Manufacturing

– in the Scottish Parliament at 9:30 am on 9th March 2000.

Alert me about debates like this

Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament 9:30 am, 9th March 2000

This morning we are debating motion S1M-642, in the name of Henry McLeish, on "Created in Scotland—The Way Forward for Scottish Manufacturing in the 21 st Century", and an amendment to that motion.

The motion as it appears in the business bulletin is not quite correct. It should read:

"That the Parliament notes the Executive's aim of pursuing a successful manufacturing sector and welcomes the Executive's report Created in Scotland—The Way Forward for Scottish Manufacturing in the 21st Century, published on 2 March 2000."

The wording will be corrected before decision time in the revised business bulletin that will be issued this afternoon.

Photo of Henry McLeish Henry McLeish Labour 9:31 am, 9th March 2000

I am glad that you cleared up that technical change, Sir David. I did not want to give you any more burdens at this time.

Last week I launched our publication "Created In Scotland—The Way Forward for Scottish Manufacturing in the 21st Century". Today we have an opportunity to debate the contents of the report and to send out a strong message giving this Parliament's support for manufacturing. Members from all political parties in this chamber have tried to develop what I shall constantly refer to as the new economic model in Scotland. That model is about inclusivity and consultation, and it links the work of the Enterprise and Lifelong Learning Committee, the Parliament and the Executive. That is in the best interests of manufacturing and of every sector of the Scottish economy.

In sending our message of support, it is important to underline the importance of manufacturing to the Scottish economy. Some 300,000 jobs depend directly on manufacturing, and manufacturing companies also support up to 300,000 related jobs in the service sector. That adds up to nearly 30 per cent of Scottish employment. Manufactured exports were worth almost £19.3 billion in 1999. There was a 7.8 per cent growth in exports in the four quarters to the third quarter of 1999. Scotland's share of United Kingdom manufacturing exports rose to a record 12.3 per cent. The manufacturing sector's output grew by 1.4 per cent in the four quarters to the third quarter of 1999, compared to a decrease of 0.7 per cent for the UK as a whole.

We have world-class companies in Scotland and we are attracting world-class companies. For example, ADC Technology's investment in Glenrothes will provide 1,100 jobs in a quality manufacturing outlet. PPL Therapeutics is an example of a leading edge, new technology company in Scotland, and Scottish Enterprise has confirmed an investment in its alpha-1-antitrypsin therapeutic protein products, which will be manufactured in Scotland. We can take great pride in the fact that that has been developed here and will stay in Scotland, providing Scottish jobs and benefiting Scottish people. I hope that those important messages go out from this Parliament with the full backing of members from all parties.

Scotland is facing global competition. Its future is increasingly dependent on being more competitive, more productive, more innovative and more responsive to the needs of the marketplace, whether that marketplace is in Scotland, in the United Kingdom or worldwide. There are signs that that is happening, and many firms are responding to the challenge. The company that I chose for the launch, Cashmaster International at Rosyth, is an excellent model of what can be achieved, and is one of the many examples of best practice mentioned in the report. Cashmaster International is a small manufacturer of weighing scales, which has successfully diversified into production of innovative touch-screen kiosks, with marketing opportunities for tourist sites worldwide.

I was pleased to see in last week's Bank of Scotland report that manufacturing output rose again last month for the 12th month in a row. Manufacturing employment also rose for the seventh successive month, demonstrating that new jobs are being created in the sector. As I said earlier, there was excellent inward investment last week by ADC. Of course, everyone knows that we need to work hard to ensure that manufacturing continues to take its rightful place as part of the knowledge-driven economy of the future. The Executive is determined to support manufacturers in achieving that, and I hope that the Executive's thrust will be supported by the Parliament.

"Created in Scotland" is the culmination of work that I initiated last year. It is perhaps helpful to recap the path that we took to produce this publication.

In March last year, the report "Pathfinders to the Parliament" looked at the business agenda for several broad sectors of the Scottish economy, including manufacturing, and produced many helpful recommendations. In June, I announced that we would build on that work, and would be consulting business leaders, trade associations and trade unions to discuss future support for manufacturing in more detail. I then formed a steering group of prominent people to advise me on the main areas of concern, and to recommend to me what action would be helpful.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

The minister referred to the pathfinders document. Does he regret the fact that the Lib-Lab Executive has breached the recommendations in the manufacturing section of "Pathfinders to the Parliament", which stated that there should be a

"Level playing field across UK for business rates and taxes", given the decision by the Minister for Finance, Mr McConnell, to impose a business rate poundage that is 10.1 per cent higher for properties in Scotland than for properties in England that are of identical value?

Photo of Henry McLeish Henry McLeish Labour

First, the pathfinder reports were enormously helpful in the run-up to the new Parliament, and since then, and I intend to provide a résumé report of pathfinder report ideas that have not yet been published or taken up.

Secondly, the Minister for Finance outlined the situation regarding the business rate. He had a difficult balance to achieve, but this Executive is committed to a level playing field throughout the United Kingdom, so that Scottish companies are not competitively disadvantaged.

Thirdly, I will be chairing a committee over the next few months to discuss with the business community and others the way forward through the difficulties that some of the companies may experience in the years ahead.

In September, after the steering group was established, subgroups were formed to look at particular subjects, and just before Christmas, those groups put to me papers outlining their recommendations. Those papers are available in the Scottish Parliament information centre.

I did not want to constrain their discussions, so it is not surprising that the groups have produced recommendations that range between modest, down-to-earth proposals and what might be called blue skies thinking. With the agreement of the steering group, the Executive took the papers and distilled from them the thinking and actions that were most likely to be achievable in the short to medium term.

Finally, the steering group met and reviewed the report last month, and was broadly highly supportive of it. The group agreed that it was not possible to include all the group's recommendations in detail in the report, nor, given budgetary priorities, was it possible for there to be new action on all of them. The report does not try to duck that; it clearly acknowledges that the steering group did not necessarily support all the Executive's actions.

I want to record my appreciation of the steering group's efforts. I hope that we will be able to deploy the expertise, enthusiasm and commitment of members of that group in the months that lie ahead. I wish to give a special mention to the Scottish Trades Union Congress. That is not a partisan point. I mention it because when I came into this job, the STUC was one of the first organisations to say that it wanted a powerful message about manufacturing. I hope that that message has now been delivered and I thank the STUC for its participation.

The report is a statement of our commitment to manufacturing, and charts the significant progress that is being made. It also sets out a clear vision. I would like to throw in two points about the cultural change that will be required for this Parliament to send another message to Scotland. We can talk about technicalities, productivity, competitiveness, investment, innovations, skills and lifelong learning, but fundamental to this debate is the requirement for a wholesale change in attitude not only in this chamber, but throughout the country.

I would like to quote some parts of the report that tackle two areas of cultural appreciation: what is happening within Scotland and what is happening in the global economy.

First of all, as far as Scotland is concerned. "Created in Scotland" states:

"Manufacturing is an increasingly diverse activity, and there is often debate about what should be included within its definition."

Margo MacDonald put that point to me in the chamber recently.

"For many people in Scotland, manufacturing still conjures up images of heavy engineering and shipyards. These are still important to the Scottish economy and will continue to be so, but manufacturing now encompasses much more.

In the past, manufacturing was very much based around the production process. Focus on production was considered to be essential as 'making and selling something' was considered to be the key way value was added to the process. Manufacturing was tangible—you could touch your value, and you created more by making more.

Today manufacturing is both about 'creating' and 'making'. Many manufacturers now view the process much more in its entirety—research and development, design, supply, production, software, services, distribution, delivery, aftercare—and successful companies focus on those parts of the process which add real value to the product. Increasingly, having identified a market, for many companies the priorities are R&D, design, and prototyping in order to deliver a high quality product".

The value added element is crucial.

Photo of John Swinney John Swinney Scottish National Party

Does the minister agree that as manufacturing gross value added has increased dramatically in Scotland, compared to a decline in the rest of the United Kingdom, manufacturing is a more important sector to the Scottish economy than it is to the economy of the rest of the United Kingdom?

Photo of Henry McLeish Henry McLeish Labour

That is largely true. Members should consider the export figures which I mentioned earlier—12.3 per cent of the total manufacturing exports from the United Kingdom are from Scotland. That is more than our share of the population.

When we consider labour productivity as a value added exercise, we are still, per head, less than the UK in gross value added per head, so we could do better in some ways. However, John Swinney's point is largely correct. As far as Scotland is concerned, there must be an acceptance that there is a wider dimension to manufacturing than there has ever been.

I will reinforce that message by considering the global situation. The report states:

"We are living in a time of significant change in the way in which we do business. Globalisation and the dominance of knowledge as the key business resource is creating radical shifts in all areas of the economy, none more so than manufacturing. Manufacturing is and will remain a key area of economic activity in Scotland. However, the very nature of the industry and the factors driving competitive success are undergoing fundamental change. For many sectors this is a rapid step change."

I use those quotes to highlight, as I said earlier, that in addition to the technical issues surrounding manufacturing, we must also identify the key cultural, attitudinal and perception problems. It requires not only the public's perception to change but this Parliament to shape the new perceptions which reflect the changing realities of the Scottish economy.

The report also identifies—and this is an aspect on which members can unite—a number of areas in which Scottish companies are facing up to the challenges but in which they need to do more. Those are: diversification into new products and processes; better application of new technology; developing use of e-commerce; increasing product value; commercialisation of new ideas; developing alliances and relationships with companies; and improving customer focus.

Vital to all of that is what we do to help small and medium enterprises, which are crucial to every aspect of the Scottish economy, and the lifelong learning revolution, which is taking place but needs to accelerate at a much faster pace.

Throughout my speech so far, I have emphasised the importance of the report as a unifying document for the future of manufacturing. The steering group also wholeheartedly supported one important new initiative. We intend to draw up a campaign to raise the image of the manufacturing sector. Scottish manufacturers believe that the image of the manufacturing industry is unjustly outdated and can be negative. Front page stories about job losses, which are inevitable because it is a free press and has a right to comment, often give the impression that only certain aspects of manufacturing are doing well or badly.

The negativity and misconceptions inevitably affect what young people think about a career in manufacturing. The fact that fewer are applying to universities for courses such as engineering and the fact that there are skills shortages in certain sectors are proof of that. For example, software engineering is one of the rapidly expanding sectors of the Scottish economy, yet it has an enormous number of vacancies.

There are skill gaps, a fact which is not entirely due to the perception that young people, or adults, have of engineering or of the economy. On the other hand, if we take the software aspects of creative industries, for example, interactive videos, there is a whole range of activities where we have to say, powerfully: "This is a career worth pursuing. This is a growth area." To use the expression that I used at the launch of this for young people, it is a cool activity for them to seek a career in.

Photo of Alex Neil Alex Neil Scottish National Party

I hope that my suggestion is helpful. On the one hand, we have a shortage of software engineers and programmers and, on the other hand, a high percentage of our graduates in those skills leave Scotland shortly after graduating. One of the successful programmes in matching need with supply has been the software graduate placement programme run by Glasgow Development Agency. Will the minister consider the possibility of expanding that programme into other local enterprise company areas, because it has undoubtedly been a major success?

Photo of Henry McLeish Henry McLeish Labour

I thank Alex Neil for that, because I agree with the thrust of the debate that we need to create an environment in Scotland in which young people stay in Scotland after graduating. The Parliament could unite around that issue. I am impressed by the work of the GDA; indeed, Lothian and Edinburgh Enterprise Ltd has set up a software academy—another innovation. We need to build on those developments. I agree that if something positive is happening in one area of Scotland, we should not take years to reinvent the wheel somewhere else. That is a challenge for Scottish Enterprise.

We need to set the record straight on perception. We intend to set up a project group involving some members of the manufacturing task group along with others, to consider how best we can go forward from developing manufacturing as a worthwhile career to giving a general and more positive view of manufacturing to the public at large. As part of that, we intend to have a champions for manufacturing sectors programme to link up people who are well known in manufacturing, who are doing good work in Scotland and to whom the public can relate.

Photo of David Mundell David Mundell Conservative

Does the minister agree that the problem is two-sided? On the one hand, there is the traditional view of manufacturing and, on the other hand, the new, creative manufacturing, for example, in the video game industry. Being involved in developing video games is somehow perceived as not being a proper job. However, Scotland, with companies such as Red Lemon Studios and others, is at the forefront of those developments. Scotland has world-class developments in that regard. The Parliament should give credibility to those activities.

Photo of Henry McLeish Henry McLeish Labour

I could not agree more. Part of the task of the group will be to consider that fundamental point. Because of our history, which has been good, and because of our investment in many areas of industry, many people think that if a job is not in one of the traditional areas, it cannot be construed as a real job, with real career prospects and a real income. David Mundell has given an excellent example of the fact that that is not the case.

One other aspect of what is a fascinating area for the Parliament is the document that we published, alongside our manufacturing strategy, called "Partnership Action for Continuing Employment", or PACE. It is about tackling another issue that affects every member of this chamber. "Created in Scotland" refers to the need to improve how we deal with potential and actual redundancies. The PACE document is a best practice guide.

Job losses are an unwelcome but inevitable part of any dynamic economy. We need to do all we can to prevent them, but if they cannot be avoided, we need a consistent, rapid and united approach for dealing with companies and, more important, the individuals involved. I am determined to work with all key agencies to create the conditions necessary to improve partnership working across agencies, across areas, across sectors and across Scotland.

The review of our current arrangements sought to identify the lead roles of the various local agencies, to determine how best they can work in partnership and to establish a framework for a strategic response plan. That is what is happening.

I wish to finish on a very positive example, which caused enormous difficulties for the individuals, for the company and for the local communities. I refer to the success of our approach when it was applied to those who were made redundant at Continental Tyres at Newbridge. Of the 831 people who were affected last October, at least half have gained new, full-time employment. Others have been found training places or have become self-employed. Efforts continue to find jobs for those, around a sixth of the work force, who are known still to be without work. I have every confidence that the team approach will also be successful for those who will be made redundant at the Grampian Country Foods Ltd factory in Newbridge.

As we move manufacturing forward, there is an ambitious agenda for the Parliament, the Executive and the country. In the transition, there will be difficulties. That is why the PACE report was designed, to show how best the Executive, the Parliament and every agency in the country can rally to respond.

I have two brief final points. First, manufacturing matters—it has a huge future in Scotland. Secondly, we are not in the business of picking winners and losers. I firmly believe that all manufacturers—large or small, high tech or from the traditional sectors—deserve our support. We should unite around the reports that have been produced. There will be differences in tone, emphasis and substance; nevertheless, manufacturing is vital to Scotland. I commend the motion to Parliament.

I move,

That the Parliament notes the Executive's aim of pursuing a successful manufacturing sector and welcomes the Executive's report Created in Scotland—The Way Forward for Scottish Manufacturing in the 21st Century, published on 2 March 2000.

Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament

I ask all members who want to take part in the debate to press their request-to-speak buttons now. That will enable me to work out the time limit for back-bench speeches.

Photo of John Swinney John Swinney Scottish National Party 9:51 am, 9th March 2000

This is our second debate on manufacturing. At the start of the first debate, on 29 September 1999, I said rather flippantly that the first part of our new manufacturing strategy should be to get more lecterns for the Parliament. You responded, Presiding Officer, by saying that they were on their way. I am pleased to compliment you on the manufacturing achievements made by your office in providing the lecterns for our second debate on the subject. That was an example to us all.

Many aspects of the Government's strategy on manufacturing are of enormous significance and worthy of support across the political spectrum. I will address a number of those aspects. The first concerns the framework for economic development in Scotland, which the Government set as one of its main action points in the development of its strategy. We welcome that, as we welcome the on-going debate on creating that framework. We have some uncertainty over where the debate will end and what the framework will look like—Henry McLeish and Nicol Stephen probably agree with me on that—but it is important that we raise the basic understanding of the Scottish economy to higher than its present level. It is also important that we have some shared understanding of the difficulties that exist in the different sectors and industrial bases that we are trying to tackle.

I was struck by the comments of Professor Brian Ashcroft of the Fraser of Allender Institute about the Government's strategy document. In effect, he said that what was missing from the manufacturing strategy was an understanding of the problems and challenges that are faced by the Scottish manufacturing sector. I hope that the economic development framework that emerges from the work of the Government's chief economic adviser advances us towards a shared understanding of the strengths of the sectors that we are trying to assist, and focuses Executive—and Executive agency—action very purposefully on addressing the issues that emerge from that process.

The Government also put improvements in the delivery of local economic development services and in existing performance on business start-ups, survival and growth at the heart of its manufacturing strategy. The ministers will not be surprised to hear that those sentiments are supported firmly by the SNP, as is the Government's emphasis on the importance to the economy of inward investment. However, inward investment has to be balanced against the need to develop and strengthen the indigenous company base in Scotland and to guarantee that we have a special relationship with those companies that have in Scotland their roots and commitments—and, I venture to suggest, their headquarters—in developing their contribution to the Scottish economy.

Some aspects of the Government's manufacturing strategy need further development. In that strategy, the Government makes a commitment to review the five-year export development strategy for Scotland. I have one thing to say to the Government on that, which—coming from me—is not exactly a new point: we must ensure that the export development strategy that is put forward for Scotland has a distinctly more ambitious curve than any previous such strategy has had.

Although manufacturing exports may be increasing, they are doing so from a base that has contracted heavily in the past few years. They are on an upward trend, but from a lower base. Having read the reports of previous House of Commons select committee inquiries on exporting and considering the development work done by Scottish Trade International, I am struck by the relatively modest ambitions of our export development strategy. Ministers must tackle that decisively in the current review.

Photo of Henry McLeish Henry McLeish Labour

I agree with the points that John Swinney has made. He did not mention that within the export drive were other targets that were also unambitious—so much so that we have exceeded them, in some cases a year before the final target date. That is something on which we should compliment exporters, although I agree that we should have targets that are more ambitious. We also need to diversify, so that we are pushing certain exports, which, in previous years, have not had the drive that they should.

Photo of John Swinney John Swinney Scottish National Party

I am glad that the minister has made those points. It is important that we set a decisive, new and ambitious target for exporting. We do not want a 3 or 4 per cent increase in exports per annum; rather we need a step change in our export performance to provide us with the ability to trade in the global economy.

The SNP has supported many aspects of the Government strategy in the past and I will not go through them all. However, I would like to reiterate one concern that we have raised, about the significance of the Scottish university for industry in the development of skills in the Scottish economy. Despite having taken part in a debate on the subject with the Deputy Minister for Enterprise and Lifelong Learning, I am aware of the limited communication on the progress that has been made on the Scottish university for industry and I want to hear more from the Government about how the university fits into the overall lifelong strategy. I do not see how that will take place.

I refer members to the document on which Mr McLeish commented, "Partnership Action for Continuing Employment". I welcome the document, because it gives a process for handling the difficult situations that we have encountered, such as those that arose at Continental Tyres, Grampian Country Foods and Volvo. PACE gives us a guide to best practice and I noticed that some of the people who have contributed to the discussion are those who have a great deal of experience and have done much to pioneer development work in that area.

I was struck by the diagram in appendix E, which shows the partners that need to be around the table. I encourage members to look at that diagram and to reach the conclusion that fewer agencies should be involved in such policy development. If not, as my colleague Fergus Ewing has just said, we will need a very large table. The diagram includes some key partners, but also clearly shows the congestion in that policy area.

Photo of Henry McLeish Henry McLeish Labour

Are you going to do something about it?

Photo of John Swinney John Swinney Scottish National Party

We will see.

The manufacturing sector represents an important component of the Scottish economy, whichever measure one uses. The minister cited the direct number of jobs involved in the sector as 300,000. The indicator that I take to be enormously significant is that of the gross value added in the sector. In the last four quarters, there has been a decisive increase of 1.2 per cent in gross value added in the Scottish economy, whereas the rest of the UK economy experienced a contraction of 0.7 per cent. That suggests the beginnings of the development of the value added aspects of the manufacturing sector in Scotland.

We also have information from the Government's "Scottish Economic Statistics 2000" about the average net output per head in the manufacturing sector, which shows that the performance in Scotland has been outpacing that of the rest of the United Kingdom for several years. That highlights the significance of sector in Scotland. I was pleased that the minister agreed that manufacturing is of disproportionate significance to the Scottish economy.

I would like to ask the Government some questions about its strategy. In the summary to the "Created in Scotland" document, I was struck by the statement that part of the Executive action will be

"to support Scottish manufacturers where it is considered that UK and EU proposals will have an unfair impact on the competitiveness of Scottish manufacturers."

That is a welcome indication of Executive action, but I would like to probe a little to find out what it actually means. Listening to the radio this morning as I came to Parliament, I heard Mr Peter Hughes, the chief executive of Scottish Engineering, giving a slightly different impression of the health of the manufacturing sector in Scotland. When I then opened my mail, I found the "Scottish Engineering Quarterly Review" from March 2000, in which Mr Hughes starts with the words:

"I am sorry to report that hard times continue for the manufacturing sector. There is ongoing pressure on exports, pricing levels and margins."

He goes on to comment on the cutback on plans for capital investment and on the actions of the monetary policy committee of the Bank of England in increasing interest rates.

Those comments chimed with a document that I read the other day—a submission to the Chancellor of the Exchequer from the Engineering Employers Federation, which represents a multiplicity of organisations in the engineering and manufacturing sector. It represents some 10,000 companies that together employ 1.8 million people throughout the United Kingdom. I was struck by some of the language in its submission, which detailed the issues that he should pay attention to while preparing for his budget of 21 March.

The reason that I have lodged my amendment is to ask the Executive to recognise that it is all very well having a manufacturing strategy for Scotland, with an approach that we can support and with objectives that we can share, but the United Kingdom framework in which our companies have to operate is not conducive to the best development of our manufacturing sector.

I will quote from the EEF's submission:

"If it is assumed that policy makers will attempt to slow domestic demand growth then this should be done through fiscal policy rather than higher interest rates."

That is a very clear indication that the chancellor's decisions to step back from the use of fiscal policy as a player in the regulation of the economy, and to rely exclusively on the actions of the monetary policy committee whose deliberations we will hear about in a couple of hours' time, will cause difficulties for the manufacturing sector because of interest rates that are higher than the sector believes that they should be.

Another part of the submission says that:

"Although the outlook for the public finances is promising, the Chancellor should not be tempted to cut personal taxation. Prudence is still required because future finances depend on Treasury economic forecasts being correct . . . Personal tax cuts would only serve to stimulate consumer demand at a time when the MPC has been trying to restrain domestic demand. Government borrowing would also be likely to rise, increasing the probability that monetary policy would have to tighten."

The moral of all that, backed up by what Peter Hughes is saying in the "Scottish Engineering Quarterly Review", is that we dare not risk having the chancellor opting out of his obligation to take sensible decisions in relation to the formulation of UK economic policy. If he does so, and if he goes down the route that the organisations that I mentioned fear, we will see UK interest rates increasing in a way that will be damaging to the capital investment programme of a number of organisations in Scotland—organisations that depend on being competitive and that depend on the Government creating an economic climate that allows the strategy of the Scottish Executive to have some hope of getting off the ground.

My fear is that if the Chancellor of the Exchequer gets his budget decisions wrong in few days' time, the interest rate increases that we have experienced in the past couple of months will continue to affect the Scottish economy. As a result, however worthy the Government's manufacturing strategy might be, we will find it very difficult to achieve that strategy's aims if companies in Scotland are placed at a competitive disadvantage through higher interest rates and an increase in their cost base, with the result that the ability to undertake long-term investment fundamental to the health of those companies is compromised.

Photo of John Swinney John Swinney Scottish National Party

I will take an intervention if the Presiding Officer allows it.

Photo of Malcolm Chisholm Malcolm Chisholm Labour

I have been listening carefully and with great interest to John Swinney's speech. However, if he is saying that, in two weeks' time, the Chancellor should take the heat out of the economy through fiscal measures, does the SNP advise him to raise taxes, cut public expenditure or both?

Photo of John Swinney John Swinney Scottish National Party

It is not for me to decide the contents of the Chancellor's package. However, Mr Chisholm will be aware that I fought last May's election on the basis of freezing the basic rate of income tax, because I believed that that was a credible and honest position. Indeed, I am quite sure that he would almost agree with that position if he were given the freedom to do so by the whips on the Government benches. I think that I hear one of them shouting loudly about keeping Mr Chisholm in line.

Mr Chisholm cannot deny that the Scottish Government's ability to realise its worthy manufacturing strategy will be compromised if UK economic decisions are taken in a way that undermines long-term investment in the Scottish economy. As the whole Government strategy is predicated on the ability to secure long-term investment in Scottish companies, we need decisions that allow Scottish companies to invest in their own businesses and staff. If the UK Government's macro-economic strategy fails to delivers the conditions that allow such investment, the Government's worthy strategy will be rendered weak and meaningless to deal with the real challenges facing the Scottish economy.

I move amendment S1M-642.1, to insert at end:

"but recognises that appropriate UK macro-economic decisions must also be taken to ensure the prosperity of the manufacturing sector in Scotland."

Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament

Although back-bench speeches will be limited to four minutes, I will allow an extra minute for speakers who take interventions. We should be able to get everyone in that way.

Photo of Annabel Goldie Annabel Goldie Conservative 10:07 am, 9th March 2000

I apologise if I sound a bit nasal; I blame monsoon conditions at Troon.

The Conservative party welcomes the document "Created in Scotland—The Way Forward for Scottish Manufacturing in the 21st Century" as a positive contribution to any debate on the enterprise economy. Indeed, the document shows a healthy recognition that, when we use the word "manufacturing", we should not think exclusively of big bits of metal and the horny hand of toil, however attractive those attributes might have been in the past. However, the honest sweat of brow remains enduringly relevant, as I shall explain.

It is refreshing to find references in the document to how factors such as research and development, design, supply, production, software, services, distribution and aftercare can combine to create the process of manufacturing. It is equally helpful to track the course of manufacturing jobs over the past 19 years and to be presented with the analysis of the steady increase in electrical and instrument engineering jobs over the past five years.

The chart in the document that illustrates a comparison between 1973 and 1998 of gross value added by the manufacturing sector is particularly illuminating. Although the chart shows where there has been sector decline, the consistent growth in other parts of the sector and the huge productivity gains in the past 20 years are both positive aspects.

However, smiling at ourselves in the mirror becomes pointless when we lag behind competitors such as France, Germany and particularly the USA in terms of productivity. Successful business, whether in the manufacturing sector or elsewhere, exists on innovation, creation, productivity and competitiveness. To nurture those criteria, the document includes an extensive list of things to do, all of which are relevant and laudable. However, the question is how many of them are happening. Will some of them ever happen, or are they just a well-intended wish list?

Since the Parliament began, the minister has given a string of announcements about initiatives, as Mr Swinney said. What has happened to them? Has anything happened because of them? Is anybody measuring output or outcomes? Has anyone set targets?

Mr Swinney appropriately referred to the Scottish university for industry. My perception is that there is slight scepticism among the business community about the relevance of the concept. I hope that that scepticism can be dispelled, but we must be much more public about the achievements and consequences of established initiatives. If such initiatives are not to be discredited and if politicians are to enjoy any respectability with business, we need to put flesh on the bones of such initiatives and we need to do so quickly. I hope that the minister can give us an early report on progress to date.

I want also to mention a particular hobby-horse—the reviews of Scottish Enterprise and Highlands and Islands Enterprise. The minister should be under no illusion: business is looking for radical proposals and for clear links, not confusion.

We must examine the Executive's intentions for the business environment if we are to avoid the Executive's publication being discounted. Page 5 of the document says that the Executive will

"take steps to ensure that the regulatory burden is kept to a sensible minimum".

That is great news, but what is happening?

According to the British Chambers of Commerce, since 1997, the Labour Government has implemented more than 2,600 regulations and repealed only 20. Much of Scotland's manufacturing sector is made up of small concerns employing fewer than 10 people. For such businesses, being hamstrung and strangled with red tape is a threat to survival. An inquiry by National Westminster Bank plc found that the total cost of compliance with Government red tape was 8.5 per cent of turnover for businesses with a total turnover between £20,000 and £50,000 and 4.1 per cent of turnover for larger businesses.

Those are alarming statistics, because they go to the heart not only of survival, but of competitiveness. My suggestion—which I make purely constructively, I hope—is to beef up IRIS. I am not exhorting the minister to go around fattening up women; I refer to the improving regulation in Scotland unit. I suggest that the unit be given a target and that the Scottish manufacturing steering group be asked to produce proposals for a reduction in red tape over the next four months. The minister should then ask IRIS to report on the proposals to see whether they can be implemented. I assure the minister that that will raise a cheer like nothing else.

Page 5 of the report also says that the Executive will

"ensure the competitiveness of Scottish manufacturers is not adversely affected by decisions on the business rate".

Mr Ewing referred to that. Because Jack McConnell, the Minister for Finance, has abolished the uniform business rate, we have a built-in business rate pound discriminator between Scotland and England. That is bad news and bad public relations for the Scottish business community, which needs to attract, not deter, inward investment.

I do not expect a wand to be waved, but the minister should be aware that there is a disparity between words and what is going on—there is a shortfall. I am as anxious as anybody that this document should enjoy credibility, but it will do that only if deeds begin to match words.

Another of the Executive's declared aims is to

"build an integrated transport system, which meets Scotland's economic and social needs, but does not threaten the health of our environment".

So far, we have no integrated transport system. According to the Minister for Transport and the Environment, we are not getting one this year, next year, sometime never. If the minister knows something that we do not, we should be put out of our suspense. We would like to know what M74 extension card is up the minister's sleeve, because unless a card is coming out of a sleeve—or a rabbit out of a hat—the commitment in the report means nothing. We have had only deterrent factors, which hit competitiveness. They include the highest fuel prices in Europe, proposals for road-user charges and taxes on workplace parking.

On page 6 of "Created in Scotland", which deals with

"the use of knowledge and technology", the Executive says that it will

"develop an e-commerce strategy for Scotland".

That is very worthy, and it is obviously vital, but let politicians not make the mistake of thinking that e-commerce is a stand-alone electronic innovation or an end in itself. I quote an economist, George Kerevan, who was writing recently in a Sunday newspaper.

Photo of Annabel Goldie Annabel Goldie Conservative

He referred to the remark of the Chancellor of the Exchequer, Gordon Brown, that he would make the UK

"the best place to do e-commerce".

George Kerevan said:

"But the whole point of e-commerce is that place disappears over the internet. There is no best place, only worse place where Government regulation limits individual access."

Whatever the individual opinions in this chamber may be about Mr Kerevan's credentials, I think that he is a fine man. [MEMBERS: "Oh!"] He is articulating a point of view that would certainly strike a chord with the business community in Scotland.

Photo of John Swinney John Swinney Scottish National Party

We will send him a copy of the Official Report —or he will see it on the web.

Photo of Annabel Goldie Annabel Goldie Conservative

More's the pity.

If we are really serious about e-commerce, we have to get computers and business into our primary schools, so that e-commerce is literally a tool of the trade. By the time those children who are now in primary school get to secondary school, the enterprise culture should be brought to our young people not as a freak for the few, but as a fact of life for all.

Just to reassure the people of Scotland that I do not spend my weekends lolling around in indolence, I bring to their attention an article in the business section of Scotland on Sunday on 5 March. I found the article disturbing. It said that, unless crucial investment is made to provide high-speed connections, large swathes of Scotland could be by-passed by the information superhighway. The minister should confirm that he will enter into urgent consultation with current connection providers to address that threat. If there is such a basic problem with the infrastructure, the Executive's document will simply not stand up.

Mr Swinney has referred to the macro scene. I have a certain sympathy with his doing so, although his credentials are slightly questionable—I remain unconvinced that the SNP would be anything other than a high-taxation party in an independent Scotland. The current platform of taxation is oppressive. The director general of the British Chambers of Commerce, Chris Humphries, said on 11 March last year that the net effect of the budget was that business would be £500 million worse off in 1999, £1.5 billion worse off in 2000 and £1.2 billion worse off in 2001. We cannot regard those as empty statistics. Those figures have a significant impact on business. The manufacturing sector is particularly vulnerable.

The Conservative party commends the spirit of the Executive's report. Out there in our manufacturing sector, there is at every level the honest sweat of brow. Let us not turn that into a cold sweat. In "Created in Scotland", we have bones. I say to the Minister for Enterprise and Lifelong Learning that, unless we put flesh on those bones, I am afraid that there will be no conviction on the part of the business community that the Executive's initiative is anything more than a verbal one. Speaking for my party, I want the initiative to be anything but that. I believe that the document is good and that its spirit lies in the best traditions of trying to help industry.

Photo of George Lyon George Lyon Liberal Democrat 10:19 am, 9th March 2000

On behalf of the Liberal Democrats, I, too, welcome the publication of "Created in Scotland". I especially welcome the remarks made by the Minister for Enterprise and Lifelong Learning in opening the debate.

Since May last year, I, like Annabel Goldie, have expressed concern about the number of initiatives that the minister has introduced. Of course, the minister wants to get things done, but it has been regularly suggested in the chamber that the initiatives were being created with little thought for the overall strategic goals. We have to recognise that the "Created in Scotland" document is one of the first attempts to allow us to see the wood for the trees. It provides us with firm evidence that the Executive has clear ambitions and objectives in mind.

We welcome the Executive's understanding that the problems resulting from the 18 years of neglect and decline of our manufacturing base can be dealt with only by a joined-up approach. I hope that the proposals in the document will be fully implemented and will begin to turn the situation around.

Photo of George Lyon George Lyon Liberal Democrat

Certainly, but I hope that Miss Goldie is not going to make a proposal.

Photo of Annabel Goldie Annabel Goldie Conservative

Mr Lyon is perfectly safe.

I am curious about Mr Lyon's reference to the past 18 years. The one fact that comes through clearly in the document is that dramatic productivity gains have been made in that period. The document also points out that the difficulties that manufacturing encountered in this country are no different from the difficulties that were encountered in other countries. Mr Lyon is being selective with the facts when he makes his criticism.

Photo of George Lyon George Lyon Liberal Democrat

I think that the damage that was done in those 18 years of Tory rule is evident throughout the central belt.

Let us not forget the importance of the manufacturing sector to the Scottish economy. Thirty per cent of Scottish jobs depend directly or indirectly on manufacturing, which is a vibrant and exciting part of the economy. Over the years, smokestack has given way to high tech and technology has been transformed from the white heat into the little grey cells of the knowledge economy. It is important to note that there has been a huge change in the kind of industries that we have in Scotland.

As a number of members have said, substantial challenges face the Scottish manufacturing sector. The high value of sterling and high interest rates in the UK make us less competitive than our neighbours in Europe and mean that our manufacturing industry—exporters in particular—have a steep slope to climb.

Despite those disadvantages, our manufacturing industry has remained competitive. To the surprise of many of us, it has traded its way through the current difficulties. According to Scottish Executive figures, Scottish manufacturing output is rising while UK output is static.

The latest Scottish Chambers of Commerce business survey tells us that 56.8 per cent of manufacturing firms expect increased turnover in 2000 whereas only 12.1 per cent expect turnover to decline. That shows that progress is being made. The survey also shows that 50.6 per cent of manufacturing firms expect improved profitability in 2000 whereas only 22 per cent expect a reduction.

Photo of John Swinney John Swinney Scottish National Party

Does George Lyon believe, as the logic of his argument would suggest, that if interest rates were lower, Scottish manufacturers and exporters would be able to achieve even greater levels of performance and would contribute even more to the Scottish economy?

Photo of George Lyon George Lyon Liberal Democrat

I am just about to address that issue.

The ability of Scottish industry to overcome the problems of sterling and interest rates should not make us complacent. As John Swinney mentioned, Peter Hughes, speaking on behalf of the engineering industry on "Good Morning Scotland" today, said that he believed that the voice of the manufacturing sector was not being heard by the independent monetary policy committee of the Bank of England. The Executive needs to ensure that the views of Scotland's manufacturing exporters are heard and heeded by the monetary policy committee. I hope that the committee will announce no interest rate rise today. The Scottish Parliament should project the interests of Scottish manufacturing industry in the strongest possible terms. I hope that the minister will respond positively to that when he sums up.

Outwith the UK, 63 per cent of Scottish exports are to our European neighbours—our largest overseas customer is France—so exports to Europe are vital to the future of the Scottish economy and to manufacturing in particular.

Photo of Alex Neil Alex Neil Scottish National Party

The SNP agrees that the top priority must be exports. However, the total budget for Scottish Trade International is around £7 million. The Danes spend more on promoting their bacon abroad than we do on promoting the whole of our industry abroad. Does George Lyon agree that the priorities in Scottish Enterprise's budget must be reordered to allocate proper resources to export promotion, specifically to Scottish Trade International?

Photo of George Lyon George Lyon Liberal Democrat

As Alex Neil will know, the Enterprise and Lifelong Learning Committee is considering such issues; we are studying ways in which Scottish Enterprise and its various component parts can be radically overhauled.

It is vital for the longer-term success of the Scottish manufacturing sector, our export sector and our primary industries that strong economic arguments are deployed in favour of joining the single European currency. At the moment, the arguments are being lost by default because the political parties do not have the courage of their convictions to put forward the sound economic arguments that lie behind that case.

Lifelong learning is the key to manufacturing strategy. Technology marches on and time stands still for no sector of the economy. Scotland must continue to specialise in high added value and in quality manufacturing. Gone are the days when we competed in the commodity markets; we can no longer compete at that level. Lifelong learning must be a continual updating of expertise and retraining to keep our work force at the cutting edge.

The Scottish university for industry and the University of the Highlands and Islands have significant roles to play in facilitating lifelong learning in partnership with industry and individuals. Individual learning accounts, which were a Liberal Democrat idea a couple of years ago, have come on stream and will help to underpin our learning strategies. The Executive's £50 million deal for students will go a long way to widening access and equipping the next generation with the skills that will be essential to ensure that Scotland's manufacturing industry remains competitive.

Photo of Annabel Goldie Annabel Goldie Conservative

Mr Lyon mentioned student fees. Some students who previously paid no fees will now have to pay fees. Will that induce our young people to go to universities?

Photo of George Lyon George Lyon Liberal Democrat

The fact that no fees will be payable this year will induce many more students to go to university. The new grants scheme that will come into operation next year will enable an even greater number of young people from low-income backgrounds to go to university, which is what we want. The Executive's announcement is therefore very welcome.

I was pleased that the minister highlighted one of the key problems that we face—the perception of manufacturing industry. Manufacturing industry needs a makeover, so I am pleased that the minister has announced a campaign to overcome its image problem.

The Irish Government has identified growth in the high-tech manufacturing sector as a priority. The number of computer science and software engineering students who are leaving Irish universities and colleges shows the importance that the Irish Government attaches to such students in attracting inward investment to Ireland. That must be one of the targets that the Scottish Executive sets here in Scotland. Ireland has gone down that route in an attempt to become the e-commerce hub of Europe. It is important that Scotland is not left behind in the race; we must ensure that we can compete against Ireland.

Positive action and solutions to our problems are required. In Scotland, we need to maintain and develop our competitive advantages in specialist niche markets, and we need to excel. We need to continue to cut red tape wherever possible to allow business to grow freely and to generate a true enterprise culture. I welcome the commitment in "Created in Scotland" to minimising the burden of regulation on industry.

As I said, we must radically review the local and national enterprise companies to streamline their operations. We must have value for money from such organisations so that they truly support industry. Scotland must remain competitive, particularly in our key growth industries. That means a stable tax base and encouraging entrepreneurship and risk taking by individuals and, as important, by financial institutions. The Scottish Executive must act responsibly and progressively to further our economic and social priorities. As John Swinney rightly said, we need and expect the UK Government to create the right economic framework.

That is a big responsibility and concept. I want to spell out to John Swinney and his SNP colleagues what it means. Over the past few months, we have all heard the SNP's increasingly ludicrous financial proposals. Week after week, it announces yet more spending commitments: £800 million on roads; £108 million on student fees. Yesterday, it announced another £1 billion to clear the outstanding debt from the water industry and pay off the private finance initiative contracts. I have lost count of the total—I stopped counting at £3 billion. If the SNP intends to keep its spending promises, there would have to be massive increases in tax to finance them.

Members:

Toss a coin.

Photo of Nick Johnston Nick Johnston Conservative

Does George Lyon agree with Matthew Taylor, the Liberal Democrat economic spokesman, who said that, under the Labour Government, hidden indirect taxes would cost the average earner £180 a year, the equivalent of 1.5p on income tax?

Photo of George Lyon George Lyon Liberal Democrat

If we are to believe that the SNP meant its promises to spend all that money, that would mean massive increases—

Photo of John Swinney John Swinney Scottish National Party

Mr Lyon is attacking the SNP. I must have the opportunity to reply.

Photo of John Swinney John Swinney Scottish National Party

Would Mr Lyon care to clarify something that is totally confusing me? In the partnership document, the Liberal Democrats signed up to a deal whereby the tax-raising powers would not be used during this parliamentary session. On Tuesday, however, the federal leader of the Liberal Democrats came to Ayr—which, unless I am mistaken, is in Scotland—and said that the Chancellor of the Exchequer should not be cutting the basic rate of income tax. How can we take what George Lyon says a whit seriously when his federal leader says one thing and his Scottish party leader says another?

Photo of George Lyon George Lyon Liberal Democrat

That is rich coming from Fergus Ewing, given the amount of money that he would spend.

Charles Kennedy was, as he said yesterday, referring to Westminster and not to the Scottish Parliament's powers to raise taxes, as John Swinney well knows— [Interruption.] Just calm down, John. An independent Scotland would be the most highly taxed, most uncompetitive economy in Europe. It would be bad for business, bad for jobs and disastrous for the people of Scotland. I support the motion.

Photo of Patricia Ferguson Patricia Ferguson Labour

We now move to speeches from other members. Members will have four minutes—five if they take interventions.

Photo of Mike Watson Mike Watson Labour 10:34 am, 9th March 2000

It is good that the Parliament is having its second debate on manufacturing since it was established, as that shows the importance of that sector.

John Swinney and George Lyon have referred to arguments in the "Scottish Engineering Quarterly Review", and I, too, heard what Peter Hughes said on "Good Morning Scotland". To some extent, those arguments jar with what has been said today.

A major manufacturer in my constituency, Weir Pumps, recently announced redundancies, so I share the concerns of members of all parties about the level of interest rates. I certainly echo George Lyon's wish that there will not be a further increase in interest rates today. However, we must guard against the view that if we were part of the single European currency our interest rates would be half what they are now and we would be doing as well as Ireland. We might only be doing as well as France, Germany and Spain, which have far higher rates of unemployment. To say that we would do better if interest rates were lower is a simplistic argument, although I echo Mr Hughes's point that lower interest rates would aid exports.

Photo of John Swinney John Swinney Scottish National Party

If Mike Watson had listened carefully to my speech, he would understand that I said that the Chancellor of the Exchequer had got reliance on monetary policy out of balance with reliance on fiscal policy. The Engineering Employers Federation argues against cutting personal taxation because that would increase the pressure for increases in interest rates, which Mr Watson has said that he does not want. Are interest rates not a significant issue to be tackled in this debate about the future of the manufacturing sector?

Photo of Mike Watson Mike Watson Labour

Interest rates will not be tackled in this debate because we do not have powers over them. We can refer to them tangentially, but there is no point in going into that issue in detail. I regret the effect that interest rates are having on exports. However, it is simplistic to say that we are doing less well than we would do if we had far lower interest rates.

In terms of manufacturing and exports, the Scottish economy is outperforming the economy of the rest of the UK. I do not accept the SNP argument that interest rates are set purely with regard to the south-east of England. Information is sought from all over the UK, including from the Scottish Executive, before the monetary policy committee makes its decision. One could argue about the weight that is given to Scottish statistics, but I do not accept that we are ignored. One must take into account the relative strength of Scotland within the UK.

I do not want to go over ground that has been covered by others, but I welcome the "Created in Scotland" document and the work of the Scottish manufacturing steering group. The steering group has a broad base of representation, including from trade unions, which is my background. That broad representation—which would probably have been absent if such an exercise had been undertaken by the Conservative Government—means that the steering group's recommendations give a fuller picture.

Training and retraining are vital for manufacturing. I am excited about the creation of the Scottish university for industry. I do not share John Swinney's pessimism about it—perhaps that is to be unfair to John Swinney, as he asked where the university would fit into the overall strategy for lifelong learning. I think that it will sit very neatly with that strategy. It will particularly aid small and medium enterprises and enable them to access relevant training opportunities when they need them—often they require training at short notice.

I am keen that apprenticeships should be developed. I should perhaps say that I want apprenticeships to return, because they are almost a lost art. There are very few apprenticeships in Scotland, which is partly a reflection of the fact that heavy industry has been in serious recession. Members will know that the coalition Government is committed to producing 20,000 modern apprenticeships over the next three years, which will make a major contribution.

I stress the importance of the document "Partnership Action for Continuing Employment", which was published with "Created in Scotland". I welcome the sort of initiatives that "Partnership Action for Continuing Employment" proposes. All too often, employees learn of their impending redundancy through listening to the radio or reading newspapers. There has to be greater consultation and contingency planning and more of a partnership approach.

There have been a number of mergers recently, including between Glaxo Wellcome and Smithkline Beecham and, potentially, between CGU and Norwich Union, which may lead to thousands of job losses. There has to be greater consultation of trade unions. That is not to say that we are against globalisation, as there are benefits to be had from globalisation. Manufacturing in Scotland has always been international. However, we have to ensure that we cater for the downside as well as the upside of globalisation. Those who are dislodged by the vagaries of international manufacturing must be looked after, retrained and reintroduced to the Scottish economy.

Photo of Christine Grahame Christine Grahame Scottish National Party 10:40 am, 9th March 2000

Like many members, I welcome the recognition of the status of manufacturing. However, I could do without another shiny brochure.

Before I can settle down, I must get a few comments about the prose out of my system. Page 13 of the document states:

"The internet and digital technologies are radically changing the ways in which we do business."

On page 14 we find the statement:

"For Scottish manufacturers to be successful they have to be competitive."

Well, well—there is so much to learn, so much that I did not already know.

From that we move on to the sort of managerial speak that appears to have import but is, in fact, weightless and obfuscating. On page 34 we find the heading, "What will a successful UK manufacturing industry look like in 2020?", but what does

"in many instances, has entirety of value stream co-located in the UK" mean? I would like answers on a postcard. I can understand fairly intricate prose, pleadings and litigation—even B & Q assembly instructions—but I cannot understand that.

Let us talk straight for a change—let us have deeds that match words. Let us apply some tests to the Borders economy to show that manufacturing matters. Page 26 of the document talks about ensuring a level playing field for Scottish manufacturers relative to their competitors elsewhere in the UK. I know what the minister said about the Continental Tyre Group, but roll up Via Systems. After buying up two Borders plants, it bought a plant in the north-east that already had access to regional selective assistance and applied to inherit the £12 million-plus grant. The company then closed down its Borders plants and transferred work to the north-east. Eighteen months later, it held the local authority and local enterprise company to ransom by refusing to sell a prime, but now derelict, Galashiels site. That is bare-faced robbery; it seems to be okay for people to get away with the loot.

Has there been an inquiry at any time into the scandal and the role of the Department of Trade and Industry? Of course not. After an internal investigation—the results of which were not disclosed—the DTI said that everything was in order. It is good if people can get away with policing themselves. Never mind—the Executive sent down Lord Macdonald, a task force and, of course, promises. Enter the ubiquitous promised saviour—the call centre. Scottish Borders Enterprise invested £500,000 to refurbish the premises in anticipation of one starting up. A further £70,000 was spent on retraining potential employees and on continual training, so that the prospective operators did not forget the valuable skills that they had been trained in—answering the phone. Are there now banks of telephones on the site? No—no call centre has been set up and there is none on the immediate horizon.

In answer to my question S1W-4523 the Minister for Enterprise and Lifelong Learning said that Locate in Scotland had announced 60 jobs. That is true. They were announced, but they are not there—lost in the post. According to that answer, Locate in Scotland has announced another 140 jobs in the Borders for the period from 1996 to 1999. That speaks for itself. During the same period, 1,000 Via Systems jobs and 2,000 textiles jobs went. I think that that is called a debit balance—but I am no economist.

Recently I asked the First Minister a supplementary question about whether he could guarantee that Pringle of Scotland will still be in production in the Borders three years hence, and whether there was a funded strategy to reinvigorate the textiles industry, but answer of substance came there none. What examples are there of plans to develop a high-quality and sustainable Borders knitwear industry? What initiatives have been taken to raise the level of average income in the Borders above the current rate, which is the lowest in Scotland—£50 per week below the average? The source for that figure is another big glossy brochure—"Scottish Economic Report: January 2000". Why was there a delay in awarding regional selective assistance? Page 28 of "Created in Scotland" states:

"Once the new Assisted Areas map is settled, details of a new initiative for grants of up to £1,000 will be announced."

Can the minister confirm that there has been a delay, because the maps that were submitted were based on the old ward boundaries and had to be resubmitted, with the result that electronic companies such as Signum Circuits in Selkirk are now delaying expansion?

I call on the minister to translate this production and to tell me his way ahead for the Scottish Borders—a humble sheet of A4, one-sided, will do.

Photo of Alex Fergusson Alex Fergusson Conservative 10:44 am, 9th March 2000

I thought that the debate took a quantum leap forward when George Lyon said something about Liberal convictions. Until that point, I had no idea that those two words could be linked. [Laughter.] I am only sorry that he has left the chamber— leaving behind him 50 per cent of today's Liberal party representation. For that reason, if for no other, I am delighted to take part in the debate.

During the campaign for the Scottish parliamentary elections, I often described the south of Scotland as becoming a sort of economic no-go buffer zone between the border and the central belt of Scotland. Nothing has happened since then to persuade me to change that view. As traditional manufacturing has declined elsewhere, rural Scotland has been affected to a disproportionate extent. When a factory or workshop shuts down in Selkirk or Stranraer, Galashiels or Girvan, there is unlikely to be much alternative employment.

The sad result is that that gradual and persistent haemorrhaging of manufacturing jobs has led to areas such as Girvan in South Ayrshire and Newton Stewart in Wigtownshire being among the worst five travel-to-work areas in Scotland for unemployment. That is not only sad, but totally unacceptable, leading, among other things, to the drift of population away from areas such as Dumfries and Galloway, which was highlighted in a recent statistical report, "Scottish Economic Statistics 2000".

I am glad to see that the First Minister will be waving his magic, spinning wand over that situation during First Minister's question time this afternoon. The Executive needs to use a magic wand, given that its response to unemployment in Newton Stewart is not to try to encourage manufacturing growth in that small town—rather, the response has been to close Penninghame prison, which is one of the main providers of quality jobs in that area.

Let us face it—the debate is really about jobs and the basic right of an individual to live and work in the area of his or her choice. The statistical report, which showed the drift in population, was interesting. It showed that, where a given rural area is within commutable distance of a manufacturing base, it will retain its population density. The population declines in areas that are not within such commuting distances, such as Galloway and the Western Isles—not out of choice, but out of necessity, as young people are forced away from home for educational and employment reasons.

The Executive simply must address that unsustainable situation if it is to live up to its promise to govern for the whole of Scotland. While there are seldom easy answers, strong possibilities certainly exist to reverse those discouraging trends. That is in addition to the new information technology manufacturing opportunities that other members mentioned.

As I speak, the village of Garlieston in the Machars of Galloway, which has been in the news for all the wrong reasons recently, is suffering the most appalling disruption as timber lorries incessantly rumble through its too narrow streets for up to 16 hours a day, to fill a ship destined for Birkenhead with 1,200 tonnes of newly felled timber. Communities across Scotland are increasingly aware of the increase in forestry traffic, which will double over the next 10 to 15 years as output increases. That also applies to agricultural products, for which there are ever-increasing journey times to the processing and manufacturing plants en route to the supermarket shelf.

One does not need to be of rocket science intelligence to realise that, given the proper vision, Executive strategy and fiscal incentive, those products could be used to reverse the manufacturing decline that has taken place in the areas in which they are produced. Rather than complain about the traffic created by those products, how much more sense it would make to manufacture, process, package and market them as close as possible to their points of origin. Jobs would be created, value added and population drifts reversed. The environment would also benefit from vastly decreased transport problems. We could then begin to see the creation of an economic regeneration zone in the south of Scotland, rather than the almost no-go area that exists at present.

Photo of Mary Mulligan Mary Mulligan Labour 10:49 am, 9th March 2000

Like other members who have spoken in the debate, I wish to welcome the document, "Created in Scotland".

I come to the debate today knowing just how important manufacturing is to people in my constituency, which includes half of West Lothian. In 1997, West Lothian had, at 31 per cent, the highest percentage in Scotland of employees involved in manufacturing. West Lothian shares its situation with the west midlands, which has the highest percentage in England and which is an area well recognised for its dependency on manufacturing. Even in the short period since we were elected to this Parliament, I have shared with my constituents some of the highs and lows felt in the manufacturing sector.

Members have referred to the closure of Continental. Although the company was based in Edinburgh, many of its workers lived in West Lothian. That closure was closely followed by that of Levi Strauss in Whitburn. Last week we heard about the closure of and loss of jobs from Grampian Country Foods in Newbridge. Those losses have caused great personal distress and upheaval to the individuals who are affected. I welcome the minister's statement, which shows that he is committed to putting a plan in place that will ensure that those individuals are offered alternative employment.

We must, however, recognise that while there have been losses, there have been substantial gains in employment at Quintiles and Motorola in Bathgate. I believe that we will continue to see boosts from firms such as Quintiles because their operational base is broader than just production. They are there at the beginning of the process, in research and development of their products. They see their products through the manufacturing stage and follow that up with support services for customers. That emphasises how added value can encourage retention of employment.

Such a process is more sophisticated than merely manufacturing goods. Quintiles's highly skilled work force allows it to compete in the global market. I am sure that other manufacturers throughout Scotland would be pleased to follow that example.

Another example of good practice is in Sun Microsystems UK in Linlithgow, which is also involved in high-tech manufacturing. Since that company established a base at Linlithgow 12 years ago, its product base has changed on a number of occasions. That is important in a sector such as the one in which it operates and in which knowledge and technology have progressed at a tremendous pace. Changes in its product base have been made possible through employers and employees developing a solid relationship built on trust. It has also been important that on-going training has been available to update the skills of all employees. I was delighted that Hugh Aitken of Sun Microsystems is a member of the Scottish manufacturing steering group. I am sure that his contribution to addressing the issues of the manufacturing sector in Scotland will be worth while.

If manufacturing is to succeed in the global economy, it must have a number of supports. First, there must be a well-educated work force. The Executive is pursuing that, especially through its desire to raise standards in all our schools. It is also helpful to have a local college that offers support to local industry, as West Lothian College does for its community. Local enterprise companies must work closely with local manufacturers. Most important is the need for employers and employees to work together to address the constantly changing needs in their sectors.

Finally, Parliament must ensure that the right conditions for manufacturing exist so that companies can prosper.

Photo of Linda Fabiani Linda Fabiani Scottish National Party 10:53 am, 9th March 2000

I join those who have given the document a cautious welcome, because it has provided an opportunity to have the debate. However, the problems that face Scotland's manufacturing sector are beyond the scope of Parliament's powers. My Scottish National party colleagues and I reserve the right to argue, with the support of the Scottish people, that Parliament should assume the wider powers that are necessary to address those problems.

Photo of Mike Watson Mike Watson Labour

I thank Linda for giving way so graciously.

I accept what Linda Fabiani says, but what is the SNP proposing for Scottish manufacturing in the short term? It will be a long, uphill struggle to independence—if it ever happens. People want jobs, prosperity and training in the meantime.

Photo of Linda Fabiani Linda Fabiani Scottish National Party

In the short term, we would place the same importance on exports as we do on inward investment.

The minister's Westminster colleagues are again condemning the SNP's proposals, which they say threaten Scotland with economic upheaval. Where I live, families face economic upheaval right now. More than 200 workers at Philips Lighting in Hamilton, some of whom have worked there for 30 years, are facing redundancy, despite having the highest performance standards in Europe for delivery and quality. Sometimes being highly skilled just does not matter a jot. In East Kilbride, even the buoyant mobile phone sector has suffered almost 200 job losses at Vodafone.

Many people in Scotland, including voters in next week's by-election, take a different view from that of Dr John Reid and his cohorts. The message that is coming through strongly is that Scotland is fed up with a union that delivers stable but steady economic decline.

If the minister were here, I would remind him—in his absence, I shall remind his deputy instead—of the words that he spoke during the initial debate on this topic on 29 September last year. He said:

"We are preparing an overall economic strategy for Scotland. Our manufacturing strategy will be set in that context."—[Official Report, 29 September 1999; Vol 2, c 811.]

Reactions to the minister's document demonstrate how far it is from the strategy that he tells us he wants to put in place. The responses have concentrated on the major issues that affect our manufacturing sector, and especially on the strength of sterling, which, if it continues, will undermine all this Parliament's efforts.

I shall revert briefly to my interest in housing. It is a widely shared view that an obsession with owner-occupation is one of the factors that force up interest rates in the UK and undermine manufacturing investment. Perhaps the minister could have a word with his colleague the Minister for Communities and persuade her of the merits of a well-functioning housing market, instead of pushing more and more people into marginal owner-occupation. Perhaps he could also have a word with the UK Prime Minister this afternoon and ask him whether Scottish manufacturing jobs are a price worth paying for cooling the economy in London and the south-east.

I make a plea for this Parliament to take globalisation seriously. The results of globalisation are already with us. As an example, I refer again to Philips Lighting in Hamilton. The 223 jobs that are disappearing from Scotland will be relocated in Poland. Over the next few years, no other issue will have as much impact on our manufacturing base as globalisation will, and the minister referred to that in his speech of 29 September and again this morning. It is all very well for the minister to refer to those matters, but if this Parliament has no arrangements to monitor international developments, he might as well not bother.

I make no apology for drawing attention once again to developments around the World Trade Organisation. It is time that this Parliament established a committee to monitor the WTO and other international developments. When that happens, this Parliament might be able to make a serious effort to develop a plan for manufacturing, rather than simply approving reports on what the Executive is doing to cope with the problems created by its Westminster colleagues. I commend to the Parliament the amendment in John Swinney's name.

Photo of Irene Oldfather Irene Oldfather Labour 10:58 am, 9th March 2000

I welcome the opportunity to contribute to today's debate, which is vital to the economic future of constituencies such as mine, and which begins to map out the considerable challenges faced by the manufacturing sector.

I shall begin by posing a straightforward question. What does Scotland have to offer in the way of manufacturing industry in a global economy? The answer must not be underestimated, and I shall venture two suggestions: quality products and niche markets. To that we should add a commitment to harnessing our brainpower to our industrial muscle, matching the knowledge economy with a skilled work force.

How are we to go about selling our unique attributes? An aggressive marketing strategy, including the whole concept of branding, must go hand in hand with other initiatives, such as broadening our industrial base, to ensure that spin-offs from inward investment strategy involve the creation of high-tech small and medium enterprises to act as supplier networks. Our universities have highly skilled research and development scientists and academics, but we must find a way of putting their potential to commercial use.

Exports are important. Scotland has a small domestic market and is reliant on exports to the rest of the United Kingdom and to Europe. The problem is that Scottish exports cover a narrow range of products, with electronic goods heading that list. That makes us vulnerable to economic shocks to the economy. In fact, 26 companies in Scotland export around 50 per cent of manufactured goods. That means that broadening our industrial base and expanding our SMEs is essential.

With regard to marketing, I wish to mention the results of studies that were undertaken by the Scottish Council Development and Industry into exporting expertise in Scottish manufacturing companies. Only 33 per cent of Scottish exporters that responded to the survey had a dedicated export manager, and only 22 per cent had an export department. If Scottish business is to be more serious about exploiting export opportunities and competing in global markets, more support and training for small companies is necessary, and resources must be prioritised accordingly.

One of the companies that is profiled in "Created in Scotland", Altamira Colour Ltd, is in my constituency. It is a success story in an increasingly competitive textiles market. An important fact that the document does not mention is that the company has excellent working conditions, with basic wage rates that are well above the national minimum wage. Through utilising new technology and productive partnerships, companies such as Altamira show the potential that exists in Scottish manufacturing, while still managing to maintain good conditions for the work force.

It would be remiss of me to participate in this debate on manufacturing without drawing members' and ministers' attention to the major job losses in my constituency at the Volvo plant in Irvine. Members may be aware that the plant has been threatened with closure for more than a year. Two weeks ago, management announced that efforts to secure a buyer for the site had failed. The work force is asking why Volvo is relocating and what efforts have been made to find an alternative buyer. The market for buses in the UK is buoyant. In excess of 8,000 buses are purchased annually. Are those now to be imported from Sweden and Belgium? I call on Volvo to answer those questions. Answers are the least that the loyal work force in Irvine expects.

Scottish manufacturing industry has the potential to make a huge contribution to the economy well into the 21st century, and by harnessing the tools of the modern age—aggressive marketing, dedicated export departments and encouraging the commercialisation of research and development—we can find a future for our traditional industries. I call on members to support the motion.

Photo of Richard Lochhead Richard Lochhead Scottish National Party 11:03 am, 9th March 2000

I was delighted to see in the glossy document "Created in Scotland" mention of NCR in Dundee, in my own constituency. That highlights the importance of manufacturing to the city of Dundee, because it is the biggest employer in that city. However, I would like to say a few words about the importance of the manufacturing sector to rural Scotland, and in particular its importance to the rural areas of my constituency, because it is important that this chamber, ministers and the Executive set their sights beyond the former industrial heartlands in the central belt, and remember the importance of the sector to rural Scotland.

In the north-east, many small towns rely heavily on manufacturing companies for employment. In Turriff, the biggest employer manufactures printer ribbons and cartridges. One of the biggest employers in Fraserburgh makes refrigerated trailers. There are fish processors and processors of other foods, and there are small manufacturing industries throughout the north-east—indeed, throughout Scotland—that make shortbread and whisky. There are textile companies in the north-east. All those companies face special challenges, and this Parliament can have an influence on them, especially in the area of transport, which is referred to in "Created in Scotland" several times.

An issue of relevance is the campaign for a western peripheral route in Aberdeen, which has an impact on all manufacturing businesses in the north-east, because of the logjams that hold up the transport of goods. There is a ridiculous situation between Ellon and Peterhead, where the A90 is a single-carriageway road. That would not happen anywhere else in the UK, but in the north-east there is a single carriageway, although Peterhead has the UK's newest state-of-the-art power station, Europe's biggest white fish port, and Europe's biggest gas terminal. The road is a scandal. Many local manufacturing businesses work closely with those large businesses.

The Scottish National party's amendment is about the importance of macro-economic policy to the manufacturing sector in Scotland. Macro-economic policy is vital for rural manufacturing businesses. The whisky industry, for example, relies on the right policy coming from Westminster on whisky duty—if it is not right, it can be devastating for the whisky industry in rural Scotland.

Fuel duty is also crucial. Many hauliers are going out of business, yet they serve the manufacturing sector in rural Scotland—a lack of haulage businesses hits the manufacturing sector hard. The strength of sterling is another policy decided in Westminster. Manufacturing in the north-east is heavily weighted towards exports, so the strength of sterling has had a major impact on manufacturing companies' ability to make profits and keep going.

On the oil and gas sector in Aberdeen, macro-economic policy on oil and gas taxation is also decided in London. The big question mark that hung over oil and gas taxation a year or two ago had a huge impact on the north-east of Scotland and on the fabrication yards of the Highlands and Islands. That question mark has led to investment drying up. It is time that the Executive put the utmost pressure on the Chancellor of the Exchequer down in London to help the oil and gas industry, so that we can spur manufacturing in that sector back into action.

The oil and gas industry gives the best illustration of the missed opportunity for Scotland's manufacturing sector. We have somehow got into the position where much of the infrastructure is built abroad—the floating production vessels are built in Korea, Norway and so on. I understand that Norway is giving assistance towards the building of some of those production vessels in Norway. I hope that the Executive will investigate what assistance is being given in building those vessels. Why can it not assist companies in this country to build the infrastructure for our oil and gas sector?

There is also tension between the majors and the smaller companies in the oil and gas sector. Cannot the Executive intervene? If the majors allow the smaller companies in the oil and gas sectors to develop the reservoirs, that will spur more manufacturing activity in Scotland.

On the potential of renewable energy, we should learn from past mistakes and exploit our resources for the manufacturing sector. Renewable energy is a prime opportunity. I read a fantastic article in The Press and Journal recently, by Jeremy Cresswell, on the opportunities in the renewable energy sector. It states:

"Scottish companies are conspicuous in their failure to capture business in the alternative energy sector."

It goes on to state that, in relation to renewable energy,

"the UK offshore component represented a £4 billion opportunity."

Let us ensure that Scottish manufacturing benefits from that £4 billion opportunity, because we missed out when it came to the traditional oil and gas sector. We should go for that opportunity. I want to hear today what the Executive will do to ensure that we exploit that opportunity.

Photo of Nick Johnston Nick Johnston Conservative 11:08 am, 9th March 2000

The Executive motion has much to commend it. It identifies, in broad terms, a focus and direction with which the Conservatives can identify. Like many of the recent statements made by the Minister for Enterprise and Lifelong Learning, there is very little in the vision that we object to. The business community will welcome the adoption of many Conservative policies.

We will welcome and embrace the strategy if it achieves the intention behind it, and ensures that manufacturing continues to play a significant role in the future of the Scottish economy. I have made my contribution to Scottish manufacturing as I am now on my third pair of varifocal lenses—I still cannot see my notes.

Most members have concentrated on the big glossy document, which is full of what we have been inoculated against by now after 10 months of this Parliament. I would like to mention and praise the PACE document. It is tempting to try to find clever acronyms for it—Please Allow Creative Energy, Profits Are Critical Everywhere and, most appropriate for this debate with this Executive, Politicians Accept Change Eventually. I will specifically consider pages 14 to 16 of the PACE document, which deals with the mitigation of company difficulties. I will highlight the difficulties with the minister's old favourite—a case study or four.

The strategy suggests that we must provide support to businesses that are temporarily struggling. I will paint a picture of two companies. No 1 has been established for more than 90 years, is a world leader in a traditional industry, is one of the last of its kind in the UK, manufactures in the peripheral textile sector, holds the royal warrant and is involved in an industry that is struggling because the value of the pound is making exports difficult, but not impossible, and its competitors in Belgium are finding the UK a soft market for their exports.

Company No 2 was established 10 months ago. "High-tech manufacturer" would describe it in pure terms, but it is, in reality, a small shop assembling computers for the small and medium enterprise and domestic markets.

No 1 employs 800 people on two sites; No 2 is a father and son operation, set up with £2,000 of redundancy money. Both are trying to engage with the enterprise network; both are manufacturers. No 1 has been offered limited support with training. It praises the account manager system, but it has short-term needs that are far greater than the capacity of local enterprise funding.

No 2 has been told to come back in a year, once it has an accepted trading pattern. It made the mistake of launching on faith and is now rejected by the local enterprise company, the banks and the local authority.

I see that Mr Lyon has returned to his seat—if he wishes to answer my question now, I will let him intervene.

No 1 has the potential to increase its work force, but in the market conditions that apply at present it would find that difficult. In the difficult current market, raising private capital is a challenge. It is looking to the future and embraces the philosophy of the business in the chamber event—that

"An educated work force is essential to competing in global markets."

As the market stands, it is not possible to embrace the opportunity to train for the future. However, if No 1 was given some incentive to take on the unemployed and, without them being a burden on the payroll, support them through the three or six months of necessary training—in other words, if the unemployed were funded into work by being paid to train rather than sit at home watching daytime television, and skilled workers were released to engage in advanced training—it would be well placed to take advantage of the return of its traditional market.

When the company asks for advice, the only route I can suggest is that it shuts down its two factories, puts its workers on the dole, sell its sites for redevelopment and, after two or three weeks, phones Henry McLeish and says, "We want to start a manufacturing business. We want to employ 800 staff in two unemployment black spots and we want some start-up help." Perhaps the minister could tell us how much support it would receive from the enterprise network.

And what of No 2? It is still struggling on. It still has the potential to survive and to expand, and perhaps even to take on more staff. It may survive—just—without support, but with support it could become the Gateway, the Tiny Computers or the Compaq Computer of tomorrow. How sad is the lack of vision of those entrusted with providing support. Because the company is quasi-retail and probably falls into the displacement category, the enterprise agencies seem restrained in offering support.

The minister should read again pages 14 to 16 of PACE. Perhaps, in his summing up, he could tell us how those two companies—uncomfortably real examples that are repeated across Scotland time and time again—are to be helped by his manufacturing strategy.

Photo of Cathy Peattie Cathy Peattie Labour 11:12 am, 9th March 2000

I welcome the minister's statement and the launch of "Created in Scotland".

I live in Grangemouth, which is the home of an ever growing petrochemical cluster. BP Amoco is building a new propylene plant; we are soon to have a new rail freight terminal; and Grangemouth docks are the busiest in Scotland. Indeed, Falkirk East is playing a major role in Scotland's economy.

It has not been all good news in Falkirk East. For example, a number of jobs have been lost in the clothing industry over the past months. There are lessons to be learned from that, which is why I particularly welcome the PACE report. There are many examples of good practice that we should take into consideration.

Russell Athletic was a manufacturing company in Bo'ness, in my constituency. The announcement of its plant closure was heard by the work force in the morning, before they went to work. No one told them what was going to happen. There was no recognition that workers in the manufacturing industry are stakeholders in the company.

Although the company had plans to move the plant and the contracts, and so on, it had no plans to speak to the work force. Only after pressure from the MP, Michael Connarty, and me did it consider bringing in Forth Valley Enterprise and Falkirk Council. The partnership of Forth Valley Enterprise and Falkirk Council enabled the staff to consider ways forward: jobs, training and other options. That should have happened long before the announcement of closure. It is appalling that people treat their staff in that way.

Another recent example of bad news is the Bairdwear factory in Grangemouth. It is closing down. Marks and Spencer, for whom Bairdwear produced garments, had told the company that its products were about the best in Scotland and that it was very pleased with them. Days later, it decided to buy overseas and end the contract with Bairdwear, which had been in place for some years. That caused great frustration. The factory's work was good. Some workers in Bairdwear had worked there since they left school. The company knew it had a good product.

Bairdwear workers mounted a campaign to persuade people to buy local, and were to be seen on the High Street in Falkirk and elsewhere encouraging people not to buy foreign goods in high-street stores but to look for UK labels. The workers were frustrated because the garments that had originated overseas were not any cheaper and were not of such good quality, yet people were buying them.

That is why I return to "Created in Scotland". Will the minister consider a "Created in Scotland" label? The workers in Bairdwear feel that that would play a crucial role in encouraging people to buy local. A joined-up campaign that used "Created in Scotland" labels for our produce as well as our manufactured goods would also help growers and farmers in Scotland. I welcome "Created in Scotland" and urge the minister to consider such a label to ensure that, when products are created in Scotland, the label says so.

Photo of Jamie Stone Jamie Stone Liberal Democrat 11:16 am, 9th March 2000

This is a debate on manufacturing, so it will come as a relief to the minister, and to members, that I will not declare an interest in any sort of dairy product.

We have heard a series of fine speeches from lady members of Parliament. When Alex Fergusson referred to "buffers", I assume he was referring to members on the Conservative benches—Mary Scanlon and Annabel Goldie excluded. Annabel's suitably coy and witty speech was absolutely splendid.

To set the debate alight, my theme today will be women. I plan to introduce a character who I will call Rosie the Riveter, but before I launch into the fair sex, I will take up briefly the minister's point about the image of manufacturing industry. My own experience will highlight that point. When I graduated, unlike most of my peers—who went off to become solicitors, accountants or whatever—I had to don the wellies and go off to the oil fabrication yards at Nigg, Kishorn, Sullom Voe and such places.

I remember my friends and acquaintances saying, "Poor Jamie. He's got the rough end of the deal—he's got to get his fingers dirty." I was almost not spoken about, such was the embarrassment. That image is still with us, and when the minister talks about tackling it I say, "Good on you, but you have one heck of a task ahead." I wish him well; it will not be easy to get out of the default drive of thinking that someone's job is good only if they wear red braces and a stripey shirt and do something clever with millions of quid in the city.

There is an initiative called WISE—women in science and engineering—and, indeed, one called GIST—girls into science and technology. They are opening our eyes to the opportunities for women, but the fact remains that, in 1998, only 4.7 per cent of engineers were women. Up to the age of 16, females are required to learn science. The problem comes after that stage. Two statistics bear that out. Of the pupils presented for higher in craft and design, only 28 per cent—according to the most recent figures—were female; for physics, the figure was 31 per cent. We talk about the great untapped asset of women; in all my days of working in the oil yards, I met only one lady engineer, whose name was O'Shaunessy. I remember her very well.

We are wasting brain power and ability. We must grab the female problem, if I can call it that, of getting females into manufacturing industry. In my constituency, we have the example of Pat Grant of Norfrost Ltd, of whom many members will have heard; she is an astonishing lady. John Swinney has turned to look at me, but I have my doubts as to whether she voted SNP last time—that will be a shock for him. She has done incredible work in producing freezers and selling to a world market.

The only way to tackle that female problem is to go out and sell a female role model, which is why I conjured up Rosie the Riveter. We must make it sexy for women to go into manufacturing. Members may laugh, but I am not joking. We are wasting one of our country's most important assets. We must get moving. I have no doubt that the minister will make every effort to ensure that that happens.

I would like to conclude by quoting to Annabel Goldie two lines from Andrew Marvell's poem, "To His Coy Mistress":

"But at my back I always hear

Time's wingèd chariot hurrying near".

Let us get on with it.

Photo of Elaine Thomson Elaine Thomson Labour 11:20 am, 9th March 2000

That was a riveting speech.

I welcome the opportunity to take part in this important debate. I would like to talk about manufacturing in relation to the oil and gas industry. As many members will know, the North sea is now a mature province: the volume of oil is thought to have peaked and it will probably decline over the next 20 years.

Aberdeen and the north-east of Scotland has a reservoir of skill and expertise in offshore exploration and production, particularly in areas such as sub-sea technology. There is a strong future for the companies involved in those areas to continue to design, manufacture and export to anywhere in the world where oil and gas exploration and production is taking place. That can happen for as long as we continue to use oil and gas.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Does Elaine Thomson agree that the announcement made by the chancellor shortly after the Labour party won the 1997 general election, of a review of the oil tax regime, was deeply damaging to the oil fabrication industry and to investment in Scotland? The fact that the review lasted for more than a year probably resulted in the loss of orders that could have provided valuable work for oil fabrication yards.

Photo of Elaine Thomson Elaine Thomson Labour

I do not accept that. The oil and gas task force was set up and from the discussions that I have had with representatives of the oil industry I know that it was well received. The main driver in investment and activity in the oil and gas industry is the price of oil.

Photo of Elaine Thomson Elaine Thomson Labour

If Richard Lochhead does not mind, I would like to continue my speech.

There is as much oil and gas still to be extracted from the North sea as has already been extracted over the past 25 years. However, that depends on an efficient, modern engineering and manufacturing industry. That industry must deliver innovative products, allowing production costs to be continually driven down so that that UK continental shelf remains globally competitive.

I welcome "Created in Scotland" and the issues that are discussed in it. It correctly identifies the need for manufacturing companies to continue to invest and modernise, and to make maximum use of the new technologies. We must ensure that companies' product ranges are available on the web and that availability checks and ordering can be carried out using e-commerce.

As has already been said, proportionally, Scotland exports and manufactures more than the rest of the UK. We need to take advantage of every opportunity to ensure that Scottish manufacturing succeeds globally. There is no doubt that we can find an extra competitive edge through the effective use of e-commerce. We have a narrow window of opportunity to rid ourselves of some of the disadvantages that arise from being situated on the western periphery of Europe.

"Created in Scotland" also discusses issues relating to skills. The current initiatives on lifelong learning, from the national grid for learning to the Scottish university for industry, are vital. Last week, I visited an engineering company in Aberdeen that is participating in one of the pilots for the Scottish university for industry, delivering high-quality training to employees at work via the web. Trainees will be allowed to train at their own pace and in their own time, to suit them and their company. Training is an area in which we in Scotland score badly. If employers are asked—especially small and medium employers—why they do not invest in training, many talk about the cost of doing so and about the time employees would be away from work. Much of the training that will be delivered by SUFI will address those concerns.

The Offshore Petroleum Industry Training Organisation, which is the leading national training organisation for the oil and gas industries—there are several others—has produced a document on the skills required in the oil and gas industry. It has a clear agenda to do with women and gender. On average, 45 per cent of employees of most companies are women. In engineering, that figure is 20 per cent. In oil and gas companies with more than 250 employees, the figure is 10 per cent. I would describe that as miserable. A lot of opportunity is being lost. I ask the minister to address this problem to ensure that we use the skills and abilities of everybody in the economy.

Photo of Mary Scanlon Mary Scanlon Conservative 11:26 am, 9th March 2000

I would like to start by dealing with George Lyon—someone has to.

Photo of Mary Scanlon Mary Scanlon Conservative

All right—I will try to follow Annabel's advice.

George Lyon's naive and simplistic answer to everything seems to be, "Enter the single currency." The euro was supposed to be worth 71p, but the value of the single currency is falling by the day—it is now worth 61p. Our economy does not fulfil the convergence criteria, it does not fulfil the Treasury criteria as set out by Gordon Brown, and—on recent forecasts—it is unlikely to be convergent for at least a decade. A common interest rate can work to solve only common economic problems. It is hardly surprising that the chancellor, the previous chancellor and the chairman of the European Central Bank are all out of step with George.

The Executive's document contains some excellent ideas. I was pleased to read on page 23 that the Scottish Executive believes that

"all manufacturing companies, whether large or small, whether from a high technology or 'traditional' sector, deserve support" and that it

"is open to suggestions for rationalisation" of that support, rather than being open to red tape and confusion.

Many visitors to Scotland want to buy home-produced goods and would often be prepared to pay extra for them, but because it is not compulsory to label products with the country of manufacture, there is nothing to prevent cheap foreign imports masquerading as genuine Scottish products.

Like Alex Fergusson and Christine Grahame, I would like to change the emphasis and get away from the high-powered world of e-commerce, call centres and global, portable, homogenous products. I make the plea that we should not forget our own, unique, textiles industry—although I note that two people from the textiles industry are on the steering group.

Textiles is Scotland's fourth largest manufacturing industry; its exports were valued at £0.5 billion in 1998. Although I fully acknowledge the great history of textiles in the Borders, I am obviously more familiar with the Highlands. I am pleased that Jamie Stone is sporting a Hunters of Brora tweed jacket today. I am sorry that he has left the chamber and cannot give us a twirl. No, I am wrong—here he is now. He can give us a twirl. [Laughter.] Well done, Jamie—thank you. I wanted to do my bit for marketing a product of the Highlands.

The best of our unique products is undoubtedly Harris tweed. The strength of the pound and accelerating import substitution are making export sales very difficult. I will not go through the list of redundancies—because by mentioning George Lyon, I am now short of time.

I would like to talk about Alasdair Morrison's tourism strategy, which contained the excellent suggestion that we could combine enterprise and tourism. The Harris tweed and Scotland's textile industry would make a fine such combination.

Photo of Ian Jenkins Ian Jenkins Liberal Democrat

Mrs Scanlon could wear a Ballantyne cashmere twinset on her tours in the Borders.

Photo of Mary Scanlon Mary Scanlon Conservative

I prefer Johnstons of Elgin myself.

Such a synergistic approach would help both industries and enable our textile industry to have a presence at more trade shows and missions. When I hear about people closing factories, I remember that Harris tweed is not just a manufacturing industry, but a way of life. The industry is a barometer of the strength of the local economy. The history of the Harris tweed, in particular, conjures up the Highlanders' strength, straightforwardness and hardiness, all of which are respected worldwide. We should be proud of this unique product, which is hand-woven from Scottish wool in crofters' homes. With the projected 14 per cent decline in the population of the Western Isles, I make a plea that we fully support the industry.

Henry McLeish said that he is starting a campaign to change the image of manufacturing, and I noted Irene Oldfather's aggressive marketing strategy. Given the coverage that the Parliament receives across Scotland, the First Minister and the other men in dark and grey suits in the chamber could brighten up our proceedings and help to market our textiles by following John Farquhar Munro's dress code and investing in Harris tweed.

Photo of Malcolm Chisholm Malcolm Chisholm Labour 11:32 am, 9th March 2000

I should first apologise for my grey suit. I welcome this morning's co-operative approach to micro-economic policy and Opposition parties' acknowledgement of many excellent Executive initiatives such as the application of new technologies, export diversification, e-commerce, modern apprenticeships and the PACE report.

I also welcome the acknowledgement of Scotland's many manufacturing successes in spite of the undoubted difficulties caused by the high exchange rate. Several members have pointed out such figures as our 12.3 per cent share of UK manufacturing exports; our 7.8 per cent increase in manufacturing exports, according to the latest statistics; the 1.4 per cent increase in manufacturing output; the increase in manufacturing output for 12 months in a row; and the increase in manufacturing employment for seven months in a row.

Fergus Ewing had the only serious carp about the Scottish Parliament's areas of responsibility. He made his standard point about the business rate and once again was completely wrong. If we examine the product of valuation plus rate poundage, we will find that there is a level playing field throughout the UK. Of course, the same does not hold if we examine either valuation or rate poundage in isolation, but I do not think that anyone but Fergus Ewing would do that.

Photo of Malcolm Chisholm Malcolm Chisholm Labour

I want to make some progress, because I have quite a lot to say.

Annabel Goldie had a minor carp about targets—or the absence of them, as she saw it. The Executive has set many important targets, such as 100,000 new business start-ups in 10 years. What could be more important than that? Page 25 of "Created in Scotland" lists the manufacturing steering group's recommendations for other important targets on research and development, training and internet sales, and I hope that the Executive will take those on board as it develops the framework.

Although the SNP and others put forward a very positive view about Labour in Scotland, I am afraid that we also heard the SNP's standard negative view about Labour at a UK level. There was silence about many of UK Labour's successful initiatives, which are also outlined in the document. For example, research and development tax credits, the university challenge, the science enterprise challenge, Faraday partnerships and the defence diversification agency are mentioned on page 39.

There was also complete silence about the great advantages for Scotland of macro-economic stability at a UK level.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Does not Malcolm Chisholm recognise that the chancellor has created at least one distinction in Scotland in that we have the highest fuel tax and the highest fuel costs in the whole world?

Photo of Malcolm Chisholm Malcolm Chisholm Labour

That is an interesting point; I was just about to pick up on John Swinney's recipe for curing some of the problems. For the first time, perhaps, he acknowledged that it is not possible to reduce interest rates without creating knock-on effects on the whole economy. He seemed to be advising Gordon Brown to take fiscal measures in the budget to cool down the economy. I found that interesting, so I intervened to ask whether that meant increasing taxes, lowering public expenditure or both. He swerved the question. Now, his colleague Fergus Ewing is asking for a reduction in taxation. They cannot have that at a macro-economic level. John Swinney wants to take fiscal measures and Fergus Ewing and many of his colleagues want lower taxes and higher public expenditure. It makes no economic sense.

Photo of Malcolm Chisholm Malcolm Chisholm Labour

No. I think I am running out of time. Am I?

Photo of George Reid George Reid Scottish National Party

You have plenty of time, Mr Chisholm.

Photo of Malcolm Chisholm Malcolm Chisholm Labour

I have plenty of time. All right. I give way to John Swinney then.

Photo of John Swinney John Swinney Scottish National Party

I thought that the Deputy Presiding Officer was going to save Mr Chisholm there.

Can Mr Chisholm not understand the point that is being made? The chancellor is effectively leaving decisions about cooling down the economy to the blunt instrument of monetary policy. He is taking no steps, as the Engineering Employers Federation has suggested, to use fiscal policy to restrain domestic demand.

I know Mr Chisholm is an experienced member of the Westminster Parliament and has sat through many more budgets than I have. My argument is simply that the chancellor is avoiding using aspects of policy that are at his discretion and is leaving all the bad news to the monetary policy committee. That is a rather bankrupt way of conducting economic policy.

Photo of Malcolm Chisholm Malcolm Chisholm Labour

I am certainly experienced enough at Westminster not to second-guess what Gordon Brown will say in two weeks' time. I have said—and I do not mind saying it again—that I hope that he does not make further reductions in income tax, but that is my personal view. However, that is not what John Swinney was implying; he was talking about raising income tax.

What we did not get from John Swinney today was the more standard SNP line about increasing interest rates to deal with overheating in the economy in the south-east of England. We did get that from Linda Fabiani, who related it, in particular, to housing. That was a simplistic analysis. House prices here, in the city that I represent, are going up more steeply than anywhere else in the United Kingdom apart from London. It is not a simple Scotland-England interest rates issue; there are variations within Scotland and within the UK. Similarly, on the euro, the Germans want interest rates to do down, while many other countries in Europe want them to go up.

The high exchange rate causes a problem. Capital is flowing into the United Kingdom—partly because of the weakness of the euro and partly because of the economic competence of the Labour Government. The monetary policy committee was considering direct intervention to bring down the exchange rate. Indeed, it talked about little other than the exchange rate when it attended the Treasury Select Committee last Tuesday. I hope that that idea will be reconsidered, because there is clearly a problem which, in the spirit of co-operation, we all acknowledge. We should not, however, try to find a simplistic solution or give a simplistic analysis of it.

Photo of Alex Neil Alex Neil Scottish National Party 11:39 am, 9th March 2000

First, I am the only member of the Institution of Economic Development in the chamber. As such, I am more than happy to offer free economics lectures to Malcolm Chisholm, George Lyon and one or two other members who spoke this morning. Secondly, I intend to concentrate my remarks on what the Parliament can do in the short term, as Mike Watson described it.

We should not kid ourselves, however: this Parliament, with the limited powers and resources available to it, can only do so much. Let me provide two illustrations of that. The first is exchange rate and interest rate policy. The impact of any changes in exchange rates or interest rates, up or down, is far more important than this Parliament's available budget for economic development.

Secondly, although the Scottish Enterprise budget, coupled with that of Highlands and Islands Enterprise, is well over £500 million a year, that represents less than 1 per cent of Scottish gross domestic product. Although we want the maximum value from that public sector money, there are limitations to what micro-intervention can achieve in relation to macro-economic policy. We need to get this into perspective: in this Parliament, we have very limited budgetary powers compared with the powers available to Westminster.

I will turn to the issues over which we do have some control, and about which we can do something. Essential to a successful manufacturing sector is the availability of the skills required for the new technologies. A report by the National Audit Office about Scottish Enterprise's current skillseekers programme came out last week. That programme represents a fair chunk of Scottish Enterprise's budget. The NAO report showed that about half the people who engage in skillseekers leave the programme before gaining any vocational qualifications. The report also showed that around two thirds of participants would gain places anyway, even without the subsidy that is effectively available through skillseekers. I call on the minister to review urgently the skillseekers programme and consider its relevance to his manufacturing strategy.

Individual learning accounts have been set up to address the development of skills. A lot of them have been piloted in various local enterprise companies. The most successful one has probably been the pilot run by Fife Enterprise. However, it is being overruled from Bothwell Street by Scottish Enterprise, which is trying to impose the model for individual learning accounts, which, in turn, has since been imposed from south of the border—from Sheffield. I ask the minister to intervene on that matter.

Although it is not strictly in the manufacturing sector, the construction sector is suffering a major skills shortage. Vacancies are therefore not being filled because there are not the skilled people required to fill them. A major short-term boost could be given through Scottish Enterprise and the other agencies to the level of employment in the construction industry by taking urgent action to relieve that skills shortage immediately and to get people into the construction sector, through apprenticeships, modern apprenticeships and other means.

One of the problems with all the funding schemes for small and medium businesses is that the businesses are often tied up in bureaucracy. It takes so long to get funding applications through. I draw members' attention to the Prince's Scottish Youth Business Trust, which I was involved in setting up, and on whose board Annabel Goldie sits. That nationwide organisation effectively provides venture capital at very favourable, non-commercial rates to young entrepreneurs between the ages of 18 and 25. They can get their money quickly; they receive help with producing their business plan; they get training before they start, if required; for the 18 months to two years after they start, there is an intensive aftercare programme to ensure that their businesses succeed. PSYBT has one of the highest levels of survival and sustainability in Scotland for businesses that are starting up. I therefore ask the minister to consider that model and apply it elsewhere.

In response to what Mike Watson said, there are four or five sensible suggestions, but, at the end of the day, we will never solve the manufacturing problem until we get independence.

Photo of Elaine Murray Elaine Murray Labour 11:45 am, 9th March 2000

It is good to hear the Executive and most of the members who have spoken talking with confidence about the future of the manufacturing industries in Scotland, as we sometimes get the impression that manufacturing is in terminal decline. It is true that manufacturing employment in Scotland has fallen by about a third in the past 20 years but, compared to the rest of the UK, Scotland's manufacturing industries are doing well. Productivity has grown by 1.4 per cent in the year to October 1999 while it has fallen by 0.7 per cent in the rest of the UK.

However, there is no room for complacency. There have been recent job losses in manufacturing throughout Scotland and a number of regrettable closures and reductions in my constituency. One of the measures that I will be using to assess the success of our policies will be a reversal of those job losses in my constituency and throughout rural Scotland.

Manufacturing has been in a process of change for some time and only those industries that can adapt will be able to survive in the long term—that is one of the main principles of evolution. Some businesses are adapting well and are taking advantage of the emerging knowledge economies and are blurring the distinctions between services and products, adding value to what they do.

Lessons can be learned from the success of those businesses and from the failure of others.

I was pleased to note that the Executive document was produced after extensive discussion and close working with representatives of all parts of the business community. On several occasions, we have talked in this chamber of the importance of improving the business environment, of the vital role of the knowledge economy and of the need to continuously improve the skills of our working people by investment in lifelong learning. Talk is fine, but it needs to be translated into objectives and actions. The document contains a series of specific actions to be taken by the Scottish Executive and the UK Government to address the needs of manufacturing in this country.

Last week, I asked an oral question about the progress of the science strategy. At the risk of boring the minister by droning on about science again, I will say that I am particularly pleased that the Executive has listed its plans for the development of the science base and the encouragement of commercialisation. It has become axiomatic that—due in part to the low level of investment in research and development by Scottish business—Scotland produces good research but does not turn that into good technology or jobs for its people, but the axiom will change. I was pleased to hear from the minister of the discussions that he is having with members of the scientific community to work out how that change can be achieved.

The Executive has invested £11 million of additional funding to aid the promotion of commercial activity. That money will bridge the gap that exists between laboratory research and marketable products. We need more mentoring for scientists to allow them to turn their work into saleable products and we need to change the way in which research is funded and assessed.

The Executive is also investing £6 million in improving the infrastructure of higher education institutes to assist with the development of research for commercial uses. Research equipment is extraordinarily expensive: a mass spectrometer costs about £6 million and needs constant upgrading. However, without that type of equipment, our laboratories will not be able to produce saleable commodities.

I welcome the success of Scottish bids in a number of UK initiatives such as university challenge, which was a panel game on television when I was young but is now the name of a science enterprise challenge.

Research and development is essentially related to the businesses that it supports in the cluster strategies. The "Created in Scotland" document and the Scottish Enterprise network cluster strategy documents that tie research and development into job creation show that we are developing templates that will enable us to improve our manufacturing base and put Scotland back on the international manufacturing map.

Photo of Des McNulty Des McNulty Labour 11:49 am, 9th March 2000

In recent years, substantial progress has been made in terms of Scotland's economic prospects, but we should recognise that economic success is unevenly spread throughout Scotland. In Edinburgh and some of the surrounding areas there is evidence of relatively high levels of economic success. However, in part of the area that I represent, West Dunbartonshire, there are continuing high levels of male unemployment. That is partly linked to the historical legacy of manufacturing decline, and emphasises the need for a coherent and directed regional strategy in Scotland.

Regional strategies have traditionally been viewed in a UK context, with comparisons being drawn between Scotland and other parts of the UK. In particular, the rate of economic development in the south-east has been compared to that in other areas of the UK. However, Scotland has an emergent pattern of economic separation—a pattern of economic differences between one part of Scotland and another. It is important for this Parliament to acknowledge that and to ensure that, as we progress with our manufacturing and economic development strategies, we deal with that.

In the review of Scottish Enterprise that the minister is undertaking there should be a strong regional dimension. That regional dimension should not involve simply strengthening the position of the different local economic development companies such as Dunbartonshire Enterprise; the regional dimension must be incorporated into all the activities of the different agencies. Agencies such as Locate in Scotland and Scottish Trade International must take into account the economic needs in different parts of Scotland when making their recommendations and when inviting companies to move.

My second point is that there is uncertainty among manufacturing companies such as Kvaerner in my constituency. I have been working closely with the minister to address that, but we must ensure that we provide support to existing manufacturing companies, especially those in areas that have suffered severe losses in manufacturing jobs. The needs of those companies and areas must be appropriately addressed.

Photo of Brian Adam Brian Adam Scottish National Party 11:52 am, 9th March 2000

One of the inhibitors to starting up small companies, and to developing small companies, is the high level of bureaucracy that is involved in the administration of the various aspects of business.

In the past few days, we have all received a letter from the Federation of Small Businesses, which highlights the fact that we are now asking businesses—or, at least, Westminster is asking them—to administer the family tax credit scheme. That type of additional burden is a disincentive to the growth of small companies. Particular segments of our manufacturing industry will also be hard hit by the great increases in water rates that were announced yesterday. Those increases are another disincentive to the growth of businesses.

Photo of Duncan McNeil Duncan McNeil Labour

Many of those small organisations have campaigned against the minimum wage, the working time directive and the rights of part-time workers. Would Brian Adam describe those as burdens on business as well?

Photo of Brian Adam Brian Adam Scottish National Party

There are a variety of burdens on business, but I wholeheartedly support the minimum wage. Having a minimum wage does not increase the bureaucracy; it merely offers people a living wage. However, there has undoubtedly been a transfer of burden from central Government to business in dealing with the administration of tax arrangements. I cannot support that and I hope that Mr McNeil does not.

A plea has been made today to highlight things that are created in Scotland. There is a major problem in the processing sector of our food industry, as it is difficult properly to identify the labelling arrangements. I hope that, in conjunction with the Meat and Livestock Commission, we will be able to deal with that in the near future.

We have a blunt instrument in the interest rates for dealing with macro-economic policy. The changes in interest rates have been driven largely by the fact that the level of inflation in house prices in the south-east of England has been very high. I acknowledge Malcolm Chisholm's point that there is a similar problem in Edinburgh. That is a macro-economic solution to a micro-economic problem. We ought to be considering micro-economic solutions to the problem of house price inflation, rather than driving up the costs for manufacturing and other industries.

Photo of Allan Wilson Allan Wilson Labour 11:55 am, 9th March 2000

I will try in the short time available to summarise the debate. I take employment as my theme.

Scotland's share of manufacturing exports is considerably higher than its share of manufacturing employment. Scotland's export share has increased since 1980 while its share of manufacturing employment has declined. To contradict the point made by Linda Fabiani, that can in part be explained by Scotland's success in attracting export-oriented inward investments. Non-UK companies now produce over 70 per cent of all Scottish manufactured exports.

The export market is dominated by large companies. As Mary Mulligan said, the electronics sector is particularly important—53 per cent of exports are from that sector. As has been said earlier, export targets are being met and even exceeded. That also means—and this is one of the few occasions when I agree with John Swinney—that there is a need to diversify from our existing manufacturing base and to set new targets.

Much of that success is the result of high productivity. Manufacturing labour productivity in Scotland has increased and is now above the UK average, although as Annabel Goldie said, we lag behind France, Germany and North America. That is what the debate is about: the current and projected UK economic climate in a global economy, and Scotland's position in it. Scottish and UK manufacturers have performed resiliently in the face of difficult international trading conditions.

Contrary to the doom and gloom spread by the SNP talking down the Scottish manufacturing sector, in fact, as Henry McLeish said, manufacturing output in Scotland increased by 1.4 per cent while it decreased in the rest of the UK, an example of UK monetary policy benefiting manufacturing industry in Scotland.

Photo of John Swinney John Swinney Scottish National Party

If Allan Wilson had listened to my speech this morning, I gave a number of points of information on areas where I support the improved performance of the manufacturing sector in very difficult conditions. However, I do not want the Government presenting a strategy to Parliament today that ignores the realities of trading conditions experienced by engineering and manufacturing organisations. Such a strategy would not be very effective.

Photo of Allan Wilson Allan Wilson Labour

Henry McLeish did not ignore those points. John Swinney ignored the point that Malcolm Chisholm was making about his solution to the problem. The manufacturing sector has grown by 7.8 per cent and Scotland's share is at an all-time high. As Mike Watson said, and it is worth repeating, the Scottish manufacturing industry is outperforming the rest of the UK.

I want to stress that over the period of decline in manufacturing employment, employment as a whole has grown: 65,000 jobs as a result of growth in the new service sector. New high-tech industries have more than compensated for the loss of jobs in traditional manufacturing. International Labour Organisation figures show that unemployment is the lowest for a generation and levels of employment are at a 30-year high.

Photo of Alex Neil Alex Neil Scottish National Party

Will the member give way? The Labour Government increased unemployment in Scotland to over 100,000.

Photo of Allan Wilson Allan Wilson Labour

I will keep going. I will come to Alex Neil's point in a minute. When new Labour came to power many sceptics, including Alex, claimed that we had a political ball and chain. The doctrine of the right that new Labour defeated was that unemployment was a price worth paying for economic growth—

Photo of Alex Neil Alex Neil Scottish National Party

The Labour Government increased unemployment in Scotland to over 100,000.

Photo of Allan Wilson Allan Wilson Labour

We defeated the Conservatives.

One of the many factors that distinguishes us from the failed right is our commitment to employment as an engine of economic growth as well as of social justice. The minimum wage is another distinguishing factor.

I can remember the previous Labour GovernmentAlex Neil can, too, because the SNP and its Tory cohorts defeated that Government to herald in a right-wing, Thatcherite, monetarist agenda. I remember the lessons of that Labour Government and I remember the Saatchi & Saatchi "Labour isn't working" posters. The charge was that Labour could not manage the economy. It was argued that we were synonymous with a run on sterling, a balance of payments deficit, public expenditure cuts, a weak pound, runaway inflation and high personal taxation.

Photo of Allan Wilson Allan Wilson Labour

Our people paid the price for the loss of that Labour Government, which the SNP brought about. Our record in office now is low inflation, low and falling unemployment, growing employment, public expenditure growth, manufacturing export growth, lower relative interest rates, and low—soon to be lower—personal taxation.

We have a successfully managed economy, the result of which is strong sterling. The exchange rate is not set by Government but by the exchange markets. Like Mike Watson, I think that it is important to recognise that the monetary policy committee sets interest rates for the economy as a whole and not for any one sector, region or nation. That has brought economic stability and the ability to grow public expenditure and cut personal taxation and overall taxation at the same time.

John Swinney's amendment, by implication if not explicitly, threatens that economic stability, as does Alex Neil's nonsense about independence in Europe—even if the Europe part of that is dropped—which nobody believes in, except the majority fundamentalist wing of the SNP.

Photo of Allan Wilson Allan Wilson Labour

Although John Swinney is rapidly retreating from the idea, his proposition of a neverendum is arguably worse. It introduces constitutional instability, which produces economic instability à la québécoise. We have seen what constitutional instability has done to the Quebec economy; it would do the same to ours.

I support the motion and reject the amendment.

Photo of David Mundell David Mundell Conservative 12:02 pm, 9th March 2000

I declare my registered interest in British Telecommunications.

I am grateful to Allan Wilson for pointing out the difficulties that Labour created for the UK economy in the 1970s and the benefits that it inherited in 1997.

Before I talk about the "Created in Scotland" document, I want to make a general point about the relationship between manufacturing and e-commerce and the knowledge economy. In some debates, there has been a suggestion that e-commerce is an entity in itself, but it is not; it is a tool, and a way of presenting and selling products and services, developing new products and service, accessing new marketplaces or maintaining a position in existing markets. Therefore e-commerce relies on people who have created a product or a service. E-commerce is not separate from any other sector of our economy, but is inextricably entwined with them. I do not think that the document or our debates have made that point clearly enough.

Dell Computer Corporation from the US provides a good example of e-manufacturing. Dell allows one, in effect, to assemble one's own computer on-line with the features that one chooses, and then to have it delivered. Michael Dell, who is the chairman of the company, is well placed to point out that electronic commerce is the new electricity or air-conditioning—something that one must have to develop a business, but not an entity in itself.

Scottish companies are taking advantage of the opportunities afforded by the net. I was pleased to see a number of manufacturing companies on the list of finalists for Scottish Enterprise's "Winners @ the Web 2000" competition. As tonight's awards ceremony at the Hilton hotel in Glasgow is described as a dazzling affair, I had presumed that the Minister for Enterprise and Lifelong Learning would be presenting the prizes.

Manufacturing companies such as AorTech and IBH, both of which are based in Scotland, are part of the process. When I keyed in "manufacturing and Scotland" to my internet search engine yesterday, one of the results was a company called Reekie, which is based in Forfar and is a potato system manufacturer. It makes some interesting products, such as bed makers—which, unfortunately, do not do what the name might initially suggest—and clod separators, which we might use in this Parliament. It is important that such companies should play a part in our manufacturing industry and be seen as part of the e-commerce world. Commitment to e-commerce, the latest technology and the most modern practices will help to turn the image of manufacturing around.

This morning the speeches of members from all parties have progressed that discussion. For too long, industry—and manufacturing in particular—has at various levels in our education and careers system come across as second class when compared with the professions. There is some evidence that that perception is changing, but we must ensure that manufacturing's importance is understood and respected here in Scotland. That applies particularly to the new companies that I alluded to in my earlier intervention—companies such as Red Lemon, Vis and Steel Monkeys.

I take on board Mary Scanlon's point that we should all be wearing the products that are manufactured by our textile industry, but perhaps we should also be playing the games that are manufactured by our games industry. However, I am sure that the minister plays "Take The Bullet" every week at the Cabinet. That is a game that Red Lemon is promoting.

Photo of David Mundell David Mundell Conservative

Perhaps. However, we should all be prepared to get to know and understand the products that companies here in Scotland are delivering.

The aims of the document are good, but we need to see their delivery. As my colleague Annabel Goldie pointed out, it all very well to say that regulatory burdens should be kept to a sensible minimum but, as the minister knows, since May 1997 regulation has increased, increasing costs for manufacturers across the United Kingdom. If we are serious about letting industries thrive, the time has come to roll back that regulation.

We also need to know what is going to be done about the transport system. I do not think that the minister can say that the strategic roads review document and the integrated transport document alone address that issue. As Alex Fergusson pointed out, a lot more will have to be done to enhance our infrastructure and allow the timber industry to take advantage of the manufacturing opportunities that exist.

We also need to know what is going to happen with planning. Many members see planners as failing to take a commonsense approach to economic developments that arise in their area because of their insistence on local plans and national planning guidelines. We need to see some substance to back up this document's very laudable aims.

In both the traditional sector and new industries, Scotland has manufacturers of world renown who can lead it into the 21st century. We do not have any difficulty in supporting Mr Swinney's amendment, the Executive's motion or the strategy that has been outlined. However, it is now time for the talking to stop and for the Executive to deliver on what it has set out in its document.

Photo of George Reid George Reid Scottish National Party

I call Fergus Ewing to wind up for the Scottish National party.

Photo of Fergus Ewing Fergus Ewing Scottish National Party 12:10 pm, 9th March 2000

I came to the chamber this morning with low expectations of our having an interesting debate. However, I have been pleasantly surprised, as the tone of the debate has been largely constructive and, if I may say so, good humoured.

I am rarely accused of having a lively imagination, but even if I were so accused—or even if I were in possession of such imagination—I do not think that I could conceive of Annabel Goldie lolling in indolence at the weekend or at any other time. However, she and members of all parties made interesting and intelligent speeches on the wide-ranging nature of the manufacturing sector.

That good humour was interrupted only by the ritualistic attacks and side-sniping on the Scottish National party. [MEMBERS: "Shame."] I do not like to point out that behaviour, but I feel duty-bound so to do. The attacks and side-sniping varied in tone from the incoherent and splenetic attack from Mr Lyon at the beginning of the debate to the rather Neanderthal attack from Allan Wilson. I say this in the kindest possible way—I thought that Allan's speech was firmly rooted in the past century. Perhaps we should all listen and learn.

I want to start on a positive note, which may not continue for long. I welcome many parts of the "Created in Scotland" document. I welcome the commitments in the document, although I question whether those commitments will ever be implemented. In particular, I welcome the commitment on page 29 to make the planning system more proactive and positive.

I cannot help but feel that the document may be a hostage to fortune when we come to review the performance of the Lib-Lab Government in years to come. I hope that I will be proved wrong.

I also welcome the commitment on page 5 to

"take steps to ensure that the regulatory burden is kept to a sensible minimum".

Like Annabel Goldie, I am afraid that the reality is that we are being bombarded with red tape and more regulations. She said that 2,600 regulations had been implemented while only 20 had been repealed. When the Deputy Minister for Enterprise and Lifelong Learning sums up, will he set a target for repealing regulations? We have targets for just about everything else and it would be an interesting concept to have targets for repealing regulation in the pig industry, the whisky industry—

Photo of Duncan McNeil Duncan McNeil Labour

Is Fergus Ewing referring to health and safety regulations, which many people in the Federation of Small Businesses, which he purports to represent, seek to have repealed? Are those regulations included in his agenda?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

No, not at all. In my opinion, the primary purpose of regulation is to ensure health and safety, which is a serious matter. I do not think that anyone in this chamber would advocate for one moment doing anything to remove the protection that regulations are intended to provide in relation to the health and safety of employees. However, we should examine far more closely many of those directives that emanate from Westminster or Europe in which the Parliament has a say. I look forward to the time when the Executive takes steps to deal with that.

Brian Ashcroft pointed out in an article that

"Scottish manufacturing productivity has grown more quickly than the UK's during the past decade".

However, one point that has yet to be made is that that is not necessarily the case in the indigenous manufacturing sector, as foreign-owned inward investment contributes much to the total figure.

When the Minister for Enterprise and Lifelong Learning opened the debate, he was quite correct to say that we need an attitudinal change. I hope that the Executive will take up the suggestion made by the Enterprise and Lifelong Learning Committee to incorporate in the Standards in Scotland's Schools etc Bill provisions to enable business to participate directly in schools, as that is where participation is required.

I also suggest that, for the same purpose, the minister may wish to revisit page 46 of the document "Pathfinders to the Parliament", on which three proposals are made. The first is to

"cross-rotate civil servants into manufacturing on a secondment basis".

The second is to implement

"programmes for managers from industry to spend time in classrooms".

The third is to

"encourage practice of open days for communities to visit manufacturing sites".

Those measures will not cost money, but they will change children's opinions of manufacturing as a career. That is important and I do not hesitate to endorse the minister's approach.

I would like to make a serious point regarding Malcolm Chisholm's speech. I have spoken previously about the effect of business rates on Scotland's business community. Mr McConnell's decision to set the business rate for Scotland at 10.1 per cent higher than that of England may be the most significant decision affecting businesses that has been taken in Parliament—it is certainly the most damaging.

The business rate in Scotland has been set at 45.6p in the pound, as opposed to 41.4p in the pound in England. That means that a Scottish business with a property pays 10.1 per cent more than is paid by a business that owns a property of identical value in England. If two businesses in Inverness and Colchester have properties that are valued at £20,000, the business in Inverness will pay £840 more in the year 2000-01. That is a fact and I am willing to take an intervention from any member who will deny it.

Photo of Malcolm Chisholm Malcolm Chisholm Labour

As Fergus Ewing has invited intervention, I must make one, if only to repeat my previous point. One must look at both sides of the equation—the valuation and the rate poundage. If Mr Ewing asked the Convention of Scottish Local Authorities or anybody else whether there is a level playing field in business rates between Scotland and England, they would say that there was one. The two factors must be examined and Mr Ewing is looking at only one. Six times four is the same as eight times three.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

It is not the case that there is a level playing field. The calculation of rateable value is the same north and south of the border—it has been harmonised. If a business rate of 45.6 per cent is applied in Scotland and a rate of 41.4 per cent is applied in England, the bill in Scotland will be 10.1 per cent higher than for a property of identical value in England.

If Mr Chisholm does not agree with me, he might want to consult the Scottish Council Development and Industry, which wrote to Mr McConnell suggesting that his policy would place Scottish business at a competitive disadvantage. The document that we are debating says that the prime concern of manufacturing industry is for a level playing field in business rates, but we do not have that—Scottish businesses are playing uphill.

I would like to introduce a fact about business rates that has not yet reached the public domain. Mr McConnell's justification for discriminating against Scottish businesses by imposing on them a 10.1 per cent surcharge has been that the total yield of non-domestic rates income must not decrease. I understand from COSLA figures that the total yield of non-domestic rates income will increase from £1,441 million to £1,663 million—an increase of £222 million raised from the business community. Mr McConnell said that he could not afford to give Scottish businesses a level playing field. I've got news for you—he can. The £222 million is available; Malcolm Chisholm will, no doubt, accept those figures from COSLA.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Mr Chisholm had his chance and he blew it—there is nothing personal in that.

I have tried to make a serious point and I am grateful for having had the opportunity to spell it out at more length than a humble back bencher such as I might normally be able to do. We will come back to this issue—Jack's tax is a phrase that we will remember and that the Executive will not be allowed to forget.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat 12:20 pm, 9th March 2000

I am pleased that we have taken, in the main, a co-operative and inclusive approach to this important issue. There has been a cross-party approach to the subject of this morning's debate; the Executive, the Enterprise and Lifelong Learning Committee and the Parliament rightly co-operate on this matter. Most important, there is co-operation between politicians and the manufacturing sector, including both management and employees. Indeed, the width of representation on the task force was commented on.

Henry McLeish spoke about the new economic model. We must be more innovative, creative, customer focused and design led. There are huge opportunities, which we must seize. Fitness for purpose and reliability are no longer enough on their own, although they remain essential. High-volume, low-margin, low-waged, low-skilled products are not Scotland's future.

There is general agreement on the scale of the dramatic changes that are taking place. As David Mundell said, world-class computer games are now one of Scotland's core manufacturing skills. We are all about quality products and niche markets, as Irene Oldfather pointed out. Because of the changes, there is a dynamic, volatile and constantly changing position in manufacturing. Some areas have continuing decline, some have significant growth and some have huge growth. However, the balance is positive, and huge new opportunities exist.

The problems of change bring crucial responsibilities. Lack of skilled staff is a problem, but it is a good problem to have, and I am determined that all of us will be able to respond powerfully to it. Software engineering was mentioned as an area in which there are skills shortages. Alex Neil had some positive suggestions for solving that problem, such as the software academy.

Electronics is another area in which there can be skills shortages. In Livingston, new innovative ways of working are being developed, with high-technology equipment being used in one location by university, college and vocational students. That is the sort of flexible future that we must try to create.

We are tackling the problem of skills shortages with the university for industry, individual learning accounts and the new learning centres that are springing up throughout Scotland. There are more students and more modern apprenticeships, but we still have problems, especially in science and engineering and in attracting students from disadvantaged backgrounds.

Jamie Stone mentioned Rosie the Riveter. He was right to highlight the waste of skills and ability among Scottish women, and we must address that issue. It is only by investing in skills that we will create the champions of manufacturing of tomorrow. We are determined to support the steering group's view that promotion of manufacturing as a dynamic and exciting future is vital.

I agreed with many of John Swinney's points. The framework for economic development is important, as is balance between inward investment and growing locally based companies. We all want to give new emphasis to our existing companies, without lessening for a minute the importance of inward investment. Export development strategy is also important, and we need more ambitious targets. We must start to develop new markets now. Although the global market is moving fast, it can sometimes be frustratingly slow to get real benefit from the effort that is required to develop overseas and global markets.

Photo of John Swinney John Swinney Scottish National Party

Will the minister say a little more about the Executive's review of the export development strategy, its time scale and its relationship to the evolution of the e-commerce strategy that Scottish Enterprise is leading?

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

Clearly, e-commerce is an important part of the export review, and the potential of e-commerce in developing global markets is huge. We intend to complete the review by the end of the year; it will form an important part of the review of national and local enterprise networks.

John Swinney mentioned Peter Hughes's comments. I, too, listened to Peter Hughes on the radio this morning; he welcomed the report and the support that it gives to his sector of industry. We should remember that we are talking about 7.8 per cent growth in our exports in the year to the third quarter of 1999. John Swinney made some positive points about the encouraging signs in the Scottish economy: 1.2 per cent growth in Scottish productivity, as opposed to a decline in the rest of the UK. However, there are difficulties as well, which we do not deny or duck. The growth, development and momentum that we are seeing is encouraging, but we must give time and attention to some of the problems.

The UK Government plays a hugely important role. Interest rates and exchange rates are an important part of that, but we have our own separate responsibilities, and it is on those responsibilities that we are determined to deliver.

Annabel Goldie spoke about the need to improve productivity further. We agree. She spoke about the need to make further progress in certain other areas. We agree that things can still be done; the document is about creating a focus for that. We are doing well in terms of employment, which has risen. Output is expanding. Exports are growing, in some cases dramatically, so I believe that we have the foundations of something potentially very exciting, provided that we can resource the growth.

Skills are key to that. I agree with many of George Lyon's remarks on that issue. His words of support were encouraging and he helped to highlight other areas in which we are taking action. Those include the promotion of manufacturing, which is an important area; supporting innovation and new technologies; the review of the enterprise networks; encouraging inward investment; and the creation of new businesses. The most important part of the agenda is skills, and the work that we are doing in relation to universities, colleges and lifelong learning is central to that.

Many of those issues are strongly held Liberal Democrat convictions, which are shared by our Labour partners. They are also shared by many individuals in this chamber. I mention that because Alex Fergusson spoke disparagingly about Liberal convictions. It is important to contrast those convictions with Conservative convictions, which are an interesting concept—these days, sadly, they seem to mean that the politicians in question end up behind bars, although I should emphasise that I am not referring to the kind of bars that are found in the House of Commons.

Mary Mulligan mentioned the exciting exponential growth in companies such as Quintiles, Motorola and Sun Microsystems. We must get behind those companies and encourage greater growth from them, although we acknowledge what Des McNulty said about the need to emphasise traditional companies and industries.

Richard Lochhead made an important contribution, emphasising the potential of our rural areas and the fact that some exciting companies are developing there. Elaine Thomson built on Richard's comments about the importance of the oil and gas industry and its potential as a world-class industry with world-beating skills to promote and sell those skills internationally over the next few years.

Mary Scanlon touched on the problems in the textile industry. However, there is huge potential in that industry because of the quality of the products and the quality of new design skills and new product innovation. I know that my colleague Alasdair Morrison is working closely with producers and the development agencies to support the Harris tweed industry, for example.

Alex Neil had lots of positive suggestions, some of which I would like to investigate further, especially his comments on individual learning accounts. I will come back to him on those points. The only point at which he went off the rails, in my opinion—and I am sure in that of some of my colleagues—was in his final sentence. However, 2007 is an interesting new target.

The "Created in Scotland" report provides a helpful focus for all those efforts. It maps the way ahead and the way in which manufacturing companies are already facing up to the global competitiveness challenge. It brings together for the first time the actions and initiatives in which the Executive is engaged to support manufacturing. The only way forward is for manufacturers to keep pace with the demands of the new marketplace.

We intend to help that to happen.

The Executive has already moved to establish forums in which the needs of textiles and shipbuilding can be discussed. We are closely examining the opportunities for establishing centres of excellence for specific sectors throughout Scotland. Our next step will be to form a project group to oversee the campaign to raise the image of and improve attitudes towards the manufacturing sector. The Executive will convene another meeting of the steering group to set all that in train.

There will be a new angle on the report once the results of the consultation on the framework for Scottish economic development are published in a few months.

Some concerns were raised this morning about follow-through and monitoring against targets. We intend to set up a tracker document for all actions that are referred to in the manufacturing strategy document. The Scottish Executive will detail its progress on the internet, so that that progress can be seen by everyone in the chamber and in Scotland who is interested in this vital issue.