Scottish Affairs Committee
Oral evidence: Our Borderlands – Our Future, HC 571
Monday 09 February 2015
Ordered by the House of Commons to be published on 09 February 2015.
Members present: Mr Ian Davidson (Chair); Mike Crockart; Mark Menzies; Graeme Morrice; Pamela Nash; Sir James Paice.
Witnesses: Bruce Simpson, Vice Convener, Scottish Borders Chamber of Commerce, Brian Richardson, Dumfries and Galloway Chamber of Commerce, Paul Lewis, Executive Leadership Team, Scottish Enterprise and Managing Director, Sectors, Commercialisation and Investment, and Alistair McKinnon, Director, South of Scotland and Director Sustainable Construction, Scottish Enterprise, gave evidence.
Q62 Chair: Gentlemen, welcome to this meeting of the Scottish Affairs Select Committee. As you will probably be aware, we are looking at the Borders, the Borderlands Initiative and various other related matters you will have seen in the various papers and heard in the other sessions.
I wonder if I could start off just by asking you to introduce yourselves and tell us where you fit into the grand order of things, maybe starting at this end.
Bruce Simpson: Yes. I am Bruce Simpson. I am the Vice Convener of the Scottish Borders Chamber of Commerce.
Brian Richardson: Brian Richardson. I am the Chief Executive of Dumfries and Galloway Chamber of Commerce.
Paul Lewis: I am Paul Lewis. I am the Managing Director of Operations at Scottish Enterprise, covering our work with sectors, commercialisation and investment.
Alistair McKinnon: I am Alistair McKinnon from Scottish Enterprise. I am the Location Director in the south of Scotland.
Q63 Chair: What impact do you think the restructuring of Scottish Enterprise and the Enterprise network has had on enterprise in the Borders?
Bruce Simpson: From our point of view, mainly because it has decentralised, the visuality is not there. We get a feeling in the Borders that we have been left on our own to a certain extent. Another feeling is that being situated as we are, between two huge conurbations, we should be doing better economically than we are at the current time; a feeling we have been forgotten about and that is probably the main one.
Brian Richardson: Yes, just to echo that there is a certain lack of profile that we talk about in the paper we submitted. We also believe that there is a lack of resources. It has been very hard to get cash per head figures, but we believe that it is of the order of three to eight times less than, for example, the Highlands and Islands. We feel there has been a diminution of service.
Q64 Chair: Why has it been difficult to get cash per head figures?
Brian Richardson: I cannot comment on that because I have not read the paper, but I am struggling already with various other issues. I do not know why, but certainly we intend to try to find out.
Q65 Chair: But you have asked for those figures?
Brian Richardson: We have asked for figures and we cannot get them.
Q66 Chair: Gentlemen from Scottish Enterprise then, would you like to respond?
Paul Lewis: Yes, absolutely. In terms of the—you are right—restructuring that took place back in 2008 of the Enterprise agencies, it was fairly fundamental and charged Scottish Enterprise from that point onward with being a national agency, looking at economic growth, working with those sectors and those companies in Scotland that can maximise economic value. Clearly it continues to mean we support businesses and sectors across the entire part of Scotland that we can service, and that includes very much the south of Scotland. As you will have seen in our submission, we are working intensively with some of the higher-growth companies in this region, companies like Spark Energy, like ProStrakan and like others in the Borders and Dumfries and Galloway.
We have that focus and I think we achieve a good return on investment for the money that we spend with those companies, but we are also, I believe, offering a responsive service to the particular needs of the rural economy. We have a very well-established rural development programme that provides property support, leadership development and other programmes to meet the particular challenges of rural Scotland.
Q67 Chair: Mr McKinnon, you were characterised by other people to us as being a good man in a bad system. I do not know whether you would accept that, but do you accept the position that has been argued by the two Chambers of Commerce?
Alistair McKinnon: I would not like to respond to either of the two suggestions, good man or a bad system.
Chair: You should be in politics.
Alistair McKinnon: No, definitely not. One thing that Paul did not say in terms of the changes in 2007 and 2008 was that Scottish Enterprise transferred a lot of its previous responsibilities for local economic development—mainly Business Gateway, but other services as well—to the local authorities, and they continue to offer those services at the moment. Similarly, our previous services in terms of the National Skills Programmes and dedicated skills programmes for sectors or geographies were also transferred away from Scottish Enterprise to Skills Development Scotland. The Scottish Enterprise that had been before and was characterised by the local enterprise companies was basically split three ways. That may be part of the reason why Scottish Enterprise is now less visible with the wider business community than it was previously.
We continue to have staff in both patches. I have an office based at Selkirk and another one in Dumfries and we have staff based in both locations who work with businesses in the south of Scotland and across the rest of Scotland. Similarly, we have staff based in Edinburgh and Glasgow who work with businesses in the south of Scotland, so we are a much more mobile organisation than we used to be when it was enclosed within one geography. That means that we are able to bring more specialist expertise to a particular location and particular business need. Granted, it is true that Scottish Enterprise itself deals with less businesses than it did pre-transition 2007, 2008, the businesses that we no longer deal with should now be dealt by the Business Gateway, and that is it its function in terms of dealing with the wider business base and the development of a pipeline of business that should ultimately grow to the size where they are supported by Scottish Enterprise, either through our individual products or services, and then finally through account management, which is the sort of core group that Scottish Enterprise works with; I think Paul mentioned 122 businesses in the south of Scotland. We are very active still in the area, but in different ways from in the past.
Q68 Chair: In evidence to us, David Mundell noted that the creation of a business park in Annan had been delayed and harmed by the national approach, the Scotland-wide approach, of Scottish Enterprise. What is your assessment of his judgment?
Alistair McKinnon: I think he is incorrect. David Mundell called for and received a report on that development at Annan some four weeks ago, five weeks ago, something like that. That report quite clearly laid out to him and the other members of the committee whom it was addressed to the reasons behind the delays at Annan and the issues at Annan. The particular issue that had caused some consternation locally was the fact that business units had been built but remained unoccupied although businesses wanted to occupy them.
The reason for that was the planning constraints, and as you will know, planning constraints are a matter for local authorities. Basically, the buildings were built and are designated for office and light industrial use, not retail. The businesses who were looking to relocate to them were retail and that is why they could not occupy those premises. Since that happened, we have approached the council about changing the planning consent and did not get anywhere. However, last week some colleagues had another meeting with Dumfries and Galloway Council and the Director of Planning who said they would look at the issue again.
Chair: Any other comments on that particular issue?
Bruce Simpson: Only to say that with regard to the Scottish Borders and probably Dumfries and Galloway as well, we feel that the south of Scotland should be seen as an economic entity in its own right. I described in the paper how the European monies are divided and we are grouped with Edinburgh and Dumfries and Galloway is grouped with Glasgow. It does not do us any good. Having lived and worked in the Highlands for 25 years and worked for the Highland Board for five years, I think there is a strong case for a south of Scotland Enterprise. Maybe that is a personal thing, but I do think that would help the south of Scotland that is suffering economically badly. We are getting more of a voice now in the Borders than we used to. You heard from Michael that the Scottish Borders Business Forum that we helped to set up now has all the 40 or 50 business organisations talking with one voice, so we are getting louder and that is a plus point. It does not take years for this to happen.
Our whole business infrastructure could be improved immensely. Take an example of broadband: being told that our broadband is going to be improved by 2017 is all very well, but nothing is going to be improved before 2017, so come 2017, we will still be three years behind everybody else. It does not help very much from a business point of view. We have to compete with the cities and elsewhere in the country and we cannot do so if our business infrastructure is as bad as it is now.
Brian Richardson: I used to work for Cleveland County Council as Head of Economic Development Strategy and European Funding, and there is a similarity between the situation here and the integrated development operations programme between Cleveland and Durham. Cleveland and Durham had a population jointly of about 700,000 people. The idea was there were 16 designated integrated development operations programmes, of which we were one. We were successful in bidding for £400 million. Well over half of it we would not have managed to acquire had we not been an integrated unit. The process was massively beneficial. Even though we had people working in the areas quite successfully in Middlesbrough and obviously in Durham and so forth, when we came together we designed a matrix that was around business sectors, property and infrastructure, set against a set of objectives and populated obviously by the various programmes that were in existence.
If you were to do that in the south of Scotland, you would find a very good competitiveness effort going on in a programme of really good sound work, but you would equally find very large gaps. I think some of those gaps would be around some of the major infrastructure issues, some of the property issues, and the particular area I work in, which is energy. I am also actively involved in energy storage, giving a presentation on 5 March—we invited all MSPs in Parliament—around the future of energy storage in Scotland. It is those kinds of things that come along that the system as it stands cannot react to. It simply does not have the capacity or it does not have the strategy laid out that would allow it to react to those opportunities.
Paul Lewis: Obviously people can have views about structures that support economic development—as Alistair said earlier, there are a range of public agencies, from Scottish Enterprise to local authorities to Skills Development Scotland looking to support that—but I think the point you have just made about understanding the nature of the opportunities is the important bit, and how you can coalesce the right partnership around that. I have to say, having worked with partners in this locality and elsewhere, things like the regional economic programme that is being developed by a number of partners in this locality to identify where the common opportunities for growth are going to lie is a good example of what can be used to help focus effort.
Perhaps it is a different approach from looking at organisational structures and boundaries, because certainly all of the companies we work with have a very strong presence and reason for being in the south of Scotland and all of them are engaging with customers, supply chains and other businesses elsewhere in Scotland—and indeed beyond Scotland—so the boundaries are important, but not the sole thing for the focus of what we are trying to do.
Q69 Chair: I wonder if I can just pick up the point that you made, Mr Simpson, about the model and whether the Highlands and Islands model of enterprise is a better one, both in terms of the focused remit that they have, and in terms of the range of powers, having much more of a sort of general developmental remit as well. Now, as I indicated when we were discussing things with Michael Moore, we have been very impressed by the, as it were, can-do dynamism and so on that we have seen in the Islands and the Highlands and so many initiatives, the Crown Estate, Our Islands - Our Future, all of that. It does seem to us that having their own enterprise structure has helped develop that.
Part of it has been internally-generated dynamism, but part of it has been assisted and supported by having a particularly focused structure that is a wider remit than just simply the one that Scottish Enterprise seems to have at the moment. Should we be saying in our recommendations that we want to see something similar established for the south of Scotland? Bruce, since you touched on this?
Bruce Simpson: One thing I like about the way that the HIEB used to work and probably HIE as well is they are very much involved in culture and society and community, that broadening out an enterprise for the south of Scotland, but with those issues attached would, I think, bring the community, the whole of the area, together. It would help anyway just to show that the body was not purely economics, it was for the whole of the area, the people of the area.
Brian Richardson: We are fully supportive of the initiative. My belief is that the structure as it stands does not work well for the region. I would just echo what Bruce said. I think that there is a social aspect, there is a cultural aspect and that could be brought in if people so wished, in which case there is then an argument for an integrated body. If you have a situation where you have a purely economic argument similar to the integrated development operations programme, Durham and Cleveland remain separate entities, but clearly jointly they were able to make a bid to Europe and it worked very well. I do not see why it cannot be done in this region.
Q70 Chair: You are in a slightly difficult position because you are being asked to comment on whether or not the machine in which you work is the right one, but go ahead.
Paul Lewis: As you rightly pointed out, the Highlands and Islands Enterprise and Scottish Enterprise have much in common in terms of our economic focus and also some distinct differences. We do not have an explicit social and communities remit. Indeed, that is the responsibility of our colleagues in local government and that would apply in Borders and Dumfries and Galloway. We run a lot of activities on a pan-Scotland basis in both Lowland Scotland and also in the Highland area on behalf of HIE. The evidence would suggest that certainly from an economic perspective, the return on investment that is achieved from the focus we have with the businesses we work with is exceptionally good—£6 economic impact for every £1 we invest for the businesses. I think that bit of the system can be seen to be working with the companies that we fully engage with.
I mentioned in my opening remarks that while we do take a Scotland-wide approach and look to deliver benefit for Scotland, that means also all the parts of Scotland that we work with, and particularly in relation to rural Scotland we have taken a very tailored approach. We have sought to respond to the particular challenges and indeed opportunities that exist in rural Scotland and we do things with businesses and parts of rural Scotland that we would not do in other parts of the country, precisely because there are differences and we recognise those in the tailored support we provide. An example would be through the stuff we do with Co-operative Development Scotland, who are part of Scottish Enterprise, and I think are offering very good support to help social enterprises and third-sector organisations and indeed businesses to look at collaborative and co-operative models to help develop their future, which is something that is relevant across Scotland, but particularly in rural economies.
Alistair McKinnon: Can I just follow on on that? That was the point I was going to make. Within our account management portfolio, it is not all just capitalist concerns and hard-nosed business men, there are many different sorts of “enterprises”. I will give you three examples, some of which contribute in a social way as well as an economic way. The first one is there is a company not far from here called Bookdonors, which is a social enterprise. Basically it recycles all the books that you hand into your charity shop and sells them on the internet. It raises quite a lot of money; that money goes to charitable causes. It also employs local people, it also employs disadvantaged people and it does a social job. That is account managed and it is growing significantly and we have been working with them to achieve that.
The second example is a completely different example, Abbotsford House just up the road from here, a major tourism venue for the Scottish Borders. We indeed in the past have given them a significant amount of capital for redevelopment and a visitor centre cafe, interpretation centre. They are account managed and we work with them. It is a not-for-profit organisation, it employs local people, and more importantly, it is important to the local tourist industry.
The third one that you might find surprising to be in our account management portfolio is housing associations. We have three housing associations in the Borders that are account managed. Again, they employ lots of people. Yes, they employ socially disadvantaged people, but they also provide services that are very important for the community and at least one of them has an enterprise arm that does straight construction work across the borders. Those all deliver a social function without Scottish Enterprise having a social remit, because they are enterprises that are designed to generate profit for different reasons.
Q71 Chair: But in that context then the social benefit is almost just coincidental. It is a by-product. Any organisation, like yourselves, which spends substantial chunks of money, is unlikely not to produce some good results. Simply pointing to those does not in itself justify the focus and the structure of the whole organisation, and I wonder whether or not some of these things that you are doing, which are undoubtedly beneficial, could not perhaps be better accommodated in a grouping that was more focused directly on the Borders and the south of Scotland and took account of the social aspects and so on, so that the best of what you do on a Scotland-wide basis could simply continue. Because you said that there are thing you do in the Highlands and Islands under the existing remit—and that could continue—but a focus on work in the south of Scotland by a separate structure with a wider remit would get the best of both worlds, would it not, to copy a phrase that has been used elsewhere?
Alistair McKinnon: The point I am trying to make is essentially—to answer your very point—we are doing it under the existing structure.
Q72 Chair: So why is everybody unhappy then?
Alistair McKinnon: I cannot comment on that. All I am saying is that Scottish Enterprise does not need that social Highlands and Islands remit to do things that are good economic development but also deliver social benefits locally.
Paul Lewis: Just in terms of the happiness question, I think if you were to ask the companies that we work with, who employ many thousands of people in this region, whether they are happy or not with the support Scottish Enterprise can bring to them and help them sort out their growth plans, our evidence points to the fact that they find that extremely valuable and beneficial. So I think it is perhaps wrong to say, “Why is everybody unhappy?” There are a group of employees and customers that are very content with Scottish Enterprise.
Q73 Chair: Those who are getting money from you are generally likely to be happy but those that—
Paul Lewis: Not just money, advice and support.
Chair: Advice and support. But there are those who are not. A good quote from David Mundell last week, speaking I thought on behalf of your quite substantial body of opinion, was, “Scottish Enterprise isn’t working for us.” By that he meant his area. That does display a considerable degree of concern that more could be done. But look, Mike, you wanted to come in and then Sir James.
Q74 Mike Crockart: Yes, it is exactly that point because when I talk to companies in my constituency, which does not have the call to restructure Scottish Enterprise in a different way that brings in a social element, it is very much the same. The ones who are working with you and supported by you, of course they are happy with that, but it is the ones who have tried to work with you and failed who are the most vociferous in their complaints. We said, “What are you doing in the south of Scotland to answer the criticisms that there are?” Mr McKinnon, your position seems to be it is working perfectly well in the south of Scotland and, in actual fact, we could probably do away with Highlands and Islands Enterprise because there doesn’t seem to be a reason for the social aspect up there since you can do it perfectly well without it.
Alistair McKinnon: I will not comment on Highlands and Islands Enterprise. I am not saying that we could not do more. We always want to do more. The issue is about Scottish Enterprise finding the right businesses to work with to add to the whole rather than displace each other. When you look at the business profile in most rural areas—but certainly in the Borders and Dumfries and Galloway, which I know best in terms of Scotland—you will find there is a huge number of businesses, some 90%, that are absolutely tiny, and a small number of large businesses that are essentially the businesses that have the greatest growth. They provide on average the greatest value add to the economy and also in terms of pay levels. Then there is a hole in the middle by comparison to what you would see in just the other parts of Scotland.
The issue in rural areas is how you encourage some or more of that mass of small businesses to grow to middle size and then to grow and to be large and do things like exporting and innovation and provide high level, high quality jobs and so on. The challenge is not more and more start ups and working with all of the start ups all the time. It is about finding the ones that will grow beyond being essentially employment substitution. Many of the small businesses in the south of Scotland are one-man-bands, and they always have been, and they serve open markets. There is nothing wrong with that. That is really good. But it is the ones that grow and create employment that are the ones that will add value to the economy. The Scottish Enterprise piece is about adding value to the economy, not increasing the number of start ups that in turn displace some of the existing businesses that are already in those local communities. The challenge is to find a start up that will grow and ideally sell its products or services outwith the area and outwith Scotland to add more to the Scottish whole. That is our challenge.
Q75 Mike Crockart: I am not sure it is the answer to my question, though. You have seen that there is disquiet; there is an unhappiness with the way that Scottish Enterprise is operating in the south of Scotland but there does not seem to be a willingness to look at the structures and see whether that structure fits.
Paul Lewis: I am not sure we see structure as the solution. So, if we go back to what we are charged with, which is working with a group of businesses—not all businesses— that have significant growth potential. That is the remit we have been given. As I said, I think there is significant evidence to say with those customers the service they get is very good—
Mike Crockart: We have that.
Paul Lewis: I appreciate that.
Mike Crockart: We have that, but the question is not about those companies. It is about the others.
Paul Lewis: Let me finish. There are other businesses in all regions of Scotland, including the south of Scotland, that need support and the lead responsibility for much of that support comes through the Business Gateway and the local authorities who provide that support to some of the very small and micro businesses. If we need to do more it is making sure that the system of translation from a very small business, supported through local authorities as the gateway to Scottish Enterprise, can work as smoothly as possible.
I would say—and I think it is important to recognise again—as well as that core focus we have already undertaken considerable action in the south of Scotland, as part of rural Scotland, to support businesses that would not normally meet the growth criteria that we would establish. That is recognised in the specific situation of those businesses by themselves in rural Scotland. So things like a rural leaders’ programme, which is a fantastic—I think very highly regarded—a programme of support that operates in rural Scotland, particularly beneficial in the south of Scotland, helping very small businesses to understand some of the challenges they will face and how to diversify and expand their business; I think a very, very good programme. There are other programmes around rural property support because, again, we recognise there are specific market failures in this part of the country that would not necessitate support in the urban areas but need it here. So we do not have responsibility for all of the business base in this region. Those that we do have responsibility for I think we support well and others we support through that tailored programme of rural intervention.
Q76 Sir James Paice: It seems to me listening to these exchanges, and from what I have read, that one of the changes that appears to have taken place since the restructuring is not just what is seen as the impact on the ground but a perceived breakdown in relationship and lack of the cohesive approach that existed when it was a much more localised Local Enterprise Board. Can you explain to us a bit about what your local government arrangements are; accountability? You refer to two offices but how do you get the guidance, the information—I cannot use the words “orders” or “instructions” because obviously it does not apply—the community accountability in the Borders area, which seems to me to be part of the challenge?
Alistair McKinnon: In a nutshell there are two routes to that. The first one is across Scotland we have what are termed regional advisory boards, and in the south of Scotland it is known as the South of Scotland Economic Forum. It comprises predominantly private sector businesses, not all of whom are in that account management pool. That is the first thing to say. There are also representatives from Chambers and the FSB, as well as both the officials and elected representatives or the convenors from the two councils’ economic development committees.
The Economic Forum essentially is there to look at issues that are arising in the area and, more importantly, guide Scottish Enterprise and its partners, which are the two local authorities essentially, in terms of, “Where do we go next? Do we go after that opportunity? Is it something that is achievable?” It also looks at other issues like youth unemployment and so on. Indeed, it has been particularly interested in that issue with the Wood Commission and so on. The second avenue is through the South of Scotland Alliance, which is a tripartite group between the two local authorities, elected representatives and officials and Scottish Enterprise, and I sit on that group. Indeed that is the sponsoring group for the South Rural Economic Development Programme, which crystallised around the four main projects that are new there.
So those are the two key avenues in terms of that feedback, which I take it you are meaning—
Sir James Paice: Yes.
Alistair McKinnon: —back to Scottish Enterprise about: are these the right things to be doing and where can the varying agendas converge on opportunities?
Paul Lewis: Also to say obviously we participate fully in community planning partnerships in both localities as well. So we sit on the committee planning fora that exists in both of those areas as well.
Q77 Sir James Paice: Thank you. I wonder, Chairman, whether Bruce or Brian would come back on that from their perspectives. Is that approach working? If it is not is it something that could be improved or—
Brian Richardson: Yes. I just want to say I was born in Cumbria, family in Dumfries and Galloway, and I am also contracted to the Cumbria Chamber of Commerce to deliver services as well as being CEO in Dumfries and Galloway. So I have a direct comparison between the two areas because in Cumbria over the last seven years they have built up a real engagement with the rural community. There is a local presence, there are local offices. It is social as well as economic. So they develop it then with a strong voice and strong service. If you come across the border into Dumfries and Galloway sadly I don’t think that exists. That is my perception.
Q78 Sir James Paice: Are you involved with the work that the—
Brian Richardson: I have been in post one month.
Sir James Paice: Right, okay.
Brian Richardson: Or about to be.
Bruce Simpson: Yes, I tend to agree with what Brian said. I would like to see a body much more involved in the whole community. You must remember that the Highland Development Board was the first development agency to be set up in this country back in 1966. That was set up to assist the seven crofting counties. That was a community reason; it was set up to help those seven crofting counties with the Gaelic language and the culture. So I think that system was right and it would be right for the Borders as well.
Q79 Mark Menzies: This is to Paul Lewis and to Alistair McKinnon. Douglas Scott of Scottish Borders Council said, “We’ve been trying to challenge Scottish Enterprise to look wider”. Ewan Green, head of economic development at Dumfries and Galloway Council, said that the approach of Scottish Enterprise seemed to be changing, “and there seems to be an understanding that rural economies require a more flexible approach”. So how and why have you changed your approach?
Alistair McKinnon: I don’t think we have changed our approach, certainly not since the restructuring. I have been the point person for two local authorities for a long time. I have been challenging them to become more focused, going where the opportunities are, rather than perhaps shall I say the starting point some years ago, which would be about their focus being on the supply side as you could characterise it, doing lots and lots of things and focusing on outputs rather than impacts. So establishing a grant scheme and putting in lots and lots of grants to lots and lots of businesses, per se, was a good thing rather than focusing on which business you should put the grants into and what impact was delivered.
So perhaps there is a convergence and the convergence is around this regional programme because essentially what we are seeing in there is there are four key project areas, which both the local authorities and Scottish Enterprise can focus on, where the local authorities can participate—so can Scottish Enterprise—and deliver to both our sets of objectives and priorities; local priorities as well as national priorities. These are in here because they have the potential to have economic impact at the Scottish level, and that is why Scottish Enterprise is committed to seeing them through. They also have impact at the local level, which is also the reason why Scottish Enterprise is committed but from the local authorities’ point of view they are key, particularly the railway project and Tweedbank, because it is key not just to the Borders but also to Midlothian and I modestly would say it will have a positive effect on Edinburgh as well.
Q80 Mark Menzies: Looking at other parts of the United Kingdom, particularly rural areas of the United Kingdom, are there any sorts of best practices or any initiatives that you see being done elsewhere that you think you could adopt into the Scottish Borders to make your approach better or more flexible?
Alistair McKinnon: In the past Scottish Borders has looked to Cornwall quite often in terms of the model there and how things are delivered, and some of the issues in and around that business base that I mentioned, and particularly the structure of businesses. It is some time since I have been in Cornwall and looked at the operations but the last time I did they were very much focusing on trying to have an approach that was about what could be described as a trawl net. You cast your net very, very wide and then begin to filter out. So you do something for everyone, which is essentially what the Business Gateway is there to do. You do more things for some people to help them because of their greater potential, which Business Gateway does as well, and then ultimately with those businesses or those enterprises—because it is not just businesses—that have the greatest impact potential you focus your resources on them, whether it be resources for local authorities or regional development agencies. Indeed, that is kind of what we do here. So we at Scottish Enterprise obviously have the account management portfolio where we deploy all of our products and services. There is another group of businesses that would be engagement handled by Business Gateway, where we are able to deploy certain products and services to them—things that are universally available, like regional assistance and so on.
So it is about developing—as somebody else mentioned—a connection and a continuum. It is about developing the continuum so that you can help the business appropriate to its potential and also its ambitions because, let’s face it, not all businesses are going grow into being the next Richard Branson. Some are going to be quite content with being a 10-man, 20-man operation, I expect.
Q81 Sir James Paice: I want to come back to what Mr Richardson was saying about his own experience from Cumbria and Dumfries and Galloway, and to look at the Borderlands Initiative, please. Perhaps you would all give us your views as to what potential that has. What are the constraints to it developing further, and can it deliver economic development across the north of England and south of Scotland in a way that is not being delivered by anybody else or is it superfluous?
Brian Richardson: My view, and the view expressed in the paper, is that if you bring together Borders, Dumfries and Galloway, parts of Ayrshire and parts of Lanarkshire into a group of I think between 700,000 and 800,000, which ticks the box, you could create quite a coherent grouping economically as well as socially. My own experience suggests that you will be able to react to opportunities. You would be able to create landmark projects. You would be able to support a whole range of initiatives that separately you would not be able to do. That is my experience.
Bruce Simpson: That could also become a European grouping as well as long as you get over the 800,000, is it?
Brian Richardson: 800,000, yes.
Paul Lewis: At this stage we have not been involved in the Borderlands Initiative but I guess my sense is that, looking at some of the thematic areas that they are talking about, particularly drawing on the sectoral side, I am sure there can be opportunities that would harness assets south of the border in Northumberland and Cumbria and assets north of the border in the south of Scotland, which could be looked at together and perhaps be opportunities for more economic growth. Certainly, looking at other sectors in Scotland boundaries does not prevent collaboration between companies in the food and drink sector in the south of Scotland and companies in the food and drink sector in Tayside, for example. That collaboration can happen. So if that is where the Borderlands Initiative is going to put some focus then there may be some opportunities but, as I say, we have not engaged in it at this stage. We are open to some discussion on that with the authorities when that is appropriate.
Alistair McKinnon: The first thing I want to say is I think we are mixing three separate things here. The first thing is NUTS areas. NUTS areas are essentially statistical areas and if you have one and it meets the requirements it means you are eligible to be considered for funding at the programme top level.
My own view is that, yes, Borders and Dumfries and Galloway are not fairly dealt with by being mixed in with an east and west NUTS 2 area. If you strip them out and you look at the statistics, then it looks very like Highlands and Islands in terms of deprivation and that sort of stuff. I think that there is a much better chance, and there is a good case to make in terms of the NUTS 2 area in the south of Scotland, if you take in South Lanarkshire and parts of South Ayrshire as well, and that would not negatively impact on the existing NUTS areas that Ayrshire and Lanarkshire are in, so everyone is a winner. That is the first point.
The second point is Borderlands. The Borderlands Initiative at the moment is essentially a political conversation that is going on between the councils as the result of an academic paper that was published. At the moment there isn’t anything substantive there in terms of a project or projects that could be implemented, because it has not reached that point. I think it is possible that projects could come out of that. I think tourism is probably a prime contender for that area. Indeed, many years ago I wrote a paper which was called “Scotland’s Gateway”, which was about the similarities between the south of Scotland, Dumfries and Galloway and Borders, and the tourism offering with that in the English counties on the other side of the border, and the benefits in the four areas getting together to sell a combined tourism proposition. So that might be a project that could come out of this iteration and Borderlands that would be of benefit to all areas and to all the businesses because there are lots of similarities and lots of links, certainly in the customer’s mind.
Then the third bit is Borderlands and an issue of a cross-boundary agency, an economic development organisation that crossed and covered, let’s say, the four border counties. That is another completely separate issue and you do not need that to have, for example, a tourism initiative that covers the four geographies, which makes a compelling case and a compelling proposition to the customer and that is what really matters.
Bruce Simpson: Chairman, if I could come in there a bit talking about tourism, which is my area of expertise. Setting up a marketing body between the Borders and the north of England group would have been superb. It could have been done quite simply if the existing Coalition had not closed down the RDAs on the second day they got into power. I know for a fact—and I worked with them—that the one in the north-east had a superb tourism section. It has gone. So is Cumbria. Gone. There is nothing there in its place. There is nothing here in the Borders in place. Scotland closed down the Scottish Borders Tourist Board. There is nothing there either. We are starting again from scratch in many aspects of industry in the Borders.
Chair: We are where we are.
Q82 Sir James Paice: We are. We have to work forward. I want to pick this point up again—this Borderlands—because we are looking at it from the Westminster Parliament perspective, as a Select Committee, with an overview obviously looking across the whole UK. I suppose my question is: what is there that the UK Government could do or indeed the Scottish Government could do, hopefully—at least in theory—working together, to give the Borderlands Initiative more impetus and to maybe start up some of the tourist things that have been abolished? But whatever it does, are there things that you would recommend to us as measures that would be helpful to stimulate the Borderlands Initiative and cross-border economic activity?
Brian Richardson: Yes. I think there are various aspects of a more concerted strategic view that would allow things to grow that would not develop otherwise. For example, the whole background in business incubation and innovation; the Highlands and Islands has incubation centres. There is no incubation unit in Dumfries and Galloway. The reason for that is there has never been a critical mass or a strategic direction that would allow that because most of the effort, as we have talked about, has been uncompetitive. It has been businesses with greater than £100,000 a year turnover and employing more than 15 people, with the logic that that is where employment will come. Fine, but you should not let that system preclude having other areas of opportunity. So, incubation, engagement with the third sector, a whole host of things you could list that simply do not happen because there is not that strategic engaged wider view.
Q83 Chair: Any additional points on that?
Alistair McKinnon: In terms of the two Governments getting behind the Borderlands Initiative, I make the point again it is not about restructuring the Borderlands thing, it is about what it is that you are going to do. That is where political support would be useful. So if out of the Borderlands conversations there comes a plan to say, “We need to market the four borders counties as a tourism proposition together,” that does not mean you need to set up a tourism agency for the four Borderlands counties or a tourism board. It is about actually getting behind what it is that those four geographies collectively want to promote. It might be mountain biking. It might be outdoor activities. It might be a combination of heritage and Roman history or whatever it happens to be. There is a market out there for certain products and propositions. It is about aligning the products and propositions from the four areas, agreeing on what collectively could be marketed and marketing it collectively and then getting political support from Westminster and Holyrood. That may need some funds to do that. It does not mean you need to set up another structure.
Q84 Mark Menzies: Moving on to superfast broadband and then on to mobile coverage. The UK Government has pledged by its superfast broadband programme that 95% of UK premises will have superfast broadband coverage by 2017. To your knowledge, is this programme proceeding to plan in Scotland and do you have any concerns about the ability of the UK Government to ensure this target is met in Scotland, given that it is not responsible for broadband rollout on the ground?
Bruce Simpson: I think ordinary businessmen do not look at who is responsible for improving business infrastructure like that, they just want it done. The Borders, being a very rural area, has an awful lot of businesses in the hills. I am in the hills and my broadband is absolutely awful and I have been told it is not going to improve until 2017, and it will not improve. In 2017 it will change. Whether it is going to change to as good as it is in the cities I very much doubt, but that is the only time it is going to change. Until then I have copper wire between me and a mile and a quarter down the hill and I have to deal with that. So it means that another three years down the line being further uncompetitive with other areas. So asking businessmen whether it is Westminster who does it or whether it is Holyrood that does it, we don’t really care. We just want it done.
Brian Richardson: Yes. In the paper we put forward we said that we commend the Scottish Enterprise private initiative on the Create project and are committed to assist in this work. That is fine. I am not in a position to talk about the overall development other than, as Bruce said, we are aware that 2017 is the date that we have been given.
I am going to echo the point that for many parts of our region even a 3G signal would be a step forward. I can say that because I live in Hoddom near Lockerbie and a 3G signal would be great now and again.
Paul Lewis: We were involved earlier on in the case that was made for south of Scotland, which morphed into the rollout across many parts of Scotland that is underway and, like colleagues, I think all communities and businesses would say, “The sooner that is implemented the better,” because it is a very important factor in both everyday life and certainly in business life. We are aware of the time frames and certainly hopeful that the implementation measures will stick at least to that plan. If can be accelerated that is good.
The bit I think we have not necessarily spoken about is—you are right—what will change in 2017 is you get the connection. I think what can change before then is some of the work that has been done to help businesses to get ready to utilise broadband. Certainly we are in the midst of rolling out a digital programme with businesses of all sizes, not just with account managed companies. Indeed, the programme is specifically not for the account managed base but the wider business base. We are doing that with colleagues in Dumfries and Galloway and Borders and we hope to help companies get ready to utilise the infrastructure that will be provided by 2017 from that date onwards. So I think it is very important that we do focus on building the capacity of businesses to utilise digital technologies because it is driving a lot of business trends in the future.
Alistair McKinnon: The only thing I would add to that is on the mobile side. Quite frankly, it is just not acceptable that mobile coverage is not available everywhere in the 21st century, particularly in the south of Scotland. There are a number of steps that could be taken to improve what we have without digging any holes anywhere or putting up any new masts. One might be multiple providers, so the Vodafone and the O2s being able to share masts and being encouraged to share masts. For example, I was up in Banchory over the weekend and discovered that I could get mobile signal from my car, because it was on O2, but my office one would not work because it was on Vodafone, which seemed rather strange. A simple thing like that would be quite useful.
The second thing is I also understand, although I don’t know this for an absolute fact, that the emergency services have mobile coverage in 100% of the UK. There must be a way that is not beyond the wit of man to use the physical infrastructure in a way that you could provide mobile coverage everywhere, because the issue quite often is not about physically putting a mast up. The issue is about the power to the mast, the electric supply and how many miles you could run an electric cable to connect the mast up and then get the black hole back to the landline networks. So, some creative thinking perhaps is what I would suggest.
Q85 Pamela Nash: On that creative thinking, I would advocate a quick rollout of superfast broadband. As you said, Mr Simpson, it is very easy for us to get caught up in who provides it, but that is because we are making the recommendations. But we understand that it is about getting that on the ground. In the meantime, are any of your respective organisations looking at innovative ways of using current infrastructure, for instance, a satellite broadband? Is that something that has been tested to see if that is a viable current alternative to what is being used?
Alistair McKinnon: Can I come back on that immediately? From memory—and I stress it is memory—we in the Borders tested out a satellite broadband connection 10 years ago, when the technology was a bit iffy, and it worked. There are currently a number of communities who already have or are in the process of looking at their own connectivity on to broadband through some community development initiative. In fact, CES I believe are involved in supporting one or two of them as a community group not on the technical side of it.
I understand that there is funding available from the Scottish Government to do that. The problem is that if they go for that funding it means that they have to maintain their own solution forever and a day, and the network providers will never put in their own solution, and neither can the public sector subsidise a broadband rollout solution because essentially that would be duplicate funding or double funding, so one knocks out the other.
I understand there is some frustration about broadband rollout, mainly because there isn’t a clear timetable about which communities are going to get it, on what date and in which order across the whole of Scotland. As I understand it, some of that has to do with the fact that the commercial providers will make decisions that take communities out of that public programme because the commercial provider has decided at that point that it is commercial for them to then do it, which means that the whole public programme gets rejigged. So that is why what is published on the internet, about when they are going to roll out, what to where, is a relatively short timeline ahead.
Q86 Chair: I wonder if I could follow up with one other question. We have been looking at land reform in Scotland as part of another inquiry, and I wonder whether or not issues of land ownership, and prices being charged for masts or physical access to this, that or the other was playing any part in the difficulties that they experienced here. Unfortunately, a shake of the head does not get recorded in Hansard so you have to say something.
Brian Richardson: Yes. I keep going back to Cumbria, sorry about that, but there is a very active line of sight of broadband connection through Solway Communications in Cumbria, who have developed pretty well the state of the art development in terms of line of sight connection that has equal speeds upstream and downstream. The basic problem is you could download but you cannot upload. Commercially they have had a great deal of success and they are looking to almost franchise that opportunity across the UK. I have yet to find out exactly the penetration they have made into Dumfries and Galloway, but will now as I am going to make it a priority. The general view is that it works extremely well as long as you can get mast placement opportunities to be strategically placed, so that the maximum benefit can be given to the business community. Certainly south of the border in Solway it is working very well.
Alistair McKinnon: Could I answer your particular point? I think it is unlikely that it is the price of land because generally speaking the price of land is less in the rural areas. I think it boils down to the cost of connection and the cost, for example, of electricity connection.
Chair: Fine. I wanted to pick it up because we are looking at these things in another context.
Q87 Mark Menzies: Again, thinking of mobile phone coverage, I wanted to talk about your example of when you go up to the north of Banchory, different companies working differently. Do you think mobile companies—and this is a general question to everyone—are doing enough to ensure coverage in the south of Scotland improves and what further steps can be taken by the phone companies in order to bring this about?
Bruce Simpson: I can only speak to you from a personal point of view, not from the Chamber’s point of view. Where I live I have to use O2 because I cannot get anything else. It is as simple as that.
Q88 Mark Menzies: Do you think they have done enough, looking at mobile phone providers in general? I am not aware of how things have changed over the last few years, but are things getting better or is it pretty much staying the same?
Bruce Simpson: I don’t think it is getting any worse but there are too many places in the Borders when you are driving your car where you do not get any service whatsoever from anybody. That is purely a personal point of view.
Brian Richardson: Yes, if you drive between Langholm and Dumfries you struggle to get a signal for about half the journey.
Alistair McKinnon: Just an observation but there is a black spot in the middle of the M8. You drive from Edinburgh to Glasgow, your mobile phone cuts out at the black spot in the middle.
Q89 Mark Menzies: As Scottish Enterprise have you approached the mobile phone companies specifically to try to improve coverage and, if you have done, what sort of response have you received?
Alistair McKinnon: Not individually. The broadband and the mobile phone issues have been dealt with through the Scotland Alliance. We took the early lead on the broadband stuff, as Paul said, by building the case and some of the technical stuff because we happened to have somebody in the south of Scotland who was—I think you would call them—a broadband wizard. He knew everything. It was a complete confusion to me but, anyway. On the mobile side it has been the local authorities that have taken the lead on that, through Michael Moore who has done some sterling work in terms of putting it in front of certainly some of the operators. So I cannot comment beyond that.
Q90 Pamela Nash: I want to focus, gentlemen, on issues around employment and employment issues that are specific to this region. We have had a lot of evidence about the fact that underemployment is higher here, and particularly evidence about the number of people having to take on multiple jobs being considerably higher than in the rest of the country and, indeed, the local MP alluded to that in his evidence earlier. But I would like to ask for your observations as to why that is the case and what are the specific reasons for the situation in this area?
Bruce Simpson: I have not been here long enough to fully know the background to let’s say the last 40 years or so, but I would suppose it is something to do with the major industry at the time, which was textiles. I could not blame the textile industry for having poor wages. Don’t say I am. But that tended to be the major industry here, probably agriculture as well and agriculture has not been known as being the highest payer.
That is as much as I can say. I could not answer your point on that, could you?
Brian Richardson: Yes. I have worked in regions in economic development globally where there have been a loss of primary industry and issues around peripheral coastal regions. They all have the common denominator that, once you take away the primary industry the strata of business that would have been there previously does not exist. So what happens is that people have to get by with two or three different jobs or part-time employment or insecure employment because the market is fragmented. That infrastructure just does not exist.
So, over time, one of the things I certainly want to do in my new role as CEO is try to build up that business infrastructure through networking, through co-operation, through clustering, to try to build those networks up and rebuild that strata so that people can have sound employment with good prospects.
Paul Lewis: Just to build on a couple of points you made, I think your question: what are the causes? I think there are a couple of things one would point to. One is, as you have said already, the sectoral structure of the economy and there are some significant sectors in tourism, in food and drink and in agriculture in particular, that have been historically dominated to some extent by lower wage employment and, therefore, potential underemployment for some people and, also, I think the structure of the business base. As we said earlier, there are some spectacularly successful companies based in the south of Scotland and there is a very large pool of micro businesses and very small companies, and it is growing the piece in the middle, as Alistair spoke about earlier, that has been a big focus for the pull through we would like to see in the support local authorities are providing.
I would say one of the ways in which I think some of that can be tackled is twofold: how can we work with existing companies to help them add value to the operations that they put in place? So a lot of that competiveness, actually adding value to the business by doing things that make them more productive is one way of doing that. The other is building around collaboration. There is a lot of work underway again through co-operative development with Scotland to try to build consortia of smaller businesses to get them into a position where they can successfully bid for contracts on their own, which they would be too small to do but as consortia perhaps they stand a better chance of securing business. So it is not an easy thing to do but I think combining that, adding value to business and also building more collaboration are two ways you can start to think about addressing it.
Alistair McKinnon: Just a final thing, underemployment, yes, it is slightly higher than the national average. In Scotland I think it is 1% higher, 11% as against 10%, but it is comparable with Kinross and similar areas across Scotland, which have the same sorts of issues. It is the combination of, as has been described, the history of where employment originates from: farming, traditional industries, textiles to a certain degree, the food industry, tourism, characterised by low pay everywhere just about and higher costs. Things cost more in rural areas. It costs more to travel to get to your work because you cannot get a public bus. Therefore, you have to run your own car. If you live in a house it is probably older and poorly insulated and, therefore, your fuel bills are higher. All these things are very typical in rural areas.
Q91 Chair: Before we move on to youth unemployment, I want to pick up a point about the national minimum wage. Clearly the last Government did more to raise wages in the Borders than almost anything else. Now, is it the case that in order to get wage rates raised in the Borders we are going to have to rely on Government imposing something like the living wage, since it looks unlikely that the private sector will be able or be willing to do it on its own, and regrettably at the moment the public sector is not doing as much as it should?
Bruce Simpson: The Borders has a very, very large proportion of micro businesses: one man, two man, and three man businesses. If you keep imposing on them extra higher costs they will go out of business.
Q92 Chair: Wasn’t that said at a time when there was the argument about introducing the national minimum wage and it proved not to be correct. Is that not the case?
Bruce Simpson: I don’t know.
Chair: Right. I think it did. Any other observations?
Paul Lewis: The approach we are trying to take is to work with businesses and look at the positive advantages of having a highly engaged, well supported workforce, which is appropriately paid according to its productivity; so not imposition but more using examples of businesses that are doing this successfully because it increases retention rates, there is less turnover, and all that goes with that. That is certainly the approach—and we are going to come on to talk about youth—we have been taking in terms of youth employment, not looking at it purely as a social benefit but as a source of talent, new ideas and productivity for businesses. So we—certainly at Scottish Enterprise—are looking to encourage employers in that way rather than through an imposition.
Q93 Chair: I understand that you are obviously constrained by the framework that the Scottish Government imposes on you, but on the general point about persuasion rather than imposition—because it is the case, unless I am mistaken, that had we been relying on persuasion slavery would not have been abolished—there is no evidence that persuasion has been successful in the Borders because wages have not gone up. They have continued to lag in particular industries that are predominant here, and it is only something like the imposition of the national minimum wage that has had an impact.
Paul Lewis: I attended an event recently and speaking at it were a number of companies that have, not through imposition but through choice, decided to pay the living wage, including companies in the tourism sector, and were making a positive case for that approach in their minds. Not all businesses need to be persuaded through imposition. Many businesses do see positive benefits from the approach that was taken and they were being themselves champions for that.
Q94 Chair: That is helpful. What sorts of percentage of businesses in the Borders and in Dumfries and Galloway do you think have been persuaded of the merits of the living wage?
Paul Lewis: I don’t have any data to answer that question.
Q95 Chair: My understanding is it is negligible and that persuasion, therefore, effectively on the ground in the south of Scotland has been an abject failure and that if we are serious about wanting wages to rise it would have to be either the introduction of an increase in the national minimum wage, or the living wage, or something similar. Is there any evidence that you have that—apart from the usual crying of wolf—that that would have a deleterious effect on the south of Scotland if it was imposed?
Paul Lewis: I don’t have any evidence either way on what you are saying. I think the process of companies speaking actively and openly about their approach to the living wage is very, very recent. So absolutely, you are right; persuasion is something that is only just starting to happen.
Chair: Okay. Thanks.
Q96 Pamela Nash: Can I ask about local businesses and indeed other employers as well, not just businesses? I know you said earlier that you work with other organisations that are not strictly businesses. Do you think there is an acknowledgement among the business community that they have a responsibility to provide opportunities for young people? Can you tell us a bit about apprenticeship numbers and how the companies/organisations you work with and your members view apprenticeships and work opportunities for young people?
Bruce Simpson: Yes. From the point of view of the Chamber, it is one of the major things we are looking at just now. We have been working with as many of the secondary schools as possible; going to speak to all the pupils. We know there are about one-third of pupils who either do not know what they are going to do when they leave school or are being pushed into doing something they do not really want to do, probably by well-meaning parents. We are trying to target that one-third and speak to them and get our members to speak to them to give them an idea of what is available out there for them to do.
Also the work of the Wood Commission, we are speaking at the Scottish Chamber. All the chambers are getting very much involved in the Wood Commission. There are so many people doing different things for youth groups that we need someone to co-ordinate it. It needs co-ordination, and I am glad of the Wood Commission initiative and the chambers getting behind that.
Q97 Pamela Nash: You mentioned there, Mr Simpson, about a large number of young people being pushed, you felt, perhaps into doing training or jobs that may not otherwise—
Bruce Simpson: Well-meaning parents, yes.
Pamela Nash: Can I just ask about that, because we heard Mr Moore, the MP, use the woollen industry as an example, and say that there are not enough young people with that skill set to fill those jobs in the near future, and perhaps the training is not available. Would you suggest the training isn’t available here because they don’t have the customer base; that young people are not wanting to go into that industry, rather than it being the other way round—that they’re not going in because training is not available?
Bruce Simpson: Put it this way, from our point of view we find it difficult to target that particular one-third. When we have had meetings with the schools and we get 13, 14 or 15 pupils coming to our meetings, we find that we are getting the wrong 13 or 14. They already know what they are going to do or where they are going to go. We are not able to target those who don’t know what they are going to do or maybe the parents are getting a bit fed up and saying, “You’re going to do that” and their heart is not in it. That is where you get failures and people dropping out after one or two years. We want to try to stop that. It is targeting them, that is what I find difficult.
Brian Richardson: Yes, as Bruce was saying, the Chambers are very active in this area now. I am very pleased to say that Dumfries and Galloway Chamber—it has been agreed by all parties—will take the lead on the private equity initiative for employability in employment in Dumfries and Galloway. Now, what that means in terms of apprenticeships and so forth is that there is some very good training going on in Dumfries and Galloway particularly through the Dumfries and Galloway College. Those people are going on with good qualifications and training in engineering, in turbines and a whole host of other things. But they are moving out of the area, because there isn’t the local work. The other part of it, the odd part about it, is that a lot of them come back and they struggle to find a way of working in more urban areas, for example. It is locally known as the boomerang effect.
At the other end, we have in Dumfries and Galloway twice the number of young people who leave without qualifications, double the number in Highlands and Islands so we have plurality. We have issues at both ends. So what we are trying to do at the moment for the Wood Commission report is to address the issue right across all colleges and schools in Dumfries and Galloway, put together a comprehensive view and address the issues of trying to improve communication and the issues of support for young people who either plan to leave the area or ideally we would like to retain them.
Bruce Simpson: Can I add a bit to what Brian was saying? In the—
Q98 Pamela Nash: You spoke about the responsibility of businesses and employers, is there anything else that you think should be done at a Government level in order to support employers to provide those apprenticeships and those opportunities?
Brian Richardson: There is nothing specific that springs to mind. I think certainly the Wood Commission report and all the actions around it give an opportunity for the private sector to respond, which is what we are doing.
Alistair McKinnon: Can I just answer your original question and the following one as well? In any rural area the problem is always about critical mass, to be able to get the provision across many different topic areas. So you have a situation where you have an area, you have a college or even a university; you cannot possibly deliver the full breadth you might do in an urban area. Also in an area like the Borders and in many other rural areas like this as well, you do not have a critical mass of businesses in any one or two sectors, which means that the college or the university then has a strong specialisation to match the two. That is kind of the way it is in Borders and Dumfries and Galloway.
The point about parents pushing kids in directions that they might not otherwise go to, well, the history in the Borders in the textile industry is that most people who worked in it advised their children not to go into the industry even though it is a very different industry from the one they worked in. That has been a big problem for the industry to overcome. Indeed, the education people in the schools said, “You don’t want to go into the mill. It is the last thing you should possibly do”. So they have been faced with a situation for many years where it is only because of the consolidation between various companies that they have been able to find people to fill the vacancies, and also because of automation needing less people. However, it has kind of reached the point where they need fresh blood because the workforce has aged significantly. To be entirely honest, there is no way the Borders College can provide training for a collar linker, for example, for 10 people or even five people, which is the sort of numbers that are required.
So we, alongside the account managed companies that are in the textile sector, came up with a scheme by which they could share the training and buy in the necessary training using SDS funds and do it on site. It is a modern apprenticeship and it is a new amended Scottish vocational qualification and the assessors are employees of two of the companies and they share them between the companies. Now that is collaboration between businesses to provide a solution and also to put the engagement back into the schools to change the attitudes, to get younger people to come in and, indeed, for older people to retrain and to meet the skills needs.
On the point about low pay, the textile companies, for example, predominantly export their product so it is a higher value product. Therefore, they are more able, more willing and can afford to pay higher wages, and indeed do pay the minimum wage. So it comes back to the point of the value of the product that the company produces. The greater the value the greater they are to be able and to be willing to pay more to their staff and, indeed, need to pay more to their staff to get them in, in the first place, to deliver that quality product.
Chair: Can I just say, Mr McKinnnon, you mentioned that youngsters were often told that the last place you want to go was the textile industry, as somebody who grew up in Galashiels, can I say I was told that the last place you wanted to go was the skin works. Having worked in the skin works one summer I can understand that, but that option is no longer available.
Q99 Mike Crockart: I want to turn briefly to an area that was touched on but at a bit of a tangent when you were being questioned about the Borderlands Initiative, and that is to do with NUTS regions. Mr McKinnon, you dealt with it specifically. The evidence that we have had has been virtually unanimous that there is a need for the NUTS regions to be looked at. Is that the view of everyone that is giving evidence today?
Alistair McKinnon: Yes.
Bruce Simpson: Yes.
Brian Richardson: Yes.
Paul Lewis: Yes.
Mike Crockart: Good. Yes, so absolutely unanimous.
Chair: That’s good; moving on. To be fair, we prefer when our panellists fight among themselves because it gives us a better insight into the issues but if you have to agree then fair enough.
Q100 Mike Crockart: The debate then seems to centre on whether to be as ambitious as possible or just to tinker to get to a size where you get 700,000 or 800,000 that you can call a region without having to change the NUTS 1 region. Is that the best way forwards or should this be a wholesale look at the boundaries that have been drawn to try to come up with a region perhaps that crosses borders that does more effectively represent what should be a development region?
Bruce Simpson: Could you have a NUTS area encompassing the south of Scotland with the north of England? I do not know.
Mike Crockart: That is the thing; you would have to redraw the NUTS 1 level, which at the moment is the whole of Scotland, but the question is: is the best way forwards to accept what is there and try to almost gerrymander a region that would fit and get more funding or does it need a more basic restructure?
Brian Richardson: The recommendation that we put in the paper was that if you take the two major areas and add in parts of Ayrshire and Lanarkshire you reach the critical mass. The experience we had with the integrated development operations programme was that the critical mass was about 500,000 people. I know the figure now is 800,000. I believe that to be quite a high figure, to be honest. As long as you have around about 600,000 or 700,000 people in an area, particularly one that is as culturally coherent as the Borders, I think it is a system that can work, yes.
Q101 Mike Crockart: What are the obstacles to getting this done? Scottish Enterprise is staying very, very quiet on this one. Politicians. Mr McKinnon is going take exception to that, I think.
Alistair McKinnon: Your observation about going north and south of the Scotland/England border for a NUTS 2 area is completely right. You would have to redraw NUTS 1 in Scotland but you would also have to redraw NUTS 1 in England, and it seems to me that the most achievable case to succeed with is to go with a NUTS 2 Dumfries, Borders, south Ayrshire and Lanarkshire. I think that is winnable and would be much quicker to achieve than trying to reengineer the NUTS 1 boundaries. Bearing in mind, as I understand it—I am not entirely certain of this—that the process is that you put forward a case. You go through the Scottish Government in Scotland and you then go to Westminster or Whitehall, I am not quite sure which, and then you end up in Brussels to get signoff. Now the informal indication that I have heard is that the Scottish Government would be happy if the south of Scotland and Ayrshire and south Lanarkshire could jointly put forward a case for a NUTS 2 area. They would see the logic and the sense in that and, therefore, support it. Whether or not Westminster supported it is another matter, and then in turn whether or not the Europeans sign it off is another matter. So, as you said, politicians.
Q102 Mike Crockart: You need not spit it when you say that phrase. Are there any potential unintended consequences for other areas? If the boundary is redrawn then obviously it leaves other areas that are currently in different NUTS 2 areas redrawn. What are the potential consequences for them?
Alistair McKinnon: My local authority colleagues who have been working on this tell me—that is, in Borders and Dumfries and Galloway—that in their conversations with the existing east and west NUTS 2 areas if you move the population to a south NUTS 2 area it does not negatively impact on the redrawn east and west NUTS 2 areas. So that is what I meant, everybody is a winner. It is down to whether or not each of the councils would agree to put forward a case on that basis.
Q103 Chair: Yes, to some extent it comes back to the issue we touched on earlier about dynamism or lack thereof. Could I pick up a point—going back if I could, because we are getting close to the end of this session—about Business Gateway? It was mentioned that you had handed this over to the local authorities, but surely one of the difficulties about that being passed on to the local authorities without the appropriate financial support, is that it then just becomes one of many things that are competing for money with the local authorities? Sorry, you are busting to get in I can see.
Paul Lewis: No, no, I figured to impress I was going to answer the question.
Chair: Right. There you are.
Paul Lewis: A couple of things. When we say we are no longer responsible for Business Gateway, we don’t run that service, however, we do continue to run the Pan-Scotland web portal for Business Gateway. So we still have an important role in terms of that reach to a broad base of customers through the web but we don’t run the service directly to the businesses. That was transferred over as part of the reshaping of Scottish Enterprise back in 2007/08 and along with the Business Gateway budget that sat in Scottish Enterprise’s books was transferred out of this organisation and into local authorities at that point in time. So it is not a case that responsibility was transferred without resources. The resources went with it. Clearly, local authorities have a democratic right to decide how they spend their resource but the money that we spent on Business Gateway and other local services was moved from SE into local government.
Q104 Chair: Fine. Maybe I did not make myself sufficiently clear. My impression, being aware that that transfer took place at that time, was that quite clearly the local authorities have borne virtually the brunt of cuts in public expenditure in Scotland, and it has been passed basically from Edinburgh, from Holyrood, to the local authorities, and in those circumstances quite often Business Gateway almost inevitably is seen as a lower priority and, therefore, gets squeezed. Now, is that your own impression of what is happening and should we be saying something about that to make sure it gets a greater priority level?
Bruce Simpson: Chairman, from my point of view—I work very, very closely with the Business Gateway—I find the Borders Business Gateway superb to work with, very helpful. They are a member of the Chamber; very helpful, great training.
Chair: So you are happy?
Bruce Simpson: I am happy with them, yes.
Chair: Good. I always like to hear people are happy. It doesn’t make necessarily for a good report but we always glad to hear it. Brian?
Brian Richardson: Yes. I think my only comment on that is the direction of travel of Business Gateway is back towards local government. I do not necessarily see that as a good thing because you have to have a way of interacting with the private sector that is outwith major public sector institutions. I have worked for two local authorities. I worked for Cleveland County and Leeds City Councils in economic development, but they are not always the best places to engage with the private sector. So that is the only comment that I would make; my perception is that it is slowly going back into local government.
Paul Lewis: Alistair may want to comment on the specifics in terms of Borders and Dumfries and Galloway. What I would say is I certainly experienced some very good practice in local government in relation to how they engage with business across Scotland. What we have certainly started to do recently is to sit down with our colleagues in Business Gateway and look at how some of the support and development we provide to our own colleagues within Scottish Enterprise can also be extended to colleagues in Business Gateway to help raise the level of expertise across the board. I think that is probably a good thing for all businesses.
Alistair McKinnon: Yes, generally Business Gateway in Borders is very good. I know the staff. In fact they sit in the same building. Their office is in the same building as ours, which incidentally we own and they are a tenant in. I know some of the staff in the Dumfries end, so I think they are doing the best that they can do given the number of businesses that are out there in the community and finite resources. Everybody has finite resources.
Just an observation, economic development from the council’s point of view is not one of the core things that they have to do, so therefore it is kind of discretionary. As a result of that, the amount of resource and how resource is deployed is subject to local democracy and in terms of how the local priorities are set by local politicians, and in turn by what the local populace, ie the electorate ask for.
Chair: That was suitably elliptical to avoid you getting away from anybody, I would have thought, but I think we understood what you meant.
Q105 Graeme Morrice: I do not know if you were in earlier when we had our evidence session with the local MP, Michael Moore. I asked him a few questions in relation to the new rail line that is coming down from Edinburgh, the Waverley Line, and he was alluding to the fact that the opportunities that that potentially affords were not really being realised, and he felt that the agencies and others had not come to the table quick enough to look at that as a potential development issue. Now, we touched on business start ups, job creation and a new housing development. Obviously there is still a long way to go but on the basis that I think the line is opening in six months’ time, he felt that people had come to the table quite late on this. I wonder what your views were on that issue; whether you agree with that and basically what we could be doing to try to make a difference here.
Bruce Simpson: I totally agree with that. We have been working very closely with Michael and all the other elected representatives in the Borders. Again there was no co-ordination of who was doing what with regards to promotion of the line, and speaking from my own position in tourism, travel trade tourism, the promotion should have started about 18 months ago and we are only getting to the stage now where it has started. It was slow. People are beginning to move now. We have the Scottish Borders Business Forum very much involved in it. I heard from Michael we had the first meeting with Abellio two weeks ago and that was over-subscribed so we are going to have another meeting for businessmen to work out what the businesses can do, and what the benefit of this is. It is not too late, it has been late but we are catching up now.
Q106 Graeme Morrice: Can I ask why it is late? Obviously we have been aware that there has been a requirement for many, many years for the line to be reopened and obviously that decision was taken a considerably long time ago, so people have been aware of it. Why have they been late coming to the table? Whose fault is it?
Bruce Simpson: Speaking again from my own position in tourism, it will be a major tourism asset to the Borders—a major one. Again, there is no co-ordination. There is no one in charge of it. There is no one in charge of promoting it. Scottish Borders lost its tourist board—10 years ago? I cannot remember how long ago it was. That was the body that used to do most of the promotion in the Borders. We have now a body called the Area Tourism Partnership. This is private sector led with VisitScotland set up in it, and they have their tourism strategy that includes the Borders Rail but there are no resources sitting on a shelf. There is nobody to deliver it and there is no finance to deliver it. So overall, there was a major tourism asset being developed but there was lack of promotion because there is no one there to co-ordinate the promotion.
Q107 Graeme Morrice: I think to an extent it has probably fallen between stools because of the centralising agenda of the Scottish Government, and you mentioned there was a local tourist board. Obviously there had been a local enterprise company. Indeed, I was involved in one in Lothian in Edinburgh. One with Paul. Good to see you again, Paul. Do you think the focus is off areas like the Borders because of that centralisation that we are seeing currently being implemented by the Scottish Government?
Bruce Simpson: Again, with my tourism hat on, I don’t agree with you that the centralisation of tourism was down to Holyrood or down to VisitScotland and the remit they were given, and—
Q108 Chair: Sorry, who? Can I just clarify, who gave them that remit?
Bruce Simpson: Sorry?
Chair: I am sorry. Can I just clarify the remit they were given? Who gave them that remit?
Bruce Simpson: The remit they were given, I am not 100% sure on this, was to maximise the tourism benefits.
Chair: No. I understand. I was just seeking to clarify who gave them that remit?
Bruce Simpson: Holyrood would have given the remit.
Chair: I am sorry. It did come back to Holyrood, but indirectly?
Bruce Simpson: Yes, but they—
Chair: Right.
Bruce Simpson: Once they got the remit, VisitScotland—
Chair: No, no, I understand that. I just wanted to clarify.
Bruce Simpson: If I had been given that remit, I would have probably done exactly the same thing, on business grounds, because the rural areas were costing VisitScotland a heck of a lot of money. They were loss-making areas, and I would have closed those loss-making areas. So, it is the rural parts of Scotland, the Dumfries and Galloway, the Borders and all the rest of it. They are the ones who lost out, because they lost their area tourist boards, which were loss-making.
Chair: Because that was the remit that they were given but had they been given a different remit, which would have taken account of rurality, and so on and so forth, and taken account of the special circumstances of the Borders, then that consequence could have been avoided?
Bruce Simpson: I agree and I disagree with you. I agree that the remit was given to maximise tourism income, but they were not told by Holyrood to close the area tourist boards. That is where I disagree with you.
Q109 Graeme Morrice: Brian, do you want to add anything to that? Going back to the choo-choo trains?
Brian Richardson: Yes. I do not have any specific comment on that issue at this point in time.
Alistair McKinnon: I have to disagree with Michael Moore. I do not think it is too late. I think it will be fine. If I can speak for Scottish Enterprise, we were involved right at the gestation of the Borders Railway, in terms of the original business case to prove that it would be “viable”, however you define that, and various iterations of that business case until it got to the point where it was approved. There is this document, which I do not know if you have seen or not, which is the Borders Railway blueprint, which is essentially, exactly, the plan of all the various elements, which you, perhaps, are not aware of.
It could obviously have been a bit quicker, in terms of the tourism end of this, but I think that one of the issues, and this is a personal view on this, that delayed that was the timing of the Abellio franchise being awarded, such that some of the proposition about what was going to be available on the trains running up and down the line was governed by what the various tenderers put forward in their bids, and then the whole confidentiality of the tender process.
If I can add to that, what we are doing with Borders Council, in terms of exploiting it from the business angle, if I go back to the starting of the idea of about putting the railway back, there was a lot of fear in the Borders that it would be all about commuting into Edinburgh every day. But over the years, it has been quite clear, when you look at places like Peebles, that there are lots of people who commute out of Edinburgh to work in Peebles. Indeed, over the 20-odd years I have driven up and down that road, the number of cars coming in the opposite direction from me has increased every year.
So, the railway presents an opportunity to encourage people to commute down and work in the Borders or, indeed, in Midlothian, along the track line. So, the work at Tweedbank is going to be, first, around development of a piece of greenfield land that the council are in the process of buying from private owners, and the development of that land into plots, which are serviced plots. Then, hopefully, around the speculative build of an office quality building, the reason being that you can keep your business in the Borders. You can have the same quality of accommodation and, indeed, broadband connectivity as you would get in the central Edinburgh, and you can have a good working environment.
Phase 2 will be about attracting people to keep their businesses in central Borders. Phase 2 will be about the existing Tweedbank industrial estate, which is mainly private sector owned at the moment and, quite frankly, is 1970s sheds. There is the opportunity to redevelop all that, to have mixed use that reflects a central hub, and more modern accommodation to relate to more modern businesses and, again, higher value businesses. That, in turn, means that it should draw employment, higher value jobs, wealth creation, into central Borders, which people are then able to commute to from other parts of the Borders, or down from Edinburgh.
Q110 Chair: Any final points, please? As we always ask witnesses, are there any answers you had prepared to questions that we have not asked, or any points that you feel we ought to get from you that we have not had so far?
Brian Richardson: Yes. I just wanted to say something about ambition and vision. In 1998 I was working in a community development in New Zealand. I went to Canterbury Development Company. No one had ever heard of Canterbury. It is on the South Island, very remote. They said, “We have just set up a clustering initiative”. I asked them where they were clustering and they said, “We have decided to do a cluster with the west coast of America”, which was 12 hours’ flying time away. It kind of blew my mind at the time, but history has since proven that Canterbury now has become a major brand, in rugby and so forth, with a successful university. Their business is thriving, simply because they just looked at it slightly differently and had a big ambition. I would hope we can do the same in Dumfries and Galloway around energy, about renewables, and a whole load of other things.
Chair: Thank you. That is very helpful, and a very good note on which to close. Thank you very much for coming along. We have run over time a bit because we were enjoying ourselves so much. I now have a note saying, in the best traditions of Border hospitality, that if we do not go for our lunch, the sandwiches will be cleared away. So, in those circumstances, could I close the meeting? Order, order.
Oral evidence: Our Borderlands – Our Future, HC 571 27