Supporting Innovation

– in the Scottish Parliament on 8th October 2019.

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Photo of Linda Fabiani Linda Fabiani Scottish National Party

I remind members that there is absolutely no spare time this afternoon, so I will have to be quite strict on timings for the next item of business, which is a debate on motion S5M-19287, in the name of Ivan McKee, on supporting innovation.

I call Ivan McKee to speak to and move the motion. You have up to eight minutes, minister.

Photo of Ivan McKee Ivan McKee Scottish National Party

Business innovation has never been so important. The ever-increasing pace of technological change, the climate emergency and Brexit all create a highly challenging economic environment. However, where there is challenge there is also opportunity. It is my job to help businesses to weather political and economic turmoil and to support them in taking advantage of the opportunities that times of change bring.

Our First Minister has set an ambition for Scotland to be the designer, developer and manufacturer of the innovations that will shape the future—not just a consumer of them. That ambition sits at the heart of our most recent programme for government, which seeks to

“reinforce Scotland’s place as a dynamic, open, innovative economy.”

The time is right for business to step up to that challenge.

My aspirations are clear. I want to see inclusive economic growth that would benefit everyone in society—growth generated by ambitious, innovative businesses creating high-value jobs that make the best use of Scotland’s well-qualified workforce, and supported by an effective ecosystem that is easy for business to understand and access. I also want to be able to track spend, progress and outcomes to ensure that we are investing in polices that make a clear difference.

In 2017, my predecessor Paul Wheelhouse launched the Scottish Government’s innovation action plan, which clearly articulated our vision for a Scotland in which innovation is an intrinsic part of our culture, our society and our economy. It set out how we would use innovation to drive inclusive economic growth and match the innovation levels of the best-performing Organisation for Economic Co-operation and Development countries.

The plan also set an ambitious target—

Photo of Dean Lockhart Dean Lockhart Conservative

What progress has there been on the target to be in the first quartile of OECD countries for productivity and innovation?

Photo of Ivan McKee Ivan McKee Scottish National Party

As I was about to say, our innovation action plan set an ambitious target to double our business research and development investment to £1.75 billion over the decade to 2025. To answer Dean Lockhart’s question, we are on track to do so. The latest figures show a 14 per cent annual increase in business R and D in Scotland, which compares with the United Kingdom average of only 3 per cent, with Scottish R and D jobs having doubled to hit an all-time high of more than 13,000.

Photo of Daniel Johnson Daniel Johnson Labour

I recognise the figures that the minister has mentioned, but does he recognise that the Scottish Government’s R and D spend is 20 per cent lower than that of the UK Government? What is the Scottish Government doing to address that?

Photo of Ivan McKee Ivan McKee Scottish National Party

I am just about to go through a long list of things that we are doing. As I have just said, that gap is closing: we have increased business R and D spend by 14 per cent in the past year, compared with the UK Government’s increase of 3 per cent. If Daniel Johnson cares to get his calculator out, he will realise that that represents a significant closing of the gap within a one-year period. That trend is continuing as we move towards our target of doubling R and D business expenditure.

The innovation action plan identifies four priorities: to encourage more business innovation; to use public sector needs and spend to catalyse innovation; to support innovation across sectors and places; and to make best use of college and university research, knowledge and talent.

In the two years since the plan’s launch, a great deal has been achieved. We have boosted our support for business R and D grants by £45 million, which is equivalent to 70 per cent. We have invested £48 million in the national manufacturing institute Scotland and created the £14 million advanced manufacturing challenge fund. Along with Innovate UK and private sector partners, we have invested £15 million to establish the medicines manufacturing innovation centre. We have launched the can do innovation challenge fund, which leverages private sector innovation to solve public sector challenges. We have increased our support for CivTech, which is the world's first cross public sector tech accelerator. We have invested £1 million in the college innovation fund to help businesses to connect better with college facilities and expertise. We have supported the £1 million cancer innovation challenge programme. We have increased our investment in Interface, which has introduced almost 3,000 businesses to academic partners. We have launched an open innovation marketplace in which public and private sector innovation challenges can be posted and solved. We have invested in supporting industry academic links through programmes such as the knowledge transfer partnerships scheme. We have continued to fund our network of innovation centres by up to £60 million over the next five years. We have piloted new models of procurement through the launch of two innovation partnerships.

Further, recognising the need to continually optimise the innovation ecosystem, we have created the Enterprise and Skills Strategic Board to increase collaboration between the enterprise agencies. We have also initiated in-depth reviews of public sector support for innovation; mapped out our innovation system and infrastructure; started work on the creation of a single entry point for business support; and set out plans for streamlining R and D support.

We are also investing in the future. We have committed £2 billion of capital to the Scottish national investment bank to support mission-oriented investments, starting with our transition to net zero emissions. We have launched a new major export drive, backed by £20 million, to internationalise our innovation efforts. We are putting innovation at the heart of our city region deals, with support for projects including the imaging centre of excellence in Glasgow and the Data-Driven Innovation programme in Edinburgh and south-east Scotland. We are also supporting entrepreneurs through the Unlocking Ambition Challenge, the Converge Challenge, Scale Up Scotland and Scottish EDGE.

All of that is having an impact. Members can witness the range of new products and services that our businesses are taking to market, from Clyde Space, which produces and ships from its headquarters in Glasgow more cube satellites than anyone else in the world, to Caithness-based Dunnet Bay Distillers, which can now post its rock rose gin through its customers’ letterboxes thanks to its new recyclable gin pouches.

As we all know, the contribution that our universities make to global research and innovation continues to be nothing short of remarkable. We sit near the top of the OECD table for higher education R and D spend. We have four of the world’s top 200 universities—

Photo of Ivan McKee Ivan McKee Scottish National Party

I do not have enough time.

Only last week, the University of St Andrews was named by

The Times as the UK university of the year.

All of that underpins our success in attracting investment from outside Scotland. We benefit enormously from participation in the European Union’s horizon 2020 programme, winning almost €650 million for Scottish universities, research institutes and businesses. We are winning more funding from UK Research and Innovation and Innovate UK for major joint projects between academia and industry such as the ORCA Hub at Heriot-Watt University, which is the world’s largest centre for research into offshore robotics technology, and the Glasgow-based Industrial Centre for Artificial Intelligence Research in Digital Diagnostics, or iCAIRD.

We have four Scottish bids in the final stage of the strength in places fund in open banking, precision medicine, industrial biotechnology, and photonics and quantum technologies, which are all technologies in which Scotland enjoys genuinely world-class capabilities.

Although it is vital to keep investing in the development of new products and processes, their value can truly be realised only if they are adopted and commercialised to create value for businesses and the wider economy. Only by focusing on the outcomes of our innovation investment will we achieve our goals. Increasingly, that is where our attention must be. My task as Minister for Trade, Investment and Innovation is to ensure that we are investing in the right types of support and in projects that will draw investment into the Scottish economy.

Meanwhile, the endless uncertainty and confusion caused by the UK Government’s handling of Brexit is casting a long shadow over Scotland’s economy. As I stand here, we are three weeks away from crashing out of the European Union with no clear idea of what might be next, other than possibly the creation of two Irish borders where none existed previously. That uncertainty is clearly bad for business.

The Scottish Government is clear. The message to our European and other international friends is that Scotland will do everything in its power to stay open for business, and that includes pan-European research and innovation collaboration.

Business innovation is of central importance to the Scottish economy. The Scottish Government is determined to further strengthen our innovation ecosystem, to continue to benefit from increasing levels of business R and D investment, to support our thriving and innovative businesses to provide quality jobs and fair work, and to ensure that Scotland enjoys a globally competitive, entrepreneurial, inclusive and sustainable economy.

I move,

That the Parliament acknowledges that business innovation is of central importance to the Scottish economy; notes the Scottish Government’s initiatives to ensure that Scotland is a globally competitive, entrepreneurial, inclusive and sustainable economy with thriving and innovative businesses with quality jobs and fair work for everyone, and recognises the increasing levels of business investment in R&D, the increased number of businesses collaborating within supply chains and an increase in R&D jobs as a percentage of total employment, all of which contribute towards a sustainable, inclusive future for the people of Scotland.

The Deputy Presiding Officer:

We are already further over time. I give everyone notice that speeches may have to be dropped or time cut from them.

I call Alexander Burnett to speak to and move amendment S5M-19287.1. You have up to six minutes.

Photo of Alexander Burnett Alexander Burnett Conservative

I thank the Scottish Government for bringing the debate to the chamber to celebrate the amazing work of those in the innovation sector and the positive effect that they have on the Scottish and UK economy.

I have been fortunate enough to visit a number of the innovation centres across Scotland and I have seen at first hand the huge value that they add to our industries by drawing on all Scotland’s research expertise in their relevant sectors to work on problems and opportunities that are identified by industry.

From aquaculture in Stirling to oil and gas in Aberdeen and construction in Glasgow, those centres are all bringing top-quality research and development expertise to the challenges of their respective industries. Although all are outstanding, the Data Lab in particular has made a great impression. Data science is a unknown field to many people, yet job titles in the field will soon become commonplace.

Data science is expected to contribute more than £20 billion to Scotland’s economy by the end of next year and to generate more that £590 million in economic and social impact in Scotland over the next five years. The centres in Edinburgh, Glasgow, Inverness and Aberdeen, which I will visit next month, show how quickly the sector can be rolled out to the benefit of all parts of Scotland. The hard work of Gillian Docherty and Jude McCorry and their team in keeping Scotland at the forefront of such an exciting sector must be commended.

It is important that all sectors receive the backing of both the UK and Scottish Governments in delivering for Scotland by funding projects across the country—building on existing talent and infrastructure to continue to transform Scotland’s economy into one that is highly skilled and highly paid.

As members will be aware, the Economy, Energy and Fair Work Committee published a report last year that covered investment in innovation. It noted that, in 2016, total R and D spending as a share of gross domestic product was 1.54 per cent for Scotland, which is lower than for both the UK and the EU. Through the economic strategy, there is an acknowledgement that innovation is influential in relation to economic performance, but investment is lacking. The historical issue of companies being headquartered outside Scotland could also contribute to low R and D investment.

Photo of Ivan McKee Ivan McKee Scottish National Party

Alexander Burnett referred to 1.54 per cent. I want to make him aware that the latest figure is 1.63 per cent, which further significantly closes the gap between Scotland and the rest of the UK.

Photo of Alexander Burnett Alexander Burnett Conservative

I thank the minister for that information. We welcome any improvement, but we note that the percentage is still below that in the rest of the UK.

Even the Scottish Government’s own report, “Scottish National Investment Bank Implementation Plan”, notes that its R and D spending is low by international standards. The report states that Scotland lags behind key competitors in business expenditure on R and D, which remains at less than 1 per cent of GDP in Scotland, and says:

“This makes the relative lack of technology companies based in Scotland starker and points to a missed opportunity to use the intellectual capital that Scotland has in abundance.”

The question is whether the Scottish Government recognises that it is missing an opportunity in funding our universities and research teams.

I commend the fact that Scotland increased R and D expenditure in real terms by almost 14 per cent between 2016 and 2017, but, as the Fraser of Allander institute noted earlier this year, Scotland is still falling behind in innovation investment, and we need to do better.

Scotland’s R and D expenditure—

Photo of Alexander Burnett Alexander Burnett Conservative

No. I am afraid that I am pressed for time.

Scotland’s R and D expenditure is lagging behind at £466 per head, while the UK average is £544 per head. Furthermore, it has been noted that, in comparison with the rest of the UK, R and D activity in Scotland is heavily concentrated, with almost 40 per cent of total expenditure coming from just five companies. As most investment companies will know, it is important to diversify a portfolio. I would like to know what co-ordination takes place with the UK Government—with agricultural engineering precision innovation centres, for instance—and whether calls for farms and facilities in the north-east to be involved will be supported, given that we have seen what the correct investment and geographical spread can do.

Earlier, I referred to the Data Lab, which has outlined that demand for skilled data scientists continues to grow in Scotland, underlining its strength as a global leader in the field. That has been reflected in the biggest ever intake of Data Lab MSc students across Scotland.

We must keep investing if we want to keep up as a global leader, and not just in data science. Innovation is about supporting a cross-sector of industries, and the Scottish National Party Government needs to look to the UK Government to find inspiration in how it can do better in supporting innovation across Scotland.

As part of the UK Government’s modern industrial strategy, the chancellor announced £215 million in extra funding for its catapult centres, which focus on digital, medicines discovery, future cities and transport systems. Furthermore, in 2018, a further £780 million was announced, meaning that the UK Government is spending more than a billion pounds on innovation.

Innovation is the building block in ensuring that Scotland’s economy can continue to thrive efficiently and keep up with the UK, the EU and the wider global economy.

Scotland used to be a global leader, and we must strive to return to that position. In 1707, Scotland’s brilliance was unleashed on to the world through the Act of Union. However, since 2007, we have had an SNP Government that is fixated on breaking up the union and holding back Scotland’s brilliance. We can only—

Photo of Christine Grahame Christine Grahame Scottish National Party

And there you must conclude. I am sorry—there is no extra time. Please move your amendment.

Photo of Alexander Burnett Alexander Burnett Conservative

I move amendment S5M-19287.1, to insert at end

“; notes that Scotland’s R&D expenditure per head remains well below UK levels, and calls on the Scottish Government to work with the UK Government under the UK Industrial Strategy to increase levels of innovation in Scotland’s economy.”

The Deputy Presiding Officer:

I call Rhoda Gra nt to speak to and move amendment S5M-19287.2. You have an absolutely tight five minutes, Ms Grant.

Photo of Rhoda Grant Rhoda Grant Labour

The Scottish Government motion shows its complacency and its piecemeal approach to the Scottish economy, which does not work. Therefore, we seek to substantially amend the motion in order to join the dots between innovation, economic growth, earnings and productivity. Its motion praises its efforts but does not acknowledge that Scotland’s gross expenditure on research and development per head of population is lower than that of the UK, which spends 13 per cent more per head.

Scotland’s gross expenditure on research and development as a percentage of GDP was ranked in the third quartile of OECD countries in 2017, as was our business expenditure on research and development. The Scottish Government constantly brings forward debates on various aspects of the economy, but it shows no vision as to how those building blocks come together. We urge the Scottish Government to bring forward an industrial strategy in order to have all those interrelated aspects of the economy working together. Increasing productivity is key to achieving sustainable economic development, raising income levels and creating better quality employment.

Photo of Rhoda Grant Rhoda Grant Labour

I am sorry, but I do not have time .

The Conservative amendment urges the Scottish Government to work with the UK Government’s industrial strategy, and, in the absence of a Scottish strategy, we cannot argue with that. However, Scottish Labour would have a Scottish industrial strategy to guide policy making, which would recognise the different socioeconomic challenges and the need for faster sustainable economic growth, because Scotland lags behind the rest of the UK.

Currently, Scotland’s productivity is ranked in 16th place in comparison with 37 OECD countries—a place where it has languished since this Government took power in 2007. Catching up with our competitors would, therefore, require a significant and transformational increase in Scotland’s rate of productivity. Manufacturing continues to disproportionately drive innovation, investment and international exports. Sadly, research and development is still heavily concentrated in too few companies, many of which are overseas owned. By some measures, Scotland’s innovation performance is improving, which is to be welcomed. However, by many other innovation indicators, our performance is still being outstripped by that of other countries.

In contrast, our universities are at the forefront of innovation. Scotland’s higher education expenditure on research and development as a percentage of GDP is the only area in which we rank well. Scotland is seventh among the OECD countries—in the first quartile—and above the UK average. I visited the Roslin institute and was really impressed by its research and support for innovation. However, there is a disconnect between academic innovation and industrial application in Scotland. All too often, those development opportunities go overseas. We need to strengthen links between higher education and the business base. There is obvious potential to improve industrial interaction with higher education. The Roslin institute has an incubator unit for small innovative businesses that are doing their bit to keep those developments in Scotland. The Government needs to support that, and to create the right environment for home-grown business to survive and flourish in Scottish ownership.

Yesterday, the Royal Society of Edinburgh published an independent review of its enterprise fellowship scheme, which made for interesting reading and provided lessons to be learned. However, it stated that the impact of the fellowship is £52.6 million GVA, and that it creates 949 jobs in Scotland each year.

The previous Labour Government set up catapult innovation centres, which have successfully promoted innovation in industry. Those centres aimed to catapult innovation, research and development from higher education into commercial realisation and mass production. That is a proven model to drive greater collaboration between industry and academia.

Burntisland Fabrications is a prime example of where innovative jobs have been lost as a result of the Scottish National Party lacking an industrial strategy. BiFab had the opportunity to secure work that was based in floating offshore wind—a next-generation technology—which would have put Scotland at the forefront of an emerging industry.

Scotland cannot afford to continue to miss out on such lucrative opportunities. Procurement and planning practices require significant improvements if Scotland is ever to act as a catalyst for business innovation.

There must be an industrial strategy at the heart of Government in Scotland that drives innovation and strong economic development, delivers jobs, secures new technologies and advances our position on the global map.

We believe—

Photo of Rhoda Grant Rhoda Grant Labour

— in an economy for the many and not the few.

I move amendment S5M-19287.2, to leave out from “notes” to end and insert:

“recognises that, without devising and implementing a comprehensive industrial strategy, the Scottish Government cannot truly tackle the country’s stagnated economic growth, poor earnings growth and low productivity levels; considers that failure to create a framework for industries has led to Scotland’s gross expenditure on R&D as a percentage of GDP being lower than that for the UK, EU and OECD countries, and urges the Scottish Government to implement an industrial strategy that supports expenditure in R&D activity among businesses that helps build an innovative and prosperous economic future for the people of Scotland.”

The Deputy Presiding Officer:

I am sorry that I interrupted, but there is not even a squidgen of time left—whatever a squidgen is. I call Alex Cole-Hamilton, who has five minutes.

Photo of Alex Cole-Hamilton Alex Cole-Hamilton Liberal Democrat

I welcome the opportunity to participate in this afternoon’s debate. The topic cuts through every sector of Scotland’s economy, be that in areas such as vertical farming or the development of therapies to modify the immune system.

Scotland has a long tradition of leading innovation and technology. Pioneering and groundbreaking research and development have been cultivated in our world-class universities. Members need look no further than the joint venture between two of Edinburgh’s universities—Heriot-Watt University and the University of Edinburgh—to develop the UK’s first national robotarium by 2021

The increasing links between Edinburgh’s informatics community, the recently opened Bayes centre at the University of Edinburgh and the Alan Turing Institute, alongside the construction of the national robotarium, will create additional entry points for collaborative data-driven research.

However, nowhere is innovation needed more than it is in tackling our climate emergency, which is the single biggest threat of the 21st century—or any century for that matter. With the passing of the Climate Change (Emissions Reduction Targets) (Scotland) Bill, which includes targets to have all emissions offset by 2045 and interim targets of 75 per cent by 2030, we are one step closer to tackling that emergency. Although that will be transformational, we will face many obstacles along the way. What comes next will require tremendous effort, difficult choices and increased resources.

We require that 35 million people across the UK change their cars to electric vehicles or give up car ownership entirely. We will have to grow the market for electric vehicles from 1 per cent of sales today to 100 per cent of sales in 10 years. Innovation will be needed in order to drive a transition of that magnitude.

Those are the sectors where we know what to do, but removing CO2 from the atmosphere at an unprecedented rate will necessitate technologies that are not even in the pilot phase. In aviation, where the only serious solution at the moment is to fly less, and in farming, where methods will need to change dramatically, new technologies and innovative solutions will be imperative.

To underpin all that will require our reforming the regulation of finance and investment, skills and innovation and industrial support; it will also require reshaping the institutions of the Scottish and UK Governments centrally and locally.

The Scottish national investment bank can help with our ambitions by creating a sharp focus on new markets. That needs to drive our transition away from carbon-dependent industries. I want there to be a new UK-wide green investment bank, too.

If we are to meet our aim of growing our economy by making Scotland one of the most innovative places in the world, investment in education is vital. A Universities Scotland report has revealed that, over the past three years, there has been a 53 per cent increase in the number of start-up companies created by students and graduates. That underscores why education is key to innovation. The way to establish the high-wage, high-skill economy that we strive towards is to significantly invest in education and in the skills economy. By doing that, we can create a bright and sustainable future for everyone.

It is 10 years since the Scottish Science Advisory Council warned that the

“outputs of Scotland’s universities ... are not being captured by Scottish industry”.

It further warned that that meant that industry exerted

“little influence on the research undertaken in academia.”

I am very interested to hear from the minister when he closes how far the Government thinks that we have moved in the past 10 years and how much we have heeded the council’s message.

As our economy rapidly changes, the need for people to retrain and reskill has never been more imperative. It is no longer the case that the skills learned at the age of 18 or 21 will last for a lifetime or a career. The ability to learn new skills or change careers is also critical to creating changes for people to succeed in adverse economic circumstances, no matter their stage in life.

College is a vital portal to further learning and work. In that regard, I must remind the chamber that 140,000 college places have been lost on the SNP’s watch, the overwhelming majority of which were part-time places, which are accessed by those for whom studying full time is not an opportunity that they can take. Hundreds of thousands of people have missed out on opportunities to learn, and the hardest hit have been women, those who have to earn at the same time as they learn and those with caring responsibilities.

On innovation, the Government committed to a £500,000 college innovation fund. I do not think that that fully compensates for the losses that I have just mentioned, but I would be interested in hearing from the minister about the impact that it has had.

The cuts prevented people from retraining and equipping themselves for a new career at a time when businesses are reporting in survey after survey that they are struggling to find the skills that they need. We need a massive investment in education, skills and retraining. Then and only then will Scotland be a pioneer in innovation.

Photo of Gillian Martin Gillian Martin Scottish National Party

The Scottish Government is committed to making innovation, design and manufacture an intrinsic part of our culture, economy and society.

The National Decommissioning Centre is a clear example of that commitment. It was opened in January in Newburgh in my constituency, and it is a centre of excellence in the north-east of Scotland, which will develop new capabilities, skills and jobs to meet the decommissioning challenge now and in the years ahead.

The NDC is a £38 million partnership between the Oil & Gas Technology Centre and the University of Aberdeen, and is funded as part of the Aberdeen city region deal. Over the next decade, 100 offshore platforms and 5,700km of pipeline are forecast to be decommissioned or reused. That will involve safety, efficiency and environmental challenges, which are being actively tackled by the NDC. By combining industry expertise with academic excellence, the NDC is leading the world in research and development in relation to decommissioning challenges in the oil and gas industry and in the wider energy sector, such as offshore renewables. That work will have a legacy beyond our use of hydrocarbons as we transition to a low-carbon economy. There is a model there for an energy transition innovation centre that would similarly harness our local engineering expertise and couple it with the expertise in our academic institutions—assuming that universities will have a replacement for the funding that they will lose as we exit the EU.

The programme for government rightly sets its innovation ambition in the direction of low-carbon technology, and I was particularly pleased to see the announcement that the Scottish national investment bank will have that ambition as its focus. This week is Scotland’s climate week, and the world-leading emissions targets in the Climate Change (Emissions Reduction Targets) (Scotland) Bill, which we passed the other week, present Scotland with an opportunity to be at the forefront of global action, gaining a foothold in the development of low-emissions solutions products and processes that we can export all over the world. I wish that I could say that, to date, enough action has been taken for us to have that foothold, but we have much more to do, and, if we are to harness that opportunity, we need to act much more quickly than we have done so far. My region is still too reliant on oil and gas, and I know that workers in the north-east actively want to be channelling their expertise into future energy, rather than being beholden to the swings and roundabouts of a global oil price and being left behind as other countries steal a march on us as the transition happens. In particular, I know that young people want to work in low-emission energy systems instead of being reliant on hydrocarbon jobs, as their parents are.

The UK Government’s pulling of the funding for carbon capture and storage projects has set us back years in that regard. Responsibility for the issue lies not only at the feet of the Scottish Government; the UK Government is involved, too, as it has failed to recognise the challenge that is ahead of us as we decarbonise.

I have made my pitch. The Oil & Gas Technology Centre and the National Decommissioning Centre are excellent and groundbreaking, and we can learn a lot from them, but the low carbon energy transition process needs that model too, and that new focus should have its heart in the energy capital of Scotland—the north-east of Scotland—soon.

Photo of Jamie Halcro Johnston Jamie Halcro Johnston Conservative

Innovation should be a driving force in our economy. It is through renewal, invention and creation that economies thrive, and the pace of that change has increased.

In our lifetimes, the instinct for innovation has only strengthened, and the world moves forward at an ever-faster rate. We should certainly consider the challenges that arise from that; it is also worth considering the enormous, world-changing advantages that we have seen.

Innovation is the main source of sustainable economic growth. We know that, in recent years, Scotland’s economic growth has lagged behind that of the rest of the UK.

I draw attention to sustainability, because sometimes it seems that we in Parliament are expected to look on economic growth and productivity as being somehow unsustainable. Although it is right to look beyond the simple gross domestic product of a country, it is wrong to consider growth in itself as a negative thing.

Members might wish to reflect on how innovation has benefited our wider environment. We need look only to the significant decline in the cost of technologies such as offshore wind in recent years to see the environmental benefits.

Much innovation is about how we can manage resources better and be more efficient. Ultimately, the world will go forward; the challenge to individual countries is to seize the opportunities that that presents. The challenge is to be at the forefront of change and to help to shape the future, rather than simply to be shaped by it. If we are to succeed in that, Scotland and the wider UK must create the frameworks for success. Building the conditions for innovation across Scotland will be a key part of that.

We have seen positive work in the city region deals across Scotland. The projects have brought the UK Government, the Scottish Government, local authorities and other partners together in a common aim. They are promising starting points, but they must be regarded as laying the foundations rather than as examples of investment as an end point in itself.

In my region—the Highlands and Islands—opportunities have been seized. The European Marine Energy Centre in Orkney is a case in point. I have been pleased to welcome colleagues including Alexander Burnett to EMEC, to see for themselves the world-leading advances in tidal and wave-energy technology that are happening there.

Our universities must be key drivers of innovation. Some of that work has been taking place in the University of the Highlands and Islands, Heriot-Watt University and many other institutions in Scotland.

Collaboration must extend further—into industries in which productivity growth has not been as significant as we might have hoped it would be. For too many years, industries such as construction have lagged behind. The Parliament’s Economy, Energy and Fair Work Committee explored that issue recently.

In many sectors, a technological revolution is just over the horizon. Change is coming, and the basis for that change is skills—an issue to which I have returned time and again. Learning is central. Our universities can be creative hubs, but the process must begin earlier, because there remains a skills gap in Scotland between what employers need and what is available in our labour market, and the answer to that problem will be found at an earlier stage in education. Innovation and enterprise education and science, technology, engineering and mathematics education must all be improved if we are to build the skills base that we need.

Scottish Conservatives have called for greater links between business and schools—some of our proposals were taken forward by the Scottish Government as part of the developing the young workforce programme. I welcome that. There is still time for recommendations to be delivered. However, that should not happen in a piecemeal fashion; rather, we should be looking for systematic change at national level.

A focus on STEM education is vital, but in recent years the hard work has not been done. We hoped that improvements were coming; instead, the number of employers who report skills shortages in STEM areas is increasing. That is a finding of a report on the Scottish Government’s STEM strategy.

We should be forthright about making innovation an important part of what Government encourages and supports. It must be in every ministerial portfolio, from education to health and from transport to business. That approach requires co-operative working at all levels of government. Above all, it requires commitment and a Parliament that respects business and entrepreneurship and their role in our economy.

Photo of Kenneth Gibson Kenneth Gibson Scottish National Party

Innovation is a central feature of a strong economy. The Scottish Government says:

“we define ‘an innovation’ as an idea that creates economic value for individuals and society.”

Innovation can boost productivity, competitiveness and growth. It can lead to improved earnings for the workforce and greater profitability for companies. It can contribute to improving sustainable, inclusive economic growth.

The Scottish Government wants to build on Scotland’s rich history of innovation by supporting the talent and potential of Scotland’s entrepreneurs, inventors and businesses. The goal is to ensure that Scotland is recognised as a world-leading entrepreneurial and innovative nation.

To support innovation, in 2017 the Scottish Government published, “Scotland Can Do—Boosting Scotland’s Innovation Performance: An Innovation Action Plan For Scotland”. The aim is to see Scotland ranked in the top quartile of Organisation for Economic Co-operation and Development countries for productivity, sustainability, equality and wellbeing. To achieve that ambitious aim, the Scottish Government is working to ensure that Scotland achieves a strong innovation performance rating.

As part of the innovation action plan, the Scottish Government has committed £45 million over two years for additional research and development grants. Last year, 75 R and D grants totalling £123 million were awarded to projects. Between 2016 and 2017, Scotland’s gross expenditure on research and development increased by 8.3 per cent in real terms, to £2,529 million, which was a £193 million increase on the previous year.

The Scottish Government has also committed to increasing investment in business enterprise research and development, as part of its goal to double that investment between 2015 and 2025. In line with that, BERD expenditure in Scotland in 2017 was £l,247 billion, which represents a 93.6 per cent increase in real terms between 2007 and 2017. That stands in stark contrast with the UK Government’s increase of only 27.2 per cent over the same period.

As part of the Scottish Government’s innovation action plan, the can do innovation challenge fund was established to drive a process that is known as open innovation. It supports the public sector as it develops innovative market solutions to operational service and policy delivery challenges. To date, 16 organisations have been funded to run 18 challenges. More than 100 small and medium-sized enterprises have applied to the fund, with £1.36 million having been awarded. The can do innovation forum is designed to formulate and implement proposals to improve Scotland’s innovation performance. It brings together key representatives from business, industry and academia, along with the Scottish Government and its enterprise agencies.

I am the representative of an Ayrshire constituency: innovation is nothing new to us. It is an intrinsic feature of our culture, which is why many advances that have shaped the modern world were discovered or invented in Ayrshire, from fingerprinting to pneumatic tyres. The Scottish Government has committed to investing £103 million to the Ayrshire growth deal, which includes £40 million to develop innovative projects around engineering, digital automation and manufacturing.

In total, the Scottish Government has committed to investing £245.5 million on growth deals for Ayrshire, the borderlands, Moray, and Argyll and Bute, alongside £1.275 billion in city region deals for Glasgow, Aberdeen, Inverness, Stirling and Clackmannanshire, the Tay cities and Edinburgh.

Given that education and innovation are deeply connected, the Scottish Government is working to develop the innovative capacity and performance of business and the economy through training and education. This year, 2019, is the second year of the college innovation fund, which provides £500,000 to produce new course material to support emerging industries. The Government also supports the Scotland can do scale programme, which helps entrepreneurs to scale up their businesses through provision of world-class training.

In addition, a £48 million investment in the national manufacturing institute for Scotland at Inchinnan will make Scotland a global leader in advanced manufacturing. The institute will offer Scottish businesses access to expert services, advanced demonstrator facilities and training programmes that are focused on innovative manufacturing.

I also welcome the development of innovation and investment hubs overseas, which are designed to work across a wider network, including Government, partners and businesses to support Scottish innovation. Each hub works to promote Scotland’s research, innovation, industrial, social and cultural strengths.

To show the importance of developing innovation, in June 2018 the First Minister announced a new ministerial post—the Minister for Trade, Investment and Innovation, which is held by Ivan McKee.

Innovation will improve Scotland’s long-term productivity, and will enable growth and delivery of higher living standards for the people of Scotland.

Photo of Daniel Johnson Daniel Johnson Labour

I agree with what Ivan McKee said in his opening statement about the urgent need to look at innovation policy, for exactly the reasons that he set out: technology change—which is going to completely alter the way in which we work and the way in which businesses carry out their business—and climate change.

The common thread between them is that both will fundamentally change the way our economy works. The way to address them is undoubtedly through innovation.

The minister asked me to get my calculator out in response to my question about innovation spend, but I will ask him to make a note. Only three numbers really matter: Scottish spend on R and D is 1.6 per cent of GDP—that is behind the UK spend of 1.7 per cent, and both of those are behind the OECD average of 2.4 per cent. Until the numbers change and we at least meet that OECD average, there will be an awful lot more work to do. There is no room for complacency, either from the Government or from Conservative members.

Photo of Daniel Johnson Daniel Johnson Labour

I am afraid that I do not have time. I apologise for that.

I will make two or three points about where the Scottish Government needs to improve.

I make a case for the creation of an innovation agency to draw together the multiple strands that lie behind innovation policy. That is not necessarily about doing anything new, but it is certainly about consolidating what currently happens. Anyone who knows anything about this area of policy will know the lessons of the US Defense Advanced Research Projects Agency. It is ironic, given the US’s rhetoric about the free market, that the US is perhaps one of the most interventionist states when it comes to innovation policy, with DARPA having created the internet, the global positioning system and the voice recognition behind Siri.

I commend the work of Nesta, which has done excellent work around the role of innovation agencies, and points to what could be done in Scotland. However, it contrasts in some regard with the Scottish Government’s record.

I recognise that there are initiatives, but we still have a cluttered institutional landscape with innovation policy falling between Scottish Enterprise, the Scottish Further and Higher Education Funding Council and the Enterprise and Skills Strategic Board. Until we consolidate that policy effort, we will continue to struggle.

The Government needs to think about innovation not only as something that it needs to support but as something that it needs to embrace, much in the way that Estonia has. Innovation cannot be the business of only private enterprise; it must also be seen as the core business of the public sector. In that regard, the Scottish Government must change its relationship with innovation.

I will briefly comment on the universities. Much of the good work on innovation in Scotland is thanks to our outstanding universities. We have twice the rate of spin-out companies from our universities that the rest of the UK has. However, the reality is—the numbers are clear—that the Scottish Government record is not good in that regard. The recent Audit Scotland report was unequivocal that spend has been cut in real terms by 12 per cent since 2014, and that we are receiving a falling share of UK research grants. That is due in no small part to the fact that the grants that are provided by the Scottish Government for research cover only 80 per cent of universities’ costs. That is a clear finding in the Audit Scotland report.

We must do more and at least meet the OECD average of 2.4 per cent. We must join up innovation policy, because there is urgency in respect of meeting the demands of climate change and technology change.

Photo of Emma Harper Emma Harper Scottish National Party

I welcome the opportunity to speak in the debate. I acknowledge all the people across Scotland who day in and day out come up with innovative and exciting ideas. Scotland has a proud history of innovation, from well-kent inventions such as disposable contact lenses; bank automated teller machines, or ATMs; the magnetic resonance imaging scanner; the human papillomavirus vaccine, which is the world’s first vaccine designed to prevent a cancer; and the popular video game “Grand Theft Auto”; to more futuristic Scottish inventions such as the functioning acoustic tractor beam and the fabric Metaflex, which is basically an invisibility cloak—I am intrigued by that one.

Scotland has always led the way in science, technology and medicine. Central to innovation is manufacturing, which accounts for more than 181,000 jobs and 54 per cent of our international exports. In Scotland, 55 per cent of business expenditure is dedicated to research and development, which allows the creation of life-altering products, scientific advances and medical breakthroughs that often become world renowned.

Key to that innovation is ensuring that we equip our population with the skills, technical expertise and ability to thrive and create. I am chuffed that the Scottish Government has introduced a range of measures that give communities, individuals and businesses the skills, support and materials that they need to succeed. One such scheme is the can do innovation challenge fund, which supports many SMEs in Scotland. To date, more than 100 SMEs have applied for that funding and £1.36 million in contracts has been awarded.

A business worth a mention is York Technology, near Gatehouse of Fleet, which the minister visited with me recently. The managing director is Khalid Alvi, who has designed a machine called a balanced-coil needle detector, which is used in the manufacturing of clothing, including children’s clothing, and improves safety by detecting any broken-off needle tips that might be retained in garments after they have been sewn.

That is a great piece of innovative technology that supports good quality control checks in the manufacturing of clothing.

Mr Alvi contacted me this morning and noted that the minister had connected York Technology with the managing director of Johnstons of Elgin, which is a cashmere clothes maker. The minister met that managing director at an official function. Both managing directors are now able to meet to discuss York Technology’s product and see whether any opportunities exist to help Johnstons of Elgin’s product safety regime. If the minister can continue to make such good connections for York Technology with other producers, Mr Alvi will be very pleased.

There are many fantastic schemes that promote Scottish innovation. However, it would be remiss of me not to mention that the uncertainty that exit from the EU is causing is leading people, businesses and investors to fear coming to Scotland. Many parts of rural Scotland rely on EU structural funding, which is often match funded by the Scottish Government. On Friday, I attended the official opening of the newly redeveloped Stranraer millennium centre, which was part funded by EU rural development funding and the Scottish Government as well as by other key, important partners. Money from that fund has allowed for refurbishment and a Changing Places room, which has made the place fully accessible. That modern hub will be at the heart of Stranraer, and it will promote the area and encourage conferences, events and businesses to it. European money is crucial for rural development in my South Scotland region.

If we are forced out of the EU without a deal, the future of those vital structural funds will be in question. I would like the minister to address the impact of that on our communities, especially in rural Scotland.

Despite Brexit, the Scottish Government is committed to ensuring that all of Scotland can benefit from growth deal funding. I am pleased that the UK Government recently made a commitment to match Scotland’s ambition for 100 per cent coverage of growth deals in Scotland. That has allowed the Borderlands and Ayrshire growth deals in my South Scotland region to go ahead. Although the UK Government has fallen short by £20 million on Borderlands funding, those deals will allow for investment in innovation and economic growth across the region.

Finally, I want to ask the minister about support for one small business. What current support is there for LadderLimb, which is an innovative product that is made in my region, to access EU and American markets?

The Deputy Presiding Officer:

You just managed to squeeze that in. You should not have kept it so late.

Photo of Brian Whittle Brian Whittle Conservative

Presiding Officer,

“Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can’t do is ignore them. Because they change things. They push the human race forward. While some see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do.”

That is one of Apple’s mottoes.

It is timely to have a debate about innovation just a few days after the anniversary of the death of Steve Jobs, who was one of the great innovators of the computer age. The company that he co-founded and led to global success—Apple—is arguably one of the best examples of the benefits of a culture of innovation. Apple did not invent the computer, the tablet, the smart phone or digital music but, through innovation, it made them more accessible, more useable and commercially successful.

It is important that we do not confuse innovation with invention in this discussion. Both are important to Scotland’s future success and ensuring that we remain a world leader in research and development. Both rely on new ideas, but invention is the creation of something completely original and innovation involves taking an invention and finding a new way of using it that changes how it is used. To use a sporting metaphor, if invention is the giant leap forward, innovation is the run-up; without it, we are less likely to clear the hurdle.

We have an impressive record of invention and discovery in Scotland. We are the home of countless great inventions and discoveries, such as the cell nucleus, cornflour, fountain pens, marmalade, pneumatic tyres, radar, raincoats, tarmac and ultrasound scanners. We have a reasonably good track record of supporting innovators in their early stages of setting up and developing viable products.

Where we fall down is in support for innovators to grow. All too often, businesses grow to a certain size and, instead of being supported to grow further, are swallowed up by one of the big players. In a globally competitive world, innovation is the difference between success and failure. Without continuous technological and scientific innovation, we risk losing our reputation as a global leader in those fields.

Innovation can mean bringing several different ideas together in a new way, often through seeing connections that others have missed. As Henry Ford is often quoted as saying:

“If I had asked people what they wanted, they would have said faster horses.”

Innovation is not confined to the world of technology and business. It is a mindset that can be applied to almost anything. Many of us will see innovation during our regular visits to our constituencies.

At this point, I highlight how important innovation in healthcare will be as we transform its focus from secondary to primary care. Innovation is useful only if it is adopted and integrated. We have a lot of experience of developing new technologies, but our record on adopting them is much poorer. We need to look at the way that we fund healthcare innovation. There are too many quangos and it is a difficult landscape for business and entrepreneurs to navigate. We need to reduce the complexity of the landscape.

Some of the changes that are needed do not cost money. It is about changing the process and the attitude of people who work in the quangos. We need to nurture an innovative mindset. Albert Einstein said that we cannot solve problems by using the same kind of thinking that we used to create them in the first place.

Like much of the public sector, the NHS is bureaucratic and intensely risk averse—two qualities that are tailor made to stifle innovation and quick reactions to changing circumstances.

Education is the key battleground. We should be creating an educational environment that nurtures and encourages innovation. We should be encouraging exploration, rejecting dogma, questioning ideology, taking the wider view, and seeing the whole board and the benefits of being a generalist with a wide-ranging education, which is why cutting the number of subject choices is so damaging to our children’s education and our ability to innovate. The ability of teachers to innovate has been strangled by that self-same bureaucracy that stifles healthcare innovation.

We all recognise how vital supporting innovation is to our economy, our communities, our society and our health and wellbeing. Much of today’s debate has centred on the financial aspects of supporting innovation, but we should not lose sight of the wider value of encouraging people to have a more innovative mindset and promoting a culture across Scotland that is more open to trying new and innovative ideas. We must invest in education, because that is the nursery of innovation.

The Deputy Presiding Officer:

Stewart Stevenson is the final speaker in the open debate. You have five minutes, Mr Stevenson.

Photo of Stewart Stevenson Stewart Stevenson Scottish National Party

Most generous, Presiding Officer.

In our modern context, innovation plays a critical part in our economic wellbeing. The process is a kind of creative destruction, to echo what Mr Whittle has just said, and it is about replacing the obsolete with the cutting edge and developing the previously unimagined. It is a catalyst to growth, which is why it is critical to every economy on the planet. However, innovation does not happen in isolation. It requires a rich soil for growth and a foundation upon which to build.

The debate has illustrated the danger of focusing on Government and private sector spend on research and development, because it is the outputs from that research and development and from spontaneous thinking that are more important. In other words, how many patents do we produce? How many registered designs and product names do we come up with? How many start-up companies go beyond “me too” enterprise?

It is interesting that Brian Whittle referred to Apple because, of course, the iPod, its first music kit, depended entirely on a chip that came from the Wolfson institute here in Edinburgh. We are still doing innovation—we have been doing it for a long time indeed.

Scotland wants to be a leader in innovation and we put our money where our mouth is. Product and process innovation has a clear link to employment growth but it does not happen in isolation; it generally relies on the quality of the business environment. The weaker the business environment, the less likely innovation will have a positive impact on jobs.

It is worth noting that when full employment is reached, productivity falls, because then the people who are being employed often work part time and do jobs that are not inherently productive. However, even the least productive jobs can respond to innovation.

It is certainly important that we have inclusive growth that matches our innovation ambition. That means investing in public infrastructure. The Forth crossing—now the Queensferry crossing—had an original budget of £3.4 billion, but we built it for less than £1.4 billion. If that ain’t innovation in Government and stepping up to ambition, I do not know what is. We innovate in housing, healthcare, energy, education and digital connectivity.

One thing is clearly missing from the debate—this relates to a feminist issue. The Intellectual Property Office says that only one in eight patents world wide is in a woman’s name. Therefore, our Government’s focus on STEM for women is vital, because there is a huge untapped source of potential innovation in this country, as there will be in countries across the world. All the women whom I meet say that they are can-do people, and I believe that all the women in my life are can-do people. That is not the only issue; attitudes, culture and self-belief are also important factors.

The Scottish Government is working with partners to support Scotland Can Do, which is good. We must also ensure that people have somewhere where they can innovate. We need people to take risks, and we need to be prepared to see failure.

Historically, Scotland has been an innovating nation. Alexander Burnett seemed to think that innovation started in 1707. Napier’s bones and the slide rule were developed in the 100 years before that point, and the decimal point came from John Napier, too. The first coal mining on artificial islands was done in Scotland in 1575. However, there were inventions after 1707. We bequeathed to the world the overdraft, which was invented in 1728 by the Royal Bank of Scotland. Relevant to 1707, Alexander Cumming invented the first flush toilet in 1775. Scotland invents; the world benefits.

The Deputy Presiding Officer:

You never disappoint, Mr Stevenson. I learn something every time you speak—whether I want to or not.

Photo of Alex Rowley Alex Rowley Labour

This has been an interesting debate on a very important subject. I was struck by the fact that a number of members, including Alex Cole-Hamilton and Daniel Johnson, talked about skills, training and development, which are key issues. People used to say that Scotland was a world leader when it came to education, but they certainly do not say that today. There are major difficulties in our education system, not least how curriculum for excellence is panning out, so we need to see the evidence. Whether the different cohorts that come forward are more successful or not, I worry, from hearing reports from teachers, that curriculum for excellence will not deliver the innovators of tomorrow that we so desperately want to see.

There is also a major challenge in relation to school resourcing and massive class sizes, which are unacceptable. The ratio of teachers to pupils in independent schools is something like 1:14—indeed, the adult to pupil ratio in a lot of private schools is 1:8—whereas classes in schools in the state system have 30-plus children. That shows that we have a difficulty.

If we are serious about this agenda, we need to look at education in its entirety, from the cradle to the grave. Several members have mentioned the need to upskill and reskill, but our colleges have experienced massive cuts over the past number of years. As a result, adult education and the provision of training and skills for adults have suffered the most. If we are serious about this agenda, we need to be serious about education and how that moves forward.

Rhoda Grant mentioned the example of BiFab. Turbine jackets that could be built in Fife are being shipped from halfway round the world to a wind farm that is 10 miles off the Fife coast. We need innovation in renewables and other areas, but we also need to ensure that we can take advantage of that innovation and that the jobs and the skills come to Scotland. That is not happening.

We have a target of no diesel or petrol cars being sold by 2032. We are miles away from achieving that, and I am not sure that we will achieve it. We need to ask where the innovation is that is needed for the future. Does it lie in building the new types of cars or, on the technology side, developing the software for them? In all those areas, we have major challenges.

Photo of Ivan McKee Ivan McKee Scottish National Party

I can tell the member how far away we are from that—we are 11 years away. This morning, I visited CST Global in Hamilton, which is using photonics to build the light detection and ranging devices that will power autonomous vehicles and other vehicles of the future. That stuff is happening. Mr Rowley might not be seeing it—maybe he should get out more—but there is an awful lot of it happening in Scotland at the moment.

Photo of Alex Rowley Alex Rowley Labour

I accept that a lot of good stuff is happening, but it is not happening quickly enough. My concern is that we will end up buying those cars of the future without having had an input into the manufacture of the vehicles or the software.

Across Scotland, company after company tell me that they are struggling to recruit software and information technology graduates. Where are things going wrong? Where does the investment need to go to ensure that we have more graduates and a more skilled and more able workforce of the future? Too many kids who come out of primary school are not prepared for secondary school, and far too many kids who come out of secondary school are not prepared for a life of work. If we are serious about this agenda, we need to tackle the education issue.

Photo of Dean Lockhart Dean Lockhart Conservative

Quite rightly, much attention has been paid in recent years to the importance of productivity in the economy. An increase of just 1 per cent in productivity would deliver £2.3 billion extra in GDP and an extra £400 million in tax revenues. Less attention has been paid to the most important driver of productivity, which is innovation.

According to the Confederation of British Industry, innovation not only drives productivity but attracts international investment, raises living standards and supports inclusive growth.

However, the reality is that no Government can legislate for innovation. Instead, the role of Government should be to create a coherent and dynamic skills, business and education environment in which innovation can flourish. In his opening speech, the minister set out a list of initiatives that support innovation. Although we welcome those, a patchwork of initiatives is not enough to create an environment in which innovation becomes fully embedded in the economy. That is why, when it comes to innovation, Scotland continues to trail in the third quartile of OECD countries. It is clear that we need to do more to realise Scotland’s potential to be a global leader in innovation.

I will address some of the key points that have been raised in the debate. Alexander Burnett and Rhoda Grant highlighted the importance of R and D spending in Scotland. We welcome the recent increase, but the reality is that R and D spend in Scotland remains well below UK levels, so the gap that the minister mentioned is still quite substantial.

The Fraser of Allander institute also highlighted concerns that R and D activity in Scotland is heavily concentrated, with the remarkable figure that half of total R and D expenditure in Scotland comes from just 10 companies.

To encourage further business innovation and R and D, we need to promote an environment that attracts innovators from across the world to come to Scotland. In doing that, we face competition from the rest of the world and the rest of the UK, which is why we will continue to oppose the SNP’s decision to make Scotland the highest-taxed part of the UK for innovators. That is an example of creating a business environment that does not encourage innovation.

We also need a business environment that encourages innovators to scale up and expand their business, but, again, the SNP has done the opposite by imposing the large business supplement on successful firms with the ambition to expand.

We should also support universities and colleges in promoting their vital innovation activities— a point that was made by the minister himself, Alex Cole-Hamilton and Daniel Johnson. However, a recent Audit Scotland report highlighted that university funding has been cut by more than 11 per cent over the past five years, and the Economy, Energy and Fair Work Committee heard evidence that the university innovation fund has been cut by 25 per cent in the past five years, in contrast to a 15 per cent increase in the rest of the UK.

Photo of Dean Lockhart Dean Lockhart Conservative

If the member wants to explain why the university innovation fund in Scotland is declining, I am happy to give way.

Photo of Gillian Martin Gillian Martin Scottish National Party

I do not believe that that is how interventions work— they do not work by order.

I want to ask how much universities are losing as a result of horizon 2020 EU funding being taken away from them.

Photo of Dean Lockhart Dean Lockhart Conservative

Two weeks ago, the chancellor announced additional spending in the rest of the UK, which will create hundreds of millions of Barnett consequentials for education in Scotland, which dwarfs the spending from horizon.

In hearing evidence that the university innovation fund has been cut, the committee recommended that the Scottish Government increase it, and I look forward to the minister’s response to that in his closing remarks.

The negative impact of the increasing skills gap was raised by Jamie Halcro Johnston and Alex Rowley. That is a particular problem in the innovative digital sector, because only 9 per cent of businesses in Scotland use digital, compared to 43 per cent in other countries. That lack of digital penetration in the economy will act as a major drag on innovation activity going forward. That is why we have been calling for the establishment of a dedicated institute of e-commerce—a specialised agency that will help firms capitalise on developments in technology and e-commerce.

The final issue that I want to raise is the need for a coherent policy framework to promote innovation, a point that Brian Whittle highlighted, and something that the Scottish Council for Development and Industry called for in relation to the Scottish Government actively participating in the UK industrial strategy.

Innovate UK has invested £2.5 billion across the UK in the past five years, and the British Business Bank has helped to unlock £10 billion of finance for innovation.

For Scotland to deliver real potential as a global leader in innovation, this Government needs to change direction on economic policy to create an economic environment in which innovation and business can truly flourish.

The Deputy Presiding Officer:

I call Ivan McKee to close for the Government. Minister, you have until 5 o’clock.

Photo of Ivan McKee Ivan McKee Scottish National Party

It has been an interesting debate, and a lot of very valuable points have been raised. I will run through some of the contributions.

I thank Alexander Burnett for his recognition of the value of the Scottish Government’s innovation centres. I, too, have visited all of them, and have seen their great work.

Alex Cole-Hamilton gave a name check to the robotarium, a fabulous innovation that is happening between Edinburgh and Heriot-Watt universities. He also talked about climate change, which is an issue that came up in a number of contributions. It is important to recognise the leading position that Scotland holds globally in off-shore wind development and hydrogen, in tidal and wave, as mentioned by Jamie Halcro Johnston, and in decommissioning, as referred to by Gillian Martin. There is a lot going on in renewable energy, in which, I know from international trips that I have made, that Scotland is recognised globally as being at the leading edge of innovation.

Gillian Martin also mentioned the Oil & Gas Technology Centre, and it is worth pointing out that an increasing amount of the activity there is focused on renewables.

In the context of skills, it is also worth mentioning that the just transition commission and the national youth training partnership, which were raised by Alex Cole-Hamilton and Gillian Martin, are working on the transition of the workforce to the technologies of the future.

I am grateful to Kenny Gibson for reminding us of Ayrshire’s central role in global innovation, because it is always good to remember that. I thank Emma Harper for namechecking York Technology. I was delighted to help in that case and, if Ms Harper wants to introduce me to any other SMEs, I shall do my best to put them in touch with potential outlets for their products.

There was a lot of value in some of the things that Daniel Johnson said, and certainly food for thought. It is worth pointing out that Nesta now has a base in Scotland and that we work closely with it through the innovation forum, which I chair. Nesta makes a valuable input to the ecosystem in Scotland.

The Enterprise and Skills Strategic Board, rather than being another player in that space, has the role of co-ordinating work between Scottish Enterprise, the Scottish Further and Higher Education Funding Council and other agencies to ensure that there is co-ordination across the work on innovation and other aspects of the enterprise and skills area. The board is undertaking a significant piece of work in collaboration with the innovation forum to identify opportunities to streamline and make more effective the innovation landscape in Scotland. Daniel Johnson can rest assured that there is absolutely no complacency. We clearly identify the challenges that are in front of us and work to address them.

Mr Johnson also raised a valuable point about public sector innovation. I am keen on pushing that and I am working hard to get it further up the agenda. Mr Johnson is absolutely right that the public sector can set an example through innovating in order to streamline and make its processes more effective, which makes it much easier to sell innovation across the rest of the economy.

Brian Whittle talked about innovation versus invention. We recognise innovation as being broad and including not just product innovation but innovation in services and processes, and we continually strive for that.

On Mr Whittle’s point about investment, what we might call the valley of death between start-up investment and large-scale investment later down the track affects economies and businesses globally. We recognise the issue, and the Scottish national investment bank will have a focus on leveraging additional private sector funding to support SMEs as they transition through that challenging time in their growth. We are focused on understanding how we can best support that through the SNIB and other activities.

On Mr Whittle’s point about healthcare innovation, as a co-chair of the Life Sciences Scotland industry leadership group, I continually see the issue, and I am keen to simplify the process so that life sciences businesses have routes into the health sector in Scotland to allow them to use that as a platform to develop and globalise their innovations. I am working closely with health ministers to streamline that process.

At the moment, we are going through a process of mapping everything in the whole ecosystem. It is important to recognise that there is clutter. Some things are done with good intentions, but there is a requirement to understand how we can simplify and to evaluate the impact of current measures and ensure that they are focused on delivering for businesses.

I thank Stewart Stevenson for his brief tour of the 16th and 17th centuries and his point about the importance of differentiating between outputs and inputs.

I will comment quickly on the issues that were raised by the Labour front-bench members, who, in contrast to Daniel Johnson, did not seem to appreciate the breadth of the innovation process and the activities that are going on. I hear Labour members speaking all the time about Labour’s industrial strategy—frankly, that sounds a lot like Labour hiding behind a soundbite, because I think that not even they know what they mean by an industrial strategy. Labour’s Scottish industrial strategy in 2017 proposed making the Scottish Investment Bank the industrial investment bank for Scotland, which we have done through the SNIB. The strategy also proposed devolving powers to communities, which we have done through the city deals, and evaluating the innovation centres, which we have done—we are ramping up phase 2 funding for those. There was also a proposal to integrate the catapults into the manufacturing sector, which we have done through the national manufacturing institute Scotland. Those are just a few examples of the disconnect between Labour’s rhetoric and the reality—frankly, Labour has a lack of understanding of that.

Rhoda Grant talked up the Roslin incubator. The Scottish Government put £10 million into that to get it going. That is the value of the Scottish Government’s investment in supporting the innovation ecosystem in Scotland.

I will touch briefly on the Conservativesamendment to the Scottish Government’s motion. We are keen to work with the UK Government to understand how we might co-operate. Only last week, representatives from the Department for Business, Energy and Industrial Strategy were here to talk through its 2.4 per cent road map. Scottish Government officials engaged with them on that and one of the shared learning points that BEIS took away was the value of the interface programme in Scotland, which it is looking to roll out across the rest of the UK.

As I have done in the past, I urge Conservative members to recognise that co-operation is a two-way street. I have asked them to support the Scottish Government in achieving Scottish representation on the UK Life Sciences Council and the life sciences industrial strategy implementation board, but nothing has happened and we are still being refused access to those bodies. We have also asked for information on what is happening on the UK Government’s shared prosperity fund, but very little has emerged either on that or on the trade agenda. We are keen to co-operate, but the UK Government is dragging its heels. Therefore I ask Conservative members who are present in the chamber to use whatever influence they might have at UK Government level to help us to make progress.

I will conclude by reflecting that the debate has been interesting and has contained lots of food for thought. The Scottish Government remains hugely focused on what we need to do to evaluate the innovation ecosystem, make it more effective, continually improve it, understand its impact and move towards having a Scotland in which we are not just the consumer of innovations but their inventor and manufacturer.