The next item of business is a debate on delivering economic transformation—Scotland’s inward investment and export growth plans. I invite members who wish to participate in the debate to press their request-to-speak buttons now or as soon as possible.
Scotland is an outward-facing nation; we take our place in the world seriously and work hard to build our links with international partners. That is true in the field of internationalising our economy, which the Scottish Government takes seriously, and it is why we published “A Trading Nation—a plan for growing Scotland’s exports” three years ago and “Scotland’s Inward Investment Plan: Shaping Scotland’s Economy” two years ago.
Both plans are evidence led and action focused and answer the hard questions about where the Scottish Government should place its resources to maximise returns. Those plans are delivering results—I will come to them in a minute—which is why we have published updates to make members aware of the actions that we are taking to deliver on the strategies and of the results that are being delivered as a consequence.
It is true to say that we have faced more than our fair share of challenges over the past few years, such as Brexit and its impact on business growth and businesses’ ability to export; the Covid pandemic; and the current cost of living and energy price crisis, which is the consequence of events that we are aware of. Despite those challenges, the export growth plan and the inward investment plan have delivered results, and I take the opportunity to thank team Scotland for the work that it has put in to ensure that the plans have delivered.
First, I will talk about exports. In recent years, non-oil and gas exports from Scotland have grown at twice the rate of those from the rest of the United Kingdom. Last year, such exports from Scotland were up by 5.7 per cent, while the UK number was down by 2.9 per cent on the same period two years previously. Scotland is the only part of the UK that can boast a positive balance of trade in goods—at plus £2.2 billion—compared with a deficit across the rest of the UK.
On inward investment, the EY survey results—the gold standard on inward investment comparisons—that were published earlier this year show Scotland’s figure increasing by 14 per cent, compared with increases of 2 per cent across the rest of the UK and of 5 per cent across Europe. The results show that Scotland is cementing its position as the leading part of the UK for attracting inward investment outside London and that 122 projects were attracted into Scotland, which are creating almost 8,000 jobs. They show that that benefit is happening across Scotland—Edinburgh was ranked the number 1 city in the UK, with Glasgow in fourth place, Aberdeen in joint eighth and Dundee and Livingston also making it into the top 20. Five Scottish locations were in the top 20 across the UK. According to the EY results, the percentage of investors that see Scotland as the most attractive part of the UK has increased from 7 per cent to almost 16 per cent.
The EY survey is well known, but it focuses largely on the number of projects. An alternative survey that the Centre for Business & Economic Research conducted, which looked at gross value added, shows Scotland behind regions such as the midlands and the north-west. What work has the Scottish Government done to look at GVA? What can be done to improve our position against those regions of the UK?
That is a good point. If the member has read the original inward investment plan, he will recognise that we have done considerable analysis to understand spillover benefits—we recognised that the east of England is the leading part of the UK on maximising those benefits. We did considerable analysis of what the additional benefit to Scotland’s economy would be if we emulated that area’s performance, as opposed to being average with the rest of the UK. A big focus of the plan is to deliver on those benefits, and work is under way to further analyse that, although the member will appreciate that that is not as easy to analyse as some other data.
We are conscious of and focused on maximising the spillover benefits and spreading them across the country.
As the member recognises, the EY report is clear that, on projects, which it measures, Scotland is significantly outperforming most other parts of the UK.
That demonstrates the clarity that comes from having a focused and evidence-based strategy and co-ordinating across team Scotland to deliver on that. The consistent message to investors over a number of years has delivered the results. Those results did not happen by accident.
I acknowledge the headline figures that the minister gave for foreign direct investment, but does he recognise that not all foreign direct investment projects are created equal and that there are developmental projects and dependency projects? Is the Government investigating whether the projects are adding value to the Scottish economy or taking Scottish economic sovereignty out of the country?
Of course I understand that, and I will talk about the approach in the inward investment plan to focusing on maximising values alignment between what we are trying to achieve and what inward investors are trying to achieve, for the benefit of Scotland’s economy.
The export plan focused on answering four key questions. First, on which markets we should focus on, the plan was very clear on our top tier of 15 and our second tier of 11 international markets. It looked at which sectors we should prioritise. It said that we should support small, medium-sized and large businesses through a smart segmentation process, which has been delivered to great effect. It also looked at how to mobilise team Scotland, whether that is via Scottish Development International and its specialists in markets or through our GlobalScot network, our trade envoys or universities’ alumni. The whole of team Scotland, internationally, is delivering on that plan.
The inward investment plan was about understanding where there were global opportunities—where the flows of FDI met Scotland’s strengths. We identified nine sub-sectors where Scotland delivered those strengths, and we focused on ensuring that we went after those areas of opportunity. That clarity has delivered the results. We had a clear focus on the regional impact of the results and, as I mentioned, we are as a consequence seeing benefits across Scotland, including in rural areas and elsewhere. Many of the examples in the update that has been published today are of businesses that have invested in rural parts of Scotland.
We focused on the spillover benefits, and I have mentioned their impact. Importantly, values were absolutely central to our inward investment plan. We look for inward investors that share our values on net zero, the wellbeing economy and delivering living-wage jobs as a minimum—often, such jobs are high paying—and we look for businesses that are focused on the transition to net zero, which we are focused on delivering. That aligns very much with our vision for trade.
The work that we have done answers Paul Sweeney’s point—we absolutely recognise that there are different types of foreign investment, which is why we work proactively with investors that we know share our values.
On that point, we are almost halfway through the minister’s contribution and he has not mentioned the alarming and troubling situation with GFG Alliance, the Lanarkshire steel mills and the Lochaber smelter. Will he address that? Everybody would like to hear what the Government’s response is to that situation.
First, Willie Rennie made a point before the debate began about the publication of the documents for the debate. I would have been happy to provide the documents earlier, but I am informed that parliamentary procedure is such that documents can be published only shortly before the debate. However, I am delighted to take as many opportunities as members want to debate the issue, to share information with members and to meet them in any forum that they like to discuss the issue further.
On the point about GFG, I make the point very clearly that the smelter is still there—it is still employing people and it is increasing the number of people who are employed. No payments that have been due to the Scottish Government have been missed, and the Scottish Government’s liabilities as a consequence of the deal are more than covered by the assets that the Scottish Government has a call on.
We see that as progress. I know that the member would rather that the place had shut six years ago, but that is not the business that we are in—we are in the business of saving jobs as a consequence. [
.] I need to make some progress; I have only two minutes left.
I will make one further point that is important. We see inward investment as very much complementary to building indigenous supply chains and building the clusters that maximise Scotland’s economic impact in our key sectors. We see attracting inward investment as being good for Scottish businesses, as it gives them more opportunity and more access to global talent, technology and markets, and it helps to build the clusters that position Scotland’s businesses at the forefront of global technologies.
We engage frequently with our advisers and with GFG Alliance. We understand the challenges that GFG Alliance is going through and we are focused on maximising value to the Scottish economy. I go back to what I said—is the member arguing that we should have allowed the smelter to close? If that is what he is saying, I do not think that his constituents would be very happy about that. We have delivered for the economy and for the people of Scotland—[
.] I need to carry on and make some points.
I will talk briefly about businesses that are covered in the reports that we have issued today. There are many examples of businesses that have maximised their export potential as a consequence of working with SDI, the Scottish Government and the whole of team Scotland to deliver on the actions in the plans. Likewise, inward investors have had significant confidence in Scotland as a result of what we have described in the plans, the communications and ministerial engagement that we have had and the work that has happened to build strong relationships with investors.
It is worth noting that 70 per cent of inward investment over the recent period has been repeat inward investment from investors that are already here and have strong confidence in the Scottish economy. This morning, I visited the Tartan Blanket Co down in Leith. I say to those who have not been there that it is well worth a visit. That business has gone from being a start-up to one that is turning over £5 million. It is growing by 50 to 60 per cent per year, and most of that business is export. It is a hugely encouraging success story that we have been delighted to support.
I recently visited DSM down in Dalry. It has chosen to invest £100 million in its methane-reducing feed additive and it is building a global manufacturing centre for that here, because of its confidence in the Scottish economy and its ability to deliver what it needs to do on the global stage.
I could go through a whole list of things in terms of the specific actions that we have taken and what we have delivered on. They are in the reports for members to read. I could also spend considerable time going through the actions that we are still working on that will further strengthen our exports and inward investment performance. They are also in the reports for members to read.
We will continue to deliver on the plans. I will continue to engage with officials on a monthly basis and with our agencies to make sure that we are completely focused on delivering on the plans.
I will make one final comment. What the documents demonstrate is the strength of Scotland’s economy and what Scotland has to offer the world in key technology sectors of the future. Across those key sectors and in all regions of Scotland, to realise the full potential of Scotland’s economy and do even better than we have done so far, Scotland needs the full powers of all economic levers and the full powers of independence.
I add my concerns to those that were expressed by Willie Rennie. We did not receive the documents in good time. There was something that came out last night, but the two documents that were published today came out with very little time for us to consider them. Particularly for a debate for which there is no motion, and therefore no guidance—
I will be honest. I asked that the documents be published as soon as possible. They are a great news story and I would love members to have had as long as they should have had to review them. We were advised that parliamentary protocol was that, if we are debating something, we can publish it only shortly before the debate. If that is incorrect, I would be delighted to take that on board and talk to the relevant officials, but that is the advice that we had about parliamentary business and parliamentary protocol.
As a former chief whip who attended the Parliamentary Bureau, I do not think that that is quite accurate. There is an issue about having a debate about important documents—let us be honest, there is some good news in them—rather than on a motion. We do not have the ability to amend anything, and that slightly constrains us in the material that we can use.
The reason why there is no motion is that we were still in the mourning period and had been advised that, as a consequence, a motion could not be lodged—if that is incorrect, I am happy to be corrected, but that is the advice on protocol that we had.
I think that there is some substance to debating the issue. We will leave it there.
This afternoon, the minister spelled out that, among all the gloom of the current economic forecasts, there is at least some good news for Scotland, in the trends in inward investment and exports. That is good news, and we should acknowledge it. We should especially acknowledge that, according to the EY measurements, Scotland is performing well—just behind London—when it comes to attractiveness for inward investment, outpacing the growth in the UK economy and in many other nations. It is good to see that Edinburgh, Glasgow and Aberdeen are functioning well.
However, Daniel Johnson made a good point in his intervention: it is about qualitative as well as quantitative changes. We have to look at the outcomes of decisions. It is extremely welcome news that 4,400 inward investment jobs were delivered in 2020-21, on top of the 4,408 new jobs that were created by foreign direct investment, especially in advanced engineering and electronics, but there are qualitative judgments to be made. Perhaps the minister will come back to that in his summing-up speech.
Prior to this debate, the minister has been open about the Scottish Government’s intention to increase the value of Scotland’s international exports to 25 per cent of gross domestic product by 2029. Although there is still an awful lot of work to do, there are encouraging signs, especially in the context of chemicals, some manufactured goods and financial services. That is helpful.
A concern of mine is that, according to the most recent business polling, although two thirds of exporting businesses are relatively optimistic about trade, a third are much less confident—and, in some cases, pessimistic—given the on-going supply chain disruptions that they face as a result of the war in Ukraine and the tail end of the pandemic. I will come back to that third in a minute, as they have extremely important advice for both our Governments.
Therefore, although the minister is right to identify the good news—I will not counteract that—we have to set it in the context of the wider economic forecasts. We have debated the issues many times in past months. For many months, the Scottish Fiscal Commission has been highlighting a lot of weaknesses in the Scottish economy. Some of those are inherent in the UK economy, too, but the weak productivity in the Scottish economy is very serious. When we consider that along with demographic issues—we are told that in the next 50 years the population in Scotland is likely to fall by 16 per cent, with an emphasis on the problems of a shrinking working population—we can see that it makes for very difficult circumstances for us all.
The long and short of it is that much more needs to be done to ensure that Scotland is a much more attractive place in which to live and work, as well as in which to invest. That is the bigger picture to which we need to pay attention. It is the strong message from business and industry. As well as investment incentives, we need tax incentives, a better environment for innovation, and skills. If those are not in place, the rest of our endeavours to take full advantage of the improving performance around inward investment and exports growth will fall short.
Let me address a few of the issues; my colleagues will make more detailed comments. There is no doubt that business asks us time and again for an assurance that our two Governments will work together and not against each other. Businesses have seen effective co-operation on, for example, city deals, free ports and infrastructure projects. That co-operation has worked well and needs to be enhanced, particularly—dare I say it?—in light of the cost of living situation.
It is also the case that business must have as much certainty as possible in these difficult times. That is just one of the reasons why we have been asking the Scottish Government to match the UK Government’s pledge to reduce income tax from 20p to 19p in 2024, which will obviously have a knock-on effect on the block grant adjustment and lots of other issues to do with the tax take.
When I read the detail of the medium-term financial strategy, I saw a slightly worrying hint that there could be an increase in the business rate at some stage. That is causing the business community concern; it, too, points to productivity trends and demands that we do an awful lot more to support business through upskilling and reskilling. There is an important difference between those two things. The Scottish Parliament needs to be on the side of business when it comes to helping to address the barriers in the private and public sectors that restrict modernisation and impact employment and entrepreneurship.?
I will make a brief comment to finish off. It is good news that the export side and some of the inward investment side is going in the right direction, but we should set that in the context of the bigger economy and ensure that we do everything else that we can in economic policy to enhance the progress that we are making.
We have grown used in recent months to hearing about the cost of living emergency and the harsh reality of people’s wages not stretching to pay their bills or cover the cost of their shopping and the fundamentals of life.
The stark truth is that this emergency has not come out of nowhere. Wages have been stagnant for a decade— a fact that the UK Government seeks to ignore. Liz Smith hinted at another stark fact, which is that
“Scottish productivity growth has stalled since 2015.”
Those are the Scottish Fiscal Commission’s words, not mine. That is coupled with the fact that the way that the fiscal framework works, which was agreed to and trumpeted at the time by John Swinney, is that when our income tax receipts grow more slowly than the UK average, we have less money to spend. Although there is good news today, we need to grapple with those fundamental and serious issues.
I welcome the opportunity to debate those issues, but like others, I lament the fact that we have had no real time to digest what is contained in the papers. There is nothing to prevent the Government sharing them under embargo, and frankly, it is slightly shameful to point to the Queen’s death as a reason why they could not be shared.
The fundamental issues and trends are those of productivity and wage growth.
The member is inaccurate on that point. I said that the reason why there is no motion is as a consequence of the events of recent days. That is not the reason why the documents were not published; I have explained three times why the documents were not published.
I am not clear that that explanation is any better.
I welcome the three plans from the Scottish Government, because in broad terms they deal with how those issues can be tackled through exports, capital and inward investment. I recognise that they are an attempt to deal with the serious and difficult issues of the need for co-ordinated investment that is underpinned by infrastructure, the need for sustained focus on skills and human capital—those two things are linked with investment—and clarity about the things that we want to make and the services that we want to provide and sell to the world. Having that focus is fundamental if we are going to be successful.
Overall—I will confine myself to the plans because I have not had the ability to engage with the results—there are shortcomings in the plans. First and perhaps most important, we have failed to learn the lessons of the past. The plans are overly reliant on foreign direct investment. There is an all-too-familiar pattern of jobs being lost from industries such as shipyards, steelworks and factories. Various Administrations have trumpeted replacements from overseas employers and new industries. We could all name the electronics firms that came in the 1980s only to go in the 1990s and 2000s. No one talks about silicon glen any longer. Those mistakes were repeated with wind power generation, because no one talks about the Saudi Arabia of wind any longer. Although ScotWind is namechecked in all the plans, there is little more than verbiage around domestic supply chains to guarantee that those mistakes are not being repeated.
Ultimately, the plans fail to engage with how we can make those investments stick and create the conditions whereby when people invest in Scotland they do so because this is the only place that they can make the things that they want to make and do the things that they want to do.
Another key issue that runs through the plans is the lack of analysis and clarity around how they are to be implemented. That is a key criticism of the national strategy for economic transformation, and it is echoed in the plans. There is no real analysis of what has worked to arrive at this point, and therefore of how we can build on it—let alone what has not worked.
No, we have already had plenty of interventions from the minister.
The inward investment plan is much the same. There is no clarity about what the enhanced status for the selected industries will be or about what assistance they will receive. Likewise, we hear much about alignment with higher education, but no analysis of what makes our higher education sector successful or how we enhance it. There is talk about clusters, but no discussion on planning policy and similar things that hold back investment. I hear about that time and again from sectors ranging from renewables through to life sciences.
Perhaps most concerning is the failure of the plans to draw conclusions of their own from the little analysis that they provide. The inward investment strategy document sets out different productivity levels depending on domestic investments compared with overseas and RUK investments; those differences can be as much as 20 per cent to 50 per cent. Without showing any analysis, the Scottish Government seems to assume that, by virtue of that investment being foreign it somehow improves productivity. I suggest that it is because those enterprises receive investment. I think the fact that there is a difference between UK and domestic investment should be a cause for great concern, and actually, that underlines the problem that we have with indigenous, domestic investment.
I welcome focus on investment and delivering new jobs, but my fear is that we are failing to learn the lessons of the past. If the Government in London is trying to reheat and revive trickle-down economics, I think that the Scottish Government is labouring under the outmoded idea that the only form of investment that is valuable is that which comes from overseas.
I want to talk about the GFG Alliance, the Lanarkshire steel mills and the Lochaber aluminium smelter. The minister is laughing, but this is a very serious situation and he has not addressed the substance of the matters that I am about to cover, at all. Since we did not receive the documents in advance, I think that it is appropriate for the minister to answer questions despite his desire to shut me up.
We know that the Lanarkshire steel mills are owned by Liberty Steel, which is part of the troubled GFG Alliance and was previously owned by Tata Steel. The minister did not refer to this, but auditors King & King quit recently, stating that they were unable to complete audits, and I have new information today. A new freedom of information request confirmed that ministers—including the First Minister—were told of the risks of the deal when they signed it off.
Those are risks that the minister, Ivan McKee, has since avoided telling Parliament about even when we asked him directly.
Let me spell out exactly what that means. Ministers chose to throw their weight behind Liberty Steel despite the Government’s top economic official writing to Nicola Sturgeon warning of
“very significant political, financial, state aid and legal issues” and stating that they carried
“significant state aid and financial risk” because of Tata’s terms.
Ministers were specifically warned—by their own advisers—about a lack of due diligence, the risk of the “untested” state aid position and the risk of not having a business case
“that sets out the rationale for our intervention.”
Ministers were also warned that the Government could become liable for the environmental costs.
That calls into question Ivan McKee later telling Parliament that
“it was not our intention to sign up to a contract clause which may not comply with state aid requirements.”—[
, 15 December 2021; c 24.]
He did so despite being warned by the top economic adviser that that was exactly what they were getting into. Ministers knew fine well that that was a risk, and they were warned about it by their adviser.
Tata refused to deal directly with Liberty Steel because it did not know enough about the company or its business plan and it was already in a discussion with another company, Greybull Capital.
The price of Tata not selling to Greybull, was for the Scottish Government to take on Tata’s “past and future” liabilities through a back-to-back deal. Members will recall that the Scottish Government has since tried to renege on the commitment to take on the environmental liability if Liberty Steel were to collapse and the GFG Alliance were unable to step in.
Tata had another buyer and the Government was warned about the state aid rules and financial risk but charged ahead with a company that is now on the verge of collapse, and the minister does not think that it is appropriate to fill us in on any of that detail. All that reveals a reckless disregard from ministers, a dismissal of advice and warnings and a failure to be open and straightforward with the Parliament about the decisions that were taken behind the scenes. The workers and the taxpayers might pay the price.
I turn to the Lochaber aluminium company, Alvance British Aluminium, which is also owned by the GFG Alliance. In unaudited accounts, Mr Gupta outlines
“material uncertainties that cast significant doubt on the company’s ability to continue as a going concern.”
That is the top man expressing his real concern about whether the company will continue to be a going concern. However, again, the minister does not think that it is appropriate to update members on his—
Believe me, I have more to come.
Members will recall that Mr Gupta acquired the Lochaber plant and its accompanying hydro power station in 2016. However, documents filed at Companies House reveal that, although the Scottish Government provided guarantees of up to £500 million for the deal, Mr Gupta put in just £5 towards it. Now, the assets are valued at £100 million more.
The minister has time in his closing speech. I tell him that I have an awful lot more to get through.
Despite flashy promises of 2,000 jobs and a new billet plant, nothing has materialised, even though the Scottish National Party Government provided hundreds of millions of pounds of financial guarantees.
The minister has time later.
I do not have the time to remind the chamber of the issues from the failed company BiFab and the loss of millions of pounds for no return. All in all, we have a Scottish Government that is cavalier, ignores advice and uses vast sums of public funds to make political gestures rather than sound economic investments.
The industrial intervention strategy is simply not working. It is about time that the Government was open about the situation that it has created.
Scotland has what it takes to be a successful country in key areas of dynamic international growth—renewable energy, digital and life sciences in particular. We have regularly operated a trade surplus in the past, unlike the rest of the UK, and we are an international partner of choice, as the minister set out.
A strong inward investment and exporting base is important for a number of reasons. Exporting companies tend to be more innovative, productive and competitive. However, trading strength is but one of a number of firm bases that are needed for economic transformation. As the Economy and Fair Work Committee pointed out in our report on our inquiry into Scotland’s supply chain, we need strong indigenous companies with secure supply chains to survive despite the economic shocks of pandemics, European Union exit and war in Ukraine.
In particular, inward investment as a result of the takeover of previously Scottish-owned companies is a double-edged sword, as it can diminish our Scottish-owned entrepreneurial company base. New inward investment has benefits and brings more high-value jobs—I say to Daniel Johnson that that means growing Scottish income tax levels—and we have export strengths, too.
In my area, West Lothian, we can count some of the most successful of inward investment and export businesses. We have Mitsubishi Electric, which has made a £15 million investment announcement, and Shin-Etsu Handotai Europe. In life sciences, there is Q2
Solutions, whose European laboratory services operate from Livingston. We also have exporters Calnex Solutions in Linlithgow, which I visited a few weeks ago and whose test instrumentation for network synchronisation has secured orders from more 600 customer sites in 68 countries across the world.
Scotland’s educated workforce, superb world-leading research universities, great natural energy and other capital are all areas where the Scottish Government has specific responsibilities for leadership. Although the Government can create the conditions to foster and promote success, it is the businesses that choose to invest here that will deliver economic growth from exports.
However, the Scottish Government does not currently hold the key levers to face down fiscal challenges and build resilience in the economy to support trading business. It is the UK Government that benefits from corporation tax and VAT income, but it is also responsible for the plummeting of the pound, rising inflation and the collapse in the number of companies that are wanting to export. The UK economy has seen decades of decline relative to comparator countries and the current state of the economy is extremely serious, with an historic low value of the UK pound.
I agree primarily with what Ms Hyslop has set out about some of the strengths that Scotland has and what it can achieve. However, does she accept that one of the great concerns for business is the fact that if Scotland moved towards an independent state we would end up with a hard border between Scotland and the UK? When 60 per cent of our trade is with the UK, how does that help?
If Ms Smith looks at some of the issues around exports to the UK, those are in services and in value areas such as electricity. If we are talking about energy security, which I am about to come on to, there is a benefit in terms of the exports of our energy and electricity. I have no doubt that the minister will explain that those are issues that will be looked at in paper form by the Scottish Government when setting out the current case for Scottish independence.
We have a relative decline in the UK, but that does not mean that the Scottish Government does not also have responsibilities. The Scottish Government needs to drive forward integrated policy, and renewable energy must be at the heart of the Scottish Government’s economic policies. We will be—and already are—a magnet for international companies, but we are in danger of leaching the rewards and benefits overseas to international shareholders instead of benefiting from jobs or cheaper energy—and that is likely to get worse under a Liz Truss led UK Government.
The Scottish approach should be based on energy security for the future. We are and can be world leading as we build a just transition from oil and gas, using those skills for carbon capture, utilisation and storage and to deliver renewable energy. We have the energy, but we do not have the government powers. An independent Scotland could provide energy security for individuals, nationally and internationally, in order to tackle climate change and to help partners to withstand hostile aggression. However, we must execute that with pace and opportunity. The plans for green hydrogen exports, particularly with Germany, must be grasped and pursued with vigour.
We are not currently meeting the rapid escalation of demand in terms of development or manufacture. Instead, we have been resting on hydrogen research while other countries surge ahead. Scotland has so much potential, but its prospects are dictated by a UK that is in decline. Indeed, the Organisation for Economic Co-operation and Development has just this summer forecast that the UK will deliver zero per cent economic growth next year, which will be the lowest of every G20 member bar Russia. It is said that the true measure of wealth is the state of a country’s populace, and it is a sign of relative decline that 63 per cent of Ireland’s poorest people have better living standards than the poorest people in the UK. Other countries have also experienced Covid disruption and the impact of Russia’s war on Ukraine, but none has instigated its own self-inflicted economic damage of Brexit and leaving the European Union. A third of companies reducing their exports is beyond alarming.
Scotland means business. The UK is stunting our growth potential and if we want economic transformation and growth, then Scotland needs to be complete in its government powers for growth to generate an entrepreneurial attitude and use the energy of its people, talents and resources. Most importantly, the wealth of Scotland needs to be rewarded, rooted and returned to the people of Scotland for the benefit of the people of Scotland.
I welcome the unusual focus today on issues that actually matter to this country, but I must also highlight the fact that the current targets in this area that have been set out by this Government remain, like many others, unmet.
In 2019, the Scottish Government published its targets for exports, and it has fallen short, missing those targets by between around 10 per cent and 16 per cent. The promised 50 per cent increase in the value of international exports has been consistently missed.
I have no time for interventions.
It is also important to note just where our exports are going. The rest of the UK accounts for £52 billion of Scotland’s exports—three times larger than the EU’s share. The rest of the UK is our largest export partner. Between 2002 and 2019, 62 per cent of Scottish exports went to the rest of the UK, with 17 per cent to the EU and 20 per cent to the rest of the world. According to the Fraser of Allander Institute, half a million Scottish jobs—one in four jobs—are supported by trade with the rest of the UK, yet this SNP-Green devolved Government wants to put in place barriers between Scotland and the rest of the UK. The idea of placing a hard border between us and our largest trading partner is, quite simply, a disgrace.
In contrast, the UK Government is working hard to secure investment throughout the UK. In 2020, it established an office for investment to further attract foreign investment into the whole of the UK—
I have no time; sorry, minister.
It also established initiatives such as the high potential opportunities programme and free ports to assist with the movement of goods.
The UK Government has launched a new trade hub in Edinburgh to attract inward investment and, through the hub, businesses are able to use the UK Government’s global networks, expertise and influence to grow trade overseas.
When the Scottish Government’s inward investment plan was launched, the minister said:
“Domestic businesses can learn new ways of operating. Managed well, this brings opportunities across Scottish supply chains and ensures our skills system and management match global standards.”
I think that the key phrase in all of this is “managed well”. Will this be as well managed as the ferries contracts, the Rangers debacle, the national health service waiting times or the crisis in local government funding? The SNP-Green coalition of chaos has no credibility or track record when it comes to managing things well.
I was listening, and it was a load of rubbish.
I fear for the future of this policy, given that many of our core businesses and services rely on investment and exports for their futures.
When it comes to inward investment, businesses are looking for certainty and security, and the constant threat of another divisive independence referendum is driving investment away. At this time, supporting our recovery from the pandemic and helping businesses through the global cost of living crisis should be our main priority, not stoking division and dissent and creating borders where none should be. A border between Scotland and England would end the free movement of goods in Great Britain through the imposition of a trade border between Scotland and England, our main trading partner. Independence is never going to happen, but the constant threat of it is harming us and driving investment away.
When I was reading the investment plan last night, I thought that I had missed a chapter. The oil and gas industry has been a key part of our economy and inward investment, but this devolved Government seems to want to airbrush it out of our economy. It is clear to see, when you look at the table in the plan, that wages in the north-east are at the top when it comes to foreign-owned firms. That is down to the energy industry, but this Government seems intent on driving that investment away, just to appease its Green partners. While we still have a need for hydrocarbons, we should be supporting the industry in this country, not relying on imports from other countries. That is better for our jobs and our economy as a whole.
The Finance and Public Administration Committee constantly hears that we are underperforming compared with the rest of the UK, and a big part of that is because of what is happening in the north-east of Scotland, but it is clear that this Government has turned its back on the industry and the north-east.
We have heard a lot from this Government about the energy transition, which greatly affects the north-east, and we have had many debates in the chamber about a just transition. Given our global energy crisis, I welcome the UK Government’s pragmatic approach to developing domestic supplies of the fuel that we need while we move away from fossil fuels and towards sustainable energy. I know that the energy companies in the north-east welcome that approach and see an energy transition as the way forward. The SNP-Green Government would send them off a cliff edge, which would make us more reliant on foreign oil and gas and less able to be self-sufficient. That policy would be detrimental for the economy of the north-east; it would not increase investment but decimate it.
Once again, if this SNP-Green Government is serious about investment in Scotland and growing our exports, it should not pursue the obsession with splitting up the UK and creating uncertainty. Instead, it should support and work with the UK Government and understand that the trading might that we have as a United Kingdom is far greater than we can ever achieve if we split from our largest partner.
During the Covid-19 pandemic, the Scottish Government decided that it would work to rebuild our economy in a way that is ethical, bold and aimed at sustainable growth, and it published its inward investment plan in October 2020, followed by a global capital investment plan in March last year. With the pre-pandemic export growth plan, those strategies give Scotland a three-pronged approach to achieving sustainable export growth. In addition, the Scottish National Investment Bank and international trade envoys and offices help Scottish businesses in their efforts to secure investment and exports.
According to Scottish Development International, 7,780 planned real living wage jobs were created by inward investment projects in 2021-2022, with 39 investors choosing Scotland for the first time.??Scotland grew eight times faster than the UK in terms of attracting foreign direct investment projects, while the UK as a whole had the lowest rate—bar Greece—of business investment among the 37 countries of the Organisation for Economic Co-operation and Development.
The 2022 EY attractiveness survey shows that Scotland’s perceived appeal to investors now sits at a record high, with 15.8 per cent rating Scotland as the UK’s most attractive location. That is up from 15 per cent last year and more than double its 7 per cent in 2019.?
More than 90 per cent of the inward investment projects are in the nine areas of opportunity identified in the SNP Government’s inward investment plan, which accurately assessed Scotland’s needs and strengths, as well as our ability to attract the right investment.
Dutch-headquartered global health and nutrition company Royal DSM ?announced that its ground-breaking feed additive Bovaer, which drastically reduces cattle-produced methane, a molecule with more than 80 times the warming impact of carbon dioxide, will be globally manufactured at the firm’s site in Dalry, to which the minister referred. That site will be fully operational by 2025. Dalry was chosen over dozens of other global sites, which shows the confidence that DSM has in Scotland and its Ayrshire workforce. The £100 million of private investment is supported by £12 million of Scottish Government support through Scottish Enterprise, which will sustain or create at least 350 high-quality, well-paid jobs, including places for dozens of new apprentices, who were delighted when the minister visited just last month.
Terms such as foreign direct investment, inward investment and export growth sound abstract and make us think of markets rather than people. However, when I visited DSM during Scottish apprenticeship week and spoke to young employees, I was reminded how much new investment means to real people and how it provides many with an opportunity to enjoy a potentially well-paid, highly skilled and secure career.
DSM aims to have 119 apprentices by 2024, some of whom will work on Bovaer. That ground-breaking project has been a long-term strategic investment by Royal DSM into improving sustainability. Having Bovaer produced in Scotland allows us to make a huge contribution to the reduction of global greenhouse gas emissions from milk and beef production, and from sheep, because it dramatically and consistently reduces enteric methane.
I have asked the Scottish Government how it intends to incentivise use by Scottish farmers of that new sustainable feed additive. Once the UK joins other countries, from the Benelux countries to Brazil, in providing regulatory approval for Bovaer, I expect that Scottish ministers will be keen to assist our farmers in providing that low-cost additive, which is probably the most cost-effective way of reducing the impact of our emissions. Such support will surely encourage many others to buy Bovaer, thereby having an even greater impact on limiting climate change globally.
In other welcome news for people who are keen to work in Cunninghame North, an impending new project at Hunterston is expected to provide 900 jobs directly by 2024, with thousands more generated in the wider supply chain across Ayrshire and beyond. The new facility will manufacture cables for what will be the world’s longest subsea infrastructure for the Morocco to UK solar power project.
However, that project almost did not happen. In May, the project director of Essex-based company XLCC contacted me to say that, because North Ayrshire Council’s planning committee was not going to consider the company’s planning application until August, the project could go to Teesside, where it would be considered first.
I immediately contacted North Ayrshire Council’s SNP leader Marie Burns and chief executive Craig Hatton, and that very same day, they agreed to bring planning consideration forward by eight weeks. Planning consent was granted. That episode shows how crucial the timing of such decisions can be. As anticipated, some employees of Hunterston B, which was closed in January, will transfer their skills, which is inward investment aiding the just transition.
We are making great progress in exports, too. Three weeks ago, I visited Dunbia Highland Meats in Saltcoats, which exports 16 per cent of its product. That state-of-the-art cattle processing facility employs 325 people on site, and it works with more than 1,000 Scottish farmers who are all no further than four hours away from Saltcoats. The cattle are born and reared in Scotland to the highest standards. The boning hall, which represents a £12-million investment in more efficient processing, was built with the assistance of a food processing, marketing and co-operation grant of £2.5 million from the Scottish Government.
Another successful company indigenous to North Ayrshire is the highly innovative steel fabricator J & D Pierce (Contracts) Ltd, which was founded by Jim Pierce in 1975 and now employs 425 people. It is the largest steel fabricator in the northern half of the UK.
It is crucial that we create and sustain jobs of all skill levels across North Ayrshire and beyond, and I am optimistic about the prospects that that offers my constituents and others in the west of Scotland. I am keen to see more companies invest in my constituency—we have plenty to offer and we need to create and sustain greater levels of employment.
At a national level, many people will have been heartened that Scottish Development International will lead Scotland’s presence at the five-day Hannover Messe integrated energy expo in April next year. The expo is one of the largest events of its type in Europe, attracting more than 1,800 exhibitors. With the 2019 expo having led to £27 million of export sales for Scottish exhibitors, next year’s event promises to again provide a valuable opportunity, which, sadly, the UK Government will not be participating in.
The Scottish Government also published a special export plan for tech companies that supports the specific needs and aims of Scotland’s valuable technology sector, which provides 83,610 jobs and has a £21.6 billion turnover.
It is important that we use the limited powers that we have to nurture and grow our businesses and markets, and the Scottish Government continues to do just that by looking forward and outward. It will do even more with independence.
Let me begin with a few facts. We export 50 per cent more to the rest of the UK than we do to the whole of the rest of the world put together—fact. We export three times as much to the rest of the UK as we do to the whole of the European Union combined—fact. Exports that are shipped via a port in England to France are classified as Scottish exports to France—fact. Those are all published in the Scottish Government’s own “Export statistics Scotland”—fact. Therefore, to the nationalists who want us to break away, set up a separate currency and withdraw all of our democratic representative votes and voices over the political and economic direction of our biggest export market, I say that they are presenting a prospectus not for gaining control, but for giving it away.
Here is another fact: we have a state investment bank that has made its biggest investment—£50 million over five years—not in our manufacturing base or with a Scottish exporter of high-value services, but with the Gresham House forestry fund, which admits that only 60 per cent of that investment from the Scottish National Investment Bank will be directed to Scotland. This is an asset management company whose primary business objective is not to plant trees, and it is not to save the planet; it is to aid the super-rich to avoid paying tax. Go and look at its website—it offers favourable income tax treatment, exemptions from capital gains tax and 100 per cent relief on all inheritance tax. When the minister tells us that
“Government-backed investment funds are designed to fill key gaps in the continuum of growth capital to enable Scottish companies to scale up”,—[
, 29 June 2022; c 130.]
he must know that that is not what is going on out there in the real world.
Here are some more economic facts. One worker out of every three in Scotland is now employed in a company that is owned and controlled outside Scotland. More than half of the turnover in the Scottish economy is owned and controlled outside Scotland. More than two thirds of business research and development and more than three quarters of Scottish exports are from businesses that are owned and controlled outside Scotland.
I know that the minister is relaxed about that, but I put it to him that that overreliance on mobile extractive capital means that the Scottish economy is, in effect, entirely dependent on decisions that are made by a small number of financiers, speculators, landlords and capitalists in faraway boardrooms.
Long-term strategic decisions on investment, on production, on jobs, on supply chain procurement and even on marketing and sales are not made here but are made externally. All too often, that has meant lagging productivity, poor-quality, non-union jobs, downsizing and, ultimately, a heightened vulnerability to closure. All the time that that is going on—and the Scottish Government continues to quote, ad nauseam, the EY attractiveness survey—local indigenous business development is stuck at dangerously low levels.
Compassion, solidarity and a sense of common good—values so evident during lockdown—were so scarce in our economy pre-Covid-19 that many of us vowed that we must never go back. However, when I listen to the debate today, it sounds like we have.
I say to ministers that they cannot base their economic policy on being
“a magnet for inward investment” and, in the next breath, say that they want
“a country where economic power and opportunity are distributed fairly”.
They cannot have both. This is not a policy for taking back control; it is a policy for giving it away. This is not a policy for selling Scotland, as the document says; it is a policy for selling Scotland off.
What we need—what we have long needed—is an industrial strategy that is investment led, jobs first, people centred and manufacturing driven, based on democratic economic planning that is environmentally sustainable, co-operative and built from the bottom up.
We do need a redistribution of power, but towards working people. That is not about putting a few token people on a few token boards; it is about the producers controlling more of the organisation of the production process and the wealth creators controlling more of the distribution of the wealth that they create. We do need transformation—a transformation of the social and economic forces that breed poverty, inequality and class division: not merely managing the economy, but fundamentally changing the economy That is what we need to do, and the sooner we start, the sooner we will deliver the very real economic and environmental social transformation that the people of this country are crying out for.
I welcome the opportunity to speak in this vital debate on Scotland’s inward investment and export growth plans.
Scotland is leading the UK when it comes to securing foreign direct investment, in spite of the significant challenges that Brexit and the pandemic pose. Scotland is an attractive country for investors due to our highly skilled workforce and strong business networks, which are supported by regional economic advisory bodies.
Our goods exports, excluding our oil and gas, increased by 5.7 per cent from March 2020 to March 2022, while UK goods exports decreased by 2.9 per cent in the same period. Indeed, Scotland attracted 119 inward investment projects in the year to the end of March 2022, which is a 29 per cent rise from the previous 12 months, creating 4,408 new highly skilled jobs for people here in Scotland. That shows that our Scottish Government’s approach to attracting investment is working.
People and business are prepared to invest here due to our progressive, internationalist outlook, as compared to the that of the insular, ideologically driven UK Government. Scotland has been the most successful nation in the UK, outside of London, for nine of the past 11 years, and for the seventh year running it is the most successful at attracting foreign direct investment. That is a testament to our highly qualified workforce and its exceptional skill base.
Indeed, my home city of Aberdeen, along with Edinburgh and Glasgow, remains in the top 10 locations outside of London for attracting inward investment projects. Our four leading sectors are digital technology, utility supply, business and professional services, and machinery and equipment.
Digital projects in Scotland have increased by an impressive 73.4 per cent, in contrast to a 7 per cent decline in Europe and only a 7 per cent increase in the UK overall. Scotland is now firmly established as the UK’s number 2 location for digital projects, behind London. That is welcome, and Scotland will continue to do all that it can, within the bounds of the devolution settlement, to have a progressive approach to attracting inward investment. Scotland will show its success as we build on our record as a world leader.
It would be remiss of me to discuss the success of Scotland’s approach to inward investment without acknowledging the challenges that we face that have been caused by the UK Government. Brexit is forecast to cause more harm to the economy than Covid did. The Office for Budget Responsibility has forecast that the impact of Brexit on UK productivity will be worse in the long run than the impact of Covid-19, with Brexit reducing the UK’s potential productivity by 4 per cent—which amounts to around £40 billion a year—whereas the pandemic is expected to have reduced it by 2 per cent.
Indeed, recent trade statistics underline the negative impact of Scotland’s forced exit from the EU. Scotland’s total trade with the EU was 16 per cent lower in 2021 than in 2019. Trade with non-EU countries fell by just 4 per cent over the same period. Now, a London School of Economics and Political Science study shows that Brexit-related trade barriers have so far driven a 6 per cent increase in UK food prices, adding to the Tory-made cost of living crisis for households not only in Aberdeen Donside but across Scotland. If it were not for the Tories and Brexit, Scotland’s exports would be soaring. Do not take just my word for it. Exports of goods to the EU from Scotland were 19 per cent lower in 2021 compared to 2018, while exports of goods to non-EU countries were only 4 per cent lower. The difference was Brexit. Trade figures continue to highlight the negative impact of Brexit on our economy and to strengthen the case for Scotland to be an independent country. We will do so much better when we control our own affairs.
Of course, one potential opportunity could really boost the economy of the north-east, and it would be remiss of me not to mention it. A major regional alliance between Aberdeen International Airport, the Port of Aberdeen, Peterhead Port Authority, Aberdeen City Council and Aberdeenshire Council has announced its formal bid for green free port status for the north-east. If successful, the bid will boost gross value-added income by £7.5 billion over the next decade and usher in a new era of investment, innovation, regional regeneration and opportunities for those who need them most across north-east Scotland.
It is estimated that 30,000 highly skilled, highly paid jobs would come to the region, and I want to help make that happen. Although the minister cannot comment on any particular bid, as the Scottish and UK Governments are still to determine the successful projects, I seek assurances from the minister that the north-east’s bid will receive full consideration. Not only could it bring an economic boost to the north-east, it could help the region to reach our net zero ambitions.
I welcome this debate, I welcome the progress that is being made to attract inward investment in Scotland and I reiterate my ask for a potential green free port for north-east Scotland.
This debate comes at a time when the importance of energy and the global economy cannot be overstated. For some time, there has been an ambition, which is shared by many here, to make Scotland a world leader in clean energy. The opportunity is well understood. We have massive capacity for wind and significant potential for new technologies such as wave and tidal energy and, despite the failure of the UK Government to support onshore wind, we have installed huge capacity for generation.
As the need to replace Russian gas takes on geostrategic importance, and the need to replace all other fossil fuels grows increasingly urgent, it is vital that we develop the capacity that we have. However, we have a problem. The jobs that were expected to come with the renewables revolution simply have not yet materialised in the Scottish economy. Partly, that is because we are shackled to a UK economy that has little interest in generating those skills and jobs in our economy. Everything that we do is in the context of a UK Government that aims to undermine the Scottish economy at every turn, be that through seeking a hard Brexit or failing to support renewables infrastructure investment and what a previous UK Prime Minister called “green crap”.
Part of the reason why the jobs have not materialised is that we have not yet grasped the significance of the new global economy, in which we cannot rely on the very efficient supply chains that have, until now, located manufacturing in the global south. With Covid shutdowns in China, the closure of the Suez canal and the Russian invasion of Ukraine, we have seen that we cannot and should not have to rely on those supply chains. Instead, we must identify onshored supply chains, which might be less efficient in some ways but which will certainly be more reliable. We will move from a just-in-time approach to a just-in-case one. We will get the jobs and the skills, and our economy will benefit from providing the clean green energy that can decarbonise the electricity supply.
What is to be done? The severe shortages of chips that are used for electric vehicles, computer processors and many other technologies point to the need to invest in manufacturing. By bringing investment and skills to Scotland, we can create new indigenous innovation networks. We know that Scotland has already been successful in attracting foreign direct investment over the past year, despite significant economic headwinds. However, that influx has largely been into our three big cities, so what about other parts of our country? The UK’s attempt to replace EU structural funds follows the same pattern of boosting performance where it already exists.
If Maggie Chapman has a look at the analysis that was done in the inward investment report, she will see that inward investment is spread right across the country. On a proportionate basis, many of the regions outside the large cities are even leading the table. There is a real balance.
That is heartening to hear, but it remains the case that much of the investment that we see follows the pattern of boosting performance where it already exists, resulting in more unevenness than we need and would like in our economy.
We know that economic clusters can be more innovative, with thicker job markets, and that they can retain industries in a way that locating sole plants in isolation does not achieve. We therefore need to work to ensure that we support the development of clusters that serve all of Scotland.
The top four sectors that have benefited from inward investment are digital technology, utilities supply, business services and machinery and equipment. Manufacturing has seen significant investments, so we must ensure that supply chains relating to the just transition and circular economy benefit from that trend, and that we build our expertise in areas such as advanced manufacturing and data to create a manufacturing economy. That will build a virtuous circle of investment, innovation, export opportunities and well-paid, good and secure jobs.
Of course, by boosting the attractiveness of direct investment in wellbeing and local agrifood, we will help to tackle the geographic unevenness that we have seen in investment to date. Food poverty is a major issue on the horizon, so there is a strategic opportunity for all of Scotland, but particularly for many of our rural areas, such as those in Aberdeenshire and Angus in my region, to create a more food-secure future for us all.
On skills, our very high level of tertiary education is a strength, and things such as skills passports will increase the availability and skills of local workforces, which investors look at when deciding where to go. The precarity of work that is offered by the fossil fuel industry can be counterbalanced by enhancing mobility, with a strategic emphasis on the areas where skills are lacking, such as heat in buildings, renewables, transport and storage.
All of that fits with the mission-based approach that we have advocated and which has, to some extent, been adopted by the Scottish National Investment Bank. That should be a mission across government. During the debate, others have already highlighted just how important it is to have joined-up thinking not only across Government departments but across all different levels of government.
There is much that I want to say about how we must use our trading relationships to secure the highest possible standards on workers’ rights, environmental standards, animal welfare standards and so on, not just for the benefit of consumers and communities in Scotland but as part of our desire for Scotland to be a good global citizen.
We must ensure that our inward investment and trading plans focus our investment and trading activities on supporting the kind of economy that we want. Wellbeing and sustainability are integral for, not accidental to, prosperity.
I thank the minister for the progress report that we received at 13:47, which hardly gave us time to digest it and prepare for the debate. However, I welcome today’s debate. I think that everybody in the chamber agrees that creating jobs and exporting Scottish goods across the world are positive goals for any Government. We might disagree on how to go about that, but I am pleased to speak in today’s debate, which focuses on the goals that we all share.
Scotland has about 11,000 export businesses, which are successful across the world. My constituency in the Borders plays host to many of those businesses—from our world-famous weavers, based in Hawick and Selkirk, which supply textiles for fashion houses in Milan and New York, to fantastic cattle farmers who supply beef and dairy for supermarkets just over the border in Berwick-upon-Tweed. Engaging regularly with such businesses is one of my duties as an MSP. It paints a clearer picture of businesses’ concerns and how inflation and other such things impact on their plans for the future.
The Scottish Government’s plans for a trading nation do not focus on the whole of Scotland. They are yet another example of central belt focus and of the Government leaving rural areas behind. The plans do not focus specifically on the issues and challenges that we face in places such as the Borders, so I would like the minister, in his closing speech, to address the specific points that I will make during my contribution.
We know that rural areas are depopulating and that Scotland’s population is ageing. There is a higher number of retirees in the Borders, for example, which is driving economic inactivity. Skilled workers are just not being replaced. In the Borders, wages are £3,000 below the Scottish median, 9 per cent of workers earn below the living wage and the gender pay gap is four times greater than the Scottish average.
There is a sense of deep frustration in my constituency and in other rural areas that are represented by my colleagues. There is the sense that, despite the enormous contribution that the rural economy makes to our country, those areas are simply being ignored. In many cases, it seems that rural businesses are not only being ignored; the Scottish Government is unable to grasp the nettle and deal with depopulation by boosting housing stocks, which are a key driver for businesses in attracting investment and growth.
We know that the food and drink sector accounts for about £10 billion of Scotland’s overall exports. The industry employs more than 100,000 people, but it is hamstrung by the inability to drive innovation under the Government’s policy—the anti-scientific political rhetoric from the Government and the Greens. While farmers in England will look forward to forging ahead with the use of gene-editing technology in order to increase yields, protect crops, increase biodiversity and help with the threat of disease and drought, Scottish farmers will be left behind due to the Government’s intransigent position of aligning with Europe and the hated common agricultural policy.
In a second.
The Scottish Government has introduced a debate on export growth plans at a time when Putin’s invasion of Ukraine is harming global food security, but it fails to see the absurdity of the intransigence of its position on gene editing. Research and development is key to scaling up businesses and to driving inward investment and exports. Expenditure on R and D is just £60 per head in the Borders, compared to £258 per head in the rest of Scotland. Across Scotland, every business needs all the tools that it can get its hands on to take advantage of innovation in order to drive investment.
The member is missing the point entirely. The Scottish Government is missing its own biodiversity and environmental targets. Gene editing is one way of not only driving innovation and investment but helping farmers address the challenges that they face head on, and meeting the environmental targets that have to be met right now.
My colleagues have discussed the impact of uncertainty on Scottish businesses. As we have heard, the latest available data shows that the value of Scotland’s exports to the rest of the UK is £42 billion. One of the most common concerns that I hear from businesses in my constituency is the fear of constitutional grievance, on top of all their other concerns, such as rising energy costs. The businesses close to the border, for whose future cross-border trade is fundamental, must have the confidence that they can invest and grow without that constitutional upheaval.
Although I welcome the good news in today’s report, we need to look at the bigger picture, as my colleague Liz Smith highlighted. The Scottish Borders is falling behind in productivity, which reduces opportunities for shared prosperity. GVA per job in the south of Scotland was 70 per cent of the national figure in 2019. The Borderlands inclusive growth deal—a shared investment between the Scottish Government and the UK Government—has put shared prosperity at its heart. When both Governments work together, it creates jobs and allows opportunities for local people to have a better quality of life and wellbeing.
Daniel Johnson talked about skills—in the Borders, people are less likely to attain higher levels of skills. The number of people in the Borders who hold a degree-level qualification is 7 per cent lower than the Scottish average. I emphasise that, to drive investment, we want to see skilled people living and working in rural areas and reducing that widening employer and workforce skills gap.
To conclude, the Government must place rural regions at the heart of its economic plans—we need to consider the catalogue of broken promises on skills and the shortages in attracting inward investment and addressing productivity issues in rural areas—and it also has to drop its reckless ambition to break up the United Kingdom.
The William of Aberdeen vessel sailed across the Atlantic in 1596, the first recorded Atlantic trade journey from Scotland to what is now known as Newfoundland. Long before that, Scotland already had trading links with our much closer neighbours in Europe. Our trading history has fundamentally shaped who we are. In the 18th century, Adam Smith would walk along the bank of the river Forth and gaze at the great trading ships of the day taking goods and people to other lands, which inspired him to consider the benefits of international trade.
Some Tories today have not appeared to notice the shock of a Tory Brexit and the decimation of exports to mainland Europe. HM Revenue and Customs data confirms that the number of businesses exporting goods to the EU fell by 33 per cent in 2021 compared with 2020. To make matters worse, Liz Truss has confirmed that it will take years to negotiate a trade deal with the USA, and our paltry trade deal with Australia directly harms our farmers.
Therefore, perhaps the UK Government’s trailing of the removal of the cap on bankers’ bonuses tells its own story about where its priorities lie.
I thank the minister for his good work thus far. I note that Scotland is the only part of the UK with a positive balance in trade in goods with the rest of the world. I look forward to reading the progress reports that were released today, although I add my voice to the comments on the lateness of their arrival, which I regret.
I will focus on international trade in the present day, including among the Scottish diaspora. The experience of some of the members of the early diaspora that Smith watched leave their homeland and find new opportunities, particularly in the Americas, resonates with me. A few years ago, I undertook research into Scotland’s business diaspora. We collected views from more than 1,000 business leaders in 74 countries. That presented a clear picture of Scotland and of what could be done to support international trade. Among many findings was the fact that Scotland was seen as friendly, resilient and entrepreneurial. However, there was also a significant minority view that pointed to a cautious, risk-averse and inward-looking community. Scottish business people were largely viewed positively too, with key characteristics such as being ethical, hard working and well educated, although some critics thought that we were too inward looking.
To put it simply, with regard to the Scottish brand, comments about the quality of our people were prominent. I was pleased to see the mention, active consideration and modern development of our brand, which was called for years ago by Murray Pittock. In that regard, our universities and colleges have had a pivotal role in developing our people and in enabling an outward-focused, entrepreneurial export sector. Therefore, I ask the minister what recent discussions he has had to ensure that the university and college sectors continue to contribute to our export and entrepreneurially focused cultures, which, of course, is about more than the passing on of skills.
I will return to the research that I mentioned. There was also a strong perception that the Scottish diaspora is insufficiently mobilised, although many stated a willingness to help if asked. I therefore recognise the mobilisation of the diaspora, which is highlighted in the progress report, and the increase in the number of global Scots, alongside the digital system that has been put in place. However, the development of capacity in all its forms takes time. In his summing up, will the minister give further flavour to his capacity-building plans and say whether that work will be done directly through the Scottish Government or via its partner agencies?
I regret that Scotland has lost some of its capacity for direct exporting. Too many of our goods are having to pass through England before moving on to export markets. I know that that cannot be sorted overnight, but perhaps future iterations of “Scotland: a trading nation” or some other document will consider the wider infrastructure rather than just supply chain requirements, in order to build and embed resilience and enable international trade. However, I recognise the constraints on capital expenditure, particularly just now.
I have had meetings with Marco Forgione, the director general of the Institute of Export & International Trade. His thoughts on what could be done include developing a full mentoring service, including technical support from?trade?specialists; tapping into our business diaspora; and creating specialist advice lines, so that businesses can access timely advice and support when they need it.
I am delighted to see that a great deal of that is already included in the progress report, so that saves me needing to suggest those ideas to the minister. However, it might be worth the minister meeting Marco Forgione, too, if he has not already done so. I commend Ivan McKee’s outstanding work—he has made tremendous efforts to get a focus on international trade and has championed the “Scotland: a trading nation” report—all the activity that goes with the report, and the subsequent progress report. I am delighted to see that, under the minister’s direction, Scotland continues to be an outward-looking trading nation.
It has been an interesting debate, despite the difficulty of fully digesting substantial documents in such a short time, which was unfortunate. However, from across the chamber, we have been able to glean information about some useful characteristics of the report. From what members have said today, there seems to be a shared sentiment that we want Scotland to fulfil its full economic potential, we want our people to be prosperous, and we want to build prosperity in our country. However, there was a bit of a disconnect between the rather bombastic claims made by the minister in his opening remarks and the preceding statement by the Deputy First Minister during portfolio questions, when we were faced with the idea of severe economic headwinds that threaten the prosperity of our country.
There are difficulties and structural problems in the Scottish economy that we cannot help but take into consideration. I do not feel that the report is going to help us to fundamentally shift that in any way. There were some interesting points made, but the fundamental issue is that the report is too passive, given the nature of the challenges that we face.
What is not in the report that the member would like to see in there, with regard to driving export growth and inward investment growth? Does he not accept that the significant results that we have achieved over the past two years are a testament to the fact that the action plan is absolutely right on the money when it comes to doing what needs to be done to further drive Scotland’s success in these areas?
If we were right on the money, we would not be facing these significant revenue challenges, nor would we be undershooting our export growth targets, which are massively ambitious and against which we are not on the trajectory that we need to be on. A good example is action 4 in the inward investment plan. It talks about identifying and proactively targeting
“50 leading global companies we want to attract to Scotland”.
Why does it not talk about building 50 world-leading companies in Scotland? It does not mention that idea. It does not look at building wealth and capacity.
I am afraid that time is against me. I will endeavour to bring the minister in at a suitable juncture, but I want to develop some of my arguments first.
We have big advantages in Scotland. For example, economic development spending is higher in Scotland than it is anywhere else in the UK. Indeed, it is 60 per cent higher than the UK average. However, unfortunately, that higher spending is not feeding into better productivity or growth, because there is too much of a quick turnover and churn, and a lack of focus in investment strategies.
As an alumnus of Scottish Enterprise, I can attest to that. It is not an organisation that is fully geared up to building the kind of capability that we need in Scotland, because it is too passive. I have seen that at first hand.
Let us look at some of the issues that we have dealt with in the debate. The minister will be well aware, for example, of the recent closure of the Caley rail works in Springburn, just next to his constituency. Let us look at that as a case study. When it was bought over by Mutares, a German firm, that would have been counted as inward investment and lauded, according to the minister, because all inward investment is great. However, what was the inward investment about? It was debt loading Scottish-owned assets; it was flogging off real estate to a US investment trust that was based in New York; and then it was asset stripping those industries from Scotland to service the debt, and focusing on the intellectual property, which was held not in Scotland but by the English subsidiary. The Scottish subsidiary was thrown away. We have had 163 years of railway engineering destroyed because of inward investment that was predatory, not developmental, in nature. That is why we cannot simply look at FDI as a panacea, which is what my friend Richard Leonard alluded to when he spoke about the extent to which the Scottish economy is becoming increasingly characterised as a branch plant.
We see stories such as that of McVitie’s, a Scottish company, the ownership of which has been stripped from the country—it now has Turkish ownership. The last factory with the McVitie’s brand has closed down in Glasgow; we have lost that brand, which is so synonymous with Scotland and is one of the best-known Scottish brands globally. Would America allow Coca-Cola to go the same way? I do not think so.
We have to fundamentally focus on how we maintain and build Scottish wealth in this country. That will require things such as looking at where we are world leaders and where we have the potential to be world leaders, and building the companies in Scotland—building them with the Scottish National Investment Bank, taking those stakes and building that equity to ensure that predatory overseas takeovers are prevented. That should be the fundamental ethos at the heart of a plan such as the Government’s, but unfortunately, when it comes to that kind of thing, the plan is thoroughly silent.
Members on the Government benches mentioned that, including Fiona Hyslop, the member for Linlithgow, who spoke about her concern that Scotland is too vulnerable to overseas takeovers. I am sure that we all have stories about where we have seen great Scottish potential thwarted by overseas takeovers. Would it not be great to see Scottish businesses going out into the world, buying over other companies and building that global network, with the control, capability and headquarters located in our cities, rather than in board rooms in other countries?
Rather than Scottish Enterprise and Scottish Development International going around begging board rooms in other countries to invest in Scotland, we could take the bull by the horns ourselves and do the hard work that is needed. I do not think that the agencies are doing that well enough. There needs to be a fundamental challenge to them to up their game and stop the neoliberal passiveness.
For example, I made a suggestion about emulating the Mondragon concept in Spain. Let us build the railway engineering in Springburn; let us allow employees to take ownership of the assets there; let us build, along with the new publicly owned railway company, a centre of excellence for railways in Scotland. When I suggested that, I was looked at as if I had two heads. It just did not compute with the agencies’ thinking, economically and fundamentally.
We see the same thing when it comes to issues such as Willie Rennie mentioned. Liberty Steel could have been at the heart of a renewables renaissance—we could have had green steel and rolling plates and electric arc furnaces. However, what are we doing now? We are dealing with another distressed company that is on the brink of collapse. The same goes for Ferguson’s, which needs long-term investment and procurement plans; Caledonian Maritime Assets Ltd—CMAL—is not interested and we are sending orders to Turkey.
All those things are fundamentally at odds with one another, and unless we get everything shaken out and done right—which is what we all desperately want—we will not achieve the gains that are needed to help us to fund our public services, and the Deputy First Minister will continue to come to the Parliament to make cut after cut to public services.
It is welcome that the Scottish Government brought this debate today, at a time of unprecedented strain on our businesses. Many businesses across the country are struggling and face additional costs, although the help that the UK Government has announced today and over the past few weeks will be welcome. Above all, businesses are still emerging and recovering from the two years of the pandemic.
This is an unprecedented time in our history, which calls for a serious approach from Governments everywhere, so I was disappointed with Scotland’s national strategy for economic transformation, which was published earlier this year and was generally considered thin gruel for business.
When she introduced the strategy, Kate Forbes promised
“a ruthless focus on delivery”.
She also said that the Government would be
“judged on the outcomes we deliver, not the strategy we write”.
However, those fine words will be realised only by ministers meeting those commitments. It is therefore disappointing that the delivery plans for the five programmes for action were not published by 1 September, as promised.
We face challenges as never before. The economy will be central to how we weather the years ahead, how we maintain jobs and how we ensure the living standards of our constituents.
The UK has long been a global and European leader in attracting inward investment, and Scotland punches above its weight in that regard. That is testament not only to Scotland’s attractiveness as a destination but to the quality of work to promote Scotland that is done on our behalf. Since its origins as Locate in Scotland, SDI has had a commendable record of bringing investment, but of course it is far from being the only organisation that looks toward trade and investment for Scotland. The new, on-the-ground presence of the Department for International Trade at Queen Elizabeth house, just down the road, is extremely welcome and will, I hope, drive further positive working relationships between the department and SDI.
We recall the conclusions of the Economy, Energy and Tourism Committee’s inquiry into internationalising Scottish business in 2015. The committee observed, in relation to SDI and UK Trade and Investment, one of DIT’s predecessors, that
“co-ordination between SDI and UKTI was not as strong as it could be”.
At the time, the Deputy First Minister was optimistic about the role of collaborative working and the importance of getting the right services in place to enable businesses to trade internationally and locate in Scotland. I am more than happy to echo those sentiments today. As my colleague Liz Smith said, the Scottish and UK Governments should be working together in such areas, despite their political differences. There should be a shared ambition for Scotland, one of positive and sustainable economic growth—I appreciate that that is not necessarily what the SNP’s new Green colleagues in the Government support, but I hope that more sensible heads will prevail. It is therefore regrettable that the economy portfolio and the enterprise bodies that work to support business have often been the first casualties of this Scottish Government’s cuts.
We recently saw a positive example of the sort of intergovernmental co-operation about which I have spoken. It was good to see the First Minister visiting the British embassy in Copenhagen, which has hosted the SDI’s Danish operation—it is good to see both Scotland’s Governments sharing resources and knowledge for our benefit. Across the world, many such offices are co-located within British embassies and high commissions. I am sure that they benefit from more than just the pooling of rent and electricity bills.
We hope to see further work on green free ports, which have the opportunity to drive trade and investment, particularly in my region, the Highlands and Islands. The creation of free ports has lagged behind the approach in England, which is regrettable. The proposal has captured the imagination of business in our region.
An area that has been little discussed but which Paul Sweeney raised is the nature of inward investment. Not every pound of investment is equal. We should ask whether jobs are emerging in Scotland as a result of investment. We should ask what the wider impact of investments is on the local, regional and Scottish economies. That is an appropriate consideration: inward investment should be beneficial, not only to local employment but to local supply chains. However, that sort of deeper analysis is largely lacking from the Scottish Government’s figures.
That is also an issue when it comes to the international offices. We know that they are operating, but what analysis is made of their success? What are they getting right, and what value are they adding?
There is broad recognition that Scotland and the UK more generally have suffered from relatively poor productivity. In that context, innovation can be vital. It is a key driver of sustainable growth and it is vital in streamlining operations across the public sector.
Although significant work has been undertaken, particularly with the support of universities, to boost innovation in Scotland, there remains a lack of leadership in embedding innovation across the public and private sectors. Phase 1 of the enterprise and skills review published in 2016 observed a need to
“review, streamline and simplify the innovation support ecosystem, connecting programmes, funding and delivery mechanisms.”
However, since that time, support and encouragement for innovation has arguably become even more cluttered, sitting across multiple agencies, including Scottish Enterprise, Highlands and Islands Enterprise, South of Scotland Enterprise, the Scottish Funding Council, the Scottish National Investment Bank and the Scotland Can Do programme.
There is work being done in the area. In June 2022, the Scottish Government’s call for evidence for a new 10-year innovation strategy closed. In July of last year, the UK Government released a new innovation strategy, noting that
“while this Strategy applies to the whole of the UK, it also sits alongside important work being taken forward by the devolved administrations”, recognising a need for collaboration, but also for specific action from the devolved bodies.
The Scottish Conservatives have consistently supported a more active role in encouraging innovation. Our policy paper “Power up Scotland”, which was published in September 2020, advanced the argument for greater innovation spending and increased direct support for innovation. However, we must also ensure that spending is directed in a positive and structured way, that value for money can be assured and that support should be accessible but remain results driven.
We need to see a more streamlined approach to innovation that provides a key point for encouraging innovation in the public sector, and more accountability in spend. It is vital that we get support for business right and that we ensure that public money that is used to encourage business growth and location in Scotland achieves the best value possible for every pound that is spent.
We have seen several examples of where the approach has fallen short. In my own region, as Willie Rennie highlighted, the investment in the Lochaber smelter has failed to live up to its promise in terms of the money invested or jobs created. In such cases, there has been very little accountability, with the Scottish Government’s role and much of its work hiding behind the cloak of commercial sensitivity. Yet still the minister claims that he has no concerns about that deal. I hope that in his summing up he will address the issues that Willie Rennie raised.
We must ensure that Scotland remains an attractive place in which to work and invest, that we have a streamlined and transparent approach to support and, above all, that we use all the resources that are available to us, including the ability to work effectively with partners in the UK Government and its agencies.
Before I start on the substance of my closing remarks—there is a lot to cover, so I will get through them as quickly as I can—it is important to draw a line under some of the comments that were made about the lack of a motion and the timing of publication.
In particular, I am disappointed, frankly, with one member who accused me of being “shameful” because of my behaviour this afternoon. Comments were made about our hiding behind the Queen’s death as a reason for there being no motion for debate. That policy was agreed by all members of the Parliamentary Bureau, including the Labour member, Neil Bibby, so the member that my comment applies to may want to apologise during the debate, and I would happily take his intervention if he feels so inclined. [
.] Okay—I thank him for making his position on that clear.
I turn to the substance of the debate. It has been an interesting debate. Some members have been very positive about Scotland’s success in what we have delivered on export growth and inward investment. Unfortunately, some members could not bring themselves to accept that Scotland could be successful at anything, which says more about their attitude to Scotland and Scotland’s economy and how much they care about Scotland than it says about anything else.
Liz Smith opened the debate for the Conservatives extremely well; to be honest, Jamie Halcro Johnston closed it well, too, recognising and welcoming the significant progress that we have made, as well as highlighting some areas that we can do better on. Those points are hugely welcome, and I will touch on some of them.
Liz Smith mentioned supply chain disruption without mentioning Brexit, which was an interesting omission, given that that is the main driver.
I do not have a lot of time, but I will try to get the member in later. I have only a few minutes left.
Likewise, we have a declining population and Brexit is a primary cause of that situation. An interesting data point that Liz Smith should reflect on is that every year more working-age people from the rest of the UK are attracted to Scotland than leave Scotland to live and work in the rest of the UK. In fact, net inward migration to Scotland from the rest of the UK has been around 35,000 over past five years, which is testament to the fact that people from the rest of the UK want to live and work in Scotland because of what Scotland has to offer in so many regards.
Liz Smith mentioned UK co-operation in her comments. Believe me, we try to co-operate as much as we can with the UK Government, but the reason why there is no announcement on green free ports yet is not because of us—we have been ready for weeks—but because of the inaction, incoherence and lack of focus from the UK Government down south over quite a period of time over the summer. Likewise, on the cost of living crisis, the Deputy First Minister has made very clear what we asked the UK Government to do. It has been very late to the table on that, waiting for the change of Government for many, many weeks. That has been disappointing.
Daniel Johnson struggled to find something sensible to say; he was all over the place, which was disappointing because he is usually much more focused and coherent in his interventions. He did not recognise the fact that the document is absolutely jam-packed full of analysis that focuses on what we should deliver on, so he did not recognise what has been delivered as a consequence of the strategy.
In response to Daniel Johnson’s comments about shipyards, I note that the commercial shipyard is still on the Clyde because of the actions that have been taken by this Government. He talked about silicon glen, and I can tell him that I worked in silicon glen and was made redundant from a business in silicon glen. That happened under a UK Labour Government and a Scottish Labour Government, so he cannot talk to me about the Government not being focused on supporting industry and preventing redundancies.
Daniel Johnson also talked about the Saudi Arabia of wind. We are absolutely focused on delivering the renewable potential of Scotland, with 40 gigawatts of offshore and onshore wind. Only this afternoon, I was on a virtual call with businesses, investors and Governments in Germany to impress upon them the importance of Scotland’s hydrogen offering and what we can do to support their requirements in that regard. Next week, I will be in Hamburg saying exactly the same.
I do not have much to say about Willie Rennie, the member for shutting smelters. Frankly, we have been round and round the houses on that. The jobs have been saved and the plant is still there, and if it was up to Willie Rennie it would be shut by now. The Scottish Government receives all the money that is due to it, and we have a liability that is more than covered by the asset, which we can call on in the event of anything happening to the business. Further, since Harland & Wolff took over BiFab, it now employs 400 people.
Fiona Hyslop very clearly laid out that Scotland has what it takes through the businesses and sectors in which Scotland enjoys great strengths. She also highlighted the impact of Brexit and the damage that it has done to Scotland’s economy.
No. I only have four minutes and still have half of the members to get through.
Douglas Lumsden is another member who cannot bring himself to recognise the fact that Scotland has been successful. He also did not take any interventions, whereas I took several in my opening speech. Brexit is driving many of the problems that he mentioned.
I will in one minute.
Scotland has closed the productivity gap with the rest of the UK, and over the past 15 years there has been significant improvement. We have consistently had the lowest unemployment rate in comparison with the rest of the UK. Why are investors coming to Scotland in such numbers if they are so concerned about independence? They see it as an opportunity, and that is one of the reasons why Scotland is leading the UK, outside of London, on attracting inward investment.
Can we address the point about Brexit, which the minister has mentioned time and time again? Members know my views on Brexit, but it has happened and we have to deal with it. Can the minister explain where the logic is in the SNP’s position? SNP members are always moaning about the wonderful problems that we have because of Brexit, but they want to do exactly the same thing by splitting up the UK, which would cause just as much trouble as Brexit—and more. The SNP’s own advisers agree with that.
I am glad that Liz Smith recognises the damage that Brexit has done to the Scottish and UK economies. She asked what we can do about Brexit. I will tell her, the rest of the Tories and the better together coalition what we can do about Brexit. Scotland can become a normal independent country that enjoys normal international relationships, escape from the damage that the UK Government is doing to Scotland’s economy and take our place as a normal independent European country.
Kenny Gibson, as always, put focus on the success of businesses, in both inward investment terms and export terms, in North Ayrshire, many of which I had the pleasure of visiting recently. He made the very important point that Scottish Government will be at Hannover Messe next year representing the Scottish economy, but the UK Government has declined to attend.
I do not know where to start with Richard Leonard. I will start on a positive note because we are all agreed that we want inward investment that has value to Scotland’s economy. That is why values are a central focus of and core to our approach. We all agree that we want inward investment that builds our globally leading clusters and supports local businesses as a consequence.
If an inward investor parks themselves next door to a local business in a sector, that local business has access to global technology, global talent and export markets as a consequence. It builds and strengthens the cluster. Therefore, the right inward investment, which is absolutely what we are focused on—the plan is very clear on that—supports local businesses to grow and prosper.
The point has been made by other Labour members that there are many Scottish businesses, such as the Wood Group and Weir, that have grown from Scotland, gone international and acquired companies as a consequence. It is a two-way street. Countries that trade and invest internationally are more successful, and we are focused on ensuring that the inward investment that comes here is here for the right reasons.
I do not have time to go through all the other contributions. The rural point that Rachael Hamilton made is important, as are the regional aspects of the matter. There is a huge focus on that. I work closely with South of Scotland Enterprise, which is doing a great job in supporting rural investment. On my recent tours down to the south of Scotland, I saw some great businesses. Rachael Hamilton should rest assured that we are greatly focused on that.
The debate and the report have shown that Scotland has great strengths across a range of globally leading sectors, now and for the future. We are clearly focused on those sectors and on delivering Scotland’s potential. Our innovation strategy, which has been mentioned and will be published in the next few weeks, will take that analysis and focus to the next level.
Scotland has what it takes but the only way that we can realise the full potential of Scotland’s economy is for Scotland to become a normal independent country.