Knowledge Economy

– in the Scottish Parliament at 9:15 am on 23rd March 2006.

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Photo of George Reid George Reid None 9:15 am, 23rd March 2006

Good morning. The first item of business is a debate on motion S2M-4163, in the name of Nicol Stephen, on growing a knowledge economy.

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

It is my pleasure to open today's debate on our investment in economic growth through Scotland's colleges and universities. I apologise for the fact that I will be unable to stay until the end of the debate because I have other pressing business, but I will certainly be here for all the opening speeches and will stay for as much of the debate as I can. Thereafter, I will leave matters in the hands of my deputy, in whom I have complete confidence—perhaps I should not use those words.

Growing Scotland's economy is the Executive's top priority. Our record levels of investment in Scotland's colleges and universities are focused on helping us to meet that priority not just in the short term, but in the medium and long term. We know that investment in tertiary education contributes significantly to economic growth. That has been shown to be the case at various points throughout Scotland's history and it is apparent today in many countries around the world. The Executive has a great record of investment in our colleges and universities. Since devolution, we have addressed decades of underinvestment through an overall increase in funding of more than 53 per cent in real terms, up until the end of the present spending review period.

It is important that we equip our young people with the right skills to succeed in the modern world, which are based on individuals' ability to adapt to shifting demands. We start our young people on that path early. "A Curriculum for Excellence" sets out the Scottish Executive's vision for transforming Scottish school education. "Determined to Succeed" is the Scottish Executive's strategy for enterprise in education. The school and college partnership programme opens up new choices for young people and gives them a first contact with university and college education. Our young people's participation rate in higher education is extremely high.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

In the first session of Parliament, the Executive introduced the graduate endowment, which helps students greatly, but does the minister think that in the next session of Parliament we should help students at university by tackling student debt? If so, will he consider the idea of the Executive funding the graduate endowment?

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

I know that Mike Rumbles has firm and clear views on student funding, but the partnership agreement sets out our position on that subject. It is a matter on which each of the different parties must put forward their proposals for the 2007 elections and beyond. The implementation of such policies and priorities will depend heavily on the outcome of next year's elections.

Around 50 per cent of our young people go into higher education at an age at which they can benefit from the highest long-term economic return. That is why we are increasing funding for teaching in our institutions. Today the Scottish Further and Higher Education Funding Council will announce allocations of teaching grants to our universities for 2006-07 that total more than £800 million, which represents an increase of 5.7 per cent on this year's allocations.

We are going through exciting times for Scotland and for Scottish education. Our society is opening up to an increasingly diverse population. Newcomers from around the world often bring a unique entrepreneurial vibrancy to Scotland. That, combined with the emergence of an increasingly aspirational generation of young people in Scotland, means that we can really step up the economic pace.

Attracting students from overseas is good for our institutions and for Scotland. Not only can we build links all around the world when students come here to study and then move back home afterwards, but we can attract some of the best of those students to start their careers here in Scotland. The fresh talent initiative has raised Scotland's profile and is gaining interest around the world.

Our higher and further education system is already a big—perhaps the biggest—part of the story that we tell the world about modern Scotland. Our institutions create fantastic opportunities for Scotland to connect widely with the rest of the world. Over the past year, we have continued to build the links—with China, India, the United States, Canada and elsewhere—that will create the opportunities that our country and our economy need. Our objective is to develop new partnerships that will work to the economic advantage of our country and which will be good for the rest of the world.

China is set to be a major economic force in the 21st century. It will have a hugely significant impact on the world's economy. The memorandum of understanding that we signed recently with the Chinese education minister is an important development in our relationship with China. It is interesting that the minister, who is responsible for 285 million young people back in his country, chose to come to Scotland at the end of last year to visit the University of Edinburgh because of our reputation for excellence.

Photo of Jim Mather Jim Mather Scottish National Party

How will the minister measure the advantages and benefits of our interaction with China and of the overall strategy on the knowledge economy?

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

A number of measures should be used, including the number of students, the level of investment and the extent of the economic opportunities that are created through business contacts. The Scottish National Party's amendment, in the name of Jim Mather, makes fair points about measurement and it is our intention to support it because it is true that we must take a rigorous approach.

I am mindful of recent research on economic development. Sometimes progress can be difficult to measure, but it is important that we benchmark our performance against that in other parts of the globe. We must examine how other countries measure such factors and must be associated with the best and most rigorous methods of measurement, because it can sometimes be difficult to assess at an early stage the scale and importance of a particular opportunity. It would be wrong to become averse to taking risks or seizing opportunities, but we must be rigorous in our approach to measurement and we should work together on that.

Universities such as the University of Abertay Dundee, the University of Dundee, the University of Edinburgh, the University of Strathclyde, the University of Aberdeen and Napier University have been forging ahead with partnership agreements and exchanges with many institutions in China. Our colleges are developing such links, too. Last year, I visited Tongji University in Shanghai, where I met newly qualified lecturers and trainers who had studied golf course management at Elmwood College in Fife.

It is predicted that India's economy will become the third largest in the world. Who knows? It might do even better than that. India is home to more than 1 billion people, who live in a democratic nation, speak English and are hugely entrepreneurial in attitude and spirit, so it is a country that holds huge potential for Scottish universities, especially in key areas such as life science and energy, where what we in Scotland have to offer is special and world class.

It is important that we ensure that people who lack basic skills such as literacy and numeracy get the chance to engage in our economy. Such skills are fundamental to success in the labour market.

Photo of Alex Neil Alex Neil Scottish National Party

What impact will the financial crisis at Scottish Enterprise have on training? Is it true that the crisis means that no new training contracts for people who are aged 19 or over and no new training contracts for adult training will be signed?

Photo of Nicol Stephen Nicol Stephen Liberal Democrat

Alex Neil speculates on those decisions. I give him the assurance that no decisions have yet been taken, or agreed, on those matters. The situation at Scottish Enterprise is serious. It is important that the Parliament is kept informed of developments and I give Alex Neil, his committee and the Parliament an undertaking that that will be done.

We have allocated £65 million to adult literacy and numeracy partnerships over the period 2001-08. That is the first significant investment in adult literacy provision in more than 25 years. We are also investing £1.75 million over the next two years in a workplace literacy pilot. Indeed, we are already seeing signs of progress in this area: more than 100,000 learners have been helped in the past four years.

Scotland's universities have a strong record of producing world-class research. Scotland ranks third in the world for research publications and citations per head of population, ahead of the US and Germany. Annual surveys have indicated that our institutions produce 19 per cent of all United Kingdom patents and 17 per cent of UK licences. Around half of Scotland's research was awarded a four or five-star rating in the last UK research assessment exercise, which signifies our achievement of international excellence. Scotland wins more than 11 per cent of total UK expenditure by the United Kingdom research councils, which is well above our share based on population or the Barnett formula. The list could go on and on.

Although we can be rightly proud of the work that goes on in our universities, we cannot afford to rest on our efforts. To remain globally competitive, we must continue to maintain and build on our research base. Today, the Scottish funding council will announce its allocations of research and knowledge transfer funding to our universities for the next year. The total allocation is £212 million, which is an increase of 13.1 per cent on the current year. The costs of research in our universities are high, but the costs of not making the right investment at the right time are even higher. We are getting the level of investment right and we will reap the economic benefits of doing so.

Scotland is already a science nation in which science and research drive innovation, generate economic success and raise the quality of life. That is as true today as it has ever been, but we must continue the pressure to succeed. Our scientists are world leaders in a range of areas, including biomedicine, stem cell research and informatics.

In "A Science Strategy for Scotland", we identified the key Executive objectives on science. Overall expenditure on science by the Scottish Executive has increased markedly since 2001. This year, it is rising by around a quarter in real terms to £408 million. We made an unprecedented increase in funding to the higher education sector in the 2004 spending review and the funding council has increased its budget baseline for research from £180 million in 2002-03 to £216 million this year and £253 million in 2006-07. We are also taking steps to promote science further to young people. It is essential that we do all we can to ensure that Scotland benefits from the economics of that investment.

Overall public expenditure on activities to promote the exploitation of research, including the intermediary technology institutes, will be around £100 million in 2006-07, which compares well with the figure of under £40 million in 2001-02. The ITIs have the capacity to increase exchanges between the academic and corporate sectors in Scotland and to help to realise the commercial potential of the Scottish science base.

We are working hard with international partners to increase awareness of Scotland as a world-class location for science research and development in order to attract investment and further develop global science links. We must continue to pursue those objectives in the years to come; they are absolutely vital to Scotland's future success. I am committed to doing more to increase momentum in that area. In particular, I am committed to tackling some of the issues that relate to the choices that young people at school and university make about science subjects. In short, science is the future and we must deliver on that.

If we wish to develop a strong economic future for Scotland, significant investment in Scotland's colleges and universities is an absolute imperative. The Executive has recognised that in our spending priorities. Investment in our colleges and universities creates huge opportunities for Scotland's future and releases confidence among our people to be innovative and enterprising. The combination of knowledge and confidence galvanises the sort of enterprise-based, knowledge economy from which we will all benefit. I am pleased to move the motion.

I move,

That the Parliament welcomes the Scottish Executive's record investment in further and higher education and recognises its significance in Scotland's current and future economic growth with the sector's focus on key issues including sustainable development, research and innovation, globalisation, productivity and skills.

Photo of Jim Mather Jim Mather Scottish National Party 9:30 am, 23rd March 2006

The Scottish National Party has always been persuaded by the case for investing in Scotland's knowledge economy. We know that countries and continents that invest heavily in education and skills benefit economically and socially from that choice. For every pound that is invested in attaining high-skill qualifications, taxpayers get even more money back through economic growth. However, therein lies the rub: investment alone will not do it. Countries also need to make a cultural commitment that lasts from school through to industry. I agree that there are signs that we are doing that in Scotland, but countries also need to create the conditions to foster organic growth of the knowledge economy. They need to have the economic powers that make possible the creation of wealth and—equally important—root and retain as much of it as possible within their borders. The Government in Scotland has failed and continues to fail that test, which is why the SNP is winning the argument for more powers for the Scottish Parliament and the nation.

Many people—individuals and those in our public and private sectors—realise that Scotland could have a massive share of the big competitive prize that is out there. I refer to the prize of growth, jobs and prosperity and the virtuous circle that comes from reinvestment, especially in people and education. In fact, investment in education and the knowledge economy increases the demand for highly skilled people faster than our current institutions can deliver them. As the SNP amendment suggests, Scotland still has much to do.

We recognise that the Government in Scotland is wedded to its disastrous rejection of economic powers. The SNP amendment is designed to draw the Government's attention to what ought to be done to minimise the damage that is caused by that omission. If the provisions in the amendment were to be implemented, Scotland would be in better shape when people inevitably claim the powers to move forward.

If the Government is jealous about its reputation—and I am happy to see signs that it is—it will pay serious attention to our amendment, which specifies what is needed to convert Government rhetoric and investment, which has been made with little regard for results, into a more sensible approach. The Government in Scotland has no real targets for growth or for increases in population numbers. It needs to take that sensible approach to mirror the committed efforts that are being made by teaching professionals, businesses and conscientious and well-motivated individuals in our public services.

A good starting point for the Government would be to consider the report, "The Geography of the Scottish Knowledge Economy", which was produced for Scottish Enterprise by Mark Hepworth and Lee Pickavance. Its publication date is shown as August 2004, but it was slipped out with no fanfare or discussion in December of that year. Why was the report slipped out under cover of Christmas? The answer is that it not only vindicated SNP analysis of the knowledge economy but undermined the city region strategy that was being advocated in certain quarters at the time.

The report said:

"Elected regional assemblies should underpin regional knowledge economies with a massive redistribution of resources away from the South East."

It went on to say that that would mean

"More autonomy for Scotland, Wales and Northern Ireland to recognise that the most successful European economies over recent decades have been small nations with genuine economic sovereignty."

It was a good report that noted something that all of us know:

"Scotland has much greater scope - compared to the English regions - in setting its own priorities in making and delivering policies."

That is my fervent hope.

The report concluded that there is a strong case for balancing Scotland's knowledge economy geographically. What better case could be made for Scotland having truly pervasive, high-speed broadband and the accreditation of UHI Millennium Institute in the Highlands and Islands? Its conclusion stated:

"First, there is a need for a local-regional approach to cut through local politics and parochial thinking - this is seen as vital to driving the knowledge economy forward on the ground."

I welcome that, but the knowledge economy strategy should set the worthy aim of increasing the number of people of working age who are in work, in every component part of Scotland.

The report continued:

"Second, the competitive cities agenda needs to be recast to ensure that growth and prosperity is inclusive of rural Scotland - the default option."

Such an approach would support the worthy aim that I proposed. The report questioned the approach to city regions and said:

"There is considerable interest in this planning concept, but the analysis and evidence to support policy makers is inadequate."

That appears to undermine the possibility of achieving the default option. It also made the useful and accurate observation that Scotland is a "nation region", just as London is a city region. The cry for a cohesive, joined-up Scotland has great appeal.

The third point in the report's conclusion was:

"policy needs to be 'joined up' - however, the national planning framework is broad brush while Scottish Enterprise works with a very refined set of targets, can the two be reconciled?"

A more fundamental question should be asked about Scottish Enterprise's effectiveness and credibility in the absence of tax powers and given the resolve of its senior management to keep quiet about the Government's attempt to make bricks without straw.

Photo of Allan Wilson Allan Wilson Labour

I am interested in Jim Mather's exploration of Scottish Enterprise's key role in growing the Scottish knowledge economy, but how is that view compatible with nationalist plans to cut Scottish Enterprise's budget?

Photo of Jim Mather Jim Mather Scottish National Party

I make two points in response: first, we must work with what we have; and secondly, we must aspire to have something better. I am sure that anyone outside the Parliament would tell the minister that Scottish Enterprise could perform infinitely better than it does on its current trajectory. It seems to be not only making a poor contribution to economic growth but offering a poor role model.

Members should make no mistake: any attempt to create a knowledge economy without tax powers simply will not work, especially given that the starting point for Scotland is way off the pace. In 2001, the centre for advanced studies at Cardiff University produced a report on readiness for the knowledge economy, which showed that Aberdeen, where the oil industry is located, was in 14th place out of 145 UK cities and regions. That was the best that Scotland could do: Edinburgh was in 21st place; Glasgow, the former first city of the empire was in 54th place; Highland was in 128th place; my area was in 143rd place; Orkney—the constituency of the former Deputy First Minister and Minister for Enterprise and Lifelong Learning—was in 144th place; and the Western Isles were in 145th place.

More recently, the "World Knowledge Competitiveness Index 2005", which is produced by George Washington University, the University of Sheffield and Aston University showed that Scotland is still off the pace and is being overtaken. Scotland ranked 83rd out of 125 regions, whereas Sweden was in 8th position and Finland was in 20th position. Scotland has also suffered a dramatic fall in the rankings for Government expenditure on research and development, dropping from 44th place in 2004 to 82nd place in 2005.

It is obvious that we have much to learn. I am delighted that lessons are being learned from Finland and that stakeholders realise the importance of the Finnish model. However, given that we do not have tax powers, we must do more in the meantime. I am delighted that the Government will support the SNP amendment, because it relates to what W Edwards Deming, who turned round the Japanese economy, called "profound knowledge".

We cannot pick and mix. Even a commitment to perpetual improvement that will involve all stakeholders is nowhere near adequate if the strategy is peppered with major weaknesses such as the lack of an overarching, worthy aim—for example, to get more people of working age in Scotland into work—or the lack of statistical control, which is the crux of the matter. The evidence of Finland's huge success is statistical and the country has the capacity to demonstrate that its performance is consistent and predictable. For example, in Finland there is less than 5 per cent variation in student performance among schools, which is a remarkable achievement.

If we continue on the trajectory that the minister set out, there will be lower retention of talent, because the people whom we teach will go to work in other economies. That will lead to a lower retention of wealth.

Photo of Jamie Stone Jamie Stone Liberal Democrat

The member's colleague Alex Neil will surely confirm that the situation in Finland is not quite as he describes it. When the Enterprise and Culture Committee visited the country recently, it became evident that although the primary sector is forging ahead, the Finns admit that the secondary sector is lagging behind.

Photo of Jim Mather Jim Mather Scottish National Party

Jamie Stone should tell that to the compilers of the world knowledge competitiveness index, because they put Finland in 20 th place and Scotland in 83 rd place.

We are all for the knowledge economy, but the key is to create a knowledge economy that roots wealth in Scotland. If the knowledge economy is a manifestation of the smart, successful Scotland agenda, it stands condemned because it can produce only three things: smart people; intellectual property; and fledgling companies, all of which are mobile if Scotland does not have fiscal powers. We have said that time and time again.

I move amendment S2M-4163.2, to insert at end:

"and now wishes to see that investment subjected to close scrutiny to identify its effectiveness in terms of growth, jobs and incomes under a process of independent statistical control that fosters an era of perpetual improvement and benchmarks Scotland's performance against international competitors."

Photo of Murdo Fraser Murdo Fraser Conservative 9:40 am, 23rd March 2006

I declare an interest: I am a member of the board of management of Dundee University Students Association—[ Laughter. ] Well, that is relevant to the debate.

I echo Nicol Stephen's support for our universities and colleges. The further and higher education sectors make a valuable contribution to Scotland's economy. From public investment of less than £700 million, the higher education sector generated £2.8 billion in wealth and created more than 50,000 jobs. The sale of Scottish higher education services overseas earns £360 million per annum. It is clear that strong higher education and research sectors will bring investment and talent to Scotland.

If Scotland is to continue to attract talented students and academic staff, she must maintain her excellent reputation for teaching and research. As industries turn to China or India, where there is a low cost base and high human capital, collaboration with our international partners in the supply and development of higher education will be increasingly important. That will help Scotland to co-exist with such economies in a fiercely competitive global environment.

Scotland has had great success in attracting international students. Some 27,480 international students from more than 180 countries are studying at Scottish universities. The most recent figures show that personal expenditure by international students is some £434 million per year, which makes a significant economic contribution. The range of international talent at our universities means that we can contribute to and be involved in the development of the higher education sectors of our future economic partners overseas. Our hosting of international students will help to forge strong links between research, businesses and communities in Scotland and the students' home countries. The Deputy First Minister mentioned China. The Chinese market is extremely important and is growing rapidly. The University of Dundee attracts a large number of Chinese students.

The sector's economic contribution and the number of international students who come to Scotland are good news. There is also good news about research. The HE sector in Scotland consistently punches above its weight in patents and research citations. The Deputy First Minister mentioned the statistics: Scotland's population accounts for 8.5 per cent of the UK population, but last year Scottish institutions produced 19 per cent of UK patents and 17 per cent of UK licences. However, Scotland invests only 1.5 per cent of its gross domestic product in research and development, whereas Sweden invests 4 per cent of GDP. Indeed, only 0.56 per cent of Scotland's investment is successfully commercialised. We are not capitalising on our investment and research output and we are not translating into the economy the knowledge base that exists in our universities.

Professor John Coggins, from the University of Glasgow, said that links between higher education and industry are not as good as they should be, despite a growing willingness in universities to encourage researchers to create spin-out companies. Applied research has suffered from a lack of recognition compared with pure research, despite its importance to the economy. I acknowledge that work is being done in that regard, for example through the establishment of the intermediary technology institutes. The jury is still out on whether the ITIs will be an unqualified success. It is too early to make that judgment, but progress is being made.

The Executive's new interface initiative has identified the need for greater and more effective collaboration between the higher education sector and business, but unless Scotland can support a broad range of innovative commercial activity that goes beyond university research—spin-off companies—we will not be able to generate the critical mass of knowledge, skills and opportunity that we need to sustain growth. The Association of the British Pharmaceutical Industry has also expressed that view, identifying three key factors that are critical to Scotland's attracting research and development investment: access to skills and knowledge; a competitive cost base for collaborative research; and a market that supports innovation. It is difficult to see how, without those factors, a knowledge economy can grow or be sustained.

It is imperative that we support and develop our best assets—our people and our ideas. We must develop a high-skill, high-knowledge workforce that is flexible enough to respond to the changing demands of the economy, but I do not believe that increasing participation in higher education will, of itself, boost our knowledge economy. To truly unlock Scotland's full potential, the focus should be on quality, not quantity, in higher education.

The further education sector also has a key role to play in providing for businesses a workforce with the necessary technical skills to support research and knowledge transfer.

To secure the status of Scotland's university sector, we must be able to attract and retain top staff, and to achieve that universities must have adequate capital funding to develop good facilities, including libraries, labs and accommodation. I recognise the steps that the Executive has taken to increase funding to the higher education sector, but there is concern about a level playing field with institutions down south. If staff salaries in England are raised as the result of extra funds from top-up fees, Scottish staff salaries will have to be raised in line with them to prevent a brain drain. If the Government reduces the amount and proportion of ring-fenced funding, universities will have greater flexibility to direct funds to where they will be most effective.

The growth of our knowledge economy is being impeded by the fact that GDP growth in Scotland has consistently lagged behind growth in the rest of the UK, by the falling number of business start-ups and by the fact that public sector growth has outstripped that of the private sector. We have debated those issues many times before—not in this room but in the chamber downstairs. If we are to see real success in the knowledge economy, we must put the debate in the context of a competitive environment and of stronger economic performance overall. Government can support the university sector in keeping pace with international competitors by developing a long-term strategy that does not simply react to successive spending reviews but is collaborative and brings together the further and higher education sectors, with genuine participation from business. Ultimately, to compete with other economies, we must foster a dynamic business environment that will attract talent and investment and will support entrepreneurial activity. In the long run, that is the way to support and grow our higher education sector and to maximise its contribution to the knowledge economy.

I move amendment S2M-4163.1, to leave out from "welcomes" to end and insert:

"notes the valuable contribution made by the further and higher education sectors to the Scottish economy, particularly their success in attracting overseas students; notes, however, the poor levels of knowledge transfer in the economy and that, although Scotland secured 17% of all UK patents, only 1.5% of GDP was invested in research and development and only 0.59% of this was successfully commercialised, and believes that a more competitive economic environment would encourage higher levels of commercial activity and help secure additional external funding for the sector."

Photo of Frank McAveety Frank McAveety Labour 9:48 am, 23rd March 2006

Today's debate starts from the central premise that education is the fundamental enabler of our knowledge economy. Although the contributions that we have heard so far have focused, understandably, on investment in further and higher education and on skills development at that level, I want to focus on other areas of education that ensure that we can make an effective contribution to building a knowledge economy. If the premise is right, the argument should be that, whatever individuals do throughout their lives and whatever the role of the state, the individual and the state enter into a contract to build opportunities for skills and education for every individual while ensuring at the same time that the state and our society benefit positively from that. That should be the driving force behind any debate that we have about the knowledge economy.

Someone once said that the object of education is to prepare the young to educate themselves throughout their lives. In the area that I represent, there have been economic changes in the composition of capital over the past 100 years, so perhaps that statement should be adapted to say that, as well as being able to educate themselves throughout their lives, people in communities such as mine must also have the skills and knowledge to adapt to new economic opportunities throughout their lives. The history of the inner east end and south side of Glasgow shows that we depended on large industrial complexes to provide employment, that individuals had difficulty in adapting when that situation changed, and that the nature and distribution of wealth in those industries has presented us with big challenges.

The challenge for my part of Scotland—and for other parts too—is to make ourselves more competitive. I may not have been in the same university association as Murdo Fraser, but in the ancient past, when I was at Strathclyde University, I was fond of quoting Antonio Gramsci, an occasional text for teenagers who thought that they could change the world. Gramsci said:

"I'm a pessimist because of intelligence, but an optimist because of will."

He needs to be less despairing and a bit more inspiring, but there we go. We have made progress since the creation of the Parliament, and to hear a Conservative acknowledge that is progress in itself. We have made progress in macroeconomic terms. Youth unemployment is substantially lower than it was when I was a teacher in the east end of Glasgow in the mid-1980s. Employment opportunities are much more widely available than they ever were in that decade, and in the broader economic structure we have stable mortgage and inflation rates—a feature that I do not remember fondly from the mid-1980s.

It is with policy that we need to make a difference, and I want to focus on three or four areas where the Parliament and the Executive have made a difference. By investing in early years provision, we are making a long-term investment that will substantially change the capacity of individuals, particularly in the neighbourhoods that I represent, to address the need for opportunity and employment in future. The sure start programme is targeting resources on areas of substantial disadvantage and that will also have long-term positive benefits. The child care partnerships, uneven as some of them are, have also led to some positive developments, particularly in the Gorbals area of Glasgow.

A number of us from Glasgow said that we needed to do more than just have the connection—we also needed to take responsibility for ourselves. I was speaking to Charlie Gordon this morning and remembering a debate that we had about 10 years ago about what could be done about our school estate. We made some difficult, tough decisions about our school estate, and that work has been continued over the past three or four years and will result, in the next few years, in a quality of school estate in Glasgow that I cannot remember having before. However, it is not just about the quality of the buildings, but about what happens inside those buildings. It is the aspirations that are developed in those schools that will provide opportunities for the knowledge economy to which all Scots should aspire.

For too long, there has been a culture—especially in the areas where I taught before I became a parliamentarian—of trying to explain away the consequences of disaffection because of the economic dislocation caused by deindustrialisation. That is partly true, but not always the case. Too often, we did not have enough aspiration and did not encourage a culture of aspiration. I echo what I think Jim Mather was trying to say about creating a space for people to believe in themselves, to have more confidence and to try to raise their aspirations and objectives for the future. Glasgow is competing with other cities right across the world, but those cities have also had to deal with post-industrial dislocation. Manchester, Baltimore and Chicago did some simple, but also very difficult, things. They wanted to tackle the issues facing schools and education, to build skills and confidence, to create clusters of achievement, especially in the high-value labour market, and to ensure that there was continuous learning so that the workforce would be adaptable. That is the challenge that faces my city today.

Charlie Gordon and I have often said that, if we can get Glasgow right, Scotland will prosper even more as a nation. That is why there have had to be changes in educational provision, and I want to highlight two positive developments in my constituency in the past two or three years. The postal district served by St Mungo's academy is probably one of the most disadvantaged communities in the whole of the United Kingdom, but the school has had remarkable success in preparing pupils for the employment market, and that remarkable level of success has been matched in other parts of Scotland.

Photo of Alex Neil Alex Neil Scottish National Party

Does Frank McAveety agree with Gordon Brown that we should aspire to achieve the same spending level per pupil and the same size of classes as the private sector has, and that kids in his constituency would have a much greater competitive advantage in life if they had the same quality of education and the same spent on it as those in the private sector?

Photo of Frank McAveety Frank McAveety Labour

Given the experience of friends of mine who had a private education, I would not wish that on anybody else. We have made substantial progress on investing in education in Scotland, and I am surprised that Alex Neil, who has always had a strong commitment to Scottish self-government, would expect someone from Westminster to give us guidance on that. As usual, he has tried to distract me from the very good speech that I was making. The schools in my constituency that have taken a very positive attitude—St Mungo's academy and Eastbank academy—have made a real difference.

A lot of the debate has been about how we can encourage the intellectual talent that we have in our colleges and universities, and I welcome that. I also welcome the fresh talent that is coming to this country, because of the potential and opportunities both that we provide and that those people bring to our society. In my own neighbourhood, I am focused on what we can do with our unused talent—the talent that has not been allowed to flourish. In a range of policy areas, the Executive has made substantial progress on that.

I do not know how much time I have left. The Presiding Officer is looking at me with his usual alluring look.

Photo of George Reid George Reid None

No, I am tempting you to take more time, Mr McAveety; there is plenty this morning.

Photo of Frank McAveety Frank McAveety Labour

I am happy to enjoy the experience. This is the first time that you have given me more time.

Photo of Frank McAveety Frank McAveety Labour

I have got Charlie Gordon excited about our radical past.

What we did well in Glasgow is not recognised enough. In a previous life, I was an apprentice electrician—I know that that is hard to believe, as I was not considered a bright spark, but there we go. When I got the chance to be an apprentice electrician with Glasgow district council, people were selected because of their academic achievements. After three months, I found that that was not the kind of job that I wanted to do. Since Labour took responsibility in the city, we have redefined the apprenticeship programme in three ways.

First, we decided that the interview, and the commitment that is demonstrated by the individual, are more important than their academic qualifications. Secondly, we worked with schools to ensure that youngsters can follow a vocational aspiration if they choose to do so; it is not imposed on individuals, but they have an opportunity to do that, and academic students take that opportunity as well as less academic students. That has substantially improved the quality of the apprentices who enter the apprentice programmes. Thirdly, we invested heavily in an apprentice training school, which has become one of the best in the United Kingdom. That is a good model for other parts of Scotland and the UK to follow. If many neighbourhoods are given the opportunity to make the changes that have taken place in my community, there is real potential for the future.

I conclude by mentioning further and higher education. The John Wheatley College campus in the east end of Glasgow has been a remarkable success. As I have mentioned Gramsci, I might as well mention John Wheatley who was, in my opinion, the most important contributor to socialist thinking in Scotland in the 20th century.

Photo of Frank McAveety Frank McAveety Labour

I exclude Tommy Sheridan because somebody else wrote his books for him.

John Wheatley College has been a remarkable success, and in the next two years there will be a new campus in the heart of the east end of Glasgow, in Paul Martin's constituency. However, it is recognised that some people in places such as Bridgeton and Dalmarnock would be excluded even from that campus; therefore, learning campuses are now being developed in those neighbourhoods to encourage the idea of lifelong learning. That kind of strategy will transform the future opportunities for the community that I represent, and that is why I welcome the contribution of the knowledge economy. If we get the base right, we will get the aspirations, achievement and excellence at the top right as well.

Photo of Shiona Baird Shiona Baird Green 9:59 am, 23rd March 2006

The term "knowledge economy" is one of the catchphrases of the past decade. It is the concept that an economy can be driven by ideas and knowledge, rather than relying on material resources. There is no doubt that Scottish workers are increasingly using their heads more than their hands. For that to continue and flourish, we need to maintain and increase investment in our excellent higher education system.

Scotland's universities and institutes of higher education have a long and honourable history. Scotland's educational system is one of our success stories. I am sure that it is no coincidence that Scotland produced so many of the inventors and engineers who provided the intellectual driving force of the industrial revolution. They would have recognised the concept of a knowledge economy, if not the terminology.

The most important skills that our universities and colleges can teach are those that will allow today's young people to fulfil their potential in a rapidly changing world: the knowledge required to develop sustainable technologies to replace the unsustainable technologies that we have at the moment; the knowledge to understand the inherent frailties and weaknesses of the globalised economy within which we are all expected to work; and the knowledge that is needed to cope in a post-fossil fuels world. How many of our colleges are teaching that course? Given the fact that, according to scientific predictions, it will take just 10 years for us to reach the point beyond which we will not be able to reverse the impacts of climate change, we need to ensure that that knowledge is being disseminated now and that the new course is established. I spoke recently with the Scotland and Northern Ireland Plumbing Employers Federation, which is already considering ways of upskilling its sector to prepare it for the anticipated rise in the installation of micro-renewable technology.

Scotland cannot compete with the cheap labour of the developing world, and we should not have to try. There are countless examples of Scottish innovation and enterprise that enable us to punch well above our weight. Our energy future remains uncertain, but Scottish companies are well placed to capitalise on the abundant renewable energy resources that surround us. We are also leading the way in clean coal technology, which, with carbon capture, could significantly reduce the pollution of countries such as China, where unsustainable energy demand is causing devastation in the environment and for its people. The knowledge that we have gained with hindsight about the pollution that has been caused by our industrial revolution could be invaluable in preventing emerging world economies such as China's from making the same mistakes. What use is knowledge if we do not use it to prevent similar disastrous consequences from occurring elsewhere in the world?

I have one particular concern, which I would like the minister to address. The intermediary technology institutes that we have heard about have been set up to support Scotland's developing businesses and epitomise the knowledge economy. Life sciences, techmedia and energy are all areas in which Scotland's entrepreneurs show great promise. However, I have spoken to several companies that are reluctant to go down the route of ITIs and some grant-awarding schemes because of fears about their intellectual property rights. Not surprisingly, those companies want to retain possession of the IP rights to their inventions and discoveries; however, in return for financial support, the ITIs want the IP rights for themselves. It is little wonder that many companies are choosing to go it alone rather than sign over the rights to their technologies, thereby missing out on valuable support. I would be grateful if the minister could address that issue in his closing speech.

Although knowledge is a vital prerequisite for any successful economy, it cannot totally replace the other factors of production. We all want to support our universities and colleges in their efforts to bring out the best in our young people, but let us not forget the many Scottish companies that belong to a more traditional economic model. They are equally worthy of our support and encouragement. As we move to a low-carbon economy, through the rising price of oil and the need to address rising levels of CO2 emissions, we will inevitably need to consider how we can establish greater self-reliance, using the traditional skills on which the present economy was built.

Photo of Colin Fox Colin Fox SSP 10:04 am, 23rd March 2006

I welcome the opportunity to speak in the debate. I cannot promise members any quotes from Gramsci, but there will be one from George Bush in a minute or two, which might entertain them. Having to debate Scotland's knowledge economy in this room clearly shows that there is a pressing need in our economy for a greater number of joiners and people who know how to put bolts in ceilings and roofs.

I want to start by offering some observations comparing Scotland's economy today with that of the past 25 years. Scotland has abandoned low-skilled manufacturing jobs. Frank McAveety mentioned the east end of Glasgow, which was particularly badly hurt—as was Lanarkshire where I come from—as a consequence of the industrialisation of China and India, where labour is at its cheapest on the planet.

It is also true that in the past 25 years, Scotland has ceded high-skilled manufacturing jobs. I could mention the steel industry and the car factory at Linwood in the Deputy Presiding Officer's constituency. More than 0.75 million manufacturing jobs were lost in Britain between 1997 and 2004. That illustrates the colossal scale of the exodus.

It is important to remember that in its first years, Blair's New Labour Government undercut European wages, so Tony Blair was able to claim that the highest levels of inward investment in Europe were in Britain. Hyundai, Chunghwa, Toyota, Nissan and Honda all came here rather than going to continental Europe because Britain offered them the cheapest labour and non-labour costs anywhere in Europe. It is interesting that, in recent years, Britain has lost that advantage to the countries of eastern Europe in the downward spiral of seeking cheaper labour and non-labour costs. Let us not forget that in all this inward investment, not one of those companies was unionised when they came and they are still not unionised today, despite promises to the contrary.

The reality is that low-paid work is still endemic in the Scottish economy compared to our European counterparts. That is also the claim of the service sector.

I do not know whether other members heard Margaret Hodge—who I understand is either the employment minister or a junior employment minister—say last week that

"Work remains the best route out of poverty" in the United Kingdom. That is except, of course, where it is a route into poverty pay. In the past 25 years, we have effectively replaced the unemployed poor with the employed poor, and today we have 850,000 low-paid Scots.

I turn to the education system and the knowledge economy and the idea that they will provide a way out of poverty for working-class people. I suspect that there are members who can compare the circumstances in which they went to university 25 years ago—as I did—with those in which youngsters approach university today. In 1979, when I went to the University of Strathclyde, it was a difficult place to get into. There was a hugely disproportionate number of middle-class kids from fee-paying schools, but we were told that they had got there because they were cleverer—they had won their places entirely on educational merit. Of course, we know now that that was not true. It was not possible for working-class families to send their kids to university for three or four years and lose the wage that would come in to the family. As we have also clearly seen, the old- school-tie network determined who got into universities and who did not.

Today, 50 per cent of our young people go to university. It is not as difficult to get in as it was; the difficulty is in staying there. The revolution in higher education has led us back to exactly where we started. Not only do a disproportionate number of middle-class kids stay at university, but working-class kids are not able to go because they have to pay bills and there are no grants and there is no housing benefit to support them while they are there.

Photo of Richard Baker Richard Baker Labour

I challenge the member on that point. The Executive has reintroduced bursaries, particularly for students from poorer backgrounds, which has led to an increase in applications from and places for such students. This year, the Executive increased the bursary again.

Photo of Colin Fox Colin Fox SSP

I am grateful for the member's intervention. I am sure that members will agree that there have not been enough interventions in today's debate. I am also grateful that the member intervened just when I have a statistic that will answer his point.

During the 1990s, the proportion of people from the poorest 20 per cent of society getting to university and getting a degree rose from 6 per cent to 9 per cent, whilst the proportion from the wealthiest 20 per cent of the population who got a degree rose from 20 per cent to 47 per cent. The expansion of higher education has disproportionately benefited people from more affluent backgrounds.

Because he shared a platform with them last week in Aberdeen, Richard Baker will know that the National Association of Teachers in Further and Higher Education and the Association of University Teachers have repeatedly made it clear that

"It is entirely wrong to imagine that HE admissions are currently somehow based only on intrinsic merit and not influenced by social or economic backgrounds. Students from wealthier backgrounds currently have a much greater chance of getting to prestigious universities than poorer rivals."

That is the reality that the debate must consider.

What should we teach students when they get to university? We have to teach them entrepreneurship, business growth and innovation. I am glad that members have stayed with me because I will now offer that George Bush quotation. Every time I hear the word "entrepreneur" it makes me think of the phrase attributed to George Bush, the leader of the free world—God help us—that the trouble with the French is that they do not have a word for entrepreneur. Therein lies the problem. Contained in Bush's remarks is the imperialist American, free-market, laissez-faire idea that runs the world, and runs this country as much as any other. I am sure that members agree. The minister might well appreciate that Bush's remarks contain a contempt for European social democracy, which thought it important to force entrepreneurs and the entrepreneurial classes to recognise their responsibilities and become aware that the obligations of business lie beyond the balance sheet.

The idea that the rich should pay more taxes and corporations should contribute some of their record-breaking profits to the Treasury is considered old-fashioned. Labour used to stand for that idea, but no longer does.

Admirably, Labour continues to put great weight behind the idea that more educational qualifications is the way to improve social mobility; there is a great deal in that. However, several studies offered by academics at the University of Oxford suggest that employers are now less impressed by degrees than they were before.

The truth is that Scotland's economy still contains a huge number of low-paid workers in the service sector. The great wealth produced by Scotland's economy is secreted more and more in the hands of an elite, unelected, largely anonymous few, thus exacerbating inequalities. Meanwhile, the figures from the Office of National Statistics that I gave to the minister—the one who has left the room, that is—last week in Parliament show that the number of Scots living in severe poverty is greater now than it was in 1997, when the Parliament opened for business. The progress that has been made—as Save the Children, End Child Poverty and Help the Aged have highlighted—has been marginal, rather than substantial. That is the fundamental truth about Scotland's economy.

Photo of Elaine Murray Elaine Murray Labour 10:13 am, 23rd March 2006

One of the good things about as wide-ranging a subject as growing the knowledge economy is that it gives all of us the opportunity to mount our own hobby horses. Members have done a certain amount of that already and I am going to do the same. What I will speak about is dear to my heart—the contribution of science and technology to the expansion of the knowledge economy and the need to encourage more young people at school and in further and higher education to study the sciences. If we do not grow enough scientists, the expansion of our knowledge economy will not continue.

As has been said many times in the chamber, we have a great tradition of excellence in science and technology. For example, James Clerk Maxwell, whose 175th birthday will be celebrated this summer, was acknowledged by Albert Einstein as the genius on whose shoulders Einstein stood when he developed the theory of relativity. Of course, people such as Alexander Fleming and James Watt demonstrated the excellence from which Scotland's wealth and economy developed in previous centuries.

There are many good scientists in Scotland now. The minister mentioned the fact that we are third in the world in relation to citations. There is the work that is being done in Dundee by Professor David Lane and the school of life science research. A few months ago, I had the pleasure of visiting the centre for science at extreme conditions here in Edinburgh—I always think of it as the centre for extreme research, which has slightly different connotations. The centre's research is exciting and is likely to produce unusual, novel materials on which future generations of information technology can be based.

Some excellent work is being done in Scotland. There are collaborations between university departments. Some time ago, Alex Neil hosted a presentation by the Scottish universities physics alliance. Physics departments at universities across Scotland are linking together to get a competitive advantage over bigger nations such as England and the States. In chemistry, the same thing is being done through the ScotCHEM collaboration between chemistry departments.

We need to examine the structure of support, funding, career opportunities and stability of employment for scientists. Professor Bernard King of the University of Abertay Dundee has identified a number of issues. Last month, he wrote to me in my role as a member of the Finance Committee—he may also have written to a number of other members—expressing some concerns about the way in which the Executive supports science structurally. In his graduation address, which he copied to me, he stated:

"Scotland has inherited from devolution an incoherent system for formulating and implementing science, technology and research policy", because there is

"no single central function of government".

He contrasted that with the role of the Office of Science and Technology at Westminster. We may need to revisit the political structures of support, to bring things together so that we can offer greater support.

Professor King also referred to the system of university research funding, which is more a UK issue than a Scottish issue. The research assessment exercise funds universities on the basis of the amount of published research that they have already done. That is fine, but it is self-perpetuating. Research that is intended for commercialisation is not necessarily published, because the researchers do not want to give it to other people. If scientists concentrate on published research to attract funds to their university, they may not get involved in the commercialisation exercises that we would like to see.

Photo of Alex Neil Alex Neil Scottish National Party

I agree totally with everything that Elaine Murray has said. Does she agree that one of the other problems is that the RAE benefits people who have published their research, which often means handing intellectual property to our competitors, who exploit the commercialisation opportunities?

Photo of Elaine Murray Elaine Murray Labour

That is the problem. It is possible that people are being diverted from the effort that they should be putting into commercialisation. Professor C K Prahalad, who is an adviser to the Indian Government on global business strategy, coined the phrase "legacy thinking". The idea is that if we keep on doing the things that we did, we will keep on getting the same results. We may need to consider doing things a bit differently if we want to change and to increase the amount of commercialisation that we manage to achieve.

As well as reconsidering support structures and research funding mechanisms, we need to encourage students to study science at school, college and university, which is vital. In his speech, the minister spoke about promoting science to young people and the choices that young people make about what they will study. I welcome the increase in the number of science teachers, especially in chemistry, but we started from a low base. In the curriculum review, we must consider introducing more flexibility in the school curriculum, university admissions policy and, possibly, the recruitment of trainee science teachers. The challenge at school is to encourage young people to gain core scientific skills in areas such as problem solving.

In my view, the issue is problem identification. When I taught science, I found that people often had difficulty in identifying the problem and that if they knew what the problem was, they would know how to solve it. People should know where to look for information, how to select what is most relevant, how to apply it, how to present it and pass it on to others, and how to explain things. Such transferable scientific skills, which are relevant to mathematics and all the other sciences, are probably more important than knowledge of specific disciplines. They are certainly much more important than the rote learning of facts that went on in science when I was a young person and a student.

I wonder whether the university entrance qualifications for sciences are a bit too prescriptive. When the Education Committee was examining the curriculum review, one contributor—I cannot remember who it was—asked why it was necessary for someone to have higher chemistry in order to study chemistry at university, given that it is possible to take a university degree in philosophy without having studied philosophy at school. Perhaps universities should look at the way in which they use entrance qualifications, which deters people from studying science.

I can provide members with an anecdotal example from my family. My daughter decided that she wanted to study ancient history at the University of St Andrews. She had not done any history since secondary 2, but she was allowed to study ancient history and has enjoyed the subject greatly. Her younger brother has discovered in fifth year that he has both a passion for and an ability in biology. However, as he gave up chemistry in second year, he will not be able to study biology, because he does not have standard grade chemistry. Such restrictions on studying sciences at university do not encourage people to get involved in science or provide them with the opportunity to do so. Universities need to consider the issue, just as schools need to examine the way in which they develop scientific skills.

Other members have raised the issue of progression and lifelong learning. In his speech, the minister mentioned the merging of the funding councils. I want briefly to refer to what is happening in my constituency, where the Crichton university campus has brought together on one site a number of higher education institutions. The local further education college will also be relocated to that site. It is a novel project in Scotland that has been extremely successful in bringing into higher education people who would not otherwise have become involved in it, such as women who want to return to the labour market. The project has given opportunities to people who are unable to leave the area to study. However, we need to progress it. There is a need for capital investment to improve the student experience and to bring in students from outside the area. Because of the way in which higher and further education is funded, all the higher education institutions that collaborate on the campus must fund the project from within their current funding envelope. That means that money invested in the Crichton campus must be taken away from the University of Glasgow and the University of Paisley, which is a problem in its development.

The project is extremely important locally and is providing training and skills in areas where we have regional shortages. At the conclusion of the first year of social work training, there was a major shortage of social workers in Dumfries and Galloway. Now we are training them in-house and are able to bring on local people as social workers. I hope that we will do the same in teaching, as we have a shortage of teachers. I have often nagged ministers and the funding council to examine ways in which such unique projects can be developed, because the Crichton campus works differently from university and further education institutions elsewhere in Scotland. It has made a valuable contribution to the local economy, which promises to be even more valuable in future. However, our funding structures must be flexible enough to cope with such a novel project.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party 10:23 am, 23rd March 2006

In December last year, the Executive published "Measuring Progress Towards a Smart, Successful Scotland: 2005". The document contains certain comparisons between Scotland and other regions of the UK—although Scotland is not a region. It helps to point out—although this is not the document's purpose—the unevenness of progress towards a knowledge economy that is being made across the United Kingdom. Inevitably, it misses out the unevenness of progress within Scotland. In the context of higher and further education and the Government motion that is before us today, I want first to query the level of investment in education in the south-west and south of Scotland. In particular, I want to highlight two issues, on which I hope the minister will be able to comment.

The first has been raised before and Elaine Murray has just raised it again, so the minister is clearly aware of it. I refer to the funding of the Crichton campus in Dumfries. The existence of a higher education centre in the south-west of Scotland has the potential to redress, to some extent, the gravitational pull out of the area that we have felt for decades as people leave to undertake higher education and do not come back to the south or south-west.

It is a major premise of Government policy that the very existence of higher and further education is a strong stimulus for the knowledge economy. However, the converse must also be true: if there is a lack of higher education, the potential for growth in the knowledge economy in any particular area is repressed.

To expand on Elaine Murray's point, the cost to any higher education institution that develops courses in the south-west away from its main campus—as the University of Paisley and the University of Glasgow have done—will always be higher than the cost to an institution of developing courses on its home campus. However, local members continue to get complaints from those universities that their per capita funding for students is precisely the same whether a student undertakes the course at the University of Glasgow at Gilmorehill or at the campus down in Dumfries.

The funding formula does not recognise the differences in cost. When we have complained on various occasions, we have had fine words from the minister—how very sympathetic he is—but all we get is buck-passing between the minister and the Scottish funding council. That is not good enough if we are serious about spreading the benefits of what growth there is in the knowledge economy throughout the whole of Scotland, not just in the central belt where the main higher education institutions find themselves.

My second point about the south of Scotland concerns the level of funding for further education. The merged funding council has proposals to target growth in further education in certain geographical areas to address existing issues of underprovision and low participation. The funding council recognises that further education supply throughout the south of Scotland is relatively low compared with the rest of Scotland. However, the indications so far are that, compared with areas that are in a similar situation, such as Lanarkshire or Dunbartonshire, the south of Scotland will not be authorised or, more important, funded to increase its further education provision in the planned and targeted growth review. Given the likely constraints on budgets, there is great suspicion that the current increase in growth will be the last for a considerable time.

The reason why the south of Scotland is being excluded appears to be based on participation in further education. There has been a substantial increase in numbers, but the colleges involved—the Barony College, Dumfries and Galloway College and Borders College—have pointed out to us that the increase in numbers is a totally false measurement because, unlike colleges in central Scotland, they specialise in short courses that, admittedly, local people have asked for. The point is that someone is counted as a participant whether they attend for a year or a week. That is surely not a valid measurement on which to base a decision as to whether there is adequate provision in a particular area.

I ask the minister to investigate the issue because there is no doubt that the south of Scotland lags behind the rest of the country in the knowledge economy. If education is a driver of that economy, which is the thesis of today's debate, we need to do something about the provision of further and higher education in the south of Scotland.

Although my philosophy is that education is a good thing in its own right, I recognise that when Government makes expenditure decisions, we have to see how any expansion in education affects not just the delivery of education, but the growth of the economy. Growing a knowledge economy cannot simply be about growing knowledge. As both the minister and Murdo Fraser said earlier, it is true that education in itself is an economic sector—a valuable one. However, we have to look at the broader picture and the Scottish economy as a whole.

Biosciences and life sciences are a major part of the knowledge economy in Scotland. Some time ago, the point was made strongly that there was a significant funding gap in what is termed second-round funding for developing companies in biosciences and similar sectors that were looking to expand and needed, for example, between £2 million and £5 million to grow.

Start-up funding is not such a problem, because there are excellent Government initiatives and business angels to help—if someone has a good idea, they can start their business. If they reach a more advanced stage of growth and get really big, surprisingly, it is not a problem for them to be given £10 million plus. It appears that the problem occurs when businesses are in that second stage, when they need between £2 million and £5 million to get them on to the next stage of growth. We need to encourage growth at that second stage if we are to develop a successful economy in Scotland. The problem is partly that many of the venture capitalists are based in the south-east of England.

The Government has spoken interminably about setting up a Scottish investment fund to address that problem—I think that the latest title for it is the co-investment fund. Industries are looking for about £100 million in that fund, although I do not know from where it will be sourced. If there has been an announcement about its establishment, I have missed it, so I presume that it has not been set up yet—I think that the minister is nodding in agreement. We have been talking about it for a long time, but I ask the minister to say when we are going to set it up. Will the current problems at Scottish Enterprise delay that announcement and the setting up of that vital fund?

The "Measuring Progress Towards A Smart Successful Scotland" document that I mentioned earlier contains many indicators, some of which are not particularly encouraging—this is after both the original and the refreshed versions of "A Smart Successful Scotland". R and D is a vital measure of innovation and will help us to be at the forefront of the areas that we need to be in. In relation to R and D in business, the document shows that in 2003, Scotland was towards the bottom of the third quartile; we need to triple the percentage of GDP that we spend on R and D to get into the top quartile. The document also shows that R and D business spend as a proportion of GDP increased by 11 per cent, compared with an average increase in other Organisation for Economic Co-operation and Development countries of 19 per cent. I do not have time to go through the rest of the document this morning, but if members look at it they will see a series of gloomy and dismal statistics just like those that I have mentioned.

People try to put the best gloss possible on the statistics, but a lot of the news in the document is not very encouraging. I ask the minister to say what will change the document's basic statistics, which do not give a good picture of the success of the Executive's strategy thus far.

An objective assessment of the document is that our position is not good enough and that our progress from that position is not good enough—certainly, not in comparison with other small countries. Nobody denies that investment in education is vital for the development of our economy—it is a necessary condition. It is not, however, a sufficient condition. The question for the minister and the Executive is whether they have sufficient tools in their kitbag to deliver a 21st century economy for Scotland.

Photo of Richard Baker Richard Baker Labour 10:33 am, 23rd March 2006

We always want our economy to do better—Alasdair Morgan is right about that—but to say that the predictions are gloomy is to overegg the pudding somewhat.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

They are the member's party's figures.

Photo of Richard Baker Richard Baker Labour

Alasdair Morgan referred to R and D in business. He cannot, however, hide the fact that our economy is growing and that we are delivering on whatever calls he has made for investment in higher and further education and the key sectors that will create a knowledge economy. We are not just speaking about it; we are doing it.

Today's debate comes at an opportune moment for those who are concerned that progress be made in the knowledge economy in Scotland that will guarantee our country future prosperity and high achievements.

In the past few days, the Executive has taken key actions to ensure that we can compete in the global economy as a nation of excellence and skills. Indeed, this morning, the Deputy First Minister told the chamber about the record funding for our further and higher education sector, which will ensure that our academic institutions can continue to punch above their weight and lead the world in key areas of developmental research. The First Minister has also led the way by building the global connections that will enable us to capitalise fully on our growing knowledge economy and by actively promoting the very best of what Scotland has to offer China and other rapidly growing economies. That work continues two great Scottish traditions: growing the economy through new ideas and embracing new countries and markets.

The scale of the challenge presented by the new major economies, particularly those in Asia, is clear. However, it is not only undesirable but impossible for Scotland to compete as a low-skilled, low-wage economy, and the evidence suggests that we will have to work even harder to maintain our edge in academic expertise and to ensure that we can exploit new concepts and technologies ahead of a growing number of competitors.

The Parliament has taken action to address the structure of and investment in our tertiary education sector. In the previous spending review, universities, colleges, students and trade unions called for increased investment in the sector and for greater co-operation and joint working between further and higher education institutions. In response, the Executive introduced legislation, which was passed last year, to merge the Scottish Higher Education Funding Council and the Scottish Further Education Funding Council. The single Scottish funding council is working towards better articulation and greater joint working between the two sectors, which will ensure that more people have more points of access into higher and further education. Moreover, our strategy for economic growth, which is increasingly based on high skills and expertise, will be designed not to exclude certain people, which might have happened in the past, but to include people from all backgrounds.

Of course, this is not just a question of structures; resources, too, are crucial. I take the point that the funding council needs to scrutinise how resources are targeted across the sector, to ensure that not only urban colleges but rural colleges are represented. More needs to be done to ensure that those colleges receive the necessary resources to provide education in their areas.

However, overall, there can be no doubt that the Executive has put its money where its mouth is. Indeed, I believe that we are already reaping the rewards of that investment. For example, the 22 per cent increase in further and higher education funding that was announced in the previous spending review represented a ground-breaking commitment to the sector. Of course, a significant amount of that money was directed at ensuring that academics in this country were not poached by institutions south of the border that were benefiting from top-up fee income, and I urge Scottish institutions to allocate a fair proportion of that generous funding settlement to ensure that our university and college staff are paid fairly for their vital jobs.

Colleges and universities in my region of north-east Scotland are confident about their future. For example, Aberdeen College and Robert Gordon University have recently announced very ambitious plans for their own development and, today, significant new funding has been announced for the University of Aberdeen and RGU.

In contrast to the Executive's ability to find vital additional funds, Opposition parties have too often come up with bizarre spending plans that would do nothing to benefit our knowledge economy. In line with their previous commitments to scrap Scottish Enterprise or starve it of funding, they have criticised the agency again this morning. It is interesting to note that the very members who raised questions about the funding crisis in Scottish Enterprise would themselves formulate policies that would create such crises. However, whatever debates are going on about the future structure of Scottish Enterprise, it is clear that we are making significant investment in the new research and technologies that could be hugely important to our future economic success. That is particularly evident with the ITIs, whose key feature is the projects in which they choose to invest.

Photo of Jim Mather Jim Mather Scottish National Party

Does the member think that, in this climate of support for Scottish Enterprise, the ITIs and the education sector, it is reasonable to ask them and the Executive to step up to a target such as increasing the number of working-age people in work in Scotland?

Photo of Richard Baker Richard Baker Labour

I do not think that such a target is unreasonable. In fact, I believe that we will accept the Scottish National Party's amendment, which calls for such measures, and I am sure that the Scottish Executive and Scottish Enterprise are continuing to work on how we measure such targets. It is not always easy to measure everything that we would like to measure, but that is not to say that we should not try to do so to the best of our ability. I am sure that the Executive and Scottish Enterprise are doing that.

The ITIs are delivering exciting new projects with academic and business prospects that we can capitalise on. Given that ITI Energy is in Aberdeen and ITI Life Sciences is in Dundee, such initiatives are crucial in the north-east.

Our economic future lies in flexible, highly skilled industries that will require a highly educated workforce. Scotland has the talent to meet the challenges of the global economy, and I know that our world-class colleges and universities are ready to nurture that talent if we give them the support that they need.

The Executive has shown its willingness to give that support. Its ambitious strategy to ensure that Scotland has a world-beating knowledge economy means that we can look forward to the significant challenges that the country faces, confident that Scotland and its people are well placed to succeed.

Photo of Iain Smith Iain Smith Liberal Democrat 10:40 am, 23rd March 2006

As the member for North East Fife, I am pleased to contribute to this debate. As we all know, the area, which is home to Scotland's oldest university, has been at the heart of Scotland's knowledge economy for 700 years. Elaine Murray talked about studying ancient history at university; I believe that modern history courses at St Andrews start with the 14 th century. I have no idea how far back its ancient history courses go.

The University of St Andrews is not just Scotland's oldest university, teaching the courses that it has traditionally taught; it is also at the cutting edge of modern scientific research, particularly in the biosciences. For example, it is collaborating with the private sector and various research institutions on several areas of innovation including renewables. The work on battery technology, in particular, is crucial. After all, because the wind does not always blow at the right time, energy from certain renewable sources must be stored to be used when needed.

The University of St Andrews is also heavily involved in the St Andrews world-class project. By finding ways of developing employment in the innovative and knowledge-based industries to the benefit of the St Andrews economy, this collaboration with Fife Council, Scottish Enterprise Fife, the tourism agencies and some major employers is attempting to develop the town as a world-class destination not just for playing golf but for living and working in.

However, such activity must be rolled out across Fife, particularly down to the east neuk, where the traditional fishing industry is in decline and where people face problems of isolation and lack of access to employment markets, and indeed beyond my constituency to Levenmouth, where the renewables industry has great potential. If that industry can use the university's research facilities and work with facilities that are available in places such as Methil, Scotland should be able to take the lead in the developing market in renewables technology.

Of course, just across the Tay bridge—on which, I might add, we still have to pay tolls—lie the University of Abertay Dundee, which is a world leader in information technology and computer gaming; the University of Dundee which, with its life sciences park, is another world leader; and the Scottish Crop Research Institute, which provides valuable work and resources for developing knowledge.

However, we should not forget about further education which, although a vital part of the knowledge economy, is far too often seen as the poor cousin of the education sector. For example, Elmwood College in my constituency was established more than 60 years ago as a small, rural FE college to provide support and training for the agricultural industry. Although it still plays that important role in the land-based industries, it has also developed innovative training approaches in other key sectors of the local economy, such as the hospitality industry. Indeed, it has become a world leader in providing courses in green-keeping, golf course management and related golf industry matters. That has led to collaborations with universities in China and the college is now promoting the first Scottish vocational qualifications to be provided in China and in Chinese. We need such innovation from our colleges to show that they are world leaders in many educational spheres, and our further education sector can play that role just as well as our universities can.

The further education sector is important in developing skills that our local businesses need. It is at the heart of lifelong learning; provides flexibility in learning; meets local needs; and is able to adapt quickly to changing circumstances. For example, if a new employer in an area needs trained people, or if an employer leaves an area and people need to be retrained, the further education sector is best placed to respond quickly. It is also good at meeting individual needs because it can provide flexible means of learning with full-time and part-time courses, distance learning and so on. Many further education colleges are pioneering distance learning and information technology-based learning modules.

Schools have a key role—Frank McAveety mentioned their role in early years education. However, more has to be done to close the widening gap between our best performers in schools, who are continuing to get better, and our lower performers, who are not improving at all. We could encourage schools to raise the aspirations of all pupils by improving the relevance of what is provided; we will have an opportunity to do that next week in the chamber when we debate the curriculum review.

We are already doing good things. Enterprise in education schemes are an important way of showing people that education is relevant to their future career possibilities. What young people do in school will help them later when they try to get jobs. Partnerships between schools and colleges are important, because vocational education is not just an easy option for the underperforming but a way of widening opportunities for all.

Photo of Jamie Stone Jamie Stone Liberal Democrat

Does the member agree that we still have a long way to go to persuade businesses, corporations and companies to engage in enterprise in education schemes?

Photo of Iain Smith Iain Smith Liberal Democrat

That is a valid point. Not only in Scotland but in the UK as a whole, business has failed to acknowledge its important role in developing education. I will shortly come on to discuss research and development—another area in which the UK has failed for generations to invest sufficiently to ensure that we maintain our lead.

Photo of Iain Smith Iain Smith Liberal Democrat

I did not intend to attack any individuals; I was talking about business in general. The UK has failed to invest in research and development, which is why many areas of our economy have fallen behind. Scotland suffers from that as much as any other part of the UK. I had intended to come on to that point later, but I have now dealt with it.

How can we encourage young people in schools to get involved? Last night, I attended a presentation in the garden lobby on the computer club for girls that is being piloted in schools in Fife and in many other areas. Madras college in my constituency is taking part. The girls had often been put off IT because they did not think that it would be of any use to them, or because they did not like the look of the geeky boys in the computer rooms. The computer club shows girls how relevant IT can be to their lives; it gets them involved and interested. Girls are now moving on from the club and are taking IT courses at standard and higher grade. We should consider similar exercises to get more people interested in science and engineering.

We are providing opportunities for growth by investing in increasing the skills of Scotland's workforce; by abolishing fees for students; by delivering genuine lifelong learning in community schools that benefit not only the pupils but everyone else; by creating all-age career services; and by supporting business creation and entrepreneurship. All that will help us to move forward.

There has been massive investment in further and higher education, with a 30 per cent rise in funding to 2008. We are meeting the skills needs. We have merged the funding councils to allow us to take a more strategic approach to meeting the future skills needs of Scotland. We have abolished fees and introduced bursaries for people on lower incomes, which has helped to encourage more Scots students to go to university. To encourage research and development, we are cutting business rates for businesses that undertake to do it. We have invested in transport. We are exceeding our targets for modern apprenticeships; more than 32,000 apprentices are in training in Scotland. We are creating more green jobs by supporting green industries such as the renewable energy and recycling industries. We have enterprise in education schemes in our schools. We are creating a tough sustainability record, putting a green thread through our economy. All those things are important in developing the knowledge economy.

Our biggest weakness is in research and development—that is the case not just in Scotland but throughout the UK. Scotland is in the bottom quartile of Organisation for Economic Co-operation and Development countries, close to our position in 1999. We are doing better than the UK as a whole, but we are still in the bottom quartile. That is not good enough and we need to do more—and I am not talking only about what the Scottish Executive can do but about what business can do.

Business has to be engaged. Partnerships are required with the Scottish Executive and the local enterprise companies in the Scottish Enterprise and Highlands and Islands Enterprise areas to encourage research and development. We cannot do it alone; if we are to grow the knowledge economy in Scotland, we need business to work with us. I encourage all Scottish businesses to work with the Scottish Executive on the positive things that we are doing for Scotland's economy. I encourage them to get involved in research and development.

Photo of Karen Gillon Karen Gillon Labour 10:50 am, 23rd March 2006

I welcome the opportunity to participate in the debate. I am sure that there is no one in the chamber who does not want us to grow the knowledge economy. To follow up on what Iain Smith said, I think that the debate is about more than what the Executive can do and what business can do. It is about what Scots can do.

I believe fundamentally in lifelong learning. I was brought up in a family that encouraged me to learn from a very early age. I understood that, through learning and education, people could move towards a better situation. I am in no doubt that, without that education and encouragement from my family, I would not have found myself in the chamber as an elected member of the Scottish Parliament. That education—which began in the home, which developed through school and which continued through further and higher education—shaped me as an individual.

We talk about poverty, which is a huge issue across Scotland. However, it is poverty of ambition that limits many young people. They fail to recognise their potential and fail to take the opportunities offered. When we meet young people, we must encourage them to realise their full potential.

I want to pick up on a couple of points that have been made in the debate. The first one is to do with the funding council. In my constituency, there are no colleges or higher education institutions, and—although I understand many of the points that Alasdair Morgan and Richard Baker made about the role of rural colleges—I say to the minister that we have to be cautious of change that could disadvantage areas such as Lanarkshire, rural constituencies such as Clydesdale, and communities such as Larkhall. In getting the package right, we have to ensure that change does not lead to unintended consequences. We have to think through all the issues. In particular, I am keen that we should develop the FE sector.

In my area, there are growing concerns that, in the months ahead, Scottish Enterprise will not be able to deliver as much as it should in rural constituencies such as Clydesdale. The minister is aware of those concerns and I hope that action is being taken to address the issues with Scottish Enterprise. I accept that it has to make changes, but it has to continue to invest in the economies of constituencies such as mine. Developing the big centres such as Edinburgh and Glasgow cannot be done at the expense of developing the smaller local economies. Again, it is about getting the balance right.

I want to focus on the role of community learning. Jim Mather asked a valid question: do we want to ensure that more people are in work in 10 years' time than are in work now? Yes, we do. Further and higher education will help in that, but many people in Scotland have no formal education or qualifications. They left school without basic adult literacy and numeracy skills. Our adult literacy service plays a crucial role in developing those skills and I welcome the Executive's investment. However, there are other important areas, and I think that the delivery of courses in local communities has slipped back. I encourage the minister to discuss with his colleagues in local government how we can continue to develop community-based learning. I worked in community education before I became an MSP. There were courses that took people, over a period of years, from the very basic adult literacy level to the level of gaining a place at university. Some of those courses have slipped back; we have to consider how we can continue to develop them.

Another area in which I welcome the Executive's investment but feel that we must do more is workplace learning. The Scottish Trades Union Congress and employers have a role in developing in-work training. I have been encouraging employers in my constituency to access funds and ensure that their employees have transferable skills—so that, if their industry runs into difficulties, those employees will have skills and qualifications that they can take to other jobs.

Vocational education and training are much maligned but much needed in our economy. It is important that skills that are developed through vocational training are transferable and that courses are based on providing sound theory and practical grounding in the chosen field. Scotland has an excellent history of vocational training—it is not a new development but has been going on since 1925. Our higher national qualifications are well respected and are a mainstay for business in meeting its workforce development needs. The skills that the courses provide are central to the Executive's vision of a smart, successful Scotland. I welcome the Executive's commitment to, and additional investment in, the higher national qualifications, but we need to build on that. Progress has been made. New principles have been agreed with the Scottish Qualifications Authority for higher national certificates and diplomas to ensure that HN group awards continue to meet the current and future needs of end users. That is an important development.

There is much to be commended in the Executive's actions. However, I am glad that we have accepted the SNP amendment, because it gives us a good base on which to develop. We cannot rest on our laurels and think that everything is great. We need targets to ensure that the changes that we make pay dividends; that we are investing in the right areas; that the investment is securing growth in all sectors of our economy; and that it benefits all, from the youngest to the oldest, from those who leave school with no qualifications to those who have many qualifications. Only by including all Scotland's population in our learning revolution will we truly build the knowledge economy that we seek. I welcome the minister's commitment to do so.

Photo of Jamie Stone Jamie Stone Liberal Democrat 10:57 am, 23rd March 2006

The debate has been most interesting. I will touch on members' comments and then make some points of my own. I followed Jim Mather's speech with interest, although, as I pointed out in an intervention, we differ over the statistics on Finland. Nevertheless, he made a worthy contribution. Frank McAveety quipped that something must be very good news when a Conservative tells us that it is good news—that was well put. Murdo Fraser made the initial contention that not enough investment goes into research and development, which members of various parties have echoed. Iain Smith pointed out that many of the solutions may lie in the hands of business, but I will say more of that anon.

Frank McAveety made a most amusing and thought-provoking speech in which he rightly mentioned the link, or perhaps non-link, between the state and individuals and argued that it is important for individuals to adapt to new economic opportunities. He rightly highlighted the good news, such as the investment in the early years programme and child care partnerships, which should lead to a culture of aspiration. As the minister pointed out, the facts are straightforward: the Scottish Executive's overall expenditure on science has increased markedly since 2001—it has gone up by 25 per cent in real terms and is at £408 million this year. Other sectors receive similar levels of funding.

Shiona Baird understandably made the green point about global warming. That leads me neatly on to one of my hobby horses, which is the potential for hydrogen power. Iain Smith mentioned research at the University of St Andrews on the storage of hydrogen power in batteries. As I have said before to Shiona Baird and her colleagues, hydrogen power is the future. No less a figure than Arnold Schwarzenegger has introduced a hydrogen highway in California. We should learn from that.

Colin Fox spoke at length about job losses, which is understandable given his political perspective. He also commented amusingly on the influence of the old school tie in higher education. I was wheeched out of state education and fired away to private school for a couple of years, but my old school tie did me no good whatever at any stage of my existence. I got into the University of St Andrews because of the exams that I passed at school but, as many colleagues know, I could not get a job at all after university—my first paid employment was as a lavatory cleaner.

Photo of Jamie Stone Jamie Stone Liberal Democrat

Indeed. I give 10 points for one of the best interventions of the morning.

Alasdair Morgan made a good speech in which he rightly raised issues from his area, although Richard Baker responded resoundingly, saying that the Executive is delivering.

To turn again to Iain Smith, I was glad that he referred to my alma mater, the University of St Andrews, which is an example of a higher education institution that engages with industry. I mentioned the work on batteries, but it carries out other research. However, that cannot be said for all higher education institutions although, as we have heard, the University of Abertay Dundee does worthy work on information technology. Although universities often approach graduates who are successful businessmen to ask for money or to ask them to sit on some committee or other, such people are rarely asked to go back to the university to lecture first, second or third-year students about enterprise, aspiration and what drives them. I make no apologies for saying that that is a missed opportunity and that our academics have an unfortunate tendency to stay in their ivory towers. They are beginning to reach out, but it could happen more.

My three children went to state schools in the Highlands. My eldest daughter has just graduated from university and my other two children are at university. Their education has been light years beyond the education that I received. The teaching of all subjects is much better today than it was in my time. I remember being bored rigid in certain subjects, but there has been a huge improvement. However, as ministers concede, we still need to improve language teaching. For example, if we are to engage with the Chinese economy, which Nicol Stephen mentioned, we must get more young people to learn Mandarin. That is a challenge for the Scottish Executive and for all of us.

It would be remiss of me not to mention the opportunities that arise in my constituency from the decommissioning work at Dounreay. When the Enterprise and Culture Committee came to Thurso in my constituency—for which I thank Alex Neil and other colleagues—we heard a lot about that. Huge sums of money will be spent at Dounreay to take apart the several nuclear reactors there, carefully and step by step. That involves cutting-edge science, so we are learning as we go. We would do well to accumulate the knowledge that we need for the post-Dounreay, post-nuclear scenario in Caithness and the north of Scotland by providing related higher and further education through the UHI Millennium Institute. For example, I am thinking of the creation of departments of robotics or of restoration of the environment. We could take young people from throughout Scotland, not just Caithness, teach them the skills and then fire them out into the world.

I do not see why Caithness and other areas should not become state-of-the-art centres that provide the best skills. That is important for the future not only of our country but of the world. I urge the Executive to keep an eye on the situation and to provide investment. I have talked about hydrogen power, but there is huge potential for that and for renewable energy developments in the Pentland firth. However, we need to accumulate new skills and knowledge on those matters. Why can we not steal a march on the world on decommissioning and on hydrogen and renewable energy?

It is good that the Executive has taken on board the SNP amendment, which shows a consensual approach. The debate has been good because we all agree that it is vital to push the knowledge economy. Although knowledge is of course about the economy and the wealth of our nation, let us not forget that new knowledge enriches people's lives, even if they are unemployed or retired or if they cannot work through incapacity. Extra knowledge gives people something that they will have until the end of their days. People can gain interests that will not leave them for as long as they are on the planet.

Photo of Derek Brownlee Derek Brownlee Conservative 11:05 am, 23rd March 2006

Given the historically high regard in which Scottish education and the Scottish university sector is held internationally, it is ironic that we still feel that the knowledge economy in Scotland is not where we would like it to be. I think that that is the consensus across all parties. It is easy to talk about the knowledge economy, and a lot of good words have been spoken this morning, but it is much more difficult to translate that into action.

I had the dubious pleasure of reading a previous debate on the subject, in February 2000, when the Deputy First Minister—as he is now—told Parliament that he was determined to deliver

"our vision ... for the future."—[Official Report, 9 February 2000; Vol 4, c 894.]

What he did not mention today was what measurable progress the Executive has made on that front over the past six years as a direct result of actions it has taken. The SNP amendment is helpful because it mentions measurement.

The Executive motion talks about

"record investment in further and higher education", and I do not dispute the minister's

"53 per cent in real terms", but while the motion talks about the significance of further and higher education

"in Scotland's current and future economic growth", the real issue is surely what the investment is delivering: not its significance, but its impact. A criticism of a lot of what the Executive does is that we should tie the spending more closely to the outputs. It is helpful that the Executive has indicated its support for Jim Mather's amendment.

Karen Gillon made the interesting and valid point that a knowledge economy is not all about the Government. A knowledge economy comes through culture as much as through Government action. If anyone believes that it can be delivered solely through the actions of an Executive, they are in for a great disappointment. Karen Gillon talked about the important cultural aspects, about family and about a hunger for learning. The Executive could not flick a switch and deliver that, even if it had the desire to.

We have to take a long, hard look at where Scotland is in relation not just to the rest of the UK but to the rest of the world. In a study on regional competitiveness in the UK, prepared for the Department of Trade and Industry, the authors talked about the number of people coming through the Scottish education system and matching them to the needs of employers in Scotland. A key worry in the report is that

"the low employment growth performance ... suggests that increasing the graduate population may simply lead to more underemployment ... a significant increase in the brain drain and more pressure on public sector job generation."

What we can take from that is that it is all well and good to talk about more graduates and about putting more resources into colleges and universities, but we need to ensure that there is a match between what business needs and what is being put out. I take Jamie Stone's point—Alasdair Morgan made a similar point—about the importance of education for its own sake. We should not view education as purely for economic growth, but that is a fundamental part of it.

One of the dangers of talking about the knowledge economy is that people may not be entirely clear what it means. We tend to talk about it as if it is a good thing, without acknowledging the dangers. A knowledge economy means that it is easy for people to acquire skills and to compete internationally, but it also means that there is no reason why our competitors in the far east, who are competing effectively with us in manufacturing terms, could not be doing exactly the same in the knowledge industries, certainly within our lifetimes. We must somehow translate the skills that we give people into transferable skills so that they can maintain the pace as the global economy changes. We should also try to come up with innovative ways of making the new knowledge businesses "sticky" to the UK. That is difficult to achieve.

As he probably does on most occasions when he speaks, Jim Mather mentioned the lack of tax powers in Scotland. He probably accepts that we will not get them overnight—if at all—and he might agree that part of the problem is not so much tax powers as tax policy. Even if we accepted that the Executive is doing everything right—which I do not—all the good work it does could be fatally undermined by damaging tax policy.

Jim Mather mentioned the ranking of Aberdeen University. What will be the impact on the university and on the economy of Aberdeen of the increases in taxation on the oil sector that were announced by the Chancellor of the Exchequer in December and again yesterday? We have to think about the knowledge economy on a UK basis. If the Executive cannot influence the chancellor, good work may be undermined.

Another little snippet in the detail of yesterday's budget is quite important. The Economic and Fiscal Strategy Report tells us that

"Productivity growth ... is central to long-term economic performance."

None of us disagrees with that. It goes on:

"In the increasingly knowledge-driven global economy, science, innovation and creativity are important drivers of productivity growth".

Again, we can probably all sign up to that. But what happens then? Table 1.2—"Budget 2006 policy decisions"—outlines three measures under the heading "MEETING THE PRODUCTIVITY CHALLENGE". Gordon Brown proposes that we meet the productivity challenge by increasing taxation on business by £235 million over the next three years. It is all well and good hearing fine words from Executive ministers up here, but if all the work is being undone by Gordon Brown down south, it makes the job a lot more difficult.

In a statement last September, the First Minister told us that the Executive

"will make Scotland the most attractive place in the UK in which to invest in research and development",—[Official Report, 6 September 2005; c 18783.]

which is one of the key determinants of improved innovation. We probably all accept that that is a laudable aim. The First Minister went on to pledge to

"consider carefully a specific reduction in business rates for research and development-intensive companies."—[Official Report, 6 September 2005; c 18783.]

Iain Smith referred to that as having happened, but we are still waiting. In fact, we are still waiting for the consultation on the research and development proposals that were announced and hastily abandoned a few weeks ago. In the intervening period, between the First Minister announcing what he was going to do on business rates for research and development and today's debate, Gordon Brown has been busily raising taxes on a range of companies throughout the UK and undermining anything the Executive seeks to do.

An interesting report prepared by the Local Futures Group considered the 50 most productive areas in the UK, of which only four were outside the south-east of England. Surely Edinburgh, one of the ones that we would be most interested in here, is in that group not because of what the Executive is doing but because of what the financial services sector has done over many years. That is one of the key issues. How much of Scotland's productivity growth and how much of the delivery of the knowledge economy has been driven by what the Executive has done? Precious little as far as the Conservatives can see. Until the Executive puts in place some concrete measures, how will we know?

Elaine Murray made some valid observations about the structure of Government support for science and the need for joined-up government—another buzz word that describes something that often does not materialise. She made some valid points about the teaching of science in schools and the skills that are necessary for that to be expanded. In relation to the local points that Elaine Murray made about the Crichton campus, the funding problems that Alasdair Morgan touched on certainly need to be addressed. The Crichton campus has huge potential to deliver for south-west Scotland and it would be a great shame if it was undermined or if it did not reach its full potential as a result of funding decisions that were not properly taken into account in considerations.

Alasdair Morgan mentioned the other colleges in the south of Scotland. I hope that the minister will address the points he made. Some members, such as Frank McAveety and Karen Gillon, have talked about basic skills. It is important that there is an increase in basic numeracy and literacy. Another document that was slipped out by the Treasury yesterday suggested that if we increase the literacy score of the country by 1 per cent, we will increase labour productivity by 2.5 per cent and GDP per head by 1.5 per cent. Given the current ranking of Scotland in those measures, that is important.

We hear a lot of rhetoric and a lot of good intentions from the Executive. I do not for one moment doubt the validity of the intentions. My key concern is that a knowledge economy is not really about words; it has to be about results and direct consequences. We must be able to see that the measures the Executive takes lead to progress in delivering a knowledge economy.

Seven years into the Executive's life, we are entitled to ask why, if the Deputy First Minister says it is good to measure performance, it has not been doing that. It is not rocket science, to mix metaphors. Why has it taken seven years for the Executive to concede the point, far less come up with a range of assessment measures? Until and unless the Executive becomes much more focused on getting results for the money it spends, we can have all the well-meaning debates we like, but we will not necessarily get where we want to go.

Photo of Murray Tosh Murray Tosh Conservative

I call Alex Neil to close for the Scottish National Party. Mr Neil, I can give you about 12 minutes.

Photo of Alex Neil Alex Neil Scottish National Party 11:15 am, 23rd March 2006

You are extremely generous, Presiding Officer, and your generosity is much appreciated. I intend to take every available minute.

In the past couple of weeks, there has been a great deal of nostalgia about Harold Wilson, the former Labour Prime Minister who resigned about 30 years ago. In one of his best-remembered speeches, which was made in 1963 in Scarborough, he talked about the white heat of the technological revolution; this morning, 40 years later, we are talking about the white heat of the knowledge revolution that has taken over the globe, and our role in exploiting that revolution.

The knowledge economy is not confined to the new industries, such as life sciences; it also applies to our traditional industries, such as shipbuilding and textiles. If we are to maintain a presence on the international textiles market, we will do so only by applying the latest technology—particularly information technology—and knowledge to the design and production of textiles.

The same is true in shipbuilding. The way in which we go about shipbuilding has changed fundamentally in the past decade or so and the industry has had to accommodate itself to the knowledge economy. There are many other examples, and we should put on record the fact that our discussion does not refer exclusively to the six clusters that are the target for growth but applies to all sectors of the economy, whether in manufacturing or the service sector.

There are many positive developments in Scotland today. When the Enterprise and Culture Committee went up to the University of Dundee, from which I graduated a few years ago, it saw the excellent work that is being done there in life sciences. Only last week, the university announced that it is leading the way in the identification of the gene that causes asthma and eczema, in the hope that we will find a cure for those diseases. If members go to almost any of our 13 universities in Scotland—such as the petroleum department at Heriot-Watt University, the biology department at the University of St Andrews or the universities in Aberdeen or Glasgow—they will find a lot to be proud of and to make them confident in the universities' future.

The college sector is similar. It was perhaps a bit neglected until recently, but it provides something like 40 per cent of the higher education in Scotland as well as further education. Members should go and see the work that is being done in biotechnology in Falkirk College, for example.

Photo of Sylvia Jackson Sylvia Jackson Labour

Does Alex Neil remember that it has now changed its name to Forth Valley College?

Photo of Alex Neil Alex Neil Scottish National Party

I spoke at the launch of Forth Valley College, so I accept the reprimand entirely.

Forth Valley College has a lot to be proud of in its work in biotechnology, and I could quote many examples of the work that colleges are doing the length and breadth of Scotland.

In a while, I will come to some of the downsides that we need to address in the college sector, but I register the fact that the SNP's mindset is not one of moaning, groaning and whining; we are proud of what is positive in Scotland, but we must also be realistic about the challenges that we face. I turn to those challenges now.

Let us consider the Scottish economy's performance in relation to other OECD countries. There are four areas in which we are in the top quartile—right up in the top of the class. They are: the proportion of employers that are exporting; the employment rate; the proportion of those in employment who are undertaking training; and the percentage of businesses that are trading online.

However, when we go down to the second quartile, we see that we lag behind on GDP per capita, relative productivity levels in industry, cost and coverage of broadband and graduates as a percentage of the population. We are in only the third quartile for business research and development, net immigration and the proportion of 16 to 19-year-olds who are not in education, employment or training.

I am sure that we all agree that, if we are to realise our ambitions for the Scottish economy, we must maintain our position in the top quartile and get the indicators in the second and third quartiles up to the top quartile. That is what I want to talk about this morning.

I stand by every word the Enterprise and Culture Committee printed in its report on business growth, which was published last week. That report was typically and predictably criticised by the doom merchants in The Herald and the Fraser of Allander institute—[Interruption.]—I remind members that there is an Executive majority on the committee and that the report was unanimous. In yesterday's edition of The Herald, Brian Ashcroft—Mr Wendy Alexander—quoted an obscure researcher whose name is William Easterly—a name that no doubt drops from the lips of every member. He tried to say that there is no necessary correlation between levels of investment and growth. That is balderdash. Anyone who knows anything about business knows that, to grow a business, one needs to invest in it. It is impossible to grow a business without investing in it.

The latest OECD figures on growth and investment are a mixed bag for the UK and Scotland. They show that the average growth in real gross private non-residential fixed capital formation—which is a way of saying investment less housing—throughout the OECD was 6 per cent. The UK level was half that—3.1 per cent—which compares with 13.9 per cent in Norway, 40.6 per cent in Iceland, 12.9 per cent in Belgium and 10 per cent in Australia. Those figures are from 2005. Unlike Scotland, the OECD has up-to-date figures; our latest figures are for 2000, which is Scotland's history, not its future.

If we consider the latest figures for public investment as a percentage of GDP, which are from 2004, the first thing we notice about the British figure is that the Tories have a better record on public investment than the Labour Government. The figures for 1990 to 1997 show that public investment was 2.8 per cent of GDP in the UK, but under Labour, from 1998 to 2004, it has fallen to 1.47 per cent.

Photo of Allan Wilson Allan Wilson Labour

Does the member support the Conservatives' years of public investment in unemployment, as opposed to investing in our economy and in employment throughout Scotland?

Photo of Alex Neil Alex Neil Scottish National Party

The reality is that, without Scotland's oil, the Government would not have been investing very much at all. The Government is still depending this year on £10 billion of revenue from Scotland's oil, yet ministers are boasting that the Chancellor of the Exchequer is giving us £87 million more over the next two years. That is hardly petty cash in relation to the oil revenue.

I turn to the public investment figures for the UK compared with those for other countries. I will cite just two examples. The level of investment in the public sector in independent, oil-producing Norway, which is the same size as Scotland in population, was 3 per cent of GDP, which is twice the level in the UK. The figure was even higher in Ireland, at 3.5 per cent. In New Zealand, it was 3.66 per cent.

Secondly, there are the figures for overall business investment as a percentage of GDP. They are even more depressing. I quote the very latest figures, for last year. In Iceland, business investment was 19 per cent of GDP. In the UK, it was a miserable 9.4 per cent. In independent, oil-producing, same-size-as-Scotland Norway, it was 12.6 per cent—about a quarter above the UK level. Those who say that we do not have challenges to face are talking nonsense.

I had many other points to make, but my final one is this. Under "A Smart, Successful Scotland", for Scottish Enterprise to succeed, it must be an organisation that performs. Despite my warnings to the First Minister two months ago, when it was denied that there was a financial crisis, many people will face the prospect of redundancy over the next week or two because of the financial mismanagement at Scottish Enterprise. I hope that the minister will make clear in his summing-up speech that we will get a detailed, reliable statement on the true finances of Scottish Enterprise, if not today then next week—certainly before the Easter recess.

Photo of Murray Tosh Murray Tosh Conservative

I call Allan Wilson to wind up the debate. You have 12 minutes.

Photo of Allan Wilson Allan Wilson Labour 11:28 am, 23rd March 2006

Thank you very much, Presiding Officer. I will try to use that time fruitfully. This has been an intelligent and expansive debate—in large part. I will take Alex Neil's last point first. The Deputy First Minister has already answered the question in his opening speech. We remain committed to keeping Parliament informed of progress on these matters.

Photo of Alex Neil Alex Neil Scottish National Party

I am sorry to interrupt the minister so early in his speech, but can I ask—

Photo of Allan Wilson Allan Wilson Labour

I would like to continue. The Deputy First Minister

Photo of Allan Wilson Allan Wilson Labour

The Deputy First Minister made specific reference on that point, and I am not—

Photo of Alex Neil Alex Neil Scottish National Party

He didnae tell us. Are we getting a statement?

Photo of Allan Wilson Allan Wilson Labour

I am not going to add to what the Deputy First Minister said.

A number of specific issues have been raised. Alasdair Morgan, Karen Gillon, Elaine Murray and others referred to their particular areas of the country and to how we increase levels of participation in higher and further education where they are low. I propose to write to the members concerned with our plans with respect to those cases.

I wish to reflect on some of the issues that have been raised in the debate in the context of the conference of European ministers of education, which I attended in Vienna only last week. I will share my observations on a presentation by Professor Georg Winckler, president of the European University Association and rector of the University of Vienna.

Professor Winckler covered the contribution that universities make to European competitiveness. The topic runs parallel to today's debate, and I discussed it with him. He began by reminding us that modern thinking on economic growth suggests that, among other factors, growth derives from quality-improving innovations triggered by investment in human capital. In simple terms, that means that one of the keys to economic growth is investment in knowledge generation and knowledge transfer.

As we have heard today, that is exactly what we are doing here in Scotland, particularly—although not exclusively—through our significant investment in our universities and colleges. Investment in further and higher education has increased by more than 50 per cent since devolution—by a not inconsiderable sum of money. I respectfully put it to SNP members that that is what the powers of the Parliament are all about. It is not about powers per se, however; it is about how we use powers.

In this case, our annual investment will exceed £1.6 billion by 2007-08. That level of investment will allow our colleges and universities to maintain and enhance their competitiveness. We have been able to invest that money in Scotland's tertiary education system because of the Labour Government's astute management and stewardship of the Scottish economy.

Photo of Allan Wilson Allan Wilson Labour

Historically, our institutions have challenged society, but it is now important that society challenges our institutions, to ensure that they retain their relevance to contemporary society. We need to make demands of our institutions. Sometimes, they can be conflicting demands. For example, we must ask our institutions to be frontrunners in excellence and innovation while at the same time ensuring that the broadest range of people can benefit from what they have to offer in skill development and knowledge transfer.

One of the great debates of the day is access and excellence. Those on the right would have us believe that we cannot have both excellence and broad access. The left and centre-left would say, I argue, that we can have both. We can have excellence in our higher and further education institutions and we can broaden access. I believe that we have the right range of universities and colleges here in Scotland to respond successfully to such conflicting demands. I also believe that we are providing the correct level of investment to allow them to perform those critical functions.

On the level of investment, Alex Neil reamed off, as he always does, a stream of statistics. I do not wish to get into that debate, although I should say that Scotland actually excels in levels of research and development investment. Scotland invests a higher share of GDP in higher education research and development than do the USA, Japan, Germany, France, the rest of the UK, the rest of the European Union or the rest of the OECD.

We recognise the significant contribution that our colleges and universities make to the economy through their provision of highly skilled graduates for the Scottish labour market; through their leading-edge research, to which a number of members have referred, which ensures knowledge transfer into Scottish businesses; and through their work to attract students and staff from all over the world.

I will make some brief remarks about China, which has been mentioned a couple of times. When we think about the knowledge economy, it is impossible not to think about China. When China began to open up to the world in the 1990s, we all expected it to change, but I do not think that any of us expected it to change as quickly as it has. The investment that is being made in China is attracting Chinese scholars back home in high numbers. Professor Winckler told me that 81 per cent of the members of the Chinese Academy of Sciences and about 50 per cent of the Chinese Academy of Engineering are returned overseas scholars. China is on course to meet its aim of matching the US and Japan with respect to innovations by 2020. That is but one indication of the scale of development in China's tertiary education sector.

We must respond—we cannot be static in the face of such competition. We need to break down some of the barriers that surround our institutions. In particular, we need to use developments such as the Scottish credit and qualifications framework to encourage mobility between institutions at various entry points. We need our institutions to provide the appropriate skills and competencies for the labour market. That can be achieved only through partnership between institutions, employers, the Government and its agencies. I am particularly hopeful that the Scottish funding council's new skills committee will offer us all informed and expert opinion on that.

Colin Fox and Frank McAveety referred to access. Colin Fox argued that the expansion of higher education has disproportionately benefited people from more advantaged backgrounds. There is some truth in that, but the situation would not be helped by the regressive funding policies that some Opposition parties propose.

More young people from working-class backgrounds are going into higher education than ever before. We are working hard with institutions to encourage greater participation in education by those from more disadvantaged backgrounds. There is no better example of that than John Wheatley College, to which Frank McAveety referred and which is in his constituency. That college is working with the local authority and others to improve the level of participation by people from the most disadvantaged backgrounds.

Jim Mather was right to say that measurement of our interaction with China and, more generally, measurement of success in our approach to the knowledge economy are necessary. The issue is challenging but it is correct to make it a priority. We will engage with colleagues, principally in the funding council but also elsewhere, to ensure that we make progress. I set great store by making the right levels of investment, but it is crucial to measure the effectiveness of investment in securing our wider social policy and wider economic objectives.

We need to fund our institutions at appropriate levels and make funding more effective in education and research. As I have said, the Executive has an excellent record on investment in our colleges and universities, but our evaluation of effectiveness and value for money needs to be more robust and we will continue to work with the funding council to achieve that. That is why I will support the SNP's amendment to the Executive's motion.

We need to protect institutional autonomy while maintaining accountability for public investment. Tensions over that may sometimes arise, but we can achieve a sensible balance between autonomy and accountability.

We need to acknowledge and reward excellence. If we want our institutions to be front-runners in innovation and knowledge transfer, we must ensure that the people in our institutions feel valued.

We must build up an attractive image of our institutions in the world. Our institutions provide us with a good story to tell about Scotland—a story that we take to the world. It is critical for Scotland that our institutions continue to build on their good reputations and that we work hard with them to promote their work.

The Executive is making significant investments in the development of our knowledge economy. We are taking action to create an infrastructure for the 21st century by investing in the knowledge and skills of Scotland's people. We are developing strong links with the rest of the world, which will allow us to capitalise on global opportunities.

We are maintaining Scotland's ability to provide world-class further and higher education, which will ensure that Scotland remains a place of innovative thinking and world-class research. Through our investment in colleges and universities, we will ensure that they continue to act as agents for Scotland's future social, cultural and economic growth.

Photo of Alex Neil Alex Neil Scottish National Party

On a point of order, Presiding Officer. Both ministers have referred in their speeches to keeping the Parliament informed about the financial crisis at Scottish Enterprise. Can we have clarification—and, I hope, confirmation—that we will hear a full ministerial statement on the financial crisis at Scottish Enterprise today or next week, before the Easter recess?

Photo of George Reid George Reid None

That is a political point, which is now on the record. The Executive will have heard what you said.

Photo of John Swinney John Swinney Scottish National Party

Further to that point of order, Presiding Officer. Mr Neil asked about obtaining a statement from ministers on an issue that is the subject of great public speculation. Yesterday, I made a point of order about the fact that a third-party organisation—NFU Scotland—was informed of a change in Government policy, whereas Parliament was not told about it, although the Minister for Environment and Rural Development announced the original policy to Parliament just 14 days ago.

Can you suggest any mechanism to force the Government to make statements to Parliament about significant issues that affect our constituents? Many of us have been frustrated in our efforts to obtain answers from ministers who are not prepared to give Parliament the answers it deserves.

Photo of George Reid George Reid None

A mechanism exists, Mr Swinney—it is called the Parliamentary Bureau. I have no doubt that, if he so wishes, your representative on the bureau will raise the matter at next Tuesday's meeting.