Worker Ownership

– in the Scottish Parliament on 28th September 2017.

Alert me about debates like this

Photo of Christine Grahame Christine Grahame Scottish National Party

The next item of business is a members’ business debate on motion S5M-07165, in the name of Richard Leonard, on the importance of worker ownership to the Scottish economy. The debate will be concluded without any question being put. Those members who wish to speak in the debate should press their request-to-speak buttons.

Motion debated,

That the Parliament recognises the contribution made to the Scottish economy by worker-owned companies such as Clansman Dynamics and Novograf in Lanarkshire; notes their expansion since the change in ownership; welcomes the commitment by the previous owners to the transfer to worker control and ownership, and notes calls for other business owners to consider an employee ownership and control model in their succession planning.

Photo of Richard Leonard Richard Leonard Labour

Today, we face a state of affairs in which we are witnessing a growing centralisation and a growing concentration—I would argue that it is a growing overconcentration—in the ownership of Scotland’s economy.

Too much power rests in too few hands, and, increasingly, that power rests in boardrooms that are thousands of miles away, with more than a third of Scotland’s economic and industrial base now overseas owned. There is nothing intrinsically wrong with foreign direct investment, which can bring innovation, investment and employment. However, all too often, it is the result of mergers and acquisitions, including, in recent years, the acquisition of public utilities that we, the people, used to own—a transfer of ownership, rather than the source of new investment.

If our economy becomes—as it is increasingly becoming—a branch-plant economy, the result will be that we are more vulnerable to international shocks. The truth is that economic ownership matters, because with economic ownership comes economic power. If we are to achieve, as I believe we must achieve, a redistribution of wealth and power to the many from the few, decisive action will be required to challenge and change the ownership structure of our economy. That is why it is time that we put in place a Scottish investment bank that is worthy of the name, working as a proactive agent of economic change, investing patient capital and taking strategic public interest shares in private companies.

It is also time that we put in place different frameworks and ownership structures to build up business resilience to takeovers and to build in greater democracy and accountability in our economic system. It has long been my view that, in order to do that, it is time to promote direct employee and worker ownership in the Scottish economy.

I am therefore delighted to bring the debate to Parliament and to have secured some cross-party support for it, so that together, in this Parliament, we can all recognise the contribution that is made by employee-owned companies to the Scottish economy in the present and consider the even greater contribution that worker-owned businesses could make with a bit more support from the Parliament in the future.

The motion that we are debating was prompted by my recent visit to two employee-owned firms in East Kilbride: Clansman Dynamics and Novograf. One is now well-established as a worker-owned business and one is just starting out on that journey. In both cases, the catalyst for the transfer of ownership was the far-sightedness of the existing owners. In each case, the owners were looking for a succession plan that did not entail selling up the business only to see the assets stripped, the order book stolen and the local jobs lost for ever. To their great credit, the owners believed that they had a moral obligation to the working women and men who, with them, had built those businesses up.

The question for Parliament is this: what can we do to put that radical idea into action more widely? Can we make that moral obligation on some a legal obligation on all? How can we move the idea from the fringes to the mainstream of our economy?

What can we learn from international experience? In Italy, the Marcora law, introduced in 1985, gives workers whose business faces closure a statutory right to buy the company. Alongside that legal right is funding from the state to match a contribution from the workers. In France, the social and solidarity economy law, passed in 2014, gives legal recognition and incentives to workers to buy the business that they work in when it is to be sold off. In the Basque country of Spain, Mondragon has been a shining beacon of co-operative ownership for six decades. More than 83,000 workers are employed in over 250 worker-owned enterprises, where surpluses are reinvested in the business rather than redistributed to absentee shareholders, with the result that jobs have been retained during the current economic slump.

I say this: in Scotland, which was home to the Fenwick weavers, and where Robert Owen wrote “A New View of Society” and established New Lanark, why should we not set ourselves the ideal—the goal—of becoming the Mondragon of the north? Let us have a vision of Scotland as a northern European beacon of co-operation. If we can have a community right to buy land, why can we not have a workers’ right to buy business? Why should those who create the wealth not have a right to own the wealth that they create? Support for that idea, whether as a statutory right of first refusal for workers when an enterprise is put up for sale or facing closure, or simply its wider promotion on a voluntary basis, will demand a better resourced and more powerful Co-operative Development Scotland, with access to investment and technical support and with statutory underpinning from this Parliament.

There are sound industrial and economic reasons to promote worker ownership, boost employment and forge a sustainable alternative to footloose and speculative capital ownership. There are underlying political and social reasons, too. A century ago, GDH Cole declared that if democracy

“is good in the State and local government, it is good ... in industry also.”

I believe that we need industrial and economic as well as political democracy. We can and we must build a future in Scotland that is based on equality and greater common ownership. It is a future that working people across this country, who all too often encounter drudgery, alienation and exploitation at work, will strive for and reach out for, because it is a message of hope and a message of change, and real hope and real change are what I believe the people of Scotland expect this Parliament to deliver.

Photo of Maree Todd Maree Todd Scottish National Party

I thank Richard Leonard, because I am delighted to have the opportunity to explain why we have embraced the employee-ownership model in the Highlands and Islands and to talk about some of the thriving businesses that we have as a result, such as Aquascot, Hebridean Jewellery, Highland Home Carers, Shetland Vets and the

West Highland Free Press

. The northern beacon that Richard Leonard spoke about already exists—we just all need to look north.

In the Highlands and Islands, we have two of the biggest employee-owned businesses in Scotland. Aquascot—the largest by turnover—is a sustainable seafood business with a turnover of £45 million and around 180 employees. Highland Home Carers—the largest by number of employees—is the largest provider of care at home in the Highland area and employs more than 500 staff.

Employee ownership has a specific role to play in the fragile economy of the Highlands and Islands. Before going down the employee-ownership route with Aquascot, Dennis Overton looked at the history of entrepreneurial start-ups in the Highlands.

Going back to 1960, it was found that only a few businesses had achieved a turnover of more than £20 million at 1990 values, that most founders exited by way of a trade sale, and that the majority of the businesses had disappeared within five years, usually through consolidation with operations in the south. Because of that, Highlands and Islands Enterprise is currently putting significant effort into raising awareness of employee ownership, which is why I am particularly grateful to have the opportunity to speak today.

The model is about successful businesses. Independent research suggests that a combination of shared ownership and employee participation delivers superior business performance. Productivity in the United Kingdom workforce as a whole might be flat, but when a business becomes employee owned, productivity is boosted by 5 to 10 per cent and is sustained at the higher level—it is not just a temporary boost. Research shows that those businesses grow well, even in tough times, and, at the moment, the employee-owned sector contributes £30 billion in gross domestic product to the UK economy annually.

There are a lot of misconceptions about the business model, so I will take the opportunity to bust a few myths. Employee ownership is not necessarily about saving failing companies; it is about successful business. Although a common reason for a business becoming employee owned is retirement, some folk choose the employee-ownership model long before retirement because of the benefits to the business and staff.

The transaction does not need to be complex. As members can imagine, everyone tends to be on the same side so there is less conflict and a generally more co-operative transition. Further, it is not too expensive for employees to afford. Shares that are bought by a trust on behalf of employees can be funded by contributions from the company itself or by a loan that is paid for by the company. The vendor does not need to sell at a lower price, so there is no reason why a carefully considered employee buy-out cannot deliver a fair price that is in line with the company’s market value.

One reason why we like the model so much in the Highlands and Islands is that it keeps profits and jobs in the local economy. Companies can protect the location and the ethos of their business following succession, which is what happened with Highland Home Carers. The founder did not want the company to be swallowed up by one of the national providers or its core values to be diluted and its high care standards to be compromised.

With this business model, employees share in the profits and bonuses, which increases spending locally and boosts the local economy. I love the egalitarian aspect of the model, in which every shareholder from factory floor worker to managing director gets the same tax-free bonus.

I have mentioned Aquascot a couple of times and I would love the minister to visit and see for himself the difference that employee ownership makes. This month, Aquascot won the Highlands and Islands—

The Deputy Presiding Officer:

I am sorry, but you must conclude, and that is the place to stop, because the minister was nodding and accepting your invitation.

Photo of Maree Todd Maree Todd Scottish National Party

E mployee ownership is good for business, it is good for the local people who work in the business and it is good for the local economy. I have no doubt that, in the future, Scotland will be inclusive, fair and prosperous, and that that business model will help.

The Deputy Presiding Officer:

I have been more than generous in giving you that little bit of time at the end.

I know that Jackie Baillie has to be away sharp to get to something.

Photo of Jackie Baillie Jackie Baillie Labour

I do—thank you very much, Presiding Officer. I will be as brief as I can.

I congratulate Richard Leonard on securing the debate. Diversity in the economy is a good thing and it is very good for economic growth. I will illustrate that with evidence because, if all that we do in Parliament is to consider the evidence, here it is.

The UK employee-ownership index compares the share price performance of companies that are more than 10 per cent owned by their employees against the performance of FTSE companies. Since 1992, companies listed on the employee-ownership index have outperformed FTSE companies by an average of 10 per cent a year. In cash terms, an investment of £100 in an employee-owned company in 2003 would have resulted in a net worth of £754 by 2014, but the same investment in a FTSE company would have resulted in a mere £280. If members needed any more evidence, there it is, because it matters financially for our economy to invest in employee ownership.

That difference is also borne out in growth measures. In employee-owned companies, sales typically grew by 11.1 per cent, which was in contrast to the rest of the business sector, for which sales growth was 0.6 per cent. In employee-owned companies, productivity has increased by about 4.5 per cent year on year, when other businesses have struggled.

Although employee-owned businesses, as Maree Todd rightly pointed out, contribute £30 billion to GDP each year, there is much more potential. That is not because the model is about failing businesses—it is not—or even because it recycles things into fragile economies. Members just need to look at the well-known businesses on our high streets that are employee owned, such as John Lewis and Waitrose. In case the minister needs any further convincing, I point out that 80 per cent of employee owners would recommend their organisation as a place to work.

Employee-owned businesses provide positive models that contribute to a growing economy. As Richard Leonard’s motion points out, employee-owned businesses have grown. They are also an attractive option for business succession. They build resilience in our economy and, when ownership is transferred to employees, it is guaranteed that the new owners will take a genuine interest in the business’s long-term future.

I am proud that a Labour Scottish Government set up Co-operative Development Scotland. I commend my Co-operative Party colleagues of the time, Cathy Jamieson and Johann Lamont—to name but two—for their efforts in that regard. Co-operative Development Scotland has done a lot to encourage employee ownership, but its profile is low; it sits within Scottish Enterprise and I do not think that SE entirely gets it—it does not appear to be a priority.

Five of the key growth sectors on which Scottish Enterprise focuses have not grown in the past four or five years. We do not want to put all our eggs in one basket, but surely we need to encourage more employee ownership. Employee-owned businesses are growing, they are productive and they contribute positively to the economy.

I ask the minister what additional actions he will take to provide Co-operative Development Scotland with the resources that it requires. I invite him to consider the proposals in Scottish Labour’s industrial strategy to place Co-operative Development Scotland on a statutory footing and provide it with investment tools to grow employee-owned companies. I apologise for not being able to hear his response to that challenge, but I look forward to reading it in the

Official Report

.

Photo of Dean Lockhart Dean Lockhart Conservative

I congratulate Richard Leonard on bringing the motion and debate to the chamber. It is a valuable opportunity to debate the benefits that are afforded by employee-owned businesses in Scotland.

It might not come as a surprise that my views on wider economic issues diverge slightly from Mr Leonard’s, but I am happy to support his motion on employee-owned businesses. The increasing importance of this business model has been highlighted by the Employee Ownership Association. There are 115 such businesses in Scotland and, collectively, they generate more than £1 billion in turnover and employ a total of 7,000 staff, so they are clearly an important part of the business community.

The importance of employee-owned businesses is increasing. There is more interest in the business model from the public and private sectors, given the increased demand for a more progressive form of ownership, as well as ageing populations and baby-boomer owners looking to prepare for retirement. For example, research that was commissioned by Scottish Enterprise suggests that there are 16,000 businesses in Scotland whose owners are looking to exit within five years. It is good that employee ownership is one of the business models that can be considered. There is clearly great potential for greater uptake of it.

Reflecting that fact, as Jackie Baillie said, within Scottish Enterprise is the service that its Co-operative Development Scotland arm runs, working with Highlands and Islands Enterprise. That service provides expert advice on how companies can transition. Business owners can go in and talk to the team for one day to three days to get an understanding of how a business can transition to the employee-owned model. The Conservative members encourage any business that is considering that model to get in touch with that team at an early stage so that the necessary preparations can be made.

Research that was commissioned by Scottish Enterprise has also identified the point that, in many areas, the performance of employee-owned businesses can be superior to that of businesses in other models. Jackie Baillie mentioned the comparison with FTSE companies, but there is also strong performance in job creation, exports and productivity.

It is worth while stepping back and considering why employee-owned businesses perform better than some of their peers. Research has indicated that the improved performance is driven by a number of factors, including increased employee motivation, which Richard Leonard mentioned. Employees have a direct stake in the business’s success and feel that they are contributing to that.

Higher productivity levels are driven by employees feeling empowered to alter and improve processes and systems on a daily basis to make the business more efficient. The concept of workplace productivity is becoming a central policy driver across all business models. This particular model shows, on a relatively small scale, that workers looking at a process day in, day out are the ones with the best ideas for how to improve it.

Employee-owned businesses also have higher levels of interaction with the local community. They tend to have more engagement with local communities and with a wider range of stakeholders.

Any business model that can achieve any or all of those improvements has to be welcomed.

John Lewis has been mentioned as a good example. Recently, I was lucky enough to visit the Waitrose store in Stirling to see how this model can make a difference to employees and their level of engagement.

One of the challenges that these types of businesses will face is finding the capital investment required up front to transition to the employee ownership model. We need to raise awareness among businesses and professional advisers that transitioning to this model is a feasible and viable option not just for succession planning but in other circumstances.

It is important to highlight the benefits of employee-owned businesses and to have a discussion about some of the attributes and successes that have been generated, such as employee motivation and participation, higher levels of productivity and engagement with the local community and stakeholders. I think that there is consensus across the chamber about those benefits, not just in the context of employee-owned businesses but in the economy as a whole. I am pleased to support Richard Leonard’s motion.

Photo of Andy Wightman Andy Wightman Green

I thank Richard Leonard for bringing this motion to the chamber. I was particularly pleased to hear him talk about the importance of who owns the capital in our economy. That topic has not had sufficient attention in recent years, although it used to be a bigger topic of conversation.

I also welcome the fact that Richard Leonard noted that much foreign direct investment is not actually investment. It is merely transfer payments that come into this country—in fact, they do not even come into this country; they go into some other country and then go somewhere else. Much of our industry and economy, such as whisky, is now foreign owned; there is very little left. Most of the shares in the Edrington Group were handed over to the Robertson Trust, so if one wants to buy socially benign and beneficial whisky, one should buy Famous Grouse.

I was a bit disappointed that Richard Leonard’s motion uses the words “recognises”, “notes” and “welcomes”. The substance of his intention in bringing this debate to the chamber was to promote the notion that there should be rights for labour to acquire capital. Those rights have existed in the past, they have some precedent in this Parliament and they should be embedded in law. As a number of members have noted, by any metric, employee-owned businesses are more likely to be successful than others. The staff are more engaged and productive, as Dean Lockhart pointed out, the business is more resilient and the business has better links to the community and so on.

It is encouraging to know that employee-owned businesses are growing at a rate of nearly 10 per cent across the UK. Employee-owned businesses grew their sales by 11.1 per cent through the recession, compared with others, which grew by 0.6 per cent.

In my constituency in Edinburgh, shortly after being elected, I was pleased to be able to congratulate Black Light Ltd, a sound and vision company based in Granton, on making the move to employee ownership. It did so at the instigation of the previous owner. As Richard Leonard pointed out, previous owners are often critical because they have some sense that they want the business that they have spent a lot of time and money building up to have a sustainable future. The most sustainable future in many cases is employee ownership. In the past year, Black Light’s turnover has increased by 10 per cent.

Richard Leonard might be aware that employee-owned capital is central to Green thinking. In our policy passed by members at our conference on trade unions and workers’ rights, we state that we are

“committed to democracy, whereby undertakings shall be managed co-operatively through the involvement of those who work in them and the communities they serve.”

Further, we support

“the mutual sector as a key component of a Green economy.”

Just two years ago, I was pleased to second a motion that

“We will legislate to grant private sector employees the right to buy the company for which they work, creating a cooperative. This right will be dependent on the company meeting a range of criteria which will be subject to public consultation, and which may include the size of the workforce, ethical standards such as tax compliance and pay ratios,” and so on.

As Richard Leonard well knows, many of those aspects are reserved to Westminster but we already have in the frame—through Scottish legislation passed by this Parliament—the community right to buy. We have had instances of avoidance—last year, for example, a major estate in Scotland, the Tulchan estate, avoided the provisions of the community right to buy by selling the shares in the company rather than the land itself. I think that that issue will be repeated in a sale that is coming up in Aberdeenshire very soon, so we need to revisit that legislation to stop those avoidance tactics.

I am very happy—as all Greens are—to work with Richard Leonard in whatever capacity in the Parliament to advance these notions.

Photo of Elaine Smith Elaine Smith Labour

I thank my colleague Richard Leonard for bringing this important issue to the chamber. Richard has spent much of his working life fighting for workers’ rights and he has consistently raised workers’ issues in the chamber since his election last year. Indeed, his first members’ business debate was on the Caterpillar workers’ occupation.

The number of employee-owned businesses in Scotland has trebled over the past five years and it is one of the fastest growing forms of ownership in our country. It is time that we paid it more attention.

Last year, I lodged a motion celebrating the work of Specialised Castings of Denny, in my region of Central Scotland. It is Scotland’s only employee-owned foundry and it is one of only two remaining iron foundries in the country. By the owner allowing employees to buy out that company in a succession plan, that key historic industry has been kept in the area and it has been allowed to thrive. If that option had not been available, not only would we have seen unemployment but we would have been left having to look abroad for such specialist items.

Such employee ownership is a model for other businesses across the region and the country as a whole and, as the motion notes, other companies in the central region such as Novograf and Clansman Dynamics are flourishing in a similar way. Not only is employee ownership radical and forward thinking, it is sensible too—who better to advise on how to run a business or an organisation than the people who work in it every single day?

For many people, our economy is just not working. When people are put out of work, often because of an employer relocating or closing down a business, it can result in poverty, family breakdown, mental ill health or indeed homelessness, as the Local Government and Communities Committee has been hearing in our on-going inquiry into homelessness.

That happens to many workers without them ever having the opportunity to do anything to stop it and that just cannot be right. Richard Leonard mentioned the Marcora law, which enables workers to buy out an enterprise when it is up for sale and threatened with closure. There are, of course, other European examples.

Richard Leonard has personally committed to pursuing legislation to ensure that those who create the wealth have a right to own the wealth that they create and I fully support that. It makes sense to keep jobs and profits in Scotland as part of a wider industrial strategy, with workers’ ownership at its core. That could have dramatically changed the situation for the Upper Clyde Shipbuilders in 1971, the workers of Lee Jeans in 1981, or the Caterpillar workers in 1987.

Rather than a sit-in, a work-in or a strike, workers could meet owners face to face and decide their own future rather than having it decided for them by corporate greed. We should design our society with the workers who toil every single day right at the forefront. That would include profits being fed back into companies and the economy to secure jobs and build expertise. What better way to improve productivity and job security than to give people a financial investment in their own labour?

As a socialist, I firmly believe in the principle on which Labour’s 1918 constitution was founded, which is also known as clause IV. I will just remind members of it:

“To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution, and exchange, and the best obtainable system of popular administration and control of each industry or service.”

Indeed, Scottish Labour’s campaign for socialism—I was the convener of the campaign for more than a decade until last year, and it is now convened by my colleague Neil Findlay, who is sitting next to me—was set up to retain that very clause and to campaign for socialist policies to build the sound, planned economy that is needed to ensure equality and social justice.

We need to let workers, business owners and politicians, especially colleagues in here, know that employee ownership is not a fantasy or a utopia; it is an everyday reality that can transform our economy in new and progressive ways.

Let us promote co-operatives, foster worker buyouts and teach young people about the possibilities of employee control so that we can produce wealth, not just for a tiny handful at the top but for everyone—in other words, for the many, not the few.

Photo of John Mason John Mason Scottish National Party

I thank Richard Leonard for raising this important subject. I am more than happy to take part in the debate.

When discussing the economy in Scotland, we have tended to focus on starting and growing businesses, but we have spent less time on who owns them and whether it is a good or bad thing for a business to be sold. We tend to accept that the norm is for one or two people to start a business and grow it to some extent. If it can be sold to a multinational for a sizeable sum, that is considered to be a huge success that will certainly get headlines on the back page, if not the front, of

The Herald

.

However, there are downsides to such a model. Often, only a few people make a big profit from the sale, while control and profits go abroad and we are left with a local branch that is always vulnerable when a downturn comes.

As Richard Leonard described, there are alternatives. The best-known examples are John Lewis and Waitrose, although they are a bit bigger than your average business.

I thank Co-operatives UK and others for briefings for today’s debate. Co-operatives UK makes the point that

“while giving employees a beneficial ownership stake in business is a very good thing, the positive impacts of doing so are maximised when the workforce also has a significant degree of collective influence in the running of their business as well”.

I have seen various statistics on worker and employee ownership and some have been quoted today. The key ones seem to be that there are between 51 and 86 employee-owned businesses in Scotland, or 115 worker-owned businesses, which involve about 6,800 to 7,000 workers and a turnover that is between £925 million and £1 billion. Research suggests that worker-owned companies outperform their competitors in employment, sales and productivity. Their staff turnover and absenteeism rates are often less than half the figures in their sector, and they are considered to be more trustworthy—58 per cent would trust an employee-owned business, compared with 33 per cent for others.

As Co-operatives UK says, worker ownership can mean flatter pay structures and profit sharing, reduced inequalities, and opportunities to develop skills, boost life chances and improve social mobility. However, it has to be accepted that those things are not automatic, and I was disappointed to see that, in the John Lewis constitution, the pay of the highest-paid partner can still be 75 times the average basic pay of non-management partners. I accept that 75 times higher might be better than some companies, but it is still not great.

Photo of Andy Wightman Andy Wightman Green

I have also studied the little green book of John Lewis, and that company’s governance structure does not give the partners—the workers—as much control over their labour and the future of the company as some people have said. I am sure that Mr Mason agrees that governance is just as important as ownership.

Photo of John Mason John Mason Scottish National Party

That is very much the direction that I take. I am enthusiastic about the idea, but we have to watch both sides.

I will give a more positive example, which is from my constituency. Members might well have heard of Page\Park Architects, which is owned by its 40 or so employees—it is not a huge business. It is based near Glasgow Green and has been involved in projects for Scottish Opera, the Scottish national portrait gallery, Maggie’s centre in Inverness and the national museum of rural life. Some of us from the Economy, Jobs and Fair Work Committee visited Page\Park as part of our gender pay gap study, which we are to debate next week, and I was impressed by what we heard there.

Page\Park has what I understand to be a system of indirect ownership. Everyone knows everyone else’s salary, and salaries are structured in a fairly flat system. In good years, if there is a bonus, that is transparent and is shared in proportion to salary, although, if there was to be a bad year, everyone could lose in the same proportion.

I realise that my time is up. I thank Richard Leonard for bringing the subject for debate today.

The Deputy Presiding Officer:

I was going to give you a little extra time to make up for the intervention, but there you go.

Photo of Jamie Halcro Johnston Jamie Halcro Johnston Conservative

First, I congratulate Richard Leonard on securing this debate on an issue that is clearly close to his heart. Employee ownership is a concept that can attract support from all sides of the chamber.

Noel Skelton, the former Unionist MP for Perth, is best remembered for his advocacy of a property-owning democracy in relation to the understanding that advances in home ownership would give individuals a greater stake in society. However, his central focus was not housing, despite later covering that topic as a Scottish Office minister, but the status of the worker and his or her stake in the enterprise in which they are employed.

As far back as Adam Smith, there has been a long tradition of recognising the benefits that a more direct involvement for the many in a nation’s economic life will bring. Research suggests that workforce wellbeing can be improved by that approach, with wide benefits to the business, reductions in absenteeism, reduced staff turnover and attrition, faster growth and greater resilience. Evidence shows that employee ownership can be a potential driver of productivity, which fits in with the aspirations of both Scotland’s Governments. Above all, we should see the benefits of employee ownership in terms of people having greater direction in their lives.

There are different models of employee ownership; all sorts of enterprises large and small and established and innovative start-ups have successfully adopted one or other of those models. It is welcome that members have the opportunity to consider such companies’ successes.

In my region of the Highlands and Islands, a number of employee-owned enterprises operate, as Maree Todd mentioned. For example, Shetland Vets—previously Westside Vets—used employee ownership to ensure its independence and local focus; Aquascot, a salmon processor in Easter Ross, was part of a management buyout that evolved into an employee-owned trust; Highland Home Carers in Inverness is one of Scotland’s largest employee-owned companies; and the well-known

West Highland Free Press continues to operate as part of an employee-led publishing co-operative. Other alternative models of ownership are familiar in my region, because the expansion of community co-operatives has shown that people can maintain essential services in rural areas by harnessing local enthusiasm and local knowledge for the benefit of all.

I am pleased that this month’s programme for government recognised investigating the scope to expand support for employee ownership as an aspiration. Having voices from across the political parties speaking up on such issues is a positive step in making progress.

In practical terms, other steps have been taken. We know of existing tax relief that incentivises certain employee-ownership schemes, and the number of businesses that have taken up such models has increased across the UK. The UK Government has also undertaken work following its commissioning of the Nuttall review of employee ownership in 2012, including developing a range of information for workers and guidance for businesses that are considering moving towards employee ownership.

Last year, the Economy, Jobs and Fair Work Committee, which I now sit on, had an exchange of correspondence with the Deputy First Minister on employee ownership.

Photo of Andy Wightman Andy Wightman Green

I note that the Conservatives had a proposal in their manifesto in May to put workers on company boards and to allow workers to hold annual votes on executive pay. Does Mr Halcro Johnston support that and will he encourage his colleagues in Westminster to bring forward those proposals in legislative form?

Photo of Jamie Halcro Johnston Jamie Halcro Johnston Conservative

I support that.

In his response to the Economy, Jobs and Fair Work Committee, Mr Swinney indicated that business gateway provides consistent support and advice across Scotland on alternative business models and that the enterprise agencies are apprised of the Scottish Government’s objective of widening the models of business ownership, with Co-operative Development Scotland taking the lead. One proposal was to enhance the Scottish Enterprise community development unit’s remit, particularly in relation to rural areas, given the comparative success of Highlands and Islands Enterprise in supporting local-led business. It would be welcome if the minister updated members on any changes to the signposting of alternative business ownership in Scottish Enterprise in the ordinary course of its work.

The frameworks are clearly in place to enable employee ownership. In many cases, the challenge, as my colleague Dean Lockhart mentioned, is simply making businesses aware of that option and giving potential employee-owned start-ups the support that they need to make their business a success. Again, I thank Richard Leonard for bringing the debate to the chamber.

The Deputy Presiding Officer:

I call Paul Wheelhouse to close for the Government. Minister—you have seven minutes or thereabouts, please.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I welcome the debate, which has included intelligent speeches from across the chamber on the merits of employee ownership.

During our time in Government, the SNP has very much supported co-operative business models, as can be seen in, for example, the number of employee-owned businesses that are headquartered in Scotland having tripled in the past five years as a result of Co-operative Development Scotland’s work, which I am sure we all take pleasure in seeing.

Worker ownership is an important subject that is worthy of debate, and Richard Leonard’s motion is one that I am pleased to support.

Scotland has a proud and rich history of co-operation. As Richard Leonard and other members have said, it forms an important part of our enterprise heritage. I will respond to members’ positive contributions to the debate shortly, as well as outlining the commitment that the Government has made, and continues to make, to supporting employee ownership.

Way back in the middle of the huge social and economic changes that took place in the 18th century, the Fenwick Weavers Society, which Richard Leonard referred to, was formed when a group of workers decided that their best hope for prosperity lay in working together in a properly constituted society. They recognised the benefits—not just for themselves, but for their families and the wider community—of taking control of the working environment. Ever since, people around the world have looked to those same principles, and co-operation is now a worldwide movement. We might be a small part of that worldwide movement, but Scotland can and should be proud to stake its claim as the birthplace of doing business in a better way—a way that puts people first. I think that we all share that view.

Richard Leonard made some important points about foreign direct investment. I welcomed his clarification, so I will not labour the point, but we have opportunities to work with foreign direct investors on the business pledge and other initiatives, through which they can adopt the same approach in areas including workplace innovation, valuing the workforce and gaining productivity improvements—as would be delivered through employee ownership. I think that we are in agreement on that, so I will not force the issue.

Productivity is one of the best defences for companies from being attacked in a market sense. We warmly support engagement in workforce innovation. I am sure that members will be aware that there have been great successes in companies. For example, at Michelin in Dundee, where the workforce took a grip of its future, the company developed a highly successful business model that involved working with employees to innovate and to drive productivity improvements.

Maree Todd made excellent points about sustaining productivity improvements of 5 per cent to 10 per cent per annum. She also highlighted that measures such as succession planning can be implemented well before the retirement of the owners of a business, which was an important point to make.

Retention of profit in the local community also has a dramatic impact in areas like the Highlands and Islands by sustaining general prosperity in the local economy.

Jackie Baillie made some sensible and important points about the employee-ownership index. It was fascinating and extremely enlightening to hear about the difference in performance between that index and the FTSE index. She also asked me about Co-operative Development Scotland. I appreciate that she is no longer in the chamber, but I would like to address her points. Co-operative Development Scotland is now a core part of Scottish Enterprise, which means that employee ownership is now a core part of Scottish Enterprise’s succession-planning approach. That addresses a point that was made by Jamie Halcro Johnston, whom I welcome to Parliament. This is the first time that I have had the opportunity to address him directly. That development also ensures that account managers have direct access to Co-operative Development Scotland’s resources. I hope that that answers Jackie Baillie’s questions.

The Scottish Government recognises the importance of employee-owned enterprises, and the contribution that they make to the growth of our economy through providing jobs and wealth across Scotland and contributing strongly to inclusive growth. Although the number of employee-owned companies in Scotland is not high—at the last count, it stood at 86—we should, as a number of members have, recognise that some are substantial employers. Collectively, they have a combined turnover of just over £925 million and employ 6,800 staff, so the sector is important. Crucially—I stress this—it still has the potential to expand much further in the future. Richard Leonard and other colleagues made that point, and it is highlighted in the motion, which gives the examples of Clansman Dynamics and Novograf, which are important companies in Lanarkshire. Other examples have been given.

Employee-owned businesses are also unlike other businesses in their social purpose, their values, their governance and their commitment to their local communities. They are collaborative vehicles that play an important role in creating sustainable and inclusive growth. They enable employees, businesses and communities to work together to fulfil shared interests which, in turn, unlocks creativity and capacity in the workforce, creates a greater feeling of being valued in the workplace and leads to productivity improvements.

There is growing evidence that the use of employee-ownership models increases productivity, innovation and growth, while achieving wider societal benefits in local communities. I emphasise that such models make a positive contribution to inclusive growth, which is increasingly placing them in the spotlight from an economic development policy perspective. The Scottish Government has been, and remains, committed to encouraging and supporting those who choose the employee-ownership business model to drive forward their businesses and help to deliver our vision of inclusive growth—by which we mean growth that combines increased prosperity with greater equality, creating opportunities for all and distributing the dividends of increased prosperity fairly in society.

Our support is ably delivered through Co-operative Development Scotland, the Scottish Government’s delivery agent, which, working through Scottish Enterprise and Highlands and Islands Enterprise, supports company growth through employee-ownership business models. Co-operative Development Scotland’s ambition is to achieve a tenfold increase in employee ownership in Scotland over the coming 10 years. It has already delivered employee ownership at, for example, Scott & Fyfe and Stewart-Buchanan Gauges, which between them employ more than 240 people, which gives an indication of the scale of the success.

A generation of businesses faces a succession problem. As the baby-boomer generation reaches retirement age, many business owners are considering what will happen to their companies when they choose to step back. Starting the process early creates more opportunities, as Maree Todd said. The Scottish Enterprise succession expert support service provides business owners with advice on the various options, including employee ownership, which we think has real advantages.

For the record, when a company gets into difficulty and the partnership action for continuing employment framework is engaged, I often ask whether employee ownership or a management buyout might be a solution. Such models are not always appropriate, as members will accept, but we continue at least to raise them as options to consider in such situations, to see whether they can be taken forward.

There is no doubt that the co-operative movement and Co-operative Development Scotland are doing a fantastic job—I welcome the endorsement of that work that came from members from across the chamber. This is an area in which Scotland is particularly strong and is getting stronger, but I accept that we could do even more and commit to keeping an eye on how we can do so.

More than 180 businesses accessed support over the past five years, and there is a strong pipeline of businesses that are seriously considering the employee-ownership option. As a result of CDS’s promotional activity, many more businesses are aware of the model.

As members know, in recent months the Scottish Government completed phase 2 of the enterprise and skills review, through which we aimed to improve the customer journey for all businesses, including employee-owned businesses, by ensuring that delivery of business support is clear and, in practical terms, joined up, by hiding the wiring behind the scenes so that partners who collaborate to support individual businesses can do so successfully and there is a no-wrong-door approach to businesses who approach us for support.

Work is under way to put the business user at the centre of our collaborative focus on business support, which will involve a move towards a more rounded team approach to companies and their growth ambitions, with scope for specialist support where that is appropriate. Such an approach is very much aligned with our can-do framework—

The Deputy Presiding Officer:

I have been waving my pen at you in vain. Will you wind up, minister?

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

Indeed I will, Presiding Officer. I will conclude quickly.

A number of approaches have been described today that I very much welcome. I welcome the quality of the speeches from across the chamber; the debate has been a good example of how Parliament can operate collaboratively—indeed, I should say “co-operatively”, in the context of the debate. We very much support the emphasis in Richard Leonard’s motion on engagement with employee-owned companies, and I will happily work with any member who wants to achieve success in their area.

13:33 Meeting suspended.

14:30 On resuming—