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The next item of business is stage 3 proceedings on the Scottish National Investment Bank bill.
Members should have with them the bill as amended at stage 2, the marshalled list and the groupings.
When we come to the first division of the afternoon, the division bell will sound and there will be a five-minute suspension to allow us to call members to the chamber. That first division will last for 30 seconds, but thereafter the first division in a group will last one minute.
Any member who wishes to speak in the debate on any group of amendments should press their request-to-speak button as soon as possible after I call the group.
I am pleased to open this afternoon’s deliberations on the bill in a consensual spirit—as is usual for me. We will support a number of amendments in the group.
Amendment 4, in my name, will make a change to the statement on the vision for the bank. It will update the reference to a low-carbon economy, so that the statement will refer to a “net-zero emissions” economy, to align with the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019, which the Parliament recently passed, and the amendments that were made at stage 2 to the bank’s objects.
Amendment 30, in the name of Maurice Golden, will make technical changes to the bank’s objects, as amended at stage 2, to ensure that they have the intended legal effect. We will support amendment 30, and I am grateful to Maurice Golden for his work on the issue. We will also support amendment 30A, in the name of Claudia Beamish. We are grateful to Claudia Beamish for her collaborative approach on the amendment.
I regret that I cannot support amendment 31, in the name of Jackie Baillie, on technical grounds, as we have concerns that it relates to reserved matters. I make clear that the Scottish Government strongly supports increasing the number of workers in Scotland who are covered by collective bargaining. We are working with the Scottish Trades Union Congress to deliver that. The percentage of workers who are covered by collective bargaining is one of the indicators that we use to measure performance against the Scottish national performance framework.
I assure all members that, despite our not being able to support amendment 31, my expectation is that the bank will contribute to the promotion of collective bargaining. The Scottish Government is committed to doing everything that it can to promote collective bargaining, within the limits of its legal powers. We will support the bank to contribute to that agenda, including in its promotion of fair work. I hope that that gives Jackie Baillie some assurance. I will be happy to work further with her on the issue, but I ask her not to move amendment 31, for the reason that I have given.
We will support amendment 32, in the name of Jackie Baillie. Promoting the fair work agenda will be a key part of the bank’s work. For that reason, at stage 2, we supported the addition of provision for a ministerial fair work direction. Amendment 32 is drafted in such a way as not to exclude organisations that are improving their working practices from accessing bank financing.
The Government will support amendment 33, in the name of Jackie Baillie, which will refine the wording of the bank’s ancillary object to promote
“the advancement of equality and non-discrimination”,
which was added at stage 2 by an amendment in my name.
Amendment 33 finds a compromise between the wording inserted by the amendment in my name and that of an amendment on the subject that Jackie Baillie lodged at stage 2. In particular, amendment 33 addresses our concern at stage 2 that if we agreed to the amendment in Jackie Baillie’s name, the bank might be seen to be entirely responsible for eliminating discrimination. Of course, the elimination of discrimination is a worthy goal, and the bank can contribute to achieving it, but such a goal can be achieved only by the actions of many different actors. Amendment 33 provides a better formulation, and I am grateful to Jackie Baillie for her joint working on it.
I move amendment 4.
Amendment 30 is a technical amendment that ensures that the amendment in my name that was agreed to at stage 2, which requires the bank to support “circular economy initiatives”, has the intended effect. I thank members for their cross-party work on the amendment.
We will support amendment 30A, in the name of Claudia Beamish, which is about promoting biodiversity.
Amendment 30A proposes a further addition to the bank’s ancillary objects, as set out in section 2, by amending Maurice Golden’s amendment 30, on the circular economy, about which I feel very positive.
Amendment 30 will expand the bank’s ancillary object of promoting “environmental wellbeing” by highlighting the promotion of biodiversity as a particular aspect of environmental wellbeing. It will mean that, when investment decisions are made, consideration will have to be given to how the financing of activities, or lending to or investing in them, will contribute to the promotion of biodiversity.
We face a climate and environmental emergency. Everyone knows what the “State of Nature 2019” reports said about the risk of extinction to many species, so I will not go into detail on that today. Current efforts to protect endangered animals and plants are insufficient to meet 13 of 20 agreed United Nations targets by 2020 in Scotland, and
Scottish Natural Heritage states that it is unclear whether the Scottish economy is operating within safe ecological limits.
Looking after the natural environment is an investment in the future and will, I believe, ensure, that the bank’s investments make strong public-good returns. The approach might also help to promote the physical and mental wellbeing of employees, through the creation of a range of green spaces and other efforts.
The bank can take biodiversity into account in a number of ways. As an example, the Scottish Government has highlighted the bank’s evaluation of the impact of its activities on biodiversity through the use of its balanced scorecard approach to performance reporting.
We can see that other countries’ failure to include biodiversity as a mandatory criterion meant that it could be sacrificed—sometimes, ironically, in favour of low-carbon projects. Regretfully, that was the case with the Green Investment Bank, which approved biomass projects that resulted in the clear felling of wetland forests in Europe and America. We must learn from those errors, and that is one of a number of reasons why amendment 30A is important. We must look to more positive examples, such as the European Investment Bank, which includes protection of biodiversity in its criteria.
References to the nature and climate emergencies must work in harmony.
I thank the Scottish Wildlife Trust and Biofuelwatch for their help with my stage 2 amendment, which I withdrew. My thanks also go to the cabinet secretary for meeting me to discuss the issue ahead of stage 3 and for offering support.
I urge members to support amendment 30A, to ensure that the ways in which we tackle the climate and environmental emergency are absolutely interlinked as the Scottish national investment bank moves forward.
I am pleased to speak to amendments 31 to 33, which are in my name.
Amendment 31 would require the bank to ensure that its investment decisions promote collective bargaining. We know that collective bargaining contributes to delivering a fairer economy for the workers of Scotland. In the Scottish Government’s own fair work action plan, it made a clear commitment to promote collective bargaining, stating that it will
“Support union access to workplaces, encourage adherence to existing agreements and support the development of new collective agreements as an integral part of Fair Work First.”
I fully support that approach. Indeed, in the programme for government, we see a commitment to
“working with the Scottish Trade Union Congress to increase the number of workers covered by collective bargaining.”
Therefore, I assumed that I was pushing at an open door. How disappointing that that was not the case.
I cannot help but observe that, if the Scottish Government is truly committed to promoting collective bargaining and to increasing the number of workers who are covered by it—as it says that it is—it should put its money where its mouth is and support amendment 31. Otherwise, the danger is that that commitment becomes meaningless.
I am not sure whether the cabinet secretary is right about rejecting amendment 31 on technical grounds, but in the interests of consensus, I will live to fight another day. Alongside the Scottish Trades Union Congress, I will take up his invitation to ensure that the bank promotes collective bargaining.
Amendment 32 covers fair work and payment of the living wage. The Scottish Government rightly talks about making Scotland a living wage and fair work nation. I completely agree with that ambition. How serious we are will be measured by whether we commit today to including living wage and fair work provisions in the bill.
The cabinet secretary knows all too well that about 470,000 people in Scotland earn less than the living wage. The bank should not in any way encourage practices that would see that number increase. It is therefore imperative that the bank is required to promote the living wage in any investment decisions that it takes. We need to reduce the number of workers across Scotland who are languishing on a wage that does not meet the rising cost of living.
Amendment 33 requires the bank to promote the advancement of equality in its investment decisions. After some to-ing and fro-ing at stage 2, I am glad that the cabinet secretary has seen the light and come to a positive compromise that will ensure that the bank will make a substantial contribution to equality.
I urge members to support amendments 32 and 33, and I look forward to meeting the cabinet secretary, alongside the STUC, to give practical effect to amendment 31 on collective bargaining.
I want to make a few comments on behalf of the Delegated Powers and Law Reform Committee, which should not take up too much time. I will concentrate on amendment 32, in the name of Jackie Baillie, because it mentions fair work.
As members will know, the committee places the need for appropriate parliamentary scrutiny at the heart of its work. Committee members were, therefore, somewhat concerned that the fair work direction, as added at stage 2, would allow ministers to define fair work without any parliamentary scrutiny whatsoever. The Scottish Government provided some context on what the definition of fair work was likely to include—
I know that Mr Simpson is a great champion of parliamentary scrutiny. However, when the Transport (Scotland) Bill went through Parliament, the Government introduced into it an entire member’s bill on the workplace parking levy without any parliamentary scrutiny. How did the member vote on that occasion?
That is an absolutely ridiculous comment from Neil Findlay. As he knows, the context for my remarks is that I am speaking as the convener of a committee. I am surprised at him—as a former member of the Delegated Powers and Law Reform Committee, he should know how these things work.
I reiterate that the Scottish Government provided some context on what the definition of fair work was likely to include. It said that it is
“work that offers effective voice, opportunity, security, fulfilment and respect; that balances the rights and responsibilities of employers and workers and that can generate benefits for individuals, organisations and society.”
I will come back to that definition in a minute.
Nevertheless, last week, the committee sought a guarantee from the Government that the Parliament would have an opportunity to scrutinise the definition of fair work to be adopted in the direction. After a flurry of letters between me and the cabinet secretary, the committee was delighted to receive such an assurance.
The committee has no specific comments on amendment 32, but I place on the record my own view of that definition of fair work, which is that it could mean anything to anybody. When we make law we need to be absolutely clear about what it means, which is why I will vote against amendment 32.
Despite what Derek Mackay said, it is clear to me that there is no disagreement that collective bargaining, as defined in section 178 of the Trade Union and Labour Relations (Consolidation) Act 1992, is clearly a reserved matter—there is no dispute about that. However, how can promoting a reserved issue be regarded as a reserved issue? It simply cannot.
I therefore ask Mr Mackay to give a little more explanation of that point in his closing remarks. I think that he must be somewhat timid in that regard—there’s something that I never thought that I would accuse him of. I am willing to be convinced otherwise if he is able to do so, but I am fairly sure that simply promoting a reserved matter cannot itself be regarded as a reserved matter.
I will speak to amendments 31 to 33, in the name of Jackie Baillie. However, before I do so, I take this opportunity to thank the cabinet secretary and other members across the chamber for their constructive engagement during the passage of the bill. The fact that we have a modest 58 amendments before us today reflects the constructive approach that has been taken by the cabinet secretary and members in agreeing to the changes that were made at stage 2.
On amendments 31 and 32, I share Jackie Baillie’s objective of supporting businesses that promote fair work, the living wage and collective bargaining. However, imposing such requirements in legislation, as part of the bank’s objects, could prevent the bank from investing in companies that aspire to become fair work and living wage employers but which require the bank’s support in the first place to achieve those objectives.
It is important that the bank is able to freely invest, as the Scottish Investment Bank does, in companies that are looking to make the transition to the fair work and living wage agenda. The amendments could exclude businesses that the bank could otherwise help on that journey. We believe that there are better ways to promote the fair work agenda outside the scope of primary legislation. For those reasons, we will not support amendments 31 to 33.
Often in Parliament, we are told that the Government would take action if only it had the power to do so. How many times have we heard that said? The bill was made in Scotland—in this Parliament—and is being pursued by the Government. In it we have the power to make provisions on collective bargaining and the living wage in relation to the bank, but the Government is saying, “We’re no gonnae do that.” That is nothing to do with the Parliament not having the power; it is to do with the Government not following through on its rhetoric that it adheres to a workers agenda.
The Parliament has the power—and the Parliament includes all the Government’s back benchers. I am looking at Tom Arthur, for example, who is the chair of the Scottish National Party trade union group. Those members have a decision to make today. Will they use their powers to pursue a workers agenda in Parliament, or will they go along with the timidity of the finance secretary?
On the only contentious issue in the group, which relates to amendment 31 and collective bargaining, if Neil Findlay will forgive me, I will take legal advice from our legal advisers, not from him, as that puts us in a strong position in relation to the legal enforceability of any bill that we pass. I am sure that I will come back to Neil Findlay’s ability to accurately amend and apply the law when we debate later amendments.
I did a considerable amount of work with all Opposition members who were willing to engage with me. On many occasions, that led to enhanced drafting of amendments in a way that we could support. The evidence of that will be seen in how the Government votes on the amendments today.
On this issue, and on others, Neil Findlay has not engaged with me and, therefore, has not crafted his positioning. That leaves me wondering whether he is more interested in posturing than in delivering legal changes and effective legislation. I am sure that, at the end of the process today, we will deliver a world-leading national investment bank that is ethical and responsible and which speaks to the issues of the day. I think that we will do that with a lot of consensus in the chamber, which is something that Neil Findlay struggles with.
I am advised that the drafting of amendment 31 means that it is outwith the scope of our devolved competence. Otherwise, I would have supported it. I share the aim of promoting collective bargaining, which I discussed, alongside the First Minister, with the STUC just last week. We will take forward actions that will do exactly that, including those relating to the fair work direction, the Scottish business pledge and other issues. We will progress that work, and, as I have said, the area is covered in the national performance framework. However, it is not appropriate to insert such a provision in the bill by amendment.
Jackie Baillie said that she will not move amendment 31 if I commit to work with her and the STUC to progress the issue, and I am clear—categorically—that I will do that. However, I am afraid that the advice that I have been given is that amendment 31, as it stands, is outwith our devolved competence, so I advise members to vote accordingly.
Amendment 4 agreed to.
We all want the bank to act as an ethical investor, and the bill process has helped us to explore the best way to achieve that. Amendment 5, along with the other amendments that we are supporting, achieves that outcome. It provides that the bank’s board must set ethical standards for the bank. Those standards must align with the bank’s objects and mission, and the bank’s board is responsible for ensuring that they are implemented.
That approach will give the bank ownership of its ethical approach and operational flexibility in how it implements the approach. However, we have commissioned drafting advice on minimum ethical standards from the Ethical Finance Hub, to inform the bank’s eventual approach. That should give members and stakeholders assurance that the bank will not invest in activities or sectors that undercut its objects and missions.
Amendment 34, in the name of Rhoda Grant, covers some of the same ground as my amendment 5. However, it does not provide for the same alignment with the bank’s objects or missions; nor does it anchor that responsibility at board level.
I have concerns about amendment 36, in the name of Rhoda Grant, which seems to follow on from amendment 34. It would require the bank to publish an annual report detailing any of its investments that
“have not met the minimum ethical standards” required of it by amendment 34. In combination, the two amendments imply that the bank could set out minimum ethical standards for investment but then ignore them. The amendments would also allow the bank to invest in ways that did not meet the standards as long as it then detailed what it had done and why, in an annual report. On that basis, the purpose of the amendments is unclear and they potentially have unintended, counterproductive consequences.
For those reasons, I urge members to support amendment 5, which I consider to be stronger, and I ask Rhoda Grant not to move amendments 34 and 36.
Amendments 8 to 12, which were lodged by Neil Findlay, were debated and voted on at stage 2. As I said earlier, when the Government could not support amendments at stage 2, I offered to work with members to address any concerns. Neil Findlay did not take up that offer. His amendments are identical to those that he lodged at stage 2, so I will briefly restate the reasons why the Scottish Government is opposed to them.
Amendment 8 seeks to prohibit the bank from supporting any company that
“enters into a tax avoidance arrangement ... or ... carries out tax evasion.”
I set out at stage 2 that tax evasion is an illegal activity and that the bank will not engage with organisations that evade tax. When a company commits tax evasion after it has received investment from the bank, standard contractual arrangements will allow for the money to be recouped.
The Government’s record shows that we take the issue of tax avoidance extremely seriously. However, amendment 8 is impractical and risks disproportionately impacting on small and medium-sized enterprises that seek finance from the bank. It would require the bank to conduct extensive due diligence into the tax affairs of every company that it considered investing in. Due diligence costs are usually borne by the company that is seeking investment.
Amendment 9 seeks to prevent the bank from investing in companies that do not pay the living wage. However, the living wage as defined in the Procurement Reform (Scotland) Act 2014 is not the same as the real living wage. I consider that we should support businesses that are working towards paying their staff the living wage rather than exclude them. The fair work direction that we will set for the bank can address that issue in a flexible way and is therefore a better approach.
Amendment 10 would prohibit the bank from investing in companies that make use of zero-hours contracts. This Government opposes the inappropriate use of zero-hours contracts. We are developing our fair work first policy and are engaging with key stakeholders, including the STUC. There is a general debate about how such contracts can benefit the employer and the worker. However, amendment 10 assumes that all zero-hours contracts are exploitative, so it is too blunt and inflexible.
Amendment 11 would restrict the bank from giving finance to a company that
“enters into a contract with an umbrella company”.
That makes the error of judging a company by its structure rather than by its conduct. Umbrella companies are legitimate structures in the eyes of the law. Some companies may act inappropriately in that respect, but it is unfair to paint all umbrella companies with the same broad strokes.
Amendment 11 would likely be highly restrictive. An umbrella company structure is, for example, frequently used in management buyouts, and the bank might want to make investments to facilitate management buyouts.
Amendment 12 concerns trade union recognition. The Scottish Government is committed to increasing workforce engagement and furthering collective bargaining. However, the approach in amendment 12 is similarly blunt to that taken in Neil Findlay’s other amendments.
Amendment 12 would restrict support to companies whose workforce was big enough to be eligible for trade union recognition. Even if that is not intended, that may well be the practical effect. It could also preclude investments in companies in which workers had not sought trade union recognition and therefore a company had not even refused to give that.
Collectively, the amendments in the name of Neil Findlay risk too many unintended consequences. We have tried to address the shared objectives behind those amendments by supporting amendments elsewhere and by supporting the requirements for the fair work direction
I will speak to amendments 34 and 36, in my name, and the other amendments in the group. A publicly owned Scottish national investment bank must maintain the highest ethical standards. In the past, banks have failed to do that, which is why we must ensure that the Scottish national investment bank does it. We need to ensure a commitment to minimum ethical standards from the very outset.
I lodged amendments to that effect at stage 2, and I listened to what the cabinet secretary said at the time. I then lodged these amendments, which take account of his comments. Amendment 34 ensures that the bank, through its articles of association, must draw up an ethical standards framework that outlines its minimum ethical standards, which will be open to scrutiny by the Parliament.
The cabinet secretary stated at stage 2 that the bank must develop and take ownership of its own ethical stance, and amendment 34 allows for that. However, like any other aspect of a publicly owned company, the bank’s ethical stance must be open to scrutiny, and that scrutiny is missing from the Government’s amendment 5. I believe that my amendment is better than the Government’s and should therefore be supported.
Amendment 36 foresees that there may be times when the bank’s investments do not meet its ethical criteria, and amendment 34 stipulates that the bank must explain its reasoning and the steps it will take to remedy any damage that is caused. It also allows those decisions to be scrutinised
and the bank to be held to account.
I support the amendments in this group that were lodged in the names of my colleagues Jackie Baillie and Neil Findlay. It is important that a publicly owned bank that is investing public money should adhere to the highest standards, and those amendments will ensure that it does.
I declare an interest as the chair of the Public and Commercial Services Union parliamentary group and as a member of Unite the union. On the issue of engagement, the cabinet secretary made no effort whatsoever to engage with me on any of the amendments. That is entirely the same valid point that the minister makes. [Interruption.]
In relation to the drafting of legislation, we also get advice from the Parliament on whether it is competent. We do not just take what the minister says at face value.
Amendment 8 is about the ethical standards that the bank operates in line with, in relation to tax avoidance and evasion—the definition of which is in section 63 of The Revenue Scotland and Tax Powers Act 2014. In the committee, I highlighted the case of Amazon, a company that paid more tax to Fife Council in the form of rates than it did to the Treasury in the form of corporation tax. That is simply wrong.
The Scottish national investment bank should not lend to companies that engage in such activities; rather, it should encourage good corporate governance and corporate responsibility, which includes paying the taxes that are owed. The bank should not lend to tax evaders or avoiders—we should make that clear and up front in setting the tone for the ethical approach to lending that the bank will adhere to.
In the committee, the cabinet secretary claimed that that approach would place financial burdens on small and medium-sized businesses that seek investment, but I believe that that is a complete red herring. If that approach to lending was made clear from the outset, companies would soon realise that, if they were involved in such avoidance or evasion practices, they need not apply for funding, as those practices would be exposed when they attempted to apply for funds.
Amendment 9 indicates that the Scottish national investment bank will play an important role in the Scottish economy through its lending policy and will be able to exert leverage over those companies that apply for financial support. It will do that by driving the fair work agenda, which enshrines both rights and responsibilities. It should do that by positively prioritising lending to companies that pay the real living wage to their employees, as a minimum, and by making it clear that it will refuse to lend to enterprises that do not pay the real living wage.
The Scottish Government talks a good game about its fair work agenda and, as I said earlier, regularly claims that it does not have the powers to embed such issues in legislation. Well, today, we have those powers. Today, we can take action to advance the living wage. Members have the opportunity to do so by voting for amendment 9.
The aim of amendment 10 is to ensure that the bank does not lend to companies that employ people on precarious contracts and deny them their rights.
On amendment 11, the bank should not lend to companies that use payroll or umbrella companies that are set up deliberately to rip off workers and the taxpayer. We know about the practices of umbrella companies, particularly in the construction industry. They are a scam, and the Scottish national investment bank should not fund or encourage them.
It should also not lend to companies that fail to recognise trade unions, which we know are best placed to guarantee the rights of workers. Unionised workplaces are safer and have better pay, more stable workforces, better staff retention and fairer working conditions. On amendment 12, the Scottish Government’s fair work action plan states that it will
“Continue to support strong trade unions ... Promote collective bargaining ... Promote Fair Work in the collaborative economy” and
“extend Fair Work criteria to every type of grant, funding stream, and business support budget open to us”.
Here is a great opportunity to do just that. Here is a funding stream. Here is a business support budget—money given to a public sector bank. Will we today see the Government show that it is willing to take action to support its rhetoric? This is a tremendous opportunity to use the levers of Government to promote strong trade unions and collective bargaining and to extend fair work criteria to grants and business support.
I am pleased to speak to amendment 1, in my name. The Economy, Energy and Fair Work Committee had a strong view that the bank must invest more widely than in the private sector alone. I want the bill to maximise the impact of the bank by developing a financial institution that allows organisations such as co-operatives, social enterprises and the third sector to secure finances.
We know that social enterprises and co-operatives pay a key role in regenerating some of our most hard-pressed communities. By enabling the bank to invest in them, we help our economy to achieve inclusive growth. I hope that members will support amendment 1.
I speak in support of amendment 1, in the name of Jackie Baillie, which says that the bank may give financial assistance to third sector bodies. As Jackie Baillie has highlighted, one such body could be a co-operative. I declare an interest as a member of the Scottish Co-operative Party group of MSPs. Rural and urban co-operatives in many sectors enable member empowerment and support for inclusive action. I ask the cabinet secretary whether he will commit to meeting me and some of those who represent the co-operative sector to take forward discussions about this.
I propose to address amendments 8 to 12, in the name of Neil Findlay, which are intended to prohibit the bank from investing in companies that do not pay the living wage, companies that employ workers on zero-hours contracts, companies that engage umbrella companies and companies that do not recognise trade unions. All of those issues were previously debated at stage 2.
The Scottish Conservatives have a number of difficulties with those amendments, as was debated at stage 2. The bank should not be prevented from investing in firms that aspire to become living wage employers, recognise trade unions or promote the fair work agenda. In fact, investment by the bank may be the transformational change that enables those companies to achieve those very objectives. In all those cases, small companies would be penalised if they could not access financing from the bank. That would be inconsistent with the bank’s overall objectives of increasing economic growth in Scotland and investing in fast-growing SMEs.
We support amendment 1, in the name of Jackie Baillie, which clarifies that the bank may give financial assistance to third sector bodies, including social enterprises. That is an important amendment, which will bring social enterprises into the financing remit of the bank.
Amendments 34 and 36, in the name of Rhoda Grant, would impose an obligation on the bank to publish a report each year, setting out whether any of its investments—out of thousands of investments each year—have not met minimum ethical standards. We believe that amendment 5, in the name of the cabinet secretary, sets out a better formulation for ensuring that the bank’s investments are made in a manner that is consistent with agreed ethical standards. It would impose an obligation on the bank’s board to have in place proper processes to ensure that the bank’s investment decisions are made in accordance with the agreed ethical standards. Therefore, we will support amendment 5 but not amendments 34 and 36.
I have just a few comments to make, Presiding Officer. I will make a further point on Rhoda Grant’s amendments. It may well be the case that the investment strategy can be reviewed by ministers, as can the ethical statement. There will also be an annual report on investment performance. Therefore, there will be scrutiny by ministers, and, of course, ministers are held to account by the Parliament through committees and in other places, including through questions. I imagine that the Parliament will want to hold the bank to account as well.
The way in which Rhoda Grant’s amendment 36 is drafted almost creates an escape clause—“You can give us reasons why you haven’t kept within our ethical approach if you publish them in a report”—whereas my amendment clearly puts the responsibility on the board. We expect the board to live within the ethical strategy and, as I said, there are many routes to holding the board to account for that ethical strategy, having appropriate governance arrangements and allowing the bank to have operational independence. There are also areas in which we will want minimum ethical standards to apply, but, fundamentally, investments should be made in line with the missions of the bank, which are already set out as we build the bank. Further, we have agreed at stage 2—its consideration will be completed today, at the end of stage 3—a process by which missions can be changed only through consultation.
I would argue that there is a very strong ethical investment approach in the bill, with strong governance arrangements that ensure that responsibility rests appropriately with the board.
I make the point to Neil Findlay that every other Opposition member managed to find me to make the necessary drafting changes to amendments that would achieve the outcomes that they wanted to achieve. We will not agree on every point, as some of the amendments will show, but, where we have shared objectives, we have been able to craft amendments that can be supported by the Government and members of the Opposition.
That sense of constructiveness was absent from Neil Findlay’s comments. He said that today is “a tremendous opportunity”. I do not think that he shares my view that today is a tremendous opportunity to build a bank to be proud of; I think that Neil Findlay thinks that today is a tremendous opportunity to promote himself. That is really unfortunate when the work that we have done with other Opposition members is crafting a bank that we can all be proud of. Some of the unintended consequences—
On a point of order, Presiding Officer. This is a legislative process in which members are entitled to lodge amendments to bills, irrespective of what the cabinet secretary thinks of me or any other member. We are entitled to lodge amendments to bills without the rubbish that is coming from the cabinet secretary.
I have given the example that Neil Findlay’s amendment 11 would rule out the provision of funding for management buyouts. Management buyouts have helped us to save jobs and save companies from going under. That is one example of an unintended consequence of a poorly thought through amendment.
For those reasons, I encourage members to support the Government’s amendments.
The amendments in this group are minor technical ones. Amendments 6 and 7 fix some of the language of the balanced scorecard provision that was added at stage 2.
Amendments 16 to 19 make fixes to the advisory group section that was also added at stage 2. In particular, amendment 16 adjusts section 9A to reflect the on-going nature of the advisory group, and amendment 17 links the group’s remit to the bank’s objects, as set out in section 2.
Amendments 26 and 27 are fixes to how the bill refers to state aid in the light of Brexit developments since the bill was introduced. They require Government financing of the bank to be done in accordance with whatever state aid regime emerges to replace the European Union’s.
I ask members to support these technical amendments.
I move amendment 6.
Amendment 6 agreed to.
Amendment 7 moved—[Derek Mackay]—and agreed to.
The Presiding Officer:
The result of the division is: For 24, Against 90, Abstentions 0.
Amendment 12 disagreed to.
Amendment 1 moved—[Jackie Baillie]—and agreed to.
Amendment 2 is substantially the same as an amendment that was defeated at stage 2, but I believe that the principles that underpinned that amendment are important, which is why I have brought the matter back at stage 3.
At stage 2, the cabinet secretary said that local authorities will have a critical role in the affairs of the bank, which I welcome. However, in many other countries, local authorities and regional authorities have a much fuller role in banks—for example, in Germany, the role of the Länder in the KfW, of which they are full members.
Section 1 of the bill provides that the sole shareholder of the bank shall be the Scottish ministers. Throughout the process of the bill, my preference has been to include local authorities as members of the bank, but that raises some difficult technical problems, so I have consistently left the matter to one side.
Instead, amendment 2 provides—fairly straightforwardly—that
“at least two non-executive directors are to be appointed by Scottish local authorities,”
Scottish local authorities are critical partners in our economic development and should play a much bigger role in it: we will soon hold debates on that in relation to other bills. Their perspectives and experience should be available to the board of the bank. Through amendment 2, local authorities would be able to exercise the power to appoint two non-executive directors every four, five or six years—however long a term of appointment would be, which is governed elsewhere in the bill and in the articles of association. The local authorities would not necessarily need to appoint councillors, but would be free to appoint anybody whom they saw fit. For example, former chief executives of local authorities would be good representatives on the board.
Under amendment 2, local authorities would not be directly involved in the affairs of the bank, but would have a stake in it through their interest in the board. The interests of local government would be reflected, at least in part, in the appointments that it might make.
Amendment 2 is fairly straightforward, so I look forward to hearing what members think about it. I will support all the other amendments in the group.
I move amendment 2.
Amendments 13 and 28 are tidying amendments. Amendment 13 would leave out a change that was made by my amendment at stage 2. Its provisions would be replaced by amendment 28, which will reposition them alongside other sections that are about ministers’ functions. It is imperative that non-executive directors have experience and knowledge of the issues that workers and businesses in Scotland face. Therefore, the amendments provide for the Scottish ministers to consult representatives of trade unions and industry when making appointments.
I will speak to amendment 14. The bill is silent on pay, pensions and rewards for staff at the bank, and it devolves responsibility for those important matters to the board and chief executive.
The Scottish national investment bank will be established as a non-departmental public body. It will be part of the public sector landscape and will be covered by the public sector equality duty.
The terms and conditions of employees should at least match those that are applied across the public and governmental sector, including on pay, access to a defined benefit pension scheme and other rewards. The bank should be aligned with Scottish ministers’ public sector pay policy and the fair work agenda. A defined contribution scheme does not align with what is offered elsewhere and would mean lesser pensions for staff.
The Scottish national investment bank must not be allowed to repeat the failures of the banking sector in its lending practices, its customer care or any of the other dodgy practices that we have seen over the years, and it should not replicate the commercial banks in downgrading the pensions of its staff. It should offer the same pensions as are offered in other areas of the public sector that are covered by pay policy, which means that staff should be covered by a defined benefit scheme.
The cabinet secretary had his officials scurrying around to try to find an example to justify a pensions downgrade, and they came up with the rather obscure example of Business Stream, which is a subsidiary of Scottish Water. If that is the only example that he can find to justify the case, it is a very thin case indeed. The answer is not to ignore the overwhelming majority of public sector pensions and to have a race to the bottom, but to provide Business Stream and SNIB staff with the same quality of pensions as others and to level the playing field.
If members vote against amendment 14, they will condemn staff members—their constituents—to a lesser pension than those of other public sector workers.
On amendments 14 and 15, across the Government and agency sector, payments of performance-related bonuses have for a long time been omitted from pay awards. Recruitment and retention supplements are used, particularly in core Scottish Government roles, and golden hellos and other such incentives have been introduced in other areas, including teaching and social work. Those are regularly reviewed through market pay comparisons in order to ensure that the case is robust, and to reduce the risk of equal pay claims.
The Scottish national investment bank staff who transfer from Scottish Enterprise will have their terms and conditions protected: those terms are the basis for a fair package for all Scottish national investment bank staff. We do not want to create a two-tier workforce; colleagues working side by side on different contractual arrangements will create division within the workforce, which would not be good for the bank’s culture or its image.
Performance bonuses and target-driven incentivised pay for senior executives and staff will repeat the mistakes that we have seen in the commercial banking sector. We need to learn lessons from that.
Before I speak to amendment 29, I will deal with the other amendments in the group. Amendment 2, in the name of Andy Wightman, is similar to an amendment that he lodged at stage 2. I understood from his remarks then that his proposal is not meant to give local authorities a direct role in the bank but to provide a means for their interests to be represented. As I said then, the idea of local authority interests being directly represented on the board is not reflected in the wider governance structures of the bank. There are other more appropriate routes by which they can engage in wider economic matters.
The board will be responsible for ensuring the success of the bank, and will be held accountable for its performance on that by Scottish ministers and, through them, Parliament. The bank will operate as a public limited company that has a recognisable governance structure and arrangements between the board of directors and the shareholder. Therefore, I cannot support amendment 2.
I support amendments 13 and 28, in the name of Rhoda Grant. They are technical amendments that simply move to the appropriate place in the bill the provision that will require ministers to have regard to the interests of workers and businesses when appointing non-executive directors.
Amendments 14 and 15, in the name of Neil Findlay, are similar to amendments that he lodged at stage 2. I set out at that time the reasons why the Scottish Government opposes the proposal. Our primary concern is that providing for elements of the banks remuneration package in the bill would cut across the operational independence of the bank.
The bank is a unique organisation in Scotland’s public sector landscape, requiring staff with specialist skills and experience, so we should recognise that a particular approach to the bank’s remuneration package will be required. The proposed approach is informed by the experiences of the British Business Bank and the Development Bank of Wales, in line with the recommendation that we received from the committee in its stage 1 report.
Members should also note that section 8 of the bill includes a direction-making power in relation to remuneration, which can be exercised if necessary. Further, there is the power in section 14A to issue fair work directions to the bank.
We also note that there are technical deficiencies in the drafting of amendment 15. It refers to schedule 5 of the Freedom of Information (Scotland) Act 2002, but that act does not have a schedule 5.
I urge members to vote against amendments 14 and 15.
Amendment 29, in my name, is a technical amendment that clarifies that the Commissioner for Ethical Standards in Public Life will regulate the appointment of non-executive directors to the bank’s board, but not the appointment of executive directors.
Amendment 2, in the name of Andy Wightman, would require at least two non-executive directors to be appointed by Scottish local authorities. I agree with Mr Wightman that local authorities are critically important partners in economic development, and that their perspective and experience should be available to the board of the bank.
However, that will be best achieved through stakeholder engagement and consultation, which is already hardwired into the legislation, rather than by giving various stakeholders the power to appoint directors to the bank’s board. Having two directors appointed by local authorities would risk confusing the bank’s governance structure, would confuse the accountability of the board of directors and would undermine the capacity of the Executive to hold the entire board to account for its performance. Under Scottish law, directors of a public limited company have a direct fiduciary duty to act in the best interests of shareholders, which would cut across the interests of local authorities.
Amendment 15, in the name of Neil Findlay, would require the remuneration policy of the bank to be hardwired into primary legislation. That would impair the operational independence of the bank to design a proper remuneration structure that is appropriate for a financial services institution that is also a public body, and which must be able to attract the right people to make the bank and, more important, its investments a success. We favour the approach that was proposed by the Economy, Energy and Fair Work Committee at stage 1, based on a wide array of evidence that it heard from stakeholders, to benchmark the bank’s remuneration policy against similar structures that are used by the British Business Bank and the Development Bank of Wales, in order to arrive at a package that is competitive but not excessive.
For those reasons, we cannot support amendments 2 and 15. We will support amendments 28 and 29.
Dean Lockhart said that by passing the amendment, we would confuse the governance and accountability of the bank. He referred to the fact that, under existing law, directors have a fiduciary duty to shareholders. That is correct. He argues that my amendment would “cut across” that, but it would not, precisely because directors have a fiduciary duty to shareholders. Regardless of who appoints non-executive directors, their fiduciary duty under the law is to shareholders, which in this case will be the Scottish ministers. Dean Lockhart has put forward a non-argument; it is the argument that was presented by the cabinet secretary earlier. The directors will have a duty, regardless of who appoints them, to discharge their duties in accordance with the articles and memorandum of association, and in the interests of the shareholder—the Scottish ministers. Nothing in my amendment 2 would affect that.
I am disappointed by the response, but not surprised.
I am pleased to speak to my amendments 35 and 37.
The Scottish Government recognises equality as an overarching principle, but equality was not included in the bill as introduced. Members of all parties know that if equality is bolted on later, we run the risk of it not being a priority or it being considered much too late in the process to make a meaningful difference.
The committee received evidence that other public investment banks have successful gender equality strategies. Scotland should ensure that the bank starts its life on the right footing by sharing in that positive practice.
The strategy will enable the bank to consistently advance and mainstream gender equality throughout its investment and staffing policies and any other programmes or policies that it develops. That will ensure that gender equality is an aspect of all the bank’s work and is not merely an add-on.
The strategy will assist the bank in meeting its legal obligations under the public sector equality duty. That is important, because research shows that there has been a significant decline in performance of the duty since its introduction. Today, the Scottish Government and this Parliament have the opportunity to create a financial institution that discourages discrimination, advances equality and sets the standards for future legislation.
I will turn to amendment 37, because it is all about the data: if we care about something, we should measure it. The Government’s equality impact assessment demonstrates the lack of available data and research on equalities in finance, so my proposed approach could make a difference to how the bank operates. Reporting on the impact of the strategy will enable visibility and accountability, helping to ensure that the bank remains a leader when it comes to gender equality, as well as providing vital data.
To date, public bodies have had limited success in gathering and utilising intersectional gender disaggregated data that relates to employees, service design and service delivery. Amendment 37 presents an opportunity for the bank to break that trajectory and integrate positive data practices, right from the beginning. I urge members to support amendments 35 and 37.
I move amendment 35.
I am happy to say that the Government will support Jackie Baillie’s amendments 35 and 37.
Throughout the bill’s passage, Jackie Baillie has raised the bank’s contribution to advancing gender equality. I am grateful to her for her work on the subject and for working with the Government after stage 2 to develop amendments 35 and 37. I also thank Engender and Close the Gap, who contributed their experience and expertise to this work.
At stage 2, Jackie Baillie lodged similar amendments, but I was concerned that some of their provisions were too prescriptive and that there was too much duplication between them and the Scotland-specific equality duties to which the bank will be subject. I am pleased that those issues have been addressed in amendments 35 and 37, which should support the bank in its compliance with the Scotland-specific equality duties with regard to gender. By giving the bank flexibility in how it undertakes that work, the approach in the amendments complements the scope and timing requirements of the Scotland-specific equality duties.
Those duties, of course, cover all the protected characteristics. For clarity, I will say that it is anticipated that the bank can make a positive contribution to advancing equality in a number of areas. Amendments 35 and 37 take an exceptional approach by focusing on gender equality. In the Government’s view, an exceptional approach is warranted in this case. There is a clear and well-defined evidence base that shows that women-led businesses face issues when they seek finance and that women are underrepresented in the financial services sector. The bank can help to address those issues. Therefore, I encourage members to support amendments 35 and 37.
I will be brief, in the interests of time.
On the basis of evidence that stakeholders gave to the Economy, Energy and Fair Work Committee, we will support Jackie Baillie’s amendments 35 and 37, which will require the bank to prepare a gender equality strategy and report to the Parliament on it every two years.
Amendment 3 is a slightly modified form of an amendment that was lodged at stage 2.
The committee was concerned that missions set by ministers would not be subject to a great deal of scrutiny, so I welcome the cabinet secretary’s amendments on setting strategic missions. As set out in the bill, missions were not subject to any scrutiny, but the cabinet secretary’s amendments to section 11 today rectify that and provide an appropriate balance between the interests of the Scottish ministers as shareholders and their interests in terms of their accountability to Parliament.
Amendment 3 is a straightforward amendment that puts in the bill the fact that there must be
“a strategic mission for the Bank stating that the Bank is to undertake investments that will facilitate the transition to a net-zero emissions economy.”
We know that that is already the Scottish ministers’ intention—that is fine and we welcome that. However, given that the transition to a net zero emissions economy is the most urgent task facing the globe, and facing governance across the world, it is appropriate to have that requirement in the bill so as to remove any doubt whatsoever that it is just one more strategic mission among many others. That is particularly so in light of the fact that the transition to a net zero emissions economy will take some time, but is of considerable urgency.
I move amendment 3.
Amendments 20 to 25 are all technical amendments. Amendments 20 to 22 divide up section 11, which had become too long as a result of stage 2 amendments. Amendment 20 covers the process by which the Government can set, modify or end a strategic mission for the bank, and it includes a clarification that missions can address both socioeconomic and environmental challenges. It better describes the challenges that we expect the bank to address through its missions. Amendment 23 is consequential to amendment 20.
Amendment 21 moves the consultation process for the setting, modifying and ending of missions that was agreed at stage 2 into a section of its own. It also puts it beyond doubt—because lawyers like such things to be spelled out—that the consultation that is done before the bill receives royal assent counts as consultation. That means that we can get the first missions in place in time for the bank’s establishment.
I am sure that Dean Lockhart will explain in more detail his amendments 21A and 21B. They address the issue that I raised regarding Dean Lockhart’s stage 2 amendment, which in effect risked giving the bank’s board a veto
over the missions to be set for it. Amendments 21A and 21B, however, are perfectly sensible and I am pleased to support them.
Amendment 22 clarifies and moves into a section of its own the process, which was agreed at stage 2, for the bank’s board to propose that a mission be set, modified or ended.
Amendment 24 corrects a misplaced term in the bill.
Amendment 25 concerns the review of the bank’s performance in relation to the national performance framework. It tidies up, at a technical level, a stage 2 amendment by Jackie Baillie. I agree that the bank’s performance should be reviewed with reference to the national performance framework. I thank Jackie Baillie once again for collaborating on that issue, so that it is now best accounted for in the bill.
I appreciate the motivation behind Andy Wightman’s amendment 3, which is to provide for a mission regarding the transition to a net zero emissions economy, but I cannot support the amendment for the following reasons. As recommended by the committee in its stage 1 report, I intend that all proposed missions for the bank will be subject to consultation, and that is now set out in the bill. Andy Wightman’s proposal to include a mission in the bill would bypass that step and would not afford the Parliament or other stakeholders that opportunity.
Amendment 3 is also likely to be, in effect, an inflexible provision. I point out to Mr Wightman that the language that was used in the implementation plan in 2018 is now quite outdated in comparison with the terms of the Government’s current climate change targets. That makes the point that it would be inappropriate to include the mission in the bill. It is not inconceivable that further changes might be required sooner than we might have anticipated. If that were to be the case, the Government has provided for a meaningful consultation process, so that this will be done in a transparent and robust way, while retaining a greater degree of flexibility.
The Scottish Government has already very clearly committed to the idea that supporting Scotland’s just transition to net zero by 2045 will be the bank’s primary mission, which has been informed by extensive stakeholder engagement. In particular, the mission references a just transition, clarifying that transitioning to net zero should be done in a way that maximises economic and social opportunities, builds on Scotland’s existing strengths and mitigates arising societal risks. That is not covered by amendment 3. For those reasons, we cannot support amendment 3.
The Scottish Conservatives welcome the cabinet secretary’s amendments 20 and 21, which include a requirement to undertake a public consultation in relation to any change or modification to the bank’s strategic missions.
Amendment 21A, in my name, would require that, before they made any change or modification to those missions, the Scottish ministers would have to
“first consult, and seek to reach agreement with, the Bank’s board”.
That would mean that those who will be most closely involved with implementing the bank’s strategy and are most knowledgeable about its operation—in other words, its board of directors—would have prior rights of consultation on changes proposed by the Scottish ministers, giving the board the chance to improve or modify such changes. That is in line with best practice followed elsewhere—for example, in the British Business Bank’s shareholder agreement—and it would give the board assurance that the Scottish ministers would consult it first, before making significant changes to the bank’s direction.
My amendment 21B provides that the bank’s board need not be consulted on the first set of missions that the Scottish Government proposes, because those would be subject to public consultation.
Amendment 3, in the name of Andy Wightman, seeks to hardwire into the bill a requirement that one of the strategic missions of the bank is the transition to a net zero emissions economy. The Scottish Conservatives agree with the sentiments of that amendment. On the basis of all the announcements that the Scottish Government has made to date, we fully expect that to be one of the bank’s core missions. However, the fact is that—as the Economy, Energy and Fair Work Committee has agreed—strictly speaking, the setting of the missions is an executive function that is within the powers of the Scottish Government under section 11. It would therefore not be appropriate for such a mission to be set out in the bill. That said, the Scottish Conservatives look forward to the cabinet secretary’s confirming, in the weeks ahead, that a net zero emissions economy will be one of the core missions of the bank.
Amendment 22, in the name of the cabinet secretary, is based on an amendment that I lodged at stage 2, which would have allowed the bank’s board of directors itself to submit to the Government proposals to change the strategic missions of the bank. As the board will be the body that is most closely involved in implementing the bank’s strategy, it will be important that it should be able to make its own proposals to the Government to update or change the bank’s missions to take account of developments that the board sees in the business and financial landscape and in its implementation of the strategy.
For those reasons, the Scottish Conservatives will support amendments 20 to 25, but will not support Andy Wightman’s amendment 3.
I intend to press amendment 3. The cabinet secretary argued that giving effect to amendment 3 would preclude opportunities for consultation. I do not think that any member here would think that the strategic mission of the bank—to facilitate the transition to a net zero emissions economy—needed to be debated in any way. Indeed, the cabinet secretary supported it, as did Dean Lockhart. Therefore to say that it cannot be subject to consultation is a bit ridiculous. That mission would be the primary mission for the Scottish ministers in this context. If that is the case, why is that not stated in the bill?
Dean Lockhart said that setting the missions should be an executive function, and I agree that the committee was concerned about that. However, the committee was also concerned about the scrutiny of the missions, and we have dealt with that. The mission relating to net zero emissions is so important and fundamental that there is absolutely no reason why it should not be a statutory mission in the bill. To be clear, I do not doubt the Scottish ministers’ intentions in that regard. I do not at all question their commitment to having it as a primary mission, but the matter is of such overriding importance that we need protections.
I will give some clarification that might give Andy Wightman further reassurance. In relation to our climate intentions, we have set more ambitious and challenging targets than had been set when the proposals for the bank were first conceived. We have moved from wanting emissions reductions to wanting a net zero economy. I am making the point that it should not require changes to primary legislation to improve on our position. We can do that through the mission-setting process and the consultation therein. Being dependent on changing primary legislation in order to be potentially even more ambitious would be unnecessary and burdensome and would not be in keeping with our shared ambition in that regard. We are trying to allow our ambitions to be progressed, not constrained.
It is the last group, and I am pleased to speak to amendment 38, in my name.
We are now in a new decade, yet the gender pay gap today is still as high as 5.6 per cent. The only way that employers can be sure that they are providing equal pay is to carry out an equal pay review. An equal pay review is the methodology that is used to uncover unequal pay, yet we see complacency among employers. Research by Close the Gap on employer action on the pay gap found that, although 94 per cent of employers surveyed had an equal pay policy, less than one third had undertaken an equal pay review, and only 3 per cent had taken any action to address pay gaps. Requiring the bank to do an equal pay review would be a really positive step and would be vital in ensuring that the bank overcomes the issues around unequal pay and the gender pay gap that have characterised other financial institutions. By agreeing to the amendment, members will make a difference to closing the gender pay gap, and I commend the amendment to the chamber.
I move amendment 38.
I am happy to say that the Government will support amendment 38, in the name of Jackie Baillie. Carrying out periodic equal pay reviews is a sensible proposal for the bank to consider. An equal pay review can help an organisation to ensure that its pay policy is being implemented fairly and to address one of the contributing factors to a gender pay gap. We know that there are gender pay issues in the Scottish and wider UK economies, and that the financial services sector has particular experience of such issues. It is therefore important that the bank keeps its house in order. Amendment 38 will contribute to that work, and I encourage members to support it.
The Presiding Officer:
That ends consideration of amendments. As members may be aware, at this point in the proceedings,
I am required under standing orders to decide whether, in my view, any provision of the bill relates to a protected subject matter—that is, whether the bill modifies the electoral system or franchise for Scottish parliamentary elections. It is my view that the bill does no such thing and therefore does not require a supermajority at stage 3.