is he saying that we should delay, that we should hold back or that we should get on with it?

Much was also said in the debate about rural areas. The new technologies and e-commerce create real prospects and great hope for rural areas in Scotland. Companies such as Sykes in the borders, whose business was driven by digital technologies, are now moving into new forms of e-commerce. Sykes is now shipping products such as watches, leather jackets and even Christmas trees from the Borders to all parts of Europe, building on the company's digital business, which was originally based on software. There are other companies, such as Iomart in the western isles and Cap Gemini in the Highlands.

David Mundell spoke about excitement and the need for momentum and more energy. At times, I got lost with some of the visual imagery about elephants, e's, k's, w's and Nick Johnston's i's. David Mundell's speech was in the right spirit. However, I take no lessons from the Conservative party's cry that there is a lack of resources and determination. Nor will I take lessons from the Conservative party on being less conservative and more radical, when, in government, that party backed away from supporting business and industry, and from the sort of measures that are needed to encourage greater modernisation and more use of new technologies.

Allan Wilson is right to say that the knowledge economy is about all companies—every business—in Scotland. The scale of the challenge is underlined by the fact that no longer will reliability and dependability of products be enough; however, they will be the foundation on which the new, excellent and exciting products of the future will be built. A great example of that is the Glasgow Collection, with more than 50 new, innovative designs that have been produced by young entrepreneurs and designers in Scotland. More than 28 of those designs are now in production.

I would like to come back to the theme of excitement that David Davidson mentioned. We are doing a lot of significant things involving schools. This morning, we launched the education for work initiative, with Henry McLeish presenting the new HM Inspectors of Schools report.

Fergus Ewing said that e-commerce is about including rural areas and obviating their problems. However, he then went on to raise many of the points on remoteness and peripherality that he often raises in debates. People in the world of e-commerce do not carry their e-mail on a truck to market. There are huge opportunities for rural Scotland as a consequence of e-commerce, and we must do more to embrace those opportunities.

Margo MacDonald spoke about motherhood and apple pie. I tell her that instead of getting bored about a debate such as this, in other countries people are looking to create world-beating motherhood and are working out how to use the new technologies to get better apple pie.

Photo of Margo MacDonald Margo MacDonald Independent

Not half as disappointed as I am in the deputy minister's. Will he give way?

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

No, I am not giving way. I am just about to finish. I would be delighted to give way to Margo if I was not right out of time.

Duncan McNeil spoke about the fear of change. That is central to this debate. Do we prepare for change, or do we wait for it? I suggest that we have to do more than prepare for change: we have to embrace change. But the best companies in the world do more than that. Those that are really interested in the future do not predict it or simply prepare for it: they help to shape the future. They make the future. That has to be our vision, together, for the future. We are determined to deliver on it.

In a global economy, we can never control or predict events with 100 per cent accuracy all the time. However, if we, like a Sony or a Microsoft, can help to shape the future, and if we can be fiercely and ferociously focused—not on the dreaming, which is the easy bit, and not on the development, which is the difficult bit, but on the delivery, which is the real magic and the really important bit—together we can achieve. I can assure the chamber that, together, we are determined to deliver.